9. Commitments and Contingencies

Operating Leases

In 2015, Inotek entered into a lease agreement (the “Office Lease”) for its headquarters in Lexington, Massachusetts. Inotek occupied this space in September 2015, at which time its rental obligations commenced. Inotek recorded $445 as leasehold improvements for costs incurred to build out the space, and is amortizing those costs to facilities expense over the term of the lease. Rent expense is recognized on a straight-line basis at the average monthly rent over the term of the lease. Deferred rent is included in other current and long-term liabilities on Inotek’s consolidated balance sheets.

In 2016, Inotek signed an amendment to the Office Lease, whereby it agreed to rent additional space (the “Lease Amendment”). Inotek occupied the additional space on July 1, 2016. The terms of the Lease Amendment follow the terms of the Office Lease. The lease term is 90 months and Inotek has the right to extend the term for one period of five years.

Rent expense was $337 and $275 for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, the remaining aggregate annual commitments pursuant to the Office Lease and the Lease Amendment are as follows:

Year	(in thousands)
2018	$	411
2019		421
2020		430
2021		439
2022		445
Thereafter		74
Total	$	2,220

Employee Agreements

In September 2017, Inotek modified the employment agreements with certain of its remaining employees such that in the event of termination in connection with a change in control (“CIC”), Inotek will provide these employees severance payments at each employee’s current monthly salary rate, and continued medical, dental and vision coverage pursuant to COBRA (of the employer’s portion of the premium cost) for up to six months primarily depending on duration of each individual employee’s service. Inotek also modified the employment agreements with certain of its named executive officers. In the event of a qualifying termination in connection with a CIC, for each of Inotek’s Chief Medical Officer and Vice President, Finance, Inotek will pay (i) twelve and six months’ severance, respectively, at each person’s current monthly salary rate, and (ii) continued medical, dental and vision coverage pursuant to COBRA (of the employer’s portion of the premium cost), for twelve and six months, respectively. In the event of a qualifying termination in connection with a CIC, in addition to the severance benefits previously provided to Inotek’s Chief Executive Officer (consisting of a lump-sum payment equal to 18 months’ base salary), Inotek agreed to provide continued medical, dental and vision coverage pursuant to COBRA (of the employer’s portion of the premium cost), for eighteen months. In addition, Inotek committed to paying to all seven remaining employees, if they were employees on the date of a CIC, a retention bonus, with the aggregate of all such retention bonuses equal to approximately $642.

Also, upon a CIC, Inotek would owe Perella Weinberg a fee of $2,000.

All payments described above became due and payable upon the consummation of the Reverse Merger in January 2018.

Securities Litigation

On January 6, 2017, a purported stockholder of Inotek filed a putative class action in the U.S. District Court for the District of Massachusetts, captioned Whitehead v. Inotek Pharmaceuticals Corporation, et al., No. 1:17-cv-10025. An amended complaint was filed on July 10, 2017, and a second amended complaint was filed on September 5, 2017. The second amended complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 against the Company, David Southwell, and Rudolf Baumgartner based on allegedly false and misleading statements and omissions regarding Inotek’s phase 2 and phase 3 clinical trials of trabodenoson. The lawsuit seeks, among other things, unspecified compensatory damages for purchasers of Inotek’s common stock between July 23, 2015 and July 10, 2017, as well as interest and attorneys’ fees and costs. The defendants filed a motion to dismiss the second amended complaint on October 6, 2017, the plaintiffs opposed the motion on December 5, 2017, and the defendants filed a reply on January 16, 2018. Inotek continues to vigorously defend itself against this claim.

From time to time, Inotek may be subject to other various legal proceedings and claims that arise in the ordinary course of its business activities. Although the results of litigation and claims cannot be predicted with certainty, Inotek does not believe it is party to any other claim or litigation the outcome of which, if determined adversely to Inotek, would individually or in the aggregate be reasonably expected to have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on Inotek because of defense and settlement costs, diversion of management resources and other factors.

Termination of Chief Scientific Officer

In October 2016, Inotek entered into a Transition Agreement with its former Chief Scientific Officer, William K. McVicar, Ph.D. (the “Transition Agreement”). Pursuant to the terms of the Transition Agreement, Dr. McVicar remained an employee of the Company as a Senior Advisor for a six-month period ending April 4, 2017 (the “Transition Period”) and for twelve months thereafter will receive his salary and medical benefits at the same rate in effect as of the date of the Transition Agreement. Inotek recorded a charge in research and development expense of approximately $862 in 2016 related to the Transition Agreement, including approximately $215 related to stock options expected to vest during the Transition Period. Through December 31, 2017, Inotek has made payments of approximately $591 to Dr. McVicar, including $102 related to his 2016 bonus payment which was accrued prior to his termination. As of December 31, 2017, Inotek had $106 in accrued severance related to Dr. McVicar.

Indemnification Arrangements

As permitted under Delaware law, Inotek’s bylaws provide that Inotek will indemnify any director, officer, employee or agent of Inotek or anyone serving in these capacities. The maximum potential amount of future payments Inotek could be required to pay is unlimited. Inotek has insurance that reduces its monetary exposure and would enable it to recover a portion of any future amounts paid. As a result, Inotek believes that the estimated fair value of these indemnification commitments is minimal.

Throughout the normal course of business, Inotek has agreements with vendors that provide goods and services required by Inotek to run its business. In some instances, vendor agreements include language that requires Inotek to indemnify the vendor from certain damages caused by Inotek’s use of the vendor’s goods and/or services. Inotek has insurance that would allow it to recover a portion of any future amounts that could arise from these indemnifications. As a result, Inotek believes that the estimated fair value of these indemnification commitments is minimal.