UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the quarterly period ended June 30, 2018
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the transition period from               to             
Commission File Number: 001-38052
 
TOCAGEN INC.
(Exact name of registrant as specified in its charter)

		
Delaware	26 - 1243872	
(State or other jurisdiction of
incorporation or organization)	(I.R.S. Employer
Identification Number)	
 	 	
4242 Campus Point Court, Suite 500, San Diego, CA	92121	
(Address of principal executive offices)	(Zip Code)	
 
Registrant's telephone number, including area code: (858) 412-8400
 
3030 Bunker Hill Street, Suite 230, San Diego, CA, 92109
(Former name, former address and former fiscal year, if changed since last report)

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.   ☒      Yes      ☐      No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      ☒      Yes      ☐      No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐	
Non-accelerated filer	☒   (Do not check if a smaller reporting company)	Smaller reporting company filer	☐	
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐     No   ☒
As of August 3, 2018, the registrant had 19,951,158 shares of common stock, par value $0.001 per share, outstanding.

 

 
TOCAGEN INC.
TABLE OF CONTENTS
 
 	 	 	 	Page No.	
PART I	 	FINANCIAL INFORMATION	 	1	
ITEM 1.	 	FINANCIAL STATEMENTS	 	1	
 	 	Condensed Balance Sheets as of June 30, 2018 (unaudited) and December 31, 2017	 	1	
 	 	Condensed Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2018 and 2017 (unaudited)	 	2	
 	 	Condensed Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017 (unaudited)	 	3	
 	 	Notes to Condensed Financial Statements (unaudited)	 	4	
ITEM 2.	 	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	 	13	
ITEM 3.	 	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	 	19	
ITEM 4.	 	CONTROLS AND PROCEDURES	 	19	
PART II	 	OTHER INFORMATION	 	20	
ITEM 1.	 	LEGAL PROCEEDINGS	 	20	
ITEM 1A.	 	RISK FACTORS	 	20	
ITEM 2.	 	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	 	52	
ITEM 6.	 	EXHIBITS	 	53	
SIGNATURES	 	 	

 

 PART I - FINANCI AL INFORMATION
 Item 1. Financial Statements.
TOCAGEN INC.
 CONDENSED BALANCE SHEETS
(in thousands, except share and par value data)
 
 	 	June 30,	 	 	December 31,	 	
 	 	2018	 	 	2017	 	
 	 	(unaudited)	 	 	 	 	 	
ASSETS	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	24,613	 	 	$	35,933	 	
Marketable securities	 	 	54,848	 	 	 	52,792	 	
Prepaid expenses and other current assets	 	 	3,989	 	 	 	1,904	 	
Total current assets	 	 	83,450	 	 	 	90,629	 	
Property and equipment, net	 	 	3,652	 	 	 	1,217	 	
Other assets	 	 	234	 	 	 	227	 	
Total assets	 	$	87,336	 	 	$	92,073	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	
Accounts payable	 	$	1,500	 	 	$	1,951	 	
Accrued liabilities	 	 	11,208	 	 	 	8,120	 	
Notes payable, current portion	 	 	-	 	 	 	7,200	 	
Deferred license revenue	 	 	1,036	 	 	 	36	 	
Deferred grant funding	 	 	22	 	 	 	23	 	
Total current liabilities	 	 	13,766	 	 	 	17,330	 	
Notes payable, net of current portion	 	 	25,913	 	 	 	3,625	 	
Deferred license revenue, net of current portion	 	 	18	 	 	 	36	 	
Deferred rent, net of current portion	 	 	1,550	 	 	 	—	 	
Total liabilities	 	 	41,247	 	 	 	20,991	 	
Commitments and contingencies	 	 	 	 	 	 	 	 	
Stockholders’ equity:	 	 	 	 	 	 	 	 	
Preferred stock, $0.001 par value; 10,000,000 shares authorized at June 30, 2018
  and December 31, 2017; no shares issued or outstanding at June 30, 2018
  and December 31, 2017	 	 	—	 	 	 	—	 	
Common stock, $0.001 par value; 200,000,000 shares authorized
   at June 30, 2018 and December 31, 2017; 19,951,158 and
   19,882,551 shares issued and outstanding at June 30, 2018 and
   December 31, 2017, respectively	 	 	20	 	 	 	20	 	
Additional paid-in capital	 	 	242,021	 	 	 	238,025	 	
Accumulated deficit	 	 	(195,898	)	 	 	(166,929	)	
Accumulated other comprehensive loss	 	 	(54	)	 	 	(34	)	
Total stockholders’ equity	 	 	46,089	 	 	 	71,082	 	
Total liabilities and stockholders’ equity	 	$	87,336	 	 	$	92,073	 	
 
See accompanying notes to these unaudited condensed financial statements.

1

TOCAGEN INC.
 CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share data)
 
 	 	Three Months Ended
June 30,	 	 	Six Months Ended
June 30,	 	
 	 	2018	 	 	2017	 	 	2018	 	 	2017	 	
 	 	(unaudited)	 	 	(unaudited)	 	
License revenue	 	$	9	 	 	$	10	 	 	$	18	 	 	$	21	 	
Operating expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Research and development	 	 	12,763	 	 	 	6,632	 	 	 	23,199	 	 	 	13,256	 	
General and administrative	 	 	2,573	 	 	 	2,030	 	 	 	4,992	 	 	 	3,970	 	
Total operating expenses	 	 	15,336	 	 	 	8,662	 	 	 	28,191	 	 	 	17,226	 	
Loss from operations	 	 	(15,327	)	 	 	(8,652	)	 	 	(28,173	)	 	 	(17,205	)	
Other income (expense), net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest income	 	 	331	 	 	 	103	 	 	 	646	 	 	 	140	 	
Interest expense	 	 	(1,093	)	 	 	(495	)	 	 	(1,442	)	 	 	(1,111	)	
Change in fair value of preferred stock warrants	 	 	—	 	 	 	(22	)	 	 	—	 	 	 	37	 	
Total other expense, net	 	 	(762	)	 	 	(414	)	 	 	(796	)	 	 	(934	)	
Net loss	 	 	(16,089	)	 	 	(9,066	)	 	 	(28,969	)	 	 	(18,139	)	
Other comprehensive loss:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net unrealized gain (loss) on investments	 	 	54	 	 	 	(6	)	 	 	(20	)	 	 	(7	)	
Comprehensive loss	 	$	(16,035	)	 	$	(9,072	)	 	$	(28,989	)	 	$	(18,146	)	
Net loss per common share, basic and diluted	 	$	(0.81	)	 	$	(0.56	)	 	$	(1.45	)	 	$	(1.95	)	
Weighted-average number of common shares outstanding,
   basic and diluted	 	 	19,922,355	 	 	 	16,330,996	 	 	 	19,914,159	 	 	 	9,308,386	 	
 
See accompanying notes to these unaudited condensed financial statements.

2

TOCAGEN INC.
 CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
 
 	 	Six Months Ended
June 30,	 	
 	 	2018	 	 	2017	 	
 	 	(unaudited)	 	
OPERATING ACTIVITIES	 	 	 	 	 	 	 	 	
Net loss	 	$	(28,969	)	 	$	(18,139	)	
Adjustments to reconcile net loss to net cash used in operating activities	 	 	 	 	 	 	 	 	
Stock-based compensation	 	 	3,193	 	 	 	1,585	 	
Depreciation	 	 	222	 	 	 	127	 	
Noncash interest expense	 	 	873	 	 	 	293	 	
Change in fair value of preferred stock warrants	 	 	—	 	 	 	(37	)	
Amortization of discount on investments, net	 	 	(86	)	 	 	(13	)	
Changes in operating assets and liabilities:	 	 	 	 	 	 	 	 	
Prepaid expenses and other assets	 	 	(1,532	)	 	 	207	 	
Accounts payable	 	 	(684	)	 	 	(534	)	
Accrued liabilities	 	 	2,035	 	 	 	1,621	 	
Deferred license revenue	 	 	982	 	 	 	(21	)	
Deferred rent	 	 	496	 	 	 	—	 	
Deferred grant funding	 	 	(1	)	 	 	(9	)	
Net cash used in operating activities	 	 	(23,471	)	 	 	(14,920	)	
INVESTING ACTIVITIES	 	 	 	 	 	 	 	 	
Proceeds from the sale/maturity of marketable securities	 	 	26,454	 	 	 	23,049	 	
Purchases of marketable securities	 	 	(28,444	)	 	 	(29,844	)	
Purchases of property and equipment	 	 	(877	)	 	 	(109	)	
Proceeds from sale of property and equipment	 	 	—	 	 	 	20	 	
Net cash used in investing activities	 	 	(2,867	)	 	 	(6,884	)	
FINANCING ACTIVITIES	 	 	 	 	 	 	 	 	
Proceeds from issuance of notes payable, net of issuance costs	 	 	26,325	 	 	 	—	 	
Cash paid on extinguishment of debt	 	 	(8,631	)	 	 	—	 	
Principal payments on notes payable	 	 	(3,000	)	 	 	(3,600	)	
Proceeds from issuance of common stock	 	 	324	 	 	 	47	 	
Proceeds from offering of common stock, net of issuance costs	 	 	—	 	 	 	88,615	 	
Proceeds from issuance of convertible promissory notes, net of issuance costs	 	 	—	 	 	 	7,338	 	
Net cash provided by financing activities	 	 	15,018	 	 	 	92,400	 	
Net (decrease) increase in cash and cash equivalents	 	 	(11,320	)	 	 	70,596	 	
Cash and cash equivalents, beginning of period	 	 	35,933	 	 	 	5,510	 	
Cash and cash equivalents, end of period	 	$	24,613	 	 	$	76,106	 	
NONCASH INVESTING AND FINANCING ACTIVITIES	 	 	 	 	 	 	 	 	
Allowance for tenant improvements	 	$	1,054	 	 	$	—	 	
Property and equipment purchases included in accounts payable and accrued liabilities	 	$	733	 	 	$	158	 	
Fair value of common stock warrants issued in connection with notes payable	 	$	479	 	 	$	—	 	
Convertible preferred stock converted into shares of common stock	 	$	—	 	 	$	131,410	 	
Convertible promissory notes principal and accrued interest converted into shares of common stock	 	$	—	 	 	$	11,092	 	
Preferred stock warrant liabilities converted into warrants to purchase shares of common stock	 	$	—	 	 	$	89	 	
Deferred equity issuance costs paid in previous periods reclassified to equity on effective date of initial public offering	 	$	—	 	 	$	1,574	 	
Deferred debt and equity issuance costs in accounts payable and accrued liabilities	 	$	—	 	 	$	99	 	
 
See accompanying notes to these unaudited condensed financial statements.
 
3

TOCAGEN INC.
 NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1.	Organization and Basis of Presentation	
Tocagen Inc. (Tocagen or the Company) is a clinical-stage, cancer-selective gene therapy company focused on developing first-in-class, broadly-applicable product candidates designed to activate a patient’s immune system against their own cancer. The Company’s cancer-selective gene therapy platform is built on retroviral replicating vectors which are designed to selectively deliver therapeutic genes into the DNA of cancer cells. Tocagen’s gene therapy approach is designed to fight cancer through immunotherapeutic mechanisms of action without the autoimmune toxicities commonly experienced with other immunotherapies. The Company views its operations and manages its business in one operating segment.
From inception through June 30, 2018, the Company has devoted substantially all of its efforts to developing its gene therapy platform and its lead product candidate, Toca 511 & Toca FC, as well as raising capital and building its infrastructure. The Company has not generated revenues from its principal operations.
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In management’s opinion, the accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results for the interim periods presented. Interim financial results are not necessarily indicative of results anticipated for the full year. These unaudited financial statements should be read in conjunction with the audited financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, from which the balance sheet information herein was derived.
Initial Public Offering
On April 19, 2017, the Company completed its initial public offering (IPO), whereby the Company sold an aggregate of 9,775,000 shares of its common stock, at $10.00 per share, resulting in net proceeds of $86.9 million after underwriting discounts, commissions and offering costs of $10.8 million, of which $9.1 million of the costs were paid during the six months ended June 30, 2017.
In addition, in connection with the IPO, all of the Company’s outstanding shares of convertible preferred stock were converted into an aggregate of 6,690,066 shares of the Company’s common stock, warrants to purchase up to 68,572 shares of the Company’s Series H convertible preferred stock were converted into warrants to purchase up to 9,936 shares of the Company’s common stock, each at an exercise price of $36.23 per share, and $11.1 million of aggregate principal and accrued interest underlying convertible promissory notes were automatically converted into an aggregate of 1,109,176 shares of the Company’s common stock at the IPO price of $10.00 per share.
Liquidity
The Company has a limited operating history and the sales and income potential of the Company’s business and patient markets are unproven. The Company has experienced net losses and negative cash flows from operating activities since its inception. As of June 30, 2018, the Company had an accumulated deficit of $195.9 million and working capital of $69.7 million available to fund future operations. As the Company continues to incur net losses, its transition to profitability is dependent upon the successful development, approval, and commercialization of its product candidates and achieving a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional capital. The Company plans to continue to fund its losses from operations and capital funding needs through debt and equity financing, or through collaborations or partnerships with other entities. Debt or equity financing, or collaborations and partnerships with other entities may not be available on a timely basis on terms acceptable to the Company, or at all.  
As of June 30, 2018, the Company had cash, cash equivalents and marketable securities of $79.5 million. The Company has evaluated and concluded that there are no conditions or events, considered individually or in the aggregate, that raises substantial doubt about our ability to continue as a going concern for a period of one year following the date that these financial statements are issued.
Use of Estimates
 The Company’s financial statements are prepared in accordance with GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and
4

liabilities in the financial statements and accompanying notes. Significant estimates in the Company’s financial stateme nts relate to clinical trial accruals, the valuation of equity awards, and the development period used for license revenue recognition. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results may diffe r from these estimates under different assumptions or conditions.
2.	Summary of Significant Accounting Policies  	
Clinical Trial Accruals
Expenses related to clinical studies are based on estimates of the services received and efforts expended pursuant to the Company’s contract arrangements. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to the Company’s service providers will temporarily exceed the level of services provided and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients, site initiation and the completion of clinical milestones. The Company makes estimates of its accrued expenses as of each balance sheet date in its financial statements based on facts and circumstances known at that time. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from its estimate, the Company adjusts the accrual or prepaid expense balance accordingly. Historically, the Company’s estimated accrued liabilities have materially approximated actual expense incurred.
Revenue Recognition
On January 1, 2018, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contract with Customers (Topic 606) , using the modified retrospective transition method. There was no impact to opening retained earnings or revenue as of January 1, 2018 related to the adoption of Topic 606. Revenue generally consists of license revenue with upfront payments.
Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those goods and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the transaction price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when or as the Company satisfies the performance obligation(s).
At contract inception, the Company assesses the goods and services promised within each contract and assesses whether each promised good or service is distinct and determines that those are performance obligations. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. The Company considers factors such as the research, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. The Company considers a performance obligation satisfied once the Company has transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The Company recognizes revenue for satisfied performance obligations only when the Company determines there are no uncertainties regarding payment terms or transfer of control.
Collaborative Arrangements
The Company enters into collaborative arrangements with partners that may include payment to the Company of one or more of the following: (i) license fees; (ii) payments related to the achievement of developmental, regulatory, or commercial milestones; and (iii) royalties on net sales of licensed products.  Where a portion of non‑refundable upfront fees or other payments received are allocated to continuing performance obligations under the terms of a collaborative arrangement, they are recorded as contract liabilities and recognized as revenue when (or as) the underlying performance obligation is satisfied.  
As part of the accounting for these arrangements, the Company must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligation(s). The stand-alone selling price may include items such as forecasted revenues, development timelines, discount rates, and probabilities of technical and regulatory success. The Company evaluates each performance obligation to determine if it can be satisfied at a point in time or over time. In addition, variable consideration must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.
5

License Fees
If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, upfront fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration or other revenues and earnings in the period of adjustment.
Milestone Payments
At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price. If it is probable that a milestone event would occur at the inception of the arrangement, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control, such as regulatory approvals, are generally 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 the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each reporting period, the Company evaluates the probability of achievement of such milestones and any related constraint(s), and if necessary, may adjust the Company’s estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration or other revenues and earnings in the period of adjustment.
Royalties
For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from its collaborative arrangement with Siemens Healthcare Diagnostics Inc.
Stock-Based Compensation
Stock-based compensation expense represents the cost of the grant date fair value of stock awards, including stock options, and stock purchase rights granted to employees and members of the Company’s board of directors. For awards with time-based vesting provisions, the Company estimates the fair value of stock options on the date of grant using the Black-Scholes option pricing model and recognizes the expense over the requisite service period of the awards, which is generally the vesting period, on a straight-line basis. For awards with performance-based vesting provisions, the Company estimates the fair value of stock option grants on the date of grant, or the date when all of the terms of the grant have been agreed to, if later, and recognizes the expense based on the probability of the occurrence of the individual milestones at each reporting period. The expense is recognized over the implicit service period that commences once management believes the performance criteria are probable of being met.  For purchase rights, the Company estimates the fair value of the purchase as of the plan enrollment date and recognizes expense on a straight-line basis over the applicable offering period.  The Company accounts for forfeitures when they occur, and reverses any compensation cost previously recognized for awards for which the requisite service has not been completed, in the period that the award is forfeited.
The Company accounts for stock options granted to non-employees using the Black-Scholes option pricing model with assumptions generally consistent with those used for employee stock options, with the exception of expected term, which is over the contractual life. These option grants are subject to periodic revaluation over their vesting term.
Net Loss Per Share
Basic and diluted net loss per common share for the periods presented is computed by dividing net loss by the weighted-average number of common shares outstanding during the respective periods, without consideration of common stock equivalents as they are anti-dilutive. Common stock equivalents that could potentially dilute earnings in the future are comprised of shares issuable upon the conversion of all outstanding principal and accrued interest related to convertible promissory notes payable, shares issuable upon the conversion of convertible preferred stock, options to purchase shares of common stock outstanding under the Company’s equity incentive plan and warrants for the purchase of shares of common stock. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.
6

Common stock equivalents from potentially dilutive securities that are not included in the ca lculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows:
 
 	 	Three Months Ended
June 30,	 	 	Six Months Ended
June 30,	 	
 	 	2018	 	 	2017	 	 	2018	 	 	2017	 	
Common stock options	 	 	3,548,847	 	 	 	2,540,896	 	 	 	3,548,847	 	 	 	2,540,896	 	
Common stock warrants	 	 	67,238	 	 	 	10,660	 	 	 	67,238	 	 	 	10,660	 	
Total	 	 	3,616,085	 	 	 	2,551,556	 	 	 	3,616,085	 	 	 	2,551,556	 	
 
Recently Issued Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-02 , Leases (Topic 842) . The new standard amends the existing accounting standards for leases. Under the new guidance, lessees will be required to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is still in the process of evaluating the effect of adoption on its financial statements and expects to adopt the standard on January 1, 2019. The adoption will lead to an increase in the assets and liabilities recorded on the balance sheets primarily due to the lease agreement attributable to leased laboratory and office space.
In June 2018, the FASB issued ASU 2018-07, Compensation- Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting . This ASU is intended to simplify aspects of share-based compensation issued to non-employees by aligning the accounting for share-based payment awards issued to employees and non-employees as it relates to the measurement date and impact of performance conditions. The ASU will become effective January 1, 2019 and is not expected to have a material impact to the overall financial statements of the Company.
3.	Fair Value of Financial Instruments	
Fair Values of Assets Measured on a Recurring Basis
The following tables summarize the Company’s assets that require fair value measurements on a recurring basis and their respective input levels based on the fair value hierarchy (in thousands):
 
 	 	 	 	 	 	Fair Value Measurements at End of Period Using:	 	
 	 	Total	 	 	Quoted Market
Prices for
Identical Assets
(Level 1)	 	 	Significant
Other
Observable
Inputs
(Level 2)	 	 	Significant
Unobservable
Inputs
(Level 3)	 	
June 30, 2018	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash equivalents:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Commercial paper	 	$	5,579	 	 	$	—	 	 	$	5,579	 	 	$	—	 	
Corporate debt securities	 	 	1,498	 	 	 	—	 	 	 	1,498	 	 	 	—	 	
 	 	$	7,077	 	 	$	—	 	 	$	7,077	 	 	$	—	 	
Marketable securities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Corporate debt securities	 	$	23,629	 	 	$	—	 	 	$	23,629	 	 	$	—	 	
Commercial paper	 	 	21,222	 	 	 	—	 	 	 	21,222	 	 	 	—	 	
Asset-backed securities	 	 	8,677	 	 	 	—	 	 	 	8,677	 	 	 	—	 	
Certificates of deposit	 	 	1,320	 	 	 	—	 	 	 	1,320	 	 	 	—	 	
 	 	$	54,848	 	 	$	—	 	 	$	54,848	 	 	$	—	 	
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 	 	 	 	 	 	Fair Value Measurements at End of Period Using:	 	
 	 	Total	 	 	Quoted Market
Prices for
Identical Assets
(Level 1)	 	 	Significant
Other
Observable
Inputs
(Level 2)	 	 	Significant
Unobservable
Inputs
(Level 3)	 	
December 31, 2017	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash equivalents:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Corporate debt securities	 	$	8,274	 	 	$	—	 	 	$	8,274	 	 	$	—	 	
Repurchase agreements	 	 	5,000	 	 	 	—	 	 	 	5,000	 	 	 	—	 	
 	 	$	13,274	 	 	$	—	 	 	$	13,274	 	 	$	—	 	
Marketable securities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Corporate debt securities	 	$	24,713	 	 	$	—	 	 	$	24,713	 	 	$	—	 	
Certificates of deposit	 	 	13,651	 	 	 	—	 	 	 	13,651	 	 	 	—	 	
Commercial paper	 	 	12,329	 	 	 	—	 	 	 	12,329	 	 	 	—	 	
Asset-backed securities	 	 	2,099	 	 	 	—	 	 	 	2,099	 	 	 	—	 	
 	 	$	52,792	 	 	$	—	 	 	$	52,792	 	 	$	—	 	
 
Fair values determined by Level 2 inputs, which utilize data points that are observable such as quoted prices, interest rates and yield curves, require the exercise of judgment and use of estimates, that if changed, could significantly affect the Company’s financial position and results of operations. Investments in corporate debt securities, certificates of deposit, commercial paper, repurchase agreements and asset-backed securities are valued using Level 2 inputs. Level 2 securities are initially valued at the transaction price and subsequently valued and reported utilizing inputs other than quoted prices that are observable either directly or indirectly, such as quotes from third-party pricing vendors.
There were no transfers in or out of Level 1 and Level 2 fair value measurements during the six months ended June 30, 2018 or 2017.
At June 30, 2018 and December 31, 2017, the Company had investments in money market funds of $15.6 million and $20.2 million, respectively, that were measured at fair value using the net asset value per share (or its equivalent) that have not been classified in the fair value hierarchy. The funds invest primarily in U.S. government securities. Refer to Note 4 for information regarding our investments.
 
Fair Values of Other Financial Instruments
The carrying amounts of certain of the Company’s financial instruments, including cash and accounts payable, approximate their respective fair values due to their short-term nature. The carrying amount of the Company’s notes payable of $25.9 million at June 30, 2018 approximated their fair value as the terms of the notes are consistent with the market terms of transactions with similar profiles (Level 2 inputs).
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4.	Certain Financial Statement Caption Information	
Marketable Securities
The following tables summarize the Company’s marketable securities (in thousands):
 
  	 	Maturity
(in years)	 	Amortized Cost	 	 	Unrealized Gain	 	 	Unrealized Loss	 	 	Fair Value	 	
June 30, 2018	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Corporate debt securities	 	1 or less	 	$	17,551	 	 	$	—	 	 	$	(32	)	 	$	17,519	 	
Corporate debt securities	 	>1 and <5	 	 	6,128	 	 	 	—	 	 	 	(18	)	 	 	6,110	 	
Commercial paper	 	1 or less	 	 	21,224	 	 	 	1	 	 	 	(2	)	 	 	21,222	 	
Certificates of deposit	 	1 or less	 	 	480	 	 	 	—	 	 	 	—	 	 	 	480	 	
Certificates of deposit	 	>1 and <5	 	 	840	 	 	 	—	 	 	 	—	 	 	 	840	 	
Asset-backed securities	 	1 or less	 	 	6,889	 	 	 	—	 	 	 	(3	)	 	 	6,886	 	
Asset-backed securities	 	>1 and <5	 	 	1,791	 	 	 	—	 	 	 	—	 	 	 	1,791	 	
 	 	 	 	$	54,903	 	 	$	1	 	 	$	(55	)	 	$	54,848	 	
December 31, 2017:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Corporate debt securities	 	1 or less	 	$	21,097	 	 	$	—	 	 	$	(16	)	 	$	21,081	 	
Corporate debt securities	 	>1 and <5	 	 	3,636	 	 	 	—	 	 	 	(4	)	 	 	3,632	 	
Certificates of deposit	 	1 or less	 	 	13,658	 	 	 	—	 	 	 	(7	)	 	 	13,651	 	
Commercial paper	 	1 or less	 	 	12,333	 	 	 	—	 	 	 	(4	)	 	 	12,329	 	
Asset-backed securities	 	1 or less	 	 	2,099	 	 	 	—	 	 	 	—	 	 	 	2,099	 	
 	 	 	 	$	52,823	 	 	$	-	 	 	$	(31	)	 	$	52,792	 	
 
The Company has classified all of its available-for-sale investment securities, including those with maturity greater than one year, as current assets on the balance sheet based on the highly liquid nature of these investment securities and because these investment securities are considered available for use in current operations.
There were no impairments considered other-than-temporary during the periods presented, as it is management’s intention and ability to hold the securities until a recovery of the cost basis or recovery of fair value. Gross realized gains and losses on sales of marketable securities were immaterial for all periods presented.
Accrued Liabilities
Accrued liabilities are comprised of (in thousands):
 
 	 	June 30,
2018	 	 	December 31,
2017	 	
Clinical trial expenses	 	$	4,816	 	 	$	2,809	 	
Contract manufacturing services	 	 	2,518	 	 	 	1,536	 	
Payroll and other employee-related expenses	 	 	1,563	 	 	 	2,489	 	
Interest payable	 	 	187	 	 	 	77	 	
Professional fees	 	 	83	 	 	 	276	 	
Other	 	 	2,041	 	 	 	933	 	
Total accrued liabilities	 	$	11,208	 	 	$	8,120	 	
 
5.	Notes Payable	
Loan Agreement
On October 30, 2015, the Company entered into a Loan and Security Agreement (Prior Agreement) with two lenders whereby it borrowed $18.0 million (the Initial Loans). Balances under the Prior Agreement were due in monthly principal and interest payments, with final maturity of the Loans in May 2019. Each Initial Loan included a final payment fee of 7.95% of the original principal amount due upon maturity.
 On May 18, 2018, the Company entered into an Amended and Restated Loan and Security Agreement (the Loan Agreement) with the two lenders pursuant to which the lenders agreed to lend the Company $26.5 million as term loans (the Term Loans).Of the
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total proceeds, $8.6 million was applied to the repayment of outstanding principal, interest and final pay ment owed pursuant to the Initial Loans .
The Company evaluated the amendment in accordance with ASC Topic 470, which requires modification of debt instruments to be evaluated to assess whether the modification is considered a substantial modification, in which case the modification shall be accounted for as a debt extinguishment. Based on the Company’s evaluation, the modification was considered substantial and therefore the unamortized discount associated with the Prior Agreement was written off through interest expense and the principal balance of the Prior Agreement was written off.
The Term Loans will mature on December 1, 2022 (the Maturity Date) and the Company will have interest-only payments through January 1, 2020, followed by 36 equal monthly payments of principal and interest; provided that the Term Loans will be interest-only (and the number of principal and interest payments will be correspondingly reduced) through (i) July 1, 2020 if the Company submits a Biologics License Application (BLA) for the Company’s product candidate, Toca 511 & Toca FC, to the United States Food and Drug Administration (FDA) prior to January 1, 2020, but not yet received FDA approval of such BLA prior to July 1, 2020 and (ii) January 1, 2021 if following such BLA submission to the FDA prior to January 1, 2020, the Company receives FDA approval of such BLA prior to July 1, 2020.
The Term Loans bear interest at a floating per annum rate equal to the greater of (i) 8.50% and (ii) the sum of (a) the prime rate reported in the Wall Street Journal on the last business day of the month that immediately proceeds the month in which the interest will accrue, plus (b) 3.75%. The Company will be required to make a final payment of 7.95% of the principal amount of the Term Loans payable on the earlier of (i) the Maturity Date, (ii) the acceleration of any Term Loans, or (iii) the prepayment of the Term Loans. The Company may prepay all, but not less than all, of the Term Loans upon 10 days written notice provided the Company will be obligated to pay a prepayment fee equal to (i) 3.00% of the principal amount of the applicable Term Loan prepaid on or before the first anniversary of the effective date of the Loan Agreement, (ii) 2.00% of the principal amount of the applicable Term Loan prepaid on or before the second anniversary of the effective date of the Loan Agreement, and (iii) 1.00% of the principal amount of the applicable Term Loan prepaid thereafter, but prior to the Maturity Date.
In conjunction with the Loan Agreement, the Company issued the lenders warrants exercisable for 56,578 shares of common stock (the Warrants). The Warrants are exercisable in whole or in part, immediately, and have a per share exercise price of $9.35. The Warrants will terminate on the earlier of May 18, 2028 or the closing of a certain merger or consolidation transaction. The Company recorded the Warrants as a debt discount, as a contra-liability against debt, and is amortizing the balance over the life of the underlying debt. The offset to the contra-liability is recorded as additional paid in capital in the Company’s balance sheet as the Warrants were determined to be an equity instrument. The Company determined the fair value of the Warrants at the date of issuance was $0.5 million using the Black-Scholes option pricing model (“Black-Scholes”) based on significant unobservable inputs (Level 3) with an expected term of 10 years, volatility of 85.6%, risk free fate of 3.1% and expected dividend of 0% .  
The costs incurred to issue the Term Loans of $0.1 million were deferred and are included in the discount to the carrying value of the Term Loans in the accompanying balance sheet. The deferred costs and the final payment fee are amortized to interest expense over the expected term of the Term Loans using the effective interest method with an effective interest rate of 10.7%.
The aggregate carrying amounts of the Term Loans and Initial Loans are comprised of the following, as applicable (in thousands):
 
 	 	June 30,
2018	 	 	December 31,
2017	 	
Principal	 	$	26,450	 	 	$	10,200	 	
Add: accreted liability for final payment fee	 	 	52	 	 	 	869	 	
Less: unamortized discount	 	 	(589	)	 	 	(244	)	
 	 	$	25,913	 	 	$	10,825	 	
 
The Term Loans are secured by substantially all of the Company’s assets other than its intellectual property, except rights to payment from the sale, licensing or disposition of such intellectual property. The Company is also required to maintain its primary operating accounts at all times with one of the lenders. The Agreement contains customary conditions of borrowing, events of default and covenants, including covenants that restrict the Company’s ability to dispose of assets, merge with or acquire other entities, incur indebtedness and make distributions to holders of its capital stock. Should an event of default occur, including the occurrence of a material adverse change, the Company could be liable for immediate repayment of all obligations under the Agreement. At June 30, 2018, the Company was in compliance with the covenants contained in the Agreement.
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Future maturities of the Term Loans, including the final payment fee, as of June 30, 2018 are as follows (in thousands):
 
 	 	June 30,
2018	 	
Year ending December 31, 2018	 	$	—	 	
Year ending December 31, 2019	 	 	—	 	
Year ending December 31, 2020	 	 	8,817	 	
Year ending December 31, 2021	 	 	8,817	 	
Year ending December 31, 2022	 	 	10,919	 	
 	 	 	28,553	 	
Unaccreted balance for final payment fee on Loans	 	 	(2,051	)	
Unamortized discounts	 	 	(589	)	
 	 	 	25,913	 	
Less current portion	 	 	—	 	
Noncurrent portion	 	$	25,913	 	
 
6.	Stockholders’ Equity	
Upon completion of the Company’s IPO, all of the Company’s outstanding shares of convertible preferred stock were converted into an aggregate of 6,690,066 shares of the Company’s common stock.  As of June 30, 2018, the Company’s authorized capital stock consists of 200,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share.
Common Stock Reserved for Future Issuance
Common stock reserved for future issuance as of June 30, 2018 is as follows:
 
Issued and Outstanding:	 	 	 	 	
Stock options	 	 	3,548,847	 	
Warrants for common stock	 	 	67,238	 	
Shares reserved for issuance under the ESPP	 	 	363,340	 	
Shares reserved for future award grants	 	 	315,894	 	
Total	 	 	4,295,319	 	
 
Stock-Based Compensation
The Company has not recognized non-cash stock-based compensation expense for outstanding options to purchase 188,651 shares of common stock with performance-based vesting provisions after its evaluation that the occurrence of the individual milestones is not probable as of June 30, 2018.
The following table summarizes the allocation of the Company’s non-cash stock-based compensation expense for all stock awards during the periods presented (in thousands):
 
 	 	Three Months Ended
June 30,	 	 	Six Months Ended
June 30,	 	
 	 	2018	 	 	2017	 	 	2018	 	 	2017	 	
Research and development	 	$	788	 	 	$	430	 	 	$	1,535	 	 	$	572	 	
General and administrative	 	 	884	 	 	 	626	 	 	 	1,658	 	 	 	1,013	 	
Total	 	$	1,672	 	 	$	1,056	 	 	$	3,193	 	 	$	1,585	 	
 
7.	Collaborative Arrangements	
On April 18, 2018, the Company entered into a License Agreement (the License Agreement) with Beijing Apollo Venus Biomedical Technology Limited and ApolloBio Corp. (collectively, ApolloBio), which became effective in July 2018, pursuant to which the Company granted to ApolloBio an exclusive license to develop and commercialize Toca 511 & Toca FC within the greater China region, including mainland China, Hong Kong, Macao and Taiwan (the Licensed Territory).
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Under the License Agreement, the Company received an aggregate upfront payment of $16.0 million (the Upfront Payment), consisting of $1.0 million in May 2018 and $15.0 million in July 2018 . Full payment of the Upfront P ayment was a condition to the effectiveness of the license and other rights granted under the License Agreement . T herefore , the License Agreement became effective in July 2018 .
In addition to the Upfront Payment, the Company is eligible to receive up to an aggregate $111.0 million, less withholding and other taxes, upon the achievement of specified development and commercial milestones, the most near-term of which is the completion of enrollment in the Toca 5 study.  The Company is also eligible for low double-digit tiered royalty payments based on annual net sales of licensed products in the Licensed Territory, subject to reduction under specified circumstances. ApolloBio will be responsible for all development and commercialization costs in the Licensed Territory. Future payments by ApolloBio are subject to the People’s Republic of China (PRC) currency exchange approval and may be subject to other approvals by PRC authorities.
Unless earlier terminated, the License Agreement will expire upon the expiration of the last-to-expire royalty term for any and all licensed products, which royalty term is, with respect to a licensed product in a particular region ( i.e. , mainland China, Hong Kong, Macao and Taiwan) of the Licensed Territory (each, a Region), the latest of (i) 10 years after the first commercial sale of such licensed product in such Region, (ii) the expiration of all regulatory exclusivity as to such licensed product in such Region and (iii) the date of expiration of the last valid patent claim covering such licensed product in such Region. Either party may terminate the License Agreement upon a material breach by the other party that remains uncured following 60 days (or, with respect to any payment breach, 10 days) after the date of written notice of such breach. ApolloBio may terminate the License Agreement at any time by providing 90 days’ prior written notice to the Company. In addition, the Company may terminate the License Agreement upon written notice to ApolloBio under specified circumstances if ApolloBio challenges the licensed patent rights.
The effective date of the License Agreement corresponds with the final portion of the Upfront Payment received in July 2018. Therefore the $1.0 million portion of the Upfront Payment received in May 2018 was recorded as deferred revenue on the condensed balance sheet as of June 30, 2018.

 
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 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, 2017 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K  filed with the Securities and Exchange Commission, or SEC, on March 9, 2018, or Annual Report on Form 10-K.  Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” refer to Tocagen Inc.
Forward-Looking Statements
The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements.
Overview
We are a clinical-stage, cancer-selective gene therapy company focused on developing first-in-class, broadly-applicable product candidates designed to activate a patient’s immune system against their own cancer. Our cancer-selective gene therapy platform is built on retroviral replicating vectors, or RRVs, which are designed to selectively deliver therapeutic genes into the DNA of cancer cells. Our gene therapy approach is designed to fight cancer through immunotherapeutic mechanisms of action without the autoimmune toxicities commonly experienced with other immunotherapies.
We are developing our lead product candidate, Toca 511 (vocimagene amiretrorepvec) & Toca FC (extended-release flucytosine), initially for the treatment of recurrent high grade glioma, or HGG, a brain cancer with limited treatment options, low survival rates and, therefore, a significant unmet medical need. We are conducting a randomized, controlled Phase 3 clinical trial of Toca 511 & Toca FC in patients with recurrent HGG, which is designed to serve as a registrational trial. In February 2017, the U.S. Food and Drug Administration, or FDA, granted Toca 511 & Toca FC Breakthrough Therapy Designation for the treatment of patients with recurrent HGG and in June 2017 the European Medicines Agency, or EMA, granted Toca 511 Priority Medicines, or PRIME, Designation for the treatment of patients with glioma. Breakthrough Therapy Designation indicates that preliminary clinical evidence demonstrates the drug may have substantial improvement on one or more clinically significant endpoints over available therapy. PRIME Designation indicates that there is a potential to benefit patients with unmet medical needs based on early clinical data. We also have Fast Track Designation (which may lead to expedited regulatory review of new products that treat serious diseases or conditions and demonstrate the potential to address an unmet medical need) from the FDA for Toca 511 & Toca FC for the treatment of recurrent HGG. We also received Orphan-Drug Designation from the FDA for the treatment of HGG. Orphan-Drug Designation is a designation for a product that treats a rare disease or condition and which, if the product receives the first FDA approval for that disease or condition, may result in a period of regulatory exclusivity, subject to some exceptions. The Committee for Orphan Medicinal Products of the EMA has designated both flucytosine and vocimagene amiretrorepvec as orphan medicinal products indicated for the treatment of glioma. The EMA provides several benefits to drug developers for developing drugs for orphan diseases.
In April 2018, we entered into a license agreement, or License Agreement, with Beijing Apollo Venus Biomedical Technology Limited and ApolloBio Corp., or collectively ApolloBio which became effective in July 2018, pursuant to which we granted to ApolloBio an exclusive license to develop and commercialize Toca 511 & Toca FC within the greater China region, including mainland China, Hong Kong, Macao and Taiwan, or the Licensed Territory. Under the License Agreement, we received an aggregate upfront payment of $16.0 million consisting of $1.0 million received in May 2018 and $15.0 million received in July 2018 and we are eligible to receive up to $111.0 million in future payments upon the achievement of specified development and commercial milestones. In addition, we are also eligible for low double-digit tiered royalty payments based on annual net sales of licensed products in the Licensed Territory, subject to reduction under specified circumstances.
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We do not have any products approved for sale and have not gen erated any revenue from product sales. We have funded our operations primarily through the private placement of our convertible preferred stock, from which we received net proceeds of $131.4 million and our initial public offering in April 2017, from which we received net proceeds of $86.9 million . We have also received $44.0 million in net proceeds from term loans , $16.5 million from upfront payments under our license and collaboration agreements , $10.9 million from the issuance of our conver tible promisso ry notes payable and $2.1 million from private and federal grants .
Since our inception in August 2007, we have devoted substantially all of our efforts to developing our gene therapy platform and our lead product candidate, Toca 511 & Toca FC. We have never been profitable and have incurred significant operating losses in each year since our inception. We had an accumulated deficit of $195.9 million as of June 30, 2018. Substantially all of our net losses resulted from costs incurred in connection with our research, preclinical, clinical, product, regulatory and business development activities, as well as raising capital and building our infrastructure.
We expect to continue to incur significant expenses and increasing net operating losses for at least the next several years. We expect our expenses will increase substantially in connection with our ongoing activities as we continue to develop and seek regulatory approval of our product candidates and operate as a public company. To fund further operations, we will need to raise additional capital.
Accordingly, we will seek to fund our operations through equity and/or debt financings. We may also consider new collaborations or selectively partnering our technology or programs. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. In addition, subject to limited exceptions, our Loan and Security Agreement also prohibits us from incurring indebtedness without the prior written consent of the lenders. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our product candidates.
Financial Operations Overview
Revenue
We currently have no products approved for sale, and have not generated any revenues from the sale of products. We have not submitted any product candidate for regulatory approval. Our revenue has been derived from our license and collaboration arrangement we entered into with Siemens Healthcare Diagnostics Inc., or Siemens in 2011, under which we received a nonrefundable, non-creditable, lump-sum, upfront license payment of $0.5 million for our sublicense to Siemens of certain diagnostic assay technology and the License Agreement, under which we received $1.0 million of the total upfront payment due thereunder in April 2018 and the remaining upfront payment due thereunder of $15.0 million in July 2018, upon which the license agreement became effective. As of June 30, 2018, no revenue was recognized related to the License Agreement.
In the future, we may generate revenue from a combination of product sales, royalties and milestones in connection with our Siemens agreement, the License Agreement and any future marketing and distribution arrangements and other collaborations, strategic alliances and license arrangements, or a combination of these approaches. However, we do not expect to receive additional revenues unless and until we receive regulatory approval for product candidates or potentially enter into collaboration agreements. We expect that any revenue we generate will fluctuate from quarter to quarter and year to year as a result of the timing and amount of license fees, milestone and other payments, and the amount and timing of payments that we receive upon the sale of our products, to the extent any are successfully commercialized. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval of them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.
Research and Development Expenses
Research and development expenses consist primarily of salaries and related expenses for personnel, including non-cash stock-based compensation costs, preclinical costs, clinical trial costs, costs related to acquiring and manufacturing clinical trial materials, contract services, facilities costs, overhead costs and depreciation. These activities also include research and development related to our gene therapy platform development. All research and development costs are expensed as incurred.
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We cannot determine with certainty the duration and completion costs of the current or future clinical trials of our product candidates, or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our pr oduct candidates. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:
 	•	per patient trial costs;	
 	•	the number of patients that participate in the trials;	
 	•	the number of sites included in the trials;	
 	•	the countries in which the trials are conducted;	
 	•	the length of time required to enroll eligible patients;	
 	•	the drop-out or discontinuation rates of patients;	
 	•	the potential for additional safety monitoring or other clinical trials requested by regulatory agencies;	
 	•	significant and changing government regulation; and	
 	•	the timing and receipt of any regulatory approvals.	
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.
The following table sets forth our research and development expense by project (in thousands):
 
 	 	Three Months Ended
June 30,	 	 	Six Months Ended
June 30,	 	
 	 	2018	 	 	2017	 	 	2018	 	 	2017	 	
Toca 511 & Toca FC	 	$	11,983	 	 	$	6,342	 	 	$	21,396	 	 	$	12,726	 	
Vector technology	 	 	780	 	 	 	290	 	 	 	1,803	 	 	 	530	 	
Total	 	$	12,763	 	 	$	6,632	 	 	$	23,199	 	 	$	13,256	 	
 
We expect our research and development expenses to increase for the foreseeable future as we scale up our clinical trial and manufacturing activities and seek regulatory approval of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related expenses for personnel, including non-cash stock-based compensation costs and travel expenses for our employees in executive, operational, finance and business development functions. Other general and administrative expenses include facility-related costs, consulting fees, information technology, insurance, professional fees for accounting and legal services, expenses associated with obtaining and maintaining patents and costs associated with being a public company.
We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our expanding research and development and potential commercialization of our product candidates. We also anticipate continued increases in expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs associated with being a public company. Additionally, if we believe a regulatory approval of our lead product candidate appears likely, we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations, especially as it relates to establishing a sales force and other expenses related to the sale and marketing of our product candidates.
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Interest Income
Interest income consists primarily of interest income earned on cash, cash equivalents and marketable securities.
Interest Expense
Interest expense consists primarily of stated interest and the amortization of related debt issuance costs incurred on the outstanding principal amount of our borrowings under our notes payable and convertible promissory notes payable.
Critical Accounting Policies and Significant Judgments and Estimates
There have been no significant changes to our critical accounting policies since December 31, 2017 besides the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”) , which amended the existing accounting standards for revenue recognition. For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our unaudited condensed financial statements, refer to Item 7 in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 2 to our financial statements contained in our Annual Report on Form 10-K and Note 2 to our unaudited condensed financial statements contained in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
We have reviewed all recently issued standards and have determined that other than as disclosed in Note 2 to our unaudited condensed financial statements included herein, such standards will not have a material impact on our financial statements or do not otherwise apply to our operations.
Results of Operations
Comparison of the Three and Six Months Ended June 30, 2018 and 2017
The following table summarizes our results of operations for the three and six months ended June 30, 2018 and 2017 (in thousands):
 
 	 	Three Months Ended
June 30,	 	 	Six Months Ended
June 30,	 	
 	 	2018	 	 	2017	 	 	2018	 	 	2017	 	
License revenue	 	$	9	 	 	$	10	 	 	$	18	 	 	$	21	 	
Research and development expenses	 	 	12,763	 	 	 	6,632	 	 	 	23,199	 	 	 	13,256	 	
General and administrative expenses	 	 	2,573	 	 	 	2,030	 	 	 	4,992	 	 	 	3,970	 	
Interest income	 	 	331	 	 	 	103	 	 	 	646	 	 	 	140	 	
Interest expense	 	 	(1,093	)	 	 	(495	)	 	 	(1,442	)	 	 	(1,111	)	
Change in fair value of preferred stock
   warrants	 	 	—	 	 	 	(22	)	 	 	—	 	 	 	37	 	
 
License revenue .    License revenue was less than $0.1 million for the three and six months ended June 30, 2018 and 2017.  
Research and development expenses .    Research and development expenses were $12.8 million and $23.2 million for the three and six months ended June 30, 2018, respectively, compared to $6.6 million and $13.3 million for the three and six months ended June 30, 2017, respectively. The increase of $6.2 million for the three months ended June 30, 2018 compared to the same period in 2017 was primarily related to a $1.1 million increase in personnel related costs, including non-cash stock-based compensation due to an increase in headcount from 48 to 58, $2.3 million increase in clinical trial costs due to the ramp up in patient enrollment of Toca 5 and $1.7 million increase in product development activities, including manufacturing. The $9.9 million increase for the six months ended June 30, 2018 compared to the same period in 2017 was primarily due to a $2.4 million increase in personnel related costs, including non-cash stock-based compensation due to increased headcount, $2.7 million increase in clinical trial costs and $3.2 million increase in product development activities, including manufacturing. We anticipate our research and development expenses will continue to increase in future quarters.
 General and administrative expenses .    General and administrative expenses were $2.6 million and $5.0 million for the three and six months ended June 30, 2018, respectively, compared to $2.0 million and $4.0 million for the three and six months ended June 30, 2017, respectively. The increase of $0.6 million and $1.0 million for the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017 was primarily due to increased non-cash stock-based compensation expense of $0.3
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million and $0.7 million for the three and six months ended June 30, 2018 , respectively, as well as an increase in external services associated wit h being a public company.  
Interest income .    Interest income was $0.3 million and $0.6 million for the three and six months ended June 30, 2018, respectively, compared to $0.1 million  for each of the three and six months ended June 30, 2017. The increase of $0.2 million and $0.5 million, respectively was primarily due to earning interest at higher rates during 2018 compared to 2017.
Interest expense .    Interest expense was $1.1 million and $1.4 million for the three and six months ended June 30, 2018, respectively, compared to $0.5 million and $1.1 million for the three and six months ended June 30, 2017, respectively. The increase represents charges incurred in connection with our Loan Agreement in May 2018 in which the termination of our prior loan and security agreement was treated as a debt extinguishment.
Liquidity and Capital Resources
We have incurred significant losses and cumulative negative cash flows from operations since our inception. As of June 30, 2018, we had an accumulated deficit of $195.9 million and we anticipate that we will continue to incur losses for at least the next several years. We expect that our research and development and general and administrative expenses will continue to increase and, as a result, we will need additional capital to fund our operations, which we may raise through equity and/or debt financings. We may also consider new collaborations or selectively partnering our technology or programs.
Since inception through June 30, 2018, we have funded our operations primarily through the private placement of our convertible preferred stock from which we received net proceeds of $131.4 million and our initial public offering from which we received net proceeds of $86.9 million. In addition, we have also received $44.0 million in net proceeds from term loans, $10.9 million from the issuance of our convertible promissory notes payable, $2.1 million from private and federal grants, and a $16.5 million from upfront payments under our license and collaboration agreements, including $15.0 million received in July 2018.
The loans under our amended and restated loan and security agreement, or the Loan Agreement, with two lenders, dated May 18, 2018, are secured by substantially all of our assets other than our intellectual property (except rights to payment from the sale, licensing of disposition of such intellectual property). As of June 30, 2018, there was $25.9 million outstanding under the Loan Agreement. Balances under the Loan Agreement accrue interest at the prime rate plus 3.75%, subject to a floor of 8.50%.  The interest rate as of June 30, 2018 was 8.50%. The loans under the Loan Agreement mature in December 2022 with interest only payments through January 1, 2020 followed by 36 monthly payments of principal and interest, provided that the interest only period may be extended (and the number of principal and interest payments will be correspondingly reduced) in certain circumstances. The Loan Agreement contains customary conditions of borrowing, events of default and covenants, including covenants that restrict our ability to dispose of assets, merge with or acquire other entities, incur indebtedness and make distributions to holders of our capital stock. Should an event of default occur, including the occurrence of a material adverse change, we could be liable for immediate repayment of all obligations under the Loan Agreement.
As of June 30, 2018, we had $79.5 million in cash, cash equivalents and marketable securities.  Our available cash and marketable securities are invested in accordance with our investment policy, primarily with a view to preserve principal and maintain liquidity. Currently, our funds are held in FDIC insured cash accounts, certificates of deposits, money market funds and investment-grade fixed income securities.
Cash Flows
The following table sets forth the primary sources and uses of cash for each of the periods set forth below (in thousands):
 
 	 	Six Months Ended
June 30,	 	
 	 	2018	 	 	2017	 	
Net cash (used in) provided by:	 	 	 	 	 	 	 	 	
Operating activities	 	$	(23,471	)	 	$	(14,920	)	
Investing activities	 	 	(2,867	)	 	 	(6,884	)	
Financing activities	 	 	15,018	 	 	 	92,400	 	
Net (decrease) increase in cash and cash equivalents	 	$	(11,320	)	 	$	70,596	 	
 
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Operating Activities .    Net cash used in operating activities was $ 23.5 million and $14.9 million for the six months ended June 30, 2018 and 2017 , respectively. The increase in net cash used in operating activities was primarily attributable to an increase in net loss of $10.8 million offset by an increase in non-cash stock-based compensation of $1.6 million.
Investing Activities .    Net cash used in investing activities was $2.9 million and $6.9 million for the six months ended June 30, 2018 and 2017, respectively. Net cash used in investing activities for the periods presented primarily relate to the net of purchases, sales and maturities of marketable securities used to fund our operations and purchases of property and equipment. We invest cash in excess of our immediate operating requirements in a way that maturity is staggered and designed to optimize our return on investments, while satisfying our liquidity needs. Net cash used to purchase marketable securities was $2.0 million and $6.8 million for the six months ended June 30, 2018 and 2017, respectively. We purchased $0.9 million and $0.1 million of property and equipment for the six months ended June 30, 2018 and 2017, respectively.
Financing activities .    Net cash provided by financing activities was $15.0 million and $92.4 million for the six months ended June 30, 2018 and 2017, respectively. The decrease in cash provided by financing activities for the six months ended June 30, 2018 was primarily related to net proceeds from our Loan Agreement of $26.3 million offset by cash paid on extinguishment of our prior loan and security agreement of $8.6 million in May 2018 compared to net proceeds from our initial public offering of $86.9 million in 2017.
Funding Requirements
Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, laboratory expenses, regulatory expenses, marketing, and general and administrative expenses. Based on our research and development plans and our timing expectations related to the progress of our programs, we expect that our existing cash, cash equivalents and marketable securities as of June 30, 2018 will enable us to fund our operations for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner that we currently expect. Furthermore, our operating plan may change and we may need additional funds sooner than planned.
The successful development of any product candidate is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the development of Toca 511 & Toca FC or our other current and future product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from the sale of product candidates. This is due to the numerous risks and uncertainties associated with developing immunotherapies, including the uncertainty of:
 	•	the progress, timing, costs and results of our ongoing Phase 3 clinical trial of Toca 511 & Toca FC;	
 	•	the progress, timing, costs and results of our Phase 1 dose escalation clinical trials that include our intratumoral study, resection study, and intravenous study;	
 	•	the progress, timing, costs and results of development for Toca 511 & Toca FC for the treatment of metastatic solid tumors;	
 	•	the progress, timing, costs and results of development for our other future product candidates;	
 	•	the outcome, timing and cost of regulatory approvals by the FDA and comparable foreign regulatory authorities, including the potential for the FDA or comparable foreign regulatory authorities to require that we perform more studies than those that we currently expect;	
 	•	the ability of our product candidates to progress through clinical development successfully;	
 	•	the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;	
 	•	arrangements with third-party service providers and manufacturers;	
 	•	our need and ability to hire additional personnel;	
 	•	our need to implement additional infrastructure and internal systems;	
 	•	the effect of competing technological and market developments; and	
 	•	the cost of establishing sales, marketing and distribution capabilities for any products for which we may receive regulatory approval.	
A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of that product candidate.
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Until we can generate a sufficient amount of revenue from our products, if ever, we expect to finance future cash needs through equity and/or debt financings. We may also consider new collaborations or selectively partnering our technology or programs.  We do not have any committed external source of funds. Additional capital may not be available on reasonable terms, if at all. Subject to limited exceptions, ou r Loan Agreement also prohibits us from incurring indebtedness without the prior written consent of the lenders. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates. If we raise additional funds through the issuance of additional equity or debt securities, it could result in dilution to our existing stockholders and increased fixed payment obligations, and these securities may have rights senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limi tations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Any of these events could significantly harm our business, financial condition and prospects.
Off-Balance Sheet Arrangements
As of June 30, 2018, we did not have any off-balance sheet arrangements.
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The primary objective of our investment activities is to preserve our capital to fund our operations. We also seek to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of cash equivalents and investments in securities of high credit quality. As of June 30, 2018, we had cash, cash equivalents and marketable securities of $79.5 million consisting of cash and investments in certificates of deposit and money market funds, and investment-grade fixed income securities. A significant portion of our investments may be subject to interest rate risk and could fall in value if market interest rates increase. However, because our investments are primarily short-term in duration, we believe that our exposure to interest rate risk is not significant and a 1% movement in market interest rates would not have a significant impact on the total value of our portfolio. We actively monitor changes in interest rates.
 Item 4. Controls and Procedures.
Disclosure Controls and Procedures
In evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act (1) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (2) is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during our most recent fiscal quarter ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
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 PART II – OTHE R INFORMATION
 Item 1.  Legal Proceedings
None.
 Item 1A.  Risk Factors
You should carefully consider the following risk factors, as well as the other information in this report, before deciding whether to purchase, hold or sell shares of our common stock. The occurrence of any of the following risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. You should consider all of the factors described in this section as well as the other information in our Annual Report on Form 10-K including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” when evaluating our business. The risk factors set forth below that are marked with an asterisk (*) contain changes to the similarly titled risk factors included in Item 1A of our Annual Report on Form 10-K. If any of the following risks actually occurs, our business, financial condition, results of operations and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock would likely decline and you may lose all or part of your investments.  Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
Risks related to our business and industry
We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.*
We are a clinical-stage company with a limited operating history. We are not profitable and have incurred net losses in each year since our inception in 2007, including net losses of $38.9 million for the year ended December 31, 2017 and $29.0 million for the six months ended June 30, 2018. As of June 30, 2018, we had an accumulated deficit of $195.9 million.
We have devoted most of our financial resources to research and development, including our clinical, preclinical and platform development activities. To date, we have financed our operations primarily through the private placement of our convertible preferred stock, our initial public offering of our common stock, term loans, the issuance of convertible promissory notes and upfront payments under our license and collaboration agreements. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. The amount of our future net losses will depend, in part, on the rate of our future expenditures and our ability to generate revenue. We have not completed late-stage clinical trials for any product candidate and it will be several years, if ever, before we have a product candidate ready for regulatory approval and commercialization. Even if we or our strategic partners succeed in obtaining regulatory approval and commercializing one or more of our product candidates, we will continue to incur substantial research and development and other expenditures to develop and market additional product candidates. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and will continue to have an adverse effect on our stockholders’ equity and working capital.
We will require substantial additional financing to achieve our goals, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.*
We are currently advancing our lead product candidate, Toca 511 & Toca FC, through clinical development and other product candidates through preclinical development. Developing gene therapy products is expensive, and we expect our research and development expenses to continue to increase in connection with our ongoing activities, particularly as we advance our product candidates in clinical trials.
 As of June 30, 2018, our cash, cash equivalents and marketable securities were $79.5 million. We expect that our existing cash, cash equivalents and marketable securities as of June 30, 2018 will be sufficient to fund our current operations through at least the next 12 months. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through equity and/or debt financings. We do not have any committed external source of funds. We may also consider new collaborations or selectively partner our technology or programs. In any event, we will require additional capital to obtain regulatory approval for, and to commercialize, our product candidates. Raising funds in the current
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economic environment may present additional challenges. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additio nal capital if market conditions are favorable or if we have specific strategic considerations.
Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Subject to limited exceptions, our amended and restated loan and security agreement, or Loan Agreement also prohibits us from incurring indebtedness without the prior written consent of the lenders. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity or convertible securities would dilute all of our stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects.
If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs or the commercialization of any product candidates or be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.
Immunotherapy, gene therapy and biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of uncertainty. We have never generated any revenue from product sales and may never be profitable.*
Since our inception in August 2007, we have devoted most of our efforts to developing our gene therapy platform and our lead product candidate, Toca 511 & Toca FC. We are still developing our product candidates, and we have not completed development of any products. Our ability to generate revenue and achieve profitability depends in large part on our ability, alone or with partners, to successfully complete the development of, obtain the necessary regulatory approvals for, and commercialize product candidates. We do not anticipate generating revenues from sales of products for the foreseeable future. Our ability to generate future revenues from product sales depends heavily on our success in:
 	•	completing clinical trials through all phases of clinical development of our current and future product candidates;	
 	•	seeking and obtaining marketing approvals for product candidates that successfully complete clinical trials;	
 	•	launching and commercializing product candidates for which we obtain marketing approval with a partner or, if launched independently, successfully establishing a sales force, marketing and distribution infrastructure;	
 	•	identifying and developing new product candidates;	
 	•	progressing our preclinical programs into human clinical trials;	
 	•	establishing and maintaining supply and manufacturing relationships with third parties;	
 	•	maintaining, protecting, expanding and enforcing our intellectual property; and	
 	•	attracting, hiring and retaining qualified personnel.	
Because of the numerous risks and uncertainties associated with gene therapy product development, we are unable to predict the timing or amount of increased expenses or when we will be able to achieve or maintain profitability, if ever. In addition, our expenses could increase beyond expectations if we are required by the U.S. Food and Drug Administration, or FDA, or foreign regulatory agencies, to perform studies and clinical trials in addition to those that we currently anticipate or if there are any delays in the development of any of our product candidates. If one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated with commercializing such product candidates. Even if we are able to generate revenues from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations, which may not be available to us on favorable terms, if at all. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.
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Our gene therapy product candidates are based on novel technology, which makes it difficult to predict the time and cost of product candidate development. *
We have concentrated our product research and development efforts on our gene therapy platform, and our future success depends on the successful development of this therapeutic approach. There can be no assurance that any development problems we experience in the future related to our gene therapy platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays in developing a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, or developing or validating product release assays in a timely manner, which may prevent us from completing our clinical trials or commercializing our products on a timely or profitable basis, if at all.
In addition, the clinical trial requirements of the FDA, the European Medicines Agency, or EMA, and other regulatory agencies and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the potential products. The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or extensively studied pharmaceutical or other product candidates. In October 2015, the FDA approved Amgen Inc.’s oncolytic virus therapy, Imlygic (talimogene laherparapvec), for the local treatment of unresectable lesions in patients with melanoma recurrent after initial surgery and in December 2015, Imlygic was approved by the European Commission for early stage, unresectable melanoma that is regionally or distantly metastatic following a recommendation for marketing authorization as a gene therapy in Europe by the Committee for Advanced Therapies. In 2017, the FDA approved the first two CAR T cell therapy products: Novartis’ Kymriah (tisagenlecleucel), for the treatment of a type of leukemia and Kite Pharma’s Yescarta (axicabtagene ciloleucel), for the treatment of a type of lymphoma.  On December 19, 2017, the FDA approved Spark Therapeutics, Inc.’s Luxturna (voretigene neparvovec-rzyl), a new gene therapy, to treat children and adult patients with an inherited form of vision loss that may result in blindness. Two other gene therapy products have been approved in Europe, uniQure NV’s Glybera (alipogene tiparvovec), which received marketing authorization from the European Commission in 2012 and GlaxoSmithKline, Fondazione Telethon and Ospedale San Raffaele’s Strimvelis (GSK2696273), which was approved by the European Commission in 2016. The limited precedent for gene therapy approvals makes it difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in the United States, Europe or other territories.  
Regulatory requirements governing gene therapy products have changed frequently and may continue to change in the future. For example, in January 2017, the FDA Oncology Center of Excellence, or the Center of Excellence, was created to leverage the combined skills of regulatory scientists and reviewers with expertise in drugs, biologics, and devices (including diagnostics). While the Center of Excellence is designed to help expedite the development of oncology and malignant hematology-related medical products and support an integrated approach in the clinical evaluation of drugs, biologics and devices for the treatment of cancer, the new Center of Excellence may initially create confusion within the FDA and especially in the Center of Biologics and Research that is the primary review division for our initial product candidate. Gene therapy clinical trials conducted at institutions that receive funding for recombinant DNA research from the U.S. National Institutes of Health, or the NIH, are also subject to review by the NIH Office of Biotechnology Activities’ Recombinant DNA Advisory Committee, or the RAC. We have received from time to time questions from the FDA regarding investigational new drug application, or IND, submissions and clinical protocols for Toca 511 & Toca FC. We believe that we have adequately addressed these questions, some of which have caused, in the past, some delays in our clinical trials. Although the FDA decides whether individual gene therapy protocols may proceed, the RAC review process can impede the initiation of a clinical trial, even if the FDA has reviewed the study and approved its initiation. Conversely, the FDA can put an IND on a partial or complete clinical hold even if the RAC has provided a favorable review. Our trials have, in the past, been put on hold for reasons including suspected serious adverse events, which resulted in delays of our trials. Also, before a clinical trial can begin at an NIH-funded institution, that institution’s institutional review board, or IRB, and its Institutional Biosafety Committee will have to review the proposed clinical trial to assess the safety of the study. In addition, adverse developments in clinical trials of gene therapy products conducted by others may cause the FDA or other regulatory bodies to change the requirements for performing studies or for obtaining approval of any of our product candidates.
These regulatory review committees and advisory groups, and the new guidelines they promulgate, may lengthen the regulatory review process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post-approval limitations or restrictions. As we advance our product candidates, we will be required to consult with these regulatory and advisory groups and comply with applicable guidelines. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generate sufficient revenue to maintain our business.
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Failure to successfully develop and obtain approval of our lead product candidate, Toca 511 & Toca FC, or our other future p roduct candidates could adversely affect our future success.
Our business and future success is substantially dependent on our ability to obtain regulatory approval of and then successfully commercialize our lead product candidate, Toca 511 & Toca FC which is in clinical development. All of our product candidates, including Toca 511 & Toca FC, will require additional clinical and nonclinical development, regulatory review and approval in one or more jurisdictions, substantial investment, access to sufficient pre-commercial and commercial manufacturing capacity and significant marketing efforts before we can generate any revenue from product sales. In addition, because Toca 511 & Toca FC is our most advanced product candidate, and because all of our other future product candidates will likely be based on similar technology, if Toca 511 & Toca FC encounters safety or efficacy problems, developmental delays, regulatory issues or other problems, our development plans and business for our other product candidates would be significantly harmed.
We may have difficulty enrolling patients in our clinical trials, which could delay or prevent development of our product candidates.
Identifying and qualifying patients to participate in clinical trials of our product candidates is critical to our success. The timing of our clinical trials depends on the speed at which we can recruit patients to participate in testing our product candidates. We have experienced delays in some of our clinical trials in the past due to difficulties with enrollment and we may experience similar delays in the future. If patients are unwilling to participate in our clinical trials because of negative publicity from adverse events in the industry or in the trials for other third party product candidates, or for other reasons, including competitive clinical trials for similar patient populations, the timeline for recruiting patients, conducting studies and obtaining regulatory approval of potential products may be delayed. These delays could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical trials altogether.
We or our clinical trial sites may not be able to identify, recruit and enroll a sufficient number of patients, or those with the required or desired characteristics in a clinical trial, to complete our clinical trials in a timely manner. Patient enrollment is affected by factors including:
 	•	severity of the disease under investigation;	
 	•	design of the clinical trial protocol, including the fact that certain of our clinical trials are randomized to current treatments;	
 	•	size of the patient population;	
 	•	eligibility criteria for the clinical trial in question;	
 	•	perceived risks and benefits of the product candidate under study;	
 	•	general level of excitement for the treatment approach;	
 	•	comments on social media;	
 	•	proximity and availability of clinical trial sites for prospective patients;	
 	•	availability of competing therapies and clinical trials;	
 	•	efforts to facilitate timely enrollment in clinical trials;	
 	•	patient referral practices of physicians; and	
 	•	ability to monitor patients adequately during and after treatment.	
In particular, recurrent high grade glioma, or HGG, the condition for which we are initially evaluating our lead product candidate, has a limited number of patients for clinical trials. The eligibility criteria of our clinical trials will further limit the pool of available trial participants. For example, some clinical trials will be limited to patients with recurrent HGG who are scheduled for a repeat resection, for which there are fewer patients. Additionally, the process of finding and diagnosing patients may prove costly. Finally, our treatment necessitates that the patient be near one of our clinical trial sites, since periodic follow-up visits at the clinical trial site are contemplated in the protocols.
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We currently plan to seek initial marketing approval in the United States and subsequently other pharmaceutical markets. We may not be able t o initiate or continue clinical trials if we cannot enroll a sufficient number of eligible patients to participate in the clinical trials required by the FDA, the EMA or other regulatory agencies. Our ability to successfully initiate, enroll and complete a clinical trial in any foreign country is subject to numerous risks unique to conducting business in foreign countries, including:
 	•	difficulty in establishing or managing relationships with contract research organizations, or CROs, and physicians;	
 	•	different standards for the conduct of clinical trials;	
 	•	our inability to locate qualified local consultants, physicians and partners; and	
 	•	the potential burden of complying with a variety of foreign laws, medical standards and regulatory requirements, including the regulation of pharmaceutical and biotechnology products and treatments.	
If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our business.
The FDA regulatory approval process is lengthy and time-consuming, and we may experience significant delays in the clinical development and regulatory approval of our product candidates. If we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.
The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.
We have not previously submitted a biologics license application, or BLA, to the FDA, or similar approval filings to comparable foreign authorities. A BLA must include extensive preclinical and clinical data and supporting information to establish the product candidate’s safety, purity and potency for each desired indication. The BLA must also include significant information regarding the chemistry, manufacturing and controls for the product. Clinical testing is expensive, time-consuming and uncertain as to outcome. We have experienced in the past delays in the commencement and completion of our clinical trials. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. A failure of one or more clinical trials can occur at any stage of testing. In addition to challenges related to patient enrollment, other events that may prevent successful or timely completion of clinical development include:
 	•	the availability of financial resources to commence and complete our planned clinical trials;	
 	•	delays in reaching a consensus with clinical investigators on study design;	
 	•	delays in reaching a consensus with regulatory agencies on study design or approval from regulatory authorities to commence a trial;	
 	•	reaching agreement on acceptable terms with prospective clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different clinical trial sites;	
 	•	delays in obtaining required IRB and/or biologic safety committee approval at each clinical trial site;	
 	•	imposition of a clinical hold by regulatory agencies, after an inspection of our clinical trial operations or study sites, or otherwise;	
 	•	failure by our CROs, other third parties or us to adhere to clinical trial requirements;	
 	•	failure to perform in accordance with the FDA’s good clinical practices, or GCP, or applicable regulatory guidelines in other countries;	
 	•	failure to adequately acquire, preserve and quality assure clinical trial data;	
 	•	delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical sites;	
 	•	inadequate shipping or storage of our products, resulting in loss of activity;	
 	•	delays in having patients complete participation in a study or return for post-treatment follow-up;	
 	•	clinical trial sites dropping out of a study;	
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 	•	changes in legislation or regulatory requirements and guidance that require amending or submitting new clinical protocols; and	
 	•	technical equipment and/or operating room supply limitations at a clinical trial site.	
We could also encounter delays if physicians encounter unresolved ethical issues associated with enrolling patients in clinical trials of our product candidates in lieu of prescribing existing treatments that have established safety and efficacy profiles. Further, a clinical trial may be suspended or terminated by us, the IRBs for the institutions in which such clinical trials are being conducted, the Data Safety Monitoring Committee for such clinical trial, the FDA or other regulatory authorities due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or clinical trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. If we experience termination of, or delays in the completion of, any clinical trial of our product candidates, the commercial prospects for our product candidates will be harmed, and our ability to generate product revenue will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product development and approval process and jeopardize our ability to commence product sales and generate revenue.
Any inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenues from product sales, regulatory and commercialization milestones and royalties. In addition, if we make manufacturing or formulation changes to our product candidates, we may need to conduct additional studies to bridge our modified product candidates to earlier versions. Clinical trial delays could also shorten any periods during which we may have patent protection rights to commercialize our product candidates or allow our competitors to bring products into clinical trials or to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.
Our clinical trials may fail to demonstrate safety and efficacy and any of our product candidates could be associated with undesirable side effects or other properties, which would prevent or delay regulatory approval and commercialization.*
Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we or our strategic partner must conduct extensive clinical trials to demonstrate the safety and efficacy of the product candidates in humans. Failure can occur at any time during a clinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. There is typically an extremely high rate of attrition from the failure of product candidates proceeding through clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical testing and initial clinical trials. Most product candidates that commence clinical trials are never approved as products.
In addition, from time to time, we may publish interim, “top-line,” initial, or preliminary data from our clinical studies. Interim data from clinical trials are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data becomes available. Preliminary, initial, or “top-line” data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim, “top-line”, initial, and preliminary data should be viewed with caution until the final data are available. Adverse changes between preliminary, initial, “top-line” or interim data and final data could significantly harm our business prospects. In the 127 patients who received Toca 511 and Toca FC in our Phase 1 clinical trials, treatment-related adverse events were reported in 57.5% of patients and these events were predominantly low grade (48.8%). The most common treatment-related adverse events were fatigue (29.9%), diarrhea (14.2%), nausea (11.0%), headache (7.1%), and decreased appetite (5.5%). Treatment-related serious adverse events were reported in 7.1% of patients treated with Toca 511 and Toca FC. In patients that received both Toca 511 and Toca FC, hematologic toxicity was infrequent and also low grade. Patients treated with our product candidates may also be undergoing surgical, radiation and chemotherapy treatments, which can cause side effects or adverse events that are unrelated to our product candidate, but may still impact the success of our clinical trials. Additionally, our product candidates could potentially cause other adverse events that have not yet been predicted. The inclusion of critically ill patients in our or our partner’s clinical trials may result in deaths or other adverse medical events due to other therapies or medications that such patients may be using or due to the gravity of such patients’ illnesses. Patients who will be administered Toca 511 & Toca FC in the HGG clinical trials are seriously or terminally ill and some of them may have immune impairment related to their treatment with temozolomide and dexamethasone. It is expected that some of the patients will die or experience major clinical events such as strokes, hydrocephalus, infections, brain swelling and pulmonary emboli either during the course of our or our partner’s clinical trials or after such trials, which has occurred in the past.  In some patients with evidence of drug activity from Toca 511 & Toca FC, new lesions have been observed, some of which continue to grow even with continued Toca FC treatment.
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Further, the design of our ongoing Phase 3 clinical trial of Toca 511 & Toca FC was based in part on survival data from similar patients in published trials. The prognosis, unrelated to our treatment, f or our patients could be better than for patients in these prior trials, due to improvements in clinical practice, other experimental trials or underappreciated differences in entry criteria. In addition, the clinical or regulatory opinion on what constitu tes the standard of care that we have used as the basis for the control arm in this clinical trial may change before we submit the BLA for Toca 511 & Toca FC, if the clinical trial is successful.
It is possible that our retroviral replicating vector, or RRV, product candidates will spread to healthy tissues and result in unknown side effects, and that any anticipated or unanticipated side effects may occur at doses required to achieve clinically relevant efficacy, which could prohibit or delay commercialization of our product candidates. Alternatively, our RRV product candidates might not spread rapidly enough through the tumor or transfer sufficient genetic material to the tumor to demonstrate efficacy sufficient for regulatory approval. In preclinical studies in rodent models, we observed that our vectors do not initially infect tumors in some locations as well as they infect tumors in other locations, which may limit treatment with our future product candidates to a limited number of cancer locations. Further, it is possible that the RRV might not spread fast enough through the brain cancer to have a beneficial effect or that the virus might not be able to reach certain parts of the tumor due to prior surgical removal of contiguous cancer tissue or from scarring resulting from surgery, chemotherapy, radiation or spontaneous tumor necrosis (cell death) or due to mechanical limitations such as the inability to insert the needle accurately into tissue bearing the tumor; the inability to push enough RRV volume into a tumor with a high pressure; the rapid diffusion of RRV from the injection site due to high intratumor pressure or due to the communication with the ventricular space, external cerebral spinal fluid or the entry into veins; or the inability to insert the needle into the tumor without damaging vital brain structures. It is possible that the cancers which we seek to treat with our product candidates will be or become resistant to infection with the virus or become resistant to the 5-FU (5-fluorouracil) produced from Toca FC, due to mutation within the cancer cells genes or due to mutation of Toca 511, including loss of the therapeutic gene, cytosine deaminase.
If the results of our or our partner’s clinical trials are inconclusive or if there are safety concerns or adverse events associated with our product candidates, we may:
 	•	be delayed in obtaining marketing approval for our product candidates, if at all;	
 	•	obtain approval for indications or patient populations that are not as broad as intended or desired;	
 	•	obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;	
 	•	be subject to changes with the way the product is administered;	
 	•	be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements;	
 	•	have regulatory authorities withdraw their approval of the product or impose restrictions on its distribution in the form of a modified Risk Evaluation and Mitigation Strategy, or REMS;	
 	•	be subject to product liability or other litigation claims; or	
 	•	experience damage to our reputation.	
In third-party clinical trials involving other viral vectors for gene therapy, some patients experienced serious adverse events, including the development of leukemia due to vector-related insertional oncogenesis and death. If our vectors demonstrate a similar effect, we may be required to halt or delay clinical development of our product candidates.*
Existing data on the safety and efficacy of gene therapy is very limited and sometimes include historically poor clinical efficacy of previous non-replicating gene therapy products. In addition, there have been publicized safety issues associated with previous gene therapy products in third-party clinical trials, including patient deaths. The results of preclinical and clinical trials performed for our product candidates do not definitively predict safety or efficacy in humans. Possible serious side effects of other viral vector-based gene therapy therapies in general include uncontrolled viral infections and the development of cancer, particularly lymphoma or leukemia.
 A significant risk in any gene therapy product based on viral vectors that integrate into the host genome at measurable frequencies is that the vector will insert near cancer-linked oncogenes leading to uncontrolled clonal proliferation of mature cancer cells in the patient. For example, in 2003, 20 patients treated for X-linked severe combined immunodeficiency in two gene therapy studies conducted by third parties using a murine gamma-retroviral vector showed correction of the disease, but the studies were terminated after five patients developed leukemia. The cause of these adverse events was believed to be related to insertional oncogenesis, which is the process whereby the corrected gene inserts near a gene that is important in a critical cellular process like growth or division, and this insertion results in the development of a cancer (often leukemia). A potential clinical concern for gene
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therapy using retrov iral vectors has been the possibility of insertional mutagenesis by the vectors, leading to malignant transformation of transduced cells (i.e., cancer). Because our replicating retroviruses produce viral antigens, these foreign proteins could serve as a ta rget for immune activation against virally-infected cells and inflammation, which is not a feature of non-replicating retroviral vectors. In addition, we have not, and do not plan to, treat patients with severe immunodeficiency with our product candidates. Further, with our lead product candidate, Toca FC kills the virally-infected cells and presents the antigens. We believe that we have not observed oncogenesis in the patients treated in our clinical trials to date for these reasons. Our future product can didates are also designed to activate the immune system against virally-infected cells.
It is possible Toca 511 may spread to non-tumor tissue. We have detected transient and low levels of viral sequences in the saliva of several patients. The risk of insertional mutagenesis or oncogenesis remains a significant concern for gene therapy, and we cannot provide any assurance that it will not occur in any of our current, planned or future clinical trials. There is also the potential risk of delayed adverse events following exposure to gene therapy products due to persistent biological activity of the genetic material or other components of products used to carry the genetic material. If any such adverse events occur, further advancement of our clinical trials could be halted or delayed, which would have a material adverse effect on our business and operations.
We may not be successful in our efforts to identify or discover additional product candidates from our gene therapy platform.
The success of our business depends primarily upon our ability to identify, develop and commercialize products based on our gene therapy platform. Although our Toca 511 & Toca FC product candidate is currently in clinical development, our research programs may fail to identify other potential product candidates for clinical development. Our research methodology may be unsuccessful in identifying potential product candidates, or our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval. If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which would have a material adverse effect on our business and could potentially cause us to cease operations.
We rely, and expect to continue to rely, on third parties to conduct, supervise and monitor our clinical trials, and if these third parties perform in an unsatisfactory manner, it may harm our business.
We rely on CROs and clinical trial sites to ensure our clinical trials are conducted properly and on time. While we have agreements governing their activities, we may have limited influence over their actual performance. We control only certain aspects of our CROs’ activities. Nevertheless, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.
We and our CROs are required to comply with the GCPs for conducting, recording, auditing and reporting the results of clinical trials to assure that the data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. The FDA enforces these GCPs through periodic inspections of study sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply with applicable GCPs, the clinical data generated in our future clinical trials may be deemed unreliable, and the FDA may require us to perform additional clinical trials before approving any marketing applications. Upon inspection, the FDA may determine that our clinical trials did not comply with GCPs. In addition, our ongoing and future clinical trials will require a sufficient number of test subjects to evaluate the safety and effectiveness of our product candidates. Accordingly, if our CROs fail to comply with these regulations or fail to recruit a sufficient number of patients, we may be required to repeat such clinical trials, which would delay the regulatory approval process.
Our CROs are not our employees, and we are not able to directly monitor whether or not they devote sufficient time and resources to our clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere to our clinical protocols or regulatory requirements, or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.
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We expect to continue to rely on third parties to distribute , manufacture and perform release testing for our vectors, product candidates and other key materials and if such third parties do not carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approvals for our product candidates.*
We intend to continue to rely on third-party contract manufacturing organizations, or CMOs, to produce our vectors, product candidates and other key materials and on third-party contract testing organizations, or CTOs, for the establishment and performance of validated product release assays, but we have not entered into commercial supply agreements with any such CMOs or CTOs. Additionally, any CMO may not have experience or availability to produce adequate product candidates at commercial levels and may not achieve the necessary regulatory approvals or produce our vectors and products at the quality, quantities, locations and timing needed to support commercialization. We may change our manufacturing process from the current defined media process to a different defined media process, or from its current equipment to different equipment, or our cell line or vector and there can be no guarantee that the regulatory authorities will approve this new process in a timely manner, or ever. Also, as a consequence of the manufacturing change, there may be a requirement to do more preclinical safety or efficacy studies, develop new manufacturing and release assays and/or repeat all or part of the ascending dose safety study in animals or humans. Regulatory requirements ultimately imposed could adversely affect our ability to test, manufacture or market products.
We have not yet secured manufacturing capabilities for commercial quantities of our viral vector. Although we intend to rely on third-party manufacturers for commercialization, we currently utilize a sole-source manufacturer to support our clinical trials. We may be unable to negotiate binding agreements with this manufacturer or additional manufacturers to support our commercialization activities at commercially reasonable terms.
No manufacturer we know of currently has the direct experience or the demonstrated ability to produce our vectors and product candidates at reasonable commercial levels or under full commercial requirements. We have developed in-house, a more scalable manufacturing process for Toca 511, which we have transferred to one or more CMOs. We may run into technical or scientific issues related to manufacturing or development that we may be unable to resolve in a timely manner or with available funds. Further, we have not completed the characterization and validation activities necessary for commercial and regulatory approvals. If our manufacturing and testing partners do not satisfy such regulatory requirements, our commercialization efforts may be harmed.
Similarly, we currently have a single manufacturer of the active pharmaceutical ingredient for Toca FC and another single manufacturer of the final drug product. We also rely on outside contractors to perform validated release testing for Toca FC. Currently we have not fully validated production of the drug product, Toca FC.
Even if we have developed manufacturing processes for Toca 511 and Toca FC and successfully implement them at third-party manufacturers, if such third-party manufacturers are unable to produce viral vectors and our product candidates in the necessary quantities, or in compliance with current good manufacturing practices, or cGMP, or in compliance with pertinent regulatory requirements, and within our planned time frame and cost parameters, the development and sales of our products, if approved, may be materially harmed. The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we submit our BLA to the FDA. We do not directly control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with cGMPs for the manufacture of our product candidates. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved. In addition, any failure to achieve and maintain compliance with these laws, regulations and standards could subject us to the risk that we may have to suspend the manufacturing of our product candidates or that obtained approvals could be revoked, which would adversely affect our business and reputation.
In addition, any significant disruption in our supplier relationships could harm our business. We source key materials, devices and equipment from third parties, either directly through agreements with suppliers or indirectly through our manufacturers who have agreements with suppliers. There are a small number of suppliers for certain key materials, equipment, software and components that are used to manufacture our product candidates. Such suppliers may not sell these key materials to our manufacturers at the times or quantities we need them or on commercially reasonable terms. We may not have any control over the process, quality or timing of the acquisition of these key materials by our manufacturers.
We also expect to rely on other third parties to store and distribute our vectors and products for our clinical trials. Any performance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our products, if approved, producing additional losses and depriving us of potential product revenue.
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Our reliance on third parties may require us to share our trade secrets, wh ich increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.
Because we rely on third parties to manufacture our vectors and our product candidates, and because we collaborate with various organizations and academic institutions on the advancement of our gene therapy platform, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements or other similar agreements with our manufacturers, collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, are used inappropriately to create new inventions or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.
In addition, these agreements typically restrict the ability of our collaborators, advisors, employees and consultants to publish data potentially relating to our trade secrets. Our academic collaborators typically have rights to publish data, provided that we are notified in advance and may delay publication for a specified time in order to secure our intellectual property rights arising from the collaboration. In other cases, publication rights are controlled exclusively by us, although in some cases we may share these rights with other parties. We also conduct joint research and development programs that may require us to share trade secrets under the terms of our research and development partnerships or similar agreements. Despite our efforts to protect our trade secrets, our competitors may discover our trade secrets through breach of these agreements, independent development or publication of information including our trade secrets in cases where we do not have proprietary or otherwise protected rights at the time of publication. A competitor’s discovery of our trade secrets may impair our competitive position and have an adverse impact on our business.
 We are dependent on ApolloBio to develop and commercialize Toca 511 & Toca FC within the greater China region, including mainland China, Hong Kong, Macao and Taiwan. Failure of ApolloBio or any other third parties to successfully develop and commercialize Toca 511 & Toca FC in the applicable jurisdictions could have a material adverse effect on our business.*
 We have granted ApolloBio an exclusive license to develop and commercialize Toca 511 & Toca FC within the greater China region, including mainland China, Hong Kong, Macao and Taiwan. We have limited contractual rights to force ApolloBio to invest significantly in the development and commercialization of Toca 511 & Toca FC.
In the event that ApolloBio or any other third party with any future development and commercialization rights to any of our product candidates fails to adequately develop and commercialize those product candidates because they lack adequate financial or other resources, decide to focus on other initiatives or otherwise, our ability to successfully develop and commercialize our product candidates in the applicable jurisdictions would be limited, which would adversely affect our business, financial condition, results of operations and prospects. In addition, our license agreement with ApolloBio may be terminated by either party upon a material breach by the other party that remains uncured following 60 days (or, with respect to any payment breach, 10 days) after the date of written notice of such breach, may be terminated by ApolloBio at any time by providing us 90 days’ prior written notice and may be terminated by us upon written notice to ApolloBio under specified circumstances if ApolloBio challenges the licensed patent rights.  If we or ApolloBio terminate our license agreement, our ability to develop and commercialize Toca 511 & Toca FC within the greater China region, including mainland China, Hong Kong, Macao and Taiwan, would be materially harmed.
 Any adverse developments that occur during any clinical trials conducted by ApolloBio may affect our ability to obtain regulatory approval or commercialize Toca 511 & Toca FC.*
 ApolloBio retains the rights to develop and commercialize Toca 511 & Toca FC in the greater China region, including mainland China, Hong Kong, Macao and Taiwan. If serious adverse events occur during any clinical trials ApolloBio decides to conduct with respect to Toca 511 & Toca FC, the FDA and other regulatory authorities may delay, limit or deny approval of Toca 511 & Toca FC or require us to conduct additional clinical trials as a condition to marketing approval, which would increase our costs. If we receive FDA approval for Toca 511 & Toca FC and a new and serious safety issue is identified in connection with clinical trials conducted by ApolloBio, the FDA and other regulatory authorities may withdraw their approval of the product or otherwise restrict our ability to market and sell our product. In addition, treating physicians may be less willing to administer our product due to concerns over such adverse events, which would limit our ability to commercialize Toca 511 & Toca FC. ApolloBio is not currently conducting any clinical trials of Toca 511 & Toca FC.
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We face intense competition and rapid technological c hange and the possibility that our competitors may develop therapies that are more advanced or effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product candidates.
We are engaged in developing gene therapies and cancer immunotherapies, which are rapidly evolving and fiercely competitive fields. A wide variety of institutions in the United States and internationally, including major multinational pharmaceutical companies, specialty biotechnology companies, academic research departments and public and private institutions, are actively developing potentially competitive technology and products. We face substantial competition from biotechnology and pharmaceutical companies developing products in immunotherapy and our initial proposed indication. Our competitors generally fall into the following categories: companies developing checkpoint inhibitors; companies developing immunotherapies; companies aimed at stimulating immune responses; companies developing CAR and TCR T cells; companies developing oncolytic virus-based technology; and companies with a focus on HGG.
Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations. Accordingly, our competitors may be more successful than us in obtaining approval for treatments and achieving widespread market acceptance, rendering our treatments obsolete or non-competitive. These companies also compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials and acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
If these competitors develop and commercialize more effective, safer or less toxic products than us or if they obtain regulatory approval before us in key geographies, our commercial opportunities could be substantially limited. In addition, adverse clinical outcomes or similar events at gene therapy companies in the past have adversely affected other companies in this field and could also do so in the future at our company.
Even if we obtain regulatory approval of our product candidates, the products may not gain market acceptance among physicians, patients, hospitals, cancer treatment centers, third-party payors and others in the medical community.*
Ethical, social and legal concerns about gene therapy and genetic research could result in additional regulations restricting or prohibiting the products and processes we may use. Even with the requisite approvals, the commercial success of our product candidates will depend in part on the medical community, patients, and third-party payors accepting gene therapy products in general, and our product candidates in particular, as medically useful, cost-effective and safe. Any product that we bring to the market may not gain market acceptance by physicians, patients, third-party payors and others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptance of these product candidates, if approved for commercial sale, will depend on a number of factors, including:
 	•	the clinical indications for which our product candidates are approved;	
 	•	physicians, hospitals, cancer treatment centers and patients considering our product candidates as a safe and effective treatment;	
 	•	the potential and perceived advantages of our product candidates over alternative treatments;	
 	•	the prevalence and severity of any side effects;	
 	•	product labeling or product insert requirements of the FDA or other regulatory authorities;	
 	•	limitations or warnings contained in the labeling approved by the FDA;	
 	•	the timing of market introduction of our product candidates as well as competitive products;	
 	•	the pricing and cost-effectiveness of our product candidates as well as the cost of treatment in relation to alternative treatments;	
 	•	the availability of favorable coverage and adequate reimbursement by third-party payors and government authorities;	
 	•	the willingness of patients to pay out-of-pocket in the absence of coverage or adequate reimbursement by third-party payors, including government authorities;	
 	•	the willingness, ability and availability of healthcare providers that can comply with the transportation, handling, and temperature-controlled storage requirements associated with our product candidates;	
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 	•	relative convenience and ease of administration, including as compared to alternative treatment s and competitive therapies; and	
 	•	the effectiveness of our sales and marketing efforts.	
Even if a potential product displays a favorable efficacy and safety profile in preclinical and clinical trials, market acceptance of the product will not be known until after it is launched. Our efforts to educate the medical community and third-party payors on the benefits of the product candidates may require significant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed by our competitors and may be restricted by the allowed label.
We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on our management, scientific and medical personnel, including our Chief Executive Officer and our Chief Financial Officer. The loss of the services of any of our executive officers, other key employees and other scientific and medical advisors, and our inability to find suitable replacements, could result in delays in product development and harm our business.
To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided stock options that vest over time. The value to employees of stock options that vest over time may be significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies. Despite our efforts to retain them, valuable employees and members of our management, scientific and development teams may terminate their employment with us at any time, with or without notice. We do not maintain “key man” insurance policies on the lives of any of our executive officers or other employees. Our success also depends on our ability to continue to attract, retain and motivate highly skilled scientific and medical personnel.
We will need to expand our organization and we may experience difficulties in managing this growth, which could disrupt our operations.*
As of June 30, 2018, we had 73 full-time employees. As our development and commercialization plans and strategies develop, and as we continue operating as a public company, we expect to need additional managerial, operational, sales, marketing, financial and other personnel. Future growth would impose significant added responsibilities on members of management. There are a small number of individuals with experience in gene therapy and clinicians who have successfully developed drugs and the competition for such individuals is high. Our future financial performance and our ability to commercialize our product candidates will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities. We currently rely, and for the foreseeable future will continue to rely on certain independent organizations, advisors and consultants to provide certain services, including substantially all aspects of regulatory approval, clinical management and manufacturing. There can be no assurance that the services of independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed or that we can find qualified replacements. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable terms, or at all.
If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development and commercialization goals.
We may use our financial and human resources to pursue a particular research program or product candidate and fail to capitalize on programs or product candidates that may be more profitable or for which there is a greater likelihood of success.
 Because we have limited resources, we may forego or delay pursuit of opportunities with certain programs or product candidates or for indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs for product candidates may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate
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through strategic collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate, or we may allocate internal resources to a product candidate in a therapeutic area in which it wou ld have been more advantageous to enter into a partnering arrangement.
We currently have a very limited marketing and sales organization. If we are unable to expand our marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be able to generate product revenue.*
We currently have very limited sales, marketing and distribution capabilities. At the appropriate time, we plan to build a commercial infrastructure targeting oncologists, neuro-oncologists and neurosurgeons and related clinicians and health care workers in leading and regional cancer centers in the United States, which will require significant capital expenditures, management resources and time. ApolloBio retains the rights to develop and commercialize Toca 511 & Toca FC in the greater China region, including mainland China, Hong Kong, Macao and Taiwan. We may build our own commercial infrastructure in other territories or consider additional opportunities to enter into out-licensing or co-promotion agreements with other pharmaceutical or biotechnology companies to develop and/or commercialize our product candidates outside the United States. We will have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.
If we are unable or decide not to establish internal sales, marketing and distribution capabilities, we will pursue collaborative arrangements regarding the sales and marketing of our products, however, there can be no assurance that we will be able to establish or maintain such collaborative arrangements, or if we are able to do so, that they will have effective sales forces. Any revenue we receive will depend upon the efforts of such third parties, which may not be successful. We may have little or no control over the marketing and sales efforts of such third parties, and our revenue from product sales may be lower than if we had commercialized our product candidates ourselves. We also face competition in our search for third parties to assist us with the sales and marketing efforts of our product candidates.
There can be no assurance that we will be able to develop in-house sales and distribution capabilities or establish or maintain relationships with third-party collaborators to commercialize any product in the United States or elsewhere.
A variety of risks associated with marketing our product candidates internationally could materially adversely affect our business.
We plan to seek regulatory approval of our product candidates outside of the United States and, accordingly, we expect that we will be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including:
 	•	differing regulatory requirements and reimbursement regimes in foreign countries;	
 	•	unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;	
 	•	economic weakness, including inflation, or political instability in particular foreign economies and markets;	
 	•	compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;	
 	•	foreign taxes, including withholding of payroll taxes;	
 	•	foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;	
 	•	difficulties staffing and managing foreign operations;	
 	•	workforce uncertainty in countries where labor unrest is more common than in the United States;	
 	•	potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations;	
 	•	challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;	
 	•	production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and	
 	•	business interruptions resulting from geo-political actions, including war and terrorism.	
These and other risks associated with our international operations may materially adversely affect our ability to attain or maintain profitable operations.
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The terms of our Loan A greement place restrictions on our operating and financial flexibility. *
In May 2018, we entered into a Loan Agreement with Oxford Finance LLC and Silicon Valley Bank which is secured by substantially all of our assets other than our intellectual property (except rights to payment from the sale, licensing or disposition of such intellectual property). We borrowed $26.5 million upon execution of the Loan Agreement. Approximately $8.6 million of the proceeds received was used to repay the outstanding principal, interest and final payment fees owed under our prior loan and security agreement.
The Loan Agreement includes affirmative and negative covenants applicable to us and any subsidiaries we create in the future. The affirmative covenants include, among others, covenants requiring us to maintain our legal existence and governmental approvals, deliver certain financial reports, maintain insurance coverage, and subject all of our deposit accounts, securities accounts, commodity accounts or any other bank accounts, to a control agreement in favor of Oxford Finance LLC. The negative covenants include, among others, restrictions on us transferring collateral, incurring additional indebtedness, engaging in mergers or acquisitions, paying dividends in cash or making other distributions, making investments, creating liens, selling assets, and suffering a change in control, in each case subject to certain exceptions.
The Loan Agreement also includes events of default, the occurrence and continuation of which provide Oxford Finance LLC, as collateral agent, with the right to exercise remedies against us and the collateral securing the loans under the Loan Agreement, including foreclosure against our properties securing the Loan Agreement, including our cash, potentially requiring us to renegotiate our agreement on terms less favorable to us or to immediately cease operations. These events of default include, among other things, our failure to pay any amounts due under the Loan Agreement, a breach of covenants under the loan and security agreement, our insolvency, impairment in the perfection or priority of each lender’s security interest in the collateral, the occurrence of any default under certain other indebtedness in an amount greater than $250,000, our failure to obtain or maintain material governmental approvals, and a final judgment against us of at least $250,000. Further, if we are liquidated, the lender’s right to repayment would be senior to the rights of the holders of our common stock to receive any proceeds from the liquidation. The lenders could declare a default upon the occurrence of any event that they interpret as a material adverse change as defined under the Loan Agreement, thereby requiring us to repay the loan immediately or to attempt to reverse the declaration of default through negotiation or litigation. Any declaration by the lenders of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline.
If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.
We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
 	•	decreased demand for our product candidates;	
 	•	injury to our reputation;	
 	•	withdrawal of clinical trial participants;	
 	•	initiation of investigations by regulators;	
 	•	costs to defend the related litigation;	
 	•	a diversion of management’s time and our resources;	
 	•	substantial monetary awards to clinical trial participants or patients;	
 	•	product recalls, withdrawals or labeling, marketing or promotional restrictions;	
 	•	exhaustion of any available insurance and our capital resources;	
 	•	loss of revenue;	
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 	•	the inability to commercialize any product candidate; and	
 	•	a decline in our share price.	
Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of any products we develop, alone or with corporate collaborators. We currently carry $5 million of product liability insurance covering our clinical trials. Although we maintain such insurance, our insurance policies may have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise.
Negative public opinion and increased regulatory scrutiny of gene therapy and genetic research may damage public perception of our product candidates or adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.
Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medical community. In particular, our success will depend upon physicians specializing in the treatment of those diseases that our product candidates target prescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments with which they are already familiar with and for which greater clinical data may be available. More restrictive government regulations or negative public opinion would have a negative effect on our business or financial condition and may delay or impair the development and commercialization of our product candidates or demand for any products we may develop. Adverse events in our clinical trials, even if not ultimately attributable to our product candidates, and the resulting publicity could lead to increased governmental regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our potential product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidates. Concern about environmental spread of our product, whether real or anticipated, may hinder the commercialization of our products.
Our internal computer systems, or those used by our CROs, SaaS providers, contractors or consultants, may fail or suffer security breaches.
Despite the implementation of security measures, our internal computer systems and those of our CROs, SaaS providers, contractors and consultants are vulnerable to damage from computer viruses and unauthorized access. While we have not experienced any such material system failure or security breach to date, 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. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, and the further development and commercialization of our product candidates could be delayed.
 Our business could be negatively impacted by cyber security threats.   *
 In the ordinary course of our business, we use our data centers and our networks to store and access our proprietary business information. We face various cyber security threats, including cyber security attacks to our information technology infrastructure and attempts by others to gain access to our proprietary or sensitive information. The procedures and controls we use to monitor these threats and mitigate our exposure may not be sufficient to prevent cyber security incidents. The result of these incidents could include disrupted operations, lost opportunities, misstated financial data, liability for stolen assets or information, increased costs arising from the implementation of additional security protective measures, litigation and reputational damage. Any remedial costs or other liabilities related to cyber security incidents may not be fully insured or indemnified by other means.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
Our operations, and those of our CROs, contractors and consultants, could be subject to power shortages, telecommunications failures, wildfires, water shortages, floods, earthquakes, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or man-made disasters or business interruptions for which we are predominantly self-insured. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. Our ability to obtain clinical supplies of our product candidates could be disrupted if the operations of our contract manufacturers or cell line storage facilities are affected by a man-made or natural disaster or other business interruption.
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Risks related to government regulation
The FDA may disagree with our regulatory plans, and we may fail to obtain regulatory approval of our product candidates.*
Following receipt of Breakthrough Therapy Designation from the FDA, we redesigned our Phase 2/3 clinical trial of Toca 511 & Toca FC for the treatment of recurrent HGG to a single Phase 3 trial design and have included the 187 patients that were previously enrolled in the Phase 2/3 trial in the total of approximately 380 patients expected to enroll in the redesigned trial. The interim or final analyses of this trial alone could support approval of a BLA for Toca 511 & Toca FC in the indication of recurrent HGG. However, the general approach for FDA approval of a new biologic or drug is to require dispositive data from two adequate and well-controlled Phase 3 clinical trials of the biologic or drug in the relevant patient population.
In addition, we believe that it is likely that there may be a regulatory requirement for one or more diagnostic assays to monitor treatment, especially for the presence of Toca 511 & Toca FC or their components or derivatives. We plan to meet with the FDA to discuss the development of such assays, and it is possible that the FDA may require a separate regulatory approval for such assays contemporaneously with the approval of Toca 511 & Toca FC.
Our clinical trials results may not support approval. In addition, Toca 511 & Toca FC and our other product candidates could fail to receive regulatory approval for many reasons, including the following:
 	•	the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials, including clinical endpoints;	
 	•	the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;	
 	•	we may be unable to demonstrate that our product candidates’ clinical and other benefits outweigh their safety risks or are better than recently produced safety or efficacy data for other products;	
 	•	we may encounter serious and unexpected adverse events during clinical trials that render our products unsafe for use in humans;	
 	•	the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;	
 	•	the data collected from clinical trials of our product candidates may not be sufficient to the satisfaction of the FDA or comparable foreign regulatory authorities to support the submission of a BLA or other comparable submission in foreign jurisdictions or to obtain regulatory approval in the United States or elsewhere;	
 	•	the FDA or comparable foreign regulatory authorities may fail to approve our manufacturing processes and/or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and	
 	•	the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.	
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.
Obtaining and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials. Studies and clinical trials conducted in one jurisdiction or study group may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.
 We may also submit marketing applications in other countries. Regulatory authorities in jurisdictions outside of the United States have requirements for approval of product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining approvals in one jurisdiction does not guarantee that we will be able to obtain approval in any other jurisdiction, but the failure to obtain approval in a jurisdiction may have a negative impact on our ability to obtain approval in other jurisdictions. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with
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the regulatory requirements in international markets and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.
Additional time may be required to obtain regulatory approval for Toca 511 & Toca FC because it is a combination product.
We believe our Toca 511 & Toca FC product candidate is regulated as a drug/biologic combination product, which will require coordination within the FDA and similar foreign regulatory agencies for review of their biologic and drug components and potentially one or more diagnostic assays to monitor treatment. Although the FDA and similar foreign regulatory agencies have systems in place for the review and approval of combination products such as ours, we may experience delays in the development and commercialization of our product candidates due to regulatory timing constraints and uncertainties in the product development and approval process.
Even if we receive regulatory approval of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense, and we may be subject to penalties and/or withdrawal of product approval if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.
Any regulatory approvals that we receive for our product candidates will require surveillance to monitor the safety and efficacy of the product candidate. Specifically, we believe that it is likely that there may be a regulatory requirement for one or more diagnostic assays to monitor treatment, especially for the presence of Toca 511 or Toca FC or their components or derivatives. We plan to meet with the FDA to discuss the development of such assays, and it is possible that the FDA may require a separate regulatory approval for such assays. Further, each vector containing a particular gene could be regulated as a separate biologic depending on its intended use and FDA policy. The FDA may also require a REMS, in order to approve our product candidates, which could entail requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable foreign regulatory authority approves our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and record keeping for our product candidates will be subject to extensive and ongoing regulatory requirements. These requirements include, among other things, submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs for manufacturing and GCPs for any clinical trials that we conduct post-approval. Later discovery of previously unknown problems with our product candidates, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:
 	•	restrictions on the marketing or manufacturing of our product candidates, withdrawal of the product from the market, or voluntary or mandatory product recalls;	
 	•	fines, warning letters or holds on clinical trials;	
 	•	refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license approvals;	
 	•	suspension or termination of manufacturing at one or more manufacturing facilities;	
 	•	product seizure or detention, or refusal to permit the import or export of our product candidates; and	
 	•	injunctions or the imposition of civil or criminal penalties.	
The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad.
We have Orphan-Drug Designation for Toca 511 & Toca FC for the treatment of malignant glioma in addition to glioblastoma multiforme, or GBM, but we may be unable to maintain the benefits associated with Orphan-Drug Designation, including potential eligibility for any future market exclusivity.
Under the Orphan-Drug Act, the FDA may grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is defined as one occurring in a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States for which there is no reasonable expectation that the cost of developing and making available in the United States a drug or biologic for a disease or condition will be recovered from sales in the United States for that drug or biologic. In the United States, Orphan-Drug Designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a product that has Orphan-Drug Designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or where the manufacturer is unable to assure sufficient product quantity.
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Toca 511 & Toca FC has Orphan-Drug Designation in the United States for the treatment of malignant glioma in addition to GBM. However, we are currently develop ing this product candidate for the treatment of recurrent HGG, of which GBM is a subset. Exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan designated indication and may be lost if t he FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further, even if we obtain o rphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different products with different active moieties can be approved for the same condition. Even after an orphan product is approved, the FDA can subsequently approve the same product with the same active moiety for the same condition if the FDA concludes that the later product is safer, more effective or makes a major contribution to patient care. Orphan-Drug Designation neither shortens th e development time or regulatory review time of a drug or biologic nor gives the drug or biologic any advantage in the regulatory review or approval process. In addition, while we may seek orphan designation for other product candidates, we may never recei ve such designations.
A Fast Track Designation or Breakthrough Therapy Designation by the FDA or PRIME Designation by the EMA, may not actually lead to a faster development or regulatory review or approval process.
If a product candidate is intended for the treatment of a serious or life-threatening condition and demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply for FDA Fast Track Designation. Similarly, Breakthrough Therapy Designation may be granted by the FDA, or PRIME Designation may be granted by the EMA, to product candidates for serious conditions that have preliminary clinical evidence indicating the product candidate may offer substantial improvement over available therapy. The FDA and EMA have broad discretion whether or not to grant these designations, and even if we believe a particular product candidate is eligible for these designations, we cannot assure you that the FDA or EMA would decide to grant them. We have been granted Fast Track Designation and Breakthrough Therapy Designation for our Toca 511 & Toca FC product candidate for the treatment of recurrent HGG and PRIME designation for Toca 511 in glioma, but this is no assurance we will receive these designations for any future product candidates.  Further, even though we have received these designations for Toca 511 & Toca FC, we may not experience a faster development process, review or approval compared to conventional FDA or EMA procedures. The FDA or EMA may withdraw these designations if it believes that they are no longer supported by data from our clinical development program.
Our Toca 511 & Toca FC product may face competition sooner than anticipated, if approved.
The Biologics Price Competition and Innovation Act, or BPCIA, created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product.
We believe that any of our product candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for competition sooner than anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.
We may be subject, directly or indirectly, to federal, state, local and foreign healthcare fraud and abuse laws, false claims laws, privacy laws and other applicable healthcare laws, and the failure to comply with such laws could result in substantial penalties. Our employees, independent contractors, consultants, principal investigators, CROs, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.*
We are exposed to the risk of fraud, misconduct or other illegal activity by our employees, independent contractors, consultants, principal investigators, CROs, commercial partners and vendors. Misconduct by these parties could include intentional, reckless and/or negligent conduct that fails to: comply with the laws of the FDA and other similar foreign regulatory bodies; provide true, complete and accurate information to the FDA and other similar foreign regulatory bodies; comply with manufacturing standards we have established; comply with federal and state data privacy, security, fraud and abuse and other healthcare laws and regulations in the United States and similar foreign fraudulent misconduct laws; or report financial information or data accurately or to disclose unauthorized activities to us.
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In addition, our current and future operations are subject to regulation under such laws, and if we obtain FDA approval for any of our product candidates and begin commercializing those products in the Uni ted States, our potential exposure under such laws would increase significantly, along with our costs associated with compliance with such laws. These laws may impact, among other things, our current activities with principal investigators and research pat ients, as well as proposed and future sales, marketing and education programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, including off-label promoti on of our products, structuring of commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of pa tient recruitment for clinical trials, creating fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation. The laws that ma y affect our ability to operate include, but are not limited to:
 	•	the Federal Anti-Kickback Statute, which prohibits, among other things, individuals and entities from knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;	
 	•	federal civil and criminal false claims laws and civil monetary penalty laws, including the civil False Claims Act, which impose criminal and civil penalties, through government, civil whistleblower or qui tam actions, on individuals and entities for, among other things, knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other federal healthcare programs that are false, fictitious or fraudulent, or knowingly making, using or causing to be made or used, a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the Federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;	
 	•	the Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private), willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false, fictitious or fraudulent statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the Federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;	
 	•	HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses, as well as their respective business associates that perform services for them that involve the creation, use, maintenance or disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization;	
 	•	the federal physician payment transparency requirements, sometimes referred to as the “Physician Payments Sunshine Act,” created under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively the Affordable Care Act, and its implementing regulations, which require certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the Centers for Medicare and Medicaid Services, or CMS, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members;	
 	•	the U.S. Federal Food, Drug and Cosmetic Act, or FD&C Act, which prohibits, among other things, the adulteration or misbranding of drugs and medical devices; and	
 	•	federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers.	
 Additionally, we are subject to state, local and foreign equivalents of each of the healthcare fraud and abuse laws described above, among others, some of which may be broader in scope and may apply regardless of the payor. We may also be subject to state,
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local and foreign laws that require pharmac eutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; to report inf ormation related to payments and other transfers of value to healthcare providers or entities, or marketing expenditures; and require registration of pharmaceutical sales representatives. We may also be subject to state and foreign laws governing the priva cy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. In the European Union, the General Data Protection Regulati on (2016/679), or GDPR applies to any organization established in the European Union, as well as to those outside of the European Union if they collect and use “personal data”, or any information relating to an identified or identifiable natural person, in connection with the offering of goods or services to individuals in the European Union or the monitoring of their behavior   Under the GDPR, fines of up to 20 million Euros or up to 4% of the annual global turnover of the infringer, whichever is greater, c ould be imposed for significant non-compliance.
It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent inappropriate conduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. We are also subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. Efforts to ensure that our business arrangements will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law interpreting applicable fraud and abuse or other healthcare laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal and administrative penalties, damages, disgorgement, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, individual imprisonment, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. In addition, the approval and commercialization of any of our product candidates outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.
Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, if approved, which could make it difficult for us to sell our product candidates profitably.*
Successful sales of our product candidates, if approved, depend on the availability of coverage and adequate reimbursement from third-party payors such as government authorities, including Medicare and Medicaid, private health insurers, and health maintenance organizations. Because our product candidates represent new approaches to the treatment of cancer, we cannot be sure that coverage and reimbursement will be available for, or accurately estimate the potential revenue from, our product candidates.
Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors are critical to new product acceptance.
Third-party payors decide which drugs and treatments they will cover and the amount of reimbursement. Coverage and reimbursement by a third-party payor may depend upon a number of factors, including, but not limited to, the third-party payor’s determination that use of a product is:
 	•	a covered benefit under its health plan;	
 	•	safe, effective and medically necessary;	
 	•	appropriate for the specific patient;	
 	•	cost-effective; and	
 	•	neither experimental nor investigational.	
 In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors, and coverage and reimbursement for products can differ significantly from payor to payor. As a result, obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to each payor supporting scientific, clinical and cost-effectiveness data for the use of our products and to justify the level of coverage and reimbursement relative to other therapies, with no assurance that coverage and adequate reimbursement will be obtained. Third party payors may also have difficulty in determining the appropriate coverage of our product candidates, if approved, due to the fact that they are combination products that include a small molecule drug. To the extent there are any delays in
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determining such coverage or inadequate coverage and reimbursement for all aspects of our combination therapies, it would adversely affect the market acceptance, demand and use of our product candidates.
A number of gene therapy products have been approved over the past year by the FDA. Although CMS subsequently approved a method of coverage and reimbursement for certain gene therapy products, it is difficult to predict how CMS may decide to cover and reimburse our product candidates, if approved. Often private payors follow the coverage and reimbursement decisions of the Medicare program, but also have their own methods and approval process. Therefore, coverage and reimbursement for can differ significantly from payor to payor and approval by one payor does not guarantee approval by another. Further, third-party payors’ coverage and reimbursement determinations are subject to change. Any denial in coverage or reduction in reimbursement from Medicare or other government programs may result in a similar denial or reduction in payments from private payors, which may adversely affect our future profitability.
We intend to seek approval to market our product candidates in both the United States and in selected foreign jurisdictions. If we obtain approval in one or more foreign jurisdictions for our product candidates, we will be subject to rules and regulations in those jurisdictions. In some foreign countries, particularly those in the European Union, the pricing of biologics is subject to governmental control and other market regulations which could put pressure on the pricing and usage of our product candidates. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval of a product candidate. In addition, market acceptance and sales of our product candidates will depend significantly on the availability of coverage and adequate reimbursement from third-party payors for our product candidates and may be affected by existing and future health care reform measures.
Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.*
Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our products profitably. In particular, in 2010, the Affordable Care Act was enacted in the United States. The Affordable Care Act and its implementing regulations, among other things, subjected biological products to potential competition by lower-cost biosimilars, revised the methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics, including our product candidates, that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, and provided incentives to programs that increase the federal government’s comparative effectiveness research.
 Since its enactment, there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, and we expect there will be additional challenges and amendments to the Affordable Care Act in the future, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the Affordable Care Act.  Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the Affordable Care Act or otherwise circumvent some of the requirements for health insurance mandated by the Affordable Care Act. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the Affordable Care Act. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the Affordable Care Act have been signed into law. On December 22, 2017, President Trump signed into law new federal tax legislation which includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain Affordable Care Act-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical device  s. Further, the Bipartisan Budget Act of 2018, or the BBA, among other things, amends the Affordable Care Act, effective January 1, 2019, to close the coverage gap in most Medicare Part D drug plans, commonly referred to as the “donut hole”. More recently, in July 2018, CMS announced that it is suspending further collections and payments to and from certain Affordable Care Act qualified health plans and health insurance issuers under the Affordable Care Act risk adjustment program pending the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. Congress will likely consider other legislation to repeal or repeal and replace other elements of the Affordable Care Act.  We continue to evaluate the effect that the Affordable Care Act and its possible repeal and replacement has on our business. It is uncertain the extent to which any such changes may impact our business or financial condition.
 In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the
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years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers up to 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislation, including the BBA, will stay in effect through 2027 unless Congressional action is taken. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Moreover, payment methodologies including payment for any companion diagnostics may be subject to changes in healthcare legislation and regulatory initiatives. For example, CMS bega n bundling the Medicare payments for certain laboratory tests ordered while a patient received services in a hospital outpatient setting and, beginning in 2018, CMS will pay for clinical laboratory services based on a weighted-average of reported prices th at private payors, Medicare Advantage plans and Medicaid Managed Care plans pay for laboratory services.
 Further recently, there has been heightened governmental scrutiny over the manner in which drug manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. At the federal level, the Trump administration’s budget proposal for fiscal year 2019 contains further product price control measures that could be enacted during the 2019 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain products under Medicare Part B, to allow some states to negotiate product prices under Medicaid, and to eliminate cost sharing for generic products fo  r low-income patients. Further, the Trump administration released a “Blueprint”, or plan, to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers. The United States Department of Health and Human Services has already started the process of soliciting feedback on some of these measures and, at the same, is immediately implementing others under its existing authority. While some proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:
 	•	the demand for our product candidates, if we obtain regulatory approval;	
 	•	our ability to set a price that we believe is fair for our products;	
 	•	our ability to generate revenue and achieve or maintain profitability;	
 	•	the level of taxes that we are required to pay; and	
 	•	the availability of capital. 	
Due to the novel nature of our technology and the small size of our initial target patient populations, we face uncertainty related to pricing and reimbursement for these product candidates.
Our initial target patient populations are relatively small. As a result, the pricing and reimbursement of our product candidates, if approved, must be adequate to support commercial infrastructure. If we are unable to obtain adequate levels of reimbursement, our ability to successfully market and sell our product candidates will be adversely affected. The manner and level at which reimbursement is provided for services related to our product candidates (e.g., for administration of our product to patients) is also important. Inadequate reimbursement for such services may lead to physician resistance and adversely affect our ability to market or sell our products.
We and our contract manufacturers are subject to significant regulation with respect to manufacturing our products. The manufacturing facilities on which we rely may not continue to meet regulatory requirements and have limited capacity.*
 We currently have relationships with a limited number of suppliers for the manufacturing of our viral vectors and product candidates. Each supplier may require licenses to manufacture such components if such processes are not owned by the supplier or in
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the public domain and we may be unable to transfer or sublicense the intellectual property rights we may have or later obtain with respect to such activities.
All entities involved in the preparation of therapeutics for clinical trials or commercial sale, including our existing contract manufacturers for our product candidates, are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or used in late-stage clinical trials must be manufactured in accordance with cGMP. These regulations govern manufacturing processes and procedures (including record keeping) and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing. We or our contract manufacturers must supply all necessary documentation in support of a BLA on a timely basis and must adhere to the FDA’s good laboratory practices and cGMP regulations enforced by the FDA through its facilities inspection program. Some of our contract manufacturers have limited experience in production of commercially-approved products and therefore may have not obtained the requisite FDA approvals to do so. Our facilities and quality systems and the facilities and quality systems of some or all of our third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory approval of our product candidates or any of our other potential products. In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our product candidates or our other potential products or the associated quality systems for compliance with the regulations applicable to the activities being conducted. If these facilities do not pass a pre-approval plant inspection, FDA approval of the products may not be granted.
The regulatory authorities also may, at any time following approval of a product for sale, audit our manufacturing facilities or those of our third-party contractors. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/or time-consuming for us or a third party to implement and that may include the temporary or permanent suspension of a clinical trial or commercial sales or the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.
If we or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new drug product or biologic product or revocation of a pre-existing approval. As a result, our business, financial condition and results of operations may be materially harmed.
Additionally, if supply from one approved manufacturer is interrupted, there could be a significant disruption in commercial supply. An alternative manufacturer would need to be qualified through a BLA supplement which could result in further delay. The regulatory agencies may also require additional studies if a new manufacturer is relied upon for commercial production. Switching manufacturers may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.
These factors could cause the delay of clinical trials, regulatory submissions, required approvals or commercialization of our product candidates, cause us to incur higher costs and prevent us from commercializing our products successfully. Furthermore, if our suppliers fail to meet contractual requirements, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical trials may be delayed or we could lose potential revenue.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.
Our research and development, manufacturing processes, clinical trials and products may involve the controlled use of hazardous materials, chemicals, viruses and various radioactive compounds. Specifically, if our products or product candidates spread from human or companion pet patients to other people or pets, these other individuals or pets (such as the immune suppressed or the very young), might be more sensitive to the product or product candidate than the patient and may experience an adverse reaction. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of such materials and certain waste products, including numerous environmental, health and safety laws and regulations, such as those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.
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Although we maintain workers’ compensation insurance to cov er us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities. In addition, we may inc ur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Risks related to our intellectual property
If we are unable to protect our intellectual property rights or if our intellectual property rights are inadequate for our technology and product candidates, our competitive position could be harmed.
Our commercial success will depend in part on our ability to obtain and maintain patent and other intellectual property protection in the United States and other countries with respect to our proprietary technology and products. We rely on trade secret, patent, copyright and trademark laws, and confidentiality, licensing and other agreements with employees and third parties, all of which offer only limited protection. We seek to protect our proprietary position by filing and prosecuting patent applications in the United States and abroad related to our novel technologies and products that are important to our business.
The patent positions of biotechnology and pharmaceutical companies generally are highly uncertain, involve complex legal and factual questions and have in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patents, including those patent rights licensed to us by third parties, are highly uncertain. The steps we or our licensors have taken to protect our proprietary rights may not be adequate to preclude misappropriation of our proprietary information or infringement of our intellectual property rights, both inside and outside of the United States. Further, the examination process may require us or our licensors to narrow the claims for our pending patent applications, which may limit the scope of patent protection that may be obtained if these applications issue. The rights already granted under any of our currently issued patents or those licensed to us and those that may be granted under future issued patents may not provide us with the proprietary protection or competitive advantages we are seeking. If we or our licensors are unable to obtain and maintain patent protection for our technology and products, or if the scope of the patent protection obtained is not sufficient, our competitors could develop and commercialize technology and products similar or superior to ours, and our ability to successfully commercialize our technology and products may be adversely affected. It is also possible that we or our licensors will fail to identify patentable aspects of inventions made in the course of our development and commercialization activities before it is too late to obtain patent protection on them. It is also possible that as research and development progresses, the direction of our intellectual property strategy and patent portfolio will change, resulting in strategic business decisions to allow certain patents or patent applications to be abandoned or lapse.
With respect to patent rights, we do not know whether any of the pending patent applications for any of our compounds or biologic products will result in the issuance of patents that effectively protect our technology or products, or if any of our issued patents or if any of our or our licensors’ issued patents will effectively prevent others from commercializing competitive technologies and products. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing or in some cases not at all, until they are issued as a patent. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions.
Our pending applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications. Because the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, issued patents that we own or have licensed from third parties may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in the loss of patent protection, the narrowing of claims in such patents or the invalidity or unenforceability of such patents, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection for our technology and products. Protecting against the unauthorized use of our or our licensor’s patented technology, trademarks and other intellectual property rights is expensive, difficult and may in some cases not be possible. In some cases, it may be difficult or impossible to detect third-party infringement or misappropriation of our intellectual property rights, even in relation to issued patent claims, and proving any such infringement may be even more difficult.
Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.
 Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions and inter
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partes reexamination proceedings before the U.S. Patent and Trademark Office, or U.S. PTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, e xist in the fields in which we are pursuing development candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of third parties.
Third parties have asserted, and in the future may assert, that we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire.
Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all.
Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, may involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
We may not be successful in obtaining or maintaining necessary rights to gene therapy product components and processes for our development pipeline through acquisitions and in-licenses.
Presently we believe that we have rights to the intellectual property, through licenses from third parties and under patents that we own, to develop our gene therapy product candidates. Because our programs may involve additional product candidates that may require the use of proprietary rights held by third parties, the growth of our business may depend in part on our ability to acquire, in-license or use these proprietary rights. In addition, our product candidates may require specific formulations to work effectively and efficiently and these rights may be held by others. We may be unable to acquire or in-license any compositions, methods of use, processes or other third-party intellectual property rights from third parties that we identify. The licensing and acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.
In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain rights to required third-party intellectual property rights, our business, financial condition and prospects for growth could suffer.
If we fail to comply with our obligations in the agreement under which we license intellectual property rights from the University of Southern California, or USC, or otherwise experience disruptions to our business relationships with USC or other future licensors, we could lose license rights that are important to our business.
In October 2007, we entered into a license agreement with USC pursuant to which we received a worldwide, exclusive license to, among other things, manufacture and market products utilizing certain inventions that are critical to our business. We expect to enter into additional license agreements in the future. Our existing license agreement imposes, and we expect that future license agreements will impose, various diligence, milestone payment, royalty and other obligations on us. If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which event we would not be able to market products covered by the license.
 We may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expend significant time and resources to develop or license replacement technology. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates, which could
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harm our business significantly. We cannot provide a ny assurances that third-party patents do not exist which might be enforced against our current product candidates or future products, resulting in either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties.
In certain cases, patent prosecution of our licensed technology may be controlled solely by the licensor. If our licensors fail to obtain and maintain patent or other protection for the proprietary intellectual property we license from them, we could lose our rights to the intellectual property or our exclusivity with respect to those rights, and our competitors could market competing products using the intellectual property. In certain cases, we control the prosecution of patents resulting from licensed technology. In the event we breach any of our obligations related to such prosecution, we may incur significant liability to our licensing partners. Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues and is complicated by the rapid pace of scientific discovery in our industry. Disputes may arise regarding intellectual property subject to a licensing agreement, including:
 	•	the scope of rights granted under the license agreement and other interpretation-related issues;	
 	•	the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;	
 	•	the sublicensing of patent and other rights under our collaborative development relationships;	
 	•	our diligence obligations under the license agreement and what activities satisfy those diligence obligations;	
 	•	the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and	
 	•	the priority of invention of patented technology.	
If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.
We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and unsuccessful.
Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid, is unenforceable and/or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.
Interference or derivation proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to our patents or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation, interference or derivation proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
 Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the U.S. PTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We employ an outside firm and rely on our outside counsel to pay these fees due to non-U.S. patent agencies. The U.S. PTO and various non-U.S. governmental patent agencies require compliance with a number of
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pr ocedural, documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant ju risdiction. In such an event, our competitors might be able to enter the market and this circumstance would have a material adverse effect on our business.
Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court.
If we, USC or one of our future licensing partners initiated legal proceedings against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the U.S. PTO, or made a misleading statement, during prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection would have a material adverse impact on our business.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
We employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employer or other third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
We may be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents or other intellectual property. We may have potential ownership disputes arising, for example, from conflicting obligations of consultants, collaborators or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biotechnology industry involve both technological and legal complexity, and therefore obtaining and enforcing biotechnology patents is costly, time-consuming and inherently uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts and the U.S. PTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
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We have not yet registered trademarks for a commercial trade name for Toca 511 & Toca FC, and failure to secure such registrations could adversely affect our business.
We have not yet developed a proprietary name for our products nor registered trademarks for a commercial trade name for Toca 511 & Toca FC. During trademark registration proceedings, we may receive rejections. Although we would be given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in the U.S. PTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. Moreover, any name we propose to use with our product candidates in the United States must be approved by the FDA, regardless of whether we have registered it, or applied to register it, as a trademark. The FDA typically conducts a review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA objects to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitable substitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Risks related to ownership of our common stock
The market price of our common stock may be highly volatile, and you could lose all or part of your investment.
The market price of our common stock is likely to be volatile. Our stock price could be subject to wide fluctuations in response to a variety of factors, including the following:
 	•	adverse results or delays in preclinical or clinical trials;	
 	•	reports of adverse events in other gene therapy products or clinical trials of such products;	
 	•	inability to obtain additional funding;	
 	•	any delay in filing an IND or BLA for any of our product candidates and any adverse development or perceived adverse development with respect to the FDA’s review of that IND or BLA;	
 	•	failure to develop successfully and commercialize our product candidates;	
 	•	failure to maintain our existing strategic collaboration or enter into new collaborations;	
 	•	failure by us or our licensors and strategic collaboration partners to prosecute, maintain or enforce our intellectual property rights;	
 	•	changes in laws or regulations applicable to future products;	
 	•	inability to obtain adequate product supply for our product candidates or the inability to do so at acceptable prices;	
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 	•	adverse regulatory decisions;	
 	•	introduction of new products, services or technologies by our competitors;	
 	•	failure to meet or exceed financial projections we may provide to the public;	
 	•	failure to meet or exceed the financial projections of the investment community;	
 	•	the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community;	
 	•	announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us, our strategic collaboration partners or our competitors;	
 	•	disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;	
 	•	additions or departures of key scientific or management personnel;	
 	•	significant lawsuits, including patent or stockholder litigation;	
 	•	changes in the market valuations of similar companies;	
 	•	sales of our common stock by us or our stockholders in the future; and	
 	•	trading volume of our common stock.	
In addition, companies trading in the stock market in general, and The Nasdaq Global Select Market in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.
Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.
As widely reported, global credit and financial markets have experienced extreme volatility and disruptions in the past several years, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. We cannot assure you that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, 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 and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget.
We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.
We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future, including due to limitations that are currently imposed by our Loan Agreement. Any return to stockholders will therefore be limited to the appreciation of their stock.
We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.*
 We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act, or JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding nonbinding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years following the year in which we completed our initial public offering, although circumstances could cause us to lose that status earlier. We will remain an emerging
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growth company until the e arlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering (i.e. December 31, 2022), (b) in which we have total annual gross revenue of at least $1 .07  billion or (c) in which we are de emed to be a large accelerated filer, which requires the market value of our common stock that is held by non-affiliates to exceed $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1 billion in non-convertible debt during the prior three-year period.
Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantage of many of the same exemptions from disclosure requirements including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. As a result, changes in rules of U.S. generally accepted accounting principles or their interpretation, the adoption of new guidance or the application of existing guidance to changes in our business could significantly affect our financial position and results of operations.
We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to existing and new compliance initiatives.*
As a public company, we incur significant legal, accounting and other expenses that we did not incur as a private company. We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which require, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and The NASDAQ Global Select Market to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas such as “say on pay” and proxy access. Recent legislation permits emerging growth companies to implement many of these requirements over a longer period and up to five years from the pricing of our initial public offering. We intend to take advantage of this legislation but cannot guarantee that we will not be required to implement these requirements sooner than budgeted or planned and thereby incur unexpected expenses. Stockholder activism, the current political environment and the current level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.
We expect the rules and regulations applicable to public companies to continue to result in substantial legal and financial compliance costs and to make some activities more time-consuming and costly. If these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. These costs could decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. For example, these rules and regulations could make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.
Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.*
If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the market price of our common stock could decline. We had 19,951,158 shares of common stock outstanding as of August 3, 2018. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.
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Sales of our common stock by current stockholders may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate, an d make it more difficul t for other stockholders to sell shares of our common stock. In addition, as of June 30, 2018 , 3,931,979 shares of common stock that are either subject to outstanding options, reserved for future issuance under our equity incentive plans or subject to outs tanding warrants will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules and Rule 144 and Rule 701 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the market price of our common stock could decline.
Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
Additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. These sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.
Pursuant to our 2017 Equity Incentive Plan, or 2017 Plan, our management is authorized to grant stock options to our employees, directors and consultants.  The number of shares of our common stock reserved for issuance under our 2017 Plan will automatically increase on January 1 of each year through and including January 1, 2027, by 4% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by our board of directors.  Additionally, the number of shares of our common stock reserved for issuance under our 2017 Employee Stock Purchase Plan, or the ESPP, will automatically increase on January 1 of each year through and including January 1, 2027, by the lesser of 1% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, 300,000 shares or a lesser number of shares determined by our board of directors.  Unless our board of directors elects not to increase the number of shares available for future grant each year under the 2017 Plan and the ESPP, our stockholders may experience additional dilution, which could cause our stock price to fall.
We have broad discretion in the use of working capital and may not use it effectively.*
Our management will have broad discretion in the application of working capital, and stockholders do not have the opportunity to assess whether working capital is being used appropriately. Because of the number and variability of factors that will determine our use of our working capital, its ultimate use may vary substantially from its currently intended use. Management might not apply working capital in ways that ultimately increase stockholder value. We intend to use our working capital to fund our Phase 3 clinical trial of Toca 511 & Toca FC in recurrent HGG, manufacturing scale-up and validation for Toca 511 & Toca FC, the other ongoing and planned clinical development and regulatory activities for Toca 511 & Toca FC and for other general corporate purposes. Failure by us to apply working capital effectively could harm our business. Pending its use, we may invest our working capital in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply our working capital in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.
The recently passed comprehensive tax reform bill could adversely affect our business and financial condition.
On December 22, 2017, President Trump signed into law new legislation that significantly revises the Internal Revenue Code of 1986, as amended, or IRC.  The newly enacted federal income tax law, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including reducing the business tax credit for certain clinical testing expenses incurred in the testing of certain drugs for rare diseases or conditions).  Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain and our business and financial condition could be adversely affected.  In addition, it is unknown if and to what extent various states will conform to the newly enacted federal tax law.  The impact of this tax reform on holders of our common stock is likewise uncertain and could be adverse.  We urge our stockholders to consult with their legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our common stock.
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Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.*
As of December 31, 2017, we had federal and state net operating loss carryforwards of $137.8 million and $41.5 million, respectively. Our federal and state net operating loss carryforwards will begin to expire, if not utilized, in 2028.  If these net operating loss carryforwards expire unused, they will be unavailable to offset future income and reduce future income tax liabilities. In addition, under the newly enacted federal income tax law, federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited.  It is uncertain if and to what extent various states will conform to the newly enacted federal tax law. Under Sections 382 and 383 of the IRC, if a corporation undergoes an “ownership change,” generally defined as a cumulative change in its equity ownership by “5-percent shareholders” of greater than 50 percentage points (by value) over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards, or NOLs, and certain other pre-change tax attributes (such as research tax credits) to offset its post-change taxable income and taxes, as applicable, may be limited. We have completed an initial public offering and multiple rounds of financing since our inception which may have resulted in an ownership change or could result in an ownership change in the future. As of June 30, 2018, we have not completed a Section 382 and 383 analysis regarding any limitations on our NOLs and research and development credit carryforwards and such limitations could be significant. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, our ability to use our NOLs and research and development credit carryforwards to offset our U.S. federal taxable income and taxes, as applicable, may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, similar rules may apply and there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders or remove our current management.
Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that may have the effect of delaying or preventing a change in control of us or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws, include provisions that:
 	•	permit our board of directors to issue up to 10,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate (including the right to approve an acquisition or other change in our control);	
 	•	provide that the authorized number of directors may be changed only by resolution of the board of directors;	
 	•	provide that the board of directors or any individual director may only be removed with cause and the affirmative vote of the holders of at least 66-2/3% of the voting power of all of our then outstanding common stock;	
 	•	provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;	
 	•	divide our board of directors into three classes;	
 	•	require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent;	
 	•	provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner and also specify requirements as to the form and content of a stockholder’s notice;	
 	•	do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose);	
 	•	provide that special meetings of our stockholders may be called only by the chairman of the board, our Chief Executive Officer or by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors; and	
 	•	provide that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of	
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 		our directors or officers to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws, or (iv) any action asserting a claim against us governed by the internal affairs doctrine.	
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.
Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware is 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 or our directors, officers or employees.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a breach of fiduciary duty owed by any of our directors, officers or other employees 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 the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; or (iv) any action asserting a claim against us or any of our directors, officers or other employees that is governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation and amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.
Because we have an even number of members of our board of directors, deadlocks may occur in our board of directors’ decision-making process, which may delay or prevent critical decisions from being made.
Since we have an even number of directors, deadlocks may occur when such directors disagree on a particular decision or course of action. Our amended and restated certificate of incorporation and amended and restated bylaws do not contain any mechanisms for resolving potential deadlocks. While our directors are under a duty to act in the best interest of our company, any deadlocks may impede the further development of our business in that such deadlocks may delay or prevent critical decisions regarding our business.
 Item 2.  Unregistered  Sales of Equity Securities and Use of Proceeds.
Use of Proceeds
On April 12, 2017, our Registration Statement on Form S-1 (file No. 333-216574) was declared effective by the SEC for our initial public offering of common stock. We issued 9,775,000 shares of common stock at an offering price of $10.00 per share for gross proceeds of $97.8 million.  After deducting underwriting discounts, commissions and offering costs incurred by us of $10.8 million, the net proceeds from the offering were $86.9 million.  The offering was completed on April 19, 2017. The joint bookrunning managers for the offering were Leerink Partners LLC, Evercore Group L.L.C. and Stifel, Nicolaus & Company, Incorporated. No offering costs were paid or are payable, directly or indirectly, to our directors or officers, to persons owning 10% or more of any class of our equity securities, or to any of our affiliates.
 There has been no material change in the  expected use of the net proceeds from our initial  public offering as described in our final prospectus filed with the SEC on April  13, 2017. Through the date hereof, we have used $27.6 million of the net proceeds from the offering. Pending such uses, we plan to continue investing the unused proceeds from this offering in fixed, non-speculative income instruments.
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 Item 6.  E xhibits
 
The following exhibits are filed as part of this Quarterly Report on Form 10-Q.
 
Exhibit
Number	 	Description of Exhibit	
3.1	 	Amended and Restated Certificate of Incorporation of the Registrant, incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed on April 19, 2017.	
3.2	 	Amended and Restated Bylaws of the Registrant, incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed on April 19, 2017.	
4.1	 	Form of Common Stock Certificate of the Registrant, incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1 (File No. 333-216574), as amended, originally filed with the Securities and Exchange Commission on March 9, 2017.	
4.2	 	Warrant to Purchase Common Stock, dated June 5, 2013, issued to Voices Against Brain Cancer, incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1 (File No. 333-216574), as amended, originally filed with the Securities and Exchange Commission on March 9, 2017.	
4.3†	 	Research and Development Grant Agreement, dated June 5, 2013, by and between the Registrant and Voices Against Brain Cancer, incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form S-1 (File No. 333-216574), as amended, originally filed with the Securities and Exchange Commission on March 9, 2017.	
4.4	 	Warrant to Purchase Stock, dated October 30, 2015, issued to Oxford Finance LLC, incorporated by reference to Exhibit 4.4 of the Registrant’s Registration Statement on Form S-1 (File No. 333-216574), as amended, originally filed with the Securities and Exchange Commission on March 9, 2017.	
4.5	 	Warrant to Purchase Stock, dated October 30, 2015, issued to Silicon Valley Bank, incorporated by reference to Exhibit 4.5 of the Registrant’s Registration Statement on Form S-1 (File No. 333-216574), as amended, originally filed with the Securities and Exchange Commission on March 9, 2017.	
4.6*	 	Warrant to Purchase Stock, dated May 18, 2018, issued to Oxford Finance LLC.	
4.7*	 	Warrant to Purchase Stock, dated May 18, 2018, issued to Oxford Finance LLC.	
4.8*	 	Warrant to Purchase Stock, dated May 18, 2018, issued to Oxford Finance LLC .	
4.9*	 	Warrant to Purchase Stock, dated May 18, 2018, issued to Silicon Valley Bank.	
10.1*††	 	License Agreement, dated April 18, 2018, by and among the Registrant, Beijing Apollo Venus Biomedical Technology Limited and ApolloBio Corp.	
10.2*	 	Amended and Restated Loan and Security Agreement, dated May 18, 2018, by and among the Registrant, Oxford Finance LLC and Silicon Valley Bank.	
10.3*	 	First Amendment to Amended and Restated Loan and Security Agreement, dated August 3, 2018, by and amount the Registrant, Oxford Finance LLC and Silicon Valley Bank	
31.1*	 	Certification of Principal Executive Officer pursuant to Rule13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.	
31.2*	 	Certification of Principal Financial Officer pursuant to Rule13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended .	
32.1*	 	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act, as amended, and 18 U.S.C. Section 1350.	
101.INS*	 	XBRL Instance Document.	
101.SCH*	 	XBRL Taxonomy Extension Schema Document.	
101.CAL*	 	XBRL Taxonomy Extension Calculation Linkbase Document.	
101.DEF*	 	XBRL Taxonomy Extension Definition Linkbase Document.	
101.LAB*	 	XBRL Taxonomy Extension Label Linkbase Document.	
101.PRE*	 	XBRL Taxonomy Extension Presentation Linkbase Document.	

*	Filed herewith.	
†	Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.	
††	Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.	

 
53

 SIGNAT URES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Date: August 9, 2018	 	TOCAGEN INC.	
 	 	 	 	
 	 	By:	/s/  Martin J. Duvall	
 	 	 	Martin J. Duvall	
 	 	 	Chief Executive Officer	
 	 	 	(Principal Executive Officer)	
 
By:	/s/  Mark Foletta	
 	Mark Foletta	
 	Chief Financial Officer	
 	(Principal Financial Officer)	

 

Exhibit 4.6
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
WARRANT TO PURCHASE STOCK

Company:	TOCAGEN INC., a Delaware corporation	
Number of Shares:	9,893	
Type/Series of Stock:	Common Stock	
Warrant Price:	$9.35 per share	
Issue Date:	May 18, 2018	
Expiration Date:	May 18, 2028 See also Section 5.1(b)	
Credit Facility:	This Warrant to Purchase Stock (“ Warrant ”) is issued in connection with that certain Amended and Restated Loan and Security Agreement of even date herewith among Oxford Finance LLC, as Lender and Collateral Agent, the Lenders from time to time party thereto, including Silicon Valley Bank and the Company (as modified, amended and/or restated from time to time, the “ Loan Agreement ”).	
THIS WARRANT CERTIFIES THAT, for good and valuable consideration, OXFORD FINANCE LLC (“ Oxford ” and, together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, “ Holder ”) is entitled to purchase the number of fully paid and non-assessable shares (the “ Shares ”) of the above-stated Type/Series of Stock (the “ Class ”) of the above-named company (the “ Company ”) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.
SECTION 1. EXERCISE.
1.1 Method of Exercise . Holder may at any time and from time to time exercise this Warrant, in whole or in part, by delivering to the Company the original of this Warrant together with a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1 and, unless Holder is exercising this Warrant pursuant to a cashless exercise set forth in Section 1.2, a check, wire transfer of same-day funds (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.
1.2 Cashless Exercise . On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive Shares equal to the value of this Warrant, or portion hereof as to which this Warrant is being exercised. Thereupon, the Company shall issue to the Holder such number of fully paid and non-assessable Shares as are computed using the following formula:
X = Y(A-B)/A
where:
 	X =	the number of Shares to be issued to the Holder;	 	
 	Y =	the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the Company in payment of the aggregate Warrant Price);	 	
1

 	A =	the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and	 	
 	B =	the Warrant Price.	 	
1.3 Fair Market Value . If the Company’s common stock is then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “ Trading Market ”) and the Class is common stock, the fair market value of a Share shall be the closing price or last sale price of a share of common stock reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company. If the Company’s common stock is not traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faith judgment.
1.4 Delivery of Certificate and New Warrant . Within a reasonable time after Holder exercises this Warrant in the manner set forth in Section 1.1 or 1.2 above, the Company shall deliver to Holder a certificate representing the Shares issued to Holder upon such exercise and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Shares not so acquired.
1.5 Replacement of Warrant . On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.
1.6 Treatment of Warrant Upon Acquisition of Company.
(a) Acquisition . For the purpose of this Warrant, “ Acquisition ” means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger, consolidation or reorganization (or, if such Company stockholders beneficially own a majority of the outstanding voting power of the surviving or successor entity as of immediately after such merger, consolidation or reorganization, such surviving or successor entity is not the Company); or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power.
(b) Treatment of Warrant at Acquisition . In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a “ Cash/Public Acquisition ”), either (i) Holder shall exercise this Warrant pursuant to Section 1.1 and/or 1.2 and such exercise will be deemed effective immediately prior to and contingent upon the consummation of such Acquisition or (ii) if Holder elects not to exercise the Warrant, this Warrant will expire immediately prior to the consummation of such Acquisition.
 (c) The Company shall provide Holder with written notice of its request relating to the Cash/Public Acquisition (together with such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such contemplated Cash/Public Acquisition giving rise to such notice), which is to be delivered to Holder not less than seven (7) Business Days prior to the closing of the proposed Cash/Public Acquisition. In the event the Company does not provide such notice, then if, immediately prior to the Cash/Public Acquisition, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon such exercise to the
2

Holder and Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as the date thereof.
(d) Upon the closing of any Acquisition other than a Cash/Public Acquisition defined above, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of such Acquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.
(e) As used in this Warrant, “ Marketable Securities ” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or prior to the closing thereof is then traded in Trading Market, and (iii) following the closing of such Acquisition, Holder would not be restricted from publicly re-selling all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise or convert this Warrant in full on or prior to the closing of such Acquisition, except to the extent that any such restriction (x) arises solely under federal or state securities laws, rules or regulations, and (y) does not extend beyond six (6) months from the closing of such Acquisition.
SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.
2.1 Stock Dividends, Splits, Etc . If the Company declares or pays a dividend or distribution i n the outstanding shares of the Class payable in common stock or other securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred. If the Company subdivides the outstanding shares of the Class by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the Class are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.
2.2 Reclassification, Exchange, Combinations or Substitution . Upon any event whereby all of the outstanding shares of the Class are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Company securities of a different class and/or series, then from and after the consummation of such event, this Warrant will be exercisable for the number, class and series of Company securities that Holder would have received had the Shares been outstanding on and as of the consummation of such event, and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations substitutions, replacements or other similar events.
2.3 [Reserved.]
2.4 [Reserved.]
2.5 No Fractional Share . No fractional Share shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional Share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional Share interest by paying Holder in cash the amount computed by multiplying the fractional interest by (i) the fair market value (as determined in accordance with Section 1.3 above) of a full Share, less (ii) the then-effective Warrant Price.
3

2.6 Notice/Certificate as to Adjustments . Upon each adjustment of the Warrant Price, Class and/or number of Shares, the Company, at the Company’s expense, shall notify Holder in writing within a reasonable time setting forth the adjustments to the Warrant Price, Class and/or number of Shares and facts upon which such adjustment is based. The Company shall, upon written request from Holder, furnish Holder with a certificate of its Chief Financial Officer, including computations of such adjustment and the Warrant Price, Class and number of Shares in effect upon the date of such adjustment.
SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties . The Company represents and warrants to, and agrees with, the Holder that the Shares which may be issued upon the exercise of this Warrant shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws. The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of shares of common stock and other securities as will be sufficient to permit the exercise in full of this Warrant.
3.2 Notice of Certain Events . If the Company proposes at any time to:
(a) declare any dividend or distribution upon the outstanding shares of the Class or common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;
(b) offer for subscription or sale pro rata to the holders of the outstanding shares of the Class any additional shares of any class or series of the Company’s stock (other than pursuant to contractual pre-emptive rights);
(c) effect any reclassification, exchange, combination, substitution, reorganization or recapitalization of the outstanding shares of the Class; or
(d) effect an Acquisition or to liquidate, dissolve or wind up;
then, in connection with each such event, the Company shall give Holder:
(1) at least seven (7) Business Days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of outstanding shares of the Class will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above; and
(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event).
Reference is made to Section 1.6(c) whereby this Warrant will be deemed to be exercised pursuant to Section 1.2 hereof if the Company does not give written notice to Holder of a Cash/Public Acquisition as required by the terms hereof. Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.
SECTION 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER .
The Holder represents and warrants to the Company as follows:
4.1 Purchase for Own Account . This Warrant and the securities to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.
4

4.2 Disclosure of Information . Holder is aware of the Company’s business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.
4.3 Investment Experience . Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.
4.4 Accredited Investor Status . Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.
4.5 The Act . Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein.   Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act.
 4.6 [Reserved.]
4.7 No Voting Rights . Holder, as a Holder of this Warrant, will not have any voting rights until the exercise of this Warrant.
SECTION 5. MISCELLANEOUS.
 5.1  Term; Automatic Cashless Exercise Upon Expiration .   
(a) Term . Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or in part at any time and from time to time on or before 6:00 PM, Eastern time, on the Expiration Date and shall be void thereafter.
(b) Automatic Cashless Exercise upon Expiration . In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall, within a reasonable time, deliver a certificate representing the Shares (or such other securities) issued upon such exercise to Holder.
5.2 Legends . Each certificate evidencing Shares shall be imprinted with a legend in substantially the following form:
 THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
5

(THE “ ACT ”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE ISSUER TO OXFORD FINANCE LLC DATED MAY 18 , 2018 , MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
5.3 Compliance with Securities Laws on Transfer . This Warrant and the Shares issued upon exercise of this Warrant may not be transferred or assigned in whole or in part except in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder, provided that any such transferee is an “accredited investor” as defined in Regulation D promulgated under the Act. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144 promulgated under the Act.
5.4 Transfer Procedure . After receipt by Oxford of the executed Warrant, Oxford may transfer all or part of this Warrant to one or more of Oxford’s affiliates (each, an “ Oxford Affiliate ”), by execution of an Assignment substantially in the form of Appendix 2. Subject to the provisions of Article 5.3 and upon providing the Company with written notice, Oxford, any such Oxford Affiliate and any subsequent Holder, may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant to any other transferee, provided, however, in connection with any such transfer, the Oxford Affiliate(s) or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). Notwithstanding any contrary provision herein, at all times prior to the IPO, Holder may not, without the Company’s prior written consent, transfer this Warrant or any portion hereof, or any Shares issued upon any exercise hereof, to any person or entity who directly competes with the Company, except in connection with an Acquisition of the Company by such a direct competitor.
5.5 Notices . All notices and other communications hereunder from the Company to the Holder, or vice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3rd) Business Day after being mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile or electronic mail and such receipt is confirmed in writing by the recipient, or (iv) on the first Business Day following delivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time in accordance with the provisions of this Section 5.5. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:
Oxford Finance LLC
133 N. Fairfax Street
Alexandria, VA 22314
Attn: Legal Department
Telephone: (703) 519-4900
Facsimile: (703) 519-5225
Email: LegalDepartment@oxfordfinance.com
Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:
Tocagen Inc.
4242 Campus Point Court
6

San Diego, CA 92121
Attn: Chief Financial Officer
Telephone: 858-412-8403
Facsimile: (858) 412-8499
Email: mfoletta@tocagen.com
With a copy to : Cooley LLP
Attn: Karen Deschaine Anderson
4401 Eastgate Mall
San Diego, CA 92121
5.6 Waiver . This Warrant and any term hereof may be changed, waived, discharged or terminated (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
5.7 Attorneys’ Fees . In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.
5.8 Counterparts; Facsimile/Electronic Signatures . This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.
5.9 Governing Law . This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.
5.10 Headings . The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.
5.11 Business Days . “ Business Day ” is any day that is not a Saturday, Sunday or a day on which Silicon Valley Bank is closed.
[Remainder of page left blank intentionally]
[Signature page follows]
 
7

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

By:	/s/ Mark Foletta	
 	 	
Name:	Mark Foletta	
 	(Print)	
Title:	CFO	

“HOLDER”	
 	 	
OXFORD FINANCE LLC	
 	 	
By:	/s/ Colette H. Featherly	
 	 	
Name:	Colette H. Featherly	
 	(Print)	
Title:	Senior Vice President	

 
[Signature Page to Warrant to Purchase Stock]

APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned Holder hereby exercises its right to purchase shares of the Common Stock of TOCAGEN INC. (the “ Company ”) in accordance with the attached Warrant To Purchase Stock, and tenders payment of the aggregate Warrant Price for such shares as follows:
[   ] Check in the amount of $ _______ payable to order of the Company enclosed herewith
[   ] Wire transfer of immediately available funds to the Company’s account
[   ] Cashless Exercise pursuant to Section 1.2 of the Warrant
[   ] Other [Describe] __________________________________________
2. Please issue a certificate or certificates representing the Shares in the name specified below:
____________________________________________
Holder’s Name
____________________________________________
____________________________________________
(Address)
3. By its execution below and for the benefit of the Company, Holder hereby restates each of the
representations and warranties in Section 4 of the Warrant to Purchase Stock as of the date hereof.
HOLDER:

By:	 	
 	 	
Name:	 	
 	 	
Title:	 	
Date:	 	

 
Appendix 1

APPENDIX 2
ASSIGNMENT
For value received, Oxford Finance LLC hereby sells, assigns and transfers unto
 
Name:	[OXFORD TRANSFEREE]	
 	 	
Address:	 	
 	 	
Tax ID:	 	
that certain Warrant to Purchase Stock issued by TOCAGEN INC. (the “ Company ”), on May 18, 2018 (the “ Warrant ”) together with all rights, title and interest therein.
OXFORD FINANCE LLC

By:	 	
 	 	
Name:	 	
 	 	
Title:	 	
 
Date:	 	
 
By its execution below, and for the benefit of the Company, [OXFORD TRANSFEREE] makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.
[OXFORD TRANSFEREE]

By:	 	
 	 	
Name:	 	
 	 	
Title:	 	

Appendix 2

Exhibit 4.7
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
WARRANT TO PURCHASE STOCK

Company:	TOCAGEN INC., a Delaware corporation	
Number of Shares:	7,701	
Type/Series of Stock:	Common Stock	
Warrant Price:	$9.35 per share	
Issue Date:	May 18, 2018	
Expiration Date:	May 18, 2028 See also Section 5.1(b)	
Credit Facility:	This Warrant to Purchase Stock (“ Warrant ”) is issued in connection with that certain Amended and Restated Loan and Security Agreement of even date herewith among Oxford Finance LLC, as Lender and Collateral Agent, the Lenders from time to time party thereto, including Silicon Valley Bank and the Company (as modified, amended and/or restated from time to time, the “ Loan Agreement ”).	
THIS WARRANT CERTIFIES THAT, for good and valuable consideration, OXFORD FINANCE LLC (“ Oxford ” and, together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, “ Holder ”) is entitled to purchase the number of fully paid and non-assessable shares (the “ Shares ”) of the above-stated Type/Series of Stock (the “ Class ”) of the above-named company (the “ Company ”) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.
SECTION 1. EXERCISE.
1.1 Method of Exercise . Holder may at any time and from time to time exercise this Warrant, in whole or in part, by delivering to the Company the original of this Warrant together with a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1 and, unless Holder is exercising this Warrant pursuant to a cashless exercise set forth in Section 1.2, a check, wire transfer of same-day funds (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.
1.2 Cashless Exercise . On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive Shares equal to the value of this Warrant, or portion hereof as to which this Warrant is being exercised. Thereupon, the Company shall issue to the Holder such number of fully paid and non-assessable Shares as are computed using the following formula:
X = Y(A-B)/A
where:
 	X =	the number of Shares to be issued to the Holder;	 	
 	Y =	the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the Company in payment of the aggregate Warrant Price);	 	
1

 	A =	the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and	 	
 	B =	the Warrant Price.	 	
1.3 Fair Market Value . If the Company’s common stock is then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “ Trading Market ”) and the Class is common stock, the fair market value of a Share shall be the closing price or last sale price of a share of common stock reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company. If the Company’s common stock is not traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faith judgment.
1.4 Delivery of Certificate and New Warrant . Within a reasonable time after Holder exercises this Warrant in the manner set forth in Section 1.1 or 1.2 above, the Company shall deliver to Holder a certificate representing the Shares issued to Holder upon such exercise and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Shares not so acquired.
1.5 Replacement of Warrant . On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.
1.6 Treatment of Warrant Upon Acquisition of Company.
(a) Acquisition . For the purpose of this Warrant, “ Acquisition ” means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger, consolidation or reorganization (or, if such Company stockholders beneficially own a majority of the outstanding voting power of the surviving or successor entity as of immediately after such merger, consolidation or reorganization, such surviving or successor entity is not the Company); or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power.
(b) Treatment of Warrant at Acquisition . In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a “ Cash/Public Acquisition ”), either (i) Holder shall exercise this Warrant pursuant to Section 1.1 and/or 1.2 and such exercise will be deemed effective immediately prior to and contingent upon the consummation of such Acquisition or (ii) if Holder elects not to exercise the Warrant, this Warrant will expire immediately prior to the consummation of such Acquisition.
 (c) The Company shall provide Holder with written notice of its request relating to the Cash/Public Acquisition (together with such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such contemplated Cash/Public Acquisition giving rise to such notice), which is to be delivered to Holder not less than seven (7) Business Days prior to the closing of the proposed Cash/Public Acquisition. In the event the Company does not provide such notice, then if, immediately prior to the Cash/Public Acquisition, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon such exercise to the
2

Holder and Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as the date thereof.
(d) Upon the closing of any Acquisition other than a Cash/Public Acquisition defined above, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of such Acquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.
(e) As used in this Warrant, “ Marketable Securities ” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or prior to the closing thereof is then traded in Trading Market, and (iii) following the closing of such Acquisition, Holder would not be restricted from publicly re-selling all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise or convert this Warrant in full on or prior to the closing of such Acquisition, except to the extent that any such restriction (x) arises solely under federal or state securities laws, rules or regulations, and (y) does not extend beyond six (6) months from the closing of such Acquisition.
SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.
2.1 Stock Dividends, Splits, Etc . If the Company declares or pays a dividend or distribution i n the outstanding shares of the Class payable in common stock or other securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred. If the Company subdivides the outstanding shares of the Class by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the Class are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.
2.2 Reclassification, Exchange, Combinations or Substitution . Upon any event whereby all of the outstanding shares of the Class are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Company securities of a different class and/or series, then from and after the consummation of such event, this Warrant will be exercisable for the number, class and series of Company securities that Holder would have received had the Shares been outstanding on and as of the consummation of such event, and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations substitutions, replacements or other similar events.
2.3 [Reserved.]
2.4 [Reserved.]
2.5 No Fractional Share . No fractional Share shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional Share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional Share interest by paying Holder in cash the amount computed by multiplying the fractional interest by (i) the fair market value (as determined in accordance with Section 1.3 above) of a full Share, less (ii) the then-effective Warrant Price.
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2.6 Notice/Certificate as to Adjustments . Upon each adjustment of the Warrant Price, Class and/or number of Shares, the Company, at the Company’s expense, shall notify Holder in writing within a reasonable time setting forth the adjustments to the Warrant Price, Class and/or number of Shares and facts upon which such adjustment is based. The Company shall, upon written request from Holder, furnish Holder with a certificate of its Chief Financial Officer, including computations of such adjustment and the Warrant Price, Class and number of Shares in effect upon the date of such adjustment.
SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties . The Company represents and warrants to, and agrees with, the Holder that the Shares which may be issued upon the exercise of this Warrant shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws. The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of shares of common stock and other securities as will be sufficient to permit the exercise in full of this Warrant.
3.2 Notice of Certain Events . If the Company proposes at any time to:
(a) declare any dividend or distribution upon the outstanding shares of the Class or common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;
(b) offer for subscription or sale pro rata to the holders of the outstanding shares of the Class any additional shares of any class or series of the Company’s stock (other than pursuant to contractual pre-emptive rights);
(c) effect any reclassification, exchange, combination, substitution, reorganization or recapitalization of the outstanding shares of the Class; or
(d) effect an Acquisition or to liquidate, dissolve or wind up;
then, in connection with each such event, the Company shall give Holder:
(1) at least seven (7) Business Days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of outstanding shares of the Class will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above; and
(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event).
Reference is made to Section 1.6(c) whereby this Warrant will be deemed to be exercised pursuant to Section 1.2 hereof if the Company does not give written notice to Holder of a Cash/Public Acquisition as required by the terms hereof. Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.
SECTION 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER .
The Holder represents and warrants to the Company as follows:
4.1 Purchase for Own Account . This Warrant and the securities to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.
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4.2 Disclosure of Information . Holder is aware of the Company’s business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.
4.3 Investment Experience . Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.
4.4 Accredited Investor Status . Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.
4.5 The Act . Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein.   Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act.
 4.6 [Reserved.]
4.7 No Voting Rights . Holder, as a Holder of this Warrant, will not have any voting rights until the exercise of this Warrant.
SECTION 5. MISCELLANEOUS.
 5.1  Term; Automatic Cashless Exercise Upon Expiration .   
(a) Term . Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or in part at any time and from time to time on or before 6:00 PM, Eastern time, on the Expiration Date and shall be void thereafter.
(b) Automatic Cashless Exercise upon Expiration . In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall, within a reasonable time, deliver a certificate representing the Shares (or such other securities) issued upon such exercise to Holder.
5.2 Legends . Each certificate evidencing Shares shall be imprinted with a legend in substantially the following form:
 THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
5

(THE “ ACT ”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE ISSUER TO OXFORD FINANCE LLC DATED MAY 18 , 2018 , MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
5.3 Compliance with Securities Laws on Transfer . This Warrant and the Shares issued upon exercise of this Warrant may not be transferred or assigned in whole or in part except in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder, provided that any such transferee is an “accredited investor” as defined in Regulation D promulgated under the Act. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144 promulgated under the Act.
5.4 Transfer Procedure . After receipt by Oxford of the executed Warrant, Oxford may transfer all or part of this Warrant to one or more of Oxford’s affiliates (each, an “ Oxford Affiliate ”), by execution of an Assignment substantially in the form of Appendix 2. Subject to the provisions of Article 5.3 and upon providing the Company with written notice, Oxford, any such Oxford Affiliate and any subsequent Holder, may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant to any other transferee, provided, however, in connection with any such transfer, the Oxford Affiliate(s) or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). Notwithstanding any contrary provision herein, at all times prior to the IPO, Holder may not, without the Company’s prior written consent, transfer this Warrant or any portion hereof, or any Shares issued upon any exercise hereof, to any person or entity who directly competes with the Company, except in connection with an Acquisition of the Company by such a direct competitor.
5.5 Notices . All notices and other communications hereunder from the Company to the Holder, or vice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3rd) Business Day after being mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile or electronic mail and such receipt is confirmed in writing by the recipient, or (iv) on the first Business Day following delivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time in accordance with the provisions of this Section 5.5. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:
Oxford Finance LLC
133 N. Fairfax Street
Alexandria, VA 22314
Attn: Legal Department
Telephone: (703) 519-4900
Facsimile: (703) 519-5225
Email: LegalDepartment@oxfordfinance.com
Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:
Tocagen Inc.
4242 Campus Point Court
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San Diego, CA 92121
Attn: Chief Financial Officer
Telephone: 858-412-8403
Facsimile: (858) 412-8499
Email: mfoletta@tocagen.com
With a copy to : Cooley LLP
Attn: Karen Deschaine Anderson
4401 Eastgate Mall
San Diego, CA 92121
5.6 Waiver . This Warrant and any term hereof may be changed, waived, discharged or terminated (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
5.7 Attorneys’ Fees . In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.
5.8 Counterparts; Facsimile/Electronic Signatures . This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.
5.9 Governing Law . This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.
5.10 Headings . The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.
5.11 Business Days . “ Business Day ” is any day that is not a Saturday, Sunday or a day on which Silicon Valley Bank is closed.
[Remainder of page left blank intentionally]
[Signature page follows]
 
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IN WITNESS WHEREOF, the parties have caused this Warrant to Purchase Stock to be executed by their duly authorized representatives effective as of the Issue Date written above.
 
“COMPANY”	
 	 	
TOCAGEN INC.	

By:	/s/ Mark Foletta	
 	 	
Name:	Mark Foletta	
 	(Print)	
Title:	CFO	

“HOLDER”	
 	 	
OXFORD FINANCE LLC	
 	 	
By:	/s/ Colette H. Featherly	
 	 	
Name:	Colette H. Featherly	
 	(Print)	
Title:	Senior Vice President	

 
[Signature Page to Warrant to Purchase Stock]

APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned Holder hereby exercises its right to purchase shares of the Common Stock of TOCAGEN INC. (the “ Company ”) in accordance with the attached Warrant To Purchase Stock, and tenders payment of the aggregate Warrant Price for such shares as follows:
[   ] Check in the amount of $ _______ payable to order of the Company enclosed herewith
[   ] Wire transfer of immediately available funds to the Company’s account
[   ] Cashless Exercise pursuant to Section 1.2 of the Warrant
[   ] Other [Describe ] __________________________________________
2. Please issue a certificate or certificates representing the Shares in the name specified below:
____________________________________________
Holder’s Name
____________________________________________
____________________________________________
(Address)
3. By its execution below and for the benefit of the Company, Holder hereby restates each of the
representations and warranties in Section 4 of the Warrant to Purchase Stock as of the date hereof.
HOLDER:

By:	 	
 	 	
Name:	 	
 	 	
Title:	 	
Date:	 	

Appendix 1

APPENDIX 2
ASSIGNMENT
For value received, Oxford Finance LLC hereby sells, assigns and transfers unto
 
Name:	[OXFORD TRANSFEREE]	
 	 	
Address:	 	
 	 	
Tax ID:	 	
that certain Warrant to Purchase Stock issued by TOCAGEN INC. (the “ Company ”), on May 18, 2018 (the “ Warrant ”) together with all rights, title and interest therein.
OXFORD FINANCE LLC

By:	 	
 	 	
Name:	 	
 	 	
Title:	 	
 
Date:	 	
 
By its execution below, and for the benefit of the Company, [OXFORD TRANSFEREE] makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.
[OXFORD TRANSFEREE]

By:	 	
 	 	
Name:	 	
 	 	
Title:	 	

Appendix 2

Exhibit 4.8
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
WARRANT TO PURCHASE STOCK

Company:	TOCAGEN INC., a Delaware corporation	
Number of Shares:	10,695	
Type/Series of Stock:	Common Stock	
Warrant Price:	$9.35 per share	
Issue Date:	May 18, 2018	
Expiration Date:	May 18, 2028 See also Section 5.1(b)	
Credit Facility:	This Warrant to Purchase Stock (“ Warrant ”) is issued in connection with that certain Amended and Restated Loan and Security Agreement of even date herewith among Oxford Finance LLC, as Lender and Collateral Agent, the Lenders from time to time party thereto, including Silicon Valley Bank and the Company (as modified, amended and/or restated from time to time, the “ Loan Agreement ”).	
THIS WARRANT CERTIFIES THAT, for good and valuable consideration, OXFORD FINANCE LLC (“ Oxford ” and, together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, “ Holder ”) is entitled to purchase the number of fully paid and non-assessable shares (the “ Shares ”) of the above-stated Type/Series of Stock (the “ Class ”) of the above-named company (the “ Company ”) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.
SECTION 1. EXERCISE.
1.1 Method of Exercise . Holder may at any time and from time to time exercise this Warrant, in whole or in part, by delivering to the Company the original of this Warrant together with a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1 and, unless Holder is exercising this Warrant pursuant to a cashless exercise set forth in Section 1.2, a check, wire transfer of same-day funds (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.
1.2 Cashless Exercise . On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive Shares equal to the value of this Warrant, or portion hereof as to which this Warrant is being exercised. Thereupon, the Company shall issue to the Holder such number of fully paid and non-assessable Shares as are computed using the following formula:
X = Y(A-B)/A
where:
 	X =	the number of Shares to be issued to the Holder;	 	
 	Y =	the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the Company in payment of the aggregate Warrant Price);	 	
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 	A =	the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and	 	
 	B =	the Warrant Price.	 	
1.3 Fair Market Value . If the Company’s common stock is then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “ Trading Market ”) and the Class is common stock, the fair market value of a Share shall be the closing price or last sale price of a share of common stock reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company. If the Company’s common stock is not traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faith judgment.
1.4 Delivery of Certificate and New Warrant . Within a reasonable time after Holder exercises this Warrant in the manner set forth in Section 1.1 or 1.2 above, the Company shall deliver to Holder a certificate representing the Shares issued to Holder upon such exercise and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Shares not so acquired.
1.5 Replacement of Warrant . On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.
1.6 Treatment of Warrant Upon Acquisition of Company.
(a) Acquisition . For the purpose of this Warrant, “ Acquisition ” means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger, consolidation or reorganization (or, if such Company stockholders beneficially own a majority of the outstanding voting power of the surviving or successor entity as of immediately after such merger, consolidation or reorganization, such surviving or successor entity is not the Company); or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power.
(b) Treatment of Warrant at Acquisition . In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a “ Cash/Public Acquisition ”), either (i) Holder shall exercise this Warrant pursuant to Section 1.1 and/or 1.2 and such exercise will be deemed effective immediately prior to and contingent upon the consummation of such Acquisition or (ii) if Holder elects not to exercise the Warrant, this Warrant will expire immediately prior to the consummation of such Acquisition.
 (c) The Company shall provide Holder with written notice of its request relating to the Cash/Public Acquisition (together with such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such contemplated Cash/Public Acquisition giving rise to such notice), which is to be delivered to Holder not less than seven (7) Business Days prior to the closing of the proposed Cash/Public Acquisition. In the event the Company does not provide such notice, then if, immediately prior to the Cash/Public Acquisition, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon such exercise to the
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Holder and Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as the date thereof.
(d) Upon the closing of any Acquisition other than a Cash/Public Acquisition defined above, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of such Acquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.
(e) As used in this Warrant, “ Marketable Securities ” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or prior to the closing thereof is then traded in Trading Market, and (iii) following the closing of such Acquisition, Holder would not be restricted from publicly re-selling all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise or convert this Warrant in full on or prior to the closing of such Acquisition, except to the extent that any such restriction (x) arises solely under federal or state securities laws, rules or regulations, and (y) does not extend beyond six (6) months from the closing of such Acquisition.
SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.
2.1 Stock Dividends, Splits, Etc . If the Company declares or pays a dividend or distribution i n the outstanding shares of the Class payable in common stock or other securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred. If the Company subdivides the outstanding shares of the Class by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the Class are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.
2.2 Reclassification, Exchange, Combinations or Substitution . Upon any event whereby all of the outstanding shares of the Class are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Company securities of a different class and/or series, then from and after the consummation of such event, this Warrant will be exercisable for the number, class and series of Company securities that Holder would have received had the Shares been outstanding on and as of the consummation of such event, and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations substitutions, replacements or other similar events.
2.3 [Reserved.]
2.4 [Reserved.]
2.5 No Fractional Share . No fractional Share shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional Share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional Share interest by paying Holder in cash the amount computed by multiplying the fractional interest by (i) the fair market value (as determined in accordance with Section 1.3 above) of a full Share, less (ii) the then-effective Warrant Price.
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2.6 Notice/Certificate as to Adjustments . Upon each adjustment of the Warrant Price, Class and/or number of Shares, the Company, at the Company’s expense, shall notify Holder in writing within a reasonable time setting forth the adjustments to the Warrant Price, Class and/or number of Shares and facts upon which such adjustment is based. The Company shall, upon written request from Holder, furnish Holder with a certificate of its Chief Financial Officer, including computations of such adjustment and the Warrant Price, Class and number of Shares in effect upon the date of such adjustment.
SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties . The Company represents and warrants to, and agrees with, the Holder that the Shares which may be issued upon the exercise of this Warrant shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws. The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of shares of common stock and other securities as will be sufficient to permit the exercise in full of this Warrant.
3.2 Notice of Certain Events . If the Company proposes at any time to:
(a) declare any dividend or distribution upon the outstanding shares of the Class or common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;
(b) offer for subscription or sale pro rata to the holders of the outstanding shares of the Class any additional shares of any class or series of the Company’s stock (other than pursuant to contractual pre-emptive rights);
(c) effect any reclassification, exchange, combination, substitution, reorganization or recapitalization of the outstanding shares of the Class; or
(d) effect an Acquisition or to liquidate, dissolve or wind up;
then, in connection with each such event, the Company shall give Holder:
(1) at least seven (7) Business Days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of outstanding shares of the Class will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above; and
(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event).
Reference is made to Section 1.6(c) whereby this Warrant will be deemed to be exercised pursuant to Section 1.2 hereof if the Company does not give written notice to Holder of a Cash/Public Acquisition as required by the terms hereof. Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.
SECTION 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER .
The Holder represents and warrants to the Company as follows:
4.1 Purchase for Own Account . This Warrant and the securities to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.
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4.2 Disclosure of Information . Holder is aware of the Company’s business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.
4.3 Investment Experience . Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.
4.4 Accredited Investor Status . Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.
4.5 The Act . Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein.   Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act.
 4.6 [Reserved.]
4.7 No Voting Rights . Holder, as a Holder of this Warrant, will not have any voting rights until the exercise of this Warrant.
SECTION 5. MISCELLANEOUS.
 5.1  Term; Automatic Cashless Exercise Upon Expiration .   
(a) Term . Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or in part at any time and from time to time on or before 6:00 PM, Eastern time, on the Expiration Date and shall be void thereafter.
(b) Automatic Cashless Exercise upon Expiration . In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall, within a reasonable time, deliver a certificate representing the Shares (or such other securities) issued upon such exercise to Holder.
5.2 Legends . Each certificate evidencing Shares shall be imprinted with a legend in substantially the following form:
 THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
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(THE “ ACT ”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE ISSUER TO OXFORD FINANCE LLC DATED MAY 18 , 2018 , MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
5.3 Compliance with Securities Laws on Transfer . This Warrant and the Shares issued upon exercise of this Warrant may not be transferred or assigned in whole or in part except in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder, provided that any such transferee is an “accredited investor” as defined in Regulation D promulgated under the Act. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144 promulgated under the Act.
5.4 Transfer Procedure . After receipt by Oxford of the executed Warrant, Oxford may transfer all or part of this Warrant to one or more of Oxford’s affiliates (each, an “ Oxford Affiliate ”), by execution of an Assignment substantially in the form of Appendix 2. Subject to the provisions of Article 5.3 and upon providing the Company with written notice, Oxford, any such Oxford Affiliate and any subsequent Holder, may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant to any other transferee, provided, however, in connection with any such transfer, the Oxford Affiliate(s) or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable). Notwithstanding any contrary provision herein, at all times prior to the IPO, Holder may not, without the Company’s prior written consent, transfer this Warrant or any portion hereof, or any Shares issued upon any exercise hereof, to any person or entity who directly competes with the Company, except in connection with an Acquisition of the Company by such a direct competitor.
5.5 Notices . All notices and other communications hereunder from the Company to the Holder, or vice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3rd) Business Day after being mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile or electronic mail and such receipt is confirmed in writing by the recipient, or (iv) on the first Business Day following delivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time in accordance with the provisions of this Section 5.5. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:
Oxford Finance LLC
133 N. Fairfax Street
Alexandria, VA 22314
Attn: Legal Department
Telephone: (703) 519-4900
Facsimile: (703) 519-5225
Email: LegalDepartment@oxfordfinance.com
Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:
Tocagen Inc.
4242 Campus Point Court
6

San Diego, CA 92121
Attn: Chief Financial Officer
Telephone: 858-412-8403
Facsimile: (858) 412-8499
Email: mfoletta@tocagen.com
With a copy to : Cooley LLP
Attn: Karen Deschaine Anderson
4401 Eastgate Mall
San Diego, CA 92121
5.6 Waiver . This Warrant and any term hereof may be changed, waived, discharged or terminated (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
5.7 Attorneys’ Fees . In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.
5.8 Counterparts; Facsimile/Electronic Signatures . This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.
5.9 Governing Law . This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.
5.10 Headings . The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.
5.11 Business Days . “ Business Day ” is any day that is not a Saturday, Sunday or a day on which Silicon Valley Bank is closed.
[Remainder of page left blank intentionally]
[Signature page follows]
 
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IN WITNESS WHEREOF, the parties have caused this Warrant to Purchase Stock to be executed by their duly authorized representatives effective as of the Issue Date written above.
 
“COMPANY”	
 	 	
TOCAGEN INC.	

By:	/s/ Mark Foletta	
 	 	
Name:	Mark Foletta	
 	(Print)	
Title:	CFO	

“HOLDER”	
 	 	
OXFORD FINANCE LLC	
 	 	
By:	/s/ Colette H. Featherly	
 	 	
Name:	Colette H. Featherly	
 	(Print)	
Title:	Senior Vice President	

 
[Signature Page to Warrant to Purchase Stock]

APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned Holder hereby exercises its right to purchase shares of the Common Stock of TOCAGEN INC. (the “ Company ”) in accordance with the attached Warrant To Purchase Stock, and tenders payment of the aggregate Warrant Price for such shares as follows:
[   ] Check in the amount of $ _______ payable to order of the Company enclosed herewith
[   ] Wire transfer of immediately available funds to the Company’s account
[   ] Cashless Exercise pursuant to Section 1.2 of the Warrant
[   ] Other [Describe] __________________________________________
2. Please issue a certificate or certificates representing the Shares in the name specified below:
____________________________________________
Holder’s Name
____________________________________________
____________________________________________
(Address)
3. By its execution below and for the benefit of the Company, Holder hereby restates each of the
representations and warranties in Section 4 of the Warrant to Purchase Stock as of the date hereof.
HOLDER:

By:	 	
 	 	
Name:	 	
 	 	
Title:	 	
Date:	 	

Appendix 1

APPENDIX 2
ASSIGNMENT
For value received, Oxford Finance LLC hereby sells, assigns and transfers unto
 
Name:	[OXFORD TRANSFEREE]	
 	 	
Address:	 	
 	 	
Tax ID:	 	
that certain Warrant to Purchase Stock issued by TOCAGEN INC. (the “ Company ”), on May 18, 2018 (the “ Warrant ”) together with all rights, title and interest therein.
OXFORD FINANCE LLC

By:	 	
 	 	
Name:	 	
 	 	
Title:	 	
 
Date:	 	
 
By its execution below, and for the benefit of the Company, [OXFORD TRANSFEREE] makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.
[OXFORD TRANSFEREE]

By:	 	
 	 	
Name:	 	
 	 	
Title:	 	

Appendix 2

 
Exhibit 4.9
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
WARRANT TO PURCHASE STOCK
 
Company:	TOCAGEN INC., a Delaware corporation	
Number of Shares:	28,289	
Type/Series of Stock:	Common Stock	
Warrant Price:	$9.35 per share	
Issue Date:	May 18, 2018	
Expiration Date:	May 18, 2028 See also Section 5.1(b)	
Credit Facility:	This Warrant to Purchase Stock (“ Warrant ”) is issued in connection with that certain Amended and Restated Loan and Security Agreement of even date herewith among Oxford Finance LLC, as Lender and Collateral Agent, the Lenders from time to time party thereto, including Silicon Valley Bank and the Company (as modified, amended and/or restated from time to time, the “ Loan Agreement ”).	

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, SILICON VALLEY BANK (“ SVB ” and, together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, “ Holder ”) is entitled to purchase the number of fully paid and non-assessable shares (the “ Shares ”) of the above-stated Type/Series of Stock (the “ Class ”) of the above-named company (the “ Company ”) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant. Reference is made to Section 5.4 of this Warrant whereby Silicon Valley Bank shall transfer this Warrant to its parent company, SVB Financial Group.
SECTION 1. EXERCISE.
1.1 Method of Exercise . Holder may at any time and from time to time exercise this Warrant, in whole or in part, by delivering to the Company the original of this Warrant together with a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1 and, unless Holder is exercising this Warrant pursuant to a cashless exercise set forth in Section 1.2, a check, wire transfer of same-day funds (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.
1.2 Cashless Exercise . On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive Shares equal to the value of this Warrant, or portion hereof as to which this Warrant is being exercised. Thereupon, the Company shall issue to the Holder such number of fully paid and non-assessable Shares as are computed using the following formula:
X = Y(A-B)/A
where:

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

 
 	A =	the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and	
 	B =	the Warrant Price.	
1.3 Fair Market Value . If the Company’s common stock is then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “ Trading Market ”) and the Class is common stock, the fair market value of a Share shall be the closing price or last sale price of a share of common stock reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company. If the Company’s common stock is not traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faith judgment.
1.4 Delivery of Certificate and New Warrant . Within a reasonable time after Holder exercises this Warrant in the manner set forth in Section 1.1 or 1.2 above, the Company shall deliver to Holder a certificate representing the Shares issued to Holder upon such exercise and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Shares not so acquired.
1.5 Replacement of Warrant . On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.
1.6 Treatment of Warrant Upon Acquisition of Company .
(a) Acquisition. For the purpose of this Warrant, “ Acquisition ” means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger, consolidation or reorganization; or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power.
(b) Treatment of Warrant at Acquisition . In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a “ Cash/Public Acquisition ”), and the fair market value of one Share as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date immediately prior to such Cash/Public Acquisition, and Holder has not exercised this Warrant pursuant to Section 1.1 above as to all Shares, then this Warrant shall automatically be deemed to be Cashless Exercised pursuant to Section 1.2 above as to all Shares effective immediately prior to and contingent upon the consummation of a Cash/Public Acquisition. In connection with such Cashless Exercise, Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as of the date thereof and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon exercise. In the event of a Cash/Public Acquisition where the fair market value of one Share as determined in accordance with Section 1.3 above would be less than the Warrant Price in effect immediately prior to such Cash/Public Acquisition, then this Warrant will expire immediately prior to the consummation of such Cash/Public Acquisition.
(c) Upon the closing of any Acquisition other than a Cash/Public Acquisition defined above, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of such Acquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.
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(d) As used in this Warrant, “ Marketable Securities ” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or prior to the closing thereof is then traded in Trading Market, and (iii) following the closing of such Acquisition, Holder would not be restricted from publicly re-selling all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise or convert this Warrant in full on or prior to the closing of such Acquisition, except to the extent that any such restriction (x) arises solely under federal or state securities laws, rules or regulations, and (y) does not extend beyond six (6) months from the closing of such Acquisition.
SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.
2.1 Stock Dividends, Splits, Etc . If the Company declares or pays a dividend or distribution on the outstanding shares of the Class payable in common stock or other securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred. If the Company subdivides the outstanding shares of the Class by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the Class are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.
2.2 Reclassification, Exchange, Combinations or Substitution . Upon any event whereby all of the outstanding shares of the Class are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Company securities of a different class and/or series, then from and after the consummation of such event, this Warrant will be exercisable for the number, class and series of Company securities that Holder would have received had the Shares been outstanding on and as of the consummation of such event, and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations, substitutions, replacements or other similar events.
2.3 [ Reserved .]
2.4 [ Reserved .]
2.5 No Fractional Share . No fractional Share shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional Share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional Share interest by paying Holder in cash the amount computed by multiplying the fractional interest by (i) the fair market value (as determined in accordance with Section 1.3 above) of a full Share, less (ii) the then effective Warrant Price.
2.6 Notice/Certificate as to Adjustments . Upon each adjustment of the Warrant Price, Class and/or number of Shares, the Company, at the Company’s expense, shall notify Holder in writing within a reasonable time setting forth the adjustments to the Warrant Price, Class and/or number of Shares and facts upon which such adjustment is based. The Company shall, upon written request from Holder, furnish Holder with a certificate of its Chief Financial Officer, including computations of such adjustment and the Warrant Price, Class and number of Shares in effect upon the date of such adjustment.
SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties . The Company represents and warrants to, and agrees with, the Holder that the Shares which may be issued upon the exercise of this Warrant shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for
3

 
restrictions on transfer provided for herein or under applicable federal and state securities laws. The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of shares of common stock and other securities as will be sufficient to permit the exercise in full of this Warrant.
3.2 Notice of Certain Events . If the Company proposes at any time to:
(a) declare any dividend or distribution upon the outstanding shares of the Class or common stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;
(b) offer for subscription or sale pro rata to the holders of the outstanding shares of the Class any additional shares of any class or series of the Company’s stock (other than pursuant to contractual pre-emptive rights);
(c) effect any reclassification, exchange, combination, substitution, reorganization or recapitalization of the outstanding shares of the Class; or
(d) effect an Acquisition or to liquidate, dissolve or wind up;
then, in connection with each such event, the Company shall give Holder:
(1) at least seven (7) Business Days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of outstanding shares of the Class will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above; and
(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event and such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such event giving rise to the notice).
Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.
SECTION 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER
The Holder represents and warrants to the Company as follows:
4.1 Purchase for Own Account. This Warrant and the securities to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.
4.2 Disclosure of Information. Holder is aware of the Company’s business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.
4.3 Investment Experience. Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this
4

 
Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.
4.4 Accredited Investor Status. Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.
4.5 The Act. Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act.
4.6 [ Reserved .]
4.7 No Voting Rights . Holder, as a Holder of this Warrant, will not have any voting rights until the exercise of this Warrant.
SECTION 5. MISCELLANEOUS.
5.1 Term and Automatic Cashless Exercise Upon Expiration .
(a) Term . Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or in part at any time and from time to time on or before 6:00 PM, Pacific time, on the Expiration Date and shall be void thereafter.
(b) Automatic Cashless Exercise upon Expiration . In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall, within a reasonable time, deliver a certificate representing the Shares (or such other securities) issued upon such exercise to Holder.
5.2 Legends .  The Shares shall be imprinted with a legend in substantially the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE ISSUER TO SILICON VALLEY BANK DATED MAY 18, 2018, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
5.3 Compliance with Securities Laws on Transfer . This Warrant and the Shares issuable upon exercise of this Warrant may not be transferred or assigned in whole or in part except in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to SVB
5

 
Financial Group (Silicon Valley Bank’s parent company) or any other affiliate of Holder, provided that any such transferee is an “accredited investor” as defined in Regulation D promulgated under the Act. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144 promulgated under the Act.
5.4 Transfer Procedure. After receipt by Silicon Valley Bank of the executed Warrant, Silicon Valley Bank will transfer all of this Warrant to its parent company, SVB Financial Group. By its acceptance of this Warrant, SVB Financial Group hereby makes to the Company each of the representations and warranties set forth in Section 4 hereof and agrees to be bound by all of the terms and conditions of this Warrant as if the original Holder hereof. Subject to the provisions of Section 5.3 and upon providing the Company with written notice, SVB Financial Group and any subsequent Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant to any transferee, provided, however, in connection with any such transfer, SVB Financial Group or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable); and provided further, that any subsequent transferee other than SVB Financial Group shall agree in writing with the Company to be bound by all of the terms and conditions of this Warrant. Notwithstanding any contrary provision herein, at all times prior to the IPO, Holder may not, without the Company’s prior written consent, transfer this Warrant or any portion hereof, or any Shares issued upon any exercise hereof, to any person or entity who directly competes with the Company, except in connection with an Acquisition of the Company by such a direct competitor.
5.5 Reserved .
5.6 Notices . All notices and other communications hereunder from the Company to the Holder, or vice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3 rd ) Business Day after being mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile or electronic mail and such receipt is confirmed in writing by the recipient, or (iv) on the first Business Day following delivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time in accordance with the provisions of this Section 5.5. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:
SVB Financial Group
Attn: Treasury Department
3003 Tasman Drive, HA 200
Santa Clara, CA 95054
Telephone: (408) 654-7400
Facsimile: (408) 496-2405
Email: warradmi@svb.com
 
Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:
Tocagen Inc.
4242 Campus Point Court
San Diego, CA 92121
Attn: Chief Financial Officer
Telephone: 858-412-8403
Facsimile: (858) 412-8499
Email: mfoletta@tocagen.com
With a copy to :
Cooley LLP
Attn: Karen Deschaine Anderson
4401 Eastgate Mall
6

 
San Diego, CA 92121
5.7 Waiver . This Warrant and any term hereof may be changed, waived, discharged or terminated (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.
5.8 Attorney’s Fees . In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.
5.9 Counterparts; Facsimile/Electronic Signatures . This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.
5.10 Governing Law . This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.
5.11 Headings . The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.
5.12 Business Days . “ Business Day ” is any day that is not a Saturday, Sunday or a day on which Silicon Valley Bank is closed.
[Remainder of page left blank intentionally]
[Signature page follows]
 
7

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

 
		
By:	/s/ Mark Foletta	
 	 	
Name:	Mark Foletta	
 	(Print)	
Title:	CFO	

 
"HOLDER"
 
SILICON VALLEY BANK

 
		
By:	/s/ Kristine Rohmer	
 	 	
Name:	Kristine Rohmer	
 	(Print)	
Title:	Vice President	

 
 
8

 
APPENDIX 1
 
NOTICE OF EXERCISE
 
1. The undersigned Holder hereby exercises its right to purchaseshares of the Common Stock of TOCAGEN INC. (the “Company”) in accordance with the attached Warrant To Purchase Stock, and tenders payment of the aggregate Warrant Price for such shares as follows:
 
 	[    ]	Check in the amount of $_________ payable to the order of the Company enclosed herewith	
 
 	[    ]	Wire transfer of immediately available funds to the Company’s account	
 
 	[    ]	Cashless Exercise pursuant to Section 1.2 of the Warrant	
 
 	[    ]	Other [Describe] ___________________________________________	
 
2. Please issue a certificate or certificates representing the Shares in the name specified below:

 	
Holder’s Name	

 	

(Address)	
 
3. By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Section 4 of the Warrant to Purchase Stock as of the date hereof.
 
HOLDER:
___________________________________________
 
By: _______________________________________
Name: _____________________________________
Title: ______________________________________
(Date): _____________________________________
 
Appendix 1

Exhibit 10.1
***Text Omitted and Filed Separately
with the Securities and Exchange Commission.
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(c) and Rule 24b-2 of the
Securities Act of 1934, as amended.
EXECUTION VERSION
 LICENSE AGREEMENT
 This LICENSE AGREEMENT (this “ Agreement ”), is entered into as of April 17, 2018 (the “ Execution Date ”), by and between Tocagen Inc. , a Delaware corporation having a principal place of business at 3030 Bunker Hill Street #230, San Diego, California 92109, USA (“   Tocagen ”); Beijing Apollo Venus Biomedical Technology Limited (北京阿波罗金星生物医药科技有限公司)   , a People’s Republic of China company having a principal place of business at B5318, Building 3, No8 Hangfeng Road, Fengtai, Beijing (“ Apollo ”); and solely for purposes of Sections 13.1 and 13.6, ApolloBio Corp. , a People’s Republic of China corporation having a principal place of business at Room 277, Building 1, No8 Hangfeng Road, Fengtai, Beijing (“ ApolloBio ”).  
BACKGROUND
A. Tocagen is developing its proprietary drug candidate known as Toca 511 and Toca FC, and owns or controls certain patents, know-how and other intellectual property relating thereto; and
B. Apollo desires to obtain the exclusive right and license to develop, manufacture and commercialize Product in the Field in the Territory (each, as defined below), and Tocagen desires to grant Apollo such exclusive right and license, all on the terms and subject to the conditions set forth in this Agreement.
NOW , THEREFORE , in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
 ARTICLE 1 
DEFINITIONS; INTERPRETATION
 1.1 “ Accounting Standards ” means (a) with respect to Tocagen, U.S. generally accepted accounting principles, and (b) with respect to Apollo, its Affiliates and Sublicensees, PR China generally accepted accounting principles or International Financial Reporting Standards; in each case (a) and (b), as applicable, consistently applied throughout the organization of a particular Entity.
1.2 “ Act ” means the United States Federal Food, Drug and Cosmetic Act, 21 U.S.C. §§301 et seq., as amended from time to time.
1.3 “ Actual Combination Product Net Sales ” has the meaning provided in subparagraph (i) of Section 1.59.
1.4 “ Additional RRV Product ” has the meaning provided in Section 3.9.

 
1.5 “ Affiliate ” means, with respect to any Entity, any other Entity controlling, controlled by or under common control with the first Entity, for so long as such control exists.  For purposes of this Section  1.5 only, “control” means (a) direct or indirect ownership of more than fifty percent (50%) of (i) the stock or shares having the right to vote for the election of directors of such corporate entity or (ii) other ownership interest of a business entity (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity) or (b) the direct or indirect possession of the power to direct, or cause the direction of, the management or policies of such entity, whether through the ownership of voting securities, by contract or otherwise.   
 1.6 “ Anti-Corruption Laws ” shall mean the U.S. Foreign Corrupt Practices Act (15 U.S.C. §§78dd-1, et. seq.) as amended, the Organization for Economic Co-operation and Development (OECD) Convention on combating bribery of foreign public officials in international business transactions, and any other applicable anti-corruption laws.
 1.7 “ Apollo Invention  ” means any Invention made solely by one or more employees, consultants or contractors of Apollo or any of its Affiliates or Sublicensees.
1.8 “ Apollo Know-How ” means all Data and other Know-How generated, developed or obtained by or on behalf of Apollo or any of its Affiliates or Sublicensees in the course of conducting development, manufacturing, regulatory or commercialization activities under this Agreement with respect to Product or a Product Component, which Data and other Know-How are necessary or useful for the development, registration, manufacture, use or commercialization of Product or a Product Component in the Field; in each case, including Apollo Inventions; but excluding Apollo Patents, Joint Inventions and Joint Patents .  
1.9 “ Apollo Patents ” means: (a)  all Patents claiming Apollo Inventions; and (b) all other Patents Controlled by Apollo that claim inventions (other than Apollo Inventions) that both: (i) are necessary or useful for the development, registration, manufacture, use or commercialization of Product or a Product Component in the Field; and (ii) are or were actually practiced or used by or on behalf of Apollo or any of its Affiliates or Sublicensees in the development, registration, manufacture, use or commercialization of Product or a Product Component in the Field; but, in each case, excluding Joint Patents.  
1.10 “ Apollo Technology ” means Apollo Patents and Apollo Know-How.
1.11 “ Applicable Law ” means the applicable provisions of any and all national, supranational, regional, state and local laws, treaties, statutes, rules, regulations, administrative codes, guidances, ordinances, judgments, decrees, directives, injunctions, orders, permits of or from any court, arbitrator, Regulatory Authority or governmental agency or authority having jurisdiction over or related to the subject item, including the Act, Anti-Corruption Laws and Export Control Laws.
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1.12 “ Business Day ” means any day other than a Saturday, a Sunday or a day that is a statutory holiday or on which commercial banks in Beijing, China or San Diego, California are authorized or required by law to remain closed.
 1.13 “ CFDA   ” means the China Food and Drug Administration, or any successor entity thereto.
 1.14 “ cGMP  ” means, as applicable: (a) current good manufacturing practices and standards for the production of drugs and finished pharmaceuticals, as set forth in 21 C.F.R. Parts 210 and 211; and/or (b) current good manufacturing practices and standards for biological products, as set forth in 21 C.F.R. Part 600; in each case, as amended from time to time and as interpreted by relevant ICH guidelines; provided, however, that, if the CFDA specifically requires that the Product or any Product Component for use in the Field in the Territory be manufactured in accordance with any other applicable good manufacturing practice or standard established by the CFDA that differs from or is in addition to the practices and standards described in the preceding clauses (a) and (b), then such CFDA practice or standard shall be deemed to be within cGMP for purposes of this Agreement.
1.15 “ Clinical Supply Plan ” has the meaning provided in Section 7.2(a).
1.16 “ CMO ” means contract manufacturing organization.
1.17 “ Combination Product ” means a pharmaceutical product sold by Apollo, its Affiliate or a Sublicensee that comprises: […***…]  
 1.18 “ Commercialization Plan ” has the meaning provided in Section 6.2.
1.19 “ Commercialization Plan Outline ” has the meaning provided in Section 6.2.
 1.20 “ Commercially Reasonable Efforts ” means , with respect to the efforts to be expended by a Party with respect to any objective, the level of reasonable, diligent, good faith efforts that biotechnology or pharmaceutical companies typically devote to product candidates or products owned by them that are at a similar stage in their development or product life and are of similar market potential, taking into account efficacy, safety, approved labeling, the competitiveness of alternative products in the marketplace, the patent and other proprietary position of the product, the likelihood of regulatory approval, the profitability of the product, and other relevant technical, legal, scientific and medical factors.  As used in this Section 1.20, “biotechnology or pharmaceutical companies” shall mean companies in the biotechnology or pharmaceutical industry (as applicable) of a size and stage of development similar to that of such Party, including having human pharmaceutical product candidates or products in a similar stage of development to Product.

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1.21 “ Commercial Supply Agreement ” has the meaning provided in Section  7.2(b) .
1.22 “ Competing Product ” means:
(a) any product consisting of […***…]; or
(b) any product that would, if […***…], and (ii) […***…]; provided, however, that, for purposes of the foregoing, subsection […***…] shall be amended ( mutatis mutandis ) as follows: “[…***…].”
1.23 “ Competitive Infringement ” means, with respect to a Tocagen Patent (including a Tocagen Product-Specific Patent) or a Joint Patent, any activity in the Territory that (a) infringes or may infringe such Tocagen Patent or Joint Patent and (b) is competitive with Product, including any infringement or threatened infringement of a Tocagen Patent or Joint Patent by the manufacture, use, sale, offer for sale or import of any Generic/Biosimilar Product (or, in the case of an investigational product that has not received Regulatory Approval in the Field in the Territory, would, if such Regulatory Approval were received, constitute a Generic/Biosimilar Product) in the Field in the Territory; provided, however, that, for purposes of the preceding clause (b), the phrase “for at least one of the same Indications as such Product” in Section 1.40 shall be disregarded.
1.24 “ Control ” means, with respect to any Patent, Information or other intellectual property rights, the possession by a Person of the ability (whether by ownership, license or other right, other than pursuant to a license granted under this Agreement) to grant access to, or a license or sublicense of, such Patent, Information or other intellectual property rights without violating the terms of any agreement or other arrangement with any other Person.
1.25 “ Cost of Goods ” means, with respect to Product or any Product Component supplied by or on behalf of Tocagen hereunder (whether in bulk form, as unmarked “brite stock,” or in final packaging, as applicable):
(a) in the case of Product or any Product Component manufactured by a Third Party, payments made to such Third Party for such Product or Product Component, plus reasonable and documented internal and external costs and expenses incurred by Tocagen for quality assurance, quality control, release testing, stability testing, labeling, packaging, warehousing and transportation of such Product or Product Component, in each case, determined in accordance with Accounting Standards; and

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(b) in the case of Product or any Product Component manufactured by Tocagen or its Affiliate, the actual fully-allocated cost of manufacturing such Product or Product Component (in accordance with cGMP, if applicable), determined in accordance with Accounting Standards, consistently applied, which includes, without limitation, the direct and indirect cost of any raw materials, packaging materials and labor (including benefits) utilized in such manufacturing (including formulation, filling, finishing, quality assurance, quality control, stability testing, release testing, labeling and packaging, as applicable), and reasonable and documented internal and external costs and expenses incurred by Tocagen for warehousing and transportation, plus an appropriate share of all factory overhead, both fixed and variable, allocated to the applicable Product or Product Component being manufactured, in accordance with the normal accounting practices for all other products manufactured in the applicable facility.
 1.26 “ Cover ” means, with respect to a Product and a Patent that, in the absence of ownership of or a license granted under such Patent, the manufacture, use, sale, offering for sale or importation of such Product as developed hereunder would infringe (or, in the case of a claim of a pending patent application, would infringe if issued) a Valid Claim of such Patent at the time thereof.   The determination of whether a Product is Covered by a particular Valid Claim shall be made on a Region-by-Region basis (provided that if more than one (1) Region shares the same patent administration, such determination shall be made on a patent-administration-by-patent-administration basis).    “ Covered  ” and “ Covering ” have their correlative meanings.
 1.27 “ CRO ” means contract research organization.
 1.28 “ Data  ” means any and all results of research, preclinical studies, including in vitro and in vivo  studies, clinical trials and other testing of any composition of matter, product candidate or product, and any and all other data related to the development, manufacture or commercialization of any composition of matter, product candidate or product, including biological, chemical, pharmacological, toxicological, pharmacokinetic, preclinical, clinical, CMC, analytical, quality control, mechanical, software, electronic and other data, results and descriptions .
1.29 “ Development and Commercialization License ” has the meaning provided in Section 3.1(a).
1.30 “ Development Plan ” has the meaning provided in Section 5.2(a)(i).
1.31 “ Development Plan Outline ” has the meaning provided in Section 5.2(a)(i).
1.32 “ Effective Date ” has the meaning provided in Section 2.2.
 1.33 “ Entity ” means any corporation, general partnership, limited partnership, limited liability partnership, joint venture, trust, company (including any limited liability company or
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joint stock company), firm or other enterprise, association, organization or entity; but excluding any individual ( i.e. , natural person).
1.34 “ Existing Patents ” shall have the meaning provided in Section 13.3(a).
1.35 “ Export Control Laws ” shall mean: (a) all applicable U.S. laws and regulations relating to sanctions and embargoes imposed by U.S. Department of Treasury’s Office of Foreign Assets Control (or its successor office or other body having substantially the same function); (b) all applicable U.S. export control laws, including the Arms Export Controls Act (22 U.S.C. Ch. 39), the International Emergency Economic Powers Act (50 U.S.C. §§ 1701 et seq.), the Trading With the Enemy Act (50 U.S.C. app. §§ 1 et seq.), the Export Administration Act of 1979 (50 U.S.C. app. §§ 2401 et seq.), International Boycott Provisions of Section 999 of the U.S. Internal Revenue Code of 1986, and all rules, regulations and executive orders relating to any of the foregoing, including but not limited to the International Traffic in Arms Regulations (22 C.F.R. §§ 120 et seq.), the Export Administration Regulations (15 C.F.R. §§ 730 et. seq.), and the regulations administered by the Office of Foreign Assets Controls of the United States Department of the Treasury; and (c) all export controls imposed on any Product by any country or organization or nations within the jurisdiction of which a Party operates or does business.
1.36 “ FDA ” means the United States Food and Drug Administration, or any successor entity thereto.
1.37 “ Field ” means the diagnosis, treatment and/or prevention of any disease or health condition in humans or animals.
1.38 “ Final Installment ” shall have the meaning provided in Section 9.1(b).
 1.39 “ First Commercial Sale  ” means the first bona fide , arm’s length sale of a Product in a Region within the Territory following receipt of Regulatory Approval of such Product in such Region.  For clarity, First Commercial Sale shall be determined on a Product-by-Product and Region-by-Region basis.
 1.40 “ Generic/Biosimilar Product  ” means,  with respect to a Product that has received Regulatory Approval in a Region within the Territory and is being marketed and sold by Apollo or any of its Affiliates or Sublicensees in such Region, any pharmaceutical/biologic product that: (a) is sold in such Region by a Third Party that is not a Sublicensee of Apollo or its Affiliates and did not purchase or acquire such product in a chain of distribution that included Apollo or any of its Affiliates or Sublicensees; and (b) has received Regulatory Approval in such Region, for at least one of the same Indications as such Product, as a “generic medicinal product,” “biosimilar,” “bioequivalent,” “similar biological medicinal product” or similar designation of interchangeability by the applicable Regulatory Authority in such Region, pursuant to an expedited or abbreviated approval process in accordance with the then-current rules and regulations in such Region, where (i) such Product is the “reference medicinal product,” “reference listed product” or similar designation in such Region, and (ii) such approval referred
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to or relied on (x) the approved MAA for such Product held by Apollo, its Affiliate or a Sublicensee in such Region or (y) the Data contained or incorporated by reference in such approved MAA for such Product.   
1.41 “ Global Development Strategy ” has the meaning provided in Section 5.1.
1.42 “ Global Marketing Strategy ” has the meaning provided in Section 6.1.
1.43 “ ICH ” means the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use.
1.44 “ IND ” means (a) an Investigational New Drug Application (including any amendment thereto) filed with the FDA pursuant to 21 C.F.R. Part 312 necessary to commence human clinical trials of an investigational new drug and/or biologic in the U.S., (b) a Clinical Trial Application or equivalent application or filing (including any amendment thereto) filed with the CFDA necessary to commence human clinical trials of an investigational new drug and/or biologic in PR China, or (c) the equivalent application or filing filed with any equivalent agency or governmental authority in any other regulatory jurisdiction (including any supra-national agency such as the European Medicines Agency) necessary to commence human clinical trials of an investigational new drug and/or biologic in such jurisdiction.
1.45 “ Indication ” shall mean a specific disease, disorder or condition which is recognized by the applicable Regulatory Authority in a given country or jurisdiction as a disease, disorder or condition; provided, however, that, for purposes of this definition and this Agreement (including Section 9.2(a)), different types of […***…], as defined by (a) […***…], (b) […***…], and (d) […***…], shall, in each case, be treated as […***…]  Notwithstanding the foregoing, if a particular registrational clinical trial of a Product forming the basis for an MAA filing and MAA Approval enrolled patients with […***…], then, for purposes of Section 9.2(a), such MAA Approval shall be deemed to have been obtained for […***…].
1.46 “ Initial Development Plan ” has the meaning provided in Section 5.2(a)(i).
1.47 “ Initial Installment ” shall have the meaning provided in Section 9.1(a).
1.48 “ Initial Installment Deadline ” shall have the meaning provided in Section 2.2.

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1.49 “ Invention  ” means any invention or discovery, whether or not patentable, that is made conceived, generated or reduced to practice, in whole or in part, in the course and as a result of the conduct of the activities contemplated by this Agreement.
1.50 “ IRES Cassette ” means [ * …***…].  
 1.51 “ Joint Invention ” shall mean any Invention made jointly by, on the one hand, one or more employees, consultants or contractors of Apollo and/or any of its Affiliates or Sublicensees, and, on the other hand, one or more employees, consultants or contractors of Tocagen.
 1.52 “ Joint Patents ” shall mean Patents claiming Joint Inventions.
 1.53 “ Know-How  ” means any and all tangible and intangible (a) techniques, technology, practices, trade secrets, inventions (whether patentable or not), methods, knowledge, know-how, information, skill, experience, test data and results (including research, biological, chemical, pharmacological, toxicological, pharmacokinetic, preclinical, clinical, CMC, analytical and quality control data, results or descriptions), software and algorithms, and (b) compositions of matter, cells, cell lines, assays, animal models and physical, biological or chemical material; that, in each case, are not in the public domain.  
1.54 “ License ” has the meaning provided in Section 3.1(b).
 1.55 “ MAA  ” means (a) a New Drug Application (as more fully defined in 21 C.F.R. 314.5, et seq. ) and/or a Biologics License Application (as more fully defined in 21 C.F.R. 601.2), as applicable, filed with the FDA; (b) the equivalent application(s) filed with the CFDA for approval to market and sell a new drug and/or biologic in the People’s Republic of China; or (c) the equivalent application(s) filed with any Regulatory Authority in any other jurisdiction for approval to market and sell a new drug and/or biologic in such jurisdiction; in each case, including all amendments and supplements to any of the foregoing.
1.56 “ MAA Approval ” means (a) with respect to an MAA for a Product filed with the FDA, the approval of such MAA by the FDA; or (b) with respect to an MAA for a Product filed with the applicable Regulatory Authority in any other jurisdiction (including the CFDA in the People’s Republic of China), the approval of such MAA by such Regulatory Authority.
 1.57 “ Manufacturing License ” has the meaning provided in Section 3.1(b).
1.58 “[…***…]” means […***…]

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[ …***…] .
 1.59 “ Net Sales    ” means the gross amounts invoiced by Apollo, […***…] (in each case, a “ Selling Party ”) for sales or other dispositions of Product to Third Parties (other than another Selling Party, unless such Selling Party is the end user of the applicable Product), less the following amounts actually incurred, allowed, paid and accrued and specifically allocable to Product (if not previously deducted in calculating the amount invoiced), all in compliance with applicable Accounting Standards, consistently applied by the Selling Party:
(a) normal and customary discounts, including trade, cash and quantity discounts, and normal and customary trade rebates, credits or refunds; in each case, actually given or allowed to Third Parties;
(b) amounts actually repaid or credited for rejection or return of previously sold Product, including recalls, or because of retroactive price reductions, including wholesaler chargebacks, or billing errors;
(c) the portion of government-mandated and other rebates (including chargebacks, government-mandated rebates and equivalents of the foregoing) actually granted to group purchasing organizations, governmental authorities, trade customers, managed health care organizations, pharmacy benefit managers or government prescription drug plans (or analogous plans) relating to Product ;
(d) charges separately invoiced for freight (outbound), insurance, transportation, postage and handling of Product;
(e) taxes and other governmental charges and fees (such as sales, value added, or use taxes, except to the extent reimbursed to or recovered by the Selling Party, but excluding what are commonly known as income taxes) levied on or measured by the billing amount for Product, to the extent added to the sale price and set forth separately as such in the invoice, and actually paid, as adjusted for rebates and refunds; and
(f) amounts actually written off by the Selling Party as bad debt or otherwise uncollectible in accordance with applicable Accounting Standards used by such Selling Party, consistently applied; provided, however, that such write-offs shall in no event exceed […***…] percent ([…***…]%) of gross invoiced amounts in the Territory in any calendar year; and provided, further, that if any such written-off amounts are subsequently collected, such collected amounts shall be included in Net Sales in the period in which they are collected;
 provided that, in each case (a) through (f), (i) each such deduction is calculated in a manner consistent with the Selling Party’s customary practice for pharmaceutical products and in accordance with applicable Accounting Standards, consistently applied by the Selling Party,
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(ii) each such deduction is directly allocable to Product, or apportioned on a good faith, fair and equitable basis to Product and other products of the Selling Party and its Affiliates such that Product does not bear a disproportionate portion of such deductions, and (iii) no particular amount identified above shall be deducted more than once in calculating Net Sales ( i.e. , no “double counting” of deductions).  
For clarification, sale or other disposition of Product by a Selling Party to another Selling Party for resale by such other Selling Party to a Third Party (other than a Selling Party) shall not be deemed a sale for purposes of this definition of “Net Sales,” provided that the subsequent resale is included in the computation of Net Sales.  In the event of any sale or other disposition of Product for any consideration other than exclusively monetary consideration on bona fide arm’s-length terms (including any sale or other disposition of Product by a Selling Party to another Selling Party for end use by such other Selling Party), then for purposes of calculating Net Sales under this Agreement, such Product shall be deemed to have been sold exclusively for cash at the weighted (by sales volume) average sale price of such Product in bona fide arm’s-length transactions (when sold alone, and not with other products) in the applicable Region in which such sale or other disposition occurred during the applicable accounting period.  Transfers or dispositions of Product for charitable, research and development, clinical or humanitarian purposes (in each case, without consideration), and Products provided at or below their manufacturing cost (determined in accordance with applicable Accounting Standards, consistently applied) and used in compassionate use or named patient programs, shall be disregarded in determining Net Sales.
If a Product or Product Component is sold in a Region as part of a Combination Product during a calendar quarter, Net Sales of such Product or Product Component in such Region during such calendar quarter for the purpose of determining royalties and commercial milestone payments due hereunder shall be calculated as follows:
(A) In the event that both (x) the Product Component(s) in such Combination Product are sold separately in finished form in such Region during such calendar quarter and (y) the Other Active(s) in such Combination Product are sold separately in finished form in such Region during such calendar quarter , then Net Sales of such Product or Product Component shall be determined by multiplying the actual Net Sales of the Combination Product calculated pursuant to the preceding provisions of this Section 1.59 (“ Actual Combination Product Net Sales ”) in such Region during such calendar quarter by […***…].
(B) In the event that the weighted average sale price of the Product Component(s) in such Combination Product when sold separately in finished form in such Region during such calendar quarter can be determined but the weighted average sale price of the Other Active(s) in the Combination Product when sold separately in finished form in such

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Region during such calendar quarter cannot be determined, then Net Sales of such Product or Product Component shall be calculated by multiplying the Actual Combination Product Net Sales of the Combination Product in such Region during such calendar quarter by [ …***…] .
(C) In the event that the weighted average sale price of the Other Active(s) in the Combination Product when sold separately in finished form in such Region during such calendar quarter can be determined but the weighted average sale price of such Product when sold separately in finished form in such Region during such calendar quarter cannot be determined, Net Sales of such Product or Product Component shall be calculated by multiplying the Actual Combination Product Net Sales of the Combination Product by […***…].
(D) In the event that the weighted average sale prices of both the Product Component(s) in such Combination Product when sold separately in finished form in such Region during such calendar quarter and the Other Active(s) in the Combination Product when sold separately in finished form in such Region during such calendar quarter cannot be determined, then the methodology for determining Net Sales of such Product in such Region shall be mutually agreed in writing by the Parties in good faith based on the relative contributions of the Product Component(s) and the Other Active(s) to the total value of the Combination.  
1.60 “ Other Active ” means, with respect to a pharmaceutical product, any active ingredient of such product other than any Product Component.
1.61 “ Party ” means Tocagen or Apollo individually, and “ Parties ” means Tocagen and Apollo collectively.
1.62 “ Patent(s) ” means any of the following, whether existing now or in the future anywhere in the world: (a) any issued patent, including inventor’s certificates, substitutions, extensions, confirmations, reissues, reexamination, renewal or any like governmental grant for protection of inventions; and (b) any pending application for any of the foregoing, including any continuation, divisional, substitution, continuations-in-part, provisional and converted provisional applications.
1.63 “ Person ” means any individual ( i.e. , natural person) or Entity.
1.64 “ Phase 3 Clinical Trial ” means a human clinical trial of a Product conducted in any country that would satisfy the requirements of 21 CFR 312.21(c), as amended, or its foreign equivalent.

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1.65 “ PR China ” means the People’s Republic of China.
1.66 “ Product ” means any pharmaceutical product comprising Toca 511 and Toca FC, including all dosage forms, formulations, presentations, administrations, line extensions and package configurations.  For the avoidance of doubt, and notwithstanding any provision of this Agreement to the contrary, Product shall include, subject to Sections 4.2(b) and 4.7(a), any Combination Product, and Product shall in any event exclude any “Assay” (as such term is defined in the Siemens Agreement).
 1.67 “ Product Component ” means […***…], individually.
1.68 “ Product-Specific Claim ” shall mean any Patent claim that covers the composition of matter or formulation, or any method of use in the Field, of Product or a Product Component, or a component of either of the foregoing, and does not cover the composition of matter or formulation, or any method of use, of any product that is neither Product nor a Product Component.  For clarity, Product-Specific Claims do not include claims that cover both (a) Product or Product Component or a component of either of the foregoing and (b) other products that are neither Product nor a Product Component.
1.69 “ Prosecution ” means, with respect to a Patent, the filing, preparation, prosecution (including conducting all correspondence and interactions with any patent office and seeking, conducting and defending all any interferences, inter partes reviews, reissue proceedings, reexaminations, and oppositions and similar proceedings), and maintenance thereof, including obtaining patent term extensions, regulatory exclusivity, supplemental protection certificates, or their equivalents with respect thereto.  When used as a verb, “ Prosecute ” means to engage in Prosecution.  For clarification, “Prosecution” and “Prosecute” shall exclude any enforcement action with respect to a Patent.
1.70 “ Region ” means a region in the Territory, i.e. , mainland China, Taiwan, Hong Kong Special Administration Region or Macao Special Administration Region.
1.71 “ Regulatory Approval ” means, with respect to a pharmaceutical product in a particular jurisdiction, all approvals or other permissions from the applicable Regulatory Authority in such jurisdiction necessary to market and sell such product in such jurisdiction, including pricing and reimbursement approvals if required for marketing or sale of such product in such jurisdiction.
1.72 “ Regulatory Authority ” means any federal, national, multinational, state, provincial or local regulatory agency, department, bureau or other governmental entity with authority over the development, manufacture, commercialization or other use or exploitation (including the granting of Regulatory Approvals) of Product in any jurisdiction, including the FDA and CFDA.

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1.73 “ Regulatory Exclusivity ” means marketing or manufacturing exclusivity conferred by the applicable Regulatory Authority in a country or jurisdiction on the holder of an approved MAA for a pharmaceutical product in such country or jurisdiction, including regulatory data exclusivity, orphan drug exclusivity, new chemical entity exclusivity and pediatric exclusivity.
1.74 “ Regulatory Filings ” means all INDs, MAAs, MAA Approvals, other Regulatory Approvals, and other filings with, and formal submissions to, Regulatory Authorities, in each case, with respect to Product or an individual Product Component in any jurisdiction.  
 1.75 “ Right of Reference  ” means: (a) in the U.S., a “right of reference or use,” as such term is defined in 21 C.F.R. 314.3(b); or (b) in any other country or jurisdiction, the equivalent authority to rely upon, and otherwise use, an investigation for the purpose of obtaining approval of an IND,  NDA or other Regulatory Approval, including the ability to make available the underlying raw data from the investigation for audit by the applicable Regulatory Authority in such country or other jurisdiction, if necessary.
1.76 “ Selling Party ” has the meaning provided in Section 1.59.
1.77 “ Senior Executive ” means (a) with respect to Apollo, Apollo’s Chief Executive Officer (or one of his or her direct reports having authority to agree to a final resolution of a disputed matter under this Agreement) and (b) with respect to Tocagen, Tocagen’s Chief Executive Officer (or one of his or her direct reports having authority to agree to a final resolution of a disputed matter under this Agreement).
1.78 “ Siemens ” means Siemens Healthcare Diagnostics, Inc.
1.79 “ Siemens Agreement ” means that certain […***…].
1.80 “ Sublicense ” means a sublicense under the License or any portion thereof in the Field in the Territory.
 1.81 “ Sublicensee  ” means a Third Party that has received a Sublicense, directly or indirectly through one or more tiers, from Apollo or its Affiliate.  As used in this Agreement, “Sublicensee” shall not include (a) a Third Party distributor of Product or a Product Component that has no royalty or other payment obligations to Apollo or any of its Affiliates that are calculated based on amounts invoiced or received by such Third Party for sales of Product or a Product Component in the Territory; (b) a Third Party distributor of Product or a Product Component that (i) does not take title to Product or Product Component, (ii) does not invoice Product or Product Component sales to Third Party customers and (iii) is responsible only for inventory management and distribution with respect to Product or Product Component on behalf of Apollo or its Affiliate; (c) any CRO engaged by Apollo or its Affiliate to perform contract

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research services for Product or Product Component on Apollo’s or its Affiliate’s behalf, except to the extent that such CRO is granted any license or other right with respect to Product or Product Component beyond the right to perform contract research services on Apollo’s or its Affiliate’s behalf; or (d) any CMO engaged by Apollo or its Affiliate to perform contract manufacturing services for Product or Product Component on Apollo’s or its Affiliate’s behalf, except to the extent that such CMO is granted any license or other right with respect to Product or Product Component beyond the right to perform contract manufacturing services on Apollo’s or its Affiliate’s behalf.
1.82 “ Target Product Profile ” means the target clinical profile established by Tocagen for Product, including administration, clinical use and safety, as such profile may be updated from time to time by Tocagen in its discretion.
 1.83 “ Territory ” means greater China, including mainland China, Taiwan, Hong Kong Special Administration Region and Macao Special Administration Region.
1.84 “ Territory-Specific Development Support Activities ” has the meaning provided in Section 5.2(a)(iii).
1.85 “ Third Party ” means any Person, other than Tocagen, Apollo and ApolloBio and their respective Affiliates.
 1.86 “ Toca 511  ” means […***…] .
 1.87 “ Toca FC  ” means […***…] .
 1.88 “ Tocagen Cost Report ” has the meaning provided in Section 5.2(a)(iv).
1.89 “ Tocagen Designee(s) ” has the meaning provided in Section 5.5(a).
1.90 “ Tocagen Invention ” means any Invention made solely by one or more employees, consultants or contractors of Tocagen.
1.91 “ Tocagen Know-How ” means any and all Data and other Know-How (including Tocagen Inventions) Controlled by Tocagen as of the Execution Date (solely for purposes of Section 13.3) or at any time during the Term that are (a) necessary or useful for, and are actually used by or on behalf of Tocagen in, the development, registration, manufacture, use or commercialization of Product or a Product Component in the Field, or (b) otherwise necessary for the conduct of activities expressly specified in the Development Plan, which activities (including any protocol therefor) have been approved by the JDC; but excluding Tocagen

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Patents, Joint Inventions and Joint Patents .  In addition, and notwithstanding any other provision of this Agreement to the contrary, Tocagen Know-How shall in any event exclude any Know-How within the “Siemens Licensed IP” or the “Tocagen Licensed IP” (as such terms are defined in the Siemens Agreement).
 1.92 “ Tocagen Patents ” means any and all Patents Controlled by Tocagen in the Territory as of the Execution Date (solely for purposes of Section 13.3) or at any time during the Term that claim inventions (including Tocagen Inventions) that are (a) necessary for, or useful for and actually used by or on behalf of Tocagen in, the development, registration, manufacture, use or commercialization of Product or a Product Component in the Field, or (b) otherwise necessary for the conduct of activities expressly specified in the Development Plan, which activities (including any protocol therefor) have been approved by the JDC; but excluding, in each case, (i) any claim contained in any of the foregoing Patents that is directed to an invention that is not within the scope of the preceding clauses (a) and (b) and (ii) Joint Patents.   In addition, and notwithstanding any other provision of this Agreement to the contrary, Tocagen Patents shall in any event exclude any Patents within the “Siemens Licensed IP” or the “Tocagen Licensed IP” (as such terms are defined in the Siemens Agreement).  The Tocagen Patents as of the Execution Date are listed on Exhibit 1.92 .  
 1.93 “ Tocagen Product-Specific Patents  ” means any Tocagen Patent in the Territory that contains only Product-Specific Claims.  The Tocagen Product-Specific Patents as of the Execution Date are listed on Paragraph (a) of Exhibit 1.93 , which Exhibit shall be updated from time to time by Tocagen.  Notwithstanding the foregoing, the Tocagen Product-Specific Patents shall include the Tocagen Patents listed on Paragraph (b) of Exhibit 1.93 for any period that no issued and unexpired Tocagen Product-Specific Patent in the Territory is listed on Paragraph (a) of Exhibit 1.93 .
1.94 “ Tocagen Retroviral Replicating Vector Platform ” means […***…].  
1.95 “ Tocagen Technology ” means Tocagen Patents and Tocagen Know-How.
 1.96 “ Tocagen Territory-Specific Costs ” means, for purposes of Section 5.2(a)(ii) hereof, the reasonable and documented internal and external costs and expenses incurred by Tocagen after the Effective Date that are specifically attributable to (a) performance of Territory-Specific Development Support Activities or (b) preparing, submitting, obtaining or maintaining Regulatory Filings specific to such Territory-Specific Development Support Activities; in each case, including overhead directly attributable to such Territory-Specific Development Support Activities, based on direct project headcount or other generally accepted activity-based accounting methods, but excluding all other overhead.  Specifically, Tocagen Territory-Specific Costs of a particular Territory-Specific Development Support Activity shall comprise the following: (i) all reasonable and documented amounts paid by Tocagen to Third Parties for the

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conduct of such Territory-Specific Development Support Activity, including, without limitation, any such amounts paid to a Regulatory Authority to submit, obtain or maintain any Regulatory Filing specific to the applicable Territory-Specific Development Support Activity; (ii) the internal reasonable and documented costs, calculated on a full-time equivalent basis, incurred by Tocagen in conducting such Territory-Specific Development Support Activity; and (iii) one hundred ten percent (110%) of the Cost of Goods of Product used in the conduct of such Territory-Specific Development Support Activity.
1.97 “ Upfront Payment ” shall have the meaning provided in Section 9.1.
1.98 “ Upfront Payment Deadline ” shall have the meaning provided in Section 2.2.
1.99 “ U.S. ” shall mean the United States of America.
1.100 “ Valid Claim ” means (a) a claim of an issued and unexpired patent, or a supplementary protection certificate thereof, which has not been held permanently revoked, unenforceable or invalid by a decision of a court, patent office or other forum of competent jurisdiction, unappealable or unappealed within the time allowed for appeal and that is not admitted to be invalid or unenforceable through reissue, disclaimer or otherwise, or (b) a claim of a pending patent application that has not been abandoned, finally rejected or expired without the possibility of appeal or re-filing.  Notwithstanding the foregoing, if a claim of a pending patent application has not issued as a claim of a patent within seven (7) years after the filing date from which such claim takes the earliest priority, such claim shall not be a Valid Claim for the purposes of this Agreement, unless and until such claim issues as a claim of an issued and unexpired patent (from and after which time the same shall be deemed a Valid Claim subject to (a) and (b) above).
 1.101 Interpretation .  The captions and headings to this Agreement are for convenience only, and are to be of no force or effect in construing or interpreting any of the provisions of this Agreement.  Unless specified to the contrary, references to Articles, Sections or Exhibits mean the particular Articles, Sections or Exhibits to this Agreement and references to this Agreement include all Exhibits hereto.  Unless context otherwise clearly requires, whenever used in this Agreement: (a) the words “include” or “including” shall be construed as incorporating, also, “but not limited to” or “without limitation”; (b) the word “will” shall be construed in the imperative having the same meaning as the word “shall”; (c) the word “day” or “year” means a calendar day or year; (d) the word “notice” requires notice in writing (whether or not specifically stated) and shall include notices, consents, approvals and other written communications contemplated under this Agreement; (e) the words “hereof,” “herein,” “hereby” and derivative or similar words refer to this Agreement (including any Exhibits); (f) the word “or” (except where preceded by the word “either”) shall be construed as the inclusive meaning identified with the phrase “and/or”; (g) provisions that require that a Party or the Parties (but, for clarity, not the JDC) “agree,” “consent” or “approve” or the like shall require that such agreement, consent or approval be specific and in writing, whether by written agreement, letter or otherwise; (h) words of any gender include the other gender; (i) words using the singular or plural number also include the
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plural or singular number, respectively; and (j) references to any specific law, rule or regulation, or article, section or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement law, rule or regulation thereof.  Ambiguities and uncertainties in this Agreement, if any, shall not be interpreted against either Party, irrespective of which Party may be deemed to have caused the ambiguity or uncertainty to exist.  This Agreement has been prepared in the English language and the English language shall control its interpretation.
ARTICLE 2 
NATURE AND EFFECTIVENESS OF AGREEMENT
 2.1 Execution Date  .  This Agreement is binding upon the Parties and ApolloBio as of the Execution Date, and Section 9.1 and Articles II, XIV (solely with respect to Liabilities resulting from Third Party Claims arising from or relating to the matters described in clauses (c) and (d) of Section 14.1 and clauses (c) and (d) of Section 14.2), XVI and XVII hereof are effective as of the Execution Date, but no other provision of this Agreement shall be effective as of the Execution Date or ever become effective except as expressly provided in Section 2.2.  
 2.2 Effective Date .  Contingent upon Apollo’s payment in full to Tocagen of:
(a) the Initial Installment of the Upfront Payment in accordance with Section  10.1 no later than 11:59 p.m., Pacific Time, on the day that is ten (10) calendar days after the Execution Date (such time, the “ Initial Installment Deadline ”); and
(b) the Final Installment of the Upfront Payment in accordance with Section  10.1 no later than 11:59 p.m., Pacific Time, on the day that is ninety (90) calendar days after the Execution Date (such time, the “ Upfront Payment Deadline ”);
this Agreement shall become effective in its entirety on the date of Apollo’s payment in full to Tocagen of the Upfront Payment in accordance with Section 10.1 (the “ Effective Date ”).  If:
(i) Apollo has not made payment in full to Tocagen of the Initial Installment in accordance with Section 10.1 prior to the Initial Installment Deadline, then, at or after 12:00 a.m., Pacific Time, on the day that is eleven (11) calendar days after the Execution Date, Tocagen shall have the right to terminate this Agreement with immediate effect upon written notice to Apollo and ApolloBio, whereupon those Sections and Articles of this Agreement that did not previously become effective pursuant to Section 2.1 of this Agreement shall become null and void, but the remainder of this Agreement shall remain in full force and effect in accordance with its terms ; and
 (ii) Apollo makes payment in full to Tocagen of the Initial Installment prior to the Initial Installment Deadline but Apollo has not made payment in full to Tocagen of the Upfront Payment in accordance with Section 10.1 prior to the Upfront Payment Deadline, then, at or after 12:00 a.m., Pacific Time, on the day that is ninety-one (91) calendar days after
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the Execution Date, Tocagen shall have the right to terminate this Agreement with immediate effect upon written notice to Apollo and ApolloBio, whereupon those Sections and Articles of this Agreement that did not previously become effective pursuant to Section  2.1 of this Agreement shall become null and void, but the remainder of this Agreement shall remain in full force and effect in accordance with its terms .
For clarity, Apollo shall be solely responsible for registering this Agreement with the relevant local office of the Beijing Municipal Commission of Commerce (“ BMCOM Registration ”), and applying to the State Administration for Foreign Exchange for currency conversion approval (“ Conversion Approval ”) for the Upfront Payment; in each case, at Apollo’s sole cost and expense.
ARTICLE 3 
GRANT OF LICENSE
 3.1 License Grant to Apollo .  Subject to the terms and conditions of this Agreement, Tocagen hereby grants to Apollo, effective only as of the Effective Date and thereafter during the Term:
 (a) an exclusive (even as to Tocagen, except as set forth in Section  3.4), royalty  ‑bearing license, with the right to sublicense as expressly permitted by Section 3.2, under the Tocagen Technology and Tocagen’s interest in Joint Inventions and Joint Patents, solely to develop, use, sell, have sold, offer for sale and import Product (including, subject to Sections 4.2(b), 4.7(a) and 4.7(b), as a Combination Product) in the Field in the Territory (the “ Development and Commercialization License ”); and
 (b) a non-exclusive, royalty-bearing license, including the right to sublicense as expressly permitted by Section  3.2, under the Tocagen Technology and Tocagen’s interest in Joint Inventions and Joint Patents, solely: […***…].
For the avoidance of doubt, the License excludes: […***…].  Apollo shall have the right to exercise such license and discharge any of its obligations hereunder through its Affiliates, provided that Apollo shall be responsible for compliance of its Affiliates with the

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terms of this Agreement applicable to Apollo, including all relevant restrictions, limitations and obligations.
 3.2 Sublicenses by Apollo .   The License includes the right to grant Sublicenses, without the right to grant further sublicenses, to Affiliates of Apollo.  The prior written consent of Tocagen, which Tocagen may withhold in its reasonable discretion, will be required for the grant of any Sublicense by Apollo or any of its Affiliates to any Third Party (with or without the right to grant further Sublicenses).  Any Sublicense granted to any Affiliate of Apollo or to any Third Party shall be in writing and shall be subject to, and consistent with, the terms and conditions of this Agreement.  Apollo shall be fully responsible for the compliance of its Affiliates and its and their respective permitted Sublicensees with the terms and conditions of this Agreement, including all relevant restrictions, limitations and obligations, and shall remain solely liable for the performance of its obligations hereunder, notwithstanding the grant of any Sublicense.  Apollo shall promptly notify Tocagen in writing of the execution of any sublicense agreement and shall provide Tocagen with a copy of the sublicense agreement, and any amendment thereto, no later than thirty (30) days following execution thereof; provided , that Apollo may redact any confidential or financial information contained therein that is unnecessary for Tocagen to ascertain compliance with this Agreement.    
 3.3 License Grant to Tocagen   .  Subject to the terms and conditions of this Agreement, Apollo hereby grants to Tocagen:
 (a) an exclusive (even as to Apollo), royalty-free, fully-paid, irrevocable, perpetual license, with the right to sublicense through multiple tiers of sublicense, under the Apollo Technology and Apollo’s interest in Joint Inventions and Joint Patents, solely  to make, have made, develop, use, sell, have sold, offer for sale and import Product and/or any Product Component in or outside of the Field outside the Territory; and
(b) a non‑exclusive, royalty-free, fully-paid, irrevocable, perpetual license, with the right to sublicense through multiple tiers of sublicense, under the Apollo Technology and Apollo’s interest in Joint Inventions and Joint Patents, to make and have made Product and Product Components in the Territory solely (i) as necessary to perform, or have performed, Tocagen’s obligations under Sections 7.1 and 7.2; or (ii) for use and distribution outside the Territory.
 3.4 Retained Rights  .  Notwithstanding the exclusivity of the Development and Commercialization License, Tocagen hereby expressly reserves:
(a) the exclusive right (even as to Apollo, except as to the Manufacturing License) to make and have made Product and Product Components; and
 (b) the exclusive right (even as to Apollo) to practice, and to grant licenses under, the Tocagen Technology and Tocagen’s interest in Joint Inventions and Joint Patents, for any and all purposes outside of the express scope of the Development and Commercialization
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License, which retained right includes [ …***…] .
 3.5 No Other Rights .   Each Party acknowledges that the rights and licenses granted under this Article III and elsewhere in this Agreement are limited to the scope expressly granted.  Accordingly, except for the rights expressly granted under this Agreement, no right, title, or interest of any nature whatsoever is granted, whether by implication, estoppel, reliance, or otherwise, by either Party to the other Party.  All rights with respect to Know-How, Patents or other intellectual property rights that are not specifically granted herein are reserved to the owner thereof.
 3.6 Negative Covenants .  Apollo hereby covenants on behalf of itself and its Affiliates not to practice, and not to permit or cause any Affiliate, Sublicensee or other Third Party to practice, any Tocagen Technology for any purpose other than as expressly authorized in this Agreement.  Without limiting the generality of the foregoing, Apollo hereby covenants on behalf of itself and its Affiliates:
(a) not to develop, use, sell, have sold or offer for sale or seek Regulatory Approval for Product or any Product Component outside the Territory;
(b) not to develop, use, sell, have sold, offer for sale or import or seek Regulatory Approval for either Product Component, except as included in Product in the Field in the Territory;
(c) not to develop, use, sell, have sold, offer for sale or import or seek Regulatory Approval for any Combination Product except with the express prior written consent of Tocagen, which may be withheld in Tocagen’s sole discretion;
(d) not to develop, use, sell, have sold, offer for sale or import […***…];
(e) not to conduct or have conducted any preclinical study or clinical trial of Product or any Product Component (including, without limitation, Territory-specific clinical trials and post-approval clinical trials), except in accordance with a JDC-approved protocol and as expressly set forth in the Development Plan or otherwise approved in writing by Tocagen (through the Tocagen’s JDC representatives or otherwise);
(f) not to make or have made Product or any Product Component, except within the scope of the Manufacturing License;

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(g) not to purchase or obtain supply of Product or any Product Component from any source other than Tocagen (or its designee), except within the scope of the Manufacturing License; and
(h) not to grant, or purport to grant, any Affiliate of Apollo or any Third Party any license or other right to do any of the foregoing.
3.7 Excluded Activities .
(a) Apollo agrees that neither it, nor any of its Affiliates, will […***…].
 (b) Tocagen agrees that neither it, nor any of its Affiliates, will […***…].
 3.8 Exclusivity of Efforts .  During […***…], each Party hereby covenants, except as expressly permitted by this Agreement, not to (a) conduct, participate in or sponsor, directly or indirectly, any activities directed toward […***…] of any Competing Product within the Territory (collectively, such activities “ Competing Activities ”) or (b) appoint, license or otherwise authorize any Third Party, whether pursuant to license, appointment, authorization or otherwise, to perform any Competing Activities.
 3.9 Additional RRV Products .  It is understood that the Parties may wish to collaborate with respect to the development of additional Tocagen products (other than Product) incorporating or derived from the […***…] in the Field in the Territory (each, an “ Additional RRV Product ”).  To that end, no later than the […***…] ([…***…]) anniversary of the Effective Date, Apollo may nominate, by written notice to Tocagen, up to […***…] ([…***…]) Additional RRV Product(s) for development and commercialization by Apollo in the Field in the Territory, at Apollo’s sole cost and expense.  Each such nomination shall be subject to acceptance by Tocagen, which Tocagen may withhold in its absolute discretion.  The rights granted to Apollo under this Section 3.9 shall terminate and be of no further force or effect upon the earlier of: (a) such time as Tocagen and Apollo have conducted negotiations with respect to […***…] ([…***…]) Additional RRV Products in accordance with this Section 3.9 (irrespective of whether or not such negotiations have resulted in the Parties executing a definitive agreement with respect to any such Additional RRV Product); and (b) the […***…] ([…***…]) anniversary of the Effective Date.
 ARTICLE 1 
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 GOVERNANCE
4.1 Alliance Managers .  Within thirty (30) days following the Effective Date, Tocagen and Apollo will each appoint (and notify the other Party of the identity of) a representative to act as the primary point of contact for the Parties regarding the development and registration of Product in the Field in the Territory (each, an “ Alliance Manager ”).  The Alliance Managers shall be responsible for creating and maintaining collaborative, efficient, and responsive communications within and between the Parties hereunder.  A Party may replace its Alliance Manager on written notice to the other Party.
 4.2   Joint Development Committee .
(a) Establishment .  Within thirty (30) days following the Effective Date, Tocagen and Apollo shall establish a joint development committee (“ Joint Development Committee ” or “ JDC ”) to oversee the development and registration of Product in the Field in the Territory and to serve as a forum for the exchange and discussion of information with respect thereto.
 (b) Duties .  The JDC shall be responsible for:
(i) reviewing development and regulatory strategy for Product in the Territory;
(ii) ensuring harmonization of Product development and regulatory strategy in the Territory with Tocagen’s global development and commercialization strategy;
(iii) approving all pre-clinical development and all clinical development activities proposed to be conducted by or on behalf of Apollo with respect to Product or Product Component, including, without limitation, all pre-clinical development and clinical development activities proposed to be conducted by or on behalf of Apollo with respect to any Combination Product;
(iv) reviewing and approving the protocol for each Territory-specific clinical trial or pre-clinical study of Product or Product Component proposed to be conducted by or on behalf of Apollo, including, without limitation, the protocol for any clinical trial or pre-clinical study of any Combination Product proposed to be conducted by or on behalf of Apollo;
(v) facilitating the exchange of Tocagen Know-How and Apollo Know-How between the Parties;
(vi) serving as the principal means by which Apollo keeps Tocagen reasonably informed regarding Apollo’s development, registration and commercialization plans, efforts and results with respect to Product in the Territory;
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(vii) serving as the principal means by which Tocagen keeps Apollo reasonably informed regarding Tocagen’s development, registration and commercialization plans, efforts and results with respect to Product outside the Territory; and
(viii) undertaking or approving such other matters as are specifically assigned to the JDC in this Agreement.  
The JDC’s responsibilities and authority shall be limited to those matters expressly delegated to it in this Agreement.
 4.3 Membership .    The JDC shall be composed of two (2) representatives of each of Apollo and Tocagen.  Each Party shall designate its initial two (2) JDC representatives by written notice to the other Party within thirty (30) days of the Effective Date.  Either Party may replace its respective JDC representatives at any time with prior written notice to the other Party; provided that (a) each Party shall ensure that, at all times during the existence of the JDC, such Party’s representatives (initial or replacement) on the JDC have appropriate expertise for the then-current stage of development or commercialization of Product in the Field in the Territory and have the authority to bind such Party with respect to matters within the purview of the JDC and (b) at least one of each Party’s JDC representatives shall be a member of such Party’s senior management.  
4.4 Meetings .  The JDC shall meet at least once each calendar quarter, or more or less often as otherwise agreed to by the Parties.  Responsibility for chairing JDC meetings shall alternate between the Parties.  The chair for any JDC meeting shall not have any greater authority than any other representative of either Party on the JDC.  All JDC meetings may be conducted by telephone, video-conference or in person; provided, however, that the JDC shall meet in person at least once each calendar year, unless the Parties mutually agree to meet by alternative means.  Unless otherwise agreed by the Parties, all in-person meetings for the JDC shall be held on an alternating basis between Tocagen’s facilities and Apollo’s facilities.  Each Party shall bear its own personnel and travel costs and expenses relating to participation in JDC meetings.  A reasonable number of additional representatives of a Party may attend meetings of the JDC in a non-voting capacity.  
4.5 Minutes .   The chair of each JDC meeting shall be responsible for preparing definitive minutes of such JDC meeting and shall circulate a draft of the minutes of such meeting to all members of the JDC for comments within ten (10) days after such meeting.  Such minutes shall provide a description, in reasonable detail, of the discussions at the meeting and shall document all actions and determinations approved by the JDC at such meeting, including the approval of any protocol for any Territory-specific clinical trial of Product in the Field in the Territory, which shall be attached to the minutes as an exhibit.  The Parties shall promptly discuss any comments on such minutes and finalize the minutes no later than the date of the next JDC meeting.
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4.6 Decision-Making .   Decisions of the JDC shall be made by unanimous vote, with each Party’s representatives on the JDC collectively having one vote.  No vote of the JDC may be taken unless at least one of each Party’s representatives is present for the JDC vote .    Notwithstanding any other provision of this Agreement to the contrary, the JDC’s decision-making authority shall be limited to development, registration, marketing, promotion and commercialization activities with respect to Product in the Field in the Territory, and the JDC shall have no decision-making authority whatsoever with regard to Tocagen’s development, registration, marketing, promotion or commercialization activities with respect to Product outside the Territory or with regard to the Target Product Profile, Global Development Strategy or Global Marketing Strategy.   
 4.7 Dispute Resolution .  If the JDC is unable to decide or resolve unanimously any matter properly presented to it for action, then, at the written request of either Party, the matter shall be referred to the Parties’ respective Alliance Managers, who shall promptly meet and attempt in good faith to resolve such matter within ten (10) days.  If such Alliance Managers are unable to resolve such matter within such ten (10)-day period, then, at the written request of either Party, the matter shall be referred to the Parties’ respective Senior Executives, who shall promptly meet and attempt in good faith to resolve such matter within thirty (30) days.  If such Senior Executives are unable to resolve such matter within such thirty (30)-day period, then:  
 (a) subject to Section  4.7(b), Apollo’s Senior Executive shall have final decision-making authority for matters relating to […***…]; provided, however, that matters relating to the following topics with respect to […***…] shall require unanimous JDC approval or mutual written agreement of the Parties and shall not be subject to Apollo’s Senior Executive’s final decision-making authority: […***…]; and
 (b) Tocagen’s Senior Executive shall have the final authority to […***…] that: (i) […***…]; (ii) would require […***…]; (iii) would, […***…]

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[ …***…] , (iv) could reasonably be expected to […***…] , or (v) require any […***…] .
A Party’s Senior Executive, in the exercise of […***…], shall give good faith consideration to, and take into account, the other Party’s position.  Notwithstanding any other provision of this Article IV to the contrary, neither the JDC, nor a Senior Executive in the exercise of […***…], shall have the right: (1) to modify or amend the terms and conditions of this Agreement; (2) to determine any issue in a manner that would conflict with the terms and conditions of this Agreement or (3) to make a decision that is expressly stated to require the mutual written agreement or mutual written consent of the Parties.  The Parties intend that all matters within the scope of the JDC’s decision-making authority shall be resolved by the Parties in accordance with Section 4.6 and this Section 4.7, and no matter within the scope of the JDC’s authority shall be subject to the dispute resolution provisions set forth in Article XVI.  
 4.8 Scope of Governance .  Notwithstanding the creation of the JDC, each Party shall retain the rights, powers and discretion granted to it hereunder, and the JDC shall not be delegated or vested with rights, powers or discretion unless such delegation or vesting is expressly provided herein.  The JDC shall not have the power to amend or modify this Agreement, and no decision of the JDC shall be in contravention of any terms and conditions of this Agreement.  It is understood and agreed that issues to be formally decided by the JDC are only those specific issues that are expressly provided in this Agreement to be decided by the JDC.  
 ARTICLE 5 
  DEVELOPMENT, TECHNOLOGY TRANSFER AND REGULATORY ACTIVITIES
 5.1 Global Development Strategy .  Tocagen shall be solely responsible for establishing the global development and regulatory strategy for Product worldwide, both inside and outside of the Field (such strategy, the “ Global Development Strategy ”), in its sole and absolute discretion.  To that end, Tocagen shall be responsible, at its sole expense, for conducting, or having conducted, those development and regulatory activities with respect to Product as Tocagen determines in its sole discretion are necessary or appropriate to obtain and maintain Regulatory Approval for Product in the U.S. and such other countries outside the Territory as Tocagen may elect, for any Indications, in or outside of the Field, that Tocagen chooses to pursue.  

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5.2 Development Activities   .
 (a) General  .
 (i) A high level plan of the development activities to be conducted by Apollo under this Agreement has been agreed upon by the Parties and is attached hereto as Exhibit 5.2(a)(i) (the “ Development Plan Outline ”).    Within thirty (30) days after the establishment of the JDC, the JDC shall meet to review and discuss the Development Plan Outline, including Tocagen’s comments thereon, following which Apollo shall prepare an initial development plan for Product in the Field in the Territory, incorporating changes and refinements based on the JDC’s comments to the Development Plan Outline (the “ Initial Development Plan ”), for review and approval by the JDC.  Thereafter, on an annual basis, Apollo shall prepare an updated development plan for Product in the Field in the Territory (the Initial Development Plan and each such updated development plan, each, a “ Development Plan ”) for the JDC’s review and approval.  The Initial Development Plan and each subsequent Development Plan shall set forth Apollo’s development and registration strategy for Product in the Field in the Territory and shall include such detail as is typical of pharmaceutical industry development plans and a projected timeline for the development and regulatory activities set forth therein.  Apollo shall have the right to take the lead in proposing changes and revisions to the Development Plan, including the addition of Product development and registration activities, provided that any such amendment to the Development Plan is consistent with the Global Development Strategy and the Target Product Profile, and any and all amendments to the Development Plan shall be subject to the JDC’s review and approval.  References to the “Development Plan” in this Agreement shall be construed to refer to such Development Plan, as then in effect (including all updates and amendments thereto).  
 (ii) As between the Parties, subject to Article III and except as expressly provided in this Article V or Section 8.2, Apollo shall be solely responsible for conducting, or having conducted, at Apollo’s sole expense, such Territory-specific clinical trials with respect to Product in the Field in the Territory as Apollo determines are necessary or appropriate to obtain and maintain Regulatory Approvals for Product in the Field in the Territory, all in accordance with the Development Plan and the Target Product Profile.  Apollo shall keep the JDC regularly and fully informed of the status, progress and results of its development and registration efforts.  Apollo shall not conduct or have conducted any preclinical study, clinical trial, or other research or development, of any Product Component or Product, unless the Development Plan expressly provides for the conduct of such activity and such activity (including any protocol therefor) has been approved by the JDC.  
 (iii) Tocagen, via the JDC, shall provide reasonable support, consultation and advice to Apollo in Apollo’s efforts with respect to activities required to obtain Regulatory Approval of Product in the Field in the Territory.  In addition, if Regulatory Authority(ies) in the Territory specifically require the performance of preclinical or nonclinical studies or CMC development activities that are not required by Regulatory Authorities in the U.S. and have not previously been performed by Tocagen (“ Territory-Specific Development
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Support Activities ”), then Tocagen shall be responsible for conducting or having conducted such Territory-Specific Development Support Activities, at Apollo’s sole expense with respect to Tocagen Territory-Specific Costs.   
 (iv) On a Territory-Specific Development Support Activity-by-Territory-Specific Development Support Activity basis, within thirty (30) days after the end of each calendar quarter during the conduct of each Territory-Specific Development Support Activity, Tocagen shall provide to Apollo a written statement setting forth the Tocagen Territory-Specific Costs incurred for such Territory-Specific Development Support Activity during such calendar quarter (each such statement, a “ Tocagen Cost Report ”).  Tocagen shall respond promptly to Apollo’s questions regarding any Tocagen Cost Report or reasonable requests for supporting documentation, including, without limitation, copies of agreements or work orders for Tocagen Trial Activities performed by Third Parties (from which copies Tocagen may redact confidential or proprietary information that is not necessary for Apollo to ascertain Tocagen Territory-Specific Costs).  Tocagen shall calculate Tocagen Territory-Specific Costs using applicable Accounting Standards, and all defined and undefined terms in the definition of Tocagen Territory-Specific Costs will be construed in accordance with applicable Accounting Standards, in each case, consistently applied throughout Tocagen, and consistent with generally accepted methods for activity-based project costing for similar products in the biopharmaceutical industry.  Without limiting the foregoing, no cost item will be included more than once in calculating Tocagen Territory-Specific Costs.  Tocagen Territory-Specific Costs shall be subject to audit in accordance with Section 10.5(a).
 (b) Diligence .  Apollo shall use Commercially Reasonable Efforts to develop, and to obtain and maintain Regulatory Approval for, Product in the Field in the Territory in accordance with the Development Plan and this Agreement.  All such activity shall be done in consultation with the JDC.  Without limiting the generality of the foregoing, Apollo shall use Commercially Reasonable Efforts to perform the activities set forth in the Development Plan substantially within the timelines set forth therein.  Apollo shall maintain laboratories, offices and other facilities reasonably necessary to carry out development of Product in the Field in the Territory in accordance with this Agreement, and agrees to devote qualified personnel and other appropriate resources to such activities.  
 (c) Performance Standards  .  Apollo shall conduct all development and registration activities with respect to Product in the Field in the Territory in good scientific manner, in accordance with the Target Product Profile, and in full compliance with the requirements of Applicable Law and, as applicable to a particular development activity, GCP, GLP and/or cGMP.  At reasonable times, and at a reasonable frequency in light of the then-ongoing clinical development activities with respect to Product in the Field in the Territory (in each case, as determined by the JDC), Tocagen shall have the right to monitor, and/or have its Third Party designee monitor, Apollo’s clinical development of Product, including the right to be present during the administration of Toca 511 to any clinical trial participant in the Territory.  
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(d) Records .  In conformity with standard pharmaceutical and biotechnology industry practices and the terms and conditions of this Agreement, Apollo shall prepare and maintain, or shall cause to be prepared and maintained, complete and accurate written records, accounts, notes, reports and data (including Data) with respect to all development activities with respect to Product in the Field in the Territory.  Apollo shall, upon Tocagen’s request, make such records available to Tocagen for inspection or copying and/or provide Tocagen with written summaries, in English, of the information contained in such records.
 5.3 Technology Transfer .       
 (a)   Without limiting the licenses and other rights and obligations under this Agreement, Tocagen shall, at no additional charge to Apollo, deliver to Apollo or Apollo’s designee(s) within thirty (30) days following the Effective Date such existing and available (in recorded form) Tocagen Know-How (including Data within the Tocagen Know-How) in Tocagen’s possession as is necessary or useful for Apollo to exercise the License in accordance with this Agreement  .  Thereafter, on an ongoing basis during the Term, Tocagen shall also disclose to Apollo such additional  Tocagen Know-How (including Data within the Tocagen Know-How) generated after the Effective Date as is necessary or useful for Apollo to exercise the License in accordance with this Agreement.  Without limiting the generality of the foregoing, Tocagen shall provide to Apollo true and complete copies of all final reports of any preclinical study or clinical trial of Product in the Field conducted by or on behalf of Tocagen, and Apollo shall have the right to use the  Data contained in such reports solely within the scope of the License and as otherwise expressly permitted by this Agreement.  Notwithstanding the foregoing, Tocagen shall not be obligated to disclose to Apollo, or provide Apollo with access to, any CMC data or other manufacturing information with respect to Toca 511, subject to Section 5.7(b).
 (b) On an ongoing basis during the Term, Apollo shall promptly disclose to Tocagen such Apollo Know-How (including Data within the Apollo Know-How) as is necessary or useful for Tocagen to (i) exercise the license granted to Tocagen pursuant to Section  3.3 in accordance with this Agreement or (ii) perform Tocagen’s obligations under Sections 5.8 and 8.2 and Article VII of this Agreement.  Without limiting the generality of the foregoing, Apollo shall provide to Tocagen true and complete copies of all written, graphic or electronic embodiments of Data generated by or on behalf of Apollo or any of its Affiliates or Sublicensees, including, without limitation, all draft and final reports of any preclinical study or clinical trial of Product or any Product Component, and all pharmacology, toxicology, pharmacokinetic and other data with respect to Product or any Product Component, and Tocagen shall have the right to use such Data for any purpose, other than development, use, sale, offer for sale or import of Product in the Field in the Territory during the Term.  With respect to the transfer of human genetic resource data or human biological samples within the Apollo Know-How, Apollo shall be responsible for obtaining all necessary approvals and permits of Regulatory Authorities and other governmental authorities in the Territory, including approval from the China Human Genetic Resources Administration Office, if necessary for Apollo to comply with its obligations under this
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Section  5.3(b) , and Apollo shall transmit any such human genetic resource data or human biological samples in compliance with Applicable Law, including any approval from the China Human Genetic Resources Administration Office.  
 5.4 Diagnostic Assays .
(a) Certain Defined Terms .  The following capitalized terms used in this Section 5.4 shall have the respective meanings set forth in the Siemens Agreement: “Approved Product,” “Assays,” “Clinical Assay,” “Commercial Product,” “Designated Assays,” “Laboratory,” “Siemens Licensed IP,” “Tocagen Licensed IP” and “Tocagen Trial.”
(b) Siemens Agreement; Acknowledgments .  Pursuant to the Siemens Agreement, Siemens has developed on behalf of Tocagen certain Clinical Assays that Siemens uses to perform viral safety testing and Toca FC safety testing of biological samples taken from study subjects in Tocagen Trials in the Laboratory, on the terms and conditions set forth in the Siemens Agreement.  […***…]:
(i) […***…]; and
(ii) […***…]
 (c) Diagnostic Licenses .  In the event that the CFDA or any other Regulatory Authority in the Territory requires viral safety testing or Toca FC safety testing in connection with clinical trials or commercialization of Product in the Field in the Territory, and any Assay for such testing exists, then:
(i) subject to the terms and conditions of this Agreement and the Siemens Agreement, Tocagen […***…]:
(A) […***…]; and

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(B) [ …***…] ; and
 (ii) subject to the terms and conditions of this Agreement, Tocagen […***…].
 (d) Tocagen Support .  In the event that the CFDA or any other Regulatory Authority in the Territory requires viral safety testing or Toca FC safety testing in connection with clinical trials or commercialization of Product in the Field in the Territory, and any Assay for such testing exists:
(i) Tocagen shall disclose to Apollo […***…];
(ii) at Apollo’s request, Tocagen shall […***…];
(iii) at Apollo’s request, Tocagen shall […***…]; and
(iv) […***…]

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5.5 Regulatory Matters .  
 (a) Responsibility for Regulatory Filings .  As between the Parties, Apollo shall be solely responsible, at its expense, for implementing a filing strategy for Product in the Field in the Territory which shall be consistent in all material respects with the Global Development Strategy and the Target Product Profile, and, subject to Sections 5.6, 5.7 and 5.8, for preparing, filing, obtaining and maintaining all Regulatory Filings in the Field in the Territory; provided, however, that if a Regulatory Authority in the Territory requires the filing with such Regulatory Authority of CMC data or other manufacturing information with respect to Toca 511 (as opposed to permitting Apollo to cross-reference the relevant data and information contained in Tocagen’s Regulatory Filings and DMFs with respect to Toca 511 in the U.S. or elsewhere outside of the Territory), then, to the maximum extent permissible by Applicable Law in the Territory, Tocagen shall be solely responsible for the submission of such data and information and shall be the sole and exclusive owner of any such filing .  All such regulatory activities of Apollo shall be done in consultation with the JDC.   Subject to the foregoing, Apollo shall be the sole holder of all Regulatory Filings in the Field in the Territory , provided that Apollo shall provide English summaries of drafts of all proposed Regulatory Filings for Product in the Territory, and, at Tocagen’s request, English translations of key sections of such drafts, to Tocagen or its designee(s) (“ Tocagen Designee(s) ”) for review and comment reasonably in advance of submission to any Regulatory Authority in the Territory, and will provide Tocagen or the Tocagen Designee(s) with English summaries of regulatory reviewer questions and comments in conjunction with any Regulatory Filings in the Field in the Territory for review and comment reasonably in advance of a response to such questions or comments to any Regulatory Authority in the Territory.  Apollo shall promptly provide Tocagen or Tocagen Designee(s) with English summaries of all material documents, information and correspondence received from any Regulatory Authority in the Territory relating to Product and, upon reasonable request, with English summaries of any other material documents, reports and communications from or to any such Regulatory Authority, relating to Product.  Except as expressly set forth above in this Section 5.5(a), Apollo shall bear all costs and expenses incurred in connection with regulatory activities with respect to Product in the Field in the Territory.  Tocagen or Tocagen Designee(s) shall have the option to participate in all material meetings and conference calls with Regulatory Authorities relating to Product in the Territory.  If Tocagen or a Tocagen Designee is not able or permitted to participate in a material meeting or conference call with any such Regulatory Authority, Apollo shall, promptly after such meeting or conference call, provide to Tocagen or Tocagen Designee(s) a written summary, in English, of the meeting or conference call.  Subject to the foregoing, Apollo shall have responsibility for all interactions with Regulatory Authorities in the Territory with respect to Product in the Field and for all Territory compliance filings, certificates, and safety reporting.   Apollo shall also obtain any export approvals required by the CFDA to import or export Product to any Region.  
 (b) Other Regulatory Matters .  Subject to Sections 5.3(a) and 5.7(b), each Party will promptly provide the other Party with copies of all material documents, information and correspondence received from a Regulatory Authority within the Territory relating to
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Product or activities under this Agreement (including a written summary of any material communications in which such other Party did not participate) and, upon reasonable request, with copies of any other documents, reports and communications from or to any Regulatory Authority within the Territory relating to Product or activities under the Agreement.
 5.6 Regulatory Cooperation .  As between the Parties, Apollo shall be responsible for liaising with and managing all interactions with Regulatory Authorities in the Territory, except as expressly provided in Sections 5.3(a) and 5.7(b), and Tocagen shall be responsible for liaising with and managing all interactions with Regulatory Authorities outside the Territory.  To the extent relating to Product, each Party shall keep the other Party reasonably informed of any and all material interactions with Regulatory Authorities in the Territory, subject to Sections 5.3(a) and 5.7(b).  Each Party shall use Commercially Reasonable Efforts to provide the other Party with all reasonable assistance and take all actions reasonably requested by such other Party, without changing the allocation of responsibilities set forth in this Article V, that are necessary or desirable to enable: (a) Apollo to obtain and maintain Regulatory Approvals for Product and Product Components (solely as incorporated in Product) in the Field in the Territory; and (b) Tocagen to obtain and maintain Regulatory Approvals for (i) Product and Product Components outside of the Territory, (ii) Product and Product Components outside of the Field in the Territory, or (iii) the Tocagen Retroviral Replicating Vector Platform, and products based on, incorporating or using the Tocagen Retroviral Replicating Vector Platform or any component thereof, anywhere in the world, except as incorporated in Product in the Field in the Territory.  Each Party further agrees to cooperate with any inspection by the FDA, CFDA or other Regulatory Authority relating to Product, including, but not limited to, any inspection prior to approval of an application for Regulatory Approval for Product.
 5.7 Access to Regulatory Filings .
 (a)  Apollo shall promptly provide to Tocagen and/  or Tocagen Designee(s) true and complete English translations of all Regulatory Filings in the Field in the Territory (other than those filed or held by Tocagen).  Apollo hereby grants to Tocagen Rights of Reference to all such Regulatory Filings for the purposes of: (i) obtaining and maintaining Regulatory Approvals for Product and Product Components outside of the Territory; (ii) obtaining and maintaining Regulatory Approvals for Product and Product Components outside of the Field in the Territory; (iii) obtaining or maintaining Regulatory Approvals for the Tocagen Retroviral Replicating Vector Platform, and products based on, incorporating or using the Tocagen Retroviral Replicating Vector Platform or any component thereof, anywhere in the world, except as incorporated in Product in the Field in the Territory; (iv) the manufacture of any Product Component anywhere in the world for use or distribution in the Territory by Apollo or for use and distribution outside the Territory; and (v) complying with applicable pharmacovigilance and other regulatory requirements with respect to Product, Product Components and the Tocagen Retroviral Replicating Vector Platform and activities described in the preceding clauses (i) through (iv).  In addition, upon written notice by Tocagen to Apollo of the grant by Tocagen to any Third Party of any license or other right to develop, manufacture or
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 commercialize (A) Product or Product Component(s) outside of the Territory, (B) Product outside of the Field in the Territory, or (C) the Tocagen Retroviral Replicating Vector Platform, and products based on, incorporating or using the Tocagen Retroviral Replicating Vector Platform or any component thereof, anywhere in the world, except as incorporated in Product in the Field in the Territory, Apollo shall, and it hereby does, grant to such Third Party licensee Rights of Reference to such Regulatory Filings for purposes within the scope of the license or other rights granted by Tocagen to such Third Party licensee.   
 (b)  Tocagen shall promptly provide to Apollo true and complete copies of all Regulatory Filings in the Field in the U.S.; provided, however, that Tocagen shall not be obligated to provide Apollo with a copy of the CMC section of any such Regulatory Filing with respect to Toca 511.  For clarity, Tocagen shall not be obligated to provide Apollo with a copy of any drug master file maintained by or on behalf of Tocagen with respect to Product or any Product Component (“ DMF  ”).  Tocagen hereby grants to Apollo the Rights of Reference to all Regulatory Filings  in the Field in the U.S. and all DMFs in the U.S.; in each case, for the sole purpose of: (i) obtaining and maintaining Regulatory Approvals for Product in the Field in the Territory; and (ii) complying with applicable pharmacovigilance and other regulatory requirements with respect to Product in the Field in the Territory.  Notwithstanding the foregoing, if a Regulatory Authority in the Territory requires that the information from the CMC section of any such U.S. Regulatory Filing in the Field with respect to Toca 511 (“ Toca 511 CMC Information ”) and/or any DMF be submitted directly to such Regulatory Authority ( i.e. , that the Rights of Reference granted by Tocagen pursuant to this Section 5.7(b) and corresponding letters of authorization, access or cross-reference from Tocagen pursuant to Section 5.7(c) are not sufficient) and refuses to accept Toca 511 CMC Information or a copy of the DMF submitted by Tocagen or its Third Party agent or designee in the Territory to such Regulatory Authority, then the JDC and/or the Parties’ respective regulatory advisors shall promptly convene to discuss the matter in good faith and to agree upon a solution acceptable to such Regulatory Authority […***…] and reasonably acceptable to the Parties (such acceptance not to be unreasonably withheld or delayed).
 (c) Each Party shall, promptly upon request of the other Party, file with applicable Regulatory Authorities such letters of authorization, access or cross-reference as may be necessary to accomplish the intent of this Section 5.7.
 5.8 Global Safety; Pharmacovigilance; Adverse Events .
 (a) Global Safety Database .  As between the Parties, Tocagen will hold, solely own and be solely responsible for maintaining the global safety database for Product.   A high level plan for incorporating Apollo’s safety data for Product into Tocagen’s global safety database has been agreed upon by the Parties and is attached hereto as Exhibit 5.8(a) .  

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(b) Pharmacovigilance Agreement .   In conjunction with this Agreement, no later than twelve (12) months prior to the anticipated date of commercial launch of Product in the Field in the Territory, the Parties shall negotiate in good faith and enter into a pharmacovigilance agreement regarding Product, which shall set forth standard operating procedures governing the collection, investigation, reporting, and exchange of information concerning adverse drug reactions/experiences sufficient to permit each Party to comply with its regulatory and other legal obligations within the applicable timeframes.  Such agreement’s terms and conditions shall be no less stringent than U.S. and ICH guidelines, such that each Party shall be able to comply with all regulatory and legal requirements regarding the management of safety data by providing for the exchange of relevant information in appropriate format within applicable timeframes.   Subject to the foregoing, each Party shall be responsible for monitoring all clinical experiences with respect to Product in the course of its own Product development activities and filing all required reports with respect thereto in its respective territory ( i.e. , with respect to Apollo, in the Territory, and with respect to Tocagen, outside of the Territory).  
 (c) Adverse Event Reporting  .  As between the Parties: (i) Apollo shall be responsible for the timely reporting of all adverse drug reactions/experiences, Product quality, Product complaints and safety data relating to Product to the appropriate Regulatory Authorities in the Territory; and (ii) Tocagen shall be responsible for reporting all adverse drug reactions/experiences, product quality complaints and product safety data relating to Product to the appropriate Regulatory Authorities outside of the Territory; in each case (i) and (ii) in accordance with Applicable Law of the relevant countries and Regulatory Authorities.  Each Party shall use Commercially Reasonable Efforts to ensure that its Affiliates, licensees and sublicensees comply with such reporting obligations.  Apollo shall promptly consult with Tocagen and/  or Tocagen Designee(s) regarding all drug-related serious adverse event reports originating in the Territory and reasonably consider any input from Tocagen and/  or Tocagen Designee(s) prior to finalizing serious adverse event reports for such events and/  or making any submission to a Regulatory Authority regarding such events, to the extent possible.  
ARTICLE 6 
 COMMERCIALIZATION
 6.1 Global Marketing Strategy .  Tocagen shall be solely responsible for establishing the global sales and marketing strategy for Product worldwide (such strategy, the “ Global Marketing Strategy ”), in its sole and absolute discretion.
 6.2 Apollo Commercialization  .  As between the Parties, subject to Article IV and this Article VI, Apollo shall control and be solely responsible, at its expense, for commercialization, distribution, marketing and promotion of Product in the Field in the Territory.  At least […***…] ([…***…]) months prior to the anticipated commercial launch of Product in the Field in the Territory, Apollo shall prepare and deliver to Tocagen a preliminary draft commercialization plan for Product in the Field in the Territory, outlining its current thinking regarding typical commercialization matters, including the proposed pricing and reimbursement approval strategy and the proposed sales and marketing strategy for Product in the Field in the Territory (the

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“ Commercialization Plan Outline ”).  The JDC shall promptly meet to review and discuss the Commercialization Plan Outline, and Apollo shall develop a commercialization plan that incorporates the JDC’s comments to the Commercialization Plan Outline (the “ Commercialization Plan ”), for review and approval by the JDC.  Thereafter, at reasonable intervals to be agreed by the JDC (but at least annually), Apollo shall prepare and provide to Tocagen a high-level outline of Apollo’s then-current commercialization plan for Product in the Field in the Territory, which outline shall be reviewed and discussed by the JDC.  References to the Commercialization Plan in this Agreement shall be construed to refer to such Commercialization Plan, as then in effect (including all updates and amendments thereto).   
 6.3 Diligence .  From and after receipt of Regulatory Approval for Product in the Territory, Apollo shall use Commercially Reasonable Efforts to market, promote and commercialize Product in the Field in the Territory.  Without limiting the generality of the foregoing, Apollo shall: (a) perform the activities set forth in the Commercialization Plan; and (b) use Commercially Reasonable Efforts to perform the Commercialization Plan substantially within the timelines set forth therein.  
 6.4 Trademarks .     
 (a) Product Trademark  .  Tocagen shall have the sole right to select the Product-specific trademark for use in connection with the marketing and sale of Product in the Territory (the “ Product Trademark ”), which may, but need not, be the same as the Product-specific trademark used in connection with the marketing and sale of Product outside of the Territory.  Tocagen shall consider in good faith Apollo’s suggestions regarding the selection of the Product Trademark but shall retain ultimate discretion as to such selection.  Subject to the terms and conditions of this Agreement, Tocagen hereby grants to Apollo […***…] an exclusive, royalty-free license, with the right to sublicense solely in conjunction with the grant of a permitted Sublicense under Section 3.2, to use the Product Trademark for the commercialization of Product for the Field in the Territory in accordance with this Agreement.  During the Term, Tocagen shall not use (or license to an Affiliate or Third Party) the Product Trademark in connection with any product other than Product.  Apollo shall be responsible for the failure by its Affiliates and Sublicensees to comply with this Section 6.4   , including all relevant restrictions, limitations and obligations.  Apollo shall obtain Tocagen’s approval prior to the first use of the Product Trademark in any Product labeling, packaging or marketing materials, such approval not to be unreasonably withheld, conditioned or delayed if the Product Trademark is used in a manner that is consistent with Tocagen’s reasonable usage guidelines for the Product-specific trademark used in connection with the marketing and sale of Product outside of the Territory.  Tocagen shall own and retain all right, title and interest in and to the Product Trademark, and all goodwill associated with or attached to the Product Trademark arising out of the use thereof by Apollo, its Affiliates and Sublicensees shall vest in and inure to the benefit of Tocagen.  
 (b) Chinese Character Trademark  .  Apollo shall have the sole right (but not the obligation), at its option and expense, to select and register a Chinese character trademark or

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 tradename for use in connection with commercialization of Product for the Field in the Territory (such trademark or tradename including all goodwill associated therewith, the “ Chinese Character Trademark ”).   Apollo shall consider in good faith Tocagen’s suggestions regarding the selection of the Chinese Character Trademark but shall retain ultimate discretion as to such selection.  Notwithstanding the foregoing, Apollo shall not select as the Chinese Character Trademark any trademark that incorporates, or is confusingly similar to, any corporate trade name, registered trademark or logo of either of the Parties or any of their respective Affiliates.  
(c) Prosecution .  As between the Parties, (i) Tocagen shall control the prosecution of and use Commercially Reasonable Efforts to maintain the Product Trademark at its expense, and (ii) Apollo shall control the prosecution of the Chinese Character Trademark (if any) at its expense.
(d) Enforcement .  Each Party shall promptly notify the other Party in writing upon becoming aware of any infringement of the Product Trademark in the Territory, in which event the Parties shall promptly confer in good faith and determine how to proceed with any enforcement activity.  As between the Parties, Apollo shall control the enforcement of the Chinese Character Trademark (if any) in the Territory at its expense.  For the avoidance of doubt, Tocagen shall control the enforcement of the Product Trademark outside the Territory at its expense.
 (e) Tocagen Corporate Marks .  Except to the extent prohibited by Applicable Law in the Territory, or otherwise directed by Tocagen in writing, all packaging, labeling, advertising and promotional material used by Apollo, its Affiliates and Sublicensees in connection with Product, shall feature Tocagen’s corporate trade name and logo (“ Tocagen Corporate Marks ”).  Subject to the terms and conditions of this Agreement, Tocagen hereby grants to Apollo […***…] a non‑exclusive, royalty‑free license, with the right to sublicense to an Affiliate or Sublicensee, to use the Tocagen Corporate Marks solely in connection with the use, sale, importation, distribution and marketing of Product in the Field in the Territory, including the use of the Tocagen Corporate Marks on Product packaging, labeling, advertising and promotional material.  Tocagen or an Affiliate of Tocagen shall retain the ownership of the entire right, title and interest in and to the Tocagen Corporate Marks.  All goodwill associated with or attached to the Tocagen Corporate Marks arising out of the use thereof by Apollo, its Affiliates and Sublicensees shall inure to the benefit of Tocagen.  Apollo agrees not to contest, oppose or challenge Tocagen’s ownership of the Tocagen Corporate Marks.  Apollo agrees not to knowingly do or suffer to be done, at any time, any act or thing that will in any way impair Tocagen’s ownership of or rights in and to the Tocagen Corporate Marks or any registration thereof or that may depreciate the value of the Tocagen Corporate Marks or the reputation of Tocagen.  Apollo agrees that in using Tocagen Corporate Marks upon any Product packaging, labeling, advertising or promotional materials, it shall not represent in any way that it has any right or title to the ownership of the Tocagen Corporate Marks or the registration thereof.  Apollo shall obtain the prior written approval of Tocagen of the form and manner in which the Tocagen Corporate Marks will be used upon, in connection with, or in

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relation to, Product, or any packaging, labels, containers, advertisements and other materials related thereto.  Wherever any Tocagen Corporate Mark is used, e.g. , on any package, label or advertisement, the first or most prominent use shall always be accompanied by a legend acceptable to Tocagen indicating that Product utilizes the proprietary technology of Tocagen and that the Tocagen Corporate Marks are owned by Tocagen.  Apollo shall, at Tocagen’s request and expense, assist Tocagen in any action reasonably necessary or desirable to protect the Tocagen Corporate Marks used or proposed to be used hereunder.  Apollo shall as soon as practicable notify Tocagen of any apparent infringement by a Third Party of any of the Tocagen Corporate Marks.  Apollo agrees to cooperate with Tocagen to enable Tocagen to control the nature and quality of the use of the Tocagen Corporate Marks such that Tocagen may verify that the use of the Tocagen Corporate Marks is consistent with the Tocagen’s quality standards and Product specifications.   
ARTICLE 7 
 MANUFACTURING AND SUPPLY
 7.1 Supply and Purchase Obligation .  Subject to the terms and conditions of this Agreement, and except as expressly set forth in Sections 7.2 and 7.3, Tocagen shall sell and supply to Apollo, and Apollo shall purchase exclusively from Tocagen: (a) all of Apollo’s, its Affiliates’ and its and their Sublicensees’ requirements of Product and Product Components for clinical trials and other development and registration activities in the Field in the Territory, as described in additional detail in Section 7.2; and (b) all of Apollo’s, its Affiliates’ and its and their Sublicensees’ requirements of Product and Product Components for commercial distribution in the Field in the Territory, as described in additional detail in Section 7.2.  Apollo acknowledges that packaging and labeling requirements in the Territory may make it impracticable ( e.g. , unduly burdensome or costly) for Tocagen to supply one or both Product Components to Apollo in final packaged form, in which event it may be more efficient for Tocagen to supply one or both Product Components to Apollo in bulk form or as unmarked “brite stock” and for Apollo to perform, or have a Third Party in the Territory perform, all subsequent packaging and labeling of such Product Component(s).  Accordingly, the form in which Tocagen will supply Product Component(s) ( i.e. , bulk form, unmarked “brite stock,” or final packaged and labeled form) to Apollo shall be discussed in good faith by the Parties, provided that Tocagen shall have the ultimate discretion as to the form of such supply.
 7.2 Supply Arrangements .
 (a) Clinical Supply .  Subject to Section 7.3, Tocagen shall manufacture, or have manufactured, and supply, or have supplied, to Apollo, Product or Product Components for use in clinical trials and other development and registration activities in the Field in the Territory, in accordance with a clinical supply plan to be developed and unanimously approved by the JDC, without resort to either Party’s Senior Executive’s final decision-making authority or final veto authority, as applicable (the “ Clinical Supply Plan ”).  The Clinical Supply Plan will reflect the principles and terms set forth in: the second sentence of the first paragraph of Section 7.2(c);
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Sections  7.2(c)(i) , 7.2(c)(ii) , 7.2(c)(iii) , 7.2(c)(vi) and 7.2(c)(viii) ; the final paragraph of Section  7.2(c) ; and Section  7.2(d) ; in each case, mutatis mutandis .
 (b) Negotiation of Commercial Supply Agreement .  No later than […***…] ([…***…]) months prior to the anticipated commercial launch of Product in the Field in the Territory, the Parties shall negotiate in good faith and enter into a separate written commercial supply agreement, pursuant to which, subject to Sections 7.2(c), 7.2(d) and 7.3, Tocagen will manufacture, or have manufactured, and supply, or have supplied, to Apollo, Product or Product Components for commercial distribution in the Field in the Territory (the “ Commercial Supply Agreement ”).  
 (c) Commercial Supply Terms .  The Commercial Supply Agreement shall be negotiated in good faith by the Parties and shall be on commercially reasonable terms consistent with the terms of this Agreement.  In any event, the provisions of the Commercial Supply Agreement with respect to any Product Component shall be consistent with, and shall be designed to permit Tocagen to comply with its obligations under, Tocagen’s corresponding supply agreement(s) with its Third Party CMO(s) of such Product Component (“ Tocagen CMO(s) ”), and shall not impose on Tocagen obligations with respect to Product Component manufactured by any Tocagen CMO that are in excess of such Tocagen’s CMO’s obligations to Tocagen with respect to such Product Component.  Subject to, but without limiting the generality of, the foregoing, the Commercial Supply Agreement shall:
 (i) obligate Apollo to order, purchase and pay for Product or Product Component in whole numbers of lots or batches;   
 (ii) specify the lead time required for manufacture and supply of each batch or lot of Product (on a Product Component basis);
 (iii) require Tocagen to maintain, or require Tocagen CMO(s) to maintain, an appropriate manufacturing site for Product or Product Component;
 (iv) provide for Tocagen to establish an alternative source of Product or Product Component to maintain continuity of supply in the event of Tocagen’s material and/or persistent inability to supply Product or Product Component in accordance with Apollo’s forecasts and purchase orders submitted in accordance with the provisions of the Commercial Supply Agreement;
 (v) address such other matters as are customary for commercial supply agreements with respect to pharmaceutical products, such as forecasting requirements (including rolling forecasts with binding and non ‑binding portions), firm orders, procedures for order submission, delivery, acceptance and rejection, quality matters, regulatory matters, and, subject to the final paragraph of this Section 7.2(c), warranty;

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(vi) prohibit Apollo from refilling or rebottling Product or Product Component supplied by Tocagen into smaller or larger units;
 (vii) provide for the Parties to enter into an appropriate quality agreement for Product or Product Component in compliance with cGMP and Applicable Law; and
 (viii) provide that Tocagen is not responsible for documentation associated with, or the costs of, export or customs clearance.
In addition, the Commercial Supply Agreement shall not obligate Tocagen to provide any representations or warranties, or remedies for non‑conforming Product Component, with respect to Product Component manufactured by any Tocagen CMO beyond those representations, warranties and remedies provided by such Tocagen CMO to Tocagen for such Product Component, and Tocagen shall be entitled to all disclaimers of warranties, limitations of liability and other limitations on liability to which such Tocagen CMO is entitled with regard to supply of such Product Component, provided that all such representations, warranties and remedies provided by such Tocagen CMO are either enforceable by Apollo or enforced by Tocagen for the benefit of Apollo.  Tocagen shall have no obligation to amend or renegotiate any manufacturing and supply agreement with any Tocagen CMO for a Product Component existing at the Execution Date or at the time of negotiation of the Commercial Supply Agreement, except to the extent necessary to obligate such Tocagen CMO to manufacture such Product Component for use in the Territory in accordance with cGMP (as defined in this Agreement), nor shall Tocagen have any obligation to negotiate any new agreement with any Tocagen CMO for a Product Component.  
 (d) Transfer Price .  The transfer price for Product or any Product Component supplied by or on behalf of Tocagen shall be equal to […***…] percent ([…***…]%) of Tocagen’s Cost of Goods (the “ Supply Price  ”).      The costs of freight, shipping and insurance costs for Product or Product Component delivered to Apollo (or any of its Affiliates or Sublicensees) are not included in the Supply Price, and Apollo shall directly pay for all such costs.
 7.3 Manufacturing by Apollo .
 (a) General .    Subject to the terms and conditions of this Agreement, including this Section 7.3  , Apollo  shall have the […***…]  right to manufacture Toca FC, including the active pharmaceutical ingredient thereof (“ API   ”), in the Territory solely for use in the Field in the Territory in accordance with this Agreement.
 (b) Manufacturing of Toca FC .  Within thirty (30) days following the Effective Date, Tocagen shall provide to Apollo true and complete copies of any documentation or records in the possession of Tocagen describing the manufacturing processes employed by or on behalf of Tocagen to manufacture Toca FC and API (the “ Manufacturing Processes ”),

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including master batch records, and other Tocagen Know-How in the possession of Tocagen (including Regulatory Filings and DMFs, except as expressly provided below) necessary to replicate the Manufacturing Processes as practiced by or on behalf of Tocagen (collectively, “ Manufacturing Technology Documentation ”) , provided that, in the case of Regulatory Filings and DMFs within such Tocagen Know-How, Tocagen shall grant Apollo and/or its CMO(s) Rights of Reference to such Regulatory Filings and DMFs solely for the purpose of making or having made Toca FC solely for use and distribution as incorporated in Product in the Field in the Territory.  Apollo shall reimburse Tocagen for the out-of-pocket costs incurred by Tocagen in providing copies of such Manufacturing Technology Documentation or access to such Regulatory Filings and DMFs .  All copies of such Manufacturing Technology Documentation provided by Tocagen shall be provided in the same form and format as the originals, and Apollo shall be solely responsible for translation of such Manufacturing Technology Documentation from the original language into the Chinese language.   All Manufacturing Technology Documentation (including all copies thereof) shall constitute the Confidential Information of Tocagen.
 (c) […***…].
 7.4 Supply of Key Components, Starting Materials and Intermediates .  Effective as of the Effective Date, Tocagen shall, and it hereby does, grant to Apollo the right, and shall use Commercially Reasonable Efforts to assist Apollo, to procure and purchase any key components, starting materials and/or intermediates used by or on behalf of Tocagen in connection with the manufacture of Toca FC or API (collectively, “ Raw Materials ”), and subject to Section 7.3, from any qualified vendor from whom Tocagen is then directly procuring and purchasing such Raw Materials; provided, however, that Apollo acknowledges that if the Tocagen CMO(s) for Toca FC or API are responsible for procuring and purchasing any such Raw Material directly from qualified vendors for use in the manufacture of Toca FC or API, and Tocagen itself has no right to procure and purchase such Raw Material directly from such vendor, then Apollo shall be solely responsible for negotiating with such vendor(s), the Tocagen CMO(s) and/or Apollo’s CMO(s) for the supply of such Raw Material.  .
 7.5 Third Party Manufacturing .  Apollo may exercise any of its manufacturing rights with respect to Toca FC or API through one or more CMOs, subject to Section 13.5.  Apollo will use Commercially Reasonable Efforts to secure for Tocagen the right for Tocagen to participate in any and all audits and inspections performed by Apollo with respect to a CMO, and otherwise

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 agrees to keep Tocagen reasonably informed of any and all audits or inspections of such CMO performed by Apollo or any Regulatory Authority.
 7.6 Supply of Product by Apollo .  In the event that Apollo (or its CMO(s)) manufactures Toca FC or API under this Agreement, upon Tocagen’s request, the Parties shall negotiate in good faith a definitive agreement for the supply of Toca FC or API by Apollo (or its CMO(s)) to Tocagen on commercially reasonable terms, provided that neither Party shall be obligated to enter into any such agreement.  The transfer price for Toca FC or API supplied under any such agreement shall be […***…].
ARTICLE 8 
 CERTAIN COVENANTS
 8.1 General Communications .  Each Party shall keep the other Party reasonably informed as to its progress and activities relating to the development, commercialization, marketing and promotion of Product in the U.S. (in the case of Tocagen) and in the Territory (in the case of Apollo), including with respect to regulatory matters and meetings with Regulatory Authorities, by way of updates to the JDC at its meetings and as otherwise specified in this Agreement or reasonably requested by the other Party.
 8.2 Phase 3 Clinical Trial  .   F  ollowing the Effective Date, Apollo and Tocagen shall evaluate and discuss in good faith the possible inclusion of one or more sites within the Territory for Tocagen’s global multicenter Phase 3 Clinical Trial of Product, provided that Tocagen shall have no obligation to include any such site in such trial.  If Tocagen, in its sole discretion, is willing to include one or more sites within the Territory in the trial, the inclusion of such site(s) shall be subject to Tocagen’s and Apollo’s joint assessment and selection of such sites based upon Tocagen’s then-existing selection and inclusion criteria, and the Parties shall take into consideration any feedback from the FDA, CFDA and other Regulatory Authorities relating to such selection and inclusion criteria.  The terms of any such inclusion of sites within the Territory would be negotiated in good faith by the Parties.

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ARTICLE 9 
 PAYMENTS
 9.1 Upfront Payment .  In partial consideration of the rights and licenses granted by Tocagen to Apollo under this Agreement, Apollo shall pay to Tocagen, in accordance with Section 10.1, an upfront payment in the amount of Sixteen Million Dollars ($16,000,000) (the “ Upfront Payment ”), payable as follows:
 (a) One million Dollars ($1,000,000) (the “ Initial Installment ”) no later than the Initial Installment Deadline; and
 (b) One million Dollars ($1,000,000) (the “ Final Installment ”) no later than the Upfront Payment Deadline.  
The Upfront Payment shall not be refundable under any circumstances and shall not be creditable against any future milestone payments, royalties or other payments by Apollo to Tocagen under this Agreement.  If: (i) Apollo has not made payment in full to Tocagen of the Initial Installment in accordance with Section 10.1 prior to the Initial Installment Deadline, then, at or after 12:00 a.m., Pacific Time, on the day that is eleven (11) calendar days after the Execution Date, Tocagen shall have the right to terminate this Agreement with immediate effect upon written notice to Apollo and ApolloBio; or (ii) Apollo makes payment in full to Tocagen of the Initial Installment prior to the Initial Installment Deadline but Apollo has not made payment in full to Tocagen of the Upfront Payment in accordance with Section 10.1 prior to the Upfront Payment Deadline, then, at or after 12:00 a.m., Pacific Time, on the day that is ninety-one (91) calendar days after the Execution Date, Tocagen shall have the right to terminate this Agreement with immediate effect upon written notice to Apollo and ApolloBio.
 9.2 Milestone Payments .  
 (a) Development Milestones .  In further consideration of the rights and licenses granted by Tocagen to Apollo under this Agreement, within thirty (30) days following the first achievement of each of the development milestone events set forth in the table below (each, a “ Development Milestone Event ”), Apollo shall provide Tocagen with written notice of such achievement and shall pay to Tocagen the corresponding non‑refundable, non‑creditable milestone payment set forth in such table (each, a “ Development Milestone Payment ”), except as otherwise specified in the final paragraph of this Section 9.2(a) with respect to Development Milestone Event No. 1, Development Milestone Event No. 3 and Development Milestone Event No. 6:

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 Development Milestone Event	Development Milestone Payment	
1.  Completion of enrolment of […***…] patients in Tocagen’s Toca 5 clinical trial (NCT02414165	[…***…] Dollars ($ […***…] )	
2.   […***…]	[…***…] Dollars ($ […***…] )	
3.   […***…]	[…***…] Dollars ($ […***…] )	
4.   […***…]	[…***…] Dollars ($ […***…] )	
5.   […***…]	[…***…] Dollars ($ […***…] )	
6.   […***…]	[…***…] Dollars ($ […***…] )	
  
 	*	For purposes of this Section 9.2(a), if […***…].	
Notwithstanding the first paragraph of this Section 9.2(a), Tocagen shall provide Apollo with written notice of the first achievement of each of Development Milestone Event No. 1 and Development Milestone Event No. 3, and Apollo shall pay Development Milestone Payment No. 1 and Development Milestone Payment No. 3, respectively, to Tocagen within thirty (30) days after receipt of such notice.  For clarity: (i) […***…]; and (ii) […***…]

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[ …***…] .   
 (b) Commercial Milestones .  In further consideration of the rights and licenses granted by Tocagen to Apollo under this Agreement, within forty-five (45) days following the end of the first calendar year in which each of the commercial milestone events set forth in the table below (each, a “ Commercial Milestone Event ”) is first achieved, Apollo shall provide Tocagen with written notice of such achievement and shall pay to Tocagen the corresponding one-time, non‑refundable, non‑creditable milestone payment set forth in such table (each a “ Commercial Milestone Payment ”):
 
Commercial Milestone Event	Commercial Milestone Payment	
1.   First calendar year in which aggregate annual Net Sales of all Products in the Territory exceed […***…] Dollars ($ […***…] )	[…***…] Dollars ($ […***…] )	
2.   First calendar year in which aggregate annual Net Sales of all Products in the Territory exceed […***…] Dollars ($ […***…] )	[…***…] Dollars ($ […***…] )	
3.   First calendar year in which aggregate annual Net Sales of all Products in the Territory exceed […***…] Dollars ($ […***…] )	[…***…] Dollars ($ […***…] )	
 For clarity, it is understood that each Commercialization Milestone Payment shall be payable only once upon the first occurrence of the applicable Commercialization Milestone Event.  If more than one Commercial Milestone Event is achieved in any given calendar year, then the corresponding Commercial Milestone Payment for each such Commercial Milestone Event achieved in such calendar year shall be due and owing with respect to such calendar year.
 9.3 Royalty Payments to Tocagen .
 (a) Royalties .  In further consideration of the rights and licenses granted to Apollo under this Agreement, Apollo shall pay to Tocagen royalties on increments of aggregate annual Net Sales of all Products in the Territory in each calendar year at the applicable rate(s) set forth below:  

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 Increments of Aggregate Annual Net Sales of Products in the Territory	Royalty Rate	
That portion of aggregate annual Net Sales of all Products in the Territory that is less than […***…] Dollars ($ […***…] )	[…***…] Percent ( […***…] %)	
That portion of aggregate annual Net Sales of all Products in the Territory that is equal to or greater than […***…] Dollars ($ […***…] ) and less than […***…] Dollars ($ […***…] )	[…***…] Percent ( […***…] %)	
That portion of aggregate annual Net Sales of all Products in the Territory that is equal to or greater than […***…] Dollars ($ […***…] ) and less than […***…] Dollars ($ […***…] )	[…***…] Percent ( […***…] %)	
That portion of aggregate annual Net Sales of all Products in the Territory that is equal to or greater than […***…] Dollars ($ […***…] )	[…***…] Percent ( […***…] %)	
 For example, subject to the other provisions of this Section 9.3, in the event that aggregate annual Net Sales of all Products in the Territory in a calendar year are $500,000,000, then […***…].  
 (b) Royalty Term .   Royalties under Section 9.3(a) shall be payable on a Product-by-Product and Region-by-Region basis from the Effective Date until the latest of: (i) ten (10) years from First Commercial Sale of a Product in a Region; (ii) expiration of all Regulatory Exclusivity for such Product in such Region; and (iii) expiration of the last-to-expire Valid Claim of the Tocagen Patents and Joint Patents Covering the manufacture, use, sale, offer for sale or import of such Product in such Region (the “ Royalty Term ”); provided, however, that: (A) during any portion of the Royalty Term for a Product in a Region when no Valid Claim of the Tocagen Patents or Joint Patents Covers the manufacture, use, sale, offer for sale or import of such Product in such Region, but there is Regulatory Exclusivity for such Product in such Region, the royalties payable under Section 9.3(a) with respect to Net Sales of such Product in such Region shall be […***…]; and (B) during any portion of the Royalty Term for a Product in a Region when (1) no Valid Claim of the Tocagen Patents or Joint Patents Covers the manufacture, use, sale, offer for sale or import of such Product in such Region, and (2) there is no Regulatory Exclusivity for such Product in such Region, the royalties payable under Section 9.3(a) with respect to Net Sales of such Product in such Region shall be […***…].  On a Product-by-Product and Region-by-Region basis, upon
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expiration of the Royalty Term for a Product in a Region, Apollo’s License with respect to such Product in such Region shall become non ‑exclusive, royalty ‑free, fully-paid, irrevocable and perpetual.
 (c) Generic Competition .  On a Product-by-Product and Region-by-Region basis, if, during any portion of Royalty Term for a Product in a Region (x) the expiration of all Regulatory Exclusivity for such Product in such Region and (y) expiration of the last-to-expire Valid Claim of the Tocagen Patents and Joint Patents Covering the manufacture, use, sale, offer for sale or import of such Product in such Region that Apollo has the right to enforce, one or more Generic Versions of such Product account for […***…] ([…***…]%) or more of aggregate unit sales of such Product and such Generic Version(s) in such Region in a calendar quarter, as determined by reference to applicable sales data obtained from a reputable independent source ( e.g. , IQVIA), then for the remainder of the Royalty Term for such Product in such Region, Apollo’s royalty payment obligations with respect to Net Sales of such Product in such Region shall be […***…].
 (d) Royalty Stacking  .  I n the event that Apollo or its Affiliate or Sublicensee (as applicable) is required to obtain one or more licenses under issued and unexpired patents of Third Parties (excluding Sublicensees) that are necessary for the manufacture, use, sale, offer for sale or import of a Product in a Region (“ Third Party Licenses ”), […***…] percent ([…***…]%) of the royalties actually paid by Apollo or such Affiliate or Sublicensee (as applicable) under such Third Party Licenses with respect to sales of such Product in such Region for a calendar quarter will be creditable against the royalties payable by Apollo to Tocagen with respect to Net Sales of such Product in such Region for such calendar quarter; provided, however, that in no event will the royalties owed by Apollo to Tocagen hereunder with respect to Net Sales of such Product in such Region for such calendar quarter be reduced by more than […***…] percent ([…***…]%) as a result of any and all such credits in the aggregate, but any portion of the royalties paid under Third Party Licenses with respect to sales of such Product in such Region that Apollo would have been entitled to credit against royalties payable to Tocagen in the absence of the foregoing limitation on aggregate credits in any calendar quarter shall be carried over and applied against royalties payable to Tocagen in respect of such Product in such Region in subsequent calendar quarters until the full deduction is taken; and provided, further, that Apollo will not be entitled to credit any portion of royalties that are paid or payable by Apollo or its Affiliate or Sublicensee to any Third Party with respect to sales of a Combination Product in a Region solely by reason of the inclusion in such Combination Product of any Other Active.
 (e) Royalty Floor .  In no event shall the effective royalty rate applicable to Net Sales of Products in the Territory be reduced by more than an aggregate of […***…] percent ([…***…]%) in any calendar quarter as a result of any and all reductions and credits pursuant to Section 9.3(b), Section 9.3(c) and Section 9.3(d) in the aggregate; provided that any portion of the royalties with respect to Net Sales of Products that Apollo would have been entitled to credit against royalties payable to Tocagen in the absence of the foregoing limitation on aggregate credits in any calendar quarter shall be carried over and applied against royalties payable to

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Tocagen in respect of Net Sales of Products in the Territory in subsequent calendar quarters until the full deduction is taken.
 (f) Payments/Reports .   All royalties under this Section 9.3 shall be calculated and reported for each calendar quarter and shall be paid within forty-five (45) days of the end of the calendar quarter.  Each payment of royalties shall be accompanied or preceded by a report specifying, on a Product-by-Product and Region-by-Region basis: (i) gross invoiced amounts for sales of Products by Apollo, its Affiliates and Sublicensees; (ii) amounts deducted by category from gross invoiced amounts to calculate Net Sales; (iii) Net Sales; (iv) the details of any Net Sales adjustments for any Combination Product; (v) any applicable adjustments made pursuant to Section 9.3(b) or Section 9.3(c); (vi) details of any royalty credits taken pursuant to Section 9.3(d) on a Third Party License-by-Third Party License basis; (vii) the royalties payable; and (viii) the exchange rates used.  
 9.4 Source of Payments; Conversion Approval .  With respect to any payment provided for in this Agreement (other than the Upfront Payment), either:
(a) to the extent that, at the time such payment becomes due, Apollo […***…]; or
(b) except as provided in the preceding subparagraph (a), Apollo shall […***…].  
Apollo shall be solely responsible for ensuring that it has sufficient funds, and has obtained all required approvals of Apollo’s board or shareholders, to make all anticipated payments hereunder before they become due, and Apollo shall not be excused from making any such payment when due by reason of the need to raise capital or the need to obtain any required approval of Apollo’s board or shareholders.  Apollo shall take all commercially reasonable steps and use all commercially reasonable efforts and good faith to make all payments hereunder to Tocagen when due.  Subject to Apollo’s compliance with its obligations under Sections 2.2, 9.1, 10.1 and 10.4 and the foregoing provisions of this Section 9.4, and to Tocagen’s rights under Sections 2.2, 9.1 and 10.2, Tocagen agrees […***…].

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ARTICLE 10 
 PAYMENTS; BOOKS AND RECORDS
 10.1 Payment Method .  All payments under this Agreement shall be made by bank wire transfer in immediately available funds to a bank and account designated by Tocagen.  
 10.2 Late Payments .  Any payments or portions thereof due under this Agreement that are not paid by the date such payments are due under this Agreement shall accrue interest at (a) a rate per annum that is […***…] ([…***…]) basis points above the then-current prime rate quoted by Citibank N.A. in New York City, New York, USA, or (b) if lower, the maximum annual interest rate permitted by Applicable Law; in each case ((a) and (b)), for the period from the due date for payment until the date of actual payment, compounded annually and computed on the basis of a three hundred sixty-five (365) day year.  This Section 10.2 shall in no way limit any other remedies available to the Parties.  The payment of such interest shall not limit Tocagen from exercising any other rights it may have as a consequence of the lateness of any payment.  
 10.3 Currency Conversion  .  All amounts specified in this Agreement are in U.S. Dollars ($), and all payments by Apollo to Tocagen under this Agreement shall be paid in U.S. Dollars ($).  If any currency conversion shall be required in connection with the calculation of amounts payable hereunder, such conversion shall be made using the average of the buying and selling rates on the last five (5) Business Days of the calendar quarter to which the amount applies as published by The Wall Street Journal, Internet Edition at www.wsj.com .
 10.4 Taxes .
 (a) Each Party will be responsible for all taxes, fees, duties, levies or similar amounts imposed on its income, assets, capital, employment, personnel, and right or license to do business.
(b) Subject to the remainder of this Section  10.4, any tax paid or required to be withheld by Apollo for the benefit of Tocagen on account of any royalties or other payments payable to Tocagen under this Agreement shall be deducted from the amount of royalties or other payments otherwise due.  Apollo shall secure and send to Tocagen proof of any such taxes withheld and paid by Apollo for the benefit of Tocagen, and shall, at Tocagen’s request, provide reasonable assistance to Tocagen in recovering such taxes.
(c) From and after such time (if ever) as Apollo is […***…], Apollo shall […***…].

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(d) In any event, Apollo and Tocagen shall cooperate in good faith to minimize any deduction or withholding of any tax es from payments made by Apollo or its Affiliate (as applicable) to Tocagen hereunder .
(e) If Apollo is required by Applicable Laws to withhold or deduct any tax from any other payment to Tocagen under this Agreement, and such withholding or deduction obligation arises as a result of any action by Apollo after the Effective Date, including assignment or sublicense, any change in Apollo’s tax residency, any change in the entity that originates the payment, or any failure on the part of Apollo to comply with Applicable Laws, including filing or record retention requirements (each, an “ Apollo Tax Action ”), then the sum payable by Apollo to Tocagen shall be increased to the extent necessary to ensure that Tocagen receives a sum equal to the sum which Tocagen would have received had no such Apollo Tax Action occurred.
 10.5  Records; Inspection .  
 (a) Tocagen Territory-Specific Costs .  During the conduct of any Territory-Specific Development Support Activity and for a period of […***…] ([…***…]) years thereafter, Tocagen shall keep complete and accurate records pertaining to Tocagen Territory-Specific Costs for Territory-Specific Development Support Activities in sufficient detail to permit Apollo to confirm the calculation of Tocagen Territory-Specific Costs.  Apollo shall have the right to cause an independent, certified public accountant reasonably acceptable to Tocagen to audit such records to confirm Tocagen Territory-Specific Costs for Territory-Specific Development Support Activities for a period covering not more than the preceding […***…] ([…***…]) years.  Tocagen may require such accountant to execute a reasonable confidentiality agreement with Tocagen prior to commencing the audit.  Such audits may be conducted during normal business hours upon reasonable prior written notice to Tocagen, but no more frequently than once per year.  No accounting period of Tocagen shall be subject to audit more than one time by Apollo.  The auditor will send a copy of the report (which shall be in English) to Apollo at the same time it is sent to Tocagen.  The report sent to both Parties will include the methodology and calculations used to determine the results.  Prompt adjustments (including remittances of underpayments or overpayments disclosed by such audit) shall be made by the Parties to reflect the results of such audit.  Apollo shall bear the full cost of such audit unless such audit discloses an overstatement by Tocagen of Tocagen Territory-Specific Costs of the lesser of (i) […***…] percent ([…***…]%) or more of the amount of Tocagen Territory-Specific Costs actually incurred for the period audited, or (ii) $[…***…], in either of which cases Tocagen shall bear the full cost of such audit.
 (b) Net Sales, Royalties and Commercial Milestone Payments .  During the Term and for a period of […***…] ([…***…]) years thereafter, Apollo shall keep, and shall cause its Affiliates and Sublicensees to keep, full and accurate books and records pertaining to the sale or other disposition of Products by Apollo, its Affiliates and Sublicensees in sufficient detail to permit Tocagen to confirm the accuracy of all payments due hereunder.  Tocagen shall have the right to cause an independent, certified public accountant reasonably acceptable to Apollo to audit such records to confirm Net Sales, royalties, Commercial Milestone Payments and the
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timing of achievement of Commercial Milestone Events for a period covering not more than the preceding [ …***…] ( […***…] ) years.  Apollo may require such accountant to execute a reasonable confidentiality agreement with Apollo prior to commencing the audit.  Such audits may be conducted during normal business hours upon reasonable prior written notice to Apollo, but no more frequently than once per year.  No accounting period of Apollo shall be subject to audit more than one time by Tocagen.  The auditor will send a copy of the report (which shall be in English) to Tocagen at the same time it is sent to Apollo.  The report sent to both Parties will include the methodology and calculations used to determine the results.  Prompt adjustments (including remittances of underpayments or overpayments disclosed by such audit) shall be made by the Parties to reflect the results of such audit.  Tocagen shall bear the full cost of such audit unless such audit discloses an underpayment by Apollo of […***…] percent ( […***…] %) or more of the amount of payments due under this Agreement for the period audited.  
ARTICLE 11 
 CONFIDENTIALITY
 11.1 Confidential Information .  Except as expressly provided in this Agreement, each Party agrees that, during the Term and for […***…] ([…***…]) years thereafter, such Party (the “ Receiving Party ”) shall keep confidential and shall not publish or otherwise disclose and shall not use for any purpose, other than as expressly provided for in this Agreement, any information furnished to it by or on behalf of the other Party (the “ Disclosing Party ”) pursuant to this Agreement or under the Prior CDA (collectively, “ Confidential Information ”), whether before or after the Effective Date, and whether in written, electronic, oral, visual, graphic or any other form.  The Receiving Party may use Confidential Information only to the extent required to accomplish the purposes of this Agreement.  The Receiving Party shall use at least the same standard of care as it uses to protect proprietary or confidential information of its own, but no less than reasonable care, to ensure that its, and its Affiliates’, employees, agents, consultants and other representatives (“ Representatives ”) do not publish or disclose or make any unauthorized use of the Confidential Information.  The Receiving Party shall promptly notify the Disclosing Party upon discovery of any unauthorized use or disclosure of the Confidential Information by the Receiving Party, its Affiliates or their respective Representatives.  Notwithstanding the foregoing, Confidential Information shall not include information that the Receiving Party can prove by competent evidence:
 (a) was already known by the Receiving Party , other than under an obligation of confidentiality, prior to the time of receiving such information from the Disclosing Party, as evidenced by its pre‑existing written records ;
(b) is, as of the Execution Date, or thereafter becomes, generally known or available to the public, other than through any act or omission of the Receiving Party in breach of this Agreement;

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(c) was subsequently lawfully disclosed to the Receiving Party on a non ‑confidential basis by a Third Party, as a matter of right ( i.e. , without breaching any obligation such Third Party may have to the Disclosing Party); or
(d) is independently discovered or developed by the Receiving Party, independently of the activities undertaken by the Receiving Party pursuant to this Agreement and without the use of or reference to Confidential Information furnished by the Disclosing Party, as evidenced by the Receiving Party’s contemporaneously-maintained written records.
 11.2 Permitted Disclosures .  Notwithstanding the provisions of Section 11.1, the Receiving Party may disclose Confidential Information of the Disclosing Party as expressly permitted by this Agreement, or if and to the extent such disclosure is reasonably necessary in the following instances:
 (a) filing or prosecuting Patents as permitted by this Agreement;
 (b) enforcing the Receiving Party’s rights under this Agreement or performing its obligations under this Agreement;
 (c)  prosecuting or defending litigation as permitted by this Agreement;
 (d) complying with applicable court orders, Applicable Law, or the listing rules of any exchange on which the Receiving Party’s securities are traded;
(e) disclosure in Regulatory Filings that the Receiving Party has the right to make under this Agreement;
(f) disclosure to the Receiving Party’s Affiliates, to actual or potential licensees or sublicensees (including Sublicensees), and to the Receiving Party’s Representatives who, in each case, have a need to know such information in order for the Receiving Party to exercise its rights or fulfill its obligations under this Agreement, provided, in each case, that any such Affiliate, actual or potential licensee or sublicensee, or Representative agrees to be bound by terms of confidentiality and non-use at least as stringent as those set forth in this Article XI;
 (g) in the case of Tocagen, disclosure to Siemens to the extent required to comply with the Siemens Agreement; and
(h) disclosure to Third Parties in connection with due diligence or similar investigations by such Third Parties, and disclosure to potential Third Party investors in confidential financing documents, provided, in each case, that any such Third Party agrees to be bound by reasonable obligations of confidentiality and non-use.
 Notwithstanding the foregoing, in the event the Receiving Party is required to make a disclosure of the Disclosing Party’s Confidential Information pursuant to Section 11.2(c) or
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Section  11.2(d) , it shall, except where impracticable, (i) give reasonable advance notice to the Disclosing Party of such required disclosure, (ii) use efforts to secure confidential treatment of such information at least as diligent as the Receiving Party would use to protect its own confidential information, but in no event less than reasonable efforts, and (iii) cooperate with any lawful efforts by the Disclosing Party, at the Disclosing Party’s request and expense, to contest such disclosure, to obtain a protective order for the Confidential Information required to be disclosed, or to secure other confidential treatment of such Confidential Information.  Disclosure by the Receiving Party of Confidential Information in accordance with any of the foregoing provisions of this Section  11.2 shall not, in and of itself, cause the information so disclosed to cease to be treated as Confidential Information under this Agreement, except to the extent that, by virtue of disclosure by the Receiving Party in full compliance with this Section  11.2 , such information becomes generally known or available .  In any event, the Receiving Party agrees to take all reasonable action to avoid disclosure of Confidential Information hereunder.
 11.3 Confidential Terms .   Except as otherwise provided in this Article XI, each Party agrees not to disclose to any Third Party the terms of this Agreement without the prior written consent of the other Party, except that each Party may disclose the terms of this Agreement that are made public in accordance with Section 11.6 or to the extent such disclosure is permitted under Section 11.2.
 11.4 Use of Names .   Except as expressly permitted by this Agreement, neither Party shall mention or otherwise use the name, logo or trademark of the other Party or any of its Affiliates in any publication, press release, marketing and promotional material or other form of publicity in connection with this Agreement or activities hereunder without the prior written approval of such other Party.  The restrictions imposed by this Section 11.4 shall not prohibit either Party from (a) making any disclosure identifying the other Party or its Affiliates to the extent required in connection with the exercise of such Party’s rights or the performance of such Party’s obligations under this Agreement and (b) making any disclosure identifying the other Party or its Affiliates that is required by Applicable Law or the rules of a stock exchange on which the securities of such Party are listed.
 11.5 Publication of Product Information .   Each Party recognizes that the publication by Apollo and its Affiliates and Sublicensees, such as by public oral presentation, manuscript or abstract, of the results of their development activities, including clinical trials, with respect to Product may be beneficial to both Parties provided such publications are subject to reasonable controls to protect Confidential Information of Tocagen.  Accordingly, Tocagen shall have the right to review and comment on any material proposed for public oral presentation or publication by Apollo that includes Data or results of Apollo’s, its Affiliates’ and Sublicensees’ development activities and/or includes Confidential Information of Tocagen.  Before any such material is submitted for publication, Apollo shall deliver a complete copy to Tocagen at least […***…] ([…***…]) days prior to submitting the material to a publisher or initiating any other disclosure.  Tocagen shall review any such material and give its comments to Apollo within […***…] ([…***…]) days of the delivery of such material to Tocagen.  With respect to public oral presentation materials

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and abstracts, Tocagen shall make reasonable efforts to expedite review of such materials and abstracts, and shall return such items as soon as practicable to Apollo with appropriate comments, if any, but in no event later than [ …***…] ( […***…] ) days from the date of delivery to Tocagen.  Apollo shall comply with Tocagen’s request to delete references to Tocagen’s Confidential Information in any such material.  In addition, if any such publication contains patentable subject matter, then at Tocagen’s request, Apollo shall either delete the patentable subject matter from such publication or delay any submission for publication or other public disclosure for a period of up to an additional […***…] ( […***…] ) days so that appropriate patent applications may be prepared and filed.
 11.6 Public Announcements .
 (a) The Parties have agreed upon the content of a joint press release which shall be issued substantially in the form attached hereto as Exhibit 11.6(a) , and the release of which the Parties will coordinate in order to accomplish the same promptly upon execution and delivery of this Agreement.  Except to the extent already disclosed in a press release or other public communication issued in accordance with this Agreement, no public announcement concerning this Agreement, its subject matter or the transactions described herein shall be made, either directly or indirectly, by either Party or its Affiliates, except as may be required by Applicable Law (including disclosure requirements of the U.S. Securities and Exchange Commission (“ SEC ”)), judicial order, or stock exchange or quotation system rule without first obtaining the approval of the other Party and agreement upon the nature, text and timing of such announcement, which approval and agreement shall not be unreasonably withheld or delayed.  The Party desiring to make any such voluntary public announcement shall provide the other Party with a written copy of the proposed announcement in reasonably sufficient time prior to public release to allow the other Party to comment upon such announcement prior to public release.  In the case of press releases or other public communications required to be made by Applicable Law, judicial order or stock exchange or quotation system rule, the Party making such press release or public announcement shall provide to the other Party a copy of the proposed press release or public announcement in written or electronic form upon such advance notice as is practicable under the circumstances for the purpose of allowing the notified Party to review and comment upon such press release or public announcement.  Under such circumstances, the releasing Party shall not be obligated to delay making any such press release or public communication beyond the time when the same is required to be made.  Neither Party shall be required to seek the permission of the other Party to repeat any information regarding the terms of this Agreement or any amendment hereto that has already been publicly disclosed by such Party or by the other Party, in accordance with this Section 11.6(a); provided that such information remains accurate as of such time and provided the frequency and form of such disclosure are reasonable.
(b) Each Party may make public statements regarding this Agreement in response to questions by the press, analysts, investors or those attending industry conferences or financial analyst calls, provided that any such public statement or press release: (i) is not

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inconsistent with prior public disclosures or public statements made in accordance with Section  11.6(a) or as permitted by Section  11.3 ; and (ii) does not reveal (A) information regarding the terms of this Agreement that have not previously been disclosed in accordance with Section  11.6(a) or as permitted by Section  11.3 or (B) non ‑public information about the other Party.
(c) The Parties shall coordinate in advance with each other in connection with the filing of this Agreement (including redaction of certain provisions of this Agreement) with any securities authority or with any stock exchange on which securities issued by a Party or its Affiliate are traded, and each Party will use reasonable efforts to seek confidential treatment for the terms proposed to be redacted; provided that each Party will ultimately retain control over what information to disclose to any securities authority or stock exchange, as the case may be, to the extent such Party determines, on the advice of legal counsel, that disclosure is reasonably necessary to comply with Applicable Law, including disclosure requirements of the SEC, or with the requirements of any stock exchange on which securities issued by a Party or its Affiliates are traded, and provided, further, that the Parties will use their reasonable efforts to file redacted versions with any governing bodies which are consistent with redacted versions previously filed with any other governing bodies.
 11.7 Prior Non-Disclosure Agreements .  Upon execution of this Agreement, the terms of this Article XI shall supersede any prior non-disclosure, secrecy or confidentiality agreement between the Parties, including without limitation […***…].  Any information disclosed under such prior agreements by Tocagen shall be deemed disclosed by Tocagen under this Agreement, and any information disclosed under such prior agreements by ApolloBio shall be deemed disclosed by Apollo under this Agreement.
ARTICLE 12 
 INTELLECTUAL PROPERTY
Notwithstanding any provision of this Article XII to the contrary, this Article XII shall not apply in any respect to any Siemens Licensed IP (as such term is defined in the Siemens Agreement).
 12.1 Ownership of Inventions .  
 (a) General  .  Apollo shall solely own all Apollo Inventions.  Tocagen shall solely own all Tocagen Inventions.     The Parties shall jointly own all Joint Inventions.  
(b) Joint Inventions .  Subject to the terms and conditions of this Agreement, and except to the extent that a Party has granted the other Party an exclusive license under such Party’s joint ownership interest in Joint Inventions and Joint Patents, each Party shall have the right to practice, and to grant licenses under, such Party’s own joint ownership interest in Joint

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 Inventions and Joint Patents without the other Party’s consent, and shall have no duty to account to the other Party for such practice or license, and each Party hereby waives any right it may have under the laws of any country to require such consent or accounting.  
 12.2 Prosecution .  
 (a) Tocagen Patents .  To the extent possible under Applicable Laws governing the prosecution and maintenance of Patents in the Territory, as promptly as reasonably practicable after the Effective Date, Tocagen shall use reasonable efforts to separate Product-Specific Claims contained in pending patent applications within the Tocagen Patents as of the Effective Date into Tocagen Product-Specific Patents by filing appropriate divisionals, continuations or otherwise, and the reasonable and documented costs and expenses incurred by Tocagen in connection therewith shall be shared equally by the Parties in accordance with Section 12.2(a)(ii).  In the event Tocagen determines, in good faith and upon advice of outside patent counsel, that it is not practicable or not consistent with Applicable Laws and patent office requirements to separate Product-Specific Claims contained in pending patent applications within the Tocagen Patents as of the Effective Date into Tocagen Product-Specific Patents, or that separating such Product-Specific Claims is against the parties’ mutual interest in establishing strong patent protection for Product in the Territory, Tocagen shall promptly inform Apollo thereof, and the parties and their respective patent counsel shall promptly confer and attempt in good faith to agree on a course of action, provided that Tocagen shall have final decision-making authority to determine the course of action.  In addition, with respect to any patent application proposed to be filed by Tocagen in the Territory after the Effective Date that would contain any Product-Specific Claim to any invention made solely by Tocagen (including any Tocagen Invention) after the Effective Date, Tocagen shall […***…].  In the event Tocagen determines, […***…], Tocagen shall promptly inform Apollo thereof, and the parties and their respective patent counsel shall promptly confer and attempt in good faith to agree on a course of action, provided that Tocagen shall have final decision-making authority to determine the course of action.  
(i) Tocagen Patents Other Than Tocagen Product-Specific Patents .  Tocagen shall have the sole right, but not the obligation, to Prosecute the Tocagen Patents other than the Tocagen Product-Specific Patents in any jurisdiction in the world (including the Territory), at its sole cost and expense and using counsel of its own choice.
 (ii) Tocagen Product-Specific Patents .  Tocagen shall have the first right, but not the obligation, to Prosecute the Tocagen Product-Specific Patents in the Territory, using counsel reasonably acceptable to Apollo.  Tocagen’s reasonable out-of-pocket costs and expenses for Prosecution of the Tocagen Product-Specific Patents in the Territory incurred from

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and after the Effective Date shall be [ …***…]  .  Tocagen shall consult with Apollo as to the Prosecution of Tocagen Product-Specific Patents reasonably prior to any deadline or action with any patent office in the Territory, shall furnish to Apollo copies of all relevant drafts and documents reasonably in advance of such consultation, and shall consider in good faith all reasonable requests or suggestions of Apollo with respect to such drafts or with respect to strategies for Prosecuting any such Tocagen Product-Specific Patent s (provided that any decision with respect to the Prosecution of Tocagen Product-Specific Patents shall be made by Tocagen, in its reasonable discretion).   Tocagen shall keep Apollo reasonably informed of progress with regard to the Prosecution of Tocagen Product-Specific Patents and shall provide to Apollo copies of all material patent office submissions within a reasonable amount of time (but not more than thirty (30) days) following submission thereof by Tocagen.   In the event that Tocagen seeks to abandon or cease the Prosecution of any Tocagen Product-Specific Patent in the Territory, Tocagen shall provide reasonable prior written notice to Apollo of such intention to abandon or cease such Prosecution (which notice shall be given no later than thirty (30) days prior to the next deadline for any action that must be taken with respect to any such Tocagen Patent in the relevant patent office in the Territory).  In such case, at Apollo’s request, Tocagen shall consider in good faith permitting Apollo to assume responsibility for Prosecution of such Tocagen Product-Specific Patent.  
 (b) Joint Patents .  Tocagen shall have the first right, but not the obligation, to control and manage the Prosecution of all Joint Patents throughout the world, at its sole cost and expense and by counsel of its own choice.  Tocagen shall consult with Apollo as to the Prosecution of Joint Patents reasonably prior to any deadline or action with any patent office, shall furnish to Apollo copies of all relevant drafts and documents reasonably in advance of such consultation, and shall consider in good faith all reasonable requests or suggestions of Apollo with respect to such drafts or with respect to strategies for Prosecuting any such Joint Patents.  The Parties shall attempt in good faith to reach mutual agreement as to all matters concerning strategies for Prosecuting Joint Patents.  Tocagen shall keep Apollo reasonably informed of progress with regard to the Prosecution of Joint Patents, shall provide to Apollo copies of all material patent office submissions within a reasonable amount of time (but not more than thirty (30) days) following submission thereof by Tocagen.  In the event that Tocagen desires to abandon or cease the Prosecution of any Joint Patent in any country, Tocagen shall provide reasonable prior written notice to Apollo of such intention to abandon (which notice shall, to the extent possible, be given no later than thirty (30) days prior to the next deadline for any action that must be taken with respect to any such Joint Patent in the relevant patent office).  In such case, at Apollo’s sole discretion, upon written notice to Tocagen from Apollo, Apollo may elect to continue the Prosecution of any such Joint Patent, at its sole cost and expense and by counsel of its own choice.
 (c) Cooperation .  Each Party shall cooperate with the other Party in connection with all activities relating to the Prosecution of the Tocagen Patents and Joint Patents
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undertaken by such other Party pursuant to this Section  12.2 , including: (i) executing all papers and instruments, or requiring its employees or contractors, to execute such papers and instruments, so as to effectuate the ownership of Inventions set forth in Section  12.1 , and Patents claiming such Inventions, and to enable the other Party to Prosecute Tocagen Patents or Joint Patents as permitted by Section  12.2(a) or Section  12.2(b) , respectively; and (ii) promptly informing the other Party of any matters coming to such Party’s attention that may affect the Prosecution of any Tocagen Product-Specific Patent or Joint Patent.  Each Party shall also promptly provide to the other Party all information reasonably requested by such other Party with regard to such Party’s activities pursuant to this Section  12.2 .  
 12.3 Defense of Third Party Infringement Claims .  If Product or a Party becomes the subject of a Third Party’s claim or assertion of infringement of the Patents of a Third Party relating to the manufacture, use, sale, offer for sale or importation of Product in the Field in the Territory (each, a “ Third Party Infringement Claim ”), the Party first having notice of the Third Party Infringement Claim shall promptly notify the other Party in writing.  Tocagen shall have the sole right to control the defense of any Third Party Infringement Claim involving alleged infringement of Third Party rights by Tocagen’s activities at its own expense and by counsel of its own choice, and Apollo shall have the right, at its own expense, to be represented in any such action by counsel of its own choice.  Apollo shall have the sole right to control the defense of any Third Party Infringement Claim involving alleged infringement of Third Party rights by Apollo’s activities at its own expense and by counsel of its own choice, and Tocagen shall have the right, at its own expense, to be represented in any such action by counsel of its own choice.  Neither Party shall enter into any settlement of any Third Party Infringement Claim: (i)  in a manner that would diminish the rights or interests of the other Party without the written consent of such other Party, which shall not be unreasonably withheld; or (ii)     that would impose any cost or liability on the other Party, or admit the invalidity or unenforceability of any Patent Controlled by the other Party, without such other Party’s prior written consent, which may be withheld in such other Party’s sole discretion. Enforcement . Notice .  Each Party shall promptly notify the other Party in writing of any alleged or threatened infringement of any Tocagen Patent or Joint Patent of which it becomes aware or of any action or threatened action seeking a declaratory judgment of non‑infringement of a Tocagen Patent or Joint Patent of which it becomes aware.
 (b) Tocagen Patents .
(i) Tocagen Patents Other Than Tocagen Product-Specific Patents .  Tocagen shall have the sole right, but not the obligation, to bring and control any action or proceeding with respect to infringement anywhere in the world of any Tocagen Patent other than a Tocagen Product-Specific Patent, at its own expense and by counsel of its own choice.  With respect to any action or proceeding with respect to Competitive Infringement in the Field in the Territory of any Tocagen Patent other than a Tocagen Product-Specific Patent, Tocagen shall keep Apollo reasonably informed of the progress of any such action or proceeding, but Apollo shall not have the right to be represented, or otherwise participate, in such action or proceeding without the prior written consent of Tocagen, which Tocagen may withhold in its sole discretion.
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(ii) Tocagen Product-Specific Patents  .  Apollo shall have the first right, but not the obligation, to bring and control any action or proceeding with respect to Competitive Infringement in the Field in the Territory of any Tocagen Product-Specific Patent, at its own expense and by counsel of its own choice. and Tocagen shall have the right, at its own expense, to be represented in any such action or proceeding by counsel of its own choice.  If Apollo fails to bring any such action or proceeding within (i)  [ …***…] ( […***…] ) days following a written request by Tocagen to do so, or (ii)  […***…] ( […***…]  ) days before the time limit, if any, set forth in the appropriate laws and regulations for the filing of such actions, whichever comes first, then Tocagen  shall have the right to bring and control any such action, at its own expense and by counsel of its own choice, and Apollo shall have the right, at its own expense, to be represented in any such action by counsel of its own choice.  Tocagen shall have the sole right, but not the obligation, to bring and control any action or proceeding with respect to infringement of any Tocagen Product-Specific Patent, other than Competitive Infringement in the Field in the Territory, at its own expense and by counsel of its own choice; provided that Tocagen shall keep Apollo reasonably informed of the progress of any such action or proceeding in the Field in the Territory .
 (c) Joint Patents  .  Apollo shall have the first right, but not the obligation, to bring and control any action or proceeding to enforce any Joint Patent with respect to Competitive Infringement in the Field in the Territory, at its own expense and by counsel of its own choice, and Tocagen shall have the right, at its own expense, to be represented in any such action by counsel of its own choice.  Tocagen shall have the first right, but not the obligation, to bring and control any action or proceeding to enforce any Joint Patent with respect to (1) Competitive Infringement outside the Field in the Territory, or (2) Competitive Infringement outside of the Territory, in each case, at its own expense and by counsel of its own choice, and Apollo shall have the right, at its own expense, to be represented in any such action by counsel of its own choice.  If the Party having the first right to bring and control any action or proceeding to enforce any Joint Patent under this Section 12.4(c) (the “ First Party ”) fails to bring and control any such action or proceeding within (i) […***…] ([…***…]) days following a written request by the other Party to do so, or (ii) […***…] ([…***…]  ) days before the time limit, if any, set forth in the appropriate laws and regulations for the filing of such actions, whichever comes first, then the other Party shall have the right to bring and control any such action, at its own expense and by counsel of its own choice, and the First Party shall have the right, at its own expense, to be represented in any such action by counsel of its own choice.  In the case of infringement of a Joint Patent, other than Competitive Infringement, the Parties shall mutually agree in good faith on a case-by-case basis whether to jointly bring and control any action or proceeding to enforce such Joint Patent, or whether one Party will bring and control any action or proceeding to enforce such Joint Patent, and, in each case, how the costs and expenses of such action or proceeding, and any recovery from such action or proceeding, will be allocated between the Parties.  
 (d) Cooperation .  In the event a Party brings an infringement action in accordance with this Section 12.4 (such Party, the “ Enforcing Party ”) , the other Party shall
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cooperate fully, at the Enforcing Party’s request and expense, including, if required to bring such action, the furnishing of a power of attorney or being named as a party.  The Enforcing Party shall not enter into any settlement or compromise of any action under this Section  12.4 : (i)  in a manner that would diminish the rights or interests of the other Party without the written consent of such other Party, which shall not be unreasonably withheld, conditioned or delayed; (ii)  that would impose any cost or liability on the other Party without the written consent of such other Party; or (iii) that would admit the invalidity or unenforceability of any Patent Controlled by the other Party, without such other Party’s prior written consent, which may be withheld in such other Party’s sole discretion.
 (e) Recoveries   .  Except as otherwise agreed by the Parties in connection with a cost-sharing arrangement, any recovery as a result of any action or proceeding pursuant to Section 12.4(b)(i), 12.4(b)(ii) or 12.4(c), whether by way of settlement or otherwise, shall first be used first to reimburse […***…]; provided, however, that:
 (i)  any Remainder of a recovery realized by Tocagen  as a result of any action brought and controlled by Tocagen pursuant to Section 12.4(b)(i) that is specifically attributable to Competitive Infringement in the Field in the Territory of any Tocagen Patent, other than a Tocagen Product-Specific Patent, […***…];
(ii) any Remainder of a recovery realized by Apollo as a result of any action brought and controlled by Apollo pursuant to Section  12.4(b)(ii) that is specifically attributable to Competitive Infringement in the Field in the Territory of a Tocagen Product-Specific Patent […***…];
(iii) any Remainder of a recovery realized by Apollo as a result of any action brought and controlled by Apollo pursuant to Section  12.4(c) that is specifically attributable to Competitive Infringement in the Field in the Territory of any Joint Patent shall be […***…]; and
(iv) any Remainder of a recovery realized as a result of any action brought and controlled pursuant to Section  12.4(c) that is not specifically attributable to Competitive Infringement in the Field in the Territory of any Joint Patent shall be allocated as mutually agreed by the Parties.
 12.5  Patent Marking  .  Apollo shall mark (or cause to be marked) Product marketed and sold hereunder with appropriate Tocagen Patent numbers or indicia to the extent required by Applicable Law.

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ARTICLE 13 
 REPRESENTATIONS, WARRANTIES AND COVENANTS
 13.1 Mutual Representations and Warranties .  Each Party represents and warrants to the other Party, and ApolloBio represents and warrants to Tocagen, that, as of the Execution Date:
(a) it is duly organized and validly existing under Applicable Law of the jurisdiction of its incorporation or formation, and has full corporate or other power and authority to enter into this Agreement and to carry out the provisions hereof;
(b) it is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder, and the person executing this Agreement on its behalf has been duly authorized to do so by all requisite corporate or partnership action, including any required approval of this Agreement, and the execution, delivery and performance of this Agreement, by such Party’s board of directors (or equivalent governing body) and shareholders (or other holders of equity interests in such Party) .  Without limiting the generality of the foregoing, ApolloBio represents and warrants to Tocagen that ApolloBio has obtained all required approvals of Apollo’s shareholders with respect to payment in full of the Upfront Payment in accordance with Sections 2.2, 9.1, 10.1 and 10.4;
(c) this Agreement is legally binding upon it and enforceable in accordance with its terms and the execution, delivery and performance of this Agreement by it does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any Applicable Law;
(d) it is not aware of any action, suit or inquiry or investigation instituted by any Person which questions or threatens the validity of this Agreement; and
(e) neither such Party nor any of its Affiliates is debarred under Applicable Law in the United States, including 21 U.S.C. §335a, or comparable Applicable Law outside of the United States.
 13.2 Representations and Warranties of Apollo .  Apollo represents and warrants to Tocagen that, as of the Execution Date, Apollo has not granted to any of its Affiliates or to any Third Party any license or other right that would conflict with the licenses and rights granted to Tocagen hereunder.
 13.3 Representations and Warranties of Tocagen .  Tocagen represents and warrants to Apollo that, as of the Execution Date:
 (a) Exhibit 1.92 attached hereto contains a true and complete list of the existing Tocagen Patents in the Territory as of the Execution Date (the “ Existing Patents ”),
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provided that the term “Existing Patents” specifically excludes any Patent that is licensed to Tocagen by Siemens under the Siemens Agreement;
(b) Tocagen is the sole owner of the Existing Patents;
(c) it has not granted to any of its Affiliates or to any Third Party any license or other right that would conflict with the licenses and rights granted to Apollo hereunder;
 (d)  to Tocagen’s knowledge,  the claims of the issued patents within the Existing Patents  are  valid  and enforceable, and Tocagen has not received any written notice of any threatened claims or litigation seeking to invalidate or otherwise challenge the enforceability or validity of the claims of the issued patents within the Existing Patents; 
(e) Tocagen has not received written notice from any Third Party claiming that the manufacture, use, sale, offer for sale or import of Product or Product Component infringes or would infringe the patent or other intellectual property rights of any Third Party;
(f) Tocagen is […***…];
 (g) Tocagen is not a party to any legal action, suit or proceeding relating to Tocagen Technology, Product or Product Component;
(h) the Existing Patents represent all Patents in the Territory Controlled by Tocagen as of the Execution Date that are necessary for the manufacture, use, sale, offer for sale or import of Product or Product Component in the Field in the Territory, provided that the foregoing representation and warranty is limited to Product and Product Components in the forms and formulations manufactured and used by Tocagen as of the Execution Date;
(i) there are no claims, judgments, or settlements in effect against, or amounts with respect thereto owed by, Tocagen relating to the Existing Patents or the Tocagen Know-How existing as of the Execution Date, and Tocagen is not a party to any legal action, suit or proceeding relating to the Existing Patents, the Tocagen Know-How existing as of the Execution Date, Product or Product Component;
(j) to Tocagen’s knowledge, no person is infringing the issued patents within the Existing Patents, or misappropriating the Tocagen Know-How existing as of the Execution Date;

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(k) a true, correct and complete (except for redactions of financial terms) copy of the Siemens Agreement has been made available to Apollo;
(l) the Siemens Agreement is in full force and effect , and it has not received written notice of any actual or alleged breach of, or default under, the Siemens Agreement, or any intent to terminate the Siemens Agreement;
(m) all tangible or recorded information and Data provided by or on behalf of Tocagen to Apollo related to Product on or before the Execution Date in contemplation of this Agreement […***…]; and
(n) the development and manufacture of Product prior to the Execution Date have been conducted by Tocagen and, to its actual knowledge, its Third Party contractors, in compliance in all material respects with Applicable Law, including (to the extent applicable) cGMP.
For clarity, and notwithstanding the foregoing or any other provision of this Agreement to the contrary, Tocagen makes no representations or warranties with respect to any Siemens Licensed IP (as such term is defined in the Siemens Agreement), and, without limiting the generality of Section 13.7, Tocagen hereby disclaims any and all representations and warranties of any kind, express or implied, with respect to any Siemens Licensed IP, including, but not limited to, warranties of design, merchantability, fitness for a particular purpose, non-infringement of the intellectual property rights of Third Parties, or arising from a course of dealing, usage or trade practices .
 13.4 Covenants .  
(a) Mutual Covenants .  Each Party hereby covenants to the other that:
(i) it shall (1) not knowingly use in any capacity, in connection with the performance of its obligations under this Agreement, any individual or entity who or that has been debarred or suspended under 21 U.S.C. §335(a) or §335(b) or any foreign equivalent thereof, or who is the subject of a conviction described in such section or any foreign equivalent thereof, and (2) inform the other Party in writing immediately upon becoming aware if it or any individual or entity who or that is performing activities hereunder on its behalf is debarred, suspended or is the subject of a conviction described in 21 U.S.C. §335(a) or §335(b) or any foreign equivalent thereof, or if any action, suit, claim, investigation, or legal or administrative proceeding is pending or, to its actual knowledge, is threatened, relating to such debarment or conviction;

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(ii) it shall not grant during the Term any right to any of its Affiliates or any Third Party which would conflict with the rights granted by it to the other Party hereunder;
(iii) neither such Party nor any of its Affiliates will, in connection with the exercise of such Party’s rights or performance of its obligations under this Agreement, directly or indirectly through Affiliates or Third Parties, pay, promise or offer to pay, or authorize the payment of, any money or give any promise or offer to give, or authorize the giving of anything of value to a public official or entity or other Person for purpose of obtaining or retaining business for or with, or directing business to, any Person, including such Party and its Affiliates, nor will such Party or any of its Affiliates directly or indirectly promise, offer or provide any corrupt payment, gratuity, emolument, bribe, kickback, illicit gift or hospitality or other illegal or unethical benefit to a public official or entity or any other Person in connection with the exercise of such Party’s rights or performance of such Party’s obligations under this Agreement;
(iv) neither such Party nor any of its Affiliates (or any of their respective employees and contractors), in connection with the exercise of such Party’s rights or performance of such Party’s obligations under this Agreement, shall cause the other Party to be in violation of Anti-Corruption Laws or Export Control Laws; and
(v) such Party shall immediately notify the other Party if such Party has any information or suspicion that there may be a violation of Anti-Corruption Laws or Export Control Laws in connection with the exercise of such Party’s rights or performance of such Party’s obligations under this Agreement.
(b) Tocagen Covenants .  Tocagen covenants to Apollo that Tocagen shall (i) comply with all terms and conditions of the Siemens Agreement relating to Tocagen’s rights to Siemens Licensed IP (as such term is defined in the Siemens Agreement), (ii) not voluntarily terminate any of Tocagen’s licenses or rights to Siemens Licensed IP; (iii) […***…], or (iv) […***…], except in each case (i)-(iv) […***…].  Notwithstanding the foregoing, if […***…].  
 13.5 Performance by Affiliates, Sublicensees and Third Party Contractors .  The Parties recognize that each Party may perform some or all of its obligations or exercise some or all of its

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rights under this Agreement through one or more Affiliates, Third Party contractors (including CROs and CMOs), or, in the case of Apollo and subject to Section  3.2 , Sublicensees; provided, in each case, that (a) none of the other Party’s rights hereunder are diminished or otherwise adversely affected as a result of such delegation or contracting, and (b) each such Affiliate, Third Party contractor, and, in the case of Apollo, Sublicensee, undertakes in writing obligations of confidentiality and non-use regarding Confidential Information which are at least as stringent as those undertaken by the Parties pursuant to Article X I ; and provided, further, that each such Third Party contractor agrees in writing  to assign to the contracting Party any and all Inventions generated or made by such contractor in the course of performing the contracted activities (subject to reasonable and customary exceptions for improvements to such Third Party contractor’s pre ‑existing proprietary technology that it uses in performing such activities, or technology of broad applicability that such Third Party contractor uses for multiple clients or customers, provided, in each case, that such improvements do not use or incorporate Confidential Information of either Party) , so that the contracting Party can comply with its obligations under this Agreement .  Each Party shall at all times be fully responsible for the performance and payment of its Affiliates, Third Party contractors and, in the case of Apollo, Sublicensees.
 13.6 ApolloBio Guarantee .  ApolloBio hereby guarantees, and shall be liable for, the […***…] performance by Apollo (including any amounts payable hereunder) of Apollo’s obligations under Article IX of this Agreement (the “ Guaranteed Obligations ”).   ApolloBio shall execute such instruments and other documents, and shall take such other actions, as Tocagen may reasonably request to give full effect to its obligations under this Section 13.6, including, without limitation, registering ApolloBio’s obligations under this Section 13.6 with the State Administration of Foreign Exchange or other governmental authorities if required by the Applicable Law in the People’s Republic of China. In the event that the obligations of ApolloBio are unenforceable against ApolloBio due to violation of the applicable foreign exchange control or other laws or regulations of PR China, ApolloBio agrees to enter into an alternative arrangement with Tocagen such that the Guaranteed Obligations are fully satisfied, including, for example, through the assignment of the Guaranteed Obligations to an Affiliate of ApolloBio acceptable to Tocagen.
 13.7 DISCLAIMER .   Except as expressly set forth in this Agreement, THE TECHNOLOGY AND INTELLECTUAL PROPERTY RIGHTS PROVIDED BY TOCAGEN AND APOLLO HEREUNDER ARE PROVIDED “AS IS.”   EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NO PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTIES OF ANY KIND, AND EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES.
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ARTICLE 14 
 INDEMNIFICATION
 14.1 Indemnification of Tocagen .  Apollo shall indemnify, defend and hold harmless each of Tocagen, its Affiliates and their respective directors, officers and employees (the “ Tocagen Indemnitees ”), from and against any and all liabilities, damages, losses, penalties, fines, costs and expenses, including, reasonable attorneys’ fees and other expenses of litigation (collectively, “ Liabilities ”), to which any Tocagen Indemnitee may become subject as a result of any claims, actions, suits or proceedings brought by a Third Party (each, a “ Third Party Claim ”) arising from or relating to:  (a) the practice by Apollo or any of its Affiliates or Sublicensees of the License, (b) the research, development, manufacture, use, marketing, distribution, importation, handling, storage, sale or other disposition of Product by or on behalf of Apollo or any of its Affiliates or Sublicensees (other than by Tocagen or any of its Affiliates on behalf of Apollo), (c) the breach by Apollo of any provision of this Agreement (including any warranty, representation, covenant or agreement made by Apollo herein), or (d) the gross negligence or willful misconduct of any Apollo Indemnitee (defined below); except, in each case, to the extent such Losses result from  the gross negligence or willful misconduct of any Tocagen Indemnitee or the breach by Tocagen of any provision of this Agreement (including any warranty, representation, covenant or agreement made by Tocagen herein).
 14.2 Indemnification of Apollo .  Tocagen shall indemnify, defend and hold harmless each of Apollo, its Affiliates and Sublicensees and their respective directors, officers and employees (the “ Apollo Indemnitees ”) from and against any and all Liabilities to which any Apollo Indemnitee may become subject as a result of any Third Party Claim arising from or relating to: (a) the practice by Tocagen or any of its Affiliates or sublicensees of the license granted to Tocagen under Section 3.3  ; (b) the research, development, manufacture, use, marketing, distribution, importation, handling, storage, sale or other disposition of Product by or on behalf of Tocagen or any of its licensees or sublicensees (other than Apollo or any of its Affiliates or Sublicensees), (c) the breach by Tocagen of any provision of  this Agreement (including any warranty, representation, covenant or agreement made by Tocagen herein), or (d) the gross negligence or willful misconduct of any Tocagen Indemnitee; except, in each case, to the extent such Losses result from the gross negligence or willful misconduct of any Apollo Indemnitee or the breach by Apollo of any provision of this Agreement (including any warranty, representation, covenant or agreement made by Apollo herein).  
 14.3 Procedure .  A Party that intends to claim indemnification under this Article XIV (the “ Indemnitee ”) with respect to any Third Party Claim shall: (a) notify the other Party (the “ Indemnitor   ”) in writing of such Third Party Claim as soon as reasonably practicable after it receives notice of such Third Party Claim (it being understood that the Indemnitee’s failure to deliver written notice of such Third Party Claim to the Indemnitor within a reasonable time after the Indemnitee receives notice of such Third Party Claim, shall relieve the Indemnitor of its indemnification obligations under Section 14.1 or Section 14.2, as applicable, with respect to such Third Party Claim only to the extent such failure is prejudicial to the Indemnitor’s ability to
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defend such Third Party Claim); (b) permit the Indemnitor to assume direction and control of the defense of the Third Party Claim (including the right to settle the claim solely for monetary consideration) using counsel reasonably satisfactory to the Indemnitee; and (c) cooperate fully with the Indemnitor and its legal representatives in the investigation and defense of the Third Party Claim, as requested by the Indemnitor (at the expense of the Indemnitor).  If the Indemnitor does not assume control of such defense within fifteen (15) days after receiving notice of the Third Party Claim from the Indemnitee, the Indemnitee shall control such defense and, without limiting the Indemnitor’s indemnification obligations, the Indemnitor shall reimburse the Indemnitee for all documented costs, including reasonable attorney fees, incurred by the Indemnitee in defending itself within thirty (30) days after receipt of any invoice therefor from the Indemnitee.  The Party not controlling such defense may participate therein at its own expense.  The Party controlling such defense shall keep the other Party advised of the status of such Third Party Claim and the defense thereof and shall consider recommendations made by the other Party with respect thereto.  The Indemnitee shall not agree to any settlement of such Third Party Claim without the prior written consent of the Indemnitor, which shall not be unreasonably withheld, delayed or conditioned.  The Indemnitor shall not agree to any settlement of such Third Party Claim or consent to any judgment in respect thereof that does not include a complete and unconditional release of the Indemnitee from all liability with respect thereto, that imposes any liability or obligation on the Indemnitee or that acknowledges fault by the Indemnitee; in each case, without the prior written consent of the Indemnitee.  
 14.4 Insurance .   Each Party, at its own expense, shall obtain and maintain, during the Term and for […***…] ([…***…]  ) years thereafter, reasonable insurance, including commercial general liability insurance, worker’s compensation insurance and product liability insurance, at levels adequate to cover its obligations hereunder and consistent with industry standards.    Each Party shall furnish to the other Party on request certificates issued by the insurance company setting forth the amount of the liability insurance (or evidence of self-insurance).  It is understood that such insurance shall not be construed to create a limit of either Party’s liability with respect to its indemnification obligations under this Article XIV or otherwise.  
 14.5 Limitation of Liability .  NOTWITHSTANDING ANYTHING IN THIS AGREEMENT OR OTHERWISE, EXCEPT IN THE CASE OF BREACH OF ARTICLE XI ABOVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, NEITHER PARTY SHALL BE LIABLE TO THE OTHER WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT (WHETHER UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY) FOR ANY INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES; PROVIDED HOWEVER THAT NOTHING IN THIS SECTION 14.5 SHALL BE DEEMED TO LIMIT THE INDEMNIFICATION OBLIGATIONS OF EITHER PARTY UNDER THIS ARTICLE XIV WITH RESPECT TO THIRD PARTY CLAIMS.
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ARTICLE 15 
 TERM AND TERMINATION
 15.1 Term .  This Agreement shall commence on the Effective Date and, unless terminated earlier pursuant to Section 2.2 or this Article XV, shall continue in full force and effect until expiration of the last-to-expire Royalty Term for any and all Products (the “ Term ”).  
 15.2 Termination for Cause .
 (a) Material Breach .  
 (i) Each Party shall have the right to terminate this Agreement in the event of material breach of this Agreement by the other Party upon sixty (60) days’ (or, with respect to any payment breach, ten (10) days’) written notice to the other Party demanding cure of the breach.  Any such termination shall become effective at the end of such sixty (60) ‑day (or ten (10)‑day with respect to any payment breach) period unless the breaching Party has cured such breach prior to the end of such period; provided, however,  that any right to terminate this Agreement pursuant to this Section 15.2(a)(i) shall be stayed and the cure period tolled in the event that, during the applicable cure period, the Party alleged to have been in material breach shall have initiated dispute resolution in accordance with Article XVI with respect to the alleged breach, which stay and tolling shall continue until thirty (30) days after such dispute has been resolved in accordance with Article XVI.  
(ii) For clarity, in the event of material breach of this Agreement by Tocagen that is not cured within the applicable notice period set forth in Section  15.2(a)(i), Apollo, at its sole discretion, may either:
(A) terminate this Agreement in accordance with Section  15.2(a)(i) (in addition to pursuing any remedy that may be available to Apollo at law or in equity as a result of Tocagen’s breach of this Agreement); or
 (B) elect (1) not to terminate this Agreement, (2) to retain the License, subject to all terms and conditions hereof, and (3) pursue any remedy that may be available to Apollo at law or in equity as a result of Tocagen’s breach of this Agreement, without prejudice to Apollo’s right to terminate this Agreement at a later date pursuant to Section  15.2(a)(i) (for that uncured material breach or any other uncured material breach of this Agreement by Tocagen) or pursuant to Section 15.3.
 (b) Patent Challenge  .  Tocagen shall have the right to terminate this Agreement immediately upon written notice to Apollo if Apollo or any of its Affiliates or Sublicensees, directly or indirectly through any Third Party, commences any interference or opposition proceeding with respect to, challenges the validity or enforceability of, or opposes any extension of, or the grant of a supplementary protection certificate with respect to, any Tocagen Patent in the Territory (each, a “ Challenge ”).  For the avoidance of doubt, Challenge

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does not include Apollo or its Affiliates or Sublicensees (i) responding to compulsory discovery, subpoenas or other requests for information in a judicial or arbitration proceeding or (ii) complying with any Applicable Law or a court order .  
 15.3 Termination for Convenience .   Apollo may terminate this Agreement in its entirety at any time upon ninety (90) days’ prior written notice to Tocagen.  Within ten (10) days after delivery of written notice pursuant to this Section 15.3, the JDC shall convene to discuss transition planning, subject to Section 15.4(c)(iv)   .
 15.4 Effects of Expiration or Termination .
(a) Expiration .  Upon expiration (but not earlier termination) of this Agreement in accordance with Section 15.1: (i) the License shall automatically become non‑exclusive, fully‑paid, royalty‑free, irrevocable and perpetual; (ii) the license granted by Apollo to Tocagen pursuant to Section 3.3 shall automatically become worldwide both within and outside the Field, but shall be non‑exclusive in the Field in the Territory; and (iii) all other rights and obligations of the Parties under this Agreement shall terminate, except as provided elsewhere in this Section 15.3 or in Section 15.5.  
(b) Termination by Apollo Pursuant to Section 15.2(a)(i) .  Solely in the event of termination of this Agreement by Apollo pursuant to Section 15.2(a)(i): (i) the License shall automatically terminate and revert to Tocagen (it being understood that Apollo may, instead of terminating this Agreement in such circumstances, elect to retain its License and pursue its remedies against Tocagen for Tocagen’s breach of this Agreement as described in Section 15.2(a)(ii)(B)); (ii) the license granted by Apollo to Tocagen pursuant to Section 3.3 shall survive such termination; and (iii) all other rights and obligations of the Parties under this Agreement shall terminate, except as provided elsewhere in this Section 15.3 or in Section 15.5.
 (c) Termination by Tocagen Pursuant to Section 15.2(a) or 15.2(b) or by Apollo Pursuant to Section 15.3.  Solely in the event of termination of this Agreement by Tocagen pursuant to Section 15.2(a) or Section 15.2(b), or termination of this Agreement by Apollo pursuant to Section 15.3, the following provisions shall apply:  
(i) the License shall automatically terminate and revert to Tocagen;
(ii) the license granted by Apollo to Tocagen pursuant to Section 3.3 shall automatically become worldwide and exclusive both within and outside the Field;
 (iii)  as promptly as practicable (and in any event within forty-five (45) days) after such termination, Apollo shall: (A) to the extent not previously provided to Tocagen, deliver to Tocagen true, correct and complete copies of all Product Filings in the Field in the Territory (in each case, whether held in the name of Apollo, its Affiliate or a Sublicensee), and disclose to Tocagen all previously-undisclosed Apollo Know-How; (B) transfer or assign, or cause to be transferred or assigned, to Tocagen or its designee (or to the extent not so assignable,
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 take all reasonable actions to make available to Tocagen or its designee the benefits of all Product Filings in the Field in the Territory (in each case  , whether held in the name of Apollo, its Affiliate or a Sublicensee ) ; (C) assign to Tocagen or its designee all Apollo Product Marks; and (D) take such other actions and execute such other instruments, assignments and documents as may be necessary to effect, evidence, register and record the transfer, assignment or other conveyance of rights under this Section 15.4(c)(iii) to Tocagen ;
 (iv)  Apollo shall, as directed by Tocagen, either promptly wind-down any ongoing development activities with respect to Product in the Field in the Territory in an orderly fashion or promptly transition such development activities to Tocagen or its designee; in each case, with due regard for patient safety and in compliance with all Applicable Law and international guidelines.  In addition, Apollo shall, as directed by Tocagen, assign to Tocagen or its designee any or all clinical trial agreements with respect to Product  (or to the extent not so assignable, take reasonable actions to make available to Tocagen or its designee the benefits of such agreements);
(v) Apollo shall reasonably cooperate, at Tocagen’s request and expense, with Tocagen and its designee(s) to facilitate a smooth, orderly and prompt transition of any or all ongoing manufacturing and commercialization activities with respect to Product or Product Component to Tocagen or its designee(s);
(vi) Tocagen shall have the first right, but not the obligation, to Prosecute all Joint Patents throughout the world, at Tocagen’s sole expense and by counsel selected by Tocagen.  In the event that, after the effective date of such termination, Tocagen desires to abandon or cease Prosecution of any Joint Patent, Tocagen shall provide written notice to Apollo of such intention to abandon promptly after Tocagen makes such determination (which notice shall be given no later than thirty (30) days prior to the next deadline for any action that must be taken with respect to such Joint Patent in the relevant patent office).  In such case, Apollo shall have the right, in its discretion, exercisable upon written notice to Tocagen, to assume responsibility for Prosecution of such Joint Patent, at its sole cost and expense and by counsel of its own choice.  Apollo will cooperate with Tocagen and provide Tocagen with reasonable assistance with such Prosecution activities with respect to Joint Patents;
 (vii) Tocagen shall have the first right, but not the obligation, to bring and control any action or proceeding to enforce any Joint Patent with respect to Competitive Infringement anywhere in the world, at its own expense and by counsel of its own choice.  If Tocagen fails to bring and control any such action or proceeding within (A) one hundred twenty (120) days following a written request by Apollo to do so, or (B) thirty (30) days before the time limit, if any, set forth in the appropriate laws and regulations for the filing of such actions, whichever comes first, then Apollo shall have the right to bring and control any such action, at its own expense and by counsel of its own choice, and Tocagen shall have the right, at its own expense, to be represented in any such action by counsel of its own choice.  In the event a Party brings an infringement action in accordance with this paragraph, the other Party shall cooperate fully, including, if required to bring such action, the furnishing of a power of attorney or being
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named as a party.  The Party that brings such infringement action shall not enter into any settlement or compromise of any action under this paragraph: (1)  in a manner that would diminish the rights or interests of the other Party without the written consent of such other Party, which shall not be unreasonably withheld; or (2)  that would impose any cost or liability on the other Party, or admit the invalidity or unenforceability of any Patent Controlled by the other Party, without such other Party’s prior written consent, which may be withheld in such other Party’s sole discretion.  Except as otherwise agreed by the Parties in connection with a cost-sharing arrangement, any recovery as a result of any action or proceeding pursuant to paragraph, whether by way of settlement or otherwise, shall first be used first to reimburse Party that brought and controlled such action or proceeding for its documented, out-of-pocket costs and expenses (including court, attorneys’ and professional fees) incurred in connection with such action or proceeding, and then to reimburse the other Party for its documented, out-of-pocket costs and expenses (including court, attorneys’ and professional fees) incurred in connection with such action or proceeding (to the extent not previously reimbursed by the Enforcing Party), and any remainder of the recovery after reimbursement of the litigation costs and expenses of the Parties shall be retained by the Enforcing Party.  In the case of infringement of a Joint Patent, other than Competitive Infringement, the Parties shall mutually agree in good faith on a case-by-case basis whether to jointly bring and control any action or proceeding to enforce such Joint Patent, or whether one Party will bring and control any action or proceeding to enforce such Joint Patent, and, in each case, how the costs and expenses of such action or proceeding, and any recovery from such action or proceeding, will be allocated between the Parties;   
(viii) Apollo shall, and hereby does, effective on such termination, assign to Tocagen all of Apollo’s and its Affiliates’ right, title and interest in and to all Product Trademarks and any Chinese Character Trademark, including, in each case, all goodwill therein, and Apollo shall promptly take such actions and execute such instruments, assignments and documents as may be necessary to effect, evidence, register and record such assignment;
(ix) Tocagen shall have the right, but not the obligation, to purchase from Apollo any or all usable inventory of Product or Product Component in Apollo’s or its Affiliates’ possession as of the date of termination at a supply price equal to Apollo’s cost of such inventory.  Any packaging, transport, insurance and other costs relating to delivery shall be at Tocagen’s expense; and
(x) if Apollo was, prior to termination, manufacturing, or having manufactured on its behalf, any quantities of Product or Product Component, then at Tocagen’s request, until the earlier of (A) such time as Tocagen has secured another source thereof that is able to meet Tocagen’s quality and quantity requirements, and (B) twelve (12) months after such termination, Apollo shall use commercially reasonable efforts to supply, or cause to be supplied, to Tocagen such quantities thereof as Tocagen may reasonably require for the development and commercialization of Products in the Field; provided that Tocagen shall use commercially reasonable efforts to secure another source of supply as soon as reasonably practicable.  Such material shall be provided at a transfer price equal to Apollo’s cost of such materials.
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15.5 Accrued Obligations; Survival .  Neither expiration nor any termination of this Agreement shall relieve either Party of any obligation or liability accruing prior to such expiration or termination, nor shall expiration or any termination of this Agreement preclude either Party from pursuing all rights and remedies it may have under this Agreement, at law or in equity, with respect to breach of this Agreement.  In addition, the Parties’ rights and obligations under Sections  2.1, 3.5, 10.2, 10.3, 10.4(a), 10.5, 11.1, 11.2, 11.3, 11.4, 12.1, 13.7, 15.4 and 15.5 and Articles  XIV, XVI and XVII of this Agreement shall survive expiration or any termination of this Agreement.
 ARTICLE 16 
 DISPUTE RESOLUTION
 16.1 Disputes .   Subject to Section 16.4, upon the written request of either Party to the other Party, any claim, dispute, or controversy as to the breach, interpretation, enforcement, termination or validity of this Agreement (“ Dispute ”) will first be referred to the Alliance Managers of Apollo and Tocagen for attempted resolution.  If the Alliance Managers cannot resolve the Dispute within ten (10) days of the request to do so, the Dispute shall be referred to the Senior Executive of Tocagen and the Senior Executive of Apollo for attempted resolution.  In the event the two individuals referred to in the preceding sentence are unable to resolve such Dispute within thirty (30) days after such Dispute is referred to them, then, upon the written demand of either Party, the Dispute shall be subject to arbitration in accordance with Section 16.2, except as expressly set forth in Section 16.4.
 16.2 Arbitration .   Subject to Section 16.4 below, any Dispute that is not resolved pursuant to Section 16.1 shall be resolved by final and binding arbitration by the International Chamber of Commerce (“ ICC ”) in Los Angeles, California, United States, in accordance with the ICC Rules of Arbitration, as modified by this Section 16.2 (the “ Rules ”), by a single arbitrator appointed in accordance with such Rules ; provided that: (i) such arbitrator shall not be current or former employee or director, or current stockholder, of either Party, any of their respective Affiliates or any Sublicensee; (ii) the arbitrator shall have experience and familiarity with commercial licensing practices in the pharmaceutical and biotechnology industries; and (iii) to the extent permitted by the Rules, each Party shall have the right to reject up to three proposed arbitrators selected by the ICC    All proceedings and communications shall be in the English language. The arbitral tribunal shall permit discovery (including both the production of documents and deposition testimony) as reasonably necessary for an understanding of any legitimate issue raised in the arbitration, while also taking into account the desirability of making discovery efficient and cost-effective.    The arbitral tribunal shall, in rendering an award, apply the substantive law of the State of New York, USA, without giving effect to its principles of conflicts of law with the exception of sections 5-1401 and 5-1402 of New York General Obligations Law, and without giving effect to any of its rules or laws relating to arbitration.  The award shall include a written statement describing the essential findings and conclusions upon which the award is based, including the calculation of any damages awarded.  The arbitral tribunal’s authority to award special, incidental, consequential or punitive damages shall be
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subject to the limitation set forth in Section  14.5 , except to the extent the substantive laws of the State of New York, USA, do not permit such limitation.  The award rendered by the arbitral tribunal shall be final, binding and non-appealable, and judgment upon the award may be entered in any court of competent jurisdiction.   The costs of such arbitration shall be shared equally by the Parties, and each Party shall bear its own expenses in connection with the arbitration.   
 16.3 Confidentiality of Arbitration .  Except to the extent necessary to confirm or enforce an award or as may be required by applicable law, neither a Party nor the arbitral tribunal may disclose the existence, content, or results of an arbitration without the prior written consent of both Parties.
 16.4 Injunctive Relief; Court Actions .  Either Party may apply to the arbitrators for interim injunctive relief until the arbitration award is rendered or the controversy is otherwise resolved.  Either Party also may, without waiving any remedy under this Agreement, seek from any court having jurisdiction any injunctive or other equitable relief in the context of a bona fide emergency or prospective irreparable harm, and such an action may be filed and maintained notwithstanding any ongoing discussions between the Parties or any ongoing arbitration proceeding.  In addition, either Party may bring an action in any court of competent jurisdiction to resolve disputes pertaining to the validity, construction, scope, enforceability, infringement or other violations of Patents or other intellectual property rights, and no such claim shall be subject to arbitration pursuant to Section 16.2.  Further, no claim under any antitrust, anti-monopoly or competition law or regulation, whether or not statutory, shall be subject to arbitration pursuant to Section 16.2.
 ARTICLE 17 
 GENERAL PROVISIONS
17.1 Governing Law .  This Agreement and all questions regarding its validity or interpretation, or the breach or performance of this Agreement, shall be governed by, and construed and enforced in accordance with, the laws of […***…], without reference to conflict of law principles with the exception of […***…].  
 17.2 Assignment     .   Except as expressly provided hereunder, neither this Agreement nor any rights or obligations hereunder may be assigned or otherwise transferred by either Party without the prior written consent of the other Party (which consent shall not be unreasonably withheld); provided, however, that (a) either Party may assign this Agreement and its rights and obligations hereunder without the other Party’s consent […***…]

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[ …***…] ; and (b) either Party may assign this Agreement and its rights and obligations hereunder to [..***…] .   Any assignment of this Agreement in contravention of this Section  17.2 shall be null and void.   The rights and obligations of the Parties under this Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the Parties, and the name of a Party appearing herein shall be deemed to include the name of such Party’s successors and permitted assigns to the extent necessary to carry out the intent of this section.  
17.3 Consequences of Bankruptcy .  The Parties acknowledge and agree that all rights and licenses now or hereafter granted under or pursuant to any Section of this Agreement are rights to “intellectual property” as defined in Section 101(35A) of Title 11 of the United States Code or any analogous provisions in any other country or jurisdiction.  Each Party may elect to retain and may fully exercise all of its rights and elections under Section 365(n) of Title 11 of the United States Code or any analogous provisions in any other country or jurisdiction.
17.4 Notices .  Unless otherwise agreed by the Parties or specified in this Agreement, all communications between the Parties relating to, and all written documentation to be prepared and provided under this Agreement shall be in the English language.  Any notice required or permitted under this Agreement shall be in writing in the English language: (a) delivered personally; (b) sent by registered or certified mail (return receipt requested and postage prepaid); (c) sent by express courier service providing evidence of receipt, postage pre-paid where applicable; or (d) sent by facsimile or e-mail (receipt verified and a copy promptly sent by another permissible method of providing notice described in paragraphs (a), (b) or (c) above), to the following addresses of the Parties or such other address for a Party as may be specified by like notice:

To Apollo:
Beijing Apollo Venus Biomedical Technology Limited
Seasons House Jun Wang Fu, No.19 Chaoyang Park Rd(S), Dis. Chaoyang
Beijing, 100025, PR China
Attention: Yang Weiping, Ph.D.
Telephone: +86-10-65202002
Email: yangweiping@apollobio.com	To Tocagen:
Tocagen Inc.
3030 Bunker Hill St., Suite 230
San Diego, CA  92109
USA
Attention: Chief Financial Officer
Telephone: +1 (858) 412-8400
Facsimile: +1 (858) 412-8499
Email: mfoletta@tocagen.com	
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To ApolloBio : 
ApolloBio Corp.
Seasons House Jun Wang Fu, No.19 Chaoyang Park Rd(S), Dis. Chaoyang
Beijing, 100025, PR China
Attention: Yang Weiping, Ph.D.
Telephone: + 86-10-65202002
Email: yangweiping@apollobio.com	 	
Any notice required or permitted to be given concerning this Agreement shall be effective upon receipt by the Party to whom it is addressed or within seven (7) days of dispatch whichever is earlier.
 17.5 Waiver  .  The failure of either Party to exercise any right arising out of this Agreement or to insist upon compliance with any term or condition of this Agreement shall not constitute a waiver of that right or excuse a similar subsequent failure to perform any such term or condition.  No waiver by either Party of any condition or term in any one or more instances shall be construed as a continuing waiver of such condition or term or of another condition or term.  Any waiver by a Party of a particular provision or right hereunder shall be in writing, shall be as to a particular matter and, if applicable, for a particular period of time, and shall be signed by an authorized representative of such Party.  
 17.6 Severability   .  If any provision hereof should be held invalid, illegal or unenforceable in any jurisdiction, the Parties shall negotiate in good faith a valid, legal and enforceable substitute provision that most nearly reflects the original intent of the Parties and all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the Parties as nearly as may be possible.  Such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction.
 17.7 Entire Agreement/Modification .  This Agreement, including its Exhibits (which are incorporated herein by this reference), is both a final expression of the agreement between the Parties and between Tocagen and ApolloBio, concerning any and all matters contained herein, and a complete and exclusive statement with respect to all of its terms.  This Agreement supersedes all prior and contemporaneous agreements and communications, whether oral, written or otherwise, concerning any and all matters contained herein, including the Prior CDA and Term Sheet which are hereby terminated, subject to Section 11.7  .  No alteration, amendment, change or addition to this Agreement shall be binding upon the Parties unless reduced to writing and signed by the respective authorized officers of the Parties.
 17.8 Relationship of the Parties .  The Parties agree that the relationship of Tocagen and Apollo established by this Agreement is that of independent contractors.  Furthermore, the Parties agree that this Agreement does not, is not intended to, and shall not be construed to,
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 establish an employment, agency or any other relationship.  Except as may be specifically provided herein, neither Party shall have any right, power or authority, nor shall they represent themselves as having any authority to assume, create or incur any expense, liability or obligation, express or implied, on behalf of the other Party, or otherwise act as an agent for the other Party for any purpose.
 17.9 Force Majeure  .  Except with respect to payment of money, neither Party shall be liable to the other for failure or delay in the performance of any of its obligations under this Agreement for the time and to the extent such failure or delay is caused by earthquake, riot, civil commotion, war, terrorist acts, strike, flood, or governmental acts or restriction, or other cause that is beyond the reasonable control of the respective Party.  The Party affected by such force majeure will provide the other Party with full particulars thereof as soon as it becomes aware of the same (including its best estimate of the likely extent and duration of the interference with its activities), and will use Commercially Reasonable Efforts to overcome the difficulties created thereby and to resume performance of its obligations as soon as practicable.
 17.10 Counterparts .  This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together, shall constitute one and the same instrument.  Each Party may execute this Agreement in Adobe™ Portable Document Format (PDF) sent by electronic mail.  PDF signatures of authorized signatories of the Parties will be deemed to be original signatures, will be valid and binding upon the Parties, and, upon delivery, will constitute due execution of this Agreement.
[ Intentionally left blank; signature page follows ]
 
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IN WITNESS WHEREOF, the Parties have caused their duly authorized representatives to execute this Agreement as of the Execution Date.
 
TOCAGEN INC.
 
BY:   /s/ Marty Duvall                                    
NAME:  Marty Duvall
TITLE:  Chief Executive Officer
 
BEIJING APOLLO VENUS BIOMEDICAL TECHNOLOGY LIMITED
(北京阿波罗金星生物医药科技有限公司)

BY:   /s/ Yang Weiping, Ph.D.                        
NAME: Yang Weiping, Ph.D.  
TITLE: Chief Executive Officer
 
APOLLOBIO CORP.
(SOLELY FOR PURPOSES OF SECTION 13.1 AND SECTION  13.6 )

BY:   /s/ Yang Weiping, Ph.D.                        
NAME: Yang Weiping, Ph.D.
TITLE: Chief Executive Officer

 

 
EXHIBIT 1.92
TOCAGEN PATENTS

Title	Country	Application/
Patent No.	Status	
[…***…]	[…***…]	[…***…]	[…***…]	
[…***…]	[…***…]	[…***…]	[…***…]	
[…***…]	[…***…]	[…***…]	[…***…]	
[…***…]	[…***…]	[…***…]	[…***…]	

 

 
EXHIBIT 1.93
TOCAGEN PRODUCT-SPECIFIC PATENTS
 
(a)
[…***…]
 
(b)
Title	Country	Application/
Patent No.	Status	
[…***…]	[…***…]	[…***…]	[…***…]	

 
 
EXHIBIT 5.2(a)(i)
DEVELOPMENT PLAN OUTLINE
 
[…***…]

 
 
EXHIBIT 5.8(a)
Plan for Incorporation of Apollo Safety Data into Global Safety Database

 	1.	[…***…]	

 
 
EXHIBIT 11.6
JOINT PRESS RELEASE
 
Attached.

 
Exhibit 10.2
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (as the same may from time to time be amended, modified, supplemented or restated, this “ Agreement ”) dated as of May 18, 2018 (the “ Effective Date ”) among OXFORD FINANCE LLC, a Delaware limited liability company with an office located at 133 North Fairfax Street, Alexandria, Virginia 22314 (“ Oxford ”), as collateral agent (in such capacity, “ Collateral Agent ”), the Lenders listed on Schedule 1.1 hereof or otherwise a party hereto from time to time including Oxford in its capacity as a Lender and SILICON VALLEY BANK, a California corporation with an office located at 3003 Tasman Drive, Santa Clara, CA 95054 (“ Bank ” or “ SVB ”) (each a “ Lender ” and collectively, the “ Lenders ”), and TOCAGEN INC., a Delaware corporation with offices located at 3030 Bunker Hill Street, Suite 230, San Diego, CA 92109 (“ Borrower ”), amends and restates in its entirety that certain Loan and Security Agreement dates as of October 30, 2015 by and among Collateral Agent, Oxford, in its capacity as a Lender, SVB and other lenders party thereto from time to time and Borrower (as amended, restated, supplemented or otherwise modified from time to time, the “ Original Agreement ”) and provides the terms on which the Lenders shall lend to Borrower and Borrower shall repay the Lenders. The parties agree as follows:
1. ACCOUNTING AND OTHER TERMS
1.1 Accounting terms not defined in this Agreement shall be construed in accordance with GAAP.  Calculations and determinations must be made in accordance with GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein. All references to “ Dollars ” or “ $ ” are United States Dollars, unless otherwise noted.
2. LOANS AND TERMS OF PAYMENT
2.1 Promise to Pay. Borrower hereby unconditionally promises to pay each Lender, the outstanding principal amount of all Term Loans advanced to Borrower by such Lender and accrued and unpaid interest thereon and any other amounts due hereunder as and when due in accordance with this Agreement.
2.2 Term Loans .
(a) Availability .
(i) Subject to the terms and conditions of the Original Agreement, Lenders, severally and not jointly, loaned to Borrower term loans according to each Original Lender’s Term Loan Commitment (as defined in the Original Agreement) (such term loans referred to each individually as an “ Original Agreement Term Loan ” and collectively as “ Original Agreement Term Loans ”), of which the aggregate amount of Seven Million Two Hundred Dollars ($7,200,000.00) remains outstanding as of the Effective Date. The Original Agreement Term Loans shall, from and after the Effective Date, be governed by the terms and provisions of this Agreement. After repayment, no Original Agreement Term Loan may be re-borrowed.
(ii) Subject to the terms and conditions of this Agreement, Lenders agree, severally and not jointly, to lend to Borrower on the Effective Date, or as soon thereafter as practical, term loans as follows:

 
(A) SVB shall make a term loan to Borrower in the am ount of Thirteen Million Two Hundred Twenty-Five Thousand Dollars ($ 1 3 , 225 ,000.00) (the “ SVB Term Loan ”), the proceeds of which will partially be used to repay all Obligations owing from Borrower to SVB in respect of the Original Agreement Term Loans made by SVB under the Original Agreement in an amount equal to the unpaid principal balance of such Original Agreement Term Lo ans which remains outstanding as of the Effective Date .  Upon receipt by SVB of the proceeds of the SVB New Money Term Loan , the Secured Promissory Note evidencing the Original Agreement Term Loans made by SVB under the Original Agreement shall be cancelled, null and void and of no further effect;
(B) The Secured Promissory Note evidencing the Original Agreement Term Loans made by Oxford under the Original Agreement, such Original Agreement Term Loans in the aggregate principal amount of Nine Million Dollars ($9,000,000.00), shall be amended and restated to evidence the remaining principal amount outstanding under such Secured Promissory Note as of the Effective Date, as follows: the Secured Promissory Note in the original principal face amount of Nine Million Dollars ($9,000,000.00) dated October 30, 2015 shall be replaced with an amended and restated Secured Promissory Note in the principal face amount of Three Million Six Hundred Thousand Dollars ($3,600,000.00) (the “ Oxford Original Term Loan ”); and
(C) Oxford shall make a term loan to Borrower in the amount of Nine Million Six Hundred Twenty-Five Thousand Dollars ($9,625,000.00) (the “ Oxford New Money Term Loan ” and together with the Oxford Original Term Loan, collectively, the “ Oxford Term Loan ”; the Oxford Term Loan, together with the SVB Term Loan, each a “ Term Loan ” and collectively, the “ Term Loans ”).
(D) After repayment, no Term Loan may be re-borrowed
(b) Repayment . Borrower shall make monthly payments of interest only commencing on the first (1 st ) Payment Date following the Funding Date of each 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 each 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 thereof. Commencing on the Amortization Date, and continuing on the Payment Date of each month thereafter, Borrower shall make consecutive equal monthly payments of principal, together with applicable 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 Loans, (2) the effective rate of interest, as determined in Section 2.3(a), and (3) a repayment schedule with respect to the Term Loans, equal to (A) thirty-six (36) months if the BLA Submission does not occur, (B) thirty (30) months if Borrower makes the BLA Submission, but prior to Borrower receiving the BLA Approval, and (C) twenty-four (24) months if following the BLA Submission Borrower received BLA Approval. All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on the Maturity Date. Each Term Loan may only be prepaid in accordance with Sections 2.2(c) and 2.2(d).
(c) Mandatory Prepayments . If the Term Loans are accelerated following the occurrence of an Event of Default, Borrower shall immediately pay to Lenders, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of: (i) all outstanding principal of the Term Loans plus accrued and unpaid interest thereon through the prepayment date, (ii) the Final Payment, (iii) the Prepayment Fee, plus (iv) all other Obligations that are due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts. Notwithstanding
2

 
(but without duplication with) the foregoing, on the Maturity Date, if the Final Payment had not previously been paid in full in connection with the prepayment of the Term Loans in full, Borrower shall pay to Collateral Agent, for payment to each Lender in accordance with its respective Pro Rata Share, the Final Payment in respect of the Term Loans.
(d) Permitted Prepayment of Term Loans . Borrower shall have the option to prepay all, but not less than all, of the Term Loans advanced by the Lenders under this Agreement, provided Borrower (i) provides written notice to Collateral Agent of its election to prepay the Term Loans at least ten (10) 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 Loans plus accrued and unpaid interest thereon through the prepayment date, (B) the Final Payment, (C) the Prepayment Fee, plus (D) all other Obligations that are due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts.
2.3 Payment of Interest on the Credit Extensions.
(a) Interest Rate. Subject to Section 2.3(b), the principal amount outstanding under the Term Loans shall accrue interest at a floating per annum rate equal to the Basic Rate, determined by Collateral Agent on the Funding Date of the applicable Term Loan, which interest shall be payable monthly in arrears in accordance with Sections 2.2(b) and 2.3(e). Interest shall accrue on each Term Loan commencing on, and including, the Funding Date of such Term Loan, and shall accrue on the principal amount outstanding under such Term Loan through and including the day on which such 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 rights or remedies of Collateral Agent.
(c) 360-Day Year . Interest shall be computed on the basis of a three hundred sixty (360) day year, and the actual number of days elapsed.
(d) Debit of Accounts . Collateral Agent and each Lender may debit (or ACH) any deposit accounts, maintained by Borrower or any of its Subsidiaries that are co-borrowers or Guarantors, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes the Lenders under the Loan Documents when due. 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,
3

 
shall be made without set-off, recoupment or counterclaim, in lawful money of the United States and in immediately available funds.
2.4 Secured Promissory Notes. The Term Loans shall be evidenced by a Secured Promissory Note or Notes, or an Amended and Restated Promissory Note, or Notes, either previously issued under the Original Agreement or 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 or 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. Upon 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, a replacement Secured Promissory Note in the same principal amount thereof and of like tenor.
2.5 Fees. Borrower shall pay to Collateral Agent:
(a) Final Payment . The Final Payment, when due hereunder, to be shared between the Lenders in accordance with their respective Pro Rata Shares;
(b) Original Agreement Final Payment . On the Effective Date, Lenders shall receive their respective Pro Rata Shares (for this purpose, as defined under the Original Agreement) owing by Borrower for the Final Payment (for this purpose, as defined under the Original Agreement) in the aggregate amount of $1,431,000.00, of which: (x) $715,500.00 shall be paid to Oxford, in its capacity as a Lender, and (y) $715,500.00 shall be paid to SVB (collectively, the “ Original Agreement Final Payment ”).  For the sake of clarity, the Original Agreement Final Payment shall not reduce the Final Payment otherwise due in connection with Section 2.5(a) hereof;
(c) Prepayment Fee . The Prepayment Fee, when due hereunder, to be shared between the Lenders in accordance with their respective Pro Rata Shares;
(d) Good Faith Deposit . Borrower has paid to Collateral Agent a good faith deposit of Fifty Thousand Dollars ($50,000.00) to initiate Lenders’ due diligence review processes, which amount shall be applied to the Lenders’ Expenses on the Effective Date; and
(e) Lenders’ Expenses . All Lenders’ Expenses (including reasonable attorneys’ fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due.
2.6 Withholding. Payments received by 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
4

 
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 2.6 shall survive the termination of this Agreement.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. Each Lender’s obligation to make a 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) original Loan Documents, each duly executed by Borrower and each Subsidiary, as applicable;
(b) duly executed original Control Agreements with respect to any Collateral Accounts maintained by Borrower or any of its Subsidiaries;
(c) duly executed original Secured Promissory Notes and/or Amended and Restated Secured Promissory Note, as applicable, in favor of each Lender according to its Term Loan Commitment Percentage;
(d) the Operating Documents and good standing certificates of Borrower and its Subsidiaries 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 ;
(e) a completed Perfection Certificate for Borrower and each of its Subsidiaries;
(f) the Annual Projections, for the current calendar year;
(g) duly executed original officer’s certificate for Borrower and each Subsidiary that is a party to the Loan Documents, in a form acceptable to Collateral Agent and the Lenders;
(h) certified copies, dated as of a 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 Credit Extension, will be terminated or released;
(i) a landlord’s consent executed in favor of Collateral Agent in respect of all of Borrower’s and each Subsidiaries’ leased locations;
5

 
(j) subject to the terms of the Post Closing Letter, a bailee waiver executed in favor of Collateral Agent in respect of each third party bailee where Borrower or any Subsidiary of Borrower maintains Collateral having a book value in excess of Two Hundred Fifty Thousand Dollars ($250,000.00) (except for contract manufacturers identifie d on the Perfection Certificate to the extent that any such contract manufacturer maintains Collateral having a book value in the aggregate not in excess of Five Hundred Thousand Dolla rs ($500,000.00) per location);
(k) a duly executed legal opinion of counsel to Borrower dated as of the Effective Date;
(l) evidence satisfactory to Collateral Agent and the Lenders that the insurance policies required by Section 6.5 hereof are in full force and effect, together with appropriate evidence showing loss payable and/or additional insured clauses or endorsements in favor of Collateral Agent, for the ratable benefit of the Lenders; and
(m) payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.
3.2 Conditions Precedent to all Credit Extensions. The obligation of each Lender to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:
(a) receipt by (i) the Lenders of an executed Disbursement Letter in the form of Exhibit B-1 attached hereto; and (ii) SVB of an executed Loan Payment/Advance Request Form in the form of Exhibit B-2 attached hereto;
(b) the representations and warranties in Section 5 hereof shall be true, accurate and complete in all material respects on the date of the Disbursement Letter (and the Loan Payment/Advance Request Form) and on the Funding Date of each Credit Extension; 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 Credit Extension. Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in Section 5 hereof are true, accurate and complete in all material respects; 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;
(c) in such Lender’s sole discretion, there has not been any Material Adverse Change or any material adverse deviation by Borrower from the Annual Projections of Borrower presented to and accepted by Collateral Agent and each Lender; and
(d) 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 Credit Extension. Borrower expressly agrees that a Credit Extension 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
6

 
Lender of Borrower’s obligation to deliver such item, and any such Credit Extension 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 a Term Loan set forth in this Agreement, to obtain a Term Loan, Borrower shall notify the Lenders (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 noon Eastern Time three (3) Business Days prior to the date such Term Loan is to be made. Together with any such electronic, facsimile or telephonic notification, Borrower shall deliver to the Lenders by electronic mail or facsimile a completed Disbursement Letter (and the Loan Payment/Advance Request Form, with respect to SVB) executed by a Responsible Officer or his or her designee. The Lenders may rely on any telephone notice given by a person whom a Lender reasonably believes is a Responsible Officer or designee. On the Funding Date, each Lender shall credit and/or transfer (as applicable) to the Designated Deposit Account, an amount equal to its Term Loan Commitment.
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 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. Borrower represents, warrants, and covenants that 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 Permitted Liens that are permitted by the terms of this Agreement to have priority to Collateral Agent’s Lien. If Borrower shall acquire a commercial tort claim (as defined in the Code), Borrower, shall promptly notify Collateral Agent in a writing signed by Borrower, as the case may be, of the general details thereof (and further details as may be required by Collateral Agent) and grant to Collateral Agent, for the ratable benefit of the Lenders, in such writing 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.
Borrower acknowledges that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank. Regardless of the terms of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority perfected security interest in the Collateral granted herein (subject only to Permitted Liens that may have superior priority to Bank’s Lien in this Agreement).
 If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash. Upon payment in full in cash of the Obligations (other than inchoate indemnity obligations) and at such time as the Lenders’ obligation to make Credit Extensions has terminated, Collateral Agent shall, at the sole cost and expense of Borrower, release its Liens in the Collateral and all rights therein shall revert to Borrower. In the event (x) all Obligations (other than inchoate indemnity obligations), except for Bank Services, are satisfied in full, and (y) this Agreement is terminated, Collateral Agent shall terminate the security interest granted herein upon Borrower providing cash collateral acceptable to Bank in its good faith business judgment for Bank Services, if any. In the event such Bank Services consist of outstanding Letters of Credit, Borrower shall provide to Bank cash collateral in an amount equal to (x) if such Letters of Credit are denominated in Dollars, then one hundred five percent (105.00%); and (y) if such Letters of Credit are denominated in a Foreign Currency, then one hundred ten percent (110.00%), of the Dollar Equivalent of the face amount of all such Letters of Credit plus all interest, fees, and costs due or to become due in connection therewith
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(as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to such Letters of Credit.
4.2 Authorization to File Financing Statements. Borrower hereby authorizes Collateral Agent to file financing statements or take any other action required to perfect Collateral Agent’s security interests in the Collateral, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Collateral Agent’s interest or rights under the Loan Documents, including a notice that any disposition of the Collateral, except to the extent permitted by the terms of this Agreement, by Borrower, or any other Person, shall be deemed to violate the rights of Collateral Agent under the Code.
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 have a Material Adverse Change. In connection with this Agreement, Borrower and each of its Subsidiaries has delivered to Collateral Agent a completed perfection certificate signed by an officer of Borrower or such Subsidiary (each a “ Perfection Certificate ” and collectively, the “ Perfection Certificates ”). Borrower represents and warrants that (a) Borrower and each of its Subsidiaries’ exact legal name is that which is indicated on its respective Perfection Certificate and on the signature page of each Loan Document to which it is a party; (b) Borrower and each of its Subsidiaries is an organization of the type and is organized in the jurisdiction set forth on its respective Perfection Certificate; (c) each Perfection Certificate accurately sets forth each of Borrower’s and its Subsidiaries’ organizational identification number or accurately states that Borrower or such Subsidiary has none; (d) each Perfection Certificate accurately sets forth Borrower’s and each of its Subsidiaries’ place of business, or, if more than one, its chief executive office as well as Borrower’s and each of its Subsidiaries’ mailing address (if different than its chief executive office); (e) Borrower and each of its Subsidiaries (and each of its respective predecessors) have not, in the past five (5) years, changed its jurisdiction of organization, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificates pertaining to Borrower and each of its Subsidiaries, is accurate and complete (it being understood and agreed that Borrower and each of its Subsidiaries may from time to time update certain information in the Perfection Certificates (including the information set forth in clause (d) above) after the Effective Date to the extent permitted by one or more specific provisions in this Agreement); such updated Perfection Certificates subject to the review and approval of Collateral Agent. If Borrower or any of its Subsidiaries is not now a Registered Organization but later becomes one, Borrower shall notify Collateral Agent of such occurrence and provide Collateral Agent with such Person’s organizational identification number within five (5) Business Days of receiving such organizational identification number.
 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
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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 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 have a Material Adverse Change.
5.2 Collateral.
(a) Borrower and each of its Subsidiaries have 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 of its Subsidiaries that are co-borrowers or Guarantors have 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 of which Borrower or such Subsidiary that is a co-borrower or Guarantor has given Collateral Agent notice in accordance with Section 6.6 and 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.
(b) On the Effective Date, and except as disclosed on the Perfection Certificate (i) the Collateral is not in the possession of any third party bailee (such as a warehouse), and (ii) no such third party bailee possesses components of the Collateral in excess of Two Hundred Fifty Thousand Dollars ($250,000.00) in book value in the aggregate (or Five Hundred Thousand Dollars ($500,000.00) in book value in the aggregate for contract manufacturers identified on the Perfection Certificate). None of the components of the Collateral shall be maintained at locations other than as disclosed in the Perfection Certificates on the Effective Date or as permitted pursuant to Section 6.11.
(c) All Inventory is in all material respects of good and marketable quality (it being understood that the marketability of Inventory is subject to regulatory approvals), free from material defects.
(d) 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 as notified in writing to Collateral Agent, neither Borrower nor any of its Subsidiaries is a party to, nor is bound by, any material license or other material agreement with respect to which Borrower or such Subsidiary is the licensee that (i) prohibits or otherwise restricts Borrower or its Subsidiaries from granting a security interest in Borrower’s or such Subsidiaries’ interest in such material license or material agreement or any other property, or (ii) for which a default under or termination of could interfere with Collateral Agent’s or any Lender’s right to sell any Collateral. Borrower shall provide written notice to Collateral Agent and each Lender within ten (10) days of Borrower or any of its Subsidiaries entering into or becoming bound by any license or agreement with respect to which Borrower or any Subsidiary is the licensee (other than over-the-counter software that is commercially available to the public).
5.3 Litigation. Except as disclosed (i) on the Perfection Certificates, or (ii) in accordance with Section 6.9 hereof, there are no actions, suits, investigations, or 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).
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5.4 No Material Deterioration in Financial Condition; Financial Statements. All consolidated financial statements for Borrower and its Subsidiaries, delivered to Collateral Agent fairly present, in conformity with GAAP (except, with respect to unaudited financials, for the absence of footnotes and subject to normal year-end adjustments ), in all material respects the consolidated financial condition of Borrower and its Subsidiaries, and the consolidated results of operations of Borrower and its Subsidiaries as of the dates and for the periods presented . There has not been any material deterioration in the consolidated financial condition of Borrower and its Subsidiaries since the date of the most recent financial statements submitted to any Lender.
5.5 Solvency. Borrower is Solvent, and Borrower and its Subsidiaries, taken as a whole, are Solvent.
5.6 Regulatory Compliance. Neither Borrower nor any of its Subsidiaries is an “investment company” or a company “controlled” by 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 have a Material Adverse Change. 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 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 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. Neither Borrower nor any of its Subsidiaries owns any stock, shares, partnership interests or other equity securities except for Permitted Investments.
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 local taxes, assessments, deposits and contributions owed by Borrower and such Subsidiaries, 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 following sentence. Borrower and each of its Subsidiaries, may defer payment of any contested taxes, provided that Borrower or such Subsidiary, (a) in good faith contests its obligation to pay
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the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Collateral Agent in writing of the commencement of, and any material development in, the proceedings, and (c) posts bonds or takes any other steps required to prevent the Governmental Authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a “ Permitted Lien .” 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 Credit Extensions solely as working capital and to fund its general business requirements, and to refinance the Original Agreement Term Loans, in accordance with the provisions of this Agreement, and not for personal, family, household or agricultural purposes.
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 results).
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 qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of the Responsible Officers.
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 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 have a Material Adverse Change. 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 have a Material Adverse Change.
(b) 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. Borrower shall promptly provide copies to
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Collateral Agent of any material Governmental Approvals obtained by Borrower or any of its Subsidiaries.
6.2 Financial Statements, Reports, Certificates.
(a) Deliver to each Lender:
(i) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated (and consolidating, if applicable) 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;
(ii) as soon as available, but no later than one hundred eighty (180) days after the last day of Borrower’s fiscal year or within five (5) days of filing with the SEC, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to Collateral Agent in its reasonable discretion (other than any “ going concern” solely in connection with the need to raise equity and negative profits or debt maturity within one year, so long as no Event of Default has occurred and is continuing);
(iii) as soon as available after approval thereof by Borrower’s Board of Directors, but no later than the earlier of (x) thirty (30) days after the last day of each of Borrower’s fiscal years or (y) seven (7) days after approval by Borrower’s Board of Directors, Borrower’s annual 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 (such annual financial projections as originally delivered to Collateral Agent and the Lenders 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 and the Lenders no later than seven (7) days after such approval);
(iv) within five (5) days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders or holders of Subordinated Debt;
(v) within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission,
(vi) prompt notice of any amendments of or other changes to the Operating Documents of Borrower or any of its Subsidiaries together with any copies reflecting such amendments or changes with respect thereto;
(vii) prompt notice of any event that could reasonably be expected to materially and adversely affect the value of the Intellectual Property;
(viii) as soon as available, but no later than thirty (30) days after the last day of each month, copies of the month-end account statements for each Collateral Account maintained by Borrower or its Subsidiaries that are co-borrowers or Guarantors, which statements may be provided to Collateral Agent and each Lender by Borrower or directly from the applicable institution(s), and
(ix) other information as reasonably requested by Collateral Agent or any Lender.  Notwithstanding the foregoing, documents required to be delivered pursuant to the terms hereof
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(to the extent any such documents are included in materials otherwise filed with the SEC) 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.
(b) Concurrently with the delivery of the financial statements specified in Section 6.2(a)(i) above but no later than thirty (30) days after the last day of each month, deliver to each Lender, a duly completed Compliance Certificate signed by a Responsible Officer.
(c) Keep proper books of record and account in accordance with GAAP in all material respects, in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities. Borrower shall, and shall cause each of its Subsidiaries to, allow, at the sole cost of Borrower, 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 its books and records, 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.
(d) Prompt written notice of any changes to the beneficial ownership information set out in items 2(d) and 2(e) of the Perfection Certificate.  Borrower understands and acknowledges that each Lender relies on such true, accurate and up-to-date beneficial ownership information to meet such Lender’s regulatory obligations to obtain, verify and record information about the beneficial owners of its legal entity customers.
6.3 Inventory; Returns. Keep all Inventory in good and marketable condition (it being understood that the marketability of Inventory is subject to regulatory approvals), 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. Borrower must promptly notify Collateral Agent and the Lenders of all returns, recoveries, disputes and claims that involve more than One Hundred Thousand Dollars ($100,000.00) individually or in the aggregate in any calendar year.
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 file, all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower or its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.8 hereof, and shall deliver to Lenders, 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, location, size, state of development and as Collateral Agent may reasonably request. Insurance policies shall be in a form, with companies, and in amounts that are reasonably satisfactory to Collateral Agent and Lenders. All property policies insuring Collateral 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
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Agent, that it will give Collateral Agent thirty (30) days (ten (10) days for non-payment of premium) prior written notice before any such policy or policies shall be materially altered or canceled ; provided that if such provider fails to provide such notice, then Borrower and its Subsidiaries shall provide such prior written notice to Collateral Agent i n accordance with the terms of this section . At Collateral Agent’s request, Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy for Borrower or any Subsidiary that is a co-borrower or Guarantor 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 up to Five Hundred Thousand Dollars ($500,000.00) with respect to any loss, but not exceeding Five Hundred Thousand Dollars ($500,000.00), 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, 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.
6.6 Operating Accounts.
(a) Maintain (i) all of Borrower’s and its Subsidiaries’ that are co-borrowers or Guarantors Collateral Accounts subject to a Control Agreement in favor of Collateral Agent (except with respect to deposit accounts excepted from this requirement pursuant to the last sentence of Section 6.6(b)); and (ii) all of Borrower’s and its Subsidiaries’ that are co-borrowers or Guarantors primary operating accounts with Bank or its Affiliates.
(b) Borrower shall provide Collateral Agent five (5) days’ prior written notice before Borrower or any of its Subsidiaries that are co-borrowers or Guarantors establishes any Collateral Account at or with any Person other than Bank or its Affiliates. In addition, for each Collateral Account that Borrower or any of its Subsidiaries that are co-borrowers or Guarantors, at any time maintains, Borrower or such Subsidiary that is a co-borrower or Guarantor 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 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 Certificates or, after the Effective Date, with Collateral Agent’s consent after written notice from Borrower to Collateral Agent.
(c) Neither Borrower nor any of its Subsidiaries shall maintain any Collateral Accounts except Collateral Accounts maintained in accordance with Sections 6.6(a) and (b).
6.7 Protection of Intellectual Property Rights. Borrower and each of its Subsidiaries shall: (a) use commercially reasonable efforts to protect, defend and maintain the validity and enforceability of its Intellectual Property that is material to Borrower’s business; (b) promptly advise Collateral Agent in
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writing of material infringement by a third party of its Intellectual Property; and (c) not allow any Intellectual Property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Collateral Agent’s prior written consent.
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 Notices of Litigation and Default. Borrower will give prompt written notice to Collateral Agent and the Lenders of 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 Two Hundred Fifty Thousand Dollars ($250,000.00) or more or which could reasonably be expected to have a Material Adverse Change. Without limiting or contradicting any other more specific provision of this Agreement, promptly (and in any event within three (3) Business Days) 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, Borrower shall give written notice to Collateral Agent and the Lenders 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.
6.10 Intentionally Omitted.
6.11 Landlord Waivers; Bailee Waivers. In the event that Borrower or any of its Subsidiaries that are co-borrowers or Guarantors, after the Effective Date, intends to add any new offices or business locations, including warehouses, or otherwise store any portion of the Collateral with, or deliver any portion of the Collateral to, a bailee, in each case pursuant to Section 7.2, then Borrower or such Subsidiary will first notify Collateral Agent and, in the event that the Collateral at any new location has a book value in excess of Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate (Five Hundred Thousand Dollars ($500,000.00) in the aggregate per location for contract manufacturers identified on the Perfection Certificate), such bailee or landlord, as applicable, must 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.
6.12 Creation/Acquisition of Subsidiaries. In the event Borrower, or any of its Subsidiaries creates or acquires any Subsidiary, Borrower shall provide prior written notice to Collateral Agent and each Lender of the creation or acquisition of such new Subsidiary and take all such action as may be reasonably required by Collateral Agent or any Lender to cause each such Subsidiary to become a co-Borrower hereunder or to guarantee the Obligations of Borrower under the Loan Documents and, in each case, grant a continuing pledge and security interest in and to the assets of such Subsidiary (substantially as described on Exhibit A hereto); and Borrower (or its Subsidiary, as applicable) shall grant and pledge to Collateral Agent, for the ratable benefit of the Lenders, a perfected security interest in the stock, units or other evidence of ownership of each such newly created Subsidiary.
6.13 Further Assurances.
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(a) 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.
(b) Deliver to Collateral Agent and Lenders, within five (5) 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 have a Material Adverse Change.
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, or otherwise dispose of (collectively, “ Transfer ”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out or obsolete Equipment; (c) in the ordinary course of business in an aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000.00) in any fiscal year so long as such Transfers are not otherwise prohibited by this Agreement; and (d) in connection with Permitted Liens, Permitted Investments and Permitted Licenses.
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 reasonably related thereto; (b) liquidate or dissolve; or (c) (i) any Key Person shall cease to be actively engaged in the management of Borrower unless written notice thereof is provided to Collateral Agent within five (5) days of such change, or (ii) enter into any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediately prior to the first such transaction own more than forty nine percent (49.00%) of the voting stock of Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrower’s equity securities in a public offering, a private placement of public equity or to venture capital or mezzanine investors so long as Borrower identifies to Collateral Agent the venture capital or mezzanine investors prior to the closing of the transaction and, with respect to any mezzanine investors, such investors are satisfactory to the Lenders). Borrower shall not, (i) without at least ten (10) days’ prior written notice to Collateral Agent, add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than Two Hundred Fifty Thousand Dollars ($250,000.00) (Five Hundred Thousand Dollars ($500,000.00) in the aggregate per location for contract manufacturers identified on the Perfection Certificate) in book value in assets or property of Borrower or any of its Subsidiaries); and (ii) without at least thirty (30) days’ prior written notice to Collateral Agent (A) change its jurisdiction of organization, (B) change its organizational structure or type, (C) change its legal name, or (D) change any organizational number (if any) assigned by its jurisdiction of organization.
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.
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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 that are permitted by the terms of this Agreement to have priority over Collateral Agent’s Lien), 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 the definition of “ Permitted Liens ” herein.
7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.6 hereof.
7.7 Distributions; Investments. (a) 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 payments of cash in lieu of the issuance of fractional shares and 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 payments and repurchases do not exceed Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate per fiscal year) or (b) directly or indirectly make any Investment other than Permitted Investments, or permit any of its Subsidiaries to do so.
7.8 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 in the ordinary course of Borrower’s or such Subsidiary’s business, upon fair and reasonable 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 (b) Subordinated Debt or equity investments by Borrower’s investors in Borrower or its Subsidiaries.
7.9 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 or adversely affect the subordination thereof to Obligations owed to the Lenders.
7.10 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 Credit Extension 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 violation could reasonably be expected to have a Material Adverse Change, 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
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any liability to the Pension Benefit Guaranty Corporation or its successors or any other Governmental Authority.
7.11 Compliance with Anti-Terrorism Laws. Collateral Agent hereby notifies Borrower and each of its Subsidiaries that pursuant to the requirements of Anti-Terrorism Laws, and Collateral Agent’s policies and practices, Collateral Agent is required to obtain, verify and record certain information and documentation that identifies Borrower and each of its Subsidiaries and their principals, which information includes the name and address of Borrower and each of its Subsidiaries and their principals and such other information that will allow Collateral Agent to identify such party in accordance 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. Borrower and each of its Subsidiaries shall immediately notify Collateral Agent if Borrower or such Subsidiary has knowledge that Borrower, or any Subsidiary or Affiliate of Borrower, is listed on the OFAC Lists or (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. 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.
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 Credit Extension 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 of acceleration pursuant to Section 9.1 (a) hereof). During the cure period, the failure to cure the payment default is not an Event of Default (but no Credit Extension will be made during the cure period);
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), 6.9 (Notice of Litigation and Default), 6.11 (Landlord Waivers; Bailee Waivers), 6.12 (Creation/Acquisition of Subsidiaries) or 6.13 (Further Assurances) or Borrower violates any covenant in Section 7; 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)
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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 Credit Extensions shall be made during such cure period). Grace periods provided under this Section shall not apply, among other things, to financial covenants or any other covenants set forth in subsection (a) above;
8.3 Material Adverse Change. A Material Adverse Change occurs;
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 Lender or any Lender’s Affiliate or any bank or other 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 ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; and
(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 receiver, or (ii) any court order enjoins, restrains, or prevents Borrower or any of its Subsidiaries from conducting any part of its business;
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 Credit Extensions shall be made while Borrower or any Subsidiary is Insolvent and/or until any Insolvency Proceeding is dismissed);
8.6 Other Agreements. There is a default in any agreement to which Borrower or any of its Subsidiaries is a party with a third party or parties 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 that could reasonably be expected to have a Material Adverse Change;
8.7 Judgments. One or more judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least Five Hundred Thousand Dollars ($500,000.00) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower or any of its Subsidiaries and shall remain unsatisfied, unvacated, or unstayed for a period of ten (10) days after the entry thereof (provided that no Credit Extensions will be made prior to the satisfaction, vacation, or stay of such judgment, order or decree);
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 is incorrect in any material respect when made;
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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 Sections 8.3, 8.4, 8.5, 8.7, or 8.8 occurs with respect to any Guarantor, or (d) the liquidation, winding up, or termination of existence of any Guarantor;
8.11 Governmental Approvals. 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 expected to result in a Material Adverse Change; or
8.12 Lien Priority . 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 which are permitted to have priority in accordance with the terms of this Agreement.
8.13 Delisting . The shares of common stock of Borrower are delisted from NASDAQ Capital Market because of failure to comply with continued listing standards thereof or due to a voluntary delisting which results in such shares not being listed on any other nationally recognized stock exchange in the United States having listing standards at least as restrictive as the NASDAQ Capital Market.
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, and at the written direction of Required Lenders shall, 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) or (iii) by notice to Borrower suspend or terminate the 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 (but if an Event of Default described in Section 8.5 occurs 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).
(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 of an Event of Default, Collateral Agent shall have the right , without notice or demand, to do any or all of the following:
(i) foreclose upon and/or sell or otherwise liquidate, the Collateral;
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(ii) apply to the Obligations any (a) balances and deposits of Borrower that Collateral Agent or any Lender holds or controls, or (b) any amount held or controlled by Collateral Agent or any Lender owing to or for the credit or the account of Borrower; and/or
(iii) commence and prosecute an Insolvency Proceeding or consent to Borrower commencing any Insolvency Proceeding.
(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 continuance of an Event of Default, Collateral Agent shall have the right, without notice or demand, to do any or all of the following:
(i) settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Collateral Agent considers advisable, notify any Person owing Borrower money of Collateral Agent’s security interest in such funds, and verify the amount of such account;
(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;
(iii) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, and/or advertise for sale, the Collateral. Collateral Agent is hereby granted a non-exclusive, 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 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;
(iv) place a “hold” on any account maintained with Collateral Agent or the Lenders and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;
(v) demand and receive possession of Borrower’s Books;
(vi) appoint a receiver to seize, manage and realize 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;
(vii) subject to clauses 9.1(a) and (b), exercise all rights and remedies available to Collateral Agent and each Lender under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof);
(viii) for any Letters of Credit, demand that Borrower (i) deposit cash with Bank in an amount equal to (x) if such Letters of Credit are denominated in Dollars, then one hundred
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five percent (105.00%); and (y) if such Letters of Credit are denominated in a Foreign Currency, then one hundred ten percent (110.00%), of the Dollar Equivalent of the aggregate face amount of all Letters of Credit remaining undrawn (plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment)), to secure all of the Obligations relating to such Letters of Credit, as collateral security for the repayment of any future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid or payable over the remaining term of any Letters of Credit; and
(ix) terminate any FX Contracts.
Notwithstanding any provision of this Section 9.1 to the contrary, upon the occurrence of any Event of Default, Collateral Agent shall have the right to exercise any and all remedies referenced in this Section 9.1 without the written consent of Required Lenders following the occurrence of an Exigent Circumstance. As used in the immediately preceding sentence, “ 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.
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 make Credit Extensions 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 Credit Extensions 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.
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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 on the Obligations (including any interest which, but for the provisions of the United States Bankruptcy Code, would have accrued on such amounts); third, to the principal amount of the Obligations outstanding; and fourth, 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 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 banking 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
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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.
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 transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; 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:	TOCAGEN INC.	

 	Prior to June 1, 2018:	3030 Bunker Hill Street, Suite 230
San Diego, CA 92109
Attn: Chief Financial Officer
Fax: (858) 412-8499
Email: mfoletta@tocagen.com	

 	On or after June 1, 2018:	4242 Campus Point Ct,
San Diego, CA 92121
Attn: Chief Financial Officer
Fax: (858) 412-8499
Email: mfoletta@tocagen.com	

 	with a copy (which
shall not constitute
notice) to:	Cooley LLP
4401 Eastgate Mall
San Diego, CA 92121401 Ninth Street, NW, Suite 1000
Attn: Karen Deschaine Anderson
Email: kanderson@cooley.com	

 	If to Collateral Agent:	OXFORD FINANCE LLC
133 North Fairfax Street
Alexandria, Virginia 22314
Attention: Legal Department
Fax: (703) 519-5225
Email: LegalDepartment@oxfordfinance.com	
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 	with a copy to	SILICON VALLEY BANK
4370 La Jolla Village Drive, Suite 1050
San Diego, CA 92122-1253
Attn: Anthony Flores
Fax: (858) 622-1424
Email: aflores@svb.com	

 	with a copy (which
shall not constitute
notice) to:	Troutman Sanders LLP
401 Ninth Street, NW, Suite 1000
Washington, DC 20004-2134
Attn: Charles P. Charpentier
Fax: (202) 274-2994
Email: charles.charpentier@troutmansanders.com	
 
11.	CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER, AND JUDICIAL REFERENCE	
California law governs the Loan Documents without regard to principles of conflicts of law. Borrower, Collateral Agent and each Lender each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Collateral Agent or any Lender from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Collateral Agent or any Lender. Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, COLLATERAL AGENT AND EACH LENDER EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
 WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance
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with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.
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 and each Lender’s prior written consent (which may be granted or withheld in Collateral Agent’s and each Lender’s discretion, subject to Section 12.6). 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; provided , however , that any such Lender Transfer (other than a transfer, pledge, sale or assignment to an Eligible Assignee) of its obligations, rights, and benefits under this Agreement and the other Loan Documents shall require the prior written consent of the Required Lenders (such approved assignee, an “ Approved Lender ”) . Borrower and Collateral Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned until Collateral Agent shall have received and accepted an effective assignment agreement in form satisfactory to Collateral Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such Eligible Assignee or Approved Lender as Collateral Agent reasonably shall require. Notwithstanding anything to the contrary contained herein, so long as no Event of Default has occurred and is continuing, no Lender Transfer (other than a Lender Transfer (i) in respect of the Warrants or (ii) in connection with (x) assignments by a Lender due to a forced divestiture at the request of any regulatory agency; or (y) upon the occurrence of a default, event of default or similar occurrence with respect to a Lender’s own financing or securitization transactions) shall be permitted, without Borrower’s consent, to any Person which is an Affiliate or Subsidiary of Borrower, a direct competitor of Borrower or a vulture hedge fund, each as determined by Collateral Agent.
12.2 Indemnification. Borrower agrees to indemnify, defend and hold Collateral Agent and the Lenders and their respective directors, officers, employees, 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
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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. 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 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.
12.3 Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.
12.5 Correction of Loan Documents. Collateral Agent and the Lenders may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent with the agreement of the parties so long as Collateral Agent and the Lenders provide Borrower with written notice of such correction and allows Borrower at least ten (10) days to object to such correction. In the event of such objection, such correction shall not be made except by an amendment signed by Collateral Agent, the Lenders and Borrower.
12.6 Amendments in Writing; Integration. (a) 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:
(i) no such amendment, waiver or other modification that would have the effect of increasing or reducing a Lender’s Term Loan Commitment or Commitment Percentage shall be effective as to such Lender without such Lender’s written consent;
(ii) no such amendment, waiver or modification that would affect the rights and duties of Collateral Agent shall be effective without Collateral Agent’s written consent or signature;
(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
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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 of 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 (I) amend any of the provisions of Section 12.10. 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 preceding sentence;
(iv) the provisions of the foregoing clauses (i), (ii) and (iii) are subject to the provisions of any interlender or agency agreement among the Lenders and Collateral Agent pursuant to which any Lender may agree to give its consent in connection with any amendment, waiver or modification of the Loan Documents only in the event of the unanimous agreement of all Lenders.
(b) Other than as expressly provided for in Section 12.6(a)(i)-(iii), Collateral Agent may, if requested by the Required Lenders, from time to time designate covenants in this Agreement less restrictive by notification to a representative of Borrower.
(c) This Agreement and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. 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.
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. Without limiting the foregoing, except as otherwise provided in Section 4.1, the grant of security interest by Borrower in Section 4.1 shall survive until the termination of all Bank Services Agreements. The obligation of Borrower in Section 12.2 to indemnify each Lender and Collateral Agent, as well as the confidentiality provisions in Section 12.9 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 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, or in connection with a Lender’s own financing or securitization transactions and upon the occurrence of a default, event of
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default or similar occurrence with respect to such financing or securitization transaction; (b) to prospective transferees (other than those identified in (a) above) or purchasers of any interest in the Credit Extensions (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 or as otherwise required in connection with an examination or audit; (e) as Collateral Agent reasonably considers appropriate in exercising remedies under the Loan Documents; and (f) to third party service providers of the Lenders and/or Collateral Agent so long as such service providers have executed a confidentiality agreement 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; 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. 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 12.9 supersede all prior agreements, understanding, representations, warranties, and negotiations between the parties about the subject matter of this Section 12.9.
12.10 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.
12.11 Silicon Valley Bank as Agent . Collateral Agent hereby appoints Silicon Valley Bank (“ SVB ”) as its agent (and SVB hereby accepts such appointment) for the purpose of perfecting Collateral Agent’s Liens in assets which, in accordance with Article 8 or Article 9, as applicable, of the Code can be perfected by possession or control, including without limitation, all Deposit Accounts maintained at SVB.
12.12 Cooperation of Borrower. If necessary, Borrower agrees to (i) execute any documents (including new Secured Promissory Notes) reasonably required to effectuate and acknowledge each assignment of a Term Loan Commitment or 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 or Credit Extensions (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
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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.
12.13 Effect of Amendment and Restatement . Except as otherwise set forth herein, this Agreement is intended to and does completely amend and restate, without novation, the Original Agreement. All security interests granted under the Original Agreement are hereby confirmed and ratified as of the date first granted and filed and shall continue to secure all Obligations under this Agreement.
13. DEFINITIONS
13.1 Definitions. As used in this Agreement, the following terms have the following meanings:
“ Account ” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower.
“ Account Debtor ” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.
“ Affiliate ” of any Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.
“ Agreement ” is defined in the preamble hereof.
“ Amortization Date ” is, with respect to the Term Loans, (a) January 1, 2020 if the BLA Submission does not occur prior to January 1, 2020, (b) July 1, 2020 if Borrower makes the BLA Submission prior to January 1, 2020, but has not yet received the BLA Approval prior to July 1, 2020, and (c) January 1, 2021 if following the BLA Submission prior to January 1, 2020 Borrower receives BLA Approval prior to July 1, 2020 .
“ Annual Projections ” is defined in Section 6.2(a).
“ Anti-Terrorism Laws ” are any laws relating to terrorism or money laundering, including 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.
“ Approved Fund ” is any (i) investment company, fund, trust, securitization vehicle or conduit that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business or (ii) any Person (other than a natural person) which temporarily warehouses loans for any Lender or any entity described in the preceding clause (i) and that, with respect to each of the preceding clauses (i) and (ii), is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) a Person (other than a natural person) or an Affiliate of a Person (other than a natural person) that administers or manages a Lender.
“ Approved Lender ” is defined in Section 12.1.
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“ Bank Services ” are any products, credit services, and/or financial accommodations previously, now, or hereafter provided to Borrower or any of its Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash management services (including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check cashing services), interest rate swap arrangements, and foreign exchange services as any such products or services may be identified in Bank’s various agreements related thereto (each, a “ Bank Services Agreement ”).
“ Bank ” is defined in the preamble hereof.
“ Basic Rate ” is, with respect to a Term Loan, the per annum rate of interest (based on a year of three hundred sixty (360) days) equal to the greater of (i) eight and one-half percent (8.50%) and (ii) the sum of (a) the Prime Rate reported in the Wall Street Journal on the last Business Day of the month that immediately precedes the month in which the interest will accrue, plus (b) three and three-quarters percent (3.75%). Notwithstanding the foregoing, the Basic Rate for a Term Loan for the period from the Effective Date through and including May 31, 2018 shall be eight and one-half percent (8.50%).
“ BLA ” is Biologics License Application.
“ BLA Approval ” is Lenders’ receipt of evidence satisfactory to Lenders that Borrower has received FDA approval of Borrower’s BLA for its product candidate, TOCA 511, to the FDA.
“ BLA Submission ” is Lenders’ receipt of evidence satisfactory to Lenders that Borrower has submitted the BLA for Borrower’s product candidate, TOCA 511, to the FDA.
“ 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 ” is defined in the preamble hereof.
“ 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. For the avoidance of doubt, the direct purchase by Borrower or any of its Subsidiaries of any Auction Rate Securities, or purchasing participations in, or entering into any type of swap or other derivative transaction, or otherwise holding or engaging in any ownership interest in any
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type of Auction Rate Security by Borrower or any of its Subsidiaries shall be conclusively determined by the Lenders as an ineligible Cash Equivalent, and any such transaction shall expressly violate each other provision of this Agreement governing Permitted Investments. Notwithstanding the foregoing, Cash Equivalents does not include and Borrower, and each of its Subsidiaries, are prohibited from purchasing, purchasing participations in, entering into any type of swap or other equivalent derivative transaction, or otherwise holding or engaging in any ownership interest in any type of debt instrument, including, without limitation, any corporate or municipal bonds with a long-term nominal maturity for which the interest rate is reset through a dutch auction and more commonly referred to as an auction rate security (each, an “ Auction Rate Security ”).
“ Claims ” are defined in Section 12.2.
“ Code ” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; 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 California, 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 that is a co-borrower or Guarantor at any time.
“ Collateral Agent ” is, Oxford, not in its individual capacity, but solely in its capacity as agent on behalf of and for the benefit of the Lenders.
“ Commitment Percentage ” with respect to each Term Loan or all Term Loans in the aggregate, as applicable, 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.
“ Communication ” is defined in Section 10.
“ Compliance Certificate ” is that certain certificate in 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 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
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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 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 obtains control (within the meaning of the Code) for the benefit of the Lenders 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 or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.
“ Credit Extension ” is any Term Loan or any other extension of credit by Collateral Agent or Lenders for Borrower’s benefit.
“ Default Rate ” is defined in Section 2.3(b).
“ Deposit Account ” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.
“ Designated Deposit Account ” is Borrower’s deposit account, account number ******* 762, maintained with Bank.
“ Disbursement Letter ” is that certain form attached hereto as Exhibit B-1 .
“ Dollar Equivalent ” is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the country issuing such Foreign Currency.
“ Dollars , ” “ dollars ” and “$” each mean lawful money of the United States.
“ Effective Date ” is defined in the preamble of this Agreement.
 “ Eligible Assignee ” is (i) a Lender, (ii) an Affiliate of a Lender, (iii) an Approved Fund and (iv) any commercial bank, savings and loan association or savings bank or any other entity which is an “accredited investor” (as defined in Regulation D under the Securities Act of 1933, as amended) and which extends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies and commercial finance companies, in each case, which either (A) has a rating of BBB or higher from Standard & Poor’s Rating Group and a rating of Baa2 or higher from Moody’s Investors Service, Inc. at the date that it becomes a Lender or (B) has total assets in excess of Five Billion Dollars ($5,000,000,000.00), and in each case of clauses (i) through (iv), which, through its applicable lending office, is capable of lending to Borrower without the imposition of any withholding or similar taxes; provided that notwithstanding the foregoing, “Eligible Assignee” shall not include, unless an Event of Default has occurred and is continuing, (i) Borrower or any of Borrower’s Affiliates or Subsidiaries or (ii) a direct competitor of Borrower or a vulture hedge fund, each as determined by Collateral Agent. Notwithstanding the foregoing, (x) in connection with assignments by a Lender due to a forced divestiture
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at the request of any regulatory agency, the restrictions set forth herein shall not apply and Eligible Assignee shall mean any Person or party and (y) in connection with a Lender’s own financing or securitization transactions, the restrictions set forth herein shall not apply and Eligible Assignee shall mean any Person or party providing such financing or formed to undertake such securitization transaction and any transferee of such Person or party upon the occurrence of a default, event of default or similar occurrence with respect to such financing or securitization transaction; provided that no such sale, transfer, pledge or assignment under this clause (y) shall release such Lender from any of its obligations hereunder or substitute any such Person or party for such Lender as a party hereto until Collateral Agent shall have received and accepted an effective assignment agreement from such Person or party in form satisfactory to Collateral Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such Eligible Assignee as Collateral Agent reasonably shall require.
“ 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, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.
“ ERISA ” is the Employee Retirement Income Security Act of 1974, as amended, and its regulations.
“ Event of Default ” is defined in Section 8.
“ FDA ” is the United States Food and Drug Administration.
“ Final Payment ” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) due on the earliest to occur of (a) the Maturity Date, or (b) the acceleration of any Term Loan, or (c) the prepayment of a Term Loan pursuant to Section 2.2(c) or (d), equal to the original principal amount of such Term Loan multiplied by the Final Payment Percentage, payable to Lenders in accordance with their respective Pro Rata Shares.   For the sake of clarity, the Original Agreement Final Payment shall not reduce the Final Payment otherwise due in connection with Section 2.5(a) hereof.
“ Final Payment Percentage ” is seven and ninety-five hundredths of one percent (7.95%).
“ Foreign Currency ” means lawful money of a country other than the United States.
“ Foreign Subsidiary ” is a Subsidiary that is not an entity organized under the laws of the United States or any territory thereof.
“ Funding Date ” is any date on which a Credit Extension is made to or on account of Borrower which shall be a Business Day.
“ FX Contract ” is any foreign exchange contract by and between Borrower and Bank under which Borrower commits to purchase from or sell to Bank a specific amount of Foreign Currency on a specified date.
“ 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.
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“ 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, court, central bank or other entity exercising executive, legislative, 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 or any Lender.
“ 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.
“ 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, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.
“ Indemnified Person ” is defined in Section 12.2.
“ 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, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
“ Insolvent ” means not Solvent.
“ Intellectual Property ” means all of Borrower’s or any Subsidiary’s right, title and interest in and to the following:
(a) its Copyrights, Trademarks and Patents;
(b) any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how, operating manuals;
(c) any and all source code;
(d) any and all design rights which may be available to Borrower;
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(e) 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; and
(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.
“ 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, 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, payment or capital contribution to any Person.
“ Key Person ” is each of Borrower’s (i) Chief Executive Officer, who is Marty Duvall as of the Effective Date, (ii) President, R&D, who is Harry E. Gruber as of the Effective Date, (iii) Chief Financial Officer, who is Mark Foletta as of the Effective Date, and (iv) Executive Vice President, Research and Pharmaceutical Development, who is Douglas J. Jolly as of the Effective Date.
“ 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 audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses, as well as appraisal fees, fees incurred on account of lien searches, inspection 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.
“ Letter of Credit” is a standby or commercial letter of credit issued by Bank upon request of Borrower based upon an application, guarantee, indemnity, or similar agreement.
“ 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 Warrants, the Perfection Certificates, each Compliance Certificate, each Disbursement Letter, each Loan Payment/Advance Request Form and any Bank Services Agreement, the Post Closing 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 or the Original Agreement; all as amended, restated, or otherwise modified.
“ Loan Payment/Advance Request Form ” is that certain form attached hereto as Exhibit B-2 .
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“ Material Adverse Change ” is (a) a material impairment in the perfection or priority of Collateral Agent’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations or condition (financial or otherwise) of Borrower or Borrower and its Subsidiaries, taken as a whole ; or (c) a material impairment of the prospect of repayment of any portion of the Obligations.
“ Maturity Date ” is, for each Term Loan, December 1, 2022.
“ Obligations ” are all of Borrower’s obligations to pay when due any debts, principal, interest, Lenders’ Expenses, the Prepayment Fee, the Original Agreement Final Payment, the Final Payment, 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 Warrants), or otherwise, including, without limitation, all obligations relating to letters of credit (including reimbursement obligations for drawn and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including interest 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 Warrants).
“ 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 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.
“ Original Agreement ” is defined in the preamble hereof.
“ Original Agreement Final Payment ” is defined in Section 2.5(b).
“ Original Agreement Term Loans ” is defined in Section 2.2(a)(i).
“ Oxford New Money Term Loan ” is defined in Section 2.2(a)(ii)(C).
“ Oxford Original Term Loan ” is defined in Section 2.2(a)(ii)(B).
“ Oxford Term Loan ” is defined in Section 2.2(a)(ii)(C).
“ Patents ” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
“ Payment Date ” is the first (1 st ) calendar day of each calendar month, commencing on July 1, 2018.
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“ Perfection Certificate ” and “ Perfection Certificates ” is defined in Section 5.1.
“ Permitted Indebtedness ” is:
(a) Borrower’s Indebtedness to the Lenders and Collateral Agent under this Agreement and the other Loan Documents (including, for the avoidance of doubt, Indebtedness in connection with Bank Services);
(b) Indebtedness existing on the Effective Date and disclosed on the Perfection Certificate(s);
(c) Subordinated Debt;
(d) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
(e) Indebtedness consisting of capitalized lease obligations, equipment financings 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 principal amount of all such Indebtedness does not exceed Two Million Dollars ($2,000,000.00) 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);
(f) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of Borrower’s business;
(g) ordinary course unsecured Indebtedness in respect to corporate credit cards for the account of Borrower or any Subsidiary in the ordinary course of business an aggregate amount outstanding at any time not to exceed Two Hundred Fifty Thousand Dollars ($250,000.00) ;
(h) Indebtedness consisting of the financing of insurance premiums in the ordinary course of business; provided that the aggregate amount of all such Indebtedness does not exceed Seven Hundred Fifty Thousand Dollars ($750,000) at any time ;
(i) other Indebtedness not otherwise permitted herein not to exceed Two Hundred Fifty Thousand Dollars ($250,000.00) outstanding at any time; and
(j) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (e) 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.
“ Permitted Investments ” are:
(a) Investments disclosed on the Perfection Certificate(s) and existing on the Effective Date;
(b) (i) Investments consisting of cash and Cash Equivalents, and (ii) 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;
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(c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;
(d) Investments consisting of Deposit Accounts in which Collateral Agent has a perfected security interest (to the extent required pursuant to Section 6.6);
(e) 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 Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate for (i) and (ii) in any fiscal year;
(g) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;
(h) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (h) shall not apply to Investments of Borrower in any Subsidiary;
(i) non-cash Investments in joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical support; and
(j) other Investments in an aggregate amount not to exceed Five Hundred Thousand Dollars ($500,000.00).
“ Permitted Licenses ” are (A) licenses of over-the-counter software that is commercially available to the public, and (B) non-exclusive and exclusive licenses for the use of the Intellectual Property of Borrower or any of its Subsidiaries entered into in the ordinary course of business, provided , that, with respect to each such license described in clause (B), (i) no Event of Default has occurred or is continuing at the time of such license; (ii) the license constitutes an arms-length transaction, the terms of which, on their face, do not provide for a sale or assignment of any Intellectual Property and do not restrict the ability of Borrower or any of its Subsidiaries, as applicable, to pledge, grant a security interest in or lien on, or assign or otherwise Transfer any Intellectual Property; (iii) in the case of any exclusive license, (x) Borrower delivers ten (10) days’ prior written notice and a brief summary of the terms of the proposed license to Collateral Agent and the Lenders and delivers to Collateral Agent and the Lenders copies of the final executed licensing documents in connection with the exclusive license promptly upon consummation thereof, and (y) any such license could not result in a legal transfer of title of the licensed property but may be exclusive in respects other than territory (including, for the avoidance of doubt, a worldwide or U.S. license that is exclusive as to a particular field or fields of use) and may be exclusive as to territory only as to discrete geographical areas outside of the United States; and (iv) all upfront payments, royalties, milestone payments or other proceeds arising from the licensing agreement that are payable to Borrower or any of its Subsidiaries are paid to a Deposit Account that is governed by a Control Agreement.
“ Permitted Liens ” are:
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(a) Liens existing on the Effective Date and disclosed on the Perfection Certificates or arising under this Agreement and the other Loan Documents;
(b) 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 its 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;
(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 twelve (12) months 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 Two Hundred Fifty Thousand Dollars ($250,000.00), 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;
(e) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);
(f) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, 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;
(g) 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 therein;
(h) 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(b) hereof;
(i) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.4 or 8.7;
(j) deposits to secure the performance of bids, trade contracts (other than for borrowed money), contracts for the purchase of property permitted hereunder, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case, incurred in the ordinary course of business not representing an obligation for borrowed money; provided, however,
40

 
the aggregate amount of such deposits may not exceed Two Hundred Fifty Thousand Dollars ($250,000.00) at any given time ;
(k) Liens on financed insurance policies, unearned premiums with respect to financed policies, insurance proceeds with respect to financed policies, securing Indebtedness in an aggregate amount not to exceed the amount permitted under clause (h) of the definition of “ Permitted Indebtedness ,” in favor of insurance companies or insurance premium financing providers, granted solely to secure financed insurance premiums and applicable taxes, fees and finance charges, to the extent that the Indebtedness in connection with such financed insurance premiums constitutes Permitted Indebtedness under this Agreement;
(l) Liens or deposits to secure the performance of leases incurred in the ordinary course of business and not representing an obligation for borrowed money and Liens to secure tenant improvements; provided, however, the lessor thereof has executed a landlord consent in favor of, and in form and content reasonably acceptable to, Collateral Agent; provided, further, that the sum of the aggregate amount of the Indebtedness secured by such Liens and the aggregate amount of such deposits at any given time may not exceed Two Hundred Fifty Thousand Dollars ($250,000.00) at any given time ; and
(m) Liens consisting of 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 government agency.
“ Post Closing Letter ” is that certain Post Closing Letter dated as of the Effective Date by and between Collateral Agent and Borrower .
“ 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:
(i) for a prepayment made on or after the Funding Date of such Term Loan through and including the first anniversary of the Effective Date, three percent (3.00%) of the principal amount of such Term Loan prepaid;
(ii) for a prepayment made after the date which is after the first anniversary of the Effective Date through and including the second anniversary of the Effective Date, two percent (2.00%) of the principal amount of the Term Loans prepaid; and
(iii) for a prepayment made after the date which is after the second anniversary of the Effective Date, one percent (1.00%) of the principal amount of the Term Loans prepaid.
“ Prime Rate ” is the rate of interest per annum from time to time published in the money rates section of The Wall Street Journal or any successor publication thereto as the “prime rate” then in effect; provided that if such rate of interest, as set forth from time to time in the money rates section of The Wall Street Journal, becomes unavailable for any reason as determined by Collateral Agent, the “ Prime Rate ” shall mean the rate of interest per annum announced by Bank as its prime rate in effect at its principal office in the State of California (such Bank announced Prime Rate not being intended to be the lowest rate of interest charged by Bank in connection with extensions of credit to debtors).
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“ 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 Term Loans held by such Lender by the aggregate outstanding principal amount of all Term Loans.
“ Registered Organization ” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.
“ 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 their Term Loans, Lenders holding one hundred percent (100.00%) of the aggregate outstanding principal balance of the Term Loans, or (ii) at any time from and after any Original Lender has assigned or transferred any interest in its Term Loans, Lenders holding at least sixty six percent (66.00%) of the aggregate outstanding principal balance of the Term Loans and, in respect of this clause (ii), (A) each Original Lender that has not assigned or transferred any portion of its Term Loans, (B) each assignee or transferee of an Original Lender’s interest in the Term Loans, but only to the extent that such assignee or transferee is an Affiliate or Approved Fund of such Original Lender, and (C) any Person providing financing to any Person described in clauses (A) and (B) above; provided, however, that this clause (C) shall only apply upon the occurrence of a default, event of default or similar occurrence with respect to such financing.
“ 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.
“ Responsible Officer ” is any of the President, Chief Executive Officer, or Chief Financial Officer of Borrower acting alone.
“ Secured Promissory Note ” is defined in Section 2.4.
“ 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.
“ 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.
“ 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 Collateral Agent, Borrower, and/or any of its Subsidiaries, and the other creditor), on terms acceptable to Collateral Agent and the Lenders.
“ Subsidiary ” is, with respect to any Person, any Person of which more than fifty percent (50.00%) 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.
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“ SVB Term Loan ” is defined in Section 2.2(a)(ii)(B) hereof.
“ Term Loan ” is defined in Section 2.2(a)(ii)(C) hereof.
“ Term Loan Commitment ” is, for any Lender, the obligation of such Lender to make a 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 connected with and symbolized by such trademarks.
“ Transfer ” is defined in Section 7.1.
“ Warrants ” are (i) those certain Warrants to Purchase Stock dated as of October 30, 2015, issued by Borrower in favor of each Lender or such Lender’s Affiliates, and (ii) those certain Warrants to Purchase Stock dated as of the Effective Date, or any date thereafter, issued by Borrower in favor of each Lender or such Lender’s Affiliates.
[ Balance of Page Intentionally Left Blank ]
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.
BORROWER:
TOCAGEN INC.

 
By:	 	/s/ Mark Foletta	 	
Name:	 	Mark Foletta	 	
Title:	 	CFO	 	

 
COLLATERAL AGENT AND LENDER:

OXFORD FINANCE LLC

 
By:	 	/s/ Colette Featherly	 	
Name:	 	Colette Featherly	 	
Title:	 	Senior Vice President	 	

 
LENDER:
 
SILICON VALLEY BANK

 
By:	 	/s/ Kristine Rohmer	 	
Name:	 	Kristine Rohmer	 	
Title:	 	Vice President	 	

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SCHEDULE 1.1
Lenders and Commitments
Original Term Loans

Lender	Term Loan Commitment	Commitment Percentage	
OXFORD FINANCE LLC	$3,600,000.00	100.00%	
TOTAL	$3,600,000.00	100.00%	
 
New Money Term Loans

Lender	Term Loan Commitment	Commitment Percentage	
OXFORD FINANCE LLC	$4,625,000.00	20.24%	
OXFORD FINANCE LLC	$5,000,000.00	21.88%	
SILICON VALLEY BANK	$13,225,000.00	57.88%	
TOTAL	$22,850,000.00	100.00%	
 
Aggregate (all Term Loans)

Lender	Term Loan Commitment	Commitment Percentage	
OXFORD FINANCE LLC	$13,225,000.00	50.00%	
SILICON VALLEY BANK	$13,225,000.00	50.00%	
TOTAL	$26,450,000.00	100.00%	

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EXHIBIT A
Description of Collateral
The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:
All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (except as noted below), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts and other Collateral Accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, 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 does not include (i) any Intellectual Property; provided, however, the Collateral shall include all Accounts and all proceeds of Intellectual Property; provided further that if a judicial authority (including a U.S. Bankruptcy Court) would hold that a security interest in the underlying Intellectual Property is necessary to have a security interest in such Accounts and such property that are proceeds of Intellectual Property, then the Collateral shall automatically, and effective as of October 30, 2015, include the Intellectual Property to the extent necessary to permit perfection of Collateral Agent’s security interest in such Accounts and such other property of Borrower that are proceeds of the Intellectual Property; (ii) any Equipment subject to a Lien described in clause (c) of the definition of “Permitted Liens” if the granting of a Lien in such Equipment is prohibited by or would constitute a default under the agreement governing such Equipment (but (A) only to the extent such prohibition is enforceable under applicable law and (B) other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-408 or 9-409 (or any other Section) of Division 9 of the Code); provided that upon the termination, lapsing or expiration of any such prohibition, such Equipment shall automatically be subject to the security interest granted in favor of Collateral Agent hereunder and become part of the “Collateral”; and (iii) any license or contract, in each case if the granting of a Lien in such license or contract is prohibited by or would constitute a default under the agreement governing such license or contract (but (A) only to the extent such prohibition is enforceable under applicable law and (B) other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-408 or 9-409 (or any other Section) of Division 9 of the Code); provided that upon the termination, lapsing or expiration of any such prohibition, such license or contract, as applicable, shall automatically be subject to the security interest granted in favor of Collateral Agent hereunder and become part of the “Collateral.”
Pursuant to the terms of a certain negative pledge arrangement with Collateral Agent and the Lenders, Borrower has agreed not to encumber any of its Intellectual Property.
 
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EXHIBIT B-1
Form of Disbursement Letter
[see attached]
 
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DISBURSEMENT LETTER
[DATE]
The undersigned, being the duly elected and acting ________________ of TOCAGEN INC. , a Delaware corporation with offices located at 3030 Bunker Hill Street, Suite 230, San Diego, CA 92109 (“ Borrower ”), does hereby certify to OXFORD FINANCE LLC (“ Oxford ” and “ Lender ”), as collateral agent (the “ Collateral Agent ”) in connection with that certain Amended and Restated Loan and Security Agreement dated as of May __, 2018, by and among Borrower, Collateral Agent and the Lenders from time to time party thereto (the “ Loan Agreement ”; with other capitalized terms used below having the meanings ascribed thereto in the Loan Agreement) that:
1. The representations and warranties made by Borrower in Section 5 of the Loan Agreement and in the other Loan Documents are true and correct in all material respects as of the date hereof.
2. No event or condition has occurred that would constitute an Event of Default under the Loan Agreement or any other Loan Document.
3. Borrower is in compliance with the covenants and requirements contained in Sections 4, 6 and 7 of the Loan Agreement.
4. All conditions referred to in Section 3 of the Loan Agreement to the making of the Loan to be made on or about the date hereof have been satisfied or waived by Collateral Agent.
5. No Material Adverse Change has occurred.
6. The undersigned is a Responsible Officer.
[Balance of Page Intentionally Left Blank]
 
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7.	The proceeds of the Term Loan shall be disbursed as follows:	
Disbursement from Oxford:	 	
Loan Amount	$_______________	
Plus:	 	
‑‑Deposit Received	$50,000.00	
 	 	
Less:	 	
‑‑Facility Fee	($_________)	
[‑‑Accrued Interest - Oxford Original Term Loan	($_________)]	
[‑‑Interim Interest - Oxford Term Loan	($_________)]	
‑‑Lender’s Legal Fees	($_________) *	
 	 	
Net Proceeds due from Oxford:	$_______________	
 	 	
Disbursement from SVB:	 	
Loan Amount	$_______________	
Plus:	 	
‑‑Deposit Received	$__________	
 	 	
Less:	 	
‑‑Facility Fee	($_________)	
[‑‑Accrued Interest - SVB Original Term Loan	($_________)]	
[‑‑Interim Interest - SVB Term Loan	($_________)]	
 	 	
Net Proceeds due from SVB:	$_______________	
 	 	
TOTAL TERM LOAN NET PROCEEDS FROM LENDERS	$_______________	
 
8.	The Term Loans shall amortize in accordance with the Amortization Table attached hereto.	
 
9.	The aggregate net proceeds of the Term Loans shall be transferred to the Designated Deposit Account as follows:	

Account Name:	TOCAGEN INC.	
Bank Name:	Silicon Valley Bank	
Bank Address:	3003 Tasman Drive
Santa Clara, California 95054	
Account Number:	____________________________________	
ABA Number:	121140399	

 
[Balance of Page Intentionally Left Blank]

 	
* Legal f ees and costs are through the Effective Date.  Post closing legal fees and costs, payable after the Effective Date , to be invoiced and paid post closing.		
49

 
Dated as of the date first set forth above.
BORROWER:
TOCAGEN INC.

 
By:	 	 	 	
Name:	 	 	 	
Title:	 	 	 	

 
COLLATERAL AGENT AND LENDER:

OXFORD FINANCE LLC

 
By:	 	 	 	
Name:	 	 	 	
Title:	 	 	 	

 
LENDER:
 
SILICON VALLEY BANK

 
By:	 	 	 	
Name:	 	 	 	
Title:	 	 	 	

50

 
AMORTIZATION TABLE 
 (Term Loans)
[see attached]
51

 
EXHIBIT B-2
Loan Payment/Advance Request Form
Deadline for same day processing is Noon Pacific Time*
Fax To:   Date: _____________________
 
Loan Payment :
TOCAGEN INC.
 
From Account #________________________________              To Account #__________________________________________________
(Deposit Account #)                                                                                             (Loan Account #)
Principal $_______________________________________        and/or Interest $________________________________________________
 
Authorized Signature: ________________________________     Phone Number: ________________________________
Print Name/Title: ________________________________
 
Loan Advance :
 
Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an outgoing wire.
From Account #________________________________                  To Account #________________________________________________
(Loan Account #)                                                                                            (Deposit Account #)
Amount of Advance $___________________________
 
All Borrower’s representations and warranties in the Loan and Security Agreement are true, correct and complete in all material respects on the date of the request for an advance; 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 :
 
Authorized Signature: ________________________________    Phone Number: ________________________________
Print Name/Title: ________________________________
 
Outgoing Wire Request :
 
Complete only if all or a portion of funds from the loan advance above is to be wired.
Deadline for same day processing is noon, Pacific Time
 
Beneficiary Name: _____________________________           Amount of Wire: $________________________________
Beneficiary Bank: ______________________________          Account Number: ________________________________
City and State: ________________________________
 
Beneficiary Bank Transit (ABA) #: ____________________    Beneficiary Bank Code (Swift, Sort, Chip, etc.): ______________________
(For International Wire Only)
Intermediary Bank: ______________________________         Transit (ABA) #: _______________________________________________
For Further Credit to: __________________________________________________________________________________________
 
Special Instruction: ________________________________________________________________________________________________________________
By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreements(s) covering funds transfer service(s), which agreements(s) were previously received and executed by me (us).
 
Authorized Signature: ___________________________       2 nd Signature (if required): _______________________________________
Print Name/Title: ______________________________        Print Name/Title: ______________________________________________
Telephone #: ______________________________               Telephone #:______________________________ ]

34883499v9

EXHIBIT C
Compliance Certificate

TO:	OXFORD FINANCE LLC, as Collateral Agent and Lender
SILICON VALLEY BANK, as Lender	
FROM:	TOCAGEN INC.	
The undersigned authorized officer (“ Officer ”) of TOCAGEN INC. (“ Borrower ”), hereby certifies that in accordance with the terms and conditions of the Amended and Restated Loan and Security Agreement by and among Borrower, Collateral Agent, and the Lenders from time to time party thereto (the “ Loan Agreement ;” capitalized terms used but not otherwise defined herein shall have the meanings given them in the Loan Agreement),
(a) Borrower is in complete compliance for the period ending with all required covenants except as noted below;
(b) There are no Events of Default, except as noted below;
(c) Except as noted below, all representations and warranties of Borrower stated in the Loan Documents are true and correct in all material respects on this date and for the period described in (a), above; 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.
(d) Borrower, and each of Borrower’s Subsidiaries, has timely filed all required tax returns and reports, Borrower, and each of Borrower’s Subsidiaries, has timely paid all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower, or Subsidiary, except as otherwise permitted pursuant to the terms of Section 5.8 of the Loan Agreement;
(e) No Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Collateral Agent and the Lenders.
Attached are the required documents, if any, supporting our certification(s). The Officer, on behalf of Borrower, further certifies that the attached financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes and except, in the case of unaudited financial statements, for the absence of footnotes and subject to year-end audit adjustments as to the interim financial statements.
Please indicate compliance status since the last Compliance Certificate by circling Yes, No, or N/A under “Complies” column.

 	Reporting Covenant	Requirement	Actual	Complies	
1)	Financial statements	Monthly within 30 days	 	Yes	No	N/A	
34883499v9

2)	Annual (CPA Audited) statements	Within 180 days after FYE	 	Yes	No	N/A	
3)	Annual Financial Projections/Budget (prepared on a monthly basis)	Annually (within 30 days of FYE or 7 days after Board-approval), and when revised	 	Yes	No	N/A	
4)	8‑K, 10‑K and 10‑Q Filings	Within 5 days of filing	 	Yes	No	N/A	
5)	Compliance Certificate	Monthly within 30 days	 	Yes	No	N/A	
6)	IP Report	When required	 	Yes	No	N/A	
7)	Total amount of Borrower’s cash and cash equivalents at the last day of the measurement period	 	$________	Yes	No	N/A	
8)	Total amount of Borrower’s Subsidiaries’ cash and cash equivalents at the last day of the measurement period	 	$________	Yes	No	N/A	
 
Deposit and Securities Accounts
(Please list all accounts; attach separate sheet if additional space needed)
 
 	Institution Name	Account Number	New Account?	Account Control Agreement in place?	
1)	 	 	Yes	No	Yes	No	
2)	 	 	Yes	No	Yes	No	
3)	 	 	Yes	No	Yes	No	
4)	 	 	Yes	No	Yes	No	

Other Matters
 
1)	Have there been any changes in management since the last Compliance Certificate?	Yes	No	
 	 	 	 	
2)	Have there been any transfers/sales/disposals/retirement of Collateral or IP prohibited by the Loan Agreement?	Yes	No	
 	 	 	 	
3)	Have there been any new or pending claims or causes of action against Borrower that involve more than Two Hundred Fifty Thousand Dollars ($250,000.00)?	Yes	No	
 	 	 	 	
34883499v9

4)	Have there been any amendments of or other changes to the capitalization table of Borrower (prior to the IPO) and to the Operating Documents of Borrower or any of its Subsidiaries? If yes, provide copies of any such amendments or changes with this Compliance Certificate .	Yes	No	
 
Exceptions
Please explain any exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions.” Attach separate sheet if additional space needed.)
TOCAGEN INC.
By: __________________________
Name: ________________________
Title: _________________________
Date: _________________________
LENDER USE ONLY
Received by: Date:
Verified by: Date:
Compliance Status: Yes       No
 
34883499v9

EXHIBIT D
Form of Secured Promissory Note
[see attached]
 
34883499v9

[ AMENDED AND RESTATED] SECURED PROMISSORY NOTE 
(Term Loan)

$	 	 	Dated:	 	
FOR VALUE RECEIVED, the undersigned, TOCAGEN INC., a Delaware corporation with offices located at 3030 Bunker Hill Street, Suite 230, San Diego, CA 92109 (and after June 1, 2018, 4242 Campus Point Court, San Diego, CA 92121) (“ Borrower ”) HEREBY PROMISES TO PAY to the order of [OXFORD FINANCE LLC][SILICON VALLEY BANK] (“ Lender ”) the principal amount of [ ] DOLLARS ($ .00) or such lesser amount as shall equal the outstanding principal balance of the Term Loan made to Borrower by Lender, plus interest on the aggregate unpaid principal amount of such Term Loan, at the rates and in accordance with the terms of the Amended and Restated Loan and Security Agreement dated May __, 2018 by and among Borrower, Lender, Oxford Finance LLC, 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 Loan, are payable in lawful money of the United States of America to Lender as set forth in the Loan Agreement and this [Amended and Restated] 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 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 Loan, interest on the Term 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 California.
 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
34883499v9

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.
[Except as otherwise set forth herein, this Amended and Restated Secured Promissory Note is intended to and does completely amend and restate, without novation, that certain Secured Promissory Note issued October 30, 2015 in the principal amount of $9,000,000.00 by Borrower in favor of Lender.]
 
[Balance of Page Intentionally Left Blank]
 
34883499v9

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:
TOCAGEN INC.
By___________________________________
Name: ________________________________
Title: _________________________________
 
34883499v9

LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL
 
Date	Principal Amount	Interest Rate	Scheduled Payment Amount	Notation By	

 
 
34883499v9

CORPORATE BORROWING CERTIFICATE

BORROWER:	TOCAGEN INC.	DATE :	 	
 	 	
LENDERS:	OXFORD FINANCE LLC, as Collateral Agent and Lender
SILICON VALLEY BANK, as Lender	
I hereby certify as follows, as of the date set forth above:
1. I am the Secretary, Assistant Secretary or other officer of Borrower. My title is as set forth below.
2. Borrower’s exact legal name is set forth above. Borrower is a corporation existing under the laws of the State of Delaware.
3. Attached hereto as Exhibit A and Exhibit B, respectively, are true, correct and complete copies of (i) Borrower’s Certificate of Incorporation (including amendments), as filed with the Secretary of State of the state in which Borrower is incorporated as set forth in paragraph 2 above; and (ii) Borrower’s Bylaws. Neither such Certificate of Incorporation nor such Bylaws have been amended, annulled, rescinded, revoked or supplemented, and such Certificate of Incorporation and such Bylaws remain in full force and effect as of the date hereof.
4. The following resolutions were duly and validly adopted by Borrower’s Board of Directors at a duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized corporate action). Such resolutions are in full force and effect as of the date hereof and have not been in any way modified, repealed, rescinded, amended or revoked, and the Lenders may rely on them until each Lender receives written notice of revocation from Borrower.
[ Balance of Page Intentionally Left Blank ]
 
34883499v9

RESOLVED , that any one of the following officers or employees of Borrower, whose names, titles and signatures are below, may act on behalf of Borrower:
RESOLVED FURTHER, that any one of the persons designated above with a checked box beside his or her name may, from time to time, add or remove any individuals to and from the above list of persons authorized to act on behalf of Borrower.
RESOLVED FURTHER, that such individuals may, on behalf of Borrower:
Borrow Money . Borrow money from the Lenders.
Execute Loan Documents . Execute any loan documents any Lender requires.
Grant Security . Grant Collateral Agent a security interest in any of Borrower’s assets.
Negotiate Items . Negotiate or discount all drafts, trade acceptances, promissory notes, or other
indebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds.
Letters of Credit . Apply for letters of credit from Bank.
Enter Derivatives Transactions . Execute spot or forward foreign exchange contracts, interest
rate swap agreements, or other derivatives transactions.
Issue Warrants . Issue warrants for Borrower’s capital stock.
Further Acts . Designate other individuals to request advances, pay fees and costs and execute
other documents or agreements (including documents or agreement that waive Borrower’s right to a jury trial) they believe to be necessary to effectuate such resolutions.
 
RESOLVED FURTHER, that all acts authorized by the above resolutions and any prior acts relating thereto are ratified.
[ Balance of Page Intentionally Left Blank ]
 
34883499v9

5. The persons listed above are Borrower’s officers or employees with their titles and signatures shown next to their names.
By:____________________________________
Name: ___________________________________
Title: ___________________________________
*** If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set forth in paragraph 4 as one of the authorized signing officers, this Certificate must also be signed by a second authorized officer or director of Borrower.
I, the of Borrower, hereby certify as to paragraphs 1 through 5 above, as
[print title]
of the date set forth above.
By:____________________________________
Name: ___________________________________
Title: ___________________________________
 
34883499v9

EXHIBIT A
Certificate of Incorporation (including amendments)
[see attached]
 
34883499v9

EXHIBIT B
Bylaws
[see attached]

34883499v9

DEBTOR:	TOCAGEN INC.	
SECURED PARTY:	OXFORD FINANCE LLC,	
 	as Collateral Agent	
 
EXHIBIT A TO UCC FINANCING STATEMENT
 
Description of Collateral
 
The Collateral consists of all of Debtor’s right, title and interest in and to the following personal property:
All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (except as noted below), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts and other Collateral Accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, 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 does not include (i) any Intellectual Property; provided, however, the Collateral shall include all Accounts and all proceeds of Intellectual Property; provided further that if a judicial authority (including a U.S. Bankruptcy Court) would hold that a security interest in the underlying Intellectual Property is necessary to have a security interest in such Accounts and such property that are proceeds of Intellectual Property, then the Collateral shall automatically, and effective as of October 30, 2015, include the Intellectual Property to the extent necessary to permit perfection of Secured Party’s security interest in such Accounts and such other property of Debtor that are proceeds of the Intellectual Property; (ii) any Equipment subject to a Lien described in clause (c) of the definition of “Permitted Liens” if the granting of a Lien in such Equipment is prohibited by or would constitute a default under the agreement governing such Equipment (but (A) only to the extent such prohibition is enforceable under applicable law and (B) other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-408 or 9-409 (or any other Section) of Division 9 of the Code); provided that upon the termination, lapsing or expiration of any such prohibition, such Equipment shall automatically be subject to the security interest granted in favor of Secured Party under the Amended and Restated Loan and Security Agreement referred to below and become part of the “Collateral”; and (iii) any license or contract, in each case if the granting of a Lien in such license or contract is prohibited by or would constitute a default under the agreement governing such license or contract (but (A) only to the extent such prohibition is enforceable under applicable law and (B) other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-408 or 9-409 (or any other Section) of Division 9 of the Code); provided that upon the termination, lapsing or expiration of any such prohibition, such license or contract, as applicable, shall automatically be subject to the security interest granted in favor of Secured Party under the Amended and Restated Loan and Security Agreement referred to below and become part of the “Collateral.”
Pursuant to the terms of a certain negative pledge arrangement with Collateral Agent and the Lenders, Debtor has agreed not to encumber any of its Intellectual Property.
34883499v9

Capitalized terms used but not defined herein have the meanings ascribed in the Uniform Commercial Code in effect in the State of California as in effect from time to time (the “Code”) or, if not defined in the Code, then in the Amended and Restated Loan and Security Agreement by and between Debtor, Secured Party and the other Lenders party thereto (as modified, amended and/or restated from time to time).
34883499v9

Exhibit 10.3
FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “ Amendment ”) is entered into as of August 3, 2018 (the “ First Amendment Date ”), by and among OXFORD FINANCE LLC, a Delaware limited liability company with an office located at 133 North Fairfax Street, Alexandria, Virginia 22314, as collateral agent (in its individual capacity, “ Oxford ”; and in its capacity as collateral agent, “ Collateral Agent ”), the Lenders listed on Schedule 1.1 of the Loan Agreement (as defined below) or otherwise party thereto from time to time including Oxford in its capacity as a Lender and SILICON VALLEY BANK, a California corporation with an office located at 3003 Tasman Drive, Santa Clara, CA 95054 (“ Bank ” or “ SVB ”) (each a “ Lender ” and collectively, the “ Lenders ”), and TOCAGEN INC., a Delaware corporation with offices located at 4242 Campus Point Ct. , San Diego, CA 92121 (“ Borrower ”).
WHEREAS, Collateral Agent, Borrower and the Lenders party to the Loan Agreement from time to time have entered into that certain Amended and Restated Loan and Security Agreement, dated as of May 18, 2018 (as amended, supplemented or otherwise modified from time to time, the “ Loan Agreement ”) pursuant to which the Lenders have provided to Borrower certain loans in accordance with the terms and conditions thereof;
WHEREAS, Borrower, the Lenders and Collateral Agent desire to amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below;
NOW, THEREFORE, in consideration of the promises, covenants and agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower, the Lenders and Collateral Agent hereby agree as follows:

 	1.	 Capitalized terms used herein but not otherwise defined shall have the respective meanings given to them in the Loan Agreement.	
 
 	2.	Borrower hereby reaffirms the security interest granted by Borrower previously in Section 4.1 of the Loan Agreement with respect to the Collateral.	
 
 	3.	Section 6.2 of the Loan Agreement is hereby amended by amending and restating clause (a)(i) therein as in its entirety as follows:	
 
“(i) as soon as available, but no later than thirty (30) days after the last day of each quarter, a company prepared consolidated (and consolidating, if applicable) balance sheet, income statement and cash flow statement covering the consolidated operations of Borrower and its Subsidiaries for such quarter certified by a Responsible Officer and in a form reasonably acceptable to Collateral Agent;”

 	4.	Section 6.2 of the Loan Agreement is hereby amended by amending and restating clause (b) therein as in its entirety as follows:	
 
“(b) Concurrently with the delivery of the financial statements specified in Section 6.2(a)(i) above but no later than thirty (30) days after the last day of each quarter, deliver to each Lender, a duly completed Compliance Certificate signed by a Responsible Officer.”

 	5.	Section 7.1 of the Loan Agreement is hereby amended by amending and restating it in its entirety as follows:	
 
“ 7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, “ Transfer ”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out or obsolete Equipment; (c) other than Transfers permitted pursuant to Section 7.1(d) below, in the ordinary course of business in an aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000.00) in any fiscal year so
1

long as such Transfers are not otherwise prohibited by this Agreement; (d) consisting of the sale and lease back of E quipment , provided that the aggregate the cost or fair market value of all such Equipment does not exceed Two Million Dollars ($2,000,000.00) at any time; and ( e ) in connection with Permitted Liens, Permitted Investments and Permitted Licenses.”

 	6.	Section 13.1 of the Loan Agreement is hereby amended by amending and restating clause (e) of the definition of “Permitted Indebtedness” therein in its entirety as follows:	
 
“(e) Indebtedness consisting of capitalized lease obligations, equipment financings (including in connection with sale and lease backs permitted pursuant to Section 7.1(d) of this Agreement) 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 principal amount of all such Indebtedness does not exceed Two Million Dollars ($2,000,000.00) 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);
 
 	7.	Section 13.1 of the Loan Agreement is hereby amended by amending and restating clause (d) of the definition of “Permitted Liens” therein in its entirety as follows:	
 
“(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 Two Hundred Fifty Thousand Dollars ($250,000.00) (except that such limit shall not apply to statutory Liens of any contract manufacturers identified on the Perfection Certificate to the extent that any such Lien arises as a matter of law, is in the ordinary course of business, attaches only to Inventory, and is disclosed in writing to Collateral Agent), 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;
 
 	8.	Exhibit C to the Loan Agreement is hereby amended by amending and restating it in its entirety as set forth on Exhibit C attached thereto.	
 
 	9.	Limitation of Amendment.	
 
 	a.	The amendments set forth in Sections 3 through 8, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (i) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (ii) otherwise prejudice any right or remedy which the Lenders, or obligation which Borrower, may now have or may have in the future under or in connection with any Loan Document.	
 
 	b.	This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.	
 
 	10.	Release by Borrower.	
 
 	a.	 FOR GOOD AND VALUABLE CONSIDERATION, Borrower hereby forever relieves, releases, and discharges Collateral Agent and each Lender and their respective present or former employees, officers, directors, agents, representatives, attorneys, and each of them, from any and all claims, debts, liabilities, demands, obligations, promises, acts, agreements, costs and expenses, actions and causes of action, of every type, kind, nature, description or character whatsoever, whether known or unknown, suspected or unsuspected, absolute or contingent, arising out of or in any manner whatsoever connected with or related to facts, circumstances, issues, controversies or claims existing or arising from the beginning of time through and including the date of execution	
2

 		of this Amendment solely to the extent such claims arise out of or are in any manner whatsoever connected with or related to the Loan Documents, the Recitals hereto, any instruments, agreements or documents executed in connection with any of the foregoing or the origination, negotiation, administration, servicing and/or enforcement of any of the foregoing (collectively “ Released Claims ”).	
 
 	b.	In furtherance of this release, Borrower expressly acknowledges and waives any and all rights under Section 1542 of the California Civil Code, which provides as follows:	
 
“ A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” (Emphasis added.)
 
 	c.	By entering into this release, Borrower recognizes that no facts or representations are ever absolutely certain and it may hereafter discover facts in addition to or different from those which it presently knows or believes to be true, but that it is the intention of Borrower hereby to fully, finally and forever settle and release all matters, disputes and differences, known or unknown, suspected or unsuspected in respect of the Released Claims; accordingly, if Borrower should subsequently discover that any fact that it relied upon in entering into this release was untrue, or that any understanding of the facts was incorrect, Borrower shall not be entitled to set aside this release by reason thereof, regardless of any claim of mistake of fact or law or any other circumstances whatsoever. Borrower acknowledges that it is not relying upon and has not relied upon any representation or statement made by Bank with respect to the facts underlying this release or with regard to any of such party’s rights or asserted rights.	
 
 	d.	This release may be pleaded as a full and complete defense and/or as a cross-complaint or counterclaim against any action, suit, or other proceeding that may be instituted, prosecuted or attempted in breach of this release. Borrower acknowledges that the release contained herein constitutes a material inducement to Collateral Agent and the Lenders to enter into this Amendment, and that Collateral Agent and the Lenders would not have done so but for Collateral Agent’s and the Lenders’ expectation that such release is valid and enforceable in all events.	
 
 	e.	Borrower hereby represents and warrants to Collateral Agent and the Lenders, and Collateral Agent and the Lenders are relying thereon, as follows:	
 
 	i.	Except as expressly stated in this Amendment, neither Collateral Agent, the Lenders nor any agent, employee or representative of any of them has made any statement or representation to Borrower regarding any fact relied upon by Borrower in entering into this Amendment.	
 
 	ii.	Borrower has made such investigation of the facts pertaining to this Amendment and all of the matters appertaining thereto, as it deems necessary.	
 
 	iii.	The terms of this Amendment are contractual and not a mere recital.	
 
 	iv.	This Amendment has been carefully read by Borrower, the contents hereof are known and understood by Borrower, and this Amendment is signed freely, and without duress, by Borrower.	
 
 	v.	 Borrower represents and warrants that it is the sole and lawful owner of all right, title and interest in and to every claim and every other matter which it releases herein, and that it has not heretofore assigned or transferred, or purported to assign or transfer, to any person, firm or entity any claims or other matters herein released. Borrower shall indemnify Collateral Agent and the Lenders, defend and hold each harmless from and	
3

 		against all claims based upon or arising in connection with prior assignments or purported assignments or transfers of any claims or matters released herein.	
 
 	11.	To induce Collateral Agent and the Lenders to enter into this Amendment, Borrower hereby represents and warrants to Collateral Agent and the Lenders as follows:	
 
 	a.	Immediately after giving effect to this Amendment (i) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date) and (ii) no Event of Default has occurred and is continuing;	
 
 	b.	Borrower has the power and due authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;	
 
 	c.	The organizational documents of Borrower delivered to Collateral Agent on the Effective Date remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;	
 
 	d.	The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (i) any law or regulation binding on or affecting Borrower, (ii) any contractual restriction with a Person binding on Borrower, (iii) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (iv) the organizational documents of Borrower;	
 
 	e.	The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrower, except as already has been obtained or made; and	
 
 	f.	This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.	
 
 	12.	Except as expressly set forth herein, the Loan Agreement shall continue in full force and effect without alteration or amendment.  This Amendment and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.	
 
 	13.	This Amendment shall be deemed effective as of the First Amendment Date upon (a) the due execution and delivery to Collateral Agent of this Amendment by each party hereto, and (b) Borrower’s payment of all Lenders’ Expenses incurred through the date hereof, which may be debited (or ACH’d) from any of Borrower’s accounts with the Lenders.	
 
 	14.	This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, and all of which, taken together, shall constitute one and the same instrument.	
 
 	15.	This Amendment and the rights and obligations of the parties hereto shall be governed by and construed in accordance with the laws of the State of California.	

[ Balance of Page Intentionally Left Blank ]
 
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IN WITNESS WHEREOF , the parties hereto have caused this First Amendment to Amended and Restated Loan and Security Agreement to be executed as of the date first set forth above.

BORROWER:	 	 	
 	 	 	
TOCAGEN INC.	 	 	

By /s/ Mark Foletta	 	 	
Name: Mark Foletta	 	 	
Title: Chief Financial Officer	 	 	

 	 	 	
COLLATERAL AGENT AND LENDER:
 
OXFORD FINANCE LLC

By:  /s/ Colette Featherly
Name:  Colette Featherly
Title:  Senior Vice President

 	 	 	
LENDER:
 
SILICON VALLEY BANK

By:  /s/ Kristine Rohmer
Name:  Kristine Rohmer
Title:  Vice President

 

 
Exhibit 31.1
CERTIFICATION
I, Martin J. Duvall, certify that:
 1. I have reviewed this quarterly report on Form 10-Q of Tocagen Inc., a Delaware corporation (the “registrant”);
2. 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;
3. 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;
4. The registrant's other certifying officer 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)) for the registrant and have:
(a) 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;
(b) 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
(c) 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; and
5. The registrant's other certifying officer 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) 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
(b) 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: August 9, 2018	 	/s/ Martin J. Duvall	
 	 	Martin J. Duvall
Chief Executive Officer
(Principal Executive Officer)	

 
Exhibit 31.2
CERTIFICATION
I, Mark Foletta, certify that:
 1. I have reviewed this quarterly report on Form 10-Q of Tocagen Inc., a Delaware corporation (the “registrant”);
2. 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;
3. 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;
4. The registrant's other certifying officer 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)) for the registrant and have:
(a) 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;
(b) 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
(c) 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; and
5. The registrant's other certifying officer 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) 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
(b) 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: August 9, 2018	 	/s/ Mark Foletta	
 	 	Mark Foletta
Chief Financial Officer
(Principal Financial Officer)	

 
Exhibit 32.1
SECTION 1350 CERTIFICATION
Each of the undersigned, Martin J. Duvall, Chief Executive Officer of Tocagen Inc., a Delaware corporation (the “Company”), and Mark Foletta, Chief Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge (1) the quarterly report on Form 10-Q of the Company for the quarterly period ended June 30, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”) and to which this Certification is attached as Exhibit 32.1, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 

/s/ Martin J. Duvall	
Name: Martin J. Duvall
Title: Chief Executive Officer (Principal Executive Officer)
Dated: August 9, 2018	

/s/ Mark Foletta	
Name: Mark Foletta
Title: Chief Financial Officer (Principal Financial Officer)
Dated: August 9, 2018	
 
This certification accompanies and is being “furnished” with this Report, shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.