Related Party Transactions

12 Months Ended

Dec. 31, 2019

8. Related Party Transactions

Clinical Reference Laboratory, Inc.

One of the members of the Company's board of directors was the Chief Executive Officer of Clinical Reference Laboratory, Inc. (CRL) during the years ended December 31, 2019, 2018, and 2017. CRL is owned by CHC, Inc., which owns

approximately 31% of Brightstar, a holder of more than 5% of the Company's common stock. The Company has entered into various agreements and transactions with CRL.

Notes Payable to Related Party

The Company was party to a loan agreement and a security agreement, each dated as of June 11, 2010, with CRL (the CRL Construction Loan). The Company borrowed an aggregate of $2.8 million under the loan agreement to finance improvements to the Company's biology and chemistry laboratories in Lawrence, Kansas. In December 2017, the loan was assigned to CHC, Inc., a related party, which owns 100% of CRL.

Borrowings under the loan bore interest at a fixed rate equal to 6.0% per annum and the Company was required to make monthly payments of principal and interest, based on a straight-line amortization schedule of 15 years, which commenced on January 1, 2011. For the years ended December 31, 2019, 2018, and 2017, the Company recorded $0.1 million of interest expense related to this loan. For the year ended December 31, 2019, the Company made $1.4 million in principal and interest payments under the loan and for the years ended December 31, 2018 and 2017, the Company made $0.3 million in principal and interest payments under the loan.

In December 2019, the Company repaid the outstanding balance of the loan, and as such, as of December 31, 2019, there were no principal amounts owed under the loan agreement. As of December 31, 2018, principal amounts owed under the loan agreement totaled $1.3 million as described in the table below:


(in thousands)	As of December 31, 2018
Notes payable to related party	$	1,294
Less: Current portion	(187)
Notes payable to related party, net of current portion	$	1,107

The CRL Construction Loan was collateralized by a security interest in all of the equipment and fixtures at the Company's laboratories in Lawrence, Kansas. Under the loan and security agreements, the Company agreed to affirmative, negative and financial covenants to which it remained subject until the loan was paid off in full. These covenants included limitations on the Company's ability to incur additional indebtedness and engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses, as well as requirements that the Company comply with a maximum liabilities-to-assets ratio, a minimum working capital threshold, and a maximum debt-to-equity ratio. Events of default under the loan agreement included failure to make payments when due, insolvency events, failure to comply with covenants and material adverse effects with respect to the Company. The lender's remedies upon an event of default included the ability to accelerate all amounts that are due under the CRL Construction Loan to become immediately due and payable. As of December 31, 2019, the Company was no longer subject to such covenants, and as of December 31, 2018, the Company was in compliance with the financial covenants of the CRL Construction Loan.

Master Services Agreement with Related Party

The Company is party to a master services agreement, effective as of May 20, 2013, with CRL under which the Company purchased laboratory services. Under the agreement, the Company agreed to use CRL for laboratory testing needs. For the years ended December 31, 2019, 2018, and 2017, the Company recorded $0.7 million, $0.9 million, and $0.4 million, respectively, of research and development expense incurred under this agreement, of which $0.7 million, $0.8 million, and $0.4 million, respectively, was paid to CRL during those same periods. As of December 31, 2019 and 2018, total amounts owed to CRL for laboratory services were less than $0.1 million and $0.2 million, respectively, of which amounts were included in accounts payable and accrued expenses and other current liabilities in the consolidated balance sheets. The Company is not committed to purchase any minimum amounts under the agreement.

401(k) Plan with Related Party

In 2015, the Company entered into an agreement with CRL under which the Company became a participating employer in a defined contribution plan that was managed by CRL (the CRL 401(k) Plan). Effective January 1, 2018, the Company adopted the Deciphera Pharmaceuticals 401(k) Plan (the 2018 401(k) Plan) to which employees' and former employees' accounts were transitioned from the CRL 401(k) Plan. For the years ended December 31, 2019 and 2018, no contributions were made by employees of the Company to the CRL 401(k) Plan. For the year ended December 31, 2017, the total amount of contributions made by employees of the Company under the CRL 401(k) Plan was $0.6 million.