As filed with the Securities and Exchange Commission on January 19, 2021.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Longeveron LLC*
(Exact name of registrant as specified in its charter)
Delaware | 2834 | 47-2174146 | ||
(State
or other jurisdiction of
incorporation or organization) |
(Primary
Standard Industrial
Classification Code Number) |
(I.R.S.
Employer
Identification No.) |
1951 NW 7th Avenue, Suite 520
Miami, Florida 33136
Telephone: (305) 909-0840
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Geoff Green
Chief Executive Officer
Longeveron LLC
1951 NW 7th Avenue, Suite 520
Miami, Florida 33136
Telephone: (305) 909-0840
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Jennifer Minter Brian North Buchanan Ingersoll & Rooney PC Union Trust Building 501 Grant Street, Suite 200 Pittsburgh, PA 15219 Telephone: (412) 562-8800 |
Andrew Tucker Nelson Mullins Riley & Scarborough LLP 101 Constitution Avenue, NW Suite 900 Washington, D.C. 20001 Telephone: (202) 689-2987 |
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☒ |
If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities To Be Registered |
Proposed
Maximum Aggregate Offering Price(1)(2) |
Amount of
Registration Fee(3) |
||||||
Class A Common Stock, $0.001 par value per share | $ | 29,900,000 | $ | 3,262.09 | ||||
Class A Common Stock issuable upon exercise of Underwriters Warrants(4) | -- | -- |
(1) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. |
(2) | Includes the aggregate offering price of additional shares that the underwriters have the option to purchase. |
(3) | Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price. |
(4) | Longeveron agreed to issue at the closing of this offering, warrants to Kingswood Capital Markets, as representative of the underwriters, entitling it to purchase up to 4.0% of the aggregate shares of Class A common stock being sold in this offering (the “Underwriter Warrants”). The exercise price of the warrants is equal to 120% of the offering price of the Class A common stock offered hereby. Pursuant to Rule 416, also includes such indeterminate number of additional securities as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions. |
* | Prior to the closing of the offering to which this Registration Statement relates, Longeveron LLC intends to convert into a Delaware corporation pursuant to a statutory conversion, and will change its name to Longeveron Inc. |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
Longeveron LLC, the registrant whose name appears on the cover of this registration statement, is a Delaware limited liability company. Immediately prior to the closing of the offering to which this Registration Statement relates, Longeveron LLC will convert into a Delaware corporation pursuant to a statutory conversion, and change its name to Longeveron Inc. as described in the section “Corporate Conversion” of the accompanying prospectus. As a result of the Corporate Conversion, all holders of units and options exercisable for units of Longeveron LLC will become holders of shares of Class A common stock or Class B common stock and options to purchase Class A common stock of Longeveron Inc.
References in the accompanying prospectus to our capitalization and other matters pertaining to our common equity relate to the capitalization and common equity of Longeveron Inc. after giving effect to the Corporate Conversion. However, the Financial Statements and summary historical financial data included in the accompanying prospectus are those of Longeveron LLC and do not give effect to the Corporate Conversion. Shares of Class A common stock of Longeveron Inc. are being offered by this prospectus.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED , 2021
PRELIMINARY PROSPECTUS
Shares
Longeveron LLC
Class A Common Stock
We are offering shares of our Class A common stock. This is our initial public offering. Prior to the offering, there has been no public market for our Class A common stock. We expect the initial public offering price to be between $ and $ per share. We intend to apply to list our Class A common stock on The Nasdaq Capital Market under the symbol “LGVN.”
Following this offering, we will have two classes of authorized common stock: Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion rights. Each share of Class A common stock is entitled to one (1) vote. Each share of Class B common stock is entitled to five (5) votes and is convertible into one share of Class A common stock. Following the completion of this offering, outstanding shares of Class B common stock will represent approximately % of the voting power of our outstanding capital stock, assuming no exercise of the underwriters’ option to purchase additional shares.
We are an “emerging growth company” under the federal securities laws and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary—Implications of Being an Emerging Growth Company and a Smaller Reporting Company.”
Investing in our Class A common stock involves a high degree of risk. Before buying any shares, you should carefully read the discussion of the material risks of investing in our Class A common stock under the heading “Risk Factors” beginning on page 11 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
Per share | Total | |||||||
Public offering price | $ | $ | ||||||
Underwriting discounts and commissions (1) | $ | $ | ||||||
Proceeds, before expenses, to us | $ | $ |
(1) | See “Underwriters” beginning on page 136 of this prospectus for additional information regarding the compensation payable to the underwriters. |
We have granted a 30-day option to the underwriters to purchase up to additional shares of Class A common stock solely to cover over-allotments, if any. If the underwriters exercise the option in full, the total underwriting discounts and commissions payable by us will be $ , and the total proceeds to us, before expenses, will be $ .
We have agreed to issue warrants to Kingswood Capital Market, as representative of the underwriters, upon the closing of this offering, which entitle it to purchase up to 4.0% of the total number of shares of Class A common stock being sold in this offering (the “Underwriter Warrants”). The exercise price of the warrants is equal to 120% of the offering price of the Class A common stock offered hereby.
Delivery of the shares of Class A common stock is expected to be made on or about , 2021.
Kingswood Capital Markets
division of Benchmark Investments, Inc.
The date of this prospectus is , 2021
TABLE OF CONTENTS
Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares of Class A common stock offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of shares of our Class A common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
For investors outside the United States: Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of Class A common stock and the distribution of this prospectus outside the United States.
Through and including , 2021 (25 days after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
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FINANCIAL STATEMENT PRESENTATION
The financial statements for the years ended December 31, 2019 and 2018, and as of and for the nine months ended September 30, 2020 and 2019, represent the operations of Longeveron LLC. Longeveron LLC does not have subsidiaries. Prior to the closing of this offering, Longeveron LLC will complete a Corporate Conversion into a Delaware corporation pursuant to a statutory conversion, and will change its name to Longeveron Inc. All holders of units of Longeveron LLC will become holders of shares of Class A common stock or Class B common stock of Longeveron Inc., as described under the heading “Corporate Conversion.” In this prospectus, we refer to all transactions related to our conversion to a corporation as the Corporate Conversion. We expect that the Corporate Conversion will not have a material effect on our financial statements.
TRADEMARKS AND TRADENAMES
Solely for convenience, trademarks, service marks and tradenames referred to in this prospectus may appear without the ®, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, service marks and tradenames. This prospectus may also contain trademarks, service marks, tradenames and copyrights of other companies, which are the property of their respective owners.
ABOUT THIS PROSPECTUS
Except where the context otherwise requires or where otherwise indicated, the terms “Longeveron,” “we,” “us,” “our,” “our company,” “Company” and “our business” refer, prior to the Corporate Conversion discussed herein, to Longeveron LLC, and after the Corporate Conversion, to Longeveron Inc. References in this prospectus to our capitalization and other matters pertaining to our common equity relate to the capitalization and common equity of Longeveron Inc. after giving effect to the Corporate Conversion. However, the Financial Statements and summary historical financial data included in this prospectus are those of Longeveron LLC and do not give effect to the Corporate Conversion.
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This summary highlights, and is qualified in its entirety by, the more detailed information and financial statements included elsewhere in this prospectus. This summary does not contain all of the information that may be important to you in making your investment decision. You should read this entire prospectus carefully, especially the “Risk Factors” section beginning on page 11 and our financial statements and the related notes included elsewhere in this prospectus, before making an investment decision.
Business Overview
We are a clinical stage biotechnology company developing cellular therapies for specific aging-related and life-threatening conditions. Our lead investigational product is the LOMECEL-B™ cell-based therapy product (“Lomecel-B”), which is derived from culture-expanded medicinal signaling cells (MSCs) that are sourced from bone marrow of young healthy adult donors. We believe that by using the same cells that promote tissue repair, organ maintenance, and immune system function, we can develop safe and effective therapies for some of the most difficult disorders associated with the aging process and other medical disorders.
We are currently sponsoring Phase 1 and 2 clinical trials in the following indications: Aging Frailty, Alzheimer’s disease, the Metabolic Syndrome, Acute Respiratory Distress Syndrome (ARDS), and hypoplastic left heart syndrome (HLHS). Our mission is to advance Lomecel-B and other cell-based product candidates into pivotal Phase 3 trials, with the goal of achieving regulatory approvals, subsequent commercialization and broad use by the healthcare community.
Our philosophy is that healthy aging can be improved through regenerative medicine approaches. Life expectancy has substantially increased over the past century as a result of medical and public health advancements. However, this increase in longevity has not been paralleled by the number of years a person is expected to live in relatively good health, free of chronic disease and disabilities of aging – a period known as healthspan. As we age, we experience a profound decline in our own stem cells, a decrease in immune system function, decline in blood vessel functioning, chronic inflammation and other aging-related declines. Our clinical data suggest that Lomecel-B addresses these conditions through multiple mechanisms of action, or MOAs, that simultaneously target key aging-related processes.
Results from our ongoing clinical trials, in which more than 250 subjects have received Lomecel-B, have shown:
● | Lomecel-B was well-tolerated, with no Serious Adverse Events (SAEs) attributed to the product candidate to date; | |
● | Aging Frailty subjects given Lomecel-B showed statistically significant improvement in physical function compared to subjects receiving placebo; and | |
● | Aging Frailty subjects, who historically do not respond effectively to vaccines, had a post-vaccination immune response in 19/19 (100%) of the subjects given Lomecel-B in advance of receiving influenza vaccine. |
Improving healthspan is an imperative for governmental health agencies, and the United States National Institute on Aging (NIA), an institute within the National Institutes of Health (NIH), has promoted the concept of geroscience - the idea that aging itself is the biggest risk factor for many human diseases. The geroscience hypothesis provides a strong rationale for the approach of treating underlying biological processes contributing to aging as a way to reduce the burden of disease and to advance global human health. Our investments into developing and testing biological geroscience products are aimed at reducing aging-related disease burden and improving healthspan.
Our Strategy
Our core business strategy is to become a world leading regenerative medicine company through development and commercialization of novel cell therapy products for unmet medical needs, with emphasis on aging-related indications. Key elements of our business strategy are as follows:
● | Advance Lomecel-B and other regenerative medicine product candidates to approval and marketing; | |
● | Expand our manufacturing capabilities to commercial-scale production; |
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● | Continue to seek non-dilutive funding and grant awards to support our clinical research and product candidate development; | |
● | Continue to develop our existing international programs, particularly in Japan; | |
● | Seek collaboration arrangements and out-licensing opportunities to expand market opportunities for Lomecel-B; | |
● | Add to our product candidate development pipeline through internal research and development and in-licensing; and | |
● | Continue to expand our intellectual property portfolio to build market exclusivity and value around our assets. |
Clinical Development Pipeline
Since our founding in 2014, we have initiated six clinical studies under five U.S. Food and Drug Administration (FDA) Investigational New Drug applications (INDs) for the purpose of evaluating the safety and efficacy of Lomecel-B (See Figure 1). As of the third quarter of 2020, over 250 subjects have received Lomecel-B via peripheral intravenous infusion or direct injection, and there have been no SAEs reported that were considered related to the product candidate.
(Figure 1: Longeveron Lomecel-B clinical development pipeline)
● | Aging Frailty |
○ | We have two U.S. clinical trials ongoing in Aging Frailty subjects to assess whether Lomecel-B can improve physical function, reduce inflammation, and improve quality of life, among other endpoints, and to evaluate if Lomecel-B can be an effective vaccine adjuvant to improve immunity against influenza. Data from the Phase 2b Trial is expected in the second half of 2021. We have preliminary data from the HERA Trial (see “Aging Frailty Clinical Trials” on page 77 of this prospectus), with final data expected in the third quarter of 2021. |
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○ | Japan Clinical Trial: The Japanese Pharmaceuticals and Medical Devices Agency (PMDA) has approved a Clinical Trial Notification (CTN), which is equivalent to a U.S. IND, allowing us to sponsor an investigator-initiated Phase 2 clinical study for Aging Frailty subjects in Japan. We expect to initiate this trial in 2021. |
○ | The Bahamas Registry Trial: We sponsor and operate a Registry Trial in Nassau, The Bahamas, where participants may receive Lomecel-B for Aging Frailty and other indications, at the participants’ own expense. Lomecel-B is designated as an investigational product in The Bahamas. |
● | Alzheimer’s disease. We have completed a Phase 1 clinical trial to evaluate the safety and tolerability of Lomecel-B in individuals with mild Alzheimer’s disease, and to explore efficacy using multiple domains of assessment, including cognition, activities of daily living, quality of life, biomarkers, and changes to brain structure. Top-line results are expected in the fourth quarter of 2020, and preliminary results are reported in “Phase 1 Alzheimer’s Disease Clinical Trial” on page 82 of this prospectus. |
● | The Metabolic Syndrome. We are conducting a sub-study of our Aging Frailty program to evaluate whether Lomecel-B may improve the symptoms of the Metabolic Syndrome, and the effects of this comorbidity on response to treatment in Aging Frailty subjects. Top-line results are expected in the second half of 2021. |
● | Acute Respiratory Distress Syndrome due to Viral Infection. We are conducting a Phase 1 trial evaluating the safety and efficacy of Lomecel-B for ARDS due to influenza virus or SARS-nCoV-2 (COVID-19) infection. The trial is expected to complete enrollment in 2021. |
● | Hypoplastic Left Heart Syndrome. We are conducting a Phase 1 study to evaluate the safety and provisional efficacy of Lomecel-B as a combinatorial therapy to surgery for this ultra-rare heart condition in young children. Top-line results are expected in the first quarter of 2021, and a Phase 2 trial is expected to initiate in 2021. |
About Our Indications
Aging Frailty is a common geriatric condition that disproportionately increases a patient’s risk for poor clinical outcomes due to disease and injury, and is widely believed by geriatricians to ultimately be treatable. Our multinational interventional Aging Frailty clinical research program is one of the most advanced and extensive in the world for a pharmaceutical investigational product. According to various studies by leading geriatricians, Aging Frailty affects approximately 15% of individuals 65 years and older, which translates to roughly 8.1 million people in the U.S. alone. Yet, no medical treatments for Aging Frailty have been approved by the FDA, or anywhere in the world.
Alzheimer’s disease is the leading cause of dementia world-wide, and there are no approved medications that can prevent, stop, or reverse the progression of the disease. The only FDA-approved medications for AD provide only symptomatic relief, and do not alter disease progression. Approximately 5.8 million Americans have Alzheimer’s disease, with that number expected to increase to 14 million by 2050 barring significant medical breakthroughs. An estimated 35.6 million people are affected with Alzheimer’s disease worldwide– a number expected to quadruple by 2050.
The Metabolic Syndrome is a well-documented and insidious condition which, over the course of years to decades, leads to cardiovascular disease and type II diabetes mellitus. There are no approved therapies for the Metabolic Syndrome, aside from symptomatic treatments. The incidence of the Metabolic Syndrome has reached epidemic proportions and is estimated to impact approximately 35% of the total U.S. population aged 18 and older, or over 80 million people.
Acute Respiratory Distress Syndrome (ARDS), which occurs in about 150,000 patients per year, can result in both short-term severe consequences (e.g., prolonged and expensive hospitalization, and death), and long-term debilitating consequences (e.g., severe lung fibrosis and pulmonary dysfunction). ARDS due to viral infection is particularly devastating to those with Aging Frailty, and is especially well-appreciated in the context of the COVID-19 pandemic, in which approximately 80% of deaths have occurred in people aged 65 and older. There are currently limited treatment options for ARDS beyond supportive palliative care, making ARDS a “rare disease or condition” under the Orphan Drug Act, and an extremely important unmet medical need.
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Hypoplastic left heart syndrome (HLHS) is a rare congenital heart condition and our one non-aging related clinical study. Children with this condition undergo three staged life-saving heart surgeries over the course of years. Nonetheless, early-age mortality remains extremely high, and there is thus an urgent unmet medical need to improve both short- and long-term cardiac function for these patients. There are approximately 1,025 babies born each year in the U.S. with HLHS, making it a “rare disease or condition” under the Orphan Drug Act.
Our Team
We are led by an experienced team of dedicated scientists and experts with decades of experience in clinical drug development, particularly in conducting clinical trials of cell-based therapy. We currently have 16 full-time employees/consultants, five of whom have either an MD or PhD. We have a talented core of cell processing and manufacturing experts who oversee and manage our in-house manufacturing of Lomecel-B and our other experimental product candidates. Our Scientific Advisory Board is comprised of key opinion leaders with deep expertise in our therapeutic indications, and representation in both the U.S. and Japan.
Grant Funding and Partnerships
We have partnered with the NIA and the National Heart Lung and Blood Institute (NHLBI) of the NIH, the Alzheimer’s Association, and the Maryland Stem Cell Research Fund (Maryland TEDCO) to conduct our clinical trials. Our research programs have been awarded non-dilutive grant awards to support our clinical trial programs, and we intend to continue to seek grant funding for our future trials.
Manufacturing
We manufacture Lomecel-B under Good Manufacturing Practices (GMP) systems and conditions at our facility in Miami, FL. Operating our own GMP facility allows us to maintain control over our manufacturing process and research and development programs, which we believe offers strategic advantages over competitors, many of whom rely on third parties for production and development. Lomecel-B and other product candidates under development are intended to be “off-the-shelf” products once approved, which means they can be easily administered on demand in an out-patient setting in under one hour.
Financial Overview
We have experienced significant losses since inception and, at September 30, 2020, had an accumulated deficit of approximately $25.6 million. We expect to incur additional losses in the future and expect cumulative losses to increase. Since 2015, we have received approximately $27.0 million in equity financing and have been awarded approximately $16.2 million in non-dilutive grant funds for our programs ($11.9 million of which has been directly awarded to us and is recognized as revenue when the performance obligations are met). We have also generated approximately $3.3 million in non-grant revenue, primarily from clinical trial income and strategic contract manufacturing agreements.
Summary of Risk Factors
Our business and operations are subject to a number of risks, which you should be aware of prior to making a decision to invest in our Class A Common Stock. These risks are discussed more fully in the “Risk Factors” section of this prospectus immediately following this prospectus summary. Below is a summary of these risks.
Risks Relating to our Business | ||
● | We have a limited operating history and have no products approved for commercial sale, which may make it difficult for you to evaluate our current business and predict our future success and viability. | |
● | The lack of any existing FDA-approved allogeneic, cell-based therapies for Aging Frailty, Alzheimer’s disease, the Metabolic Syndrome and Hypoplastic Left Heart Syndrome could complicate and delay FDA approval of our product candidates for these indications. |
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● | Our product development programs are based on novel technologies and are inherently risky. If the potential of our cell-based product candidates to treat diseases is not realized, or the FDA, other regulatory bodies or marketplace fail to understand or accept our technology, the value of our technology and our development programs could be significantly reduced. In addition, ethical and other concerns surrounding the use of human-derived cell products may negatively affect public perception of us or our products or product candidates. | |
● | If we are not able to recruit and retain qualified management and scientific personnel, we may fail in developing our technologies and product candidates. | |
● | Our use of bone marrow and biologic growth media poses unique challenges to our operations. | |
● | We have a history of losses, and will require additional capital to fund our operations. Failure to obtain necessary financing will likely impact our ability to complete the development and commercialization of Lomecel-B or other product candidates. | |
● | According to the FDA, neither “Aging Frailty” or simply “Frailty,” nor the Metabolic Syndrome presently have definitions that are acceptable for characterizing the conditions for regulatory purposes, primarily due to either a lack of consensus on the definitions, an insufficient understanding of the underlying pathophysiologic mechanisms that cause any or all of the manifestations, or both. The FDA and the Japanese PMDA have both indicated that the concept of “Frailty” or the Metabolic Syndrome as an indication will require additional clinical data and discussion before future pivotal trials and marketing authorization. | |
● | Public health threats including those related to COVID-19, could adversely impact our operations. | |
Risks Related to Intellectual Property | ||
● | If we are unable to obtain, maintain and protect our intellectual property rights for our technology and our product candidates, or if our intellectual property rights are inadequate, our competitive position could be harmed, and our ability to continue clinical trials and commercially market products could be adversely affected. | |
● | Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties; if one or more third parties were to assert that we infringe their patents or are otherwise employing their proprietary technology without authorization, it could impair our ability to commercialize our product candidates and otherwise significantly harm our business. | |
● | We are a party to certain licensing agreements that give us rights to specified technology that is material to our business; termination of, or issues relating to, such licenses could have material adverse impact on our ability to commercialize our technology. | |
Risks Related to Regulatory Approval and Other Governmental Regulations | ||
● | Lomecel-B, and any of our future investigational products, must comply with FDA or other regulatory authority requirements to demonstrate that they are safe and effective for one or more specific indications before they are approved. We cannot guarantee that the FDA or another regulatory authority will accept or interpret our pre-clinical or clinical data in the same way that we do, or that it will approve our marketing application. Even if the FDA or another regulatory authority grants marketing approval, there will be additional, ongoing regulatory obligations that we must meet. | |
● | Achieving marketing approval from the FDA and other regulatory authorities is dependent on a number of factors, including our ability to successfully complete our clinical trials, which themselves are dependent on a number of factors. These factors may delay, add additional costs to our process, and otherwise complicate or block our pathway to commercialization. |
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Risks Related to Our Dependence on Third Parties | ||
● | Our reliance on third parties to provide us with supplies to produce our product candidates, to assist in future approved product manufacturing and/or distribution, and to provide reimbursement for our products, may result in increased costs, shortages, delays or interruptions in the supply of our product candidates for our clinical trials and approved products eventually to our customers. Further, arrangements entered into with third-party collaborators to help us develop and commercialize our product candidates expose us to various risks if they fail to perform in accordance with our expectations or at all. | |
Risks Related to the Discovery, Development and Commercialization of Our Product Candidates | ||
● | Interim, “topline” and preliminary data from our clinical trials that we announce or publish may change as more data become available and are subject to audit and verification procedures that could result in material changes in the final data. | |
● | Our foreign operations pose additional risks, including obtaining approval from foreign regulatory authorities, or with respect to FDA accepting data from trials conducted in foreign jurisdictions. | |
● | We may face difficulties relating to compliance with various laws, including those relating to health and safety, and from changes to current and future legislation, both in the U.S. as well as in other foreign jurisdictions where we may be operating. | |
Risks Related to this Offering and Ownership of Our Class A Common Stock | ||
● | The dual class structure of our common stock may adversely affect the trading market for our Class A common stock. | |
● | Two holders, including our co-founder and members of our Board, hold a significant portion of our Class B common stock, and will control the direction of our business and such parties’ ownership of our common stock will prevent you and other stockholders from influencing significant decisions. | |
● | We will face risks relating to our new status as a publicly-traded company. | |
Risks Related to Employee Matters, Managing Our Growth and Other Risks Related to Our Business | ||
● | We will need to grow our organization in order to successfully implement our plans and strategies; this growth involves risk with respect to additional resources, data privacy and protection needs, and marketing concerns. |
Corporate Conversion
We currently operate as a Delaware limited liability company under the name Longeveron LLC. Immediately prior to the effectiveness of this registration statement, Longeveron LLC intends to convert into a Delaware corporation pursuant to a statutory conversion, and will change its name to Longeveron Inc. In this prospectus, we refer to all transactions related to our conversion to a corporation as the Corporate Conversion. As a result of the Corporate Conversion, all members of Longeveron LLC will become holders of shares of Class A common stock and Class B common stock of Longeveron Inc. The number of shares of our Class A common stock or Class B common stock that holders of units will be entitled to receive in the Corporate Conversion will be based on their relative rights as set forth in our plan of conversion and limited liability company agreement, and varies depending on which class of units a holder owns. References in this prospectus to our capitalization and other matters pertaining to our common equity relate to the capitalization and common equity of Longeveron Inc. after giving effect to the Corporate Conversion. However, the financial statements and summary historical financial data included in this prospectus are those of Longeveron LLC and do not give effect to the Corporate Conversion.
The purpose of the Corporate Conversion is to reorganize our structure so that the entity that is offering our Class A common stock to the public in this offering is a corporation rather than a limited liability company and so that our existing investors will own our Class A common stock or Class B common stock rather than equity interests in a limited liability company. For further information regarding the Corporate Conversion, see “Corporate Conversion.”
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Implications of Being an Emerging Growth Company and a Smaller Reporting Company
We qualify as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or JOBS Act. As an “emerging growth company” we may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:
● | the option to present only two years of audited financial statements and only two years of related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus; | |
● | not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act; | |
● | not being required to comply with any requirements that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); | |
● | reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and | |
● | exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. |
We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the completion of this offering. However, if any of the following events occur prior to the end of such five-year period, (i) our annual gross revenue exceeds $1.07 billion, (ii) we issue more than $1.0 billion of non-convertible debt in any three-year period, or (iii) we become a “large accelerated filer,” (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), we will cease to be an emerging growth company prior to the end of such five-year period. We will be deemed to be a “large accelerated filer” at such time that we (a) have an aggregate worldwide market value of common equity securities held by non-affiliates of $700.0 million or more as of the last business day of our most recently completed second fiscal quarter, (b) have been required to file annual and quarterly reports under the Exchange Act for a period of at least 12 months and (c) have filed at least one annual report pursuant to the Exchange Act. 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 reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements.
We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. We have elected to take advantage of this extended transition period.
Corporate Information
We were formed as a Delaware limited liability company in October 2014. Prior to the closing of this offering, Longeveron LLC intends to convert into a Delaware corporation pursuant to a statutory conversion, and will change its name to Longeveron Inc. See “Corporate Conversion.” Our principal executive offices are located at 1951 NW 7th Avenue, Suite 520, Miami, Florida 33136 and our telephone number is (305) 909-0840. Our website address is www.longeveron.com. The information contained in, or accessible through, our website does not constitute a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.
7
The Offering
Class A common stock offered by us | shares. | |
Option to purchase additional shares | We have granted the underwriters an option for a period of 30 days to purchase up to additional shares of Class A common stock. | |
Class A common stock to be outstanding after this offering | shares (or shares if the underwriters exercise their option to purchase additional shares in full). | |
Class B common stock to be outstanding after this offering | shares | |
Use of proceeds | We estimate that the net proceeds from this offering will be approximately $ million (or approximately $ million if the underwriters exercise their option to purchase additional shares in full), based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We anticipate that we will use the net proceeds of this offering to fund research and development (including clinical trials), to expand and optimize our manufacturing capacity, and for working capital and other general corporate purposes. For a more complete description of our intended use of the proceeds from this offering, see “Use of Proceeds.” | |
Risk factors | You should read the section titled “Risk Factors” beginning on page 11 and the other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in our Class A common stock. | |
Voting Rights |
Shares of Class A common stock are entitled to one (1) vote per share. Shares of Class B common stock are entitled to five (5) votes per share.
Holders of our Class A common stock and Class B common stock will generally vote together as a single class, unless otherwise required by law or our certificate of incorporation. Following the completion of this offering, each share of our Class B common stock will be convertible into one share of our Class A common stock at any time and will convert automatically upon certain transfers. The Class A common stock is not convertible into Class B common stock. The holders of our outstanding Class B common stock will hold % of the voting power of our outstanding capital stock following this offering. Holders of Class B common stock will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors and the approval of any change of control transaction. See the sections titled “Principal Stockholders” and “Description of Capital Stock” for additional information. |
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Dividend policy | We do not currently pay dividends and we do not anticipate declaring or paying any dividends for the foreseeable future. | |
Proposed Nasdaq Capital Market symbol | “LGVN.” |
8
The number of shares of our Class A common stock and Class B common stock to be outstanding after this offering is based on shares of our Class A common stock outstanding and shares of our Class B common stock outstanding as of , 2020, after giving effect to the Corporate Conversion, and excludes:
● | shares of our Class A common stock issuable upon exercise of outstanding stock options, as of , having a weighted-average exercise price of $ ; | |
● | shares of our Class A common stock issuable in exchange for restricted units outstanding under our 2017 Equity Incentive Plan; | |
● | shares of our Class A common stock issuable upon exercise of the Underwriter Warrants to be issued to the underwriter in connection with this offering; and | |
● | shares of Class A common stock reserved for future issuance under our 2021 Equity Incentive Plan (the “2021 Incentive Plan”), which will become effective immediately prior to the effectiveness of the registration statement of which this prospectus forms a part. |
Unless otherwise indicated, this prospectus reflects and assumes the following:
● | the completion of our Corporate Conversion, as a result of which all outstanding Units of Longeveron LLC will be converted into an aggregate of shares of Class A common stock and shares of Class B common stock of Longeveron Inc.; and | |
● | no exercise by the underwriters of their option to purchase additional shares of our Class A common stock in this offering. |
SUMMARY FINANCIAL DATA
The following tables set forth our summary financial data for the periods indicated. We have derived the statements of operations data for the years ended December 31, 2019 and 2018, and the balance sheet data as of December 31, 2019, from our audited financial statements included elsewhere in this prospectus. The statements of operations data for the nine months ended September 30, 2020 and 2019 and the balance sheet data as of September 30, 2020 are derived from our unaudited financial statements included elsewhere in this prospectus. We have prepared the unaudited financial statements on the same basis as the audited financial statements and have included all adjustments, consisting only of normal recurring adjustments that, in our opinion, are necessary to state fairly the financial information set forth in those statements. Our historical results are not necessarily indicative of the results that should be expected for any future period. You should read the following summary financial data together with the more detailed information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus.
Years Ended
December 31, |
Nine Months Ended
September 30, |
|||||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||
(unaudited) | ||||||||||||||||
REVENUES | ||||||||||||||||
Total revenues | $ | 5,639,466 | $ | 2,134,775 | $ | 4,449,684 | $ | 3,796,209 | ||||||||
Cost of revenues | 3,885,390 | 1,454,126 | 3,152,446 | 2,649,366 | ||||||||||||
Gross profit | 1,754,076 | 680,649 | 1,297,238 | 1,146,843 | ||||||||||||
EXPENSES | ||||||||||||||||
Selling and marketing | 185,387 | 48,164 | 140,253 | 180,418 | ||||||||||||
Research and development | 1,791,842 | 3,875,842 | 1,522,707 | 1,449,275 | ||||||||||||
General and administrative | 2,774,953 | 3,117,260 | 2,029,410 | 2,041,221 | ||||||||||||
Total expenses | 4,752,182 | 7,041,266 | 3,692,370 | 3,670,914 | ||||||||||||
Loss from operations | (2,998,106 | ) | (6,360,617 | ) | (2,395,132 | ) | (2,524,071 | ) | ||||||||
OTHER INCOME AND (EXPENSES) | ||||||||||||||||
Interest income | 2,937 | 23,821 | 139 | 2,531 | ||||||||||||
Interest expense | (169 | ) | - | (3,666 | ) | (104 | ) | |||||||||
Other income | 35,461 | - | 33,871 | 35,462 | ||||||||||||
Total other income and (expenses) | 38,229 | 23,821 | 30,344 | 37,889 | ||||||||||||
Net loss | $ | (2,959,877 | ) | $ | (6,336,796 | ) | $ | (2,364,788 | ) | $ | (2,486,182 | ) | ||||
Pro forma net loss per common share (1) | ||||||||||||||||
Basic | ||||||||||||||||
Diluted | ||||||||||||||||
Pro forma weighted average common shares outstanding- (unaudited)(1) | ||||||||||||||||
Basic | ||||||||||||||||
Diluted |
9
(1) | We have presented pro forma basic and diluted net loss per share which consists of our historical net loss attributable to Longeveron LLC, divided by the pro forma basic and diluted weighted average number of shares of Class A common stock and Class B common stock outstanding after giving effect to the Corporate Conversion. See Notes to our financial statements included elsewhere in this prospectus for additional information regarding the method used to calculate the pro forma basic and diluted net loss per common share and the pro forma weighted average number of shares used in the computation of the per share amounts. |
As
of
December 31, 2019 |
||||||||||||
Actual |
Pro
Forma(1) |
Pro
Forma As
Adjusted(2)(3) |
||||||||||
Balance Sheet Data: | ||||||||||||
Cash and cash equivalents | $ | 1,865,874 | ||||||||||
Working capital(4) | (115,779 | ) | ||||||||||
Total assets | 10,584,415 | |||||||||||
Total liabilities | 6,139,373 | |||||||||||
Accumulated deficit | (23,172,053 | ) | ||||||||||
Total equity | 4,445,042 |
(1) | The pro forma balance sheet data give effect to the Corporate Conversion. |
(2) | The pro forma as adjusted balance sheet data gives effect to the pro forma adjustments described in footnote (1) and to the issuance and sale of shares of Class A common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
(3) | Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) pro forma as adjusted cash and cash equivalents, working capital, total assets, and total equity by $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 0.1 million shares in the number of shares offered by us at the assumed initial public offering price, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us would increase (decrease) pro forma as adjusted cash and cash equivalents, working capital, total assets, and total equity by $ million. The pro forma as adjusted information discussed above is illustrative only and will be adjusted based on the actual initial public offering price and other terms of our initial public offering determined at pricing. |
(4) | We define working capital as current assets less current liabilities. |
10
You should carefully consider the risks and uncertainties described below and the other information in this prospectus, including our financial statements and related notes appearing elsewhere in this prospectus and in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our Class A common stock. Our business, financial condition, results of operations or prospects could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our Class A common stock could decline and you could lose all or part of your investment. This prospectus also contains forward-looking statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below. For a summary of these risk factors, please see “Summary of Risk Factors” in the section titled “Prospectus Summary” beginning on page 1 of this prospectus.
Risks Related to our Business
We have a limited operating history and have no products approved for commercial sale, which may make it difficult for you to evaluate our current business and predict our future success and viability.
We are a clinical stage biotechnology company with a limited operating history upon which you can evaluate our business and prospects. We have no products approved for commercial sale and have not generated any material revenue from product sales. To date, we have devoted substantially all of our resources and efforts to organizing and staffing our company, business planning, building and equipping our research and development laboratories, building and equipping our manufacturing suites, raising capital, acquiring raw materials for manufacturing, product candidate development and manufacturing, securing related intellectual property rights and conducting clinical trials of Lomecel-B. We have not yet demonstrated our ability to obtain marketing approvals, manufacture a commercial-scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. As a result, it may be more difficult for you to accurately predict our future success or viability than it could be if we had a longer operating history.
In addition, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors and risks frequently experienced by clinical stage biotechnology companies in rapidly evolving fields, including but not limited to changes in FDA or foreign body regulatory oversight of such products. We also may need to transition from a company with a research focus to a company capable of supporting commercial activities. Such a transition may involve substantial additional capital requirements in order to launch and market a product, changes in the use of proceeds, and significant adjustment to personnel, compared to a clinical-stage development company. If we do not adequately address these risks and difficulties or successfully make such a transition, our business will suffer.
If the potential of our product candidates to treat diseases is not realized, the value of our technology and our development programs could be significantly reduced.
Our team is currently exploring the potential of our product candidates to treat diseases. We have not yet proven in clinical trials that our product candidates will be a safe and effective treatment for any disease or condition. Our product candidates are susceptible to various risks, including undesirable and unintended side effects, unintended immune system responses, inadequate therapeutic efficacy, or other characteristics that may prevent or limit their marketing approval or commercial use. We have not yet completed all of the testing necessary to allow us to make a determination that serious unintended consequences will not occur. If the potential of our product candidates to treat disease is not realized, the value of our technology and our development programs could be significantly reduced. Because our product candidates are based on MSCs, any negative developments regarding the therapeutic potential or side effects of our MSCs, or to scientific and medical knowledge about MSCs in general, could have a material adverse effect on our business, financial condition, results of operations, and prospects.
11
Our product development programs are based on novel technologies and are inherently risky.
We are subject to the risks of failure inherent in the development of product candidates based on new technologies. The novel nature of our product candidates creates significant challenges in regards to product development and optimization, manufacturing, government regulation, third-party reimbursement, and market acceptance. For example, although the FDA has approved several cell therapy products, the FDA has relatively limited experience with regulating these kinds of therapies, and its regulations and policies are still evolving. As a result, the pathway to regulatory approval for our product candidates may accordingly be more complex and lengthy.
Additionally, stem cells that are taken from one person and transplanted into a different individual may pose additional risks. For example, stem cells that are not autologous (i.e., taken from, and given to, the same individual) but are instead allogeneic (i.e., taken from one individual and given to a different person) are subject to donor-to-donor variability, which can make standardization more difficult. As a result of these factors, the development and commercialization pathway for our therapies may be more complex and lengthy, and subject to increased uncertainty, as compared to the pathway for new conventional (i.e., new chemical entity) drugs.
There are no FDA-approved allogeneic, cell-based therapies for Aging Frailty, Alzheimer’s disease (AD), the Metabolic Syndrome or other aging-related conditions. This could complicate and delay FDA approval of our product candidate for these indications.
Although FDA has approved several cell therapy products, there are no allogeneic cell-based or stem cell therapies currently approved for the treatment of Aging Frailty or our other indications. There are also no conventional drugs or therapies currently approved by the FDA with stated indications for Aging Frailty. According to the FDA, neither “Aging Frailty” or simply “Frailty,” nor the Metabolic Syndrome, presently have definitions that are acceptable for characterizing the conditions for regulatory purposes. This is primarily due to a lack of consensus on the definitions amongst clinicians, researchers and regulators, an insufficient understanding of the underlying pathophysiologic mechanisms that cause any or all of the manifestations, or both. The FDA and the Japanese PMDA have both indicated that the concept of “Frailty” or the Metabolic Syndrome as an indication will require additional clinical data and discussion before future pivotal trials and marketing authorization. More specifically, our ability to begin Phase 3 (i.e., pivotal) trials in a “Frailty” indication will likely depend on our Phase 2 clinical data and subsequent meeting with FDA where we would discuss the size and scope of a Phase 3 program, the appropriate target patient population (i.e., defining the indication), and agreement on one or more primary endpoints that demonstrate clinically meaningful benefit.
It is possible that the FDA may never recognize “aging” as a disease, and may never agree to a definition of “Aging Frailty,” “Frailty” or the Metabolic Syndrome. To obtain FDA approval for any indication for the disease states we are studying, we will have to demonstrate, among other things, that our product candidates are safe and effective for that indication in the target population. The results of our clinical trials must be statistically significant, meaning that there must be sufficient data to indicate that it is unlikely the outcome occurred by chance. The FDA will also require us to demonstrate an appropriate dose (i.e., number of cells) and dosing interval for our product candidates, and to identify and define treatment responders, which may require additional clinical trials. As a result, the clinical endpoints, the criteria to measure the intended results of treatment, and the correct dosing for our cell-based therapeutic approaches for these indications may be difficult to determine. These challenges may prevent us from developing and commercializing products on a timely or profitable basis, or at all.
If we are not able to recruit and retain qualified management and scientific personnel, we may fail in developing our technologies and product candidates.
Our future success depends to a significant extent on the skills, experience, and efforts of the principal members of our scientific and management personnel. These members include Joshua M. Hare, M.D. and our staff of scientific consultants. Our co-founder, Dr. Hare, remains employed by the University of Miami (UM), and provides services to us as a consultant on a limited basis. The loss of Dr. Hare or any or all of these individuals could harm our business and might significantly delay or prevent the achievement of research, development or business objectives. Competition for regulatory, clinical manufacturing and management personnel in the pharmaceutical industry is intense. We may be unable to recruit or retain personnel with sufficient management skills in the area of cell therapeutics or attract or integrate other qualified management and scientific personnel in the future.
12
Our product candidates represent new classes of therapy that the marketplace may not understand or accept.
Even if we successfully develop and obtain regulatory approval for our product candidates, the market may not understand or accept them. We are developing product candidates that represent novel treatment approaches and will compete with a number of more conventional products and therapies manufactured and marketed by others, including major pharmaceutical companies. The degree of market acceptance of any of our developed and potential products will depend on a number of factors, including:
● | the clinical safety and effectiveness of our products and their perceived advantage over alternative treatment methods; | |
● | our ability to demonstrate that our cell-based products can have a clinically significant effect, initially for Aging Frailty, AD, HLHS, the Metabolic Syndrome, ARDS and other disease states, for which we may seek marketing approval; | |
● | our ability to separate ourselves from the ethical controversies associated with cell product candidates derived from human embryonic or fetal tissue; | |
● | ethical controversies that may arise regarding the use of stem cells or human tissue of any kind, including adult stem cells, adult bone marrow, adult cardiac stem cells, and other adult tissues derived from donors; | |
● | adverse events involving our product candidates or candidates of others that are cell based; | |
● | our ability to supply a sufficient amount of our products to meet regular and repeated demand in order to develop a core group of medical professionals familiar with and committed to the use of our products; and | |
● | the cost of our products and the reimbursement policies of government and third-party payors. |
If the health care community does not accept our product candidates or future approved products for any of the foregoing reasons, or for any other reason, it could affect our sales or have a material adverse effect on our business, financial condition, results of operations, and prospects.
Our dependence upon a limited supply of bone marrow donors and biologic growth media may impact our ability to produce sufficient quantities of our product candidates as needed to complete our clinical trials, and if our trials are successful, to meet product demand.
The population of acceptable bone marrow donors is limited to volunteers between the ages of 18 and 45. In addition, potential donors are prescreened for a variety of health conditions and are only allowed to donate bone marrow a total of six times in their lifetime, further limiting the total number of potential donors. The amount of bone marrow donated may be insufficient for us to mass produce our product candidates at a scale sufficient to meet our clinical trial needs or to produce a product to meet future commercial demand at an acceptable cost. In addition, the expansion of MSCs through our proprietary manufacturing methods utilizes biologic growth media that may be in limited supply. Our product candidates will be inherently more difficult to manufacture at commercial-scale than conventional pharmaceuticals, which are manufactured using precise chemical formulations and operational methods. Cost-effective production at clinical trial or commercial scale quantities may not be achievable.
Future government regulation or health concerns, such as the ongoing COVID-19 pandemic, may also reduce the number of donors or otherwise limit the amount of bone marrow available to us. If we cannot secure quantities of bone marrow or biologic growth media sufficient to meet the manufacturing demands for our clinical trials, we might not be able to complete our clinical trials and obtain marketing approval for our product candidates. Moreover, even if our clinical trials are successful and we obtain marketing approval for our product candidates, our inability to secure enough bone marrow or biologic growth media to meet product demand could limit our potential revenues.
MSCs are biological entities obtained from living humans that can pose risks to the recipient.
MSC therapies require many manufacturing steps. Cells must be harvested from donor tissue, isolated, and expanded in cell culture to produce a sufficient number of cells for use. Each step carries risks for contamination by other cells, microbes, or adventitious agents. The transfer of cells into a recipient can also carry risks and complications associated with the procedure itself, and a recipient may reject the transplanted cells.
13
Our product candidates are derived from human bone marrow and therefore have the potential for disease transmission.
The utilization of donated bone marrow creates the potential for transmission of cancer and communicable disease, including but not limited to human immunodeficiency virus (HIV), viral hepatitis, syphilis, Creutzfeldt-Jakob disease, and other viral, fungal, or bacterial pathogens. Although we and our suppliers are required to comply with federal and state regulations intended to prevent communicable disease transmission, we or our suppliers may fail to comply with such regulations. Further, even with compliance, our products might nevertheless be viewed by the public as being associated with transmission of disease, and a clinical trial subject or patient who contracts an infectious disease might assert that the use of our product candidate or products resulted in disease transmission, even if the individual became infected through another source.
Any actual or alleged transmission of communicable disease could result in clinical trial subject or patient claims, litigation, distraction of management’s attention, potentially increased expenses, and adverse regulatory authority action. Further, any failure in screening, whether by us or other manufacturers of similar products, could adversely affect our reputation, the support we receive from the medical community, and overall demand for our products. As a result, such actions or claims, whether or not directed at us, could have a material adverse effect on our reputation with our customers and our ability to market our products, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
If our processing and storage facility or our clinical manufacturing facilities are damaged or destroyed, our business and prospects could be negatively affected.
Our processing and storage facility is located in a region which experiences severe weather, notably hurricanes, from time to time. If this facility in Miami, Florida or the equipment in the facility were to be significantly damaged or destroyed, we could suffer a loss of some or all of the stored units of our product candidates and it could force us to halt our clinical trial processes. The risk of tropical storm and hurricane activity historically rises on or about June 1st each year, and subsides on or about November 30th each year. We have not undertaken a systematic analysis of the potential consequences to our business and financial results from a major hurricane or tornado, flood, fire, earthquake, power loss, terrorist activity or other disasters and do not currently have a recovery plan for such disasters. If we underestimate our insurance needs, we will not have sufficient insurance to cover losses above and beyond the limits on our policies. In addition, we do not carry sufficient insurance to compensate us for actual losses from interruption of our business that may occur, and any losses or damages incurred by us could harm our business. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.
Ethical and other concerns surrounding the use of stem cell therapy or human tissue may negatively affect public perception of us or our products or product candidates, or may negatively affect regulatory approval of our products or product candidates, thereby reducing demand for our products.
The commercial success of our product candidates will depend in part on general public acceptance of the use of MSC therapy for the prevention or treatment of human diseases. The use of embryonic cells and fetal tissue for research and MSC therapy has been the subject of substantial national and international debate regarding related ethical, legal, and social issues. In the U.S., for example, until March 2009, federal government funding of embryonic stem cell research was limited to specifically identified cell lines and was not otherwise available. We do not use embryonic stem cells or fetal tissue, but the public may not be able to, or may fail to, differentiate our use of adult MSCs from the use of embryonic stem cells or fetal tissue by others. This could result in a negative perception of our company or our products or product candidates, thereby reducing demand, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
We may obtain MSCs from volunteer adult bone marrow donors from non-profit organizations that collect and process tissue donations. Bone marrow donors receive payment, but ethical concerns have been raised by some about the use of donated human tissue in a for-profit setting, as we are doing. Future adverse events in the field of stem cell therapy, changes in public policy, or changes to the FDA’s regulatory approval framework for these products could also result in greater governmental regulation of our product candidates or products, and potential regulatory delays relating to their testing or approval.
14
We may eventually compete for product sales with other companies, many of which will have greater resources or capabilities than we have, or may succeed in developing better products or in developing products more quickly than we do, and we may not compete successfully with them.
We compete or may eventually compete with other companies and organizations that are marketing or developing therapies for our targeted disease indications, based on traditional pharmaceutical, medical device, or other non-cellular therapy and technologies. In addition, we have other potential competitors developing a variety of therapeutics, and in some cases, such as with AD, there may be tens or hundreds of companies seeking to commercialize therapeutics.
We also face competition in the cell therapy field from academic institutions and governmental agencies. Many of our current and potential competitors have greater financial and human resources than we have, including more experience in research and development and more established sales, marketing, and distribution capabilities.
We anticipate that competition in our industry will increase. In addition, the health care industry is characterized by rapid technological change, resulting in new product introductions and other technological advancements. Our competitors may develop and market products that render product candidates now or under development by us in the future, or any products manufactured or marketed by us, non-competitive or otherwise obsolete.
We have ongoing challenges with respect to our liquidity and access to capital.
As we advance the preclinical and clinical development of our programs, we expect to continue to incur significant expenses and operating losses, for which we do not have offsetting revenue. We expect that our sales, research and development and general and administrative costs will increase in connection with conducting additional preclinical studies and clinical trials for our current and future programs and product candidates, contracting with contract research organizations (CROs) to support preclinical studies and clinical trials, expanding our intellectual property portfolio, and providing general and administrative support for our operations. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements, or other sources.
Since 2015, we have raised approximately $27.0 million in gross proceeds from the sale of shares of our equity securities. As of September 30, 2020, we had $1.3 million in cash and cash equivalents and working capital of approximately $0.2 million. We have $0.5 million of indebtedness as of September 30, 2020 from loans provided by the Small Business Administration (SBA) and the Paycheck Protection Program (PPP). We have applied to have the $0.3 million loan forgiven. To date, we have financed our operations primarily through private equity financings, grant awards, and fees generated from clinical trial income and contract manufacturing services. There are no assurances that we will be able to continue to finance operations through these means, and our inability to generate sufficient revenue in the near term may have an adverse impact on our business, operations and prospects.
We have a history of losses and may not be able to achieve profitability going forward.
We have experienced significant losses since inception and, at September 30, 2020, had an accumulated deficit of approximately $25.6 million. We expect to incur additional losses in the future and expect the cumulative losses to increase. There is no assurance that operating expenses will remain at current levels, nor that our grant revenues will fund our clinical programs. In such event, we will not have sufficient cash flow to meet our obligations or make progress in our clinical programs, and will need to raise additional capital to provide sufficient funding.
We have been funded in part by government and non-profit association grant awards, which is not a guaranteed source of future funding.
The funding of government programs is dependent on budgetary limitations, congressional appropriations and administrative allotment of funds, and changes in national health and welfare priorities, all of which are inherently uncertain and may be affected by changes in U.S. government policies resulting from various political and military developments. Our continued receipt of government and non-profit association funding is also dependent on the ability to adhere to the terms and provisions of the original grant and contract documents and other regulations. We can provide no assurance that we will receive or continue to receive funding for grants and contracts that we have been awarded. The loss of government funds or non-profit association grant awards could have a material adverse effect on our clinical programs and on our business, financial condition, and results of operations. For additional detail regarding the grant awards we have received from governmental and non-profit associations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations- Grant Awards” on page 64 of this prospectus.
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The use of our product candidates or future products in individuals may expose us to product liability claims, and we may not be able to obtain adequate product liability insurance.
Because of the nature of our products, we face an inherent risk of product liability claims. None of our product candidates have been widely used over an extended period of time, and therefore our safety data are limited. We derive the raw materials for our product candidates from human donor sources, the manufacturing process is complex, and the handling requirements are specific, all of which increase the likelihood of quality failures and subsequent product liability claims. We will need to increase our insurance coverage if and when we receive approval for and begin commercializing our product candidates. We may not be able to obtain or maintain product liability insurance on acceptable terms with adequate coverage or at all. If we are unable to obtain insurance, or if claims against us substantially exceed our coverage, then our business could be adversely impacted. Whether or not we are ultimately successful in any product liability litigation, such litigation either before or after product approval and marketing could consume substantial amounts of our financial and managerial resources and could result in, among other things:
● | significant awards against us; | |
● | substantial litigation costs; | |
● | recall of products or termination of clinical trials; | |
● | FDA withdrawal of marketing approval of products or suspension or revocation of an investigational new drug application (IND) for a product candidate; | |
● | injury to our reputation; | |
● | withdrawal of clinical trial participants; | |
● | withdrawal of clinical trial sites or investigators; or | |
● | adverse regulatory action. |
Any of these results could have a material adverse effect on our business, financial condition, and results of operations.
Public health threats, including those related to the novel strain of coronavirus, SARS-CoV-2 (which causes the disease now called COVID-19), have had, and could continue to have an adverse effect on our operations.
Public health threats have, and could continue to, adversely affect our ongoing or planned research and development activities. In particular, SARS-CoV-2, which causes the disease now called COVID-19, was first reported to have surfaced in Wuhan, China in December 2019, and has since spread globally, including to every state in the United States. On January 31, 2020, the Secretary of Health and Human Services (HHS) issued a Public Health Emergency determination in response to the spread of COVID-19. A Public Health Emergency determination remains in effect for 90 days and can be renewed for additional 90 day periods, which the Secretary of HHS has since done multiple times. The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly.
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The COVID-19 pandemic has caused reduced participation in our Bahamas Registry Trial, which primarily enrolls older individuals, due to both travel restrictions and a general unwillingness of participants to travel. Starting on July 22, 2020, the Bahamian government halted travel from the U.S. into The Bahamas, which resulted in the temporary cessation of participation in The Bahamas Registry Trial. When the pandemic began to emerge in the U.S., most of our ongoing clinical trials had completed enrollment, however a few subjects that were currently on study and in follow-up experienced some difficulties in adhering to the protocol schedule. Because we primarily enroll elderly subjects in our trials, who are at particular risk for poor outcomes related to COVID-19 infection, we have experienced some disruption in executing the follow-up visits in our protocols. These disruptions were due to a number of reasons that include an unwillingness of the subject to leave their residence to visit the hospital or clinic, the inability to leave their residence due to regional “stay-at-home” orders, and temporary clinical site closures. We have attempted to mitigate this disruption by conducting remote visits where feasible (telemedicine), arranging for in-home visits for phlebotomy in order to collect blood samples and perform protocol-specific assessments if feasible, and amending protocols to increase the window of time for follow-up visits. In spite of these efforts, several subjects either missed their scheduled follow up visit, had their follow up visit outside of the protocol-defined window of time, or dropped out of the trial prior to completing. While we believe the number of instances where a visit was missed completely is small, we cannot predict whether this will have a material impact on our clinical results in the future. If too many subjects drop out or the protocol is no longer effective, we may have to restart the clinical trial entirely.
We cannot presently predict the scope and severity of any other potential business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including the suppliers, clinical trial sites, regulators and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted.
The spread of an infectious disease, including COVID-19, may also result in the inability of our suppliers to deliver components or raw materials on a timely basis. Such events may result in a period of business and manufacturing disruption, and in reduced operations, any of which could materially affect our business, financial condition and results of operations. The extent to which the coronavirus impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain the coronavirus or treat its impact, among others.
Risks Related to Intellectual Property
If our trade secret and patent position does not adequately protect our products and uses, others could compete against us more directly, which could harm our business and have a material adverse effect on our business, financial condition and results of operations.
Our success depends, in large part, on our ability to obtain and maintain intellectual property protection for our product candidates. The patent position of biotechnology companies is generally highly uncertain, involves complex legal and factual questions, and continues to be the subject of much litigation. Our trade secrets attempt to bridge the gap that threatens patent exclusivity for the protection of products derived from MSCs. Our trade secrets also remain valid and enforceable without regard to limitations such as term restrictions that are imposed on patents. Our trade secrets and know-how are the subject of various license agreements and confidentiality agreements as further discussed below.
The claims of existing U.S. and foreign patent applications and patents, and those patents that may issue in the future, or those to be licensed to us, that are owned by the Company or under an obligation of assignment to the Company, may not confer on us significant commercial protection against competing products. Furthermore, to the extent that the Company owns or is assigned or licenses patent rights covering its business, third parties may challenge or design around those patent rights, such as by asserting that the patents are invalid or arguing that the patent claims should be narrowly construed, and thereby avoid infringement actions.
Our patent applications on MSC technology, in particular, include claims directed to therapeutic uses and kits comprising MSCs. Patents with such claims tend to be more vulnerable to challenge by other parties than patents with extremely narrow claims. Also, our pending patent applications may not issue, may issue with substantially narrower claims than currently pending claims, or we may not receive any additional patents. Further, the laws of foreign countries may not protect our intellectual property rights to the same extent as do the laws of the United States. Our patents might not contain claims that are sufficiently broad to prevent others from practicing our technologies or from competing with us with their own stem cell technology in the fields of interest to us.
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Although the Company has obligations of assignment and has been assigned patents and patent applications concerning the stem cell products and their uses, none of those patents or presently pending applications has granted claims or pending claims that, if granted, would prevent a third party from commercializing their own allogeneic stem cell therapy for those indications that we are studying. Consequently, our competitors may independently develop competing products that do not infringe our patents or other intellectual property.
Control over patented technology requires the Company to obtain formal assignment of patents and applications from third parties. Although the Company believes it has contracts requiring formal assignment of the patent properties in its patent portfolio, there is risk that the inventors and research partners now of record as owning these patent properties will refuse to execute documents confirming assignment of their rights to the Company or that litigation will be required to compel the execution of those documents. In the meantime those inventors and research partners may claim to be co-owners of some of the patent portfolio.
Because of the extensive time required for development, testing, and regulatory review of a potential product, it is possible that, before any of our products can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantages of the patent. To the extent our product candidates based on that technology are not commercialized ahead of this patent expiration, to the extent we have no other patent protection on such products, or to the extent that regulatory or patent extensions are not granted, those products might not have the robust protection we currently expect to enjoy. The background technologies used in the development of our product candidates are known in the scientific community, and it may be possible to duplicate the methods we use to create our product candidates, which makes us vulnerable to competition, without the ability to exclude others from potentially commercializing a similar product.
If certain license agreements are terminated, our ability to continue clinical trials and commercially market products could be adversely affected.
We are a party to various agreements that give us rights to use specified technologies applicable to research, development, and commercialization of our product candidates. If these agreements are voided or terminated, our product development, research, and commercialization efforts may be altered or delayed. Certain aspects of our technology rely on inventions developed using university or other third-party resources. The universities or third parties may have certain rights, as defined by law or applicable agreements, and may choose to exercise such rights. If we fail to comply with any terms or provisions of these agreements, our rights and our access to the universities’ or third parties’ resources could be terminated. The Exclusive License Agreement with the University of Miami dated November 20, 2014, as amended on December 11, 2017, requires the Company to pay fees and royalties and to make commercially reasonable efforts to achieve milestones. The University of Miami may terminate the Exclusive License Agreement for material breach if the fees, royalties, or milestones are not met, or an extension to achieve the milestones is not agreed upon.
Some of our employees, including but not limited to Dr. Hare, are employed by third party employers in addition to their employment by the Company. Such employees may owe obligations to the third party employers related to that employment. Those third party employers may assert that they are entitled to assignment of some or all rights of new inventions made by such employees. If we are unable to conclusively prove that we are entitled to assignment of those rights, we may be required to negotiate co-ownership to or a license of those rights, if such an arrangement is available at all.
If we are unable to protect the confidentiality of our proprietary information, trade secrets, and know-how, our competitive position could be impaired and our business, financial condition, results of operations, and prospects could be adversely affected.
As disclosed above, some aspects of our technology, especially regarding manufacturing processes, are unpatented and maintained by us as trade secrets. In an effort to protect these trade secrets, we require our employees, consultants, collaborators, and advisors to execute confidential disclosure agreements before the commencement of their relationships with us. These agreements require that all confidential information developed by the individual or made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties. These agreements, however, may not provide us with adequate protection against improper use or disclosure of confidential information, and these agreements may be breached. A breach of confidentiality could affect our competitive position. In addition, in some situations, these agreements may conflict with, or be subject to, the rights of third parties with whom our employees, consultants, collaborators, or advisors have previous employment or consulting relationships. Also, others may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets.
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Adequate remedies may not exist in the event of unauthorized use or disclosure of our confidential information. The disclosure of our trade secrets could impair our competitive position and could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Third-party claims of intellectual property infringement may prevent or delay our product development 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 involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates, methods of making product candidates, and methods of using product candidates may give rise to claims of infringement of the patent rights of others.
Third parties may assert that we infringe their patents or are otherwise employing their proprietary technology without authorization and may sue us. We are aware of several U.S. patents held by third parties covering potentially similar or related products and their manufacture and use. Generally, conducting clinical trials and other acts relating to FDA approval are not considered acts of infringement in the United States. If and when Lomecel-B MSCs are approved by the FDA, third parties may seek to enforce their patents by filing a patent infringement lawsuit against us. Patents issued in the United States by law enjoy a presumption of validity that can be rebutted only with evidence that is “clear and convincing,” a heightened standard of proof. We may not be able to prove in litigation that any patent enforced against us is invalid.
Additionally, there may be third-party patents of which we are currently unaware 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. Some of those patent applications may not yet be available for public inspection. 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 our product candidates, constructs or molecules used in or formed during the manufacturing process, or any final product itself, the holders of any such patents may be able to block our ability to commercialize the product candidate unless we obtained a license under the applicable patents, or until such patents expire or they are finally determined to be held not infringed, unpatentable, invalid or unenforceable. Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy or patient selection methods, the holders of any such patent may be able to block our ability to develop and commercialize the product candidate unless we obtained a license or until such patent expires or is finally determined to be held not infringed, unpatentable, invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all. If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, our ability to commercialize our product candidates may be impaired or delayed, which could in turn significantly harm our business.
Parties making claims against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product candidates. They might seek an exclusion order from the International Trade Commission to prevent import of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business and may impact our reputation. 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, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize our product candidates, which could harm our business significantly.
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We may become involved in lawsuits to protect or enforce our patents or the patents of our collaborators or licensors, which could be expensive and time consuming.
Litigation may be necessary to enforce patents issued or licensed to us, to protect trade secrets or know-how, or to determine the scope and validity of the proprietary rights. Litigation, opposition, or other patent office proceedings could result in substantial additional costs and diversion of management focus. If we are ultimately unable to protect our technology, trade secrets, or know-how, we may be unable to operate profitably. Competitors may infringe our patents or the patents of our collaborators or licensors. As a result, we may be required to file infringement claims to protect our proprietary rights, which can be expensive and time-consuming, particularly for a company of our size. In addition, in an infringement proceeding, a court may decide that a patent of ours is invalid or is unenforceable, or may refuse to enjoin the other party from using the technology at issue. An adverse determination of any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly. Litigation or other patent office proceedings may fail and, even if successful, may result in substantial costs and distraction to our management. We may not be able, alone or with our collaborators and licensors, to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States.
Furthermore, though we would seek protective orders where appropriate, 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. In addition, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments. If investors perceive these results to be negative, the market price for our Class A common stock could be significantly harmed.
The biotechnology industry, including our fields of therapeutic interest, is highly competitive and subject to significant and rapid technological change. Accordingly, our success may depend, in part, on our ability to respond quickly to such change through the development and introduction of new products. Our ability to compete successfully against currently existing and future alternatives to our product candidates and systems and competitors who compete directly with us in the biopharmaceutical industry may depend, in part, on our ability to attract and retain skilled scientific and research personnel, develop technologically superior products, develop competitively priced products, obtain patent or other required regulatory approvals for our products, and be early entrants to the market and manufacture, market, and sell our products, independently or through collaborations. If a third party were to commercialize a competitive product, there is no assurance that we would have a basis for initiating patent infringement proceedings or that, if initiated, we would prevail in such proceedings.
If our product candidates are approved by the FDA, then potential competitors who seek to introduce generic versions of our product candidates may seek to take advantage of the abbreviated approval pathway for biological products shown to be biosimilar to or interchangeable with our product candidates. The Biologics Price Competition and Innovation Act of 2009 might permit these potential competitors to enter the market using a shorter and less costly development program for a biosimilar product that competes with our products.
If the Company’s intellectual property has not all been properly assigned to the Company, our business, financial condition, results of operation, and prospects could be adversely affected.
While the Company believes that each patent application or patent has already been assigned or, if it has not yet been formally assigned, is under an obligation to be assigned to the Company either through direct employment agreements between the Company and the inventors, or through research agreements with a third party and the Company, if such is not the case, our business, financial condition, results of operations, and prospects could be adversely affected.
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Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business or permit us to maintain our competitive advantage. For example:
● | others may be able to develop products that are similar to our product candidates but that are not covered by the claims of the patents that we own or license; | |
● | we or our licensors might not have been the first to make the inventions covered by the issued patents or patent application that we own or license; | |
● | we or our licensors might not have been the first to file patent applications covering certain of our inventions; | |
● | others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; | |
● | some or all of our licensors’ pending patent applications may not lead to issued patents; | |
● | issued patents that we own or license may be held invalid or unenforceable, as a result of legal challenges by our competitors; | |
● | our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets or in commercial markets where we do not have patent rights; | |
● | we may not develop additional proprietary technologies that are patentable; and | |
● | the patents of others may have an adverse effect on our business. |
Should any of these events occur, it could significantly harm our business, results of operations and prospects.
Intellectual property litigation may lead to unfavorable publicity that harms our reputation and causes the market price of our common shares to decline.
During the course of any intellectual property litigation, there could be public announcements of the initiation of the litigation as well as results of hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our existing products, programs or intellectual property could be diminished. Accordingly, the market price of shares of our Class A common stock may decline. Such announcements could also harm our reputation or the market for our future products, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.
In September 2011, the Leahy-Smith America Invents Act, or Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted and may also affect patent litigation. In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first inventor to file” system in which, assuming that other requirements of patentability are met, the first inventor to file a patent application will be entitled to the patent regardless of whether a third party was first to invent the claimed invention. A third party that files a patent application in the USPTO after March 2013 but before us could therefore be awarded a patent covering an invention of that we also made even if we had made the invention before the invention was made independently by such third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application. Furthermore, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our technology and the prior art allow our technology to be patentable over the prior art. Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we were the first to either (1) file any patent application related to our product candidates or (2) invent any of the inventions claimed in our patents or patent applications.
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The Leahy-Smith Act also includes a number of significant changes that affect the way patent applications will be prosecuted and also may affect patent litigation. These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review (PGR), inter partes review (IPR), and derivation proceedings. An adverse determination in any such submission or proceeding could reduce the scope or enforceability of, or invalidate, our patent rights, which could adversely affect our competitive position.
Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a patent claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. Thus, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our or licensors’ patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Changes in U.S. patent law, or laws in other countries, could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve a high degree of technological and legal complexity. Therefore, obtaining and enforcing biopharmaceutical patents is costly, time-consuming and inherently uncertain. Changes in either the patent laws or in the interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property and may increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents. We cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents. In addition, Congress or other foreign legislative bodies may pass patent reform legislation that is unfavorable to us.
For example, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our or our licensors’ 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 U.S. federal courts, the USPTO, or similar authorities in foreign jurisdictions, the laws and regulations governing patents could change in unpredictable ways that would weaken our or our licensors’ ability to obtain new patents or to enforce our existing patents and patents we might obtain in the future.
Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the term of a patent, and the protection it affords, are limited. Even if patents directed to our product candidates are obtained, once the patent term has expired, we may be open to competition from competitive products. Given the amount of time required for the development, testing and regulatory review of product candidates, patents directed to our product candidates might expire before or shortly after such candidates are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
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If we or our licensors do not obtain patent term extension for our product candidates and/or methods of their use, our business may be materially harmed.
Depending upon the timing, duration and specifics of FDA marketing approval of our product candidates and their methods of use, one or more of our U.S. patents may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Amendments, or the Biologics Price Competition and Innovation Act of 2009. These laws permit a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. A maximum of one patent may be extended per FDA-approved product as compensation for the patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only those claims covering such approved drug product, a method for using it or a method for manufacturing it may be extended.
Patent term extension may also be available in certain foreign countries upon regulatory approval of our product candidates. However, we or our licensors may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. Patent term extension may also not be granted because the product candidates and/or methods of use are determined not to be the first permitted marketing or use of those drug candidates in the jurisdiction in question, or patent term extension may not be granted because the product candidates and/or methods of use are determined not to constitute an “active ingredient” or use of an “active ingredient” that is eligible for patent term extension. Moreover, if patent term extension is granted then the additional time period or the scope of patent protection afforded could be less than we request. If we or our licensors are unable to obtain patent term extension or restoration or the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our revenue could be reduced, possibly materially. Further, if this occurs, our competitors may take advantage of our investment in development and trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.
We may not be able to protect our intellectual property rights throughout the world.
Although we have in-licensed issued patents and pending patent applications in the United States and certain other countries, filing, prosecuting and defending patents 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 in-licensed inventions in all countries outside the United States or from selling or importing products made using our in-licensed inventions in and into the United States or other jurisdictions. Competitors may use our in-licensed 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 or our licensors have patent protection but enforcement is not as strong as that in the United States. These products may compete with our product candidates, and our or our licensors 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 many foreign countries do not favor the enforcement of patents and other intellectual property protection, which could make it difficult for us to stop the infringement of our or our licensors’ patents or marketing of competing products in violation of our proprietary rights. Proceedings to enforce our or our licensors’ 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 or our licensors’ patents at risk of being invalidated or interpreted narrowly and our or our licensors’ patent applications at risk of not issuing and could provoke third parties to assert claims against us. We or our licensors may not prevail in any lawsuits that we or our licensors initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our or our licensors’ 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.
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Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patents. If we or our licensors are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.
Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and other requirements imposed by regulations and 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 the USPTO and various foreign patent offices at various points over the lifetime of our patents and/or applications. We have systems in place to remind us to pay these fees, and we rely on third parties to pay these fees when due. Additionally, the USPTO and various foreign patent offices require compliance with a number of procedural, 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 rules applicable to the particular jurisdiction. However, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If such an event were to occur, it could have a material adverse effect on our business, financial condition, and results of operations.
Risks Related to Regulatory Approval and Other Government Regulations
If we are not able to successfully develop and commercialize our product candidates and obtain the necessary regulatory approvals, we may not generate sufficient revenues to continue our business operations.
To generate sales revenue from our product candidates, we must conduct extensive preclinical studies and clinical trials to demonstrate that our product candidates are safe and effective and we must obtain required regulatory approvals. Our early stage product candidates may fail to perform as we expect. Moreover, our product candidates in later stages of development may fail to show the required safety and effectiveness for approval despite having progressed successfully through preclinical or initial clinical testing. We may need to devote significant additional research and development, financial resources, and personnel to develop commercially viable products. If our product candidates do not prove to be safe and efficacious in clinical trials, we will not obtain the required regulatory approvals. If we fail to obtain such approvals, we may not generate sufficient revenues to continue our business operations.
Even if we obtain regulatory approval of a product, that approval may be subject to limitations on the indicated uses for which it may be marketed. Even after granting regulatory approval, the FDA and regulatory agencies in other countries continue to review and inspect marketed products, manufacturers, and manufacturing facilities, which may create additional regulatory burdens. Later discovery of previously unknown problems with a product, manufacturer, or facility may result in restrictions on the product or manufacturer, including a withdrawal of the product from the market or a withdrawal of the approved application by the FDA. Furthermore, FDA may require post-approval studies or other commitments from us, and failure to comply with or meet those commitments could result in withdrawal of the approved application by FDA. Regulatory agencies may also establish additional regulations, policies, or guidance that could prevent or delay regulatory approval of our product candidates.
We cannot market and sell our product candidates in the United States or in other countries if we fail to obtain the necessary regulatory approvals.
We cannot sell our product candidates until regulatory agencies grant marketing approval. The process of obtaining regulatory approval is lengthy, expensive, and uncertain, and the legal requirements for obtaining approval may change. It is likely to take several years to obtain the required regulatory approvals for our lead signaling cell product candidates, or we may never gain the necessary approvals. Any difficulties that we encounter in obtaining regulatory approval may have a substantial adverse impact on our operations. Moreover, because our product candidates are all based on only three platform technologies, any adverse events in any of our clinical trials for one of our product candidates could negatively impact the clinical trials and approval process for our other product candidates.
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The pathway to regulatory approval for MSCs may be more complex and lengthy than for approval of a new conventional drug. Similarly, to obtain approval to market our cell products outside of the United States, we, together with our collaborative partners, will need to file appropriate applications and submit clinical data concerning our product candidates and receive regulatory approval from governmental agencies, which in certain countries includes approval of the price we intend to charge for our product. We may encounter delays or rejections if changes occur in regulatory agency regulations, policies or guidance during the period in which we develop a product candidate or during the period required for review of any application for regulatory agency approval. If we are not able to obtain regulatory approvals for use of our product candidates under development, we will not be able to commercialize such products, and therefore may not be able to generate sufficient revenues to support our business.
If we are not able to conduct our clinical trials properly and on schedule, marketing approval by FDA and other regulatory authorities may be delayed or denied.
The completion of our clinical trials may be delayed or terminated for many reasons, including, but not limited to, if:
● | the FDA does not grant INDs to test the product candidates in humans; | |
● | the FDA does not grant, or suspends, permission to proceed and places the trial on clinical hold; | |
● | we are not able to identify sufficient clinical trial sites and/or clinical trial investigators to begin or complete a trial; | |
● | subjects do not enroll in our trials at the rate we expect; | |
● | subjects experience an unacceptable rate or severity of adverse side effects; | |
● | third-party clinical investigators do not perform our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, Current Good Clinical Practice (cGCP) and regulatory requirements, or other third parties do not perform data collection and analysis in a timely or accurate manner; | |
● | inspections by the FDA or Institutional Review Boards (IRBs) of clinical trial sites at research institutions participating in our clinical trials find regulatory violations that require us to undertake corrective action, suspend, or terminate one or more sites, or prohibit us from using some or all of the data in support of our marketing applications; or | |
● | one or more IRBs suspends or terminates the trial at an investigational site, precludes enrollment of additional subjects, or withdraws its approval of the trial. |
Our development costs will increase if we have material delays in our clinical trials, or if we are required to modify, suspend, terminate, or repeat a clinical trial. If we are unable to conduct our clinical trials properly and on schedule, marketing approval may be delayed or denied by the FDA.
Final marketing approval of our product candidates by the FDA or other regulatory authorities for commercial use may be delayed, limited, or denied, any of which could adversely affect our ability to generate operating revenues.
Final marketing approval for our product candidates may be delayed, limited, or denied if, among other factors:
● | we are unable to satisfy the significant clinical testing required to demonstrate safety and effectiveness of our product candidates before marketing applications can be filed with the FDA; | |
● | FDA does not agree with our interpretation of data obtained from preclinical and nonclinical animal testing and clinical trials, even though the data can be interpreted in different ways; | |
● | we fail at any stage of the development and testing of our product candidates, which may take years to complete; |
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● | we receive negative or inconclusive results or reports of adverse side effects during a clinical trial; or | |
● | the FDA requires us to expand the size and scope of the clinical trials. |
If marketing approval for our product candidates is delayed, limited, or denied, our ability to market products, and our ability to generate product sales, could be adversely affected.
Alzheimer’s disease has failed every attempt at drug approval, and we have not had success to date in developing Alzheimer’s disease therapeutics.
Despite billions of dollars invested by the biopharmaceutical industry in research programs to develop novel therapeutics for AD, no FDA approved treatments have been developed. Many new types and classes of drugs have been developed and tested in AD, including monoclonal antibodies, g-secretase modulators and inhibitors, β-site amyloid precursor protein cleaving enzyme (BACE) inhibitors, receptor for advanced glycation end-products (RAGE) inhibitors, nicotinic agonists, serotonin subtype receptor (5HT6) antagonists, and others. All of these scientific programs have failed in clinical testing. Moreover, we have not had any success to date in developing therapeutics for AD, and may never do so.
We may not be able to secure and maintain research institutions to conduct our clinical trials.
We rely on research institutions to conduct our clinical trials. Specifically, the limited number of bone marrow transplant centers further heightens our dependence on such research institutions for our Phase 3 clinical trials. Our reliance upon research institutions, including hospitals and clinics, provides us with less control over the timing and cost of clinical trials and the ability to recruit subjects. If we are unable to reach agreement with suitable research institutions on acceptable terms, or if any resulting agreement is terminated, we may be unable to quickly replace the research institution with another qualified institution on acceptable terms. Even if we do replace the institution, we may incur additional costs to conduct the trial at the new institution. We may not be able to secure and maintain suitable research institutions to conduct our clinical trials.
Producing and marketing an approved drug or other medical product is subject to significant and costly post-approval regulation.
Even if approved for commercial sale, we may be required to conduct Phase 4 clinical trials or comply with other post-marketing requirements for the products. Even if we obtain approval of a product, we can only market the product for the approved indications. After granting marketing approval, the FDA and regulatory agencies in other countries continue to review and inspect marketed products, manufacturers, and manufacturing facilities, creating additional regulatory burdens. Later discovery of previously unknown problems with a product, manufacturer, or facility may result in restrictions on the product or manufacturer, including a withdrawal of the product from the market. Further, regulatory agencies may establish different or additional regulations that could impact the post-marketing status of our products.
Our business involves the use of hazardous materials that could expose us to environmental and other liability.
We have contract facilities in Florida that are subject to various local, state, and federal laws and regulations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances, including chemicals, micro-organisms, and various radioactive compounds used in connection with our research and development activities. In the United States, these laws include the Occupational Safety and Health Act, the Toxic Test Substances Control Act, and the Resource Conservation and Recovery Act. We cannot guarantee that accidental contamination or injury to our employees and third parties from hazardous materials will not occur. We do not have insurance to cover claims arising from our use and disposal of these hazardous substances other than limited clean-up expense coverage for environmental contamination due to an otherwise insured peril, such as fire.
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Risks Related to Our Dependence on Third Parties
We rely on third parties to provide us with supplies to produce our product candidates. Any problems experienced by these third parties could result in a delay or interruption in the supply of our product candidates for our clinical trials and future approved products to our customers, which could have a material negative effect on our business.
We rely on third parties to provide us with supplies to produce our product candidates. If the operations of these third parties are interrupted or if they are unable to meet our delivery requirements due to capacity limitations or other constraints, we may be limited in our ability to fulfill our supply and product candidate needs. Any prolonged disruption in the operations of third parties could have a significant negative impact on our ability to produce our product candidates for pre-clinical and clinical trials or sell our future approved products, could harm our reputation and could cause us to seek other third-party contracts, thereby increasing our anticipated development and commercialization costs. In addition, if we are required to change third parties for any reason, we will be required to verify that the new third parties maintain facilities and procedures that comply with quality standards required by the FDA and with all applicable regulations and guidelines. The delays associated with the verification of a new third party could negatively affect our ability to develop product candidates or receive approval for any product candidates in a timely manner.
We are currently dependent upon third parties for services and raw materials needed for the manufacture of our product candidates, and if these products are successfully commercialized, may become dependent upon third parties for product distribution. If any of these third parties fail or are unable to perform in a timely manner, our ability to manufacture and deliver could be compromised.
To produce our product candidates for use in clinical studies, and to produce any of our product candidates that may be approved for commercial sale, we require biologic media, reagents, and other highly specialized materials in addition to the bone marrow aspirate used in the manufacture of our product candidates. These items must be manufactured and supplied to us in sufficient quantities and in compliance with the regulations governing GMP and Current Good Tissue Practice (cGTP) promulgated by the FDA. To meet these requirements, we have entered into supply agreements with firms that manufacture these components to meet GMP and cGTP standards. Our requirements for these items are expected to increase if and when we transition to the manufacture of commercial quantities of our product candidates.
In addition, as we proceed with our clinical trial efforts, we must be able to demonstrate to the FDA that we can manufacture our product candidates with consistent characteristics. While we currently produce our product candidates in our own facility, scaling up the manufacturing process would require us to develop a larger facility, which could require significant time and capital investments to conform to applicable manufacturing standards, or outsource manufacturing, which would cause us to be materially dependent on these suppliers for supply of GMP- and cGTP-grade components of consistent quality. Our ability to complete ongoing clinical trials may be negatively affected in the event that we are forced to seek and validate a replacement source for any of these critical components. If we are not able to obtain adequate supplies of these items of consistent quality from our third-party suppliers, it will also be more difficult to manufacture commercial quantities of our product candidates that are approved for commercial sale.
In addition, if one or more of our product candidates is approved for commercial sale, we intend to rely on third parties for their distribution. Proper shipping and distribution requires compliance with specific storage and shipment procedures (e.g., prevention of damage to shipping materials and prevention of temperature excursions during shipment). Failure to comply with such procedures will necessitate return and replacement, potentially resulting in additional cost and causing us to fail to meet supply requirements.
Use of third-party manufacturers may increase the risk that we will not have adequate quantities of our product candidates.
We may use a third-party manufacturer to supply our product candidates for clinical trials or other uses at some point. Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured such components ourselves, including:
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● | reliance on the third party for regulatory compliance and quality assurance; | |
● | the possible breach of the manufacturing agreement by the third party; and | |
● | the possible termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or inconvenient for us. |
Future contract manufacturers are or will be subject to all of the risks and uncertainties that we would have if we manufactured the product candidates on our own. Similar to us, they are subject to ongoing, periodic, and unannounced inspection by the FDA and corresponding state and foreign agencies or their designees to ensure strict compliance with GMP and cGTP regulations and other governmental regulations and corresponding foreign standards. Although we do not control compliance by our contract manufacturers with these regulations and standards, we—as the manufacturer—assume the liabilities for our contract manufacturers’ non-compliance. Our future contract manufacturers might not be able to comply with these regulatory requirements. If our third-party manufacturers fail to comply with applicable regulations, the FDA or other regulatory authorities could impose penalties on us, including fines, injunctions, civil penalties, consent decrees, compliance with FDA’s Application Integrity Policy, issuance of warning or untitled letters, denial of marketing approval of our product candidates, delays, suspensions, or withdrawals of approvals, license revocation, seizures or recalls of product candidates or our other products, operating restrictions, and criminal prosecutions. Any of these actions could significantly and adversely affect supplies of our product candidates or other products and could have a material adverse effect on our business, financial condition, and results of operations.
If we decide to use third-party manufacturers in the future, they will likely be dependent upon their own third-party suppliers, making us vulnerable to supply shortages and price fluctuations, which could harm our business.
The operations of any future third-party manufacturers will likely be dependent upon their own third-party suppliers. A supply interruption or an increase in demand beyond a supplier’s capabilities could harm the ability of any future manufacturers to manufacture our product candidates or intended products until the manufacturer identifies and qualifies new sources of supply. Reliance on these third-party manufacturers and their suppliers could subject us to a number of risks that could harm our business, including:
● | interruption of supply resulting from modifications to or discontinuation of a supplier’s operations; | |
● | failure of third-party manufacturers or suppliers to comply with their own legal and regulatory requirements; | |
● | delays in product shipments resulting from uncorrected defects, reliability issues, or a supplier’s variation in a component; | |
● | a lack of long-term supply arrangements for key components with our suppliers; | |
● | inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms; | |
● | difficulty and cost associated with locating and qualifying alternative suppliers for components in a timely manner; | |
● | production delays related to the evaluation and testing of products from alternative suppliers, and corresponding regulatory qualifications; | |
● | delay in delivery due to suppliers prioritizing other customer orders over ours or those of our third-party manufacturers; | |
● | damage to our brand reputation caused by defective components produced by the suppliers; and | |
● | fluctuation in delivery by the suppliers due to changes in demand from us, our third-party manufacturers or their other customers. |
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Any interruption in the supply of components of our product candidates or future products or materials, or our inability to obtain substitute components or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demands of our clinical trials or of our future customers, which would have an adverse effect on our business.
We will depend on third-party distributors in the future to market and sell our future products which will subject us to a number of risks.
We will depend on third-party distributors to sell, market, and service our future products in our intended markets. We are subject to a number of risks associated with reliance upon third-party distributors including:
● | lack of day-to-day control over the activities of third-party distributors; | |
● | failure of the third-party distributors to comply with their own legal and regulatory requirements; | |
● | third-party distributors may not commit the necessary resources to market and sell our future products to our level of expectations; | |
● | third-party distributors may terminate their arrangements with us on limited or no notice or may change the terms of these arrangements in a manner unfavorable to us; and | |
● | disagreements with our future distributors could result in costly and time-consuming litigation or arbitration which we could be required to conduct in jurisdictions with which we are not familiar. |
If we fail to establish and maintain satisfactory relationships with our future third-party distributors, our revenues and market share may not grow as anticipated, and we could be subject to unexpected costs which could harm our results of operations and financial condition.
The successful commercialization of our current or future product candidates will depend on obtaining reimbursement from government and third-party payors.
If we successfully develop and obtain necessary regulatory approvals, we intend to sell our product candidates in countries such as the United States and Japan. In the United States, the market for any pharmaceutical product is affected by the availability of reimbursement from government and third-party payors, such as government health administration authorities, private health insurers, health maintenance organizations, and pharmacy benefit management companies. MSC therapies may be expensive compared with conventional pharmaceuticals, due to the higher cost and complexity associated with the research, development, and production of product candidates, the small size and large geographic diversity of the target patient population for some indications, and the complexity associated with distribution of signaling cell therapies which require special handling, storage, and shipment procedures and protocols. This, in turn, may make it more difficult for us to obtain adequate reimbursement from government and third-party payors, particularly if we cannot demonstrate a favorable cost-benefit relationship. Government and third-party payors may also deny coverage or offer inadequate levels of reimbursement for our potential products if they determine that the product has not received appropriate clearances from the FDA or other government regulators or is experimental, unnecessary or inappropriate.
In some other countries where we may seek to market our products, such as Japan, the pricing of prescription pharmaceutical products and services and the level of government reimbursement are subject to governmental control. In these countries, pricing negotiations with governmental authorities can take six to twelve months or longer after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we or our potential future collaborators may be required to conduct one or more clinical trials that compare the cost effectiveness of our product candidates or products to other available therapies. Conducting one or more additional clinical trials would be expensive and could result in delays in commercialization of our product candidates.
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Managing and reducing health care costs has been a general concern of federal and state governments in the United States and various foreign governments. Although we do not believe that any recently enacted or presently proposed legislation in any jurisdictions in which we currently operate should impact our business based on our current model, we might be subject to future regulations or other cost-control initiatives that materially restrict the price we would receive for our products. In addition, government and third-party payors are increasingly challenging the price and cost-effectiveness of medical products and services, and many limit reimbursement for newly approved health care products. In particular, government and third-party payors may limit the indications for which they will reimburse patients who use any products that we may develop. Cost control initiatives could decrease the price for products that we may develop, which could result in lower product revenues to us.
We may enter into arrangements with third-party collaborators to help us develop our product candidates and commercialize our products, and our ability to commercialize such products may be impaired or delayed if collaborations are unsuccessful.
We are parties to various collaborations with third parties, and may enter into additional collaborations in the future. We are dependent upon the success of our current and any future collaborators in performing their responsibilities in connection with the relevant collaboration. If we fail to maintain these collaborative relationships for any reason, we would need to perform the activities that we currently anticipate would be performed by our collaborators on our own at our sole expense. This could substantially increase our capital needs, and we may not have the capability or financial capacity to undertake these activities on our own, or we may not be able to find other collaborators on acceptable terms, or at all. This may limit the programs we are able to pursue and result in significant delays in the development, sale, and manufacture of our product candidates and products, and may have a material adverse effect on our business, financial condition, and results of operations.
Our dependence upon our current and potential future collaborations exposes us to a number of risks, including that our collaborators (i) may fail to cooperate or perform their contractual obligations, including financial obligations, (ii) may choose to undertake differing business strategies or pursue alternative technologies, or (iii) may take an opposing view regarding ownership of clinical trial results or intellectual property.
Due to these factors and other possible events, we could suffer delays in the research, development, or commercialization of our product candidates and future products or we may become involved in litigation or arbitration, which could be time consuming and expensive. We additionally may be compelled to split revenue with our collaborators, which could have a material adverse effect on our business, financial condition, and results of operations.
If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
From time to time, we may evaluate various acquisition opportunities and strategic partnerships, including licensing or acquiring complementary products or product candidates, intellectual property rights, technologies or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including:
● | increased operating expenses and cash requirements; | |
● | the assumption of additional indebtedness or contingent liabilities; | |
● | the issuance of our equity securities; | |
● | assimilation of operations, intellectual property and products or product candidates of an acquired company, including difficulties associated with integrating new personnel; | |
● | the diversion of our management’s attention from our existing programs and initiatives in pursuing such a strategic merger or acquisition; | |
● | retention of key employees, the loss of key personnel and uncertainties in our ability to maintain key business relationships; |
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● | risks and uncertainties associated with the other party to such a transaction, including the prospects of that party to receive marketing approvals for their existing products or product candidates; and | |
● | our inability to generate revenue from acquired technology, product candidates and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs. |
In addition, if we undertake acquisitions or pursue partnerships in the future, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities, and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.
Risks Related to the Discovery, Development and Commercialization of Our Product Candidates
Interim, “topline” and preliminary data from our clinical trials that we announce or publish from time to time may change as more data become available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose preliminary or topline data from our preclinical studies and clinical trials, which is based on a preliminary analysis of then-available data. These results and related findings and conclusions are based on assumptions, estimations, calculations and conclusions, and are subject to change following the generation of additional data or a more comprehensive review of the data related to the particular study or trial. As a result, the topline or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline 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, topline and preliminary data should be viewed with caution until the final data are available.
From time to time, we may also disclose interim data from our preclinical studies and clinical trials. For example, we have reported interim data from our ongoing clinical trials, elsewhere in this prospectus. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as subject enrollment continues and more subject data become available or as subjects from our clinical trials continue other treatments for their disease. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our Class A common stock after this offering.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.
If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could have a material adverse effect on our business, financial condition, and results of operations.
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We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on other product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other therapeutic platforms or product candidates or for other indications that later prove to have greater commercial potential or a greater likelihood of success. 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, therapeutic platforms and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights.
The U.S. FDA, Japanese PMDA and other comparable foreign regulatory authorities may not accept data from trials conducted in locations outside of their jurisdiction.
We may choose to conduct international clinical trials in the future. The acceptance of study data by the U.S. FDA, Japanese PMDA or other comparable foreign regulatory authority from clinical trials conducted outside of their respective jurisdictions may be subject to certain conditions. In cases where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (1) the data are applicable to the United States population and United States medical practice; (2) the trials are performed by clinical investigators of recognized competence and pursuant to cGCP requirements; and (3) the FDA is able to validate the data through an on-site inspection or other appropriate means. The FDA may accept the use of some foreign data to support a marketing approval if the clinical trial meets certain requirements. Additionally, the FDA’s clinical trial requirements, including the adequacy of the subject population studied and statistical powering, must be met. Furthermore, such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. In Japan, the PMDA is requiring us to conduct our Japanese Phase 2 trial in a Japanese population in order to demonstrate safety and efficacy in Japanese subjects. There can be no assurance that the FDA, PMDA or any applicable foreign regulatory authority will accept data from trials conducted outside of its respective jurisdiction. If the FDA, PMDA or any applicable foreign regulatory authority does not accept such data, it would result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and which may result in our product candidates not receiving approval for commercialization in the applicable jurisdiction.
Obtaining and maintaining regulatory approval of a product in one jurisdiction does not mean that we will be successful in obtaining or maintaining regulatory approval in other jurisdictions.
Obtaining and maintaining regulatory approval of a product in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction. For example, even if the FDA or PMDA grants marketing approval of a product, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion and reimbursement of the product in those countries. However, a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. Moreover, product types or regulatory classifications, as well as approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including different or additional preclinical studies or clinical trials, as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product 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.
Obtaining foreign regulatory approvals and establishing and maintaining 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 or any future collaborator fails to comply with the regulatory requirements in international markets or fails to 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.
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The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.
If any of our product candidates are approved and we are found to have improperly promoted off-label uses of those products, we may become subject to significant liability. The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products, such as our product candidates, if approved. In particular, an approved product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected in the product’s approved labeling. If we receive marketing approval for a product candidate, physicians may nevertheless prescribe it to their patients in a manner that is inconsistent with the approved label, which is within their purview as part of their practice of medicine. If we are found to have promoted such off-label uses, however, we may become subject to significant liability. The U.S. federal government has levied large civil and criminal fines against companies for alleged improper promotion of off-label use and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. The FDA may also issue a public warning letter or untitled letter to the company. If we cannot successfully manage the promotion of our future approved products, we could become subject to significant liability, which would materially adversely affect our business and financial condition.
If we are required by the FDA to obtain approval of a companion diagnostic test in connection with approval of any of our product candidates, and we do not obtain or face delays in obtaining FDA approval of a diagnostic test, we will not be able to commercialize such future approved product and our ability to generate revenue will be materially impaired.
If safe and effective use of any of our product candidates depends on the use of an in vitro diagnostic test that is not otherwise commercially available, then the FDA generally will require approval or clearance of that diagnostic, known as a companion diagnostic, at the same time that the FDA approves our product candidates if at all. According to FDA guidance, if the FDA determines that a companion diagnostic is essential to the safe and effective use of a novel therapeutic product or indication, then the FDA generally will not approve the therapeutic product or new therapeutic product indication if the companion diagnostic is not also approved or cleared for that indication. If a satisfactory companion diagnostic is not commercially available, we may be required to create or obtain one that would be subject to its own regulatory approval requirements. The process of obtaining or creating such diagnostic is time consuming and costly.
Companion diagnostics are developed in conjunction with clinical programs for the associated product and are subject to regulation as medical devices by the FDA and comparable regulatory authorities. The approval of a companion diagnostic as part of the therapeutic product labeling limits the use of the therapeutic product to only those patients who express the specific genetic alteration that the companion diagnostic was developed to detect.
If the FDA, PMDA or a comparable regulatory authority requires approval of a companion diagnostic for any of our product candidates, whether before or after it obtains marketing approval, we, and/or future collaborators, may encounter difficulties in developing and obtaining approval for such product candidate. Any delay or failure by us or third-party collaborators to develop or obtain regulatory approval of a companion diagnostic could delay or prevent approval of a product candidate or continued marketing of an approved product.
We may also experience delays in developing a sustainable, reproducible and scalable manufacturing process for the companion diagnostic or in transferring that process to commercial partners or negotiating insurance reimbursement plans, all of which may prevent us from completing our clinical trials of a product candidate or commercializing an approved product on a timely or profitable basis, if at all.
We may attempt to secure approval from the FDA or comparable foreign regulatory authorities through an expedited review program, and if we are unable to do so, then we could face increased expense to obtain, and delays in the receipt of, necessary marketing approvals.
We may in the future seek approval for one or more of our product candidates under one of the FDA’s expedited review programs for serious conditions. These programs are available to sponsors of therapies that address an unmet medical need to treat a serious condition. The qualifying criteria and requirements vary for each expedited program. Prior to seeking review under one of these expedited programs for any of our product candidates, we intend to seek feedback from the FDA and will otherwise evaluate our ability to seek and receive marketing approval through an expedited review program.
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There can be no assurance that, after our evaluation of the FDA’s feedback and other factors, we will decide to pursue one or more of these expedited review programs. Similarly, there can be no assurance that after subsequent FDA feedback we will continue to pursue one or more of these expedited programs, even if we initially decide to do so. Furthermore, FDA could decide not to grant our request to use one or more of the expedited review programs for a product candidate, even if the FDA’s initial feedback is that the product candidate would qualify for such program(s). Moreover, FDA can decide to stop reviewing a product candidate under one or more of these expedited review programs if, for example, the conditions that warranted expedited review no longer apply to that product candidate.
Some of these expedited programs (e.g., accelerated approval) also require post-marketing clinical trials to be completed and, if any such required trial fails, the FDA could withdraw the approval of the product. If one of our product candidates does not qualify for any expedited review program, then this could result in a longer time period to approval and commercialization of such product candidate, could increase the cost of development of such product candidate, and could harm our competitive position in the marketplace.
We may face difficulties from changes to current regulations and future legislation, both in the U.S. as well as in other foreign jurisdictions where we may be operating.
Existing regulations and regulatory 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. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.
For example, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA, substantially changed the way healthcare is financed by both the government and private insurers, and significantly impacts the U.S. pharmaceutical industry. Some of the provisions of the ACA have yet to be implemented, and there have been judicial and Congressional challenges and attempts to repeal or replace certain aspects of the ACA. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Concurrently, Congress has considered legislation that would repeal, or repeal and replace, all or part of the ACA. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA have passed. On December 22, 2017, President Trump signed into law federal tax legislation commonly referred to as the Tax Cuts and Jobs Act, or the Tax Act, which includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate”. In addition, the 2020 federal spending package permanently eliminates, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. The Bipartisan Budget Act of 2018, or the BBA, among other things, amended the ACA, effective January 1, 2019, to close the coverage gap in most Medicare Part D drug plans. In December 2018, the Centers for Medicare & Medicaid Services, or CMS, published a new final rule permitting further collections and payments to and from certain ACA-qualified health plans and health insurance issuers under the ACA risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit ruled that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. It is unclear how these decisions, future decisions, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA and our business.
In addition, other legislative changes have been proposed and adopted in the United States that could impact our future business and operations, including those that may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on customers for our product candidates, if approved, and accordingly, our business, financial condition, and results of operations.
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Moreover, there has been heightened governmental scrutiny recently 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. For example, at the federal level, the Trump administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase 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. Although future measures will require additional authorization to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical 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.
We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our product candidates.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for biotechnology products. We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.
Our relationships with healthcare professionals, clinical investigators, CROs and third-party payors in connection with our current and future business activities may be subject to federal and state healthcare fraud and abuse laws, false claims laws, transparency laws, government price reporting, and health information privacy and security laws, which could expose us to, among other things, criminal sanctions, civil penalties, contractual damages, exclusion from governmental healthcare programs, reputational harm, administrative burdens and diminished profits and future earnings.
Healthcare providers and third-party payors play a primary role in the recommendation and prescription of any product candidates for which we obtain future marketing approval. Our current and future arrangements with healthcare professionals, clinical investigators, contract research organizations (CROs), third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:
● | the federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal healthcare program such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act; |
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● | the federal false claims and civil monetary penalties laws, including the civil False Claims Act, which can be enforced by private citizens through civil whistleblower or qui tam actions, prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, prohibits, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program or making false statements 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 and their implementing regulations, also imposes obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; | |
● | the federal Physician Payments Sunshine Act requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to annually report to CMS starting in 2022 information regarding payments and other transfers of value to physicians, certain other healthcare providers and teaching hospitals, as well as information regarding ownership and investment interests held by physicians and their immediate family members. The information reported is publicly available on a searchable website, with disclosure required annually; and | |
● | analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers. |
Some state laws require biotechnology companies to comply with the biotechnology industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures. Some state laws require biotechnology companies to report information on the pricing of certain drug products. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. For instance, the collection and use of health data in the European Union is governed by the General Data Protection Regulation, or the GDPR, which extends the geographical scope of European Union data protection law to non-European Union entities under certain conditions, tightens existing European Union data protection principles, creates new obligations for companies and new rights for individuals. Failure to comply with the GDPR may result in substantial fines and other administrative penalties. In addition, on June 28, 2018, the State of California enacted the California Consumer Privacy Act, or CCPA, which took effect on January 1, 2020. The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability, and similar laws have been proposed at the federal level and in other states.
Efforts to ensure that our current and future business arrangements with third parties will comply with applicable healthcare laws and regulations will involve on-going substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, temporary or permanent debarment, contractual damages, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations. Defending against any such actions can be costly, time-consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. Further, if any of the physicians or other healthcare providers or entities with whom we expect to do business are found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
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Inadequate funding for the FDA and other government agencies, or future government shutdown and or furlough of government employees, or public health emergencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being reviewed or approved in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel, the availability of industry-paid user fees, and statutory, regulatory, and policy changes. Average review times for product approvals at the FDA have fluctuated in recent years as a result. In addition, government funding of other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies, including those resulting from the current COVID-19 global pandemic, may also slow the time necessary for new products to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, if a prolonged government shutdown and/or government employee furloughs were to occur, or if FDA’s response to a global pandemic such as COVID-19 diverts FDA resources and attention to other regulatory efforts, then the ability of the FDA to timely review and process our regulatory submissions could be significantly impacted, which could have a material adverse effect on our business, financial condition, and results of operations. Further, upon completion of this offering and in our operations as a public company, future government shutdowns, furloughs or public health emergencies could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
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 our business, financial condition, and results of operations.
We are subject to numerous environmental, health and safety laws and regulations, including 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.
Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of hazardous and flammable materials, including chemicals and biological materials.
In addition, we may incur 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 commercialization efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
Our research and development activities could be affected or delayed as a result of possible restrictions on animal testing.
Certain laws and regulations require us to test our product candidates on animals before initiating clinical trials involving humans. Animal testing activities have been the subject of controversy and adverse publicity. Animal rights groups and other organizations and individuals have attempted to stop animal testing activities by pressing for legislation and regulation in these areas and by disrupting these activities through protests and other means. To the extent the activities of these groups are successful, or if the laws and regulations regarding animal testing otherwise change, our research and development activities may be interrupted, delayed or become more expensive.
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Our business activities may be subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, and similar anti-bribery and anti-corruption laws of other countries in which we operate, as well as U.S. and certain foreign export controls, trade sanctions, and import laws and regulations. Compliance with these legal requirements could limit our ability to compete in foreign markets and subject us to liability if we violate them.
If we further expand our operations outside of the United States, we must dedicate additional resources to comply with numerous laws and regulations in each jurisdiction in which we plan to operate. Our business activities may be subject to the FCPA and similar anti-bribery or anti-corruption laws, regulations or rules of other countries in which we operate. The FCPA generally prohibits companies and their employees and third party intermediaries from offering, promising, giving or authorizing the provision of anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in many other countries, hospitals owned and operated by the government, and doctors and other hospital employees would be considered foreign officials under the FCPA. Recently the Securities and Exchange Commission (SEC) and Department of Justice (DOJ) have increased their FCPA enforcement activities with respect to biotechnology and pharmaceutical companies. There is no certainty that all of our employees, agents or contractors, or those of our affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, disgorgement, and other sanctions and remedial measures, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international activities, our ability to attract and retain employees and our business, prospects, operating results and financial condition.
In addition, our products and technology may be subject to U.S. and foreign export controls, trade sanctions and import laws and regulations. Governmental regulation of the import or export of our products and technology, or our failure to obtain any required import or export authorization for our products, when applicable, could harm our international sales and adversely affect our revenue. Compliance with applicable regulatory requirements regarding the export of our products may create delays in the introduction of our products in international markets or, in some cases, prevent the export of our products to some countries altogether. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products and services to countries, governments, and persons targeted by U.S. sanctions. If we fail to comply with export and import regulations and such economic sanctions, penalties could be imposed, including fines and/or denial of certain export privileges. Moreover, any new export or import restrictions, new legislation or shifting approaches in the enforcement or scope of existing regulations, or in the countries, persons, or products targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export our products to existing or potential customers with international operations. Any decreased use of our products or limitation on our ability to export or sell access to our products would likely adversely affect our business.
Risks Related to this Offering and Ownership of Our Class A Common Stock
There has been no prior public market for our Class A common stock. We do not know whether an active, liquid and orderly trading market will develop for our Class A common stock or what the market price of our Class A common stock will be and as a result it may be difficult for you to sell your shares of our Class A common stock.
Prior to this offering, no public market for shares of our Class A common stock existed and an active trading market for our Class A common stock may never develop or be sustained following this offering. We will determine the initial public offering price for our Class A common stock through negotiations with the underwriters, and the negotiated price may not be indicative of the market price of our Class A common stock after this offering. The market value of our Class A common stock may decrease from the initial public offering price. As a result of these and other factors, you may be unable to resell your shares of our Class A common stock at or above the initial public offering price. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value of your shares. Furthermore, an inactive market may also impair our ability to raise capital by selling shares of our Class A common stock and may impair our ability to enter into strategic collaborations or acquire companies, technologies or other assets by using our shares of Class A common stock as consideration.
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The price of our stock may be volatile, and you could lose all or part of your investment.
The trading price of our Class A common stock following this offering is likely to be highly volatile and subject to wide fluctuations in response to various factors, some of which we cannot control. The stock market in general, and pharmaceutical and biotechnology companies 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 Class A common stock, regardless of our actual operating performance. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this prospectus, these factors include:
● | the timing and results of preclinical studies and clinical trials of our product candidates or those of our competitors; | |
● | the success of competitive products or announcements by potential competitors of their product development efforts; | |
● | regulatory actions with respect to our or our competitors’ product candidates or products; | |
● | actual or anticipated changes in our growth rate relative to our competitors; | |
● | regulatory or legal developments in the United States and other countries; | |
● | developments or disputes concerning patent applications, issued patents or other proprietary rights; | |
● | the recruitment or departure of key personnel; | |
● | announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures, or capital commitments; | |
● | actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; | |
● | fluctuations in the valuation of companies perceived by investors to be comparable to us; | |
● | market conditions in the pharmaceutical and biotechnology sector; | |
● | changes in the structure of healthcare payment systems; | |
● | share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; | |
● | announcement or expectation of additional financing efforts; | |
● | sales of our Class A common stock by us, our insiders or our other stockholders; | |
● | expiration of market stand-off or lock-up agreements; and | |
● | general economic, industry and market conditions. |
The realization of any of the above risks or any of a broad range of other risks, including those described in this “Risk Factors” section, could have a dramatic and adverse impact on the market price of our Class A common stock.
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Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product candidates on unfavorable terms to us.
In order to meet our operational goals, we will need to obtain additional capital, which we will likely obtain through a variety of means, including through public or private equity, debt financings or other sources, including up-front payments and milestone payments from strategic collaborations. To the extent that we raise additional capital through the sale of convertible debt or equity securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Such financing may result in dilution to stockholders, imposition of debt covenants, increased fixed payment obligations or other restrictions that may affect our business. If we raise additional funds through up-front payments or milestone payments pursuant to strategic collaborations with third parties, we may have to relinquish valuable rights to our product candidates, or grant licenses on terms that are not favorable to us. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.
The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.
We cannot predict whether our dual class structure will result in a lower or more volatile market price of our Class A common stock or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with dual class or multi-class share structures in certain of their indexes. In July 2017, S&P Dow Jones and FTSE Russell announced changes to their eligibility criteria for the inclusion of shares of public companies on certain indices, including the Russell 2000, the S&P 500, the S&P MidCap 400 and the S&P SmallCap 600, to exclude companies with multiple classes of shares of common stock from being added to these indices. Beginning in 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices; however, in October 2018, MSCI announced its decision to include equity securities “with unequal voting structures” in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria. As a result, our dual class capital structure would make us ineligible for inclusion in any of these indices, and mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track these indices will not be investing in our stock. These policies are still fairly new and it is as of yet unclear what effect, if any, they will have on the valuations of publicly traded companies excluded from the indices, but it is possible that they may depress these valuations compared to those of other similar companies that are included. Furthermore, we cannot assure you that other stock indices will not take a similar approach to S&P Dow Jones or FTSE Russell in the future. Exclusion from indices could make our Class A common stock less attractive to investors and, as a result, the market price of our Class A common stock could be adversely affected.
If securities or industry analysts do not publish research or reports, or if they publish adverse or misleading research or reports, regarding us, our business or our market, our stock price and trading volume could decline.
The trading market for our Class A common stock will be influenced by the research and reports that securities or industry analysts publish about us, our business or our market. We do not currently have and may never obtain research coverage by securities or industry analysts. If no or few securities or industry analysts commence coverage of us, the stock price would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue adverse or misleading research or reports regarding us, our business model, our intellectual property, our stock performance or our market, or if our operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Our quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.
We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:
● | variations in the level of expense related to the ongoing development of our product candidates or future development programs; |
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● | results of clinical trials, or the addition or termination of clinical trials or funding support by us or potential future partners; | |
● | our execution of any collaboration, licensing or similar arrangements, and the timing of payments we may make or receive under potential future arrangements or the termination or modification of any such potential future arrangements; | |
● | any intellectual property infringement, misappropriation or violation lawsuit or opposition, interference or cancellation proceeding in which we may become involved; | |
● | additions and departures of key personnel; | |
● | strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; | |
● | if any of our product candidates receives regulatory approval, the terms of such approval and market acceptance and demand for such approved products; | |
● | regulatory developments affecting our product candidates or future products, or those of our competitors; and | |
● | changes in general market and economic conditions. |
If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our Class A common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.
Holders of our Class B common stock will control the direction of our business and such parties’ ownership of our common stock will prevent you and other stockholders from influencing significant decisions.
Following the completion of this offering, two holders of our Class B common stock, Dr. Joshua Hare, our co-founder and Chief Scientific Officer, and DS MED LLC, a limited liability company controlled by a member of our Board, Don Soffer, will own approximately % of the combined voting power of our Class A and Class B common stock (or % if the underwriters exercise their option to purchase additional shares in full), with each share of Class A common stock entitling the holder to one (1) vote and each share of Class B common stock entitling the holder to five (5) votes, on all matters submitted to a vote of our stockholders. For so long as holders of Class B common stock continue to hold the shares, they will still be able to significantly influence or effectively control the composition of our board of directors and the approval of actions requiring stockholder approval through their voting power. Accordingly, for such period of time, these holders will have significant influence with respect to our management, business plans and policies. In particular, for so long as the Class B common stock remains outstanding, the holders may be able to cause or prevent a change of control of our Company or a change in the composition of our board of directors, and could preclude any unsolicited acquisition of our Company. The concentration of ownership could deprive you of an opportunity to receive a premium for your shares of Class A common stock as part of a sale of our Company and ultimately might affect the market price of our Class A common stock.
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If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our Class A common stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
We will be required to disclose changes made in our internal controls and procedures on a quarterly basis and our management will be required to assess the effectiveness of these controls annually. However, for as long as we are an emerging growth company, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404. We could be an emerging growth company for up to five years. An independent assessment of the effectiveness of our internal controls over financial reporting could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls over financial reporting could lead to restatements of our financial statements and require us to incur the expense of remediation.
If you purchase shares of our Class A common stock in our initial public offering, you will experience substantial and immediate dilution.
The initial public offering price of $ per share is substantially higher than the net tangible book value per share of our outstanding Class A common stock immediately following the completion of this offering. If you purchase shares of Class A common stock in this offering, you will experience substantial and immediate dilution in the pro forma net tangible book value per share of $ per share as of September 30, 2020. That is because the price that you pay will be substantially greater than the pro forma net tangible book value per share of the Class A common stock that you acquire. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares of our capital stock. You will experience additional dilution when those holding derivative securities or warrants vest or exercise their right to purchase Class A common stock under our equity incentive plans or when we otherwise issue additional shares of Class A common stock. See “Dilution.”
Sales of a substantial number of shares of our Class A common stock in the public market could cause our stock price to fall.
Our Class A common stock price could decline as a result of sales of a large number of shares of Class A common stock after this offering or the perception that these sales could occur. These sales, or the possibility that these sales may occur, might also make it more difficult for us to sell equity securities in the future at a time and price that we deem appropriate.
Upon the completion of this offering, shares of Class A common stock will be outstanding ( shares if the underwriters exercise their option to purchase additional shares from us in full), based on the number of shares outstanding as of , 2020.
All shares of Class A common stock expected to be sold in this offering will be freely tradable without restriction or further registration under the Securities Act unless held by our “affiliates” as defined in Rule 144 under the Securities Act. The resale of the remaining shares, or % of our outstanding shares of Class A common stock following this offering, is currently prohibited or otherwise restricted as a result of securities law provisions, market standoff agreements entered into by certain of our stockholders with us or lock-up agreements entered into by our stockholders with the underwriters in connection with this offering. However, subject to applicable securities law restrictions, these shares will be able to be sold in the public market beginning 181 days after the date of this prospectus. Shares issued upon the exercise of stock options and warrants outstanding under our equity incentive plans or pursuant to future awards granted under those plans will become available for sale in the public market to the extent permitted by the provisions of applicable vesting schedules, market stand-off agreements and/or lock-up agreements, as well as Rules 144 and 701 under the Securities Act. For more information, see “Shares Eligible for Future Sale.”
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Upon the completion of this offering, the underwriter will have the right, subject to some conditions, to require us to file a registration statements covering the sale of the shares of Class A common stock issuable upon the exercise of their warrants or to include those shares in registration statements that we may file for ourselves or our other stockholders. We also intend to register the offer and sale of all shares of Class A common stock that we may issue under our equity compensation plans. Once we register the offer and sale of shares for the holders of registration rights and shares that may be issued under our equity incentive plans, these shares will be able to be sold in the public market upon issuance, subject to the lock-up agreements described under “Underwriters.”
In addition, in the future, we may issue additional shares of Class A common stock, or other equity or debt securities convertible into Class A common stock, in connection with a financing, acquisition, employee arrangement or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and could cause the price of our Class A common stock to decline.
We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we intend to take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including:
● | being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this prospectus; | |
● | not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; | |
● | not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements; | |
● | reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements; and | |
● | exemptions from the requirements of holding nonbinding advisory stockholder votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. |
We cannot predict if investors will find our Class A common stock less attractive because we may rely on these exemptions. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our stock price may be more volatile.
We will remain an emerging growth company until the earliest to occur of: (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; and (4) the last day of the fiscal year ending after the fifth anniversary of our initial public offering.
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 elected to take advantage of the extended transition period for complying with new or revised accounting standards and, therefore, our financial statements may not be comparable to other public companies that comply with public company effective dates. 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.
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The requirements of being a public company may strain our resources, result in more litigation and divert management’s attention.
As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, the listing requirements of Nasdaq and other applicable securities rules and regulations. Complying with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time consuming or costly and increase demand on our systems and resources, including management. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are required to disclose changes made in our internal control and procedures on a quarterly basis. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results. We may also need to hire additional employees or engage outside consultants to comply with these requirements, which will increase our costs and expenses.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected.
These new rules and regulations may make it more expensive for us to obtain director and officer liability insurance and, in the future, we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
By disclosing information in this prospectus and in future filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If those claims are successful, our business could be seriously harmed. Even if the claims do not result in litigation or are resolved in our favor, the time and resources needed to resolve them could divert our management’s resources and seriously harm our business.
We may be subject to securities litigation, which is expensive and could divert management attention.
The market price of our Class A common stock may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
We do not currently intend to pay dividends on our Class A common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation of the value of our Class A common stock.
We have never declared or paid any cash dividends on our equity securities. 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. Any return to stockholders will therefore be limited to any appreciation in the value of our Class A common stock, which is not certain.
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Provisions in our certificate of incorporation and bylaws and Delaware law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the market price of our Class A common stock.
Our certificate of incorporation and bylaws, as we expect they will be in effect upon closing of the offering, will contain provisions that could depress the market price of our Class A common stock by acting to discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions, among other things:
● | establish a classified board of directors so that not all members of our board are elected at one time; | |
● | permit only the board of directors to establish the number of directors and fill vacancies on the board; | |
● | provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders; | |
● | our dual class common stock structure, which provides certain affiliates of ours, including our co-founder and members of our Board, individually or together, with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A common stock and Class B common stock; | |
● | authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan (also known as a “poison pill”); | |
● | eliminate the ability of our stockholders to call special meetings of stockholders; | |
● | prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; | |
● | prohibit cumulative voting; | |
● | authorize our board of directors to amend the bylaws; | |
● | establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; and | |
● | require a super-majority vote of stockholders to amend some provisions described above. |
In addition, Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.
Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for our Class A common stock.
Our certificate of incorporation that will be in effect upon the closing of this offering provides that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the exclusive forums 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 certificate of incorporation that will be in effect upon the closing of this offering provides that the Court of Chancery of the State of Delaware is the exclusive forum for:
● | any derivative action or proceeding brought on our behalf; | |
● | any action asserting a claim of breach of fiduciary duty; |
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● | any action asserting a claim against us arising under the DGCL, or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; | |
● | any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws; and |
● | any action asserting a claim against us that is governed by the internal-affairs doctrine. |
Our certificate of incorporation will further provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision. If a court were to find these exclusive-forum provisions in our bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business. Nothing in our certificate of incorporation will preclude stockholders that assert claims under the Securities Act or the Exchange Act from bringing such claims in state or federal court, subject to applicable law.
Risks Related to Employee Matters, Managing Our Growth and Other Risks Related to Our Business
We have never commercialized a product candidate before and may lack the necessary expertise, personnel and resources to successfully commercialize any products on our own or together with suitable collaborators.
We have never commercialized a product candidate, and we currently have no sales force, marketing or distribution capabilities, nor do any of our current employees have any experience in commercializing a regulated product. To achieve commercial success for our product candidates, which we may license to others, we will rely on the assistance and guidance of those collaborators. For product candidates for which we retain commercialization rights, we will have to develop our own sales, marketing and supply organization or outsource these activities to a third party.
Factors that may affect our ability to commercialize our future approved products on our own include recruiting and retaining adequate numbers of effective sales and marketing personnel, obtaining access to or persuading adequate numbers of physicians to prescribe our products and other unforeseen costs associated with creating an independent sales and marketing organization. Developing a sales and marketing organization will be expensive and time-consuming and could delay the launch of our future approved products. We may not be able to build an effective sales and marketing organization. If we are unable to build our own distribution and marketing capabilities or to find suitable partners for the commercialization of our future approved products, we may not generate revenues from them or be able to reach or sustain profitability.
In order to successfully implement our plans and strategies, we will need to grow our organization, and we may experience difficulties in managing this growth.
As of September 30, 2020, we had 12 full-time employees, two full-time consultants, and two part-time consultants. Of these full-time employees and consultants, 12 are engaged in research and development activities. In order to successfully implement our development and commercialization plans and strategies, and as we transition into 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, including:
● | identifying, recruiting, integrating, maintaining and motivating additional employees; | |
● | managing our internal development efforts effectively, including preclinical and clinical studies and investigations, as well as FDA, PMDA and other comparable foreign regulatory agencies’ review process for any current or future product candidates, while complying with any contractual obligations to contractors and other third parties we may have; and | |
● | improving our operational, financial and management controls, reporting systems and procedures. |
Our future financial performance and our ability to successfully develop and, if approved, commercialize, any current or future 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.
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We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services, including key aspects of clinical development and manufacturing. We cannot assure you 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 third party service providers is compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain marketing approval of our current and future product candidates or otherwise advance our business. We cannot assure you that we will be able to manage our existing third-party service providers 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/or engaging additional third party service providers, we may not be able to successfully implement the tasks necessary to further develop and commercialize our current and future product candidates and, accordingly, may not achieve our research, development and commercialization goals.
Our internal computer systems, or those of any of our CROs, manufacturers, other contractors, consultants, collaborators or potential future collaborators, may fail or suffer security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of our proprietary or confidential data, employee data, or personal data, which could result in additional costs, loss of revenue, significant liabilities, harm to our brand and material disruption of our operations.
Despite the implementation of security measures, our internal computer systems and those of our current and any future CROs and other contractors, consultants, collaborators and third-party service providers, are vulnerable to damage from computer viruses, cybersecurity threats, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failure. If such an event were to occur and cause interruptions in our operations or result in the unauthorized acquisition of or access to personally identifiable information or individually identifiable health information (violating certain privacy laws such as HIPAA, Health Information Technology for Economic and Clinical Health Act and GDPR), it could result in a material disruption of our drug discovery and development programs and our business operations, whether due to a loss of our trade secrets or other similar disruptions. Some of the federal, state and foreign government requirements include obligations of companies to notify individuals of security breaches involving particular personally identifiable information, which could result from breaches experienced by us or by our vendors, contractors, or organizations with which we have formed strategic relationships. Notifications and follow-up actions related to a security breach could impact our reputation, cause us to incur significant costs, including legal expenses and remediation costs. 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 lost data. We also rely on third parties to manufacture our product candidates, and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data, or inappropriate disclosure of confidential or proprietary information, we could be exposed to litigation and governmental investigations, the further development and commercialization of our product candidates could be delayed, and we could be subject to significant fines or penalties for any noncompliance with certain state, federal and/or international privacy and security laws.
Our insurance policies may not be adequate to compensate us for the potential losses arising from any such disruption, failure or security breach. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and could have high deductibles in any event, and defending a suit, regardless of its merit, could be costly and divert management attention.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
The net operating loss carryforwards, or NOLs, could expire unused and be unavailable to offset future income tax liabilities because of their limited duration or because of restrictions under U.S. tax law. NOLs generated in tax years ending on or prior to December 31, 2017 are only permitted to be carried forward for 20 taxable years under applicable U.S. federal tax law. Under the Tax Act, federal NOLs generated in tax years ending after December 31, 2017 may be carried forward indefinitely, but the deductibility of federal NOLs generated in tax years beginning after December 31, 2017 is limited. It is uncertain if and to what extent various states will conform to the Tax Act. As of December 31, 2019, we did not have NOLs available.
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In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change” (generally defined as a cumulative change in our ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period), the corporation’s ability to use its pre-change NOLs and certain other pre-change tax attributes to offset its post-change income and taxes may be limited. Similar rules may apply under state tax laws. We may have experienced such ownership changes in the past, and we may experience ownership changes in the future as a result of this offering or subsequent shifts in our stock ownership, some of which are outside our control. We have not conducted any studies to determine annual limitations, if any, that could result from such changes in the ownership. Our ability to utilize those NOLs could be limited by an “ownership change” as described above and consequently, we may not be able to utilize a material portion of our NOLs and certain other tax attributes, which could have a material adverse effect on our cash flows and results of operations.
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, including specifically in Japan, 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 FCPA 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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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that can involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, future revenue, timing and likelihood of success, plans and objectives of management for future operations, future results of anticipated products and prospects, plans and objectives of management are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” ,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:
● | the ability of our clinical trials to demonstrate safety and efficacy of our product candidates, and other positive results; | |
● | the timing and focus of our ongoing and future preclinical studies and clinical trials, and the reporting of data from those studies and trials; | |
● | the size of the market opportunity for our product candidates, including our estimates of the number of patients who suffer from the diseases we are targeting; | |
● | the success of competing therapies that are or may become available; | |
● | the beneficial characteristics, safety, efficacy and therapeutic effects of our product candidates; | |
● | our ability to obtain and maintain regulatory approval of our product candidates; | |
● | our plans relating to the further development of our product candidates, including additional disease states or indications we may pursue; | |
● | existing regulations and regulatory developments in the United States, Japan and other jurisdictions; | |
● | our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available and our ability to avoid infringing the intellectual property rights of others; | |
● | the need to hire additional personnel and our ability to attract and retain such personnel; | |
● | our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; | |
● | our financial performance; and | |
● | the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements. |
We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this prospectus and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this prospectus. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein until after we distribute this prospectus, whether as a result of any new information, future events or otherwise.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.
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This prospectus contains industry, market and competitive position data from our own internal estimates and research as well as industry and general publications and research surveys and studies conducted by third parties. Industry publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Certain of our internal data and estimates are based upon information obtained from trade and business organizations and other contacts in the markets in which we operate and our management’s understanding of industry conditions.
The industry in which we operate is subject to risks and uncertainties due to a variety of factors, including those described in the section titled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
We estimate that the net proceeds to us from in this offering will be approximately $ million, assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters’ option to purchase additional shares from us is exercised in full, we estimate that our net proceeds will be approximately $ million. Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the net proceeds to us from this offering by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 0.1 million in the number of shares we are offering would increase (decrease) the net proceeds to us from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, by $ million, assuming the assumed initial public offering price stays the same.
The principal purposes of this offering are to increase our capitalization and financial flexibility, to create a public market for our Class A common stock and to facilitate our future access to the capital markets. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds we receive from this offering. However, we currently intend to use the net proceeds we receive from this offering as follows:
Total | ||||||||
General and administrative and working capital purposes | $ | |||||||
Expanding and optimizing our Manufacturing capabilities | $ | |||||||
Research and development | ||||||||
Complete Phase 2b Frailty trial | $ | |||||||
Complete Phase 1/2 Aging Frailty influenza vaccine trial | $ | |||||||
Support for the NHLBI-funded Phase 2 HLHS trial | $ | |||||||
Complete Phase 1 ARDS trial | $ | |||||||
Bahamas Treatment Registry Trial | $ | |||||||
Initiate Phase 2 Japanese Aging Frailty trial | $ | |||||||
Initiate Phase 2 Alzheimer’s Disease trial | $ | |||||||
Initiate Phase 2/3 US Aging Frailty trial | $ | |||||||
Total research and development | $ | |||||||
Net proceeds |
We believe that the proceeds of this offering will be sufficient to complete currently ongoing clinical trials; however we do not anticipate that the proceeds of this offering will be sufficient to complete any of the above-referenced trials we intend to initiate, and therefore additional funds will be needed to complete the proposed new clinical trials.
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We will have broad discretion over how to use the net proceeds we receive from this offering. We intend to invest the net proceeds we receive from this offering that are not used as described above in. in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.
This expected use of the net proceeds from this offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. We may also use a portion of the net proceeds to in-license, acquire or invest in additional businesses, technologies, products or assets, although currently we have no specific agreements, commitments or understandings in this regard. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the closing of this offering or the amounts that we will actually spend on the uses set forth above. Predicting the cost necessary to develop product candidates can be difficult and we anticipate that we will need additional funds to complete the development of any product candidates we identify. The amounts and timing of our actual expenditures and the extent of clinical development may vary significantly depending on numerous factors, including the progress of our development efforts, the status of and results from pre-clinical studies and any ongoing clinical trials or clinical trials we may commence in the future, as well as any collaborations that we may enter into with third parties for our product candidates and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering.
We believe that the net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements through first half of 2022. We have based this estimate on assumptions that may prove to be incorrect, and we could use our available capital resources sooner than we currently expect. We may satisfy our future cash needs through the sale of equity securities, debt financings, working capital lines of credit, corporate collaborations or license agreements, grant funding, interest income earned on invested cash balances or a combination of one or more of these sources. Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.
We have never declared or paid any cash dividends on our capital stock. We intend to retain future earnings, if any, to finance the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in any future financing instruments.
We currently operate as a Delaware limited liability company under the name Longeveron LLC. Prior to the closing of this offering, Longeveron LLC will convert into a Delaware corporation pursuant to a statutory conversion, and will change its name to Longeveron Inc. In order to consummate the corporate conversion, a certificate of conversion will be filed with the Secretary of State of the State of Delaware. In this prospectus, we refer to all transactions related to our conversion to a corporation as the Corporate Conversion.
As part of the Corporate Conversion, based on the assumed initial offering price of $ , which is the midpoint of the price range set forth on the cover page of this prospectus, all of our outstanding units will be converted into an aggregate of shares of our Class A common stock, shares of our Class B common stock and options to purchase shares of our Class A common stock as follows:
● | holders of our Series A Units, will receive an aggregate of shares of our Class B common stock, which includes shares of our Class B common stock in satisfaction of the distribution priority in respect of the Series A Units; | |
● | holders of our Series B Units, will receive an aggregate of shares of our Class B common stock, which includes shares of our Class B common stock in satisfaction of the distribution priority in respect of the Series B Units; | |
● | holders of our Series C Units, will receive an aggregate of shares of our Class A common stock; |
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● | existing options to purchase Class C Units will be converted into options to purchase an aggregate of shares of our Class A common stock, for the same aggregate purchase price and upon the same terms and conditions; and |
● | existing restricted units issued under the 2017 Equity Plan will be converted into the right to receive an aggregate of shares of our Class A common stock upon the vesting thereof. |
In connection with the Corporate Conversion, Longeveron Inc. will continue to hold all property and assets of Longeveron LLC and will assume all of the debts and obligations of Longeveron LLC. Longeveron Inc. will be governed by a certificate of incorporation filed with the Secretary of State of the State of Delaware and bylaws, the material portions of which are described under the heading “Description of Capital Stock.” On the effective date of the Corporate Conversion, the members of the board of managers of Longeveron LLC will become the initial members of Longeveron Inc.’s board of directors, and as such are referred to throughout this prospectus as “Directors” rather than “Managers” and the officers of Longeveron LLC will become the officers of Longeveron Inc.
References in this prospectus to our capitalization and other matters pertaining to our equity prior to the Corporate Conversion relate to the capitalization and equity of Longeveron LLC, and after the Corporate Conversion, to Longeveron Inc. The financial statements included elsewhere in this prospectus are those of Longeveron LLC. We expect that the Corporate Conversion will not have a material effect on our financial statements.
The purpose of the Corporate Conversion is to reorganize our structure so that the entity that is offering our Class A common stock to the public in this offering is a Delaware corporation rather than a Delaware limited liability company, and so that our existing investors will own our Class A common stock or Class B common stock rather than equity interests in a limited liability company.
The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2020, as follows:
● | on an actual basis; | |
● | on a pro forma basis to give effect to the Corporate Conversion, based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus; and | |
● | on a pro forma as adjusted basis to give further effect to our issuance and sale of shares of our Class A common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us and therefore providing net proceeds of approximately $ million. |
The pro forma as adjusted information below is illustrative only, and our capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this information in conjunction with our financial statements and the related notes included elsewhere in this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Corporate Conversion” sections and other financial information contained in this prospectus.
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As of
September 30, 2020 |
||||||||||||
Actual |
Pro
Forma(1)(2) |
Pro Forma
As Adjusted(1)(3) |
||||||||||
Cash and cash equivalents | $ | 1,393,831 | $ | $ | ||||||||
Members’ Equity: | ||||||||||||
Series A Units: 1,000,000 units issued and outstanding, actual; no units issued or outstanding pro forma and pro forma as adjusted | $ | 1,000,000 | $ | - | $ | - | ||||||
Series B Units: 1,000,000 units issued and outstanding, actual; no units issued or outstanding pro forma and pro forma as adjusted | 1,000,000 | - | - | |||||||||
Series C Units: 62,764 units issued and outstanding, actual; no units issued or outstanding pro forma and pro forma as adjusted | 62,764 | - | - | |||||||||
Stockholders’ Equity | ||||||||||||
Class A common stock, $0.001 par value per share: no shares authorized, issued and outstanding, actual; shares authorized, pro forma and pro forma as adjusted; shares issued and shares outstanding, pro forma; shares issued and outstanding, pro forma as adjusted | - | |||||||||||
Class B common stock, $0.001 par value per share: no shares authorized, issued and outstanding, actual; shares authorized, pro forma and pro forma as adjusted; shares issued and shares outstanding, pro forma; shares issued and outstanding, pro forma as adjusted | - | |||||||||||
Additional paid-in capital | 26,583,905 | |||||||||||
Accumulated deficit | (25,536,841 | ) | ||||||||||
Total equity | 3,309,828 | |||||||||||
Total capitalization | $ | 3,309,828 | $ | $ |
(1) | In connection with the Corporate Conversion, all units will be reduced to zero to reflect the elimination of all outstanding units and other interests in Longeveron LLC and corresponding adjustments will be reflected as Class A common stock, Class B common stock and additional paid-in capital. The pro forma and pro forma as adjusted information is illustrative only. |
(2) | The following table presents the number of shares of Class A common stock and Class B Common Stock issuable in connection with the Corporate Conversion to holders of Series A Units, Series B Units and Series C Units based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus. |
Shares of Class B common stock to be issued for:
Shares of Class A Common Stock | Shares of Class B Common Stock | |||||||
Series A | ||||||||
Series B | ||||||||
Series C | ||||||||
Totals |
(3) | Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, total equity and total capitalization by $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 0.1 million shares in the number of shares offered by us at the assumed initial public offering price per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, total equity and total capitalization by approximately $ million. |
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The number of shares of our common stock on a pro forma and pro forma as adjusted basis set forth in the table above is based on shares of our common stock outstanding as of , 2020, after giving effect to the Corporate Conversion, and excludes:
● | shares of our Class A common stock issuable upon exercise of outstanding stock options, as of , having a weighted-average exercise price of $ ; |
● | shares of our Class A common stock issuable upon the vesting of restricted units granted to our executive officers, directors, and employees under our 2017 Equity Incentive Plan; and | |
● | shares of our Class A common stock issuable upon exercise of the warrants issued to the underwriter in connection with this offering. |
If you invest in our Class A common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the assumed initial public offering price of $ per share (the mid-point of the range appearing on the front cover of this prospectus) and the pro forma as adjusted net tangible book value per share of our Class A common stock immediately upon the consummation of this offering. Pro forma net tangible book value per share represents the book value of our tangible assets less the book value of our total liabilities divided by the number of shares of Class A common stock then issued and outstanding after giving effect to the Corporate Conversion.
After giving effect to the Corporate Conversion, our pro forma net tangible book value as of , 2020 was $ million, or $ per share, based on the shares of our Class A common stock and Class B common stock issued and outstanding after the Corporate Conversion, based on an assumed initial public offering price of $ per share (the mid-point of the range appearing on the front cover of this prospectus). After giving effect to our sale of shares of Class A common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of , 2020 would have been approximately $ , or approximately $ per share (assuming no exercise of the underwriters’ option to purchase additional shares of our Class A common stock). This amount represents an immediate and substantial dilution of $ per share to new investors purchasing Class A common stock in this offering. The following table illustrates this dilution per share:
Assumed initial public offering price per share | $ | |||
Pro forma net tangible book value per share as of , 2020 | $ | |||
Increase in net tangible book value per share attributable to this offering | $ | |||
Pro forma as adjusted net tangible book value per share after giving effect to this offering | $ | |||
Dilution per share to new investors participating in this offering | $ |
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the pro forma as adjusted net tangible book value by approximately $ million, or approximately $ per share, and increase (decrease) the dilution per share to new investors by approximately $ per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase of 0.1 million shares in the number of shares offered by us would increase our pro forma as adjusted net tangible book value by approximately $ million, or $ per share and the dilution per share to investors purchasing Class A common stock in this offering would be $ per share, assuming the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, a decrease of 0.1 million shares in the number of shares offered by us would decrease our pro forma as adjusted net tangible book value by approximately $ million, or $ per share and the dilution per share to investors purchasing Class A common stock in this offering would be $ per share, assuming the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing.
If the underwriters exercise their option in full to purchase additional shares of our Class A common stock in this offering, the pro forma as adjusted net tangible book value per share after this offering would be $ per share, and the pro forma as adjusted dilution to new investors would be $ per share, in each case assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and the estimated offering expenses payable by us.
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The following table summarizes, on a pro forma as adjusted basis described above, as of , 2020, the differences between the number of shares of Class A common stock purchased from us, the total consideration paid and the average price per share paid by existing stockholders and by new investors participating in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. As the table shows, new investors purchasing Class A common stock in this offering will pay an average price per share substantially higher than our existing stockholders paid (in thousands, except per share amounts and percentages).
Shares Purchased | Total Consideration | Average Share | ||||||||||||||||||
Number | Percent | Amount | Percent | Price | ||||||||||||||||
Existing stockholders | % | $ | % | $ | ||||||||||||||||
New investors | $ | |||||||||||||||||||
Total | 100.0 | % | 100.0 | % | $ |
If the underwriters exercise their option to purchase additional shares of our Class A common stock in full, the percentage of shares of Class A common stock held by existing stockholders will decrease to approximately % of the total number of shares of our Class A common stock outstanding after this offering, and the number of shares held by new investors will increase to , or approximately % of the total number of shares of our Class A common stock outstanding after this offering.
The foregoing tables and calculations are based on shares of our Class A common stock and Class B common stock outstanding as of , 2020, after giving effect to the Corporate Conversion, and excludes:
● | shares of our Class A common stock issuable upon exercise of outstanding stock options, having a weighted-average exercise price of $ ; | |
● | shares of our Class A common stock issuable upon the vesting of restricted units granted to our executive officers, directors, and employees under our 2017 Equity Incentive Plan; and | |
● | shares of our Class A common stock issuable upon exercise of the warrants issued to the underwriter in connection with this offering. |
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of financial condition and operating results together with our financial statements and the related notes and other financial information included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth in the section of the prospectus captioned “Risk Factors” and elsewhere in this prospectus, our actual results may differ materially from those anticipated in these forward-looking statements. For convenience of presentation some of the numbers have been rounded in the text below.
Overview
We are a clinical stage biotechnology company developing cellular therapies for aging-related and life-threatening conditions. Our lead investigational product is Lomecel-B. Lomecel-B is derived from culture-expanded MSCs that are sourced from bone marrow of young healthy adult donors. We believe that by using the same cells that promote tissue repair, organ maintenance, and immune system function, we can develop safe and effective therapies for some of the most difficult disorders associated with the aging process.
We are currently sponsoring Phase 1 and 2 clinical trials in the following indications: Aging Frailty, AD, the Metabolic Syndrome, ARDS, and HLHS. Our mission is to advance Lomecel-B and other cell-based product candidates into Phase 3 (i.e. pivotal) trials for multiple indications, with the goal of achieving regulatory approvals, subsequent commercialization, and broad use by the healthcare community.
To date, the U.S. FDA has authorized us to conduct six clinical trials evaluating Lomecel-B. We have completed three out of six of these studies, with the remaining three ongoing and data anticipated in 2020 and 2021. We have approval from Japan’s Pharmaceutical and Medical Device Agency (PMDA) to conduct a Phase 2 study in Aging Frailty, and we intend to initiate this trial in 2021. Additionally, we sponsor a registry in The Bahamas under the approval and authority of the National Stem Cell Ethics Committee. The Bahamas Registry Trial administers Lomecel-B to eligible participants at two private clinics in Nassau for a variety of indications. While Lomecel-B is considered an investigational product in The Bahamas, under the approval terms from the National Stem Cell Ethics Committee, we are permitted to charge a fee to participate in the Registry Trial.
Since our founding in 2014, we have focused the majority of our time and resources on the following: organizing and staffing our company, building, staffing and equipping a GMP manufacturing facility with research and development labs, business planning, raising capital, establishing our intellectual property portfolio, generating clinical safety and efficacy data in our selected disease conditions and indications, and developing and expanding our manufacturing processes and capabilities.
We manufacture all of our own product candidates for clinical trials. In 2017 we opened a manufacturing facility comprised of eight clean rooms, two research and development laboratories, and warehouse and storage space. We have supply contracts with multiple third parties for fresh bone marrow, which we use to produce our product candidate for clinical testing and research and development. From time to time we enter into contract development and manufacturing contracts or arrangements with third parties who seek to utilize our product development capabilities.
When appropriate funding opportunities arise, we routinely apply for grant funding to support our ongoing research and since 2016 we have received approximately $16.2 million in grant awards ($11.9 million which has been directly awarded to us and which are recognized as revenue when the performance obligations are met) from the National Institute on Aging (NIA) of the National Institutes of Health (NIH), National Heart Lung and Blood Institute (NHLBI) of the NIH, the Alzheimer’s Association, and the Maryland Stem Cell Research Fund (MSCRF) of the Maryland TEDCO.
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Impact of COVID-19 Pandemic
We continue to monitor how the COVID-19 pandemic is affecting our employees, business, and clinical trials. In response to the spread of COVID-19, we have instructed all employees who can perform their essential employment duties from home to do so. Our laboratory scientists, cell processing scientists and other manufacturing personnel continue to work from our GMP facility on a day-to-day basis, and as such cell production has been minimally impacted. When the pandemic began to emerge in the U.S., most of our ongoing clinical trials had completed enrollment, however a few subjects that were currently on study and in follow-up experienced some difficulties in adhering to the protocol schedule. Because we primarily enroll elderly subjects in our trials, who are at particular risk for poor outcomes related to COVID-19 infection, we have experienced some disruption in executing the follow-up visits in our protocols. These disruptions were due to a number of reasons that include an unwillingness of the subject to leave their residence to visit the hospital or clinic, the inability to leave their residence due to regional “stay-at-home” orders, and temporary clinical site closures. We have attempted to mitigate this disruption by conducting remote visits where feasible (telemedicine), arranging for in-home visits for phlebotomy in order to collect blood samples and perform protocol-specific assessments if feasible, and amending protocols to increase the window of time for follow-up visits. In spite of these efforts, several subjects either missed their scheduled follow up visit, had their follow up visit outside of the protocol-defined window of time, or dropped out of the trial prior to completing. While we believe the number of instances where a visit was missed completely is small, we cannot predict whether this will have a material impact on our clinical results in the future. If too many subjects drop-out or the protocol is no longer effective, we may have to restart the clinical trial entirely.
Starting on July 22, 2020, the Bahamian government halted travel from the U.S. into The Bahamas, which resulted in the temporary cessation of participation in The Bahamas Registry Trial. We expect that the COVID-19 pandemic will continue to impact our business, results of operations, clinical development timelines and financial condition. At this time, there is significant uncertainty relating to the trajectory of the COVID-19 pandemic and impact of related responses. The impact of COVID-19 on our future results will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions to and social distancing in the United States and other countries, business closures or business disruptions, the continued impact on financial markets and the global economy, and the effectiveness of the global response to contain and treat the disease.
Components of Our Results of Operations
Revenue
We have generated revenue from three sources:
● | Grant awards. Extramural grant award funding, which is non-dilutive, has been a core strategy for supporting ongoing clinical research. Since 2016 we have been directly awarded approximately $11.9 million in grants, with details of these awards provided in Grant Award table. | |
● | The Bahamas Registry Trial. Participants in The Bahamas Registry Trial pay us a fee to receive Lomecel-B, imported by us into The Bahamas, and administered at one of two private medical clinics in Nassau. While Lomecel-B is considered an investigational product in The Bahamas, under the approval terms received from the National Stem Cell Ethics Committee, we are permitted to charge a fee to participate in the Registry Trial. The fee is recognized as revenue, and is used to pay for the costs associated with manufacturing and testing of Lomecel-B, administration, shipping and importation fees, data collection and management, biological sample collection and sample processing for biomarkers and other data, and overall management of the Registry, including personnel costs. Lomecel-B is considered investigational treatment in The Bahamas and not licensed for commercial sale. | |
● | Contract development and manufacturing services. From time to time we enter into fee-for-service agreements with third parties for our product development and manufacturing capabilities. |
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Selling and Marketing Expenses
Selling and marketing expenses consist primarily of royalty and license fees associated with our agreements with the University of Miami (UM), as well as attending and sponsoring industry, investment, organization and medical conferences and events.
Research and Development Expenses
Research and development costs are charged to expense when incurred in accordance with FASB ASC 730, Research and Development. Research and development include costs such as clinical trial expenses, contracted research and license agreement fees with no alternative future use, supplies and materials, salaries, share-based compensation, employee benefits, property and equipment depreciation and allocation of various corporate costs. We accrue for costs incurred by external service providers, including CROs and clinical investigators, based on estimates of service performed and costs incurred. These estimates include the level of services performed by the third parties, subject enrollment in clinical trials, administrative costs incurred by the third parties, and other indicators of the services completed. Based on the timing of amounts invoiced by service providers, we may also record payments made to those providers as prepaid expenses that will be recognized as expense in future periods as the related services are rendered.
We currently do not carry any inventory for our product candidates, as we have yet to launch a product for commercial distribution. Historically our operations have focused on conducting clinical trials, product research and development efforts, and improving and refining our manufacturing processes, and accordingly, manufactured clinical doses of product candidates were expensed as incurred, consistent with the accounting for all other research and development costs. Once we begin commercial distribution, all newly manufactured approved products will be allocated either for use in commercial distribution, which will be carried as inventory and not expensed, or for research and development efforts, which will continue to be expensed as incurred.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, business development and administrative functions. General and administrative expenses also include legal fees relating to corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
We expect that our general and administrative expenses will increase in the future as we increase our headcount to support increased research and development activities relating to our clinical programs. We also expect to incur increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements; director and officer insurance costs; and investor and public relations costs.
Other Income and Expenses
Interest income consists of interest earned on cash equivalents and short-term investments. We expect our interest income to increase due to the net proceeds from this offering. Other income consists of funds earned that are not part of our normal operations. In past years they have been primarily a result of tax refunds received for social security taxes as part of a research and development tax credit program.
Income Taxes
We are treated as a partnership for federal and state income tax purposes. Consequently, we pass our earnings and losses through to our members based on the terms of our Operating Agreement. Accordingly, no provision for income taxes has been recorded. As we convert from an LLC to a C corporation, we may incur taxes if we have earnings. At this time the Company has not evaluated that impact of any future profits.
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RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
The following table summarizes our results of operations for the nine months ended September 30, 2020 and 2019, together with the changes in those items in dollars:
For
the Nine Months Ended
September 30, |
Increase | |||||||||||
2020 | 2019 |
(Decrease) |
||||||||||
Revenues | $ | 4,449,684 | $ | 3,796,209 | $ | 653,475 | ||||||
Cost of revenues | 3,152,446 | 2,649,366 | 503,080 | |||||||||
Gross profit | 1,297,238 | 1,146,843 | 150,395 | |||||||||
Expenses | ||||||||||||
Selling and marketing | 140,253 | 180,418 | (40,165 | ) | ||||||||
Research and development | 1,522,707 | 1,449,275 | 73,432 | |||||||||
General and administrative | 2,029,410 | 2,041,221 | (11,811 | ) | ||||||||
Total operating expenses | 3,692,370 | 3,670,914 | 21,456 | |||||||||
Loss from operations | (2,395,132 | ) | (2,524,071 | ) | (128,939 | ) | ||||||
Interest income | 139 | 2,531 | (2,392 | ) | ||||||||
Interest expense | (3,666 | ) | (104 | ) | 3,562 | |||||||
Other income | 33,871 | 35,462 | (1,591 | ) | ||||||||
Net loss | $ | (2,364,788 | ) | $ | (2,486,182 | ) | $ | (121,394 | ) |
Revenues, Cost of Revenues and Gross Profit: Revenues for the nine months ended September 30, 2020 and 2019 were approximately $4,450,000 and $3,796,000, respectively. Revenues for the nine months ended September 30, 2020 were approximately $654,000 or 17% higher when compared to the same period in 2019, primarily due to an increase in grant revenue recorded in 2020. Grant revenue for the nine months ended September 30, 2020 and 2019 was $3,602,000 and $2,629,000, respectively. Grant revenue for the nine months ended September 30, 2020 was approximately $974,000 or 37% higher when compared to the same period in 2019. Clinical trial income for the nine months ended September 30, 2020 and 2019 was $792,000 and $962,000, respectively. Clinical trial income for the nine months ended September 30, 2020 was approximately $170,000 or 18% lower when compared to the same period in 2019. Clinical trial income, which is comprised of The Bahamas Registry Trial, was impacted by COVID-19 travel restrictions. Contract manufacturing income for the nine months ended September 30, 2020 and 2019 was $55,000 and $206,000, respectively. Contract manufacturing income for the nine months ended September 30, 2020 was approximately $151,000 or 73% lower when compared to the same period in 2019. Contract manufacturing activities were not marketed during 2020, and the impact of COVID-19 also contributed to the corresponding decrease.
Related cost of revenues was approximately $3,152,000 and $2,649,000 for the nine months ended September 30, 2020 and 2019, respectively. Cost of revenues for the nine months ended September 30, 2020 was approximately $503,000 or 19% higher when compared to the same period in 2019, due to higher cost of revenues for grants incurred in 2020. This resulted in a gross profit of approximately $1,297,000 for the nine months ended September 30, 2020, an increase of approximately $150,000 or 13% when compared with a gross profit of approximately $1,147,000 for the same period in 2019.
Selling and Marketing Expenses: Selling and marketing expenses for the nine months ended September 30, 2020, decreased to approximately $140,000, compared to $180,000 for the same period in 2019. The decrease of approximately $40,000, or 22% was primarily due to lower sponsorship fees recorded.
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Research and Development Expenses: Research and development expenses for the nine months ended September 30, 2020, increased to approximately $1,523,000, from approximately $1,449,000 for the same period in 2019. The increase of $74,000, or 5%, was primarily due to an increase in research and development expenses that were not reimbursable by grants. Research and development expenses consisted primarily of the following items (less those expenses allocated to the cost of revenues for the grants):
September 30,
2020 |
September 30,
2019 |
|||||||
Clinical trial expenses-statistics, monitoring, labs, sites, etc. | $ | 268,301 | $ | 416,008 | ||||
Supplies and costs to make Lomecel-B | 329,184 |
132,417 |
||||||
Employee compensation and benefits | 276,514 | 202,730 | ||||||
Equity-based compensation | 14,820 | 26,440 | ||||||
Depreciation | 542,096 | 518,108 | ||||||
Amortization | 47,471 | 55,953 | ||||||
Travel | 5,631 | 67,199 | ||||||
Other activities | 38,690 | 30,420 | ||||||
$ | 1,522,707 | $ | 1,449,275 |
General and Administrative Expense: General and administrative expenses for the nine months ended September 30, 2020 decreased to approximately $2,029,000, compared to $2,041,000 for the same period in 2019. The decrease of approximately $12,000, or 1%, was primarily related to lower compensation and professional expenses incurred during the current period. For 2020, general and administrative expenses consisted primarily of rent, professional fees, insurance, and paid and accrued compensation costs.
Interest Income: Interest income for the nine months ended September 30, 2020 decreased to approximately $0, compared to $3,000 for the same period in 2019. The decrease of approximately $3,000, or 100%, was primarily related to non-recurring interest income earned and recorded in 2019.
Other Income: Other income for the nine months ended September 30, 2020, decreased to approximately $34,000, compared to $35,000 for the same period in 2019. The decrease of approximately $1,000 or 4% was primarily a result of tax refunds received for social security taxes as part of a research and development tax credit in 2019.
Net Loss: Net loss decreased to approximately $2,365,000 for the nine months ended September 30, 2020, from a net loss of $2,486,000 for the same period in 2019. The decrease in the net loss of $121,000, or 5%, was for reasons outlined above.
The Company is treated as a partnership for U.S. federal and state income tax purposes while a limited liability company and prior to the Corporate Conversion. Consequently, the Company passes its earnings and losses through to its members based on the terms of the Company’s Operating Agreement. Accordingly, no provision for income taxes is recorded in the accompanying financial statements.
Cash Flows
The following table summarizes our sources and uses of cash for the period presented for the nine months ended:
September 30, | ||||||||
2020 | 2019 | |||||||
Net cash used in operating activities | $ | (1,858,518 | ) | $ | (2,587,807 | ) | ||
Net cash used in investing activities | (221,119 | ) | (105,500 | ) | ||||
Net cash provided by financing activities | 1,607,594 | 200,000 | ||||||
Net decrease in cash and cash equivalents | $ | (472,043 | ) | $ | (2,493,307 | ) |
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COMPARISON OF THE YEARS ENDED DECEMBER 31, 2019 AND 2018
The following table summarizes our results of operations for the years ended December 31, 2019 and 2018, together with the changes in those items in dollars:
Year Ended
December 31, |
Increase | |||||||||||
2019 | 2018 | (Decrease) | ||||||||||
Revenues | $ | 5,639,466 | $ | 2,134,775 | $ | 3,504,691 | ||||||
Cost of revenues | 3,885,390 | 1,454,126 | 2,431,264 | |||||||||
Gross profit | 1,754,076 | 680,649 | 1,073,427 | |||||||||
Expenses | ||||||||||||
Selling and marketing | 185,387 | 48,164 | 137,224 | |||||||||
Research and development | 1,791,842 | 3,875,842 | (2,084,000 | ) | ||||||||
General and administrative | 2,774,953 | 3,117,260 | (342,307 | ) | ||||||||
Total operating expenses | 4,752,182 | 7,041,266 | (2,289,083 | ) | ||||||||
Loss from operations | (2,998,106 | ) | (6,360,617 | ) | 3,362,510 | |||||||
Interest income | 2,937 | 23,821 | 2,937 | |||||||||
Interest expense | (169 | ) | - | (169 | ) | |||||||
Other income | 35,461 | - | 11,640 | |||||||||
Net loss | $ | (2,959,877 | ) | $ | (6,336,795 | ) | $ | 3,376,918 |
Revenue, Cost of Revenues and Gross Profit: Revenues for the year ended December 31, 2019 and 2018 were approximately $5,639,000 and $2,135,000, respectively. Revenues for the year ended December 31, 2019 were approximately, $3,504,000 or 164% higher when compared to the same period in 2018, primarily due to an increase in grant revenue recorded in 2019. Grant revenue for the years ended December 31, 2019 and 2018 was $4,149,000 and $1,235,000, respectively. Grant revenue for the year ended December 31, 2019 was approximately, $2,914,000 or 236% higher when compared to the same period in 2018. Clinical trial income for the years ended December 31, 2019 and 2018 was $1,199,000 and $900,000, respectively. Clinical trial income for the year ended December 31, 2019 was approximately $299,000 or 33% higher when compared to the same period in 2018. Clinical trial income, which is comprised of The Bahamas Registry Trial, experienced significant growth due to interest from participants who learned of the program from unsolicited means. While Lomecel-B is considered an investigational product in The Bahamas, under the approval terms received from the National Stem Cell Ethics Committee, the Company is permitted to charge a fee to participate in the Registry Trial. Contract manufacturing income for the years ended December 31, 2019 and 2018 was $291,000 and nil, respectively. Contract manufacturing services were marketed on a limited basis in 2019 and were able to attract two customers. During 2018 we did not offer contract manufacturing services.
Related cost of revenues was approximately $3,885,000 and $1,454,000 in the year ended December 31, 2019 and 2018, respectively. Cost of revenues for the year ended December 31, 2019, was approximately $2,431,000 or 167% higher when compared to the same period in 2018, due to higher grant revenues driving higher grant expenses incurred in 2019. This resulted in a gross profit of approximately $1,754,000 for the year ended December 31, 2019 an increase of approximately $1,073,000 or 158% higher when compared with a gross profit of approximately $681,000 for the same period in 2019.
Selling and Marketing Expenses: Sales and marketing expenses for the year ended December 31, 2019, increased to approximately $185,000, compared to $48,000 for the same period in 2018. The increase, of approximately $137,000, or 285% was primarily due to higher royalty and licensing fees and conferences/expo fees recorded.
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Research and Development Expenses: Research and development expenses for the year ended December 31, 2019, decreased to approximately $1,792,000, from approximately $3,876,000 to the same period in 2018. The decrease of $2,084,000, or 54%, was primarily due to a decrease in research and development expenses that were not reimbursable by grants. Research and development expenses consisted primarily of the following items (less those expenses allocated to the cost of revenues for the grants):
December 31,
2019 |
December 31,
2018 |
|||||||
Clinical trial expenses-statistics, monitoring, labs, sites, etc. | $ | 421,237 | $ | 1,619,180 | ||||
Supplies and costs to make Lomecel-B | 184,596 | 522,756 | ||||||
Employee compensation and benefits | 239,236 | 698,430 | ||||||
Equity-based compensation | 35,186 | 60,807 | ||||||
Depreciation | 694,620 | 681,643 | ||||||
Amortization | 74,216 | 64,131 | ||||||
Travel | 87,364 | 68,163 | ||||||
Other activities | 55,387 | 160,732 | ||||||
$ | 1,791,842 | $ | 3,875,842 |
General and Administrative Expense: General and administrative expenses for the year ended December 31, 2019, decreased to approximately $2,775,000, compared to $3,117,000 for the same period in 2018. The decrease of approximately $342,000, or 11%, was primarily related to lower compensation costs, and the reduction in rent expenses due to the expiration of a lease for a second laboratory location incurred during the same period. For 2019, general and administrative expenses consisted primarily of rent, professional fees, insurance, and paid and accrued compensation costs.
Interest Income: Interest income for the year ended December 31, 2019 decreased to approximately $3,000, compared to $24,000 for the same period in 2018. The decrease of approximately $21,000, or 87%, was primarily related to decrease in cash balances within interest bearing accounts and decreases in interest rates year over.
Other Income: Other income for the year ended December 31, 2019, increased to approximately $35,000, compared to nil for the same period in 2018. The increase was primarily a result of a tax refund received for social security taxes as part of a research and development tax credit in 2019.
Net Loss: Net loss decreased to approximately $2,960,000, for the year ended December 31, 2019, from a net loss of $6,337,000, for the same period in 2018. The decrease in the net loss of $3,377,000, or 53% was for reasons outlined above.
The Company is treated as a partnership for U.S. federal and state income tax purposes while a limited liability company and prior to the Corporate Conversion. Consequently, the Company passes its earnings and losses through to its members based on the terms of the Company’s Operating Agreement. Accordingly, no provision for income taxes is recorded in the accompanying financial statements.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have incurred significant operating losses. We expect to incur significant expenses and operating losses as we advance the preclinical and clinical development of our programs. We expect that our sales, research and development and general and administrative costs will increase in connection with conducting additional preclinical studies and clinical trials for our current and future programs and product candidates, contracting with CROs to support preclinical studies and clinical trials, expanding our intellectual property portfolio, and providing general and administrative support for our operations. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements, or other sources.
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To date, we have financed our operations primarily through private equity financings, grant awards, and income generated from clinical trial and contract manufacturing services. As of September 30, 2020, we have an accumulated deficit of $25.5 million. Since 2015, we have raised approximately $27.0 million in gross proceeds from the sale of our membership units. As of September 30, 2020, we had $1.4 million in cash and cash equivalents and a working capital deficit of approximately $0.7 million. We have $0.5 million of indebtedness as of September 30, 2020 from loans provided by the Small Business Administration (SBA) and the Paycheck Protection Program (PPP). Under the provisions of the PPP, the loan amounts will be forgiven as long as: the loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and employee and compensation levels are maintained. In addition, payroll costs are capped at $100,000 on an annualized basis for each employee. We have applied to have $0.3 million of the loan forgiven.
Cash Flows
The following table summarizes our sources and uses of cash for the period presented:
Nine Months Ended September 30 |
Year Ended December 31, |
|||||||||||||||
2020 | 2019 | 2019 | 2018 | |||||||||||||
Net cash used in operating activities | $ | (1,858,518 | ) | $ | (2,587,807 | ) | $ | (2,390,806 | ) | $ | (5,178,372 | ) | ||||
Net cash used in investing activities | (221,119 | ) | (105,500 | ) | (125,048 | ) | (211,684 | ) | ||||||||
Net cash provided by financing activities | 1,607,594 | 200,000 | 350,000 | 1,355,000 | ||||||||||||
Net decrease in cash and cash equivalents | $ | (472,043 | ) | $ | (2,493,307 | ) | $ | (2,165,854 | ) | $ | (4,035,056 | ) |
Operating Activities. We have incurred losses since inception. Net cash used in operating activities for the nine months ended September 30, 2020 was $1.9 million, consisting primarily from our net loss of $2.4 million as we incurred expenses associated with research activities for our lead product candidates and incurred general and administrative expenses. Net cash used in operating activities for the nine months ended September 30, 2019 was $2.6 million, consisting primarily from our net loss of $2.5 million as we incurred expenses associated with research activities for our lead product candidates and incurred general and administrative expenses. Net cash used in operating activities for the year ended December 31, 2019 was $2.4 million, consisting primarily of our net loss of $3.0 million as we incurred expenses associated with research activities for our lead product candidates and incurred general and administrative expenses. Net cash used in operating activities for the year ended December 31, 2018 was $5.2 million, consisting primarily of our net loss of $6.3 million as we incurred expenses associated with research activities for our lead product candidates and incurred general and administrative expenses.
Investing Activities. Net cash used in investing activities for the nine months ended September 30, 2020 was $0.2 million, consisting of purchases of property and equipment and capitalized intangible costs. Net cash used in investing activities for the nine months ended September 30, 2019 was $0.1 million, consisting of purchases of property and equipment and capitalized intangible costs. Net cash used in investing activities for the years ended December 31, 2019 and 2018 was $0.1 million and $0.2 million, respectively, in each case consisting primarily of purchases of property and equipment and capitalized intangible costs.
Financing Activities. Net cash provided by financing activities for the nine months ended September 30, 2020 was $1.6 million, consisting of: $1.1 million in net proceeds received from subscription of our membership units and $0.5 million from loans provided by the SBA. Net cash provided by financing activities for the nine months ended September 30, 2019 was $0.2 million consisting of proceeds received from subscription of our membership units. Net cash provided by financing activities for the year ended December 31, 2019 was $0.4 million consisting of $0.4 million in net proceeds received from a subscription receivable and subscription of our membership units. Net cash provided by financing activities for the year ended December 31, 2018 was $1.4 million net proceeds received from a subscription receivable and subscription of our membership units.
Capital in 2020. During the nine months ended September 30, 2020, we received $1.1 million from investors in exchange of 18,335 Series C membership units. During the nine months ended September 30, 2020, we received $0.5 million from loans provided by the SBA. On September 15, 2020, we were awarded a $0.7 million grant from the Maryland Stem Cell Research Commission (TEDCO) for the use of our cell-based technology for ARDS due to COVID-19 and the Flu.
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Grant Awards
During the last several years we have been awarded several governmental and non-profit association grants. As of September 30, 2020, we have been awarded approximately $11.9 million, which is used to fund our clinical trials, research and development, production and overhead. Grant awards are recognized as income, and depending on the funding mechanism, is deposited directly in our accounts as lump sums, which are staggered over a predetermined period, or drawn down from a federal payment management system account for reimbursement of expenses incurred. Revenue recognition occurs when the grant related expenses are incurred, or supplies and materials are received. For the nine months ended September 30, 2020 and 2019, the amount of unused grant funds that were available for us to draw was approximately $2.2 million and $5.9 million, respectively. The following table summarizes the grants awarded.
Longeveron Project | Funding Agency(1) |
Total
Amount ($) |
Status of Award | |||||||
Aging Frailty Phase 2b Trial | SBIR (DHHS) NIA | 3,957,813 | Ongoing | |||||||
Aging Frailty Phase 2b Trial | SBIR (DHHS) NIA | 283,040 | Complete | |||||||
Alzheimer’s Disease Phase 1 Trial(2) | Alzheimer’s Association | 3,000,000 | Ongoing | |||||||
Alzheimer’s Disease Phase 1 Trial | Alzheimer’s Association | 1,000,000 | Complete | |||||||
The Metabolic Syndrome Sub-Study | STTR (DHHS) NIA | 150,000 | Complete | |||||||
The Metabolic Syndrome Sub-Study | STTR (DHHS) NIA | 901,486 | Ongoing | |||||||
Aging Frailty Influenza Vaccine Trial (“HERA”) | Maryland TEDCO | 750,000 | Complete | |||||||
HLHS Phase 1 Trial | Maryland TEDCO | 750,000 | Complete | |||||||
HLHS Phase 2 Trial(3) | UG3 (DHHS) NHLBI | 477,566 | Ongoing | |||||||
ARDS Phase 1(4) | Maryland TEDCO | 650,000 | Ongoing | |||||||
Total | 11,919,905 |
(1) | SBIR=Small Business Innovation Research programs; STTR=Small Business Technology Transfer programs; DHHS=Department of Health and Human Services; NIA = National Institute on Aging; NHLBI=National Heart, Lung, and Blood Institute. |
(2) | Under the grant award agreement with the Alzheimer’s Association, we may be required to make revenue sharing or distribution of income payments for products or inventions generated or resulting from this clinical trial program. The potential payments, although not currently defined, could result in a maximum payment of five times (5x) the award amount. |
(3) | The HLHS Phase 2b clinical trial grant was awarded to the University of Maryland, and the trial will be conducted under our IND and will test Lomecel-B. The total award was $4.8 million, and we will receive approximately $0.5 million directly. |
(4) | We have been notified by Maryland TEDCO that we have been awarded this grant; however we have not yet received the first tranche of funds. |
Terms and Conditions of Grant Awards
Grant projects are typically divided into periods (e.g. a three-year grant may have three one-year periods), and the total amount awarded is divided according to the number of periods. At pre-specified time points, which are detailed in the grant award notifications, we are required to submit interim financial and scientific reports to the granting agency totaling funds spent, and in some cases, detailing use of proceed and progress made during the reporting period. After funding the initial period, receipt of additional grant funds is contingent upon satisfactory submission of our interim reports to the granting agency. In order to receive the remaining $2.2 in grant funds after September 20, 2020, we are required to continue to submit financial and scientific progress reports to the granting agencies that outlines spending and progress through the period.
Grant awards arise from submitting detailed research proposals to granting agencies, and winning a highly competitive and rigorous application review and process that is judged on the merits of the proposal. There are typically multiple applicants applying and competing for a finite amount of funds. As such we cannot be sure that we will be awarded grant funds in the future despite our past success in receiving such awards.
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Funding Requirements
Our operating costs will continue to increase substantially for the foreseeable future in connection with our ongoing activities. In past years we have been able to fund a large portion of our clinical programs and our administrative overhead with the use of grant funding.
Specifically, our expenses will increase as we:
● | advance the clinical development of Lomecel-B for the treatment of several disease states and indications; | |
● | pursue the preclinical and clinical development of other current and future research programs and product candidates; | |
● | in-license or acquire the rights to other products, product candidates or technologies; | |
● | maintain, expand and protect our intellectual property portfolio; | |
● | hire additional personnel in research, manufacturing and regulatory and clinical development as well as management personnel; | |
● | seek regulatory approval for any product candidates that successfully complete clinical development; and | |
● | expand our operational, financial and management systems and increase personnel, including personnel to support our operations as a public company. |
We believe that the anticipated net proceeds from this offering, together with our existing cash and cash equivalents, will enable us to fund our operating expenses and capital expenditure requirements through the first half of 2022.
We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect.
Because of the numerous risks and uncertainties associated with research, development and commercialization of our product candidates, it is difficult to estimate with certainty the amount of our working capital requirements. Our future funding requirements will depend on many factors, including:
● | the progress, costs and results of our clinical trials for our programs for our cell-based therapies; | |
● | the progress, costs and results of additional research and preclinical studies in other research programs we initiate in the future; | |
● | the costs and timing of process development and manufacturing scale-up activities associated with our product candidates and other programs we advance through preclinical and clinical development; | |
● | our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements; | |
● | the extent to which we in-license or acquire rights to other products, product candidates or technologies; and | |
● | the costs and timing of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against any intellectual property-related claims. |
Further, our operating results may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.
Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, grant awards, collaboration agreements, other third-party funding, strategic alliances, licensing arrangements and marketing and distribution arrangements.
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We currently have no credit facility or committed sources of capital. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a Class A common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, collaboration agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our biologic drug development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations and Commitments
The following is our contractual obligations and commitments as of December 31, 2019:
Payments Due By Period | ||||||||||||||||||||
Total |
Less than
1 year |
1-3
years |
4-5
years |
More than
5 years |
||||||||||||||||
Operating lease obligations | $ | 4,996,000 | $ | 642,000 | $ | 2,013,000 | $ | 1,421,000 | $ | 920,000 |
We enter into contracts in the normal course of business with third-party contract organizations for clinical trials, preclinical studies, manufacturing and other services and products for operating purposes. These contracts generally provide for termination following a certain period after notice and therefore we believe that our non-cancelable obligations under these agreements are not material and they are not included in the table above.
We have not included milestone or royalty payments or other contractual payment obligations in the table above if the timing and amount of such obligations are unknown or uncertain.
Off-Balance Sheet Arrangements
We have no material off-balance sheet arrangements, no special purpose entities, and no activities that include non-exchange-traded contracts accounted for at fair value.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. We held cash and cash equivalents of approximately $1.4 million as of September 30, 2020. We generally hold our cash in interest-bearing money market accounts. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term maturities of our cash equivalents and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents.
Critical Accounting Policies and Use of Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in the notes to our financial statements appearing at the end of this prospectus, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
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Intangible assets. Intangible assets include payments on license agreements with our co-founder and Chief Science Officer and the University of Miami and legal costs incurred related to patents and trademarks. License agreements have been recorded at the value of cash consideration and/or membership units transferred to the respective parties when acquired. Payments on license agreements are amortized using the straight-line method over the estimated useful life of 20 years. Patents are amortized over their estimated useful life, once issued. We consider trademarks to have an indefinite useful life and evaluates them for impairment on an annual basis. Amortization expense is recorded in the research and development line of the Statement of Operations as the assets are primarily related to our clinical programs.
Impairment of Long-Lived Assets. We evaluate long-lived assets for impairment, including property and equipment and intangible assets, when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Upon the occurrence of a triggering event, the asset is reviewed to assess whether the estimated undiscounted cash flows expected from the use of the asset plus the residual value from the ultimate disposal exceeds the carrying value of the asset. If the carrying value exceeds the estimated recoverable amounts, the asset is written down to the estimated fair value. Any resulting impairment loss is reflected on the statements of operations. Management determined that there was no impairment of long-lived assets during the nine months ended September 30, 2020 and 2019.
Deferred income. The unearned portion of advanced grant funds and prepayments for clinical trial income, which will be recognized as income when we meet the respective performance obligations, has been presented as deferred income in the accompanying balance sheets. For the nine months ended September 30, 2020 and 2019, we recognized $0.5 million and $0.4 million, respectively, of funds that were previously classified as deferred income.
Revenue recognition. We adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, which establishes a single and comprehensive framework on how much revenue is to be recognized, and when, effective January 1, 2018. The core principle is that a vendor should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the vendor expects to be entitled in exchange for those goods or services. Revenue will be recognized by a vendor when control over the goods or services is transferred to the customer. The application of the core principle in ASC 606 is carried out in five steps: Step 1 – Identify the contract with a customer: a contract is defined as an agreement (including oral and implied), between two or more parties, that creates enforceable rights and obligations and sets out the criteria for each of those rights and obligations. The contract needs to have commercial substance and it is probable that the entity will collect the consideration to which it will be entitled. Step 2 – Identify the performance obligations in the contract: a performance obligation in a contract is a promise (including implicit) to transfer a good or service to the customer. Each performance obligation should be capable of being distinct and is separately identifiable in the contract. Step 3 – Determine the transaction price: transaction price is the amount of consideration that the entity can be entitled to, in exchange for transferring the promised goods and services to a customer, excluding amounts collected on behalf of third parties. Step 4 – Allocate the transaction price to the performance obligations in the contract: for a contract that has more than one performance obligation, the entity will allocate the transaction price to each performance obligation separately, in exchange for satisfying each performance obligation. The acceptable methods of allocating the transaction price include adjusted market assessment approach, expected cost plus a margin approach, and, the residual approach in limited circumstances. Discounts given should be allocated proportionately to all performance obligations unless certain criteria are met and reallocation of changes in standalone selling prices after inception is not permitted. Step 5 – Recognize revenue as and when the entity satisfies a performance obligation: the entity should recognize revenue at a point in time, except if it meets any of the three criteria, which will require recognition of revenue over time: the entity’s performance creates or enhances an asset controlled by the customer, the customer simultaneously receives and consumes the benefit of the entity’s performance as the entity performs, and the entity does not create an asset that has an alternative use to the entity and the entity has the right to be paid for performance to date.
We recognize revenue when performance obligations related to respective revenue streams are met. For Grant Revenue, we consider the performance obligation met when the grant related expenses are incurred, or supplies and materials are received. For clinical trial income, we consider the performance obligation met when the participant has received the therapy. For Contract Manufacturing Revenue, we consider the performance obligation met when the contractual obligation and / or statement of work has been satisfied.
Cost of revenues. We record cost of revenues based on expenses directly related to revenue. For grant revenue, we record allocated expenses for research and development costs to a grant as a cost of revenues. Expenses directly related to clinical trial income are allocated and accrued as incurred. These expenses are similar to as described in the Research and development expense note.
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Research and development expense. Research and development costs are charged to expense when incurred in accordance with FASB ASC 730, Research and Development. Research and development include costs such as clinical trial expenses, contracted research and license agreement fees with no alternative future use, supplies and materials, salaries, share-based compensation, employee benefits, property and equipment depreciation and allocation of various corporate costs. We accrue for costs incurred by external service providers, including contract research organizations and clinical investigators, based on its estimates of service performed and costs incurred. These estimates include the level of services performed by the third parties, subject enrollment in clinical trials, administrative costs incurred by the third parties, and other indicators of the services completed. Based on the timing of amounts invoiced by service providers, we may also record payments made to those providers as prepaid expenses that will be recognized as expense in future periods as the related services are rendered.
Equity-based compensation. We account for equity-based compensation expense by the measurement and recognition of compensation expense for unit-based awards based on estimated fair values on the date of grant. The fair value of options are estimated at the date of the grant using a Black-Scholes option-pricing model.
The Black-Scholes option-pricing model requires the input of highly subjective assumptions, the most significant of which are the expected unit price volatility, the expected life of the option award, the risk-free rate of return, and dividends during the expected term. Because the option-pricing model is sensitive to changes in the input assumptions, different determinations of the required inputs may result in different fair value estimates of the options.
As the Company’s units do not trade on an active market, the Company estimates the fair value of its units by using the Black-Scholes option-pricing model. Volatility is a measure of the amount by which a financial variable, such as a unit price, has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. Given the Company’s limited historical data, the Company utilizes the average historical volatility of publicly traded companies that are similar in the same industry. The risk-free interest rate is the average U.S. treasury rate (having a term that most closely approximates the expected life of the option) for the period in which the option was granted. The expected life is the period of time that the options granted are expected to remain outstanding. Options granted have a maximum term of ten years. The Company had insufficient historical data to utilize in determining its expected life assumptions and, therefore, uses the simplified method for determining expected life.
Emerging Growth Company Status
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of reduced reporting requirements that are otherwise applicable to public companies. Section 107 of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards. We have elected to take advantage of the extended transition period for complying with new or revised accounting standards; and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. The JOBS Act also exempts us from having to provide an auditor attestation of internal control over financial reporting under Sarbanes-Oxley Act Section 404(b).
We will remain an “emerging growth company” until the earliest of (1) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more, (2) the last day of the fiscal year following the fifth anniversary of the completion of this initial public offering, (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC, which generally is when we have more than $700 million in market value of our stock held by non-affiliates and we have been a public company for at least 12 months and have filed one annual report on Form 10-K.
Recent Accounting Pronouncements
A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our audited financial statements included elsewhere in this prospectus.
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Overview
We are a clinical stage biotechnology company developing cellular therapies for specific aging-related and life-threatening conditions. Our lead investigational product is the LOMECEL-B™ cell-based therapy product (“Lomecel-B”), which is derived from culture-expanded medicinal signaling cells (MSCs) that are sourced from bone marrow of young healthy adult donors. We believe that by using the same cells that promote tissue repair, organ maintenance, and immune system function, we can develop safe and effective therapies for some of the most difficult disorders associated with the aging process.
We are currently sponsoring Phase 1 and 2 clinical trials in the following indications: Aging Frailty, Alzheimer’s disease (AD), the Metabolic Syndrome, Acute Respiratory Distress Syndrome (ARDS), and hypoplastic left heart syndrome (HLHS). Our mission is to advance Lomecel-B and other cell-based product candidates into pivotal Phase 3 trials, with the goal of achieving regulatory approvals, subsequent commercialization and broad use by the healthcare community.
Our philosophy is that healthy aging can be improved through regenerative medicine approaches. Life expectancy has substantially increased over the past century as a result of medical and public health advancements. However, this increase in longevity has not been paralleled by the number of years a person is expected to live in relatively good health, free of chronic disease and disabilities of aging – a period known as healthspan. As we age, we experience: a profound decline in our own stem cells; a decrease in immune system function, known as immunosenescence; diminished blood vessel functioning; chronic inflammation, known as “inflammaging”; and other aging-related declines. Our clinical data suggest that Lomecel-B addresses these problems through multiple mechanisms of action, or MOAs, that simultaneously target key aging-related processes.
Improving healthspan is an imperative for governmental health agencies, and the NIA, an institute of the NIH, has promoted the concept of geroscience – the idea that aging itself is the biggest risk factor for aging-related human diseases. The geroscience hypothesis provides a strong rationale for the approach of treating underlying biological processes contributing to aging as a way to reduce disease burden and advance global human health. Our investments into developing and testing product candidates are aimed at reducing aging-related disease burden and improving healthspan.
Our Strategy
Our core business strategy is to become a world leading regenerative medicine company through the development and commercialization of novel cell therapy products for unmet medical needs, with emphasis on aging-related indications. Key elements of our business strategy are as follows.
● | Advance Lomecel-B and other regenerative medicine products to market. Our clinical trial execution capabilities represent one of our key core competencies; and since our founding in 2014, we have executed a robust clinical trials program. We are advancing Lomecel-B through proof-of-concept clinical studies to potentially later stage trials for the purpose of achieving commercialization in one or more indications. Our rigorously-designed studies throughout the clinical development process are intended to increase the likelihood of success of our programs, and to establish foundations for subsequent development and expansion into new areas. We will continue to leverage our technical and clinical expertise, and relationships with clinical investigators, treatment centers, and other key stakeholders, to explore new opportunities. | |
● | Expand our manufacturing capabilities to commercial-scale production. We operate a GMP-compliant manufacturing facility and produce our own product candidates for testing. We continue to improve and expand our capabilities with the goal of achieving cost-effective large-scale manufacturing to meet future commercial demand. |
● | Non-dilutive funding. Our clinical programs have received over $16.2 million in competitive extramural grant awards ($11.9 million which has been directly awarded to us and which are recognized as revenue when the performance obligations are met) from the NIH, Alzheimer’s Association, and MSCRF. These prestigious funding awards are non-dilutive and allow us to collaborate with state and federal partners in pursuing safe and effective therapeutics for disorders that have few, if any, available approved treatments. Each of our U.S. clinical trials has received grant support, and we will continue to pursue the strategy of obtaining non-dilutive funding. |
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● | Continue to develop our existing international programs. We have selected Japan as our first non-U.S. territory for a randomized, double-blinded, placebo-controlled clinical trial to evaluate Lomecel-B for Aging Frailty. We intend to explore other indications and other international locations for further development and commercialization. | |
● | Collaboration arrangements and out-licensing opportunities. We will be opportunistic and consider entering into co-development, out-licensing, commercialization or other collaboration agreements for the purpose of commercializing Lomecel-B and other products domestically and internationally. | |
● | Product candidate development pipeline through internal research and development, and in-licensing. Through our research and development program, and through strategic in-licensing agreements, we will add to our pipeline of product candidates. We are committed to developing safe and effective regenerative medicine products that address aging-related and other life-threatening unmet medical needs. | |
● | Continue to expand our intellectual property portfolio. Our intellectual property is vitally important to our business strategy, and we take significant steps to develop this property and protect its value. Results from our ongoing research and development efforts are intended to add to our existing intellectual property portfolio. |
Clinical Development Pipeline
Since our founding in 2014, we have initiated six clinical studies under five U.S. Food and Drug Administration (FDA) Investigational New Drug applications (INDs) for the purpose of evaluating the safety and efficacy of Lomecel-B (See Figure 2). As of the third quarter of 2020, over 250 subjects have received Lomecel-B via peripheral intravenous infusion or direct injection, and there have been no serious adverse events (SAEs) reported that were considered related to the product candidate.
Figure 2: Lomecel-B clinical development pipeline (“NCT” refers to each study’s identifier in ClinicalTrials.gov).
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● | Aging Frailty. Aging Frailty is a recognized condition that disproportionately increases a patient’s risk for severely poor outcomes due to disease and injury, and is widely believed by geriatricians to be treatable, although no approved medical treatments currently exist. Aging Frailty presently does not have a consensus definition of the indication for regulatory purposes, and will therefore require additional clinical data and discussion with FDA and PMDA before conducting a pivotal trial and gaining marketing authorization. |
○ | We have two U.S. clinical trials ongoing under FDA IND 016644: (1) a multicenter, randomized, placebo-controlled Phase 2b trial (“Phase 2b Trial”) to assess whether Lomecel-B can improve physical function, reduce inflammation, and improve quality of life, among other endpoints, in Aging Frailty subjects; and (2) a multicenter, randomized, placebo-controlled Phase 1/2 trial (“HERA Trial”) to evaluate if Lomecel-B can be an effective vaccine adjuvant to improve immunity against influenza virus in Aging Frailty patients, who typically respond inadequately to vaccines. Data from the Phase 2b trial is expected in the second half of 2021. We have preliminary data from the HERA Trial (see “Aging Frailty Clinical Trials” on page 77 of this prospectus.) with final data expected in the third quarter of 2021. | |
○ | Japan Clinical Trial: The Japanese Pharmaceuticals and Medical Devices Agency (PMDA) has approved a Clinical Trial Notification (CTN), which is equivalent to a U.S. IND, allowing us to sponsor a Phase 2 clinical study for Aging Frailty subjects in Japan. We expect to initiate this trial in 2021. | |
○ | The Bahamas Registry Trial: We sponsor and operate a Registry Trial in Nassau, The Bahamas, where participants may receive Lomecel-B for Aging Frailty and other indications, at the participant’s own expense. Lomecel-B is designated as an investigational product in The Bahamas. |
● | Alzheimer’s Disease. AD is the leading cause of dementia, and there are no approved medications that can prevent, stop, or reverse the progression of the disease. We have completed a double-blinded, randomized, placebo-controlled Phase 1 clinical trial under FDA IND 016524 to evaluate the safety and tolerability of Lomecel-B in individuals with mild AD. The trial was also designed to explore efficacy in multiple assessment domains, including cognition, activities of daily living (ADLs), quality of life (QOL), and biomarkers. Top-line results are reported in “Phase 1 Alzheimer’s Disease Clinical Trial” on page 82 of this prospectus. |
● | The Metabolic Syndrome. The Metabolic Syndrome is an insidious condition which, over the course of years to decades, leads to cardiovascular disease (CVD) and type II diabetes mellitus (T2MD). There are no approved therapies for the Metabolic Syndrome, aside from symptomatic treatments. Under FDA IND 016644, we are conducting a sub-study to evaluate whether Lomecel-B may improve the symptoms of the Metabolic Syndrome, and the effects of this comorbidity on responses of Aging Frailty subjects to Lomecel-B. Top-line results are expected in the second half of 2021. The Metabolic Syndrome presently does not have an accepted consensus definition as an indication for regulatory purposes, and will therefore require additional clinical data and discussion with FDA and the PMDA before conducting a pivotal trial and gaining marketing authorization. | |
● | Acute Respiratory Distress Syndrome due to Viral Infection. ARDS can result in both short-term severe consequences (e.g., prolonged and expensive hospitalization, and death), and long-term debilitating consequences (e.g., severe lung scarring and lung dysfunction). Older persons, those with Aging Frailty, and those with the Metabolic Syndrome are at exceptionally high risk for developing ARDS due to viral infection, as the COVID-19 pandemic has demonstrated, in which 80% of deaths have occurred in older people. We are conducting a multicenter, randomized, placebo-controlled Phase 1 trial under FDA IND 019668 to evaluate the safety and efficacy of Lomecel-B for treating ARDS due to influenza or SARS-CoV-2 virus infection. Both short- and long-term health consequences of ARDS due to viral infection disproportionately affect those with Aging Frailty and the Metabolic Syndrome—two prominent populations under study in our other trials. The trial is expected to complete enrollment in 2021. | |
● | Hypoplastic Left Heart Syndrome. We are conducting a multicenter, single arm, open label Phase 1 study under FDA IND 017677 to evaluate the safety and provisional efficacy of Lomecel-B as a combinatorial therapy to surgery for this ultra-rare heart condition. Babies born with this congenital condition have an underdeveloped left ventricle, and undergo multiple surgeries to prevent certain death. We believe that Lomecel-B can improve heart function and long-term clinical outcomes in these patients, who still have a very high early mortality rate despite the life-saving surgeries. Top-line results are expected in the first quarter of 2021, and a Phase 2 trial is expected to initiate sometime in 2021. |
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The first four indications are core to our geroscience approach for aging-related disorders (See Figure 3). While HLHS is a non-aging-related indication, it illustrates the broader potential for our cell-based therapy.
Figure 3. Unhealthy aging. Aging-associated processes, such as chronic inflammation and decline in MSC function, are thought to contribute to many aging-related disorders.
Clinical Trial Grant Funding and Partnerships
We have partnered with the NIA and NHLBI of NIH, the Alzheimer’s Association, and the MSCRF of Maryland TEDCO, to conduct our clinical trials.
Product Candidate Financial Overview
Since 2015, we have received approximately $27.0 million in equity financing, have been awarded approximately $16.2 million in non-dilutive grant funds for our programs ($11.9 million which has been directly awarded to us and which are recognized as revenue when the performance obligations are met), and generated approximately $3.3 million in non-grant revenue, primarily from clinical trial income and strategic contract manufacturing agreements.
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Intellectual Property
Our intellectual property includes exclusive patent license agreements, exclusive licensing of manufacturing technologies, proprietary manufacturing processes, Company-owned patent applications, and INDs for product candidates that could be awarded a period of marketing exclusivity if we receive future marketing approval. We are also developing additional regenerative medicine product candidates for our pipeline that may be the subject of future patent applications.
License Agreements and Strategic Collaborations
The University of Miami (UM)
On November 20, 2014, we entered into an Exclusive License Agreement with UM (the “UM License”) for the use of certain Aging Frailty-related MSC technology rights developed by our Chief Science Officer at UM. The UM License is a worldwide, exclusive license, with right to sublicense, with respect to any and all know-how specifically related to the development of the culture-expanded MSCs for aging-related frailty used at the Interdisciplinary Stem Cell Institute of UM (“IMSCs”), all SOPs used to create the IMSCs, and all data supporting isolation, culture, expansion, processing, cryopreservation and management of the IMSCs. We are required to pay UM (i) a license issue fee of $5,000, (ii) a running royalty in an amount equal to three percent of annual net sales on products or services developed from the technology, which amounts are payable on a country-by-country basis beginning on the date of first commercial sale and ending on the expiration or termination of the UM License Agreement, and which may be reduced to the extent we are required to pay royalties to a third party for the same product or process, (iii) escalating annual cash payments on the anniversary date of the agreement of ten, fifteen, twenty-five, forty and fifty thousand dollars, which amounts may be offset by other consideration paid. UM also received a one percent (1%) equity grant, which is subject to certain anti-dilution provisions.
The agreement extends for up to 20 years from the last date a product or process is commercialized from the technology. This agreement was amended on December 11, 2017. The amendment modified the dates of the milestone completions under the original UM License as follows: (a) by December 31, 2021, to have completed Phase 2 clinical trials for the products; and (b) by June 1, 2025, to have completed Phase 3 clinical trials for products. In addition, one-year extensions may be granted on these milestone dates by making a payment of $5,000. Upon completion of the Phase 2 clinical trials, a milestone payment of $250,000 is due. Upon completion of the Phase 3 clinical trials, a milestone payment of $750,000 is due. To date, the Company has made payments totaling $140,000 to UM, and as of September 30, 2020, we had accrued $50,000 in milestone fees payable to UM based on the estimated progress to date. We have the right to terminate the UM License upon 60 days’ prior written notice, and either party has the right to terminate upon a breach of the UM License. Currently we are in discussions to potentially modify certain terms.
JMH MD Holdings
On December 22, 2016, we entered into a worldwide exclusive license agreement with JMH MD Holdings (“JMHMD”), an affiliate of our Chief Science Officer, for the use of CD271+ technology, a subpopulation of bone marrow-derived MSCs. We are required to pay JMHMD a running royalty in an amount equal to one percent of the annual net sales of the licensed product(s) used, leased, or sold by or for us by any sub-licensees, which amounts are payable on a country-by-country basis beginning on the date of first commercial sale and ending on the latter of expiration of the last to expire patent rights in such country or ten years from the first commercial sale in such country (provided that if all claims within the patent rights have expired or been finally deemed invalid then the royalty will be reduced by 50%), and which may also be reduced to the extent we are required to pay royalties to a third party for the same product or process. We are also required to pay an initial fee and, by the first day of each anniversary of the Agreement, starting with the second anniversary, a minimum royalty of ten thousand dollars. JMHMD also received an equity grant equal to one-half of one percent of the then outstanding units of the Company on a fully-diluted basis. If we sublicense the technology, we are also required to pay an amount equal to 10% of the net sales of the sub-licensees.
Under the agreement, the Company is required to use commercially reasonable efforts to achieve the following milestones: (i) submit an investigational new drug application to FDA (or international equivalent) within one year of effective date of agreement, (ii) initiate a clinical trial utilizing bone marrow derived CD271+ Precursor Cells within three years of the effective date; provided, that any of the milestones may be extended for up to six months for a total of three times by notice and payment of a five thousand dollar extension fee. Failure to achieve these milestones within five years of the effective date triggers a right of termination by JMHMD. Otherwise, the agreement is to remain in effect until either the date all issued patents and filed patent applications have expired or been abandoned, or 20 years after the date of FDA approval of the last commercialized product or process arising from the patent rights whichever comes later. Further, each party has the right to terminate upon sixty days’ prior written notice, or in the event of breach. The Company paid an initial fee of $250,000 to JMHMD, and issued to it 10,000 Series C Units, valued at $250,000. The Company to date has not incurred any royalty or sublicense related expense, and there were no license fees due during the nine months ended September 30, 2020 and 2019 pertaining to this agreement. We paid legal fees of approximately $21,000 and $42,000 for the six months ended September 30, 2020 and 2019, respectively, in connection with the patent prosecution, issuance, and maintenance fees related to CD271+ technology.
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Lomecel-B for Aging-Related Indications: a Geroscience Approach
While the exact mechanisms of action of Lomecel-B, and MSCs in general, are still active areas of research, based on current evidence, we believe Lomecel-B can treat multiple facets of aging-related disorders simultaneously through multiple mechanisms of actions that include the following.
● | Reduce inflammation. A pro-inflammatory state is a common attribute among many aging-related disorders. Lomecel-B has the potential to reduce inflammation without leading to toxic immunosuppression, as well as the potential to promote activation of anti-inflammatory biochemical pathways. Broadly speaking, this includes reducing harmful pro-inflammatory proteins that negatively affect muscles, bones, and joints, as well as the brain (inflammation in the brain is called neuroinflammation). | |
● | Improve immune function. Lomecel-B has the potential to improve immune system function, such as the ability to make antibodies. | |
● | Improve vascular function. Lomecel-B has the potential to improve overall functioning of the blood vessels (called the vasculature). The potential broad impact is to improve blood supply to the muscles, bones, and organs, including the brain (the neurovasculature), and thereby improve nutrient supply and waste removal. | |
● | Activate intrinsic repair and regenerative mechanisms. Intrinsic ability to regenerate and repair tissue declines with aging. Lomecel-B has the potential to stimulate these regenerative and repair pathways to promote recovery from damage and a more healthful state. | |
● | Home to sites of inflammation and damage. A well-known property of MSCs is that they are attracted to sites of inflammation and damage within the body. This property may be advantageous for treating aging-related diseases where the damage can be diffuse: by delivery into the blood (via intravenous infusion), Lomecel-B should more readily be able to home to these diffuse sites. | |
● | Compensate for aging-related loss of MSCs. Lomecel-B may compensate for diminished MSC activity and numbers in the recipient, which are dramatically reduced as a function of aging. |
Biochemical Properties of Lomecel-B
The proposed mechanisms of action of Lomecel-B derive from intrinsic cellular features (See Figure 4). Lomecel-B cells secrete numerous proteins that include cytokines and growth factors, which are believed to be responsible for decreasing inflammation and promoting repair.
Lomecel-B also secretes exosomes, which are biochemically active membrane spheres (called vesicles) that carry cargo composed of proteins, ribonucleic acid (RNA), and other molecules. MSC exosomes have been found to include over a thousand proteins and hundreds of different RNAs that can have beneficial effects on numerous pathways. Using exosomes as a therapeutic is an emerging therapeutic principle that we are pursuing through our research and development.
Lomecel-B cells can also potentially regulate endogenous cells through actions that include direct cell-cell interactions that can allow for exchange of RNAs, proteins, and other cellular content between the cells through linkages called connexin-mediated gap-junctions. MSCs can also form tunneling nanotubes (TNTs) that allow for exchange of larger cytoplasmic content, including mitochondria (the energy-generating portions of cells). Such exchanges have been documented to occur between MSCs and neuronal stem cells, cardiomyocytes, corneal epithelial cells, lung epithelial cells, retinal ganglion cells, renal epithelial cells, and macrophages.
In the context of treating aging-related disorders, such exchange of mitochondria, proteins, RNA, and other cargo from Lomecel-B sourced from young donors may suggest cellular regenerative mechanisms for older cells of the recipient which have depleted mitochondria, reduced metabolic functioning, etc. In fact, mitochondria released from damaged cells appears to be a signal to induce regenerative mechanisms in MSCs, which can promote a desired shift in energy metabolism in the recipient cells.
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Figure 4. Potential mechanisms of action of Lomecel-B. (1) Lomecel-B cells release growth factors and other proteins, such as anti-inflammatory cytokines. These have the potential to reduce inflammation, and stimulate nearby stem cells and other cells (called paracrine activity) to promote regenerative and repair responses. There is also potential for these factors to be released into the blood and work at a distance, called endocrine activity. (2) Lomecel-B cells also have the potential to engage in direct cell-cell interactions to induce positive pathways in contacted cells. (3) Lomecel-B cells release exosomes, which have cargo consisting of RNA, proteins, and other molecules that can be taken up by other cells to provide beneficial effects. (4) Lomecel-B cells also have the potential to form nanotube bridges or TNTs, which can allow the exchange of mitochondria and other cellular contents between cells.
Key Features and Potential Benefits of Lomecel-B
The key features of Lomecel-B offer potential benefits as a possible geroscience therapeutic, including the following:
● | “Off-the-Shelf” and scalable product. Lomecel-B is intended to be an “off-the-shelf” commercialized product that is stored frozen and available for on-demand use. To date, it has been safely administered without eliciting a rejection or allergic response from the recipient. This is because MSCs have unique properties that inhibit a graft rejection response. This property is also known as being immunoprivileged/immunoevasive, and thus Lomecel-B does not require tissue-type matching. Each lot of Lomecel-B is derived from a young, healthy, highly-screened donor, where the cells are present in relatively small quantities. Lomecel-B cells are then culture-expanded in vitro to produce orders of magnitude more cells, which are then cryopreserved and stored for future use. These are advantages over autologous cell therapy interventions, which involve removing cells from an individual through an operative procedure, and then reintroducing the cells back into the same person, sometimes after weeks of culture expansion. Accordingly, autologous approaches lack economies of scale since they serve only a single patient. In our clinical trials, Lomecel-B is administered through intravenous infusion in under one hour on an outpatient basis, or via direct tissue injection, depending upon the indication. |
● | Enduring effects. Our clinical data suggests that the effects of a single dose of Lomecel-B may last over 6 months. This is consistent with previous studies showing human MSCs can persist for months in immunocompetent hosts, thereby helping support the potential duration of effect. |
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● | Young phenotype. The starting raw material source for Lomecel-B is young healthy adult donors. Such sourced cells can provide significantly higher potency over similarly prepared autologous MSCs (i.e., sourced from a person they will be given back to). In the context of aging-related conditions, autologous MSCs can be impaired by advanced age and/or patient co-morbidity. Relative to young adults, MSCs from older adults have reduced regenerative potential, as indicated by: diminished proliferative capacity; diminished differentiation potential; increased senescence; increased expression of deoxyribonucleic acid (DNA)-break repair genes; altered DNA-methylation and gene-expression patterns; impaired migration; altered expression of microRNAs and cell-surface markers; and diminished anti-inflammatory activity. The sourcing and manufacturing of Lomecel-B are designed to minimize these confounding issues. | |
● | Safe and consistent manufacturing. Lomecel-B manufacturing is performed in our facility using cGMP-compliant processes. The donors used for sourcing Lomecel-B undergo rigorous screening to ensure safety, including screening for communicable diseases and illicit drug use that exceed federal guidelines. Throughout the production process, the cells are analyzed according to pre-established criteria to ensure that a consistent, well-characterized, safe product candidate is produced. | |
● | Well-tolerated and with minimal adverse side-effects. Lomecel-B has thus far in our clinical trials shown to be well-tolerated. Over 250 subjects have received Lomecel-B, and no SAEs have been reported that were considered related to the product candidate. This is consistent with published reports indicating that allogeneic MSCs appear safe and well-tolerated, and do not lead to malignant tumor formation. | |
● | Support for efficacy from early clinical trial data. As described above and supported by our clinical results, Lomecel-B has multiple potential MOAs that can potentially address broad aging-related disorders. This has potential advantages over small molecule drugs and biologics that have highly-specific targeting. | |
● | Potency, identity, and efficacy assays. We are developing these assays for Lomecel-B as part of our early stage trials, for validation in our pivotal Phase 3 trials. These assays are important steps required by FDA prior to product approval and are needed to qualitatively identify and quantitatively measure biological activity of the product candidate. |
Our Aging Frailty Research Program
Aging Frailty is a clinically-defined and extreme form of unsuccessful aging. It is readily recognized by the hallmark signs of weakness, slowness, fatigue, unintentional weight loss, and low activity. Those with Aging Frailty are disproportionately compromised in their ability to cope with every day and acute stressors, are at high vulnerability to disease and injury, have lowered tolerance to medications, and are at high risk for poor outcomes and death after surgery. Even normally “minor” insults (e.g., minor infection) can have devastating consequences, and lead to a spiral of decline to debility in these patients.
The necessity for identifying patients with Aging Frailty is well-acknowledged in the geriatric community, and the treatment of Aging Frailty and promotion of healthful aging are recognized priorities of the National Academy of Medicine and NIA/NIH. Despite the pressing need for interventions, there are no FDA-approved therapies that can slow down, reverse, or prevent Aging Frailty.
Biological Underpinnings of Aging Frailty
Aging Frailty is a multifaceted biologically-driven process that is distinct from normal aging. While all of the biological mechanisms underlying frailty are still being elucidated, it is thought to involve a low-level chronic pro-inflammatory state referred to as inflammaging. This loss of control over inflammation can be attributed to an imbalance between levels of inflammatory promoters and anti-inflammatory mediators, as well as diminished capacity to restore equilibrium once an inflammatory stimulus has subsided. The ultimate result is measurable elevated serum levels of pro-inflammatory signaling molecules, such as tumor necrosis factor-α (TNF-α), and diminished anti-inflammatory mediators, such as interleukin-10 (IL-10). In particular, serum TNF-α positively correlates to Aging Frailty severity.
Inflammation can contribute to the physical decline in Aging Frailty through multiple mechanisms, including detrimental effects on muscles, bone tissue, the immune system, cardiovascular function, and cognition. In muscle cells, pro-inflammatory mediators such as TNF-α stimulate catabolic biochemical pathways that break down muscle tissue, which can explain the clinically observed atrophy, decreased strength and endurance, and increased exhaustion seen in Aging Frailty. Inflammation can also severely diminish immune system function, and accelerate the aging-related decline in the immune system, known as immunosenescence. This ultimately leads to an immune system that is hyporesponsive, making these patients highly vulnerable to disease and cancer.
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Aging Frailty (and aging in general) is also characterized by reductions in the number and function of circulating MSCs. Therefore, treatments that can positively affect and/or replenish these endogenous stem cell functions could be of therapeutic value for Aging Frailty.
The culmination of these organ system declines can explain the common clinical manifestations of Aging Frailty, such as sarcopenia and cachexia, and forms the basis for the resulting heightened vulnerability to injury, disease, adverse health outcomes, and mortality.
Lomecel-B for the Potential Treatment of Aging Frailty
We are evaluating Lomecel-B as a therapy for Aging Frailty because the potential mechanisms of action may suitably address many of the features and underpinnings of this condition. Foremost, Lomecel-B has the potential to reduce inflammation associated with Aging Frailty, and to promote an anti-inflammatory state by releasing anti-inflammatory molecules, which can promote physiological restoration to a more normal state. As our early clinical data show, Lomecel-B may be able to improve aspects of physical functioning, as well as immune function.
Market Potential.
U.S. leading geriatricians and epidemiologists from Johns Hopkins University estimate approximately 15% of community-dwelling individuals 65 years and older in the U.S. have Aging Frailty. Another 45% are considered at risk for becoming frail, or “pre-frail”. These equate to 8.1 million and 24.3 million people, respectively. By 2035, the number of individuals with Aging Frailty is projected to reach over 11.4 million. Those with Aging Frailty are disproportionately high consumers of healthcare resources with potentially crippling economic consequences. Developing treatments for this unmet medical need is a priority for many single-payor healthcare systems
Japan is considered a “super-aged” society, with approximately 28% of its population over the age of 65. Aging Frailty and pre-Aging Frailty prevalence estimates for community-dwelling individuals aged 65 and older are 7.4% and 48.1%, respectively. Based on a 65 and older population of 35.9 million, this translates to approximately 2.65 million Aging Frailty patients in Japan.
Aging Frailty Clinical Trials
We are currently conducting two multicenter trials in the U.S. for Aging Frailty, have received Pharmaceuticals and Medical Devices Agency (PMDA) approval to conduct a Phase 2 Aging Frailty clinical trial in Japan, and have government approval to use Lomecel-B for Aging Frailty participants in a registry trial that is actively enrolling in The Bahamas (See Figure 5). We are the only company that we are aware of that is developing an allogeneic cell therapy for Aging Frailty.
Figure 5. Longeveron’s international Aging Frailty program.
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U.S. Phase 2b Multicenter, Randomized, Double-Blinded, Placebo-Controlled Trial
The Phase 2b Trial is our most advanced clinical trial in our Aging Frailty program (ClinicalTrials.gov #NCT03169231). Enrollment was completed in February 2020, and the last subject visit is expected in the first quarter of 2021. The trial design was guided by input from FDA’s Center for Biologics Evaluation and Research (CBER), and Longeveron’s scientific and clinical advisors. Longeveron has designated this as a “Phase 2b” trial because its objectives include a preliminary assessment of Lomecel-B effectiveness. Longeveron did not conduct a “Phase 2a” trial.
The specific objectives of this trial are to evaluate the effectiveness of Lomecel-B in multiple domain measures of Aging Frailty: physical functioning biomarkers; patient-reported outcomes (PROs); quality-of-life measures (QOLs); frailty status; and clinical outcomes and other endpoints applicable to Aging Frailty. In addition, this trial will assess a dose-range of Lomecel-B and add further to our understanding of the safety and efficacy profile of this product candidate. The target population comprises 70–85 year-old individuals with mild to moderate Aging Frailty, and systemic inflammation evidenced by elevated tumor necrosis factor-α (TNF-α).
The primary efficacy endpoint in this clinical trial is the change from baseline in the six-minute walk test (6MWT) at six months for Lomecel-B subjects compared to placebo subjects. The 6MWT is a commonly used assessment of physical function, and has been used as the primary endpoint of clinical benefit for a number of FDA-approved products. The results of our Aging Frailty trials will be evaluated and discussed with FDA to determine what could be an acceptable and appropriate primary efficacy endpoint(s), in an approvable indication. In lieu of long-term clinical outcomes (e.g., reduction in falls, fractures, hospitalizations, debilitations, and deaths) as endpoints requiring large expensive long trials, the U.S. FDA has indicated that the 6MWT could be a suitable co-primary or composite primary endpoint in this indication, if included with a validated PRO and a suitable biomarker, for example.
Trial Status. This Phase 2b Trial is fully-enrolled and patient follow-up is ongoing. We anticipate reporting data in the second quarter of 2021.
Grant Funding Award. This study is being supported by a grant award from the NIA/NIH.
U.S. Phase 1/2 HERA Trial: Lomecel-B as a Potential Vaccine Adjuvant
The aging-related diminution of the immune system (immunosenescence) makes Aging Frailty patients vulnerable to infection and disease. Immunosenescence is the basis for a generally muted response to any type of immune challenge in these patients, including disproportionately low response to vaccines, such as the influenza vaccine.
Many efforts are made to try to boost vaccine effectiveness by manipulation of the vaccines themselves, such as increasing vaccine dosage in the case of the High-Dose Flu Vaccine given to older recipients. However, this approach often falls short of providing the sought-after immune protection because of the patients’ diminished intrinsic ability to mount an effective immune response and furthermore, may be associated with increased incidence of adverse events. To date, there are no approved therapeutics shown to improve the intrinsic competence of the immune system (immunocompetence). However, as supported by our preliminary data, Lomecel-B may be a candidate for improving immunocompetence.
The HERA Trial was designed to evaluate whether Lomecel-B can improve immune response to influenza vaccine, and to evaluate Lomecel-B’s possible effects on Aging Frailty status and endpoints (ClinicalTrials.gov #NCT02982915). Phase 1 has been completed, and Phase 2 is fully enrolled and subject follow-up is ongoing.
Trial Status. We have completed Phase 1, and Phase 2 is anticipated to be completed and have top-line results available in third quarter of 2021. Phase 1 was a 22 patient multicenter, open-label, randomized trial. Phase 2 is a multicenter, randomized, double-blinded, placebo-controlled trial. Lomecel-B has been well-tolerated in all trials to date, and no product-related adverse events have been reported.
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Grant Funding Award. This study has been supported in part by a grant award from the MSCRF, part of Maryland TEDCO.
HERA Aging Frailty Preliminary Results. At the approximate mid-point of Phase 2 of the HERA Trial, we performed a planned interim analysis in order to re-assess study powering. We evaluated the 6MWT and other physical function measures of Aging Frailty as part of this analysis. The 6MWT is also the primary efficacy endpoint of our larger Phase 2b Aging Frailty trial.
The 6MWT is a functional assessment that engages several organ systems, is a reliable indicator of frailty status, and may correlate with an individual’s ability to perform basic activities of daily living (ADLs). This validated and easily-administered test measures how many meters a person can walk in six minutes, and integrates multiple physiological systems for strength, mobility, and endurance. The HERA Phase 2 interim analysis showed that the 6MWT increased in the Lomecel-B arm by 45.20 ± 81.03 meters (n=14) at six months post-administration, versus a decrease of 21.40 ± 81.87 meters (n=15) in the placebo arm (mean ± standard deviation; six-month difference from placebo: 66.60 meters. 95%CI: -4.70 – 137.89. p = 0.0656). A similar trend was seen in the open-label HERA Phase 1 (59.59 ± 140.57 meters. 95%CI: -12.68 – 131.86. n=19. p=0.0996). We performed a combined analysis using the Lomecel-B arms from Phase 1 and the Phase 2 interim analysis Lomecel-B arms, versus the placebo arm of the interim analysis (Figure 6). At six months post-infusion, there was a significant improvement in the combined Lomecel-B arm relative to Baseline (six-month difference from placebo: 75.65 meters. 95%CI: 0.71 – 150.60. p=0.0480). By 12 months post-infusion, the improvements had waned in the Lomecel-B groups (Phase 1, Phase 2 interim analysis, and combined), and were no longer significantly different from Baseline (12-month difference from placebo: 35.31 meters. 95%CI: -16.99 – 87.61. p=0.1796).
The HERA Phase 2 interim analysis also showed a trending, but not significant, improvement in the Lomecel-B group on the short physical performance battery (SPPB) relative to placebo. The SPPB is used to evaluate lower body function and balance, and consists of three assessment domains (balance, gait speed, and chair stand). All three domains showed similar trending improvements. The other physical function measures – the Tinetti Performance Oriented Mobility Assessment (POMA) and hand-grip strength – showed minimal changes for Lomecel-B (both within group and relative to baseline).
Figure 6. 6MWT improved in Lomecel-B administered subjects, but not placebo-treated subjects. For this analysis, data were combined from HERA Phase 1 and from a HERA Phase 2 planned interim analysis. The Phase 2 study is still ongoing, so the interim analysis entailed only study group analyses of select endpoints to maintain the blind (individual patient data remains blinded). Plotted are the mean ± SEM. *, p < 0.05.
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HERA Immune-Response Results. Phase 1 of the HERA Trial was an open-label study conducted during the 2017 – 2018 flu season. The primary goal was to evaluate the safety of Lomecel-B as a vaccine adjuvant, and evaluate whether a short (1 week) or longer (4 week) interval between Lomecel-B infusion and vaccination impacted the immune response. Subjects enrolled had mild to moderate Aging Frailty, and received the Fluzone High-Dose Vaccine.
All subjects of this Phase received Lomecel-B, and showed significant positive antibody responses as determined by the blood levels of IgM and IgG antibodies raised against influenza A and B strains. IgM antibodies appear early in a normal immune response, and are normally followed by IgG antibodies which appear later. Antibody levels ≥ 1.1 index value (IV) indicate positive antibody response. Figure 7 shows IgM antibodies raised against influenza A virus, and is representative of the IgM and IgG responses against both influenza A and B strains. IgM levels prior to receiving vaccine were < 1.1 IV at the Infusion Visit and Vaccination Visit, where blood samples were taken prior to Lomecel-B administration and vaccination, respectively. Post-vaccination, these increased to > 1.1 IV in every subject for all four antibodies (IgG and IgM for influenza A and B viruses). These increases did not significantly differ between the two study arms (1-week and 4-week interval between Lomecel-B infusion and vaccination).
We also examined potential to neutralize the specific influenza virus strains that the vaccine was directed against (Michigan, Hong Kong, and Brisbane viruses). This used a test called the hemagglutinin inhibition (HAI) assay. Overall, the 1-week interval group showed significantly higher HAI results (meaning better performance) compared to the 4-week interval group. Based on these preliminary findings, we elected to use a 1-week interval between infusion with Lomecel-B and vaccination in Phase 2 of HERA. This study is ongoing, with expected unblinding in the second half of 2021.
We view these results as encouraging, in light of the reported suboptimal efficacy of the 2017 – 2018 Fluzone High-Dose Vaccine. The Centers for Disease Control & Prevention (CDC) found an overall adjusted vaccine effectiveness (VE) of just 18% against flu-associated medically-attended acute respiratory illness in those ≥ 65 years of age (CI = -25–47%).
The cumulative Phase 1 and 2 results from our HERA Trial suggest that Lomecel-B has the potential to improve physical function and immune response, supporting the concept of Lomecel-B as a geroscience product candidate.
Figure 7. Positive antibody response occurred in all subjects treated with Lomecel-B. Shown are IgM antibody levels against Influenza A. Antibody levels ≥ 1.1 IV (Index Value) indicate positive antibody responses against influenza A virus. Blood samples for antibody analyses at the Infusion Visit were obtained prior to administering Lomecel-B. Blood samples at the Vaccination Visit were obtained prior to giving the Flu vaccine. Shown are mean ± SD. p-values are for the change at the respective time-point versus Baseline. ***, p < 0.001.
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Japanese Phase 2 Aging Frailty Trial.
We have advanced our clinical initiative in Japan with the objective of capitalizing on the country’s progressive regulatory framework, which has legislation designed specifically to accelerate promising regenerative medicine therapeutics to market. In 2020, the PMDA approved our Clinical Trial Notification (CTN) application for a multicenter Phase 2 clinical study of Lomecel-B infusion in older Japanese subjects with mild to moderate Aging Frailty. The trial is similar in design to our ongoing U.S. Phase 2b Trial, and is expected to begin in 2021. We have engaged in discussions and preliminary trial planning with Japan’s largest private hospital chain, and the National Center for Geriatrics and Gerontology.
Under the 2014 law passed by the Japanese government, two new Acts were added that regulate regenerative medicine development and offer two pathways to market for regenerative medicine product candidates: the Act on the Safety of Regenerative Medicine (ASRM) and the Pharmaceutical and Medical Devices Act (PMD Act). A summary of the primary differences and benefits of the two Acts is described in “Japanese Laws and Regulations” on page 103 of this prospectus.
The Bahamas Registry Trial.
In 2017, we were granted approval by the Bahamian government to sponsor a Registry Trial in Nassau, The Bahamas. Eligible subjects with Aging Frailty who meet Registry eligibility requirements may receive Lomecel-B at their own expense at one of two medical centers with which we are partnered. The medical providers are responsible for the administration of Lomecel-B to these individuals as well as their care and Registry Trial-specific follow-up. The program is regulated by the Stem Cell Research and Therapy Act of 2013, and the Stem Cell Research and Therapy Regulations passed in 2014. Under the terms of the approval, participants in the Registry pay a fee directly to us, and we in turn pay a fee to the medical providers who administer Lomecel-B to the participant. Data collected from the Registry Trial contribute to our overall understanding of the safety profile of Lomecel-B, and for gathering real-world evidence on possible efficacy. Lomecel-B is not licensed for commercial sale in the Bahamas and is considered an investigational therapeutic.
In 2019, we received approval to expand the Registry for the following indications: mild cognitive impairment; AD and related dementias; frailty due to reasons other than aging, including overuse and injury; and osteoarthritis.
The Registry Trial has specified baseline assessments and a prescribed follow up schedule over a 12 month post-administration time period. Participants are expected to follow up with their local physician at the specified time points so that we may collect safety data and gain additional efficacy information, specifically with respect to physical function, the individual’s global impressions of change, biomarkers, and other indication-specific measures.
Participation in the Registry Trial has been adversely impacted by the COVID-19 pandemic due to travel restrictions. Starting on July 22, 2020, the Bahamian government halted travel from the U.S. into The Bahamas, which resulted in the temporary cessation of participation in The Bahamas Registry Trial.
Lomecel-B for Alzheimer’s Disease
AD is the leading form of dementia. This disease affects millions of Americans, leads to early mortality, and creates a tremendous burden on families and society that costs the U.S. hundreds of billions of dollars annually in direct costs and lost productivity.
Patients afflicted with AD have characteristic brain changes that include abnormal protein deposits in the brain, called β-amyloid deposits. Another feature that occurs within the neurons themselves is called neurofibrillary tangles, which interferes with the structure and function of the neurons, and leads to neuron death. Inflammation in the brain – a process called neuroinflammation – is also a key feature of AD. This pro-inflammatory state appears essential for the clinical manifestation of dementia resulting from AD. In addition to affecting the brain tissue itself, neuroinflammation also impairs the blood vessels in the brain and the exchange barrier between the blood and the brain, called the blood-brain barrier (BBB). Ultimately, these pathological processes lead to the structural changes in the brain and resulting dementia.
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Despite decades of research, the biotechnology and pharmaceutical industries have not succeeded in developing a safe and effective FDA-approved treatment that can prevent, slow-down, or reverse the progression of AD. Many of these failed investigational drugs narrowly target just one aspect of AD, such as β-amyloid deposits. The five currently approved drugs for AD provide only partial symptomatic relief, but do not treat disease progression. We believe reasons for these failures include the inability of these other approaches to treat multiple pathological aspects of AD, and the inability to promote regenerative responses, which is highly muted in the brain.
We are testing Lomecel-B as a potential treatment for AD based on the hypothesis that its multiple possible MOAs can simultaneously address multiple features of AD. Preclinical studies show that MSCs can potentially reduce AD-associated brain inflammation, improve the function of blood vessels in the brain, and reduce brain damage due to AD progression, and promote regenerative responses. We have completed a multicenter, randomized, placebo-controlled Phase 1 safety study of subjects with mild AD, and topline results are expected in the fourth quarter of 2020. Based on preliminary results, we intend to initiate a larger Phase 2 study. If successful in clinical studies, we hope that Lomecel-B may prove to be a disease-modifying therapy for AD.
Prevalence of AD and Market Potential. The Alzheimer’s Association estimates that 5.7 million Americans have AD, and as many as 14 million Americans will be afflicted by 2050 barring significant medical breakthroughs. An estimated 35.6 million people are affected with AD worldwide, and that number is expected to quadruple by 2050. Among individuals age 85 and older, half have AD. AD is currently the sixth leading cause of death in the U.S., taking more lives annually than breast cancer and prostate cancer combined, underscoring the critical importance for developing a therapeutic intervention that can delay or reverse the progression of the disease. Arguably, AD represents the only leading cause of death that cannot be prevented, cured, or slowed using existing approved therapies. This disease has a tremendous impact on the quality of lives of the patients and their caregivers, costing American society an estimated $240 billion annually.
Analysts have suggested that any disease-modifying AD drug that makes it all the way to market could rapidly achieve over $10 billion in sales. Without a major market competitor, analysts have predicted that that figure could balloon to over $20 billion by 2030.
Phase 1 Alzheimer’s Disease Clinical Trial.
We have conducted a double-blind, randomized, placebo-controlled Phase 1 trial using a single infusion of Lomecel-B in subjects with mild AD (ClinicalTrials.gov #NCT02600130). The observation period was 12 months post-infusion. Our results support the safety and tolerability of using Lomecel-B in individuals with AD, in which there have been no product-associated SAEs.
Results from the AD Phase 1 Trial.
While this Phase 1 study was powered for safety as the primary endpoint, it was also designed to evaluate the effects of Lomecel-B in multiple efficacy domains that include cognition, activities of daily living (ADLs), quality-of-life (QOL), and biomarkers.
The Mini Mental State Exam (MMSE) is a validated and commonly used assessment of cognitive function, in which decreasing scores indicate worsening. Statistically significant differences in the mean MMSE score were found between the Lomecel-B and placebo groups (Figure 8). The placebo group showed a steady worsening in the MMSE (p < 0.05 at 3, 9 and 12 months post-treatment versus baseline). However, the rate of decline in the Lomecel-B group after treatment was slower, reaching statistical significance at post-treatment month 9 (difference from placebo: p = 0.0403; 95%CI: 0.16 – 6.38). While other cognitive assessments (“AD Assessment Scale – Cognitive” and the “Trail Making Test”) showed no significant differences between the Lomecel-B and placebo groups, the Lomecel-B group showed trending improvements relative to the placebo group.
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Figure 8. Impact of Lomecel-B on cognitive performance in patients with mild AD. The MMSE showed a steady decline (lowered score) in the placebo group (red). The Lomecel-B group (blue) showed only a slight decline, which was statistically significant at 9-months after the treatment. The gray-box indicates the MMSE inclusion score of 18 – 24 required for enrollment on the trial. Plotted are means ± SEM. *, p < 0.05 for change in Lomecel-B arm versus placebo.
The subjects that received Lomecel-B showed on average no change in the ADCS-ADL, whereas the placebo group showed a significant decline (decreased score) (six-month difference from placebo: 95% CI 2.26 – 13.67). The ADCS-ADL is an assessment given to the patient caregiver, and provides an independent evaluation of how the AD patient is progressing. No significant differences between the Lomecel-B and placebo arms were found in quality-of-life (QOL) measures.
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Figure 9. Impact of Lomecel-B on ability to perform activities of daily living (ADLs) in patients with mild AD. The ADCS-ADL showed a declined (lowered score) in the placebo group while the Lomecel-B group showed a slight improvement. These differences were statistically significant at 6-months after the infusion. Plotted are means ± SEM. **, p < 0.01 for change in Lomecel-B arm versus placebo.
Quarterly magnetic resonance imaging (MRI) brain scans were performed on each subject to evaluate safety, as well as efficacy via brain structure changes. No adverse imaging brain changes were noted, supporting the potential safety of Lomecel-B for patients with mild AD.
Automated image analysis of the MRI scans were used to obtain unbiased measurements of brain structures (Figure 10). One of these structures, the hippocampus, is a brain region critical for memory formation, is one of the two major brain regions that undergoes rapid constant neuron replacement (the other region being the olfactory bulb), and undergoes significant atrophy (shrinking) in Alzheimer’s disease. Over the first 6 months post-treatment, the hippocampus on both sides of the brain showed trending but not significant size decreases in the placebo group, while the Lomecel-B-treated group did not. At month 6, this divergence reached significance in the left hippocampus between the placebo group and those treated with Lomecel-B at a 100 million cell dose (p = 0.0396; 95% CI 29.7 – 1044.8 mm3). These results are consistent with a proposed mechanism of action that Lomecel-B may stimulate intrinsic neuronal stem cells and regenerative mechanisms, thereby leading to increased volume of the hippocampus. Many brain regions did not show significant changes over the follow-up period. Nevertheless, it is possible that the changes observed in the imaging may be associated with the improvements in cognitive function.
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Grant Funding Award. This trial has been supported by two competitive grants from the Alzheimer’s Association.
Next Steps. We are still awaiting final results from the Phase 1 trial but are preparing and planning for the next phase trial, which is expected to be a larger, randomized, double-blind, placebo-controlled Phase 2 trial intended to explore the effects of multiple doses of Lomecel-B in subjects with AD.
Figure 10. Impact of Lomecel-B on brain architecture as assessed by brain MRI imaging. A – E, Representative brain scans of one of the treated subjects from the trial. Automated brain structure analyses were performed using programs that included the Automatic Segmentation of Hippocampal Subfields. Subregions of the whole hippocampus are shown color-coded (B – E). F and G, Hippocampal size changes after treatment with placebo or a single 100 million cell dose (100M) of Lomecel-B. At 6 months post-treatment, the left hippocampus showed a mean decrease in size in the placebo group that was statistically significantly different from the Lomecel-B group, which remained relatively unchanged. The right hippocampus showed a similar trend, but the difference was not statistically significant. Plotted are means ± SEM. *, p < 0.05 for Month 6 Lomecel-B versus placebo group.
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Lomecel-B for the Metabolic Syndrome
We have an ongoing Phase 1 sub-study exploring whether Lomecel-B can improve the Metabolic Syndrome, and if the Metabolic Syndrome presents confounding issues for this treatment approach in Aging Frailty patients. This sub-study primarily focuses upon blood-based biomarker changes, and non-invasive evaluation of vascular (blood vessel) functioning.
The Metabolic Syndrome is a clinically-defined condition (ICD-10: code 277.7) that increases the chances of developing cardiovascular disease (CVD) and Type II diabetes mellitus (T2DM). It is also known as X syndrome, insulin resistance syndrome, cardiometabolic syndrome, and Reaven’s syndrome. The Metabolic Syndrome is defined as a cluster of risk factors for which at least three of the following five criteria must be met.
● | Elevated serum triglycerides. | |
● | Reduced high-density lipoprotein (good cholesterol). | |
● | Elevated blood pressure. | |
● | Elevated fasting glucose. | |
● | Increased waist circumference (central or apple-shaped obesity). |
The Metabolic Syndrome is associated with vascular dysfunction and damage, and a proinflammatory state marked by elevated serum levels of C-reactive protein (CRP), interleukin-6 (IL-6), and D-dimer. Obesity also directly contributes to this proinflammatory state and the Metabolic Syndrome.
Compared to unaffected individuals, patients with the Metabolic Syndrome are twice as likely to develop CVD in 5 – 10 years, five-times as likely for developing T2DM, over twice as likely to have a stroke, over three-times as likely to have a heart attack, and have double the risk of dying from such events.
The incidence of the Metabolic Syndrome has reached epidemic proportions and continues to increase, as the overall prevalence in the U.S. is approximately 35% of the total population, or over 80 million individuals.
Lomecel-B may be a potential candidate for the Metabolic Syndrome through multiple potential mechanisms of action that include the potential to reduce associated inflammation and improve vascular function. Preclinical studies support the clinical benefits of allogeneic MSC therapy for treating the Metabolic Syndrome, which resulted in improvements in vascular function, atherosclerosis, and glucose homeostasis.
For the purpose of analysis, we are evaluating the Metabolic Syndrome in subjects who have been enrolled in our Phase 2b Trial and HERA Trial, and dividing them into two groups: those with and without the Metabolic Syndrome. We will look at the effect of Lomecel-B relative to placebo on the two groups with respect to effect changes relevant to the Metabolic Syndrome. Forty percent of Aging Frailty patients have been reported to have the Metabolic Syndrome, which we have empirically confirmed from our Phase 2b Trial and HERA clinical trial, in which we have identified approximately 45% and 33% of enrolled subjects, respectively, who meet the criteria for the Metabolic Syndrome. The Metabolic Syndrome is also becoming a well-recognized contributor to AD and related dementias.
Grant Funding Award. This study is being supported by a grant award from the NIA/NIH.
Lomecel-B for Acute Respiratory Distress Syndrome (ARDS)
We are conducting a multicenter, double-blinded, randomized, placebo-controlled trial for ARDS due to COVID-19 or influenza virus infection.
ARDS can be rapidly induced by a variety of insults, such as coronavirus and influenza virus infection. Approximately 200,000 people suffer from ARDS in the U.S. annually, with a mortality rate of about 40%. These numbers are likely to dramatically increase as a result of COVID-19, which could become a seasonal epidemic. Older persons, those with Aging Frailty, and those with the Metabolic Syndrome, are at significantly increased risk for severely poor outcomes from ARDS due to viral infection, including prolonged hospitalization and death.
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Viral infection leading to ARDS can results in severe inflammation called a “cytokine storm”, most pronounced by severely elevated serum levels of C reactive protein (CRP) and interleukin-6 (IL-6). This in turn leads to disruption of the lung cell layers (the endothelial and epithelial barriers), and consequently, to severe inhibition of pulmonary exchange. ARDS can result in long-term adverse effects on patients, such as lung scarring (fibrosis). As now widely appreciated due to COVID-19, there is a dearth of treatment options available for ARDS, and first-line defense measures often have sub-optimal palliative effects.
Lomecel-B has the potential to be a treatment for ARDS due to the previously described mechanisms of action. These include the potential to treat the cytokine storm induced in ARDS without leading to toxic immunosuppression, reduce fibrotic damage, promote reparative mechanisms, and improve immune functioning.
Status of Clinical Trial. This trial is currently enrolling and we expect the trial to be completed in 2021, with results in either 2021 or early 2022.
Grant Funding Award. This study is being supported in part by a grant award from the MSCRF, part of Maryland TEDCO.
Emergency Use Expanded Access. In addition to our clinical trial, we have treated patients with ARDS with Lomecel-B under FDA emergency-use expanded-access. The two patients treated had severe ARDS, were on extracorporeal membrane oxygenation (ECMO), and failed to respond to other attempted interventions. One of these patients responded after being given three doses of Lomecel-B. The other died shortly after being given a single dose of Lomecel-B.
Lomecel-B for Hypoplastic Left Heart Syndrome (HLHS)
We are testing Lomecel-B as a potential combinatorial therapy candidate to surgical intervention for HLHS. The scientific goal underlying this study builds on surgical advances of the past thirty years, and is intended to address remaining obstacles to improving long-term cardiac function in HLHS patients.
HLHS is a severe congenital birth defect in which the left ventricle of the heart is either severely underdeveloped or missing. As a consequence, babies born with this condition have severely diminished systemic blood flow, which previously used to lead to a 100% mortality rate shortly after birth. Babies born with HLHS now undergo a complex three stage heart reconstruction over the course of years, in which the single remaining right ventricle is used to support systemic circulation (the right ventricle is normally used for lung circulation, which is a much lower load). While these children can now live into adulthood, early mortality is still extremely high in this population due to right ventricle failure, which is not meant for the increased load demanded for systemic circulation. Furthermore, HLHS patients after undergoing heart reconstructive surgery are often not ideal candidates for a heart transplant. As such, there is an important unmet medical need to improve right ventricular function in these patients to improve both short-term and long-term outcomes.
We believe that Lomecel-B has potential as a combinatorial therapy with HLHS surgery to improve both short- and long-term clinical outcomes. We are evaluating whether a direct injection in the heart can improve right ventricle function by promoting regenerative and repair responses. In animal studies, this combinatorial approach resulted in a 10 – 15% improvement in right ventricle function.
Prevalence of HLHS. HLHS is an ultra-rare indication, occurring at approximately 2 – 3 cases per 10,000 live births, or roughly 1,000 children annually in the U.S. This indication would therefore meet the prevalence requirements for an orphan drug designation (ODD) if the other designation requirements are met. A sponsor may request an ODD any time before the marketing application for the product for the rare disease or condition is submitted. If Longeveron requests an ODD for Lomecel-B and if FDA approves Lomecel-B for HLHS, then it may be eligible for a period of orphan drug exclusivity (ODE). Longeveron may also have the opportunity to pursue one of the FDA’s expedited review programs for the use of Lomecel-B in HLHS. Longeveron has not sought expedited review from the FDA.
Status of the Clinical Trial. We have completed a 10 patient multicenter, open-label Phase 1 clinical trial in HLHS. Children with HLHS undergoing Stage 2 surgery were treated via intramyocardial (direct heart) injection of Lomecel-B. The last subject visit is anticipated to be in the fourth quarter of 2020, and top-line data expected in first quarter of 2021. No Lomecel-B-related adverse events have been reported on trial, supporting the safety of this approach. Phase 2 of this study, which will be randomized, controlled, double-blinded design, is anticipated to begin in 2021.
Grant Funding Award. The Phase 1 study was supported by a grant award from the MSCRF, part of Maryland TEDCO. Phase 2 is being supported by the NHLBI/NIH.
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Other Investigational Products in Development
We have been conducting preclinical research and development work for a next-generation cellular therapy product referred to as CD271+ cells. While similar to Lomecel-B, CD271+ cells may have characteristics that could lead to a more potent product and may have additional uses. We intend to enter into early-stage clinical testing of this product candidate.
Manufacturing
The manufacture and delivery of cell therapy products to patients involves complex, integrated processes. Commercial success in this area requires manufacturing processes that are reliable, scalable, and economical. We have and will continue to devote significant resources to process development and manufacturing to optimize process robustness and success rates in developing Lomecel-B and other potential product candidates, as well as to reduce per-unit manufacturing costs and enable us to quickly achieve regional and global scale production upon regulatory approval for any of our product candidates.
We currently operate a manufacturing site in Miami, FL, which supplies Lomecel-B for our clinical trials. We also intend to expand the manufacturing capacities in the U.S. and potentially Japan or other regions in Asia for commercialization at both a regional and global scale upon regulatory approvals.
Our cell manufacturing facility went online in early 2017, and consists of 4,150 ft2 (385.5 m2) of GMP space, with approximately 3,000 ft2 (279 m2) of cleanrooms and 1,150 ft2 (107 m2) of warehouse and Quality Control space. The cleanroom area is used exclusively for processing of human cellular and tissue products for use in clinical trials and research. We have validated the facility according to FDA regulations in 21 C.F.R. Part 210 (GMPs for drugs), Part 211 (GMPs for finished pharmaceuticals), Part 606 (GMPs for blood and blood components) and Part 610 (general biological products standards).
Our lead product, Lomecel-B, consists of human allogeneic bone-marrow derived MSCs as the active ingredient. These cells undergo cultured-expansion using proprietary processes, and are then formulated, packaged and stored frozen (cryopreserved) until shortly before use. Fresh bone marrow is procured from established, licensed U.S.-based third-party tissue suppliers, which harvest the tissue from young, healthy consenting donors. Lomecel-B is produced using techniques that FDA has reviewed and authorized as part of our INDs.
Technology Capabilities
From the commencement of operations in 2014, we recognized the potential for cellular therapy to be a novel therapeutic candidate in our chosen indications. We have assembled a team of experts and proprietary technologies that we believe enables us to take a systematic approach to rapidly develop improved cell therapies. We believe having established manufacturing capabilities and operations within the U.S. early in the development of our product candidates is a competitive advantage. Over time, we expect to expand regional manufacturing capacity and potentially add external supply nodes to meet projected product requirements for commercialization. We believe that anticipated future clinical and commercial demand for Lomecel-B and new pipeline programs can be met, as our process has been designed for meet these demands as milestones are achieved. We believe our scalable robust manufacturing process, along with our proprietary technologies and our industry experienced team, would be challenging and costly for potential competitors to replicate.
Contract Development and Manufacturing Services
We produce all of our product candidates at our cell manufacturing facility to satisfy our ongoing clinical studies, The Bahamas Registry Trial, and research and development needs. As a revenue-generating opportunity, we utilize excess capacity, when available, to provide contract manufacturing and research and development services to third parties. We are currently serving two clients and have initiated limited business development activity to increase our client base as a means for increasing revenue. In total we have generated $299,000 in contract fees.
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Commercialization
We currently have no established sales, marketing or product distribution infrastructure. In order to commercialize any of our product candidates if approved for commercial sale, we will need a sales and marketing organization with technical expertise and supporting distribution capabilities or collaborate with third parties that have sales and marketing experience.
As we move our product candidates through development toward regulatory approval we will evaluate several options for each product candidate’s commercialization strategy. These options include further building an internal sales force, entering into a joint marketing collaboration with another pharmaceutical or biotechnology company, or out-licensing any future approved product to another pharmaceutical or biotechnology company.
Competition
The field of regenerative medicine, which includes gene therapies, cell therapies (such as Lomecel-B), and tissue-engineered products, is broadly defined as “products intended to repair, replace or regenerate organs, tissues, cells, genes, and metabolic processes in the body,” per the Alliance for Regenerative Medicine, an international advocacy organization. Regenerative medicine companies number over 1,000 worldwide as of the first half of 2020.
In some of our indications, we face competition from both cellular therapy companies, and pharmaceutical/biotechnology companies. The following table is a general list of cellular therapy companies that we believe could be considered our primary competition on the basis that these companies are developers of living cell-based therapies, albeit for different indications in most cases.
Name | Corporate Headquarters | Clinical stage pipeline indication(s) | ||
Athersys, Inc. | U.S. | Ischemic stroke; ARDS; GvHD; Acute Myocardial Infarction | ||
BioCardia, Inc. | U.S. | Heart failure; Acute myocardial infarction | ||
BrainStorm Cell Therapeutics | U.S. | ALS; MS | ||
Caladrius Biosciences | U.S. | CLI; refractory disabling angina; CMD | ||
Corestem | South Korea | ALS (Commercial in South Korea); Lupus | ||
Cynata Therapeutics | Australia | GvHD | ||
Healios K.K. | Japan | Ischemic stroke; ARDS | ||
Medipost | South Korea | Osteoarthritis (commercial); BPD; AD | ||
Mesoblast Ltd. | Australia | Heart failure, low back pain, GvHD; ARDS; Crohn’s Disease | ||
Pluristem Therapeutics, Inc. | Israel | CLI; ARDS; ARS; GvHD | ||
ReNeuron | U.K. | Ischemic stroke; Retinitis pigmentosa | ||
SanBio Co., Ltd. | Japan | Ischemic stroke; Traumatic brain injury | ||
Stemedica Cell Technologies | U.S. | Ischemic stroke; heart failure; AD |
ARDS = Acute Respiratory Distress Syndrome; GvHD = Graft versus host disease; ALS = Amyotrophic lateral sclerosis; MS = Multiple sclerosis; BPD = Bronchopulmonary dysplasia; CLI = Critical limb ischemia; CMD = coronary microvascular disease; ARS = Acute radiation syndrome.
Biology of Aging Research Companies
To our knowledge, there are no other companies currently conducting clinical trials for Aging Frailty using a regenerative medicine approach. However, this is likely to change as the emphasis on developing an effective treatment grows. As the leader in this field, we believe we are well-positioned to advance our Aging Frailty program into pivotal Phase 3 trials.
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Shanghai East Hospital in Shanghai, China is planning to initiate a multicenter, randomized, double-blind, placebo-controlled Phase 2 clinical study of umbilical cord MSC infusion for Aging Frailty.
Healeon Medical Inc. is conducting an invitation-only trial to determine the safety and efficacy of delivery of autologous cellular stromal vascular fraction (cSVF) to improve the quality of life and functional health in frailty.
The University of Texas Health Science Center in San Antonio is collaborating with the NIH to conduct a randomized, placebo-controlled Phase 2 clinical trial of metformin, the Type-2 diabetes medication, for the prevention of frailty in subjects aged 65 to 95. Other academic groups or hospitals have or are testing hormonal treatments such as ghrelin or testosterone to prevent or treat frailty. The vast majority of interventional trials typically involve lifestyle intervention, specifically evaluating diet, dietary supplements, or exercise modifications, or a combination thereof. A number of companies are researching different approaches and therapeutics in the broad “anti-aging” category, developing therapies that may extend “healthspan” by slowing or reversing diseases associated with aging, or the aging process itself.
● | Calico Life Sciences, LLC: This Google-backed company is researching compounds that are intended to treat aging-related diseases and conditions, however its first clinical study involves patients with advanced solid tumor cancers. | |
● | Unity Biotechnology: Unity’s focus is to “extend human health span, the period in one’s life unburdened by the disease of aging.” UBX is targeting senescence (the process whereby cells cease to divide, and linger in the body releasing harmful proteins) and is in the category called “senolytic medicines”. | |
● | AgeX Therapeutics: AgeX is a pre-clinical stage company testing telomerase-expressing Pluripotent Stem Cells (PSCs) in an attempt to reverse cell aging, and extend human health and life spans. |
Competition in Alzheimer’s Disease
There are several companies currently testing cellular therapy in neurologic and cognitive disorders. However, in the United States, we believe we are the furthest advanced in the clinical development of a regenerative medicine approach to treating AD. The following companies have publicly indicated that they are conducting, or intend to conduct, cell therapy clinical trials in AD.
● | Brainstorm Cell Therapeutics: In 2020, Brainstorm Cell Therapeutics, a U.S. company, announced its intention to initiate a multinational Phase 2 trial to test its autologous MSC neurotrophic factor investigational product in AD. | |
● | Medipost Co. Ltd.: Medipost, a South Korean company, has reported that it has completed a Phase 2a study in AD using its umbilical cord-derived allogeneic MSCs. | |
● | CHABiotech Ltd.: This South Korea-based company is conducting a Phase 1/2 trial of enhanced placenta-derived stem cells in AD, according to its website. |
There are many other pharmaceutical and biotechnology companies that are conducting clinical trials of various therapeutics for the treatment of AD. According to the Alzheimer’s Association, in 2020 there are 121 unique therapies registered on ClinicalTrials.gov. Some of the more established and well-known companies in this group include Biogen, Novartis, Eisai, and Eli Lilly.
Competition in HLHS
Currently there are no FDA-approved treatments for HLHS. In addition to our HLHS clinical program, Boston Children’s Hospital is sponsoring a study of allogeneic mesenchymal precursor cells (rexlemestrocel-L) in HLHS with cells provided by Mesoblast Ltd. We are not aware of any other industry-sponsored clinical trials testing allogeneic stem cell therapy for HLHS in the U.S. or elsewhere.
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Competition in ARDS
Currently there are no FDA-approved treatments for ARDS. The COVID-19 pandemic has resulted in a spike in research on the potential for allogeneic MSCs to treat acute lung injury resulting from infection with the SARS-CoV-2 virus. Several cellular therapy companies had ongoing ARDS programs prior to the pandemic, and several other companies, including us, initiated clinical studies during the pandemic.
● | Athersys: Athersys is a U.S.-based cell therapy company developing an allogeneic bone-marrow derived stem cell product. Athersys is currently conducting a Phase 2/3 trial in ARDS, and has received both Regenerative Medicine Advanced Therapy (RMAT) and Fast Track Designations from the FDA. Athersys had previously conducted Phase 1/2 trials in ARDS prior to the COVID-19 pandemic. | |
● | Mesoblast: Mesoblast, an Australia-based company, is conducting a multi-country Phase 2/3 clinical study for ARDS related to COVID-19 using its allogeneic bone-marrow MSC product remestemcel-L. | |
● | Pluristem: Israeli company Pluristem has initiated Phase 2 trials in the U.S. and Germany for testing its placenta-tissue stem cell product. |
Intellectual Property
Generation and protection of intellectual property, including trade secrets, proprietary technology, manufacturing techniques, and patents, is of critical importance in our field and in biotechnology generally. We seek to protect our proprietary technology, inventions, and improvements that are commercially important to the development of our business by seeking, maintaining, and defending patent rights, whether developed internally, acquired from third parties, or licensed from third parties. We also intend to seek and rely on any statutory or regulatory protections, including FDA’s expedited review program, data exclusivity, market exclusivity and patent term extensions where available.
We have a combination of Company-owned and in-licensed patents and patent applications related to cell-based therapy and its various uses. This portfolio includes patent applications that are directed to use of allogeneic MSCs to (a) increase humoral immunity; (b) treat sexual dysfunction; and (c) act as adjuvants for vaccines. We also have in-licensed a patent family directed to methods of use of CD271+ MSC precursor cells derived from bone marrow for cardiac repair. Our patent applications contain claims that, if allowed, specifically protect the use of our product in individuals with Aging Frailty, immunosenescence, and other age-related diseases. Such applications may not result in issued patents and, even if patents do issue, the issued patents may not be in a form that will provide us with meaningful ability to maintain exclusivity for our products. We also rely on trade secrets that may be important to the development of our business. Trade secrets are difficult to protect and enforce and therefore provide us with only limited protection.
We expect to file additional patent applications in support of current and new product candidates, as well as for process and manufacturing-related improvements or inventions, should these arise. These expected additional patent applications may be related to existing patent applications or may create new patent families. Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection for our current and future product candidates and the methods used to develop, manufacture, administer, and use them. Our commercial success will also depend on successfully defending our patents against third-party challenges and operating without infringing on the proprietary rights of others. We are aware of several U.S. patents held by third parties covering potentially similar or related products, and their manufacture and use. Generally, conducting clinical trials and other acts relating to FDA approval are not considered acts of infringement in the United States. If and when Lomecel-B MSCs are approved by the FDA, third parties may seek to enforce their patents by filing a patent infringement lawsuit against us. Our ability to deter and, if necessary, to stop third parties from making, using, selling, offering to sell or importing our products or products that are similar to our products depends on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities. We can neither be sure that patents will be granted with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any patents that may be granted to us in the future will be commercially useful in protecting our product candidates, discovery programs and processes. We cannot be sure that no unpublished third party patent applications exist that would have an effect on our freedom to operate. For this and more comprehensive risks related to our intellectual property, please see “Risk Factors—Risks Related to Intellectual Property.”
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The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most jurisdictions where we file, including the United States, the patent term is 20 years from the earliest date of filing a non-provisional patent application. In the United States, a patent’s term may be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office (USPTO), in examining and granting a patent. Patent term in the United States may be shortened if a patent is subject to a terminal disclaimer over another patent. Delays on the part of a patentee may decrease patent term adjustment.
In the United States, the term of a patent that covers an FDA-approved “active ingredient” or methods of its use may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during the FDA regulatory review process. The Drug Price Competition and Patent Term Restoration Act of 1984, the Hatch-Waxman Amendments, or the Biologics Price Competition and Innovation Act of 2009 permit a patent term extension of up to five years beyond the expiration of the statutory term of a patent, including any patent term adjustment to which the patent is entitled. The length of the patent term extension is related to the length of time the active ingredient or method is under regulatory review. Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent applicable to an approved drug may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent that covers an approved drug. In the future, if and when our products receive FDA approval, we expect to apply for patent term extensions on patents covering those products. We plan to seek patent term extensions for any issued patents we may obtain in any jurisdiction where such patent term extensions are available. We are not assured that the applicable authorities, including the FDA in the United States, will agree with our assessment of whether such extensions should be granted, and if granted, the length of those extensions. For more information regarding the risks related to our intellectual property, see “Risk Factors—Risks Related to Intellectual Property.”
In some instances, we file patent applications directly with the USPTO as provisional patent applications. Corresponding non-provisional patent applications must be filed not later than 12 months after the provisional application filing date. While we intend to timely file non-provisional patent applications relating to our provisional patent applications, we cannot predict whether any such patent applications will result in the issuance of patents that provide us with any competitive advantage.
We may file U.S. non-provisional applications, direct foreign applications under the Paris Convention and the Agreement on Trade Related Aspects of Intellectual Property Rights, and Patent Cooperation Treaty, or PCT, applications. Those applications claim the benefit of the priority date of one or more earlier filed provisional applications, when applicable. The PCT system allows a single application to be filed within 12 months of the original priority date of the patent application, and to designate all of the PCT member states in which national or regional patent applications can later be pursued based on the PCT application.
For all patent applications, we determine claim strategy on a case-by-case basis. Advice of counsel and our business model and needs are considered. We seek to file patents containing claims for protection of all useful applications of our proprietary technologies and any products, as well as all new applications and/or uses we discover for existing technologies and products, assuming these are strategically valuable. We routinely reassess the number and type of patent applications, as well as the pending and issued patent claims to pursue maximum coverage and value for our processes and compositions. Further, we may modify claims during patent prosecution to meet our intellectual property and business needs.
We recognize that the ability to obtain patent protection and the degree of such protection depends on a number of factors. These include the volume and scope of the prior art, the novelty, non-obviousness, and utility of the invention, and the ability to satisfy the written description and enablement requirements of the patent laws. In addition, the coverage claimed in a patent application can be significantly narrowed before the patent is issued, and its scope can be reinterpreted or further altered even after patent issuance. Consequently, we may not obtain or maintain adequate patent protection for any of our future product candidates or for our technology platform. We cannot predict whether the patent applications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from copying by competitors. Any patents that we hold may be challenged, circumvented, or invalidated by third parties. We cannot predict whether, in certain jurisdictions, a third-party will use a method confidentially that we later independently discover and patent, which may result in a limited grant to the third party of the ability to continue to practice that method.
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In addition to patent protection, we rely on trademark registration, trade secrets, know how, other proprietary information and continuing technological innovation to develop and maintain our competitive position. We seek to protect and maintain the confidentiality of proprietary information to protect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection. Although we take steps to protect our proprietary information and trade secrets, including through contracts with our employees and consultants, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology. Thus, we may not be able to meaningfully protect our trade secrets indefinitely.
We require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information concerning our business or financial affairs developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except under specific circumstances. Our agreements with employees also provide that all inventions conceived by the employee in the course of employment with us or from the employee’s use of our confidential information are our exclusive property. However, such confidentiality agreements and invention assignment agreements can be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors. To the extent that our consultants, contractors or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting trade secrets, know-how and inventions. For more information regarding the risks related to our intellectual property, see “Risk Factors—Risks Related to Intellectual Property.”
The patent positions of biotechnology companies like ours are generally uncertain and involve complex legal, scientific and factual questions. Our commercial success will also depend in part on not infringing upon the proprietary rights of third parties. Third-party patents could require us to alter our development or commercial strategies or our products or processes, to obtain licenses or to cease certain activities. Our breach of any license agreements or our failure to obtain a license to proprietary rights required to develop or commercialize our future products may have a material adverse impact on us. If third parties prepare and file patent applications in the United States that also claim technology to which we have rights, we may have to participate in interference or derivation proceedings in the USPTO to determine priority of invention. If third parties file requests for inter partes review of our patents, then we may have to defend those patents in the USPTO. For more information, see “Risk Factors—Risks Related to Intellectual Property.”
When available to expand market exclusivity, our strategy is to obtain, or license additional intellectual property related to current or contemplated development platforms, core elements of technology and/or clinical candidates.
Company-Owned Intellectual Property
Mesenchymal Stem Cells as Vaccine Adjuvants and Methods for Using the Same. The claims within this patent application family are currently directed to methods of enhancing the immune response to vaccination, which is one of the research objectives of our Phase 1/2 HERA Trial. This research is relevant to Aging Frailty subjects, who are particularly vulnerable to the effects of viral contagion, such as influenza or COVID-19, and who may be lacking in immunoprotection. Certain claims address the ability to enhance a subject’s immune response to a vaccine through the administration of a therapeutically effective amount of allogeneic mesenchymal stem cells in a subject that exhibits “Inflammaging.” In this family we own one pending U.S. patent application and 11 patent applications outside of the United States (in ten jurisdictions). All of the patent applications are national or regional phase applications based on a PCT application filed in February 2017 and claiming priority to a U.S. provisional application filed in February 2016. National or regional phase applications were filed in the United States, Australia, Canada, the European Patent Organization, Hong Kong, Israel, Japan, South Korea, New Zealand, Singapore, and South Africa. If issued and assuming all maintenance and annuity fees are paid, patents arising from these applications are projected to expire in 2037.
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Methods of Using Human Mesenchymal Stem Cells to Effect Cellular and Humoral Immunity. Certain claims in this family of patent applications relate to the ability for mesenchymal stem cell therapy to improve the immune system function in patients with chronic systemic inflammation, a hallmark of frailty. It is believed that raising or lowering specific biomarkers after therapeutic intervention by a minimum amount may provide broad protection from an intellectual property standpoint and reflects clinical goals of treatment and treatment response.
In this family we own one pending U.S. patent application and 13 patent applications outside of the United States (in 13 jurisdictions). With two exceptions (The Bahamas and Taiwan), all of the applications are national or regional phase applications based on a PCT application filed in November 2017 and claiming priority to a U.S. provisional application filed in November 2016. The applications in The Bahamas and Taiwan claim priority to that same provisional application but were not filed using the PCT. In addition to the applications in Taiwan and The Bahamas, PCT national or regional phase applications were filed in the United States, Australia, Canada, China, the European Patent Organization, Israel, Japan, South Korea, New Zealand, Singapore, South Africa, and Hong Kong. If issued and assuming all maintenance and annuity fees are paid, patents arising from these applications are projected to expire in 2037.
Treatment of Sexual Dysfunction and Improvement in Sexual Quality of Life. This application family is directed towards increasing libido and improving sexual function and satisfaction in a female patient through the use of allogeneic or autologous MSC therapy, whether derived from bone marrow, adipose tissue or induced pluripotent stem cells (iPSCs). In this family we own one pending U.S. patent application and 13 patent applications outside of the United States. With two exceptions (The Bahamas and Taiwan), all of the applications are national or regional phase applications based on a PCT application filed in June 15, 2018 and claiming priority to a U.S. provisional application filed in June 2017. The applications in The Bahamas and Taiwan claim priority to that same provisional application but were not filed using the PCT. In addition to the applications in Taiwan and The Bahamas, PCT national or regional phase applications were filed in Australia, Canada, China, the European Patent Organization, Hong Kong, Israel, Japan, South Korea, New Zealand, Singapore, South Africa, and the United States. If issued and assuming all maintenance and annuity fees are paid, patents arising from these applications are projected to expire in June 2038.
Potency Assay. We own one U.S. provisional patent application relating to examination of protein production by human mesenchymal stem cells in response to stimuli. That application was filed in April 2020. Related applications, if any, are not required to be filed until April 2021.
Treatment of Alzheimer’s Disease with Allogeneic Mesenchymal Stem Cells. We own one U.S. provisional patent application related to treatment of AD with allogeneic mesenchymal stem cells. That application was filed in September 2020. Related applications, if any, are not required to be filed until September 2021.
In-licensed Patents and Applications
Bone Marrow Derived CD271+ Precursor Cells for Cardiac Repair. We have in-licensed the exclusive right to use CD271+ MSC precursors from bone marrow to treat certain aging-related conditions and diseases, such as frailty, Metabolic Syndrome, loss of muscle due to aging or frailty and neurocognitive disorders. That patent has issued in Australia, China, Israel, Japan, South Korea, Mexico, New Zealand, Germany, Spain, France, the United Kingdom, Italy, Sweden, and Singapore. The patent application remains pending in U.S. (where there are two pending utility applications), Canada, and Brazil. The Canadian and Brazilian applications have both been allowed. One of the U.S. applications is currently under appeal with the USPTO. While method of use claims may relate to the use of CD271+ cells for cardiac repair, our license terms exclude our use of CD271+ cells for preventing and treating cardiovascular diseases or disorders, including congenital cardiovascular defects. Assuming that all maintenance and annuity fees are paid, patents in this family are expected to expire in August 2031.
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Trademarks
We have registered trademarks or applied for registered trademarks for “Longeveron” and “LMSC” in the following jurisdictions. Over the next one to two years we plan to phase out the registrations and applications for “LMSC” in favor of registrations for “LOMECEL-B”. In some jurisdictions multiple registrations and/or applications exist so that multiple goods and/or services may be listed:
Territory | “Longeveron” | “LMSC” | ||
The Bahamas | Registered | Pending | ||
Brazil | Registered | |||
Canada | Registered | |||
China | Registered | Registered | ||
European Union | Registered | |||
Hong Kong | Registered | |||
India | Registered | |||
Japan | Registered | Registered | ||
South Korea | Registered | |||
Morocco | Registered | Registered | ||
Panama | Registered | |||
Switzerland | Registered | |||
Taiwan | Registered | |||
United States | Pending | Pending | ||
Vietnam | Registered |
Government Regulation and Biologic Drug Approval
Government authorities in the United States, at the federal, state and local level, and other countries extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, recordkeeping, promotion, advertising, distribution, marketing and export and import of products such as those we are developing. We believe that the FDA will regulate Lomecel-B as a biologic drug (i.e., a biologic) through the biologics license application (BLA) process under the jurisdiction of the Center for Biologics Evaluation and Research (CBER). We will work with FDA to confirm that a BLA is the most appropriate pathway and that CBER will be the FDA center responsible for review and licensure (i.e., approval). However, FDA may disagree with us, in which case we will follow FDA’s recommendation. For future product candidates we will also confirm the appropriate approval pathway (i.e., BLA or new drug application (NDA)) and the appropriate FDA center with regulatory oversight (i.e., CBER or the Center for Drug Evaluation and Research (CDER)).
U.S. Biologic Drug Development Process
In the United States, biologic drugs—or simply “biologics”—are regulated under two statutes: the Public Health Service Act (PHS Act) and the federal Food, Drug, and Cosmetic Act (FFDCA) and their implementing regulations. However, submission and approval of only one application—typically either a BLA or an NDA—is required prior to marketing. The FDA has also issued numerous “Guidance Documents” and other materials that address specific aspects of biologic development for specific types of product candidates (e.g., cells, tissues, gene therapies, or vaccines). The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, and local statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time during the biologic development, approval, or post-approval processes may subject an applicant to administrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold on ongoing clinical trials, issuance of warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.
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The process required by the FDA before a biologic may be marketed in the United States generally involves the following steps:
● | completion of preclinical laboratory tests, animal studies and formulation studies in accordance with FDA’s current good laboratory practice requirements and other applicable regulations; | |
● | submission to the FDA of an IND, which must become effective before human clinical trials may begin; | |
● | approval by an independent IRB at each clinical site (or by one “commercial IRB”) before each trial may be initiated; | |
● | performance of adequate and well-controlled human clinical trials in accordance with current good clinical practice (cGCP) requirements to establish the safety, purity, and potency (i.e., efficacy) of the proposed biologic for its intended use; | |
● | submission to the FDA of a BLA after completion of all clinical trials; | |
● | satisfactory outcome of an FDA advisory committee review, if applicable; | |
● | satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the biologic is produced to assess compliance with GMP requirements to assure that the facilities, methods and controls are adequate to preserve the biologic’s identity, strength, quality and purity, and of selected clinical investigation sites to assess compliance with cGCPs; and | |
● | FDA review and approval of the BLA to permit commercial marketing of the product for particular indications for use in the United States. |
The specific preclinical studies and clinical testing that is required for a BLA varies widely depending upon the specific type of product candidate under development. Prior to beginning a human clinical trial with either a biologic or drug product candidate in the United States, we must submit an IND to the FDA and that IND must become effective. The focus of an IND submission is the general investigational plan and protocol for the proposed clinical study. The IND also includes results of animal and in vitro studies assessing the toxicology, pharmacokinetics, pharmacology, and pharmacodynamic characteristics of the product; chemistry, manufacturing, and controls (CMC) information; and any available human data or literature to support the use of the investigational product. An IND must become effective before human clinical trials may begin. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the proposed clinical trial. In such a case, the IND may be placed on clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical hold is lifted and the clinical trial can begin. Submission of an IND therefore may or may not result in FDA authorization to begin a clinical trial.
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCPs, which include the requirement that all research subjects provide their informed consent for their participation in any clinical trial. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters for monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical trial conducted during product development. Other submissions to an IND include protocol amendments, information amendments, IND safety reports and annual reports. Furthermore, an independent IRB for each clinical trial site (or a “commercial IRB” that acts as the IRB at one or more of the clinical trial sites) must review and approve the protocol and informed consent form before the clinical trial may begin. The IRB also monitors the clinical trial until completed.
Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. Some clinical trials also include oversight by an independent group of qualified experts organized by the clinical trial sponsor, known as a data monitoring committee (DMC). A DMC authorizes whether or not a study may move forward at designated check points based on access to certain data from the trial. The DMC may halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or on other grounds, such as no demonstration of efficacy. Related reporting requirements for the sponsor, clinical investigator, and/or IRB also include IND safety reports and updating clinical trial results in public registries (e.g., ClinicalTrials.gov).
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Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:
● | Phase 1: The product candidate is initially introduced into healthy human subjects. These clinical trials are designed to test the safety, dosage tolerance, absorption, metabolism, distribution, excretion, side effects, and, if possible, early evidence of effectiveness. In the case of some products for severe or life-threatening diseases when the product may be too inherently toxic to ethically administer it to healthy volunteers, the initial human testing is often conducted in individuals who have the targeted disease or condition instead of healthy subjects. | |
● | Phase 2: The product candidate is administered to a limited population of individuals who have the specified disease or condition to continue to evaluate safety, as well as preliminary efficacy, optimal dosages and dosing schedule, possible adverse side effects and safety risks. Multiple Phase 2 clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 (i.e., pivotal) clinical trials. | |
● | Phase 3: Generally the largest in size, Phase 3 clinical trials are generally conducted at multiple geographically dispersed clinical trial sites. The product candidate is administered to an expanded population of individuals who have the specified disease or condition to further evaluate dosage, provide statistically significant evidence of clinical efficacy and gain additional safety data. These clinical trials are intended to establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval. |
Concurrent with clinical trials, sponsors usually complete additional animal studies. Sponsors must also develop information about the chemical and physical characteristics of the biologic and finalize a process for manufacturing the product in commercial quantities in accordance with GMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final biologic. In addition, the sponsor must develop and test appropriate packaging, and must conduct stability studies to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
During the development of a new biologic, sponsors are given opportunities to meet with the FDA. These meetings typically occur prior to submission of an IND (i.e., pre-IND meeting), at the end of Phase 2 (i.e., EOP2 meeting), and before a BLA is submitted (i.e., pre-BLA meeting). Meetings at other times may be requested. These meetings provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice, and for the sponsor and the FDA to reach agreement on the next phase of development. Sponsors typically use EOP2 meetings to discuss Phase 2 clinical results and present plans for the pivotal Phase 3 clinical trials that they believe will support approval of the new biologic.
U.S. Review and Approval Process for Biologic Drugs
Assuming successful completion of all required testing in accordance with the applicable statutory and regulatory requirements, the sponsor submits a BLA to the FDA. A BLA contains the results of product development, preclinical and other non-clinical studies and clinical trials, descriptions of the manufacturing process, analytical testing, proposed labeling and other relevant information. The submission of a BLA is subject to the payment of a substantial application fee under the Prescription Drug User Fee Amendments (PDUFA). PDUFA fees apply to both drugs and biologics. Sponsors may seek a waiver of these fees in certain limited circumstances, including a waiver of the application fee for the first BLA or NDA submitted by a small business. Product candidates with an orphan drug designation (ODD) are not subject to the BLA application fee unless the product application also includes a non-orphan indication.
The FDA reviews a BLA to determine, among other things, whether a biologic is safe, pure, and potent (i.e., effective) for its intended use and whether its manufacturing is GMP-compliant to assure the product’s identity, strength, quality and purity. Under PDUFA, the FDA has a goal date of ten months from the date of “filing” to review and act on the submission. However, the time between submission and filing can add an additional two months as FDA conducts a preliminary review to ensure that the BLA is sufficiently complete to permit substantive review. Formal FDA review of the BLA does not begin until FDA has accepted it for filing. The FDA may refer an application in some cases to an advisory committee for its independent review. An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation to FDA as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
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Before approving a BLA, the FDA will typically inspect the locations where the product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with GMPs, and are adequate to assure consistent production of the product within required specifications. An important part of a BLA is a lot release protocol that the sponsor will use to test each lot of product made after BLA approval, as well as the FDA’s own test plan that will be used for confirmatory testing of each post-approval product lot that is made before it is released to the public. If the FDA determines that the data and information in the application, including about the manufacturing process or manufacturing facilities, are not acceptable, then the FDA will outline the deficiencies and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
After the FDA evaluates a BLA, it will either issue an approval letter or a Complete Response Letter (CRL). The approval letter authorizes commercial marketing of the biologic with approved prescribing information for specific approved indications. On the other hand, a CRL indicates that the review cycle of the application is complete but the BLA cannot be approved in its present form. A CRL usually describes the specific deficiencies identified by the FDA and describes the actions the sponsor must take to correct those deficiencies. A sponsor that receives a CRL must resubmit the BLA after addressing the deficiencies or withdraw the application. Even if such additional data and information are submitted to address the deficiencies, the FDA may decide that the data and information in the resubmitted BLA do not satisfy the approval criteria.
Following marketing approval, a sponsor may need to fulfill certain post-marketing requirements (PMRs) or post-marketing commitments (PMCs). For example, post-approval trials, sometimes referred to as Phase 4 studies, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients for the intended therapeutic indication. The trials may be agreed upon prior to approval, or the FDA may require them if new safety issues emerge. Following approval, a sponsor may also need to conduct a pediatric study that was temporarily deferred during the initial product development process. Under the Pediatric Research Equity Act (PREA), a sponsor must conduct pediatric clinical trials for most new drugs or biologics, for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. The required assessment must evaluate the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the product is safe and effective. PREA studies must be included in the application unless the sponsor has received a deferral or waiver.
A risk evaluation and mitigation strategy (REMS) may also be an important component of a BLA approval that requires sponsor post-marketing regulatory efforts. A REMS is a safety strategy to manage a known or potential serious risk associated with a drug or biologic and to enable patients to have continued access to such medicines by managing their safe use. A REMS may include medication guides, physician communication plans, or elements to assure safe use (ETASU) such as restricted distribution methods, patient registries, and other risk minimization tools.
Once approved, the FDA may withdraw the product approval if compliance with PMRs, PMCs, or a REMS program is not maintained or if problems occur after the product reaches the marketplace. The FDA may also request that a product be recalled for an identified safety issue. In addition, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could impact the timeline for regulatory approval or otherwise impact ongoing development programs.
FDA Expedited Review Programs for Serious Conditions
Under various statutory and regulatory authorities, the FDA has authority to review and approve certain drugs and biologic drugs on an expedited basis if they are intended to treat a serious condition and meet other requirements. These expedited programs are discussed below.
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RMAT Designation. In 2017, the FDA established a new designation, known as the regenerative medicine advanced therapy (RMAT) designation, as part of its implementation of the 21st Century Cures Act. If they meet the appropriate criteria, regenerative medicine therapies to treat, modify, reverse, or cure serious conditions may be eligible for RMAT designation as well as FDA’s other expedited programs (i.e., fast track, breakthrough therapy, or priority review designations or accelerated approval). As with other biological products, regenerative medicine therapies receiving RMAT designation must meet the same standards for approval, including demonstrating the product’s safety and effectiveness. As described in Section 3033 of the 21st Century Cures Act, an investigational product is eligible for RMAT designation if:
● | It is a regenerative medicine therapy, which is defined as a cell therapy, therapeutic tissue engineering product, human cell and tissue product, or any combination product using such therapies or products (except for those regulated solely under Section 361 of the PHS Act and 21 C.F.R. Part 1271); | |
● | It is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition; and | |
● | Preliminary clinical evidence indicates that the drug has the potential to address unmet medical needs for such disease or condition. |
Advantages of the RMAT designation include all the benefits of the fast track and breakthrough designations, including early interactions with the FDA to discuss the use of any potential surrogate or intermediate endpoints to support an accelerated approval. However, unlike a breakthrough designation, the RMAT designation does not require evidence to indicate that the drug may offer a substantial improvement over available therapies. A request for an RMAT designation can be included in a new IND, or submitted as an amendment to an existing IND. As with other expedited programs, the FDA can withdraw an RMAT designation that has been granted if the designation criteria are no longer met.
Accelerated Approval. In addition, a product may be eligible for accelerated approval. Drug products intended to treat serious or life-threatening diseases or conditions may be eligible for accelerated approval upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials. In addition, the FDA currently requires pre-approval of promotional materials as a condition for accelerated approval, which could adversely impact the timing of the commercial launch of the product.
Fast-Track Designation. The fast track designation is intended to expedite or facilitate the process for reviewing new drug and biologic drug products that meet certain criteria. Specifically, products are eligible for this designation if they are intended to treat a serious or life-threatening disease or condition and demonstrate the potential to address unmet medical needs for the disease or condition. With regard to a fast track product, the FDA may review sections of the marketing applications on a rolling basis before the complete application is submitted if the sponsor provides a schedule for the submission of the application sections, the FDA agrees to accept sections of the application and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section.
Priority Review Designation. A product is eligible for priority review designation if it has the potential to provide a safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketed products. The FDA will attempt to direct additional resources to the evaluation of an application for a priority review-designated product in an effort to facilitate the review. The FDA endeavors to review applications with priority review designations within six months of the filing date as compared to the standard ten months for review.
Breakthrough Therapy Designation. The Food and Drug Administration Safety and Innovation Act established a category of products referred to as “breakthrough therapies” that may be eligible to receive breakthrough therapy designation. A sponsor may seek FDA designation of a product candidate as a “breakthrough therapy” if the product is intended, alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The designation includes all of the features of a fast track designation, as well as more intensive FDA interaction and guidance. The breakthrough therapy designation is a distinct status from both accelerated approval and priority review designation, which can also be granted to the same drug if relevant criteria are met. If a product is designated as breakthrough therapy, the FDA will work to expedite the development and review of that product.
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A drug or biologic drug that is subject to one or more of these expedited programs may be reviewed and approved more quickly than other non-expedited program products; however, the standard for approval (i.e., safety and effectiveness) does not change. Even if a product candidate qualifies for one or more of these programs, the FDA may later decide that it no longer meets the conditions of the expedited program and the expedited program status may be removed. We may explore one or more of these opportunities for Longeveron product candidates as appropriate.
Marketing Exclusivity
In the case of biologic drugs, several types of marketing exclusivity may apply:
● | Reference product exclusivity; | |
● | Orphan drug designation and orphan drug exclusivity; and | |
● | Pediatric exclusivity. |
Reference Product Exclusivity
We believe that FDA will regulate Lomecel-B as a new biologic and will require submission and approval of a biologics license application (BLA) under the Public Health Service Act (PHS Act). The PHS Act includes a framework for determining when a biologic is a “reference product” and therefore eligible for marketing exclusivity. The reference product is the single biologic against which a biosimilar (a product that is highly similar to and has no clinically meaningful differences from the reference product) or an interchangeable biosimilar (a product that is both biosimilar to, and will produce the same clinical result as, the reference product) is evaluated.
FDA must determine the date of “first licensure” (i.e., approval) of a biologic which will, in turn, determine whether that biologic qualifies as a reference product that will be eligible for statutory exclusivity (and when such exclusivity will expire). Typically (but not always) the date of approval is the date of first licensure. Once that date of first licensure is determined for a reference product, then FDA will not approve a biosimilar or interchangeable biosimilar until the date that is 12 years after the date on which the reference product was first approved. However, FDA may receive an application for a biosimilar or interchangeable biosimilar four years after the date on which the reference product was first approved. These 12 and four year terms are each extended by six months if the product has been awarded six month pediatric exclusivity.
Legal uncertainties remain about FDA’s application of the date of first licensure and statutory exclusivity provisions to cell therapy products. At the appropriate time, we intend to provide information to FDA so that FDA can determine the date of first licensure of Lomecel-B (or any other product candidate that will be regulated as a biologic) which will, in turn, set the date from which statutory exclusivity will begin to run. However, FDA may not make an immediate decision about the date of first licensure at the time it approves a new biologic. Furthermore, there is currently no precedent showing how FDA will apply this statutory framework to a cell therapy product. The law in this area is evolving and will likely continue to evolve.
Orphan Drug Designation and Exclusivity
To encourage the pharmaceutical and biotechnology industries to develop drugs and biologics to treat diseases or conditions that affect relatively few patients in the U.S., Congress enacted the Orphan Drug Act in 1983. As amended, under this act the FDA may grant an orphan drug designation (ODD) for a drug or biologic drug being developed to treat a “rare disease or condition,” defined as affecting less than 200,000 persons in the U.S., or affecting more than 200,000 persons in the U.S. but for which there is no reasonable expectation that development costs will be recovered from U.S. sales of the product. A request for ODD must be submitted to the FDA before a marketing application is submitted (i.e., BLA or NDA), but there is no assurance that FDA will award an ODD if requested. If awarded, information about the ODD will be made public on FDA’s website.
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An ODD does not change the regulatory review standards of safety and effectiveness and does not shorten the length of the FDA review or approval process. However, there are a number of potential benefits if a drug or biologic with an ODD is eventually approved. If an investigational product with an ODD subsequently receives the first FDA approval for the disease or condition for which it has such designation, then the approved product is entitled to orphan drug exclusivity (ODE). Having ODE means that the FDA may not approve any other applications to market the same drug or biologic for the same use or indication for seven years, except in limited circumstances (including but not limited to demonstrating clinical superiority of a new product vs. the product with ODE because of greater safety, greater effectiveness, or making a major contribution to patient care; or an FDA finding that the sponsor of the product with ODE cannot assure that sufficient quantities of the product will be available for patients). Even if an investigational product has an ODD, there is no guarantee that FDA will award ODE upon approval.
Competitors may receive approval of either a different product for the same use or indication, or the same product for a different use or indication. Approved drugs and biologics can also be used by physicians off-label, which is within the scope of their practice of medicine. Accordingly, receiving ODE is not an absolute protection against potentially competing products. Moreover, an ODE awarded to another sponsor could block FDA approval of one of Longeveron’s product candidates for seven years. The law involving ODDs and ODEs, including FDA’s interpretation of “same drug,” is continuing to evolve through litigation, as well as changes to FDA regulations and policies.
In addition to the potential award of seven year ODE upon product approval, the benefits of an ODD also include eligibility for certain research tax credits and a waiver of the marketing application fee. An application for a prescription product with an ODD is not subject to an application fee unless the application also includes an indication for a non-rare disease or condition as well. For fiscal year 2021, the application fee for a new drug or biologic requiring clinical studies is $2,875,842.
Pediatric Exclusivity
Pediatric exclusivity is another type of marketing exclusivity available in the United States. Pediatric exclusivity provides for an additional six months of marketing exclusivity attached to another period of exclusivity (e.g., ODE) if a sponsor conducts clinical trials in children in response to a written request from the FDA. The issuance of a written request does not require the sponsor to undertake the described clinical trials.
Post-approval Requirements
Any products manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual program fees for any marketed products. Drug and biologic drug manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with GMPs, which therefore imposes certain procedural and documentation requirements on us and our third-party manufacturers. Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from GMPs and impose reporting requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with GMPs and other aspects of regulatory compliance.
The FDA may withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution restrictions or other restrictions under a REMS program. Other potential consequences include, among other things:
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● | restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; | |
● | fines, warning letters, or untitled letters; | |
● | clinical holds on clinical studies; | |
● | refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of product approvals; | |
● | product seizure or detention, or refusal to permit the import or export of products; | |
● | consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs; | |
● | mandated modification of promotional materials and labeling and the issuance of corrective information; | |
● | the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety information about the product; or | |
● | injunctions or the imposition of civil or criminal penalties. |
The FDA closely regulates the marketing, labeling, advertising and promotion of approved products. A company can make only those claims that were approved by the FDA in the application for marketing approval and in accordance with the provisions of the approved labeling. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe, in their independent professional medical judgment, legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA. Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of approved treatments, as the practice of medicine is outside the scope of FDA’s authority. The FDA does, however, restrict manufacturer’s communications on the subject of off-label use of their products. The federal government has levied large civil and criminal fines against companies for alleged improper promotion of off-label use and has enjoined companies from engaging in off-label promotion. The FDA and other regulatory agencies have also required that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA-approved labeling.
Other Healthcare Laws
Pharmaceutical and medical device manufacturers are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business. Such laws include, without limitation, U.S. federal anti-kickback, fraud and abuse, false claims, consumer fraud, pricing reporting, data privacy and security, and transparency laws and regulations as well as similar foreign laws in the jurisdictions outside the U.S. Similar state and local laws and regulations may also restrict business practices in the pharmaceutical industry, such as state anti-kickback and false claims laws, which may apply to business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, or by patients themselves; state laws that require pharmaceutical 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 and other potential referral sources; state laws and regulations that require drug manufacturers to file reports relating to pricing and marketing information; state and local laws which require tracking gifts and other remuneration and items of value provided to physicians, other healthcare providers and entities or that require the registration of pharmaceutical sales representatives; and state and local laws that require the registration of pharmaceutical sales representatives; and state and local laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Violation of any of such laws or any other governmental regulations that apply may result in penalties, including, without limitation, significant administrative, civil and criminal penalties, damages, fines, 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, the curtailment or restructuring of operations, exclusion from participation in governmental healthcare programs and imprisonment.
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Japanese Laws and Regulations
Under the 2014 law passed by the Japanese government, two new Acts were added that regulate regenerative medicine development and offer two pathways to market for regenerative medicine therapeutic candidates: the Act on the Safety of Regenerative Medicine (ASRM) and the Pharmaceutical and Medical Devices Act (PMD Act).
Japan’s Act on the Safety of Regenerative Medicine. The ASRM route is intended to allow physicians to provide cellular therapies to patients through an application process that is regulated by the Japanese Ministry of Health, Labor and Welfare (MHLW). Manufacturers of cell and gene therapy products wishing to utilize this pathway must identify and work with a partner clinic or hospital which enables the clinic to act as the distributor, with the manufacturer receiving a fee or a royalty, for example. The ASRM route may require a clinical trial or other clinical data in order to seek approval from the MHLW. Treatments under the ASRM route must be provided by a medical institution for the purpose of either “medical research” or as a “medical treatment at one’s own expense.” Therapies provided under this framework are not covered by Japan’s National Health Insurance.
Japan’s Pharmaceutical & Medical Device Act. The PMD Act includes special treatment for regenerative medicine products and identifies them as a stand-alone medical category with a novel “conditional approval” system. Sponsors seeking manufacturing approval need to provide clinical data to show that the product does not have any major safety concerns, clinical data to demonstrate “probable” efficacy, and satisfy established chemistry, manufacturing and controls criteria. A conditional approval can therefore occur after a Phase 2 trial. The conditional approval period lasts for a maximum of seven years. Sponsors that receive conditional approval must re-apply, with additional satisfactory safety and efficacy data, for a full unconditional approval within the timeframe provided to them under the conditional approval. A conditional approval allows the product to be marketed and partially reimbursed through Japan’s National Health Insurance.
Coverage and Reimbursement
Sales of any pharmaceutical product depend, in part, on the extent to which the product will be covered by third-party payors, such as federal, state and foreign government healthcare programs, commercial insurance and managed healthcare organizations, and their level of reimbursement for the product.. Significant uncertainty exists as to the coverage and reimbursement status of any newly approved product. Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis. One third-party payor’s decision to cover a particular product does not ensure that other payors will also provide coverage for the product. As a result, the coverage determination process can require manufactures to provide scientific and clinical support for the use of a product to each payor separately and can be time-consuming, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance. For products administered under the supervision of a physician, obtaining coverage and adequate reimbursement may be particularly difficult because of the higher prices often associated with such drugs. Additionally, separate reimbursement for the product itself or the treatment or procedure in which the product is used may not be available, which may impact physician utilization. In addition, companion diagnostic tests require coverage and reimbursement separate and apart from the coverage and reimbursement for their companion pharmaceutical or biological products. Similar challenges to obtaining coverage and reimbursement, applicable to pharmaceutical or biological products, will apply to companion diagnostics.
In addition, third-party payors are increasingly reducing reimbursements for pharmaceutical products and services. The U.S. government and state legislatures have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement and requirements for substitution of generic products. Third-party payors are more and more challenging the prices charged, examining the medical necessity and reviewing the cost effectiveness of pharmaceutical products, in addition to questioning their safety and efficacy. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit sales of any product. Decreases in third-party reimbursement for any product or a decision by a third-party payor not to cover a product could reduce physician usage and patient demand for the product.
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In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. A member state may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market. Pharmaceutical products may face competition from lower-priced products in foreign countries that have placed price controls on pharmaceutical products and may also compete with imported foreign products. Furthermore, there is no assurance that a product will be considered medically reasonable and necessary for a specific indication, will be considered cost-effective by third-party payors, that an adequate level of reimbursement will be established even if coverage is available or that the third-party payors’ reimbursement policies will not adversely affect the ability for manufacturers to sell products profitably.
Healthcare Reform
In the United States and certain foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system. In March 2010, the ACA was signed into law, which substantially changed the way healthcare is financed by both governmental and private insurers in the United States. By way of example, the ACA increased the minimum level of Medicaid rebates payable by manufacturers of brand name drugs from 15.1% to 23.1%; required collection of rebates for drugs paid by Medicaid managed care organizations; imposed a non-deductible annual fee on pharmaceutical manufacturers or importers who sell certain “branded prescription drugs” to specified federal government programs, implemented a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected; expanded eligibility criteria for Medicaid programs; created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research; and established a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.
Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the ACA have passed. For example, in 2017, Congress enacted the Tax Act, which eliminated the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. On December 14, 2018, a Texas U.S. District Court Judge ruled that the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA were invalid as well. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit ruled that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. It is unclear how these decisions, future decisions, subsequent appeals, and other efforts to repeal and replace the ACA will impact the ACA.
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Other legislative changes have been proposed and adopted since the ACA was enacted, including aggregate reductions of Medicare payments to providers of 2% per fiscal year and reduced payments to several types of Medicare providers, which will remain in effect through 2029 absent additional congressional action. Moreover, there has recently been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted legislation designed, among other things, to bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs and reform government program reimbursement methodologies for pharmaceutical products. For example, at the federal level, the Trump administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the other of pocket costs of drug products paid by consumers. Additionally, the Trump administration’s budget proposal for the fiscal year 2020 contains further drug price control measures that could be enacted during the budget process or in future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients. Although a number of these and other measures may require additional authorization 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. In addition, individual states in the United States have also become increasingly active in implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures and, in some cases, mechanisms to encourage importation from other countries and bulk purchasing. Furthermore, there has been increased interest by third party payors and governmental authorities in reference pricing systems and publication of discounts and list prices.
Further, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Beilina Right to Try Act of 2017, or the Right to Try Act, was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new product candidates that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a drug manufacturer to make its products available to eligible patients as a result of the Right to Try Act.
Employees
As of September 30, 2020, we had 12 full-time employees, two full-time consultants, and two part-time consultants. Among those, five have M.D. or Ph.D. degrees, one has an M.B.A. degree, and one has a J.D. degree. Of these full-time employees and consultants, 12 are engaged in research and development activities. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.
Facilities
Our principal executive office is located at 1951 NW 7th Avenue, Suite 520, Miami, Florida 33136. We rent approximately 15,000 ft2 of space, which includes our executive offices and GMP manufacturing facility, and research and development operations. See “Manufacturing” on page 88 of this prospectus for additional details regarding our facilities.
Legal Proceedings
We are not currently subject to any material legal proceedings.
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Executive Officers, Non-executive employees and Directors
The following table sets forth the name, age as of September 30, 2020, and position of the individuals who (i) currently serve as directors and executive officers of Longeveron LLC, and (ii) will join or continue to serve as directors and executive officers of Longeveron Inc. following the Corporate Conversion and the closing of this offering. The following also includes certain information regarding the individual experience, qualifications, attributes and skills of our directors and executive officers as well as brief statements of those aspects of our directors’ backgrounds that led us to conclude that they are qualified to serve as directors.
Name | Age | Position | ||
Executive Officers | ||||
Geoff Green, M.B.A. | 47 | Chief Executive Officer | ||
Joshua M. Hare, M.D. | 58 | Co-Founder, Chief Science Officer, Chairman and Director | ||
James Clavijo | 54 | Chief Financial Officer and Treasurer | ||
Paul Lehr, J.D. | 53 | International Executive Director, General Counsel, and Secretary | ||
Non-Executive Employees | ||||
Anthony Oliva, PhD. | 50 | Senior Vice President of Scientific Affairs | ||
Lisa McClain-Moss | 50 | Senior Director of Manufacturing | ||
Non-Employee Directors | ||||
Donald M. Soffer | 88 | Director | ||
Neil E. Hare | 50 | Director | ||
Rock Soffer | 38 | Director | ||
Douglas Losordo, M.D.(1) | 64 | Director | ||
Erin Borger(1) | 40 | Director |
(1) | Dr. Losordo and Mr. Borger will join the Board as directors immediately following the Corporate Conversion. |
Executive Officers
Geoff Green (Chief Executive Officer) has been with Longeveron since 2016, first as Senior Vice President of Clinical Operations (2016 – 2018), and then as President and as Chief Executive Officer (2019 – present). Mr. Green is a versatile life sciences executive with over 20 years in leadership roles spanning clinical drug development, clinical operations, and business development. Prior to joining Longeveron, he was VP of Operations at Partikula, VP, Business Development & Clinical Affairs at Accu-Break Pharmaceuticals, President and Acting CEO of DOR BioPharma (now Soligenix (NAS: SNGX)), VP of Business Development & Operations at Heart Genomics, and Director of Clinical Affairs at Innovative Drug Delivery Systems. Early in his career he spent several years managing oncology clinical trials at Memorial Sloan-Kettering Cancer Center, and as a research associate at Paramount Capital, where he managed clinical trials for several portfolio companies. Mr. Green received a B.A. in biology from Kenyon College, and an M.B.A. from Barry University’s Andreas School of Business.
Joshua M. Hare, M.D., F.A.C.C., F.A.H.A. (Co-Founder, Chief Science Officer and Chairman) co-founded Longeveron in 2014 and has served on its Board of Directors and as its Chief Science Officer since that time. Longeveron obtained an exclusive license to cell production technologies developed by Dr. Hare at UM. Dr. Hare is a double boarded cardiologist (Cardiology and Advanced Heart Failure and Transplantation) and is the founding director of the Interdisciplinary Stem Cell Institute at the UM Miller School of Medicine. He has obtained in excess of $25 Million in funding from the National Institutes of Health over the past 15 years to support basic research of cell therapy strategies. He is also a recipient of the Paul Beeson Physician Faculty Scholar in Aging Research Award, and is an elected member of the American Association of Physicians, The American Society for Clinical Investigation, and is an elected Fellow of the American Heart Association. Dr. Hare has also served in numerous leadership roles at the American Heart Association and at the Center for Scientific Review of the National Institutes of Health. Dr. Hare is also a co-founder of Vestion, Inc., and Heart Genomics, LLC, companies that hold cardio-related intellectual property. He received a B.A. from the University of Pennsylvania, and his MD from The Johns Hopkins University School of Medicine, and completed fellowships at Johns Hopkins and Brigham and Women’s Hospital, and was a Research Fellow at Harvard Medical School.
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James Clavijo (Chief Financial Officer) joined Longeveron in 2019. He has over 25 years of experience in executive, finance and accounting activities, including experience as a Chief Financial Officer for several pharmaceutical, healthcare and manufacturing companies. Mr. Clavijo’s experience has included building, leading and advising companies with strategic plans for pharmaceutical commercialization and manufacturing, negotiating licensing and drug development agreements, as well as advising companies with complex restructurings, mergers and acquisitions, capital market transactions, and system implementations. During 2018, Mr. Clavijo served as the Chief Financial Officer for Aeterna Zentaris (NASDAQ: AEZS). Prior to this, Mr. Clavijo served for two years as the Chief Financial Officer for Tri-source Pharma, a pharmaceutical company focused on procuring pharmaceutical products facing supply issues and supplying pharmaceutical products to veterinary markets. Since 2009, Mr. Clavijo, has also served as founder and principal of Barcelona Capital Partners, a consulting firm that provided Chief Financial Officer services, which include the preparation of regulatory filings with the Securities and Exchange Commission. Previously, Mr. Clavijo served for five years as the Chief Accounting Officer at Soligenix (NASDAQ: SNGX), a public biopharmaceutical company. In addition, Mr. Clavijo worked for Deloitte & Touche and was an Officer in the U.S. Army, serving for 13 years in active and reserve duty. Mr. Clavijo was licensed as a CPA in Florida from 2000-2011. He is licensed in Florida as a real estate/business agent since 2013. Mr. Clavijo received a B.A. in Chemistry (PreMed) from the University of Florida, a B.A. in Accounting from the University of Nebraska, and a Masters in Accounting from Florida International University.
Paul Lehr (International Executive Director, General Counsel and Secretary) joined Longeveron in 2016 and serves as General Counsel and Corporate Secretary as well as its International Executive Director, overseeing Longeveron’s international efforts and programs. Over the past 20 years, Mr. Lehr has held senior legal and executive positions in corporate, non-profit, and research settings. Mr. Lehr has also been an Executive Director of GroundUP Music, which organizes an annual music festival, since 2015. Mr. Lehr has also served since 2011 as CEO and co-founder of HeartGenomics, a biotech firm based on intellectual property Mr. Lehr licensed from the UM Miller School of Medicine. Mr. Lehr served as a law clerk for a United States Federal Judge and practiced law with experience in healthcare and business transactions and litigation at a leading Miami law firm for 5 years. Thereafter, Mr. Lehr focused his efforts in the cardiac rehabilitation field as President of a non-profit research foundation. With this research serving as the foundation of the for-profit arm of the cardiac rehabilitation program, Mr. Lehr negotiated a master franchise agreement with a leading Indian healthcare operator with 100+ facilities across India and the Middle East, then co-lead negotiations with the Centers for Medicare & Medicaid Services to successfully secure reimbursement of their residential intensive cardiac rehabilitation program. Mr. Lehr has held senior legal and executive positions in corporate as well as educational and not-for-profit settings. He earned his B.A. from Brown University, and his JD from University of Florida College of Law.
Non-Executive Employees
Anthony Oliva, Ph.D. (Senior Vice President of Scientific Affairs) has been with Longeveron since 2015. Dr. Oliva has over 20 years of basic and clinical research experience, has deep experience in regulatory affairs, and has been integral in leading Longeveron’s grant application and grant funding process. Prior to joining Longeveron, he held a faculty appointment at Florida International University. Dr. Oliva earned his B.A. in Biological Sciences from the University of Chicago, and his Ph.D. in Neuroscience from Baylor College of Medicine. He did his post-doctoral research at Oregon Health & Science University.
Lisa McClain-Moss (Senior Director of Manufacturing) joined Longeveron in 2017. She has 20+ years of experience in the cell and gene therapy space including GMP cleanroom operations. During this time she was involved in the development, manufacturing and scale up of biopharmaceutical products including viral vectors such as vaccinia and retroviruses, H5N1 influenza seed stock for the WHO as well as seed stocks for multiple strains of influenza, rAAV, monoclonal antibodies and cell and tissue expansion and banking. From September 2007 to August 2017 she served as the Director of Manufacturing at Cognate Bioservices. While at Cognate she led manufacturing operations in a GMP environment as well as implementation of new client processes from technology transfer to finished final product. From March 1999 to August 2007, she served at St. Jude Children’s Research Hospital starting with the production of vectors for clinical trials to Therapeutics Production Section Head providing oversight for GMP operations. From 1993 to 1999 she was a microbiologist at C. E. Kord Animal Diagnostic Laboratory providing diagnostic testing for multiple animal species. Ms. McClain-Moss received her B.S. in Biology/Microbiology from Tennessee Technological University.
Non-Employee Directors
Donald M. Soffer, M.B.A. is a co-founder and investor in Longeveron. Mr. Soffer has also served on Longeveron’s Board of Directors since December of 2014. For the last 40+ years, Mr. Soffer has been one of the leading real estate developers in the country. In 1967, Mr. Soffer purchased 785 acres of swampland adjacent to the intra-coastal waterway in North Miami Beach, Florida (now Aventura, Florida) and began developing it. Mr. Soffer founded Turnberry Associates Inc. in 1977 and developed Turnberry Resort and Club and the Aventura Mall. Mr. Soffer has built major shopping centers in Florida and the Midwest, including the Greater Pittsburgh Merchandise Mart & Expo Center, the largest convention center between New York and Chicago. He holds a degree in Economics from Brandeis University.
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Neil E. Hare, J.D. has served on Longeveron’s Board of Directors since September of 2015. Mr. Hare is the founder and president of Global Vision Communications, LLC, (GVC), a Washington, D.C.-based agency specializing in strategic communications, business development, branding and marketing. He is also a licensed attorney and is Of Counsel to the law firm of McCarthy Wilson LLP. Mr. Hare represents Fortune 500 companies, major trade associations, and Federal government agencies. He is an expert in small business policy, focusing on access to capital, and is a regular contributor to Forbes magazine. Previously, he served as vice president of Corporate Communications at the U.S. Chamber of Commerce, where he managed public policy awareness campaigns aimed at the Chamber’s three million members on issues such as tax and regulatory reform, market driven health care, energy, free trade, and expanded transportation and infrastructure. Mr. Hare received a J.D. from American University’s Washington College of Law and a B.A. in international relations from Tufts University.
Rock Soffer was elected to Longeveron’s Board of Directors in March 2020. Mr. Soffer is President, Special Project Division at Turnberry Associates, where he oversees leasing, asset acquisitions, zoning and site approvals, as well as the development of other specialty projects. He has experience in managing and securing financing for complex projects, as well as overseeing a number of developments in Florida, such as the redevelopment of an almost 200,000 square-foot open-air lifestyle shopping center in Aventura. In addition, Mr. Rock Soffer was tasked with overseeing the referendum for the new 800-key Miami Beach Convention Center luxury hotel. Upon completion, the privately-funded property will be the cornerstone of the Convention Center District in Miami Beach. Mr. Rock Soffer is an advocate for responsible, environmentally sustainable development. He is actively involved in his local community and sits on the boards of AYITI Community Trust, and the Institute of Contemporary Art Miami.
Douglas Losordo, M.D. was elected to Longeveron’s Board of Directors in , 2021 as part of Longeveron’s Corporate Conversion. Dr. Losordo has worked in the biotech industry developing cell-based therapies for over twenty years, most recently serving as Executive Vice President, Global Head of Research and Development, Chief Medical Officer of Caladrius Biosciences (Nasdaq: CLBS), a clinical-stage biopharmaceutical company dedicated to the development of cellular therapies designed to reverse chronic disease, from August 2013 until November 2020. Dr. Losordo has extensive knowledge of clinical, regulatory, manufacturing, supply chain and commercial factors unique to cellular therapy technologies as a result of his prior industry experience. Dr. Losordo’s also previously served as a Professor of Medicine at NYU Langone Medical Center and Northwestern University’s Feinberg School of Medicine. He received his MD from the University of Vermont College of Medicine, and his B.A. in Zoology from the University of Vermont.
Erin Borger was elected to Longeveron’s Board of Directors in , 2021 as part of Longeveron’s Corporate Conversion. Mr. Borger is a Managing Director in Wealth Management at UBS Financial Services Inc., where he has worked since 2008. Throughout the years Mr. Borger has also served as a member on a number of medical and non-medical boards and committees, such as the Alzheimer’s Association South Florida, Cystic Fibrosis Foundation, Palisades Medical Center and the University of Miami, Miller School of Medicine, to name a few. Additionally, Mr. Borger has spent a number of years helping to support non-profit organizations with a focus in the medical field through various research and financial support. Mr. Borger received his B.A. in Sociology and Psychology from Wofford College, and also holds a number of securities licenses from the Financial Industry Regulatory Authority.
Scientific Advisory Board
Our Scientific Advisory Board (SAB) advises our management team in planning, development and execution of scientific, clinical, and research and development initiatives and strategies. Our SAB consists of experts across a range of key disciplines relevant to our initiatives. Each SAB member has entered into an agreement with us that includes confidentiality, non-disclosure and intellectual property terms, and, with the exception of Dr. Arai who serves as a voluntary advisor to the Company, receives modest compensation for services.
We have entered into agreements with each member of the SAB, which set forth the terms and conditions relating to the individual’s service on the SAB. The agreements outline each member’s responsibilities to the SAB, which include providing the Company with guidance and scientific advice on matters before the SAB, assisting the Company in establishing strategic relationships with leading physicians, scientists, and medical institutions, attending meetings, and more. The agreements establish base compensation, either on a per meeting or hourly rate, up to a maximum cap per year, not including reimbursement for expenses incurred. They also include confidentiality and protection of Company intellectual property, and indemnification protection.
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Our current advisors are:
Name | Titles and Affiliations | |
Jeremy D. Walston, M.D. | Raymond and Anna Lublin Professor of Geriatric Medicine and Gerontology, the deputy director of the Division of Geriatric Medicine and Gerontology, the principal investigator of the Johns Hopkins Older Americans Independence Center, and the co-director of the Biology of Healthy Aging program. | |
Elena Volpi, M.D., Ph.D. | Daisy Emery Allen Distinguished Chair in Geriatric Medicine; Director, Sealy Center on Aging; Director, UTMB Claude D. Pepper Older Americans Independence Center; Associate Director, Institute for Translational Sciences; Professor, Departments of Internal Medicine-Geriatrics, Neuroscience and Cell Biology, Nutrition and Metabolism, Graduate School of Biomedical Sciences at the University of Texas Medical Branch. | |
Joe G. N. Garcia, M.D. | Pulmonary physician-scientist, a Merlin K. DuVal, MD endowed professor of medicine at the University of Arizona College of Medicine – Tucson, and an elected member of the Institute of Medicine of the National Academies. | |
Hidenori Arai, M.D., Ph.D. | Deputy Director of the National Center for Geriatrics and Gerontology (NCGG) of Japan, Director of the Center of Gerontology and Social Science (CGSS) at the NCGG. Former Secretary General of the Asia Pacific Federation of International Atherosclerosis Society and former Professor in the Department of Human Health Science, Kyoto University Graduate School of Medicine, Kyoto, Japan. |
On April 6, 2020, we entered into a one-year consulting agreement with Dr. Garcia, who will be paid an hourly rate, which payment will initially consist of incentive unit options and then move to a cash payment following achievement of certain grant award-related milestones. Under the agreement, work will not exceed 20 hours per week. If both parties are in agreement the agreement may be renewed for one-year terms.
Family Relationships
Joshua M. Hare and Neil E. Hare are brothers. Rock Soffer is Donald Soffer’s son. There are no other family relationships among our directors or executive officers.
Board Composition and Election of Directors
Our board of directors currently consists of four members. Following the completion of the Corporate Conversion, our directors will be elected by the vote of holders of our Class A common stock and Class B common stock, voting together as a single class, with holders of our Class B common stock having five (5) votes per share. Under our bylaws, to be effective upon the completion of the Corporate Conversion, the number of directors will be determined from time to time by our board of directors.
Director Independence
Our board has determined that, of our directors, four of them currently have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, such that only Dr. Losordo and Mr. Borger, who will join the Board upon the occurrence of the Corporate Conversion, will be “independent” as that term is defined under the rules of The Nasdaq Stock Market LLC, or the Nasdaq rules. As permitted by Nasdaq, we intend to phase in compliance with its director independence requirements within the schedule outlined in Nasdaq’s rules. That schedule requires a majority of the members of our Board to be independent within one year of listing. It also requires one member of each Board committee be independent at the time of listing, a majority of Board committee members to be independent within 90 days of listing, and all Board committee members to be independent within one year from listing.
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Classified Board of Directors
In accordance with our certificate of incorporation and bylaws that will go into effect upon the completion of the Corporate Conversion, our board of directors will be divided into three classes with staggered, three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Effective upon the closing of this offering, our directors will be divided among the three classes as follows:
● | the Class I directors will be and , and their terms will expire at our first annual meeting of stockholders following this offering; | |
● | the Class II directors will be and , and their terms will expire at our second annual meeting of stockholders following this offering; and | |
● | the Class III directors will be and , and their terms will expire at the third annual meeting of stockholders following this offering. |
Our certificate of incorporation and bylaws will go into effect upon the completion of the Corporate Conversion and will provide that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control of our company. Our directors may be removed only for cause by the affirmative vote of the holders of at least two-thirds of our outstanding voting stock entitled to vote in the election of directors.
Board Leadership Structure
Our board has determined that upon completion of this offering our corporate governance guidelines will provide that, if the chairman of the board is a member of management or does not otherwise qualify as independent, the independent directors of the board may elect a lead director. The lead director’s responsibilities would include, but would not be not limited to: presiding over all meetings of the board of directors at which the chairman is not present, including any executive sessions of the independent directors; approving board meeting schedules and agendas; and acting as the liaison between the independent directors and the chief executive officer and chairman of the board. Our corporate governance guidelines will further provide the flexibility for our board of directors to modify our leadership structure in the future as it deems appropriate.
Role of the Board in Risk Oversight
One of the key functions of our board of directors is informed oversight of our risk management process. Our board of directors will not have a standing risk management committee, but will rather administer this oversight function directly through our board of directors as a whole, as well as through various standing committees of our board of directors that address risks inherent in their respective areas of oversight. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure and our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. Our Audit Committee will also monitor compliance with legal and regulatory requirements. Our Nominating and Corporate Governance Committee will monitor the effectiveness of our corporate governance practices, including whether they are successful in preventing illegal or improper liability-creating conduct. Our Compensation Committee will assess and monitor whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. While each committee will be responsible for evaluating certain risks and overseeing the management of such risks, our entire board of directors will be regularly informed through committee reports about such risks.
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Board Committees
Following this offering, we will have the following board of directors committees: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. The anticipated composition and responsibilities of each committee are described below. Members will serve on these committees until their resignation or until otherwise determined by our board of directors. Upon our listing on The Nasdaq Capital Market, each committee’s charter will be available under the Corporate Governance section of our website at www.longeveron.com. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this prospectus.
Audit Committee. The Audit Committee’s responsibilities will include:
● | appointing, approving the compensation of, and assessing the independence of our registered public accounting firm; | |
● | overseeing the work of our registered public accounting firm, including through the receipt and consideration of reports from such firm; | |
● | reviewing and discussing with management and the registered public accounting firm our annual and quarterly financial statements and related disclosures; | |
● | coordinating our board of directors’ oversight of our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics; | |
● | discussing our risk management policies; | |
● | meeting independently with our internal auditing staff, if any, registered public accounting firm and management; | |
● | reviewing and approving or ratifying any related person transactions; and | |
● | preparing the audit committee report required by SEC rules. |
After this offering, we expect that the initial members of our audit committee will be (chairperson) and . All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq. Our board has determined that is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of Nasdaq. Under the rules of the SEC, members of the audit committee must also meet heightened independence standards. However, a minority of the members of the audit committee may be exempt from the heightened audit committee independence standards for one year from the date of effectiveness of the registration statement of which this prospectus forms a part. Our board of directors has determined that is independent under the heightened audit committee independence standards of the SEC and Nasdaq.
As allowed under the applicable rules and regulations of the SEC and Nasdaq, we intend to phase in compliance with the heightened audit committee independence requirements prior to the end of the one-year transition period. The audit committee operates under a written charter that satisfies the applicable standards of the SEC and Nasdaq.
Compensation Committee. The Compensation Committee’s responsibilities include:
● | reviewing and approving, or recommending for approval by the board of directors, the compensation of our Chief Executive Officer and our other executive officers; | |
● | overseeing and administering our cash and equity incentive plans; |
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● | reviewing and making recommendations to our board of directors with respect to director compensation; |
● | reviewing and discussing annually with management our “Compensation Discussion and Analysis,” to the extent required; and | |
● | preparing the annual compensation committee report required by SEC rules, to the extent required. |
After this offering, we expect that the members of our compensation committee will be (chair) and . Each of the members of our compensation committee is independent under the applicable rules and regulations of Nasdaq and is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act. The compensation committee operates under a written charter that satisfies the applicable standards of the SEC and Nasdaq.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee’s responsibilities include:
● | identifying individuals qualified to become board members; | |
● | recommending to our board of directors the persons to be nominated for election as directors and to each board committee; | |
● | developing and recommending to our board of directors corporate governance guidelines, and reviewing and recommending to our board of directors proposed changes to our corporate governance guidelines from time to time; and | |
● | overseeing a periodic evaluation of our board of directors. |
After this offering, we expect that the members of our nominating and corporate governance committee will be (chairperson), and . Each of the members of our Nominating and Corporate Governance Committee is an independent director under the applicable rules and regulations of Nasdaq relating to nominating and corporate governance committee independence. The Nominating and Corporate Governance Committee operates under a written charter that satisfies the applicable standards of the SEC and Nasdaq.
Compensation Committee Interlocks and Insider Participation
No member of our compensation committee will have been a current or former officer or employee. None of our executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, one of whose executive officers served as a director or member of our compensation committee during the last completed fiscal year.
Code of Ethics and Code of Conduct
We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Upon our listing on The Nasdaq Capital Market, our code of business conduct and ethics will be available under the Corporate Governance section of our website at www.longeveron.com. In addition, we intend to post on our website all disclosures that are required by law or the Nasdaq rules concerning any amendments to, or waivers from, any provision of the code. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this prospectus.
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EXECUTIVE AND DIRECTOR COMPENSATION
This section discusses the material components of the executive compensation program for our executive officers who are named in the “Summary Compensation Table” below, whom we refer to as our “NEOs.”
This discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt following the closing of this offering may differ materially from the currently planned programs summarized in this discussion.
Summary Compensation Table
The following table presents summary information regarding the total compensation that was awarded to, earned by or paid to our NEOs for services rendered during the years ended December 31, 2019 and 2018.
Name and principal position | Year |
Salary
($) |
Bonus
($) |
Option
awards ($)(1) |
All other
compensation ($)(2) |
Total
($) |
|||||||||||||||||
Joshua M. Hare, M.D., | 2019 | 270,000 | (4) | - | - | - | 270,000 | ||||||||||||||||
CSO(3) | 2018 | 270,000 | - | 89,466 | - | 359,466 | |||||||||||||||||
Geoff Green | 2019 | 206,139 | - | - | 19,291 | 225,430 | |||||||||||||||||
CEO | 2018 | 161,185 | - | - | 8,059 | 169,244 | |||||||||||||||||
James Clavijo, CFO, Treasurer | 2019 | 75,000 | - | - | 6,934 | 81,934 | |||||||||||||||||
Paul Lehr, International | 2019 | 185,063 | - | - | 7,975 | 193,038 | |||||||||||||||||
Executive Director, General Counsel and Corporate Secretary(5) | 2018 | 208,991 | - | - | - | 208,991 |
(1) | Amount reflects the full grant-date fair value of Series C unit option awards at grant date as calculated under FASB ASC 718. |
(2) | Other compensation represents 401k matching and health insurance costs paid by the Company. |
(3) | The option award granted to Dr. Hare in 2018 was compensation for services rendered as part of the Board. Other than that award, Dr. Hare did not receive any additional compensation from the Company in connection with his service on the Board in 2018 or 2019. |
(4) | Amount reflects the full value of consulting fees earned by Dr. Hare during fiscal year 2020. Of this amount, the Company deferred $188,125 of the payment of his 2019 consulting compensation. |
(5) | Mr. Lehr deferred $25,947 of his $210,000 consulting compensation due in 2018 and 2019. |
Narrative Disclosure to Compensation Tables
The primary elements of compensation for our NEOs are base salary, discretionary annual performance bonuses and discretionary equity awards. Our NEOs are also entitled to participate in employee benefit plans and programs that we offer to our other employees, as described below.
Annual Base Salary. We pay our NEOs a base salary or a consulting fee to compensate them for the satisfactory performance of services rendered to us. The base salary payable to each NEO is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. Base salaries for our NEOs have generally been set at lower levels than would normally be deemed necessary to attract and retain individuals with this level of talent.
Bonus Compensation. From time to time our board, upon the recommendation of our Chief Executive Officer, may approve bonuses for our NEOs based on individual performance, company performance or as otherwise determined appropriate.
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Equity-Based Incentive Awards. Our equity-based incentive awards are designed to align our interests and the interests of our stockholders with those of our employees and consultants, including our named executive officers. The board of directors is responsible for approving equity grants.
Since our formation, we have granted awards of options to purchase Series C Units under the 2017 Longeveron LLC Incentive Plan (the “2017 Incentive Plan”). There are currently outstanding options to purchase 30,909 Series C Units at an exercise price of $60 per Series C Unit.
In January 2021 we granted awards of 154,981 restricted units to our directors, executive officers, and employees under the 2017 Incentive Plan. Each restricted unit represents the right to receive a Series C Unit upon vesting. Vesting of the restricted units will occur upon the satisfaction of both a time-based condition and an event condition and subject to the recipient’s continued service through the satisfaction of both conditions.
The time-based condition would ordinarily result in one sixteenth of an award being subject to vesting at the end of each calendar quarter of continuing employment beginning with the last day of the calendar quarter in which the first anniversary of the date of an award occurs. However, in recognition of the fact that we had not awarded equity incentives for the three years prior to December 2020, the schedule for the time-based condition was accelerated and the time-based condition for a portion or all of each participant’s award (ranging from 25% to 100%) was immediately satisfied.
The event-based condition will be satisfied if the participant remains employed on the last day of the second calendar quarter following the calendar quarter during which the closing of this offering occurs. Assuming the continued employment of the participants through this date, an aggregate of shares of our Class A common stock would become vested on that date.
Under the 2017 Incentive Plan, our board has broad discretion to make adjustments to awards to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the 2017 Incentive Plan, including adjusting the number and type of securities subject to an outstanding award and the exercise price of an outstanding award.
In connection with this offering, outstanding options to purchase our Series C Units will be converted into the right to receive shares of our Class A common stock and outstanding Restricted Units will convert into restricted stock units that provide a contractual right to receive shares of our Class A common stock. For more information about the treatment of our outstanding options and Restricted Units in the Corporate Conversion, see the section titled “Corporate Conversion”. We anticipate that the 2017 Incentive Plan will be replaced by the Longeveron Inc. 2021 Equity Incentive Award Plan, which is described below under “Incentive Award Plans- 2021 Incentive Plan”.
Other Elements of Compensation
Perquisites, Health, Welfare and Retirement Benefits. Our named executive officers are eligible to participate in our employee benefit plans, including our medical, dental, vision, group life, disability and accidental death and dismemberment insurance plans, in each case on generally the same basis as all of our other employees. We provide a 401(k) plan to our employees, including our current named executive officers, as discussed in the section below titled “—401(k) plan.”
401(k) plan. We maintain a defined contribution employee retirement plan, or 401(k) plan, for our employees. Our named executive officers are eligible to participate in the 401(k) plan on the same basis as our other employees, if they are considered an employee and not a consultant. The 401(k) plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Internal Revenue Code. The 401(k) plan provides that each participant may make pre-tax deferrals from his or her compensation up to the statutory limit, which is $19,500 for calendar year 2020, and other testing limits. Participants that are 50 years or older can also make “catch-up” contributions, which in calendar year 2020 may be up to an additional $6,500 above the statutory limit. The 401(k) plan provides for discretionary matching and profit-sharing contributions, we currently provide a 5% match to the 401(k) plan. Participant contributions are held and invested, pursuant to the participant’s instructions, by the plan’s trustee.
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Nonqualified Deferred Compensation. We do not maintain nonqualified defined contribution plans or other nonqualified deferred compensation plans. Our board of directors may elect to provide our officers and other employees with non-qualified defined contribution or other nonqualified deferred compensation benefits in the future if it determines that doing so is in our best interests.
Employment and Consulting Agreements with our NEOs
Consulting Agreement with Dr. Hare
We entered into a consulting services agreement with Dr. Hare in November 2014 (the “Agreement”). The Agreement, which has an initial term of ten (10) years, with automatic renewals thereafter for four (4) year terms unless either party determines not to renew, provides for an initial annual fee structure of $250,000 and eligibility to participate in any incentive compensation programs that are established for the Company. More current information regarding Dr. Hare’s compensation is set forth in the Summary Compensation Table above. Dr. Hare’s annual base salary as of December 31, 2019 was $270,000.
Under the terms of the Agreement, if Dr. Hare’s employment is terminated without Cause (as defined below), Dr. Hare is entitled to receive a lump sum payment equal to the sum of (i) annual fees through the date of termination to the extent not previously paid, (ii) annual fees from the date of termination through the end of the Term (as though no termination had occurred), and (iii) any accrued but unpaid expenses. In the event Dr. Hare resigns for Good Reason (as defined below), then, subject to executing a release of claims and complying with 12-month non-solicit and non-compete covenants, Dr. Hare would be entitled to receive a lump sum payment equal to the sum of (i) annual fees through the date of termination to the extent not previously paid, (ii) annual fees from the date of termination through the end of the Term (as though no termination had occurred), plus an additional three (3) years, which shall include an annual increase in said fees of ten percent per year for each of the additional three (3) years, and (iii) any accrued but unpaid expenses. If Dr. Hare terminates the Agreement without Good Reason, then he shall receive the sum of (i) annual fees through the date of termination to the extent not previously paid, and (ii) any accrued but unpaid expenses. For purposes of this paragraph, Term is defined in the Agreement as the period commencing on the effective date and continuing through the tenth (10th) anniversary of the effective date. Upon Dr. Hare’s death or disability during the Term of the Agreement, he is entitled to receive any accrued and unremunerated fees or expenses; provided, however, that the Board has the discretion to choose to continue to pay fees for any period of time following a determination of disability.
“Cause” is defined in the Agreement as (i) an act of fraud or embezzlement by Dr. Hare, whether or not related to the Company, as determined by the Company upon completion of an internal investigation or filing of a report of such fraud or embezzlement with law enforcement officers; (ii) Dr. Hare’s conviction of, or plea of guilty or nolo contendere to a felony that is either a crime of moral turpitude or a crime that has a fundamental element of fraud or dishonesty, (iii) deliberate and intentional failure by Dr. Hare to perform his duties to the Company as Chief Science Officer (other than as a result of incapacity or disability) after a written demand for substantial performance is delivered to Dr. Hare by the Board, which specifically identifies the manner in which the Board believes Dr. Hare has not substantially performed following a reasonable cure period; (iv) gross negligence, recklessness, or willful misconduct in the execution of Dr. Hare’s duties (other than actions taken pursuant to an action authorized by the Board); or (v) Dr. Hare’s material breach of his agreement, after written notice and 30 day opportunity to cure.
Good Reason is defined in the Agreement as the existence of any of the following circumstances (following written notice by Dr. Hare within 90 days after the initial occurrence thereof, and failure to remedy within 30 days thereafter): (i) material reduction in Dr. Hare’s position, authority, duties or responsibilities, (ii) relocation to a work location more than 25 miles away from the current offices of the Company, or (iii) failure by the Company to materially comply with any provisions of the agreement applicable to it (after reasonable notice and cure opportunity).
The Agreement acknowledges that Dr. Hare is employed by UM, and remains subject to UM’s policies, and also acknowledges that he serves as a consultant to enumerated outside entities. The Agreement outlines Dr. Hare’s obligations with respect to confidentiality, ownership of information, inventions and original works, contains a non-competition covenant with respect to Dr. Hare’s associations during his time with the Company and for a period of two (2) years thereafter, and contains non-solicitation and non-disparagement obligations.
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Letter Agreement- Mr. Green
On December 9, 2015, we entered into an employment letter with Mr. Green to serve as Senior Vice President, which position subsequently changed to President in 2019 and then Chief Executive Officer in 2020. The letter agreement outlined the material responsibilities of the position, and provided for an initial annual base salary of $210,000, along with eligibility for performance based bonus and participation in any equity incentive plans.
The letter agreement provided that, upon termination without cause (which was not defined), Mr. Green would be entitled to a severance, based on the length of service prior to termination, with termination prior to one year of service providing for three months’ base salary as severance, and each additional year of service increasing the severance payment by an additional three months of severance, capped at four or more years of service allowing for one-year of base salary as severance.
Employment Agreement- Mr. Clavijo
On August 12, 2020, we entered into a one-year employment agreement with Mr. Clavijo to serve as our Chief Financial Officer and Treasurer, which was thereafter amended on December 18, 2020. After the initial term, this employment agreement will automatically renew for successive one-year periods, unless at least sixty (60) days prior to the end of the initial term or renewed term, either party delivers written notice to the other that the employment agreement is not to be renewed, in which case the agreement shall be terminated. Pursuant to this employment agreement, we agreed to pay Mr. Clavijo an annual base salary of $150,000. As part of the December 2020 revisions, Schedule A was adjusted so that Mr. Clavijo’s annual base salary will be $210,000 with an effective date of December 1, 2020. However, the increase to the annual base salary of $60,000 will not be paid to Mr. Clavijo until such time as the Company has raised at least $10.0 million or more. Mr. Clavijo’s base salary will increase to $250,000 on the date we become a publicly listed company. Also pursuant to this agreement Mr. Clavijo will receive a $15,000 bonus for every $5.0 million raised.
In the event we terminate Mr. Clavijo without Cause (as defined below), or he terminates his employment for Good Reason (as defined below), he will be entitled to six months of his then existing annual base salary after being employed for one year. Further for each year of additional service Mr. Clavijo will be entitled to one more month of service to a maximum of twelve months. In the event of a change of control, the full payment of twelve months of severance would be due.
“Cause” is defined in Mr. Clavijo’s agreement (as determined by the Company) as : (A) the commission of an act of theft, fraud, embezzlement, falsification of the Company or customer documents, misappropriation of funds or other assets of the Company or its affiliates, involving the property or affairs of the Company or its affiliates; (B) the conviction (by trial, upon a plea or otherwise) or the admission of guilt or a plea of nolo contendere by Mr. Clavijo, of any felony or criminal act of moral turpitude; (C) failure to substantially perform his duties or responsibilities under this Agreement, or follow the reasonable instructions of the Company, provided that if such failure is capable of cure in the determination of the Company, Mr. Clavijo is given written notice of any such failure, which notice shall specify in reasonable detail the nature of the failure to substantially perform, and employee fails to remedy the same within thirty (30) days of receipt of such notice; (D) the breach by Mr. Clavijo of any provision of the agreement, or of any fiduciary duty to the Company or violation of any other contractual, statutory, common law or other legal duty to the Company or its affiliates; (E) gross negligence or willful misconduct by Mr. Clavijo in the performance of his duties; (F) Mr. Clavijo’s material violation of any written policy or procedure of the Company, provided that if such violation is capable of cure in the Company’s determination, he is given written notice of any such violation, which notice shall specify in reasonable detail the nature of the violation, and he fails to remedy the same within thirty (30) days of receipt of such notice; or (G) conduct that brings the Company into public disgrace or disrepute in any material respect.
“Good Reason” means, without Mr. Clavijo’s express written consent, a material diminution in his authority, duties, or responsibilities (excluding any change made in connection with the termination of his employment for Cause, or on account of his death or disability, or temporarily as a result of Mr. Clavijo’ incapacity or other absence for an extended period); a change in the geographic location where Mr. Clavijo must render services by more than fifty (50) miles, provided that any such relocation materially increases the length of his normal daily work commute; or a material breach of the agreement by the Company. In order for employee to resign for Good Reason: (A) the Company must be notified by employee in writing within sixty (60) days of the event constituting Good Reason; (B) the event must remain uncorrected by the Company for thirty (30) days following such notice (the “Company Notice Period”); and (C) if the Company fails to cure the same during the Company Notice Period, then the termination must occur within sixty (60) days after the expiration of the Notice Period. Notwithstanding the foregoing, an across-the-board salary reduction affecting Mr. Clavijo and other similarly situated employees of the Company shall not constitute Good Reason.
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Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information with respect to outstanding unit option unit awards for each of our NEOs as of December 31, 2019. As noted above, in connection with the Corporate Conversion, outstanding options held by our NEOs to acquire Series C membership units will be converted into stock options exercisable for common shares. The number of Class A common stock options to be issued to each such NEO in respect of his option award will be determined based upon the vested options at the conversion date. Following the Corporate Conversion, the vesting provisions applicable to the options as in effect prior to the Corporate Conversion will apply, in substantially the same manner, to any securities issued in respect of such options in the conversion.
Name | Grant Date |
Number of
Securities Underlying Unexercised Options (#) Exercisable |
Number of
Securities Underlying Unexercised Options (#) Unexercisable |
Option
Exercise Price ($) |
Termination Date | |||||||||||||
Joshua M. Hare, M.D. | 08/17/17 | 3,224 | (1) | - | 60.00 | 08/17/27 | ||||||||||||
01/26/18 | 5,000 | (2) | - | 60.00 | 01/26/28 | |||||||||||||
Geoff Green | 08/17/17 | 2,595 | (1) | - | 60.00 | 08/17/27 | ||||||||||||
James Clavijo | - | - | - | - | - | |||||||||||||
Paul Lehr | 08/17/17 | 1,880 | (3) | 627 | 60.00 | 08/17/27 |
(1) | The award vested 50% when granted and then the remaining options vested 25% each year thereafter on the anniversary date. |
(2) | The award vested 100% when granted. This award was issued in connection with Dr. Hare’s service on the Board. |
(3) | The award vested 25% when granted and then the remaining options vested 25% each year thereafter on the anniversary date. |
Refer to “Corporate Conversion” for more information regarding the distribution of our Class A common stock to employees, including our NEOs, in respect of their holdings of our units at the time of the Corporate Conversion.
Termination or Change in Control Benefits
Our executive officers may become entitled to certain benefits or enhanced benefits in connection with a change in control of our company. See “Employment and Consulting Agreements with our NEOs” above as it relates to the termination and change in control provisions set forth in Dr. Hare’s current consulting agreement and Mr. Clavijo’s employment agreement.
Incentive Award Plans
2021 Incentive Plan
Immediately prior to the effectiveness of this offering, we intend to adopt and have approved, the 2021 Incentive Award Plan (“2021 Incentive Plan”). Under the 2021 Incentive Plan, we may grant cash and equity incentive awards to eligible service providers in order to attract, motivate and retain the talent for which we compete. The material terms of the 2021 Incentive Plan, as it is currently contemplated, are summarized below. Until implemented, the terms of the 2021 Incentive Plan and, accordingly, this summary, are subject to change.
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Eligibility and Administration
Our employees, consultants and directors will be eligible to receive awards under the 2021 Incentive Plan. Following our initial public offering, the 2021 Incentive Plan will generally be administered by our board of directors with respect to awards to non-employee directors and by our compensation committee with respect to other participants, each of which may delegate its duties and responsibilities to committees of our directors and/or officers (referred to collectively as the plan administrator below), subject to certain limitations that may be imposed under the 2021 Incentive Plan, Section 16 of the Securities Exchange Act of 1934, as amended, and/or stock exchange rules, as applicable. The plan administrator will have the authority to make all determinations and interpretations under, prescribe all forms for use with, and adopt rules for the administration of, the 2021 Incentive Plan, subject to its express terms and conditions. The plan administrator will also set the terms and conditions of all awards under the 2021 Incentive Plan, including any vesting and vesting acceleration conditions.
Limitation on Awards and Shares Available
An aggregate of shares of our Class A common stock will initially be available for issuance under awards granted pursuant to the 2021 Incentive Plan, which is comprised of shares and any shares of Class A common stock which are subject to Corporate Conversion Awards which become available for issuance under the 2021 Incentive Plan. No more than shares of Class A common stock may be issued upon the exercise of incentive stock options, or ISOs, under the 2021 Incentive Plan. Shares issued under the 2021 Incentive Plan may be authorized but unissued shares, shares purchased in the open market or treasury shares.
If an award under the 2021 Incentive Plan expires, lapses or is terminated, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, any shares subject to such award will, as applicable, become or again be available for new grants under the 2021 Incentive Plan. Awards granted under the 2021 Incentive Plan upon the assumption of, or in substitution for, awards authorized or outstanding under a qualifying equity plan maintained by an entity with which we enter into a merger or similar corporate transaction will not reduce the shares available for grant under the 2021 Incentive Plan.
Awards
The 2021 Incentive Plan provides for the grant of stock options, including ISOs, and nonqualified stock options, or NSOs, restricted stock, dividend equivalents, restricted stock units, or RSUs, stock appreciation rights, or SARs, and other stock or cash-based awards. Certain awards under the 2021 Incentive Plan may constitute or provide for a deferral of compensation, subject to Section 409A of the Internal Revenue Code, which may impose additional requirements on the terms and conditions of such awards. All awards under the 2021 Incentive Plan will be set forth in award agreements, which will detail the terms and conditions of the awards, including any applicable vesting and payment terms and post-termination exercise limitations. A brief description of each award type follows.
Stock options. Stock options provide for the purchase of shares of our Class A common stock in the future at an exercise price set on the grant date. ISOs, by contrast to NSOs, may provide tax deferral beyond exercise and favorable capital gains tax treatment to their holders if certain holding period and other requirements of the Internal Revenue Code are satisfied. The exercise price of a stock option will not be less than 100% of the fair market value of the underlying share on the date of grant (or 110% in the case of ISOs granted to certain significant stockholders), except with respect to certain substitute options granted in connection with a corporate transaction. The term of a stock option may not be longer than ten years (or five years in the case of ISOs granted to certain significant stockholders). Vesting conditions determined by the plan administrator may apply to stock options and may include continued service, performance and/or other conditions. ISOs generally may be granted only to our employees and employees of our parent or subsidiary corporations, if any.
SARs. SARs entitle their holder, upon exercise, to receive from us an amount equal to the appreciation of the shares subject to the award between the grant date and the exercise date. The exercise price of a SAR will not be less than 100% of the fair market value of the underlying share on the date of grant (except with respect to certain substitute SARs granted in connection with a corporate transaction), and the term of a SAR may not be longer than ten years. Vesting conditions determined by the plan administrator may apply to SARs and may include continued service, performance and/or other conditions.
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Restricted stock and RSUs. Restricted stock is an award of nontransferable shares of our Class A common stock that remain forfeitable unless and until specified conditions are met, and which may be subject to a purchase price. RSUs are contractual promises to deliver shares of our Class A common stock in the future, which may also remain forfeitable unless and until specified conditions are met and may be accompanied by the right to receive the equivalent value of dividends paid on shares of our Class A common stock prior to the delivery of the underlying shares. Delivery of the shares underlying RSUs may be deferred under the terms of the award or at the election of the participant, if the plan administrator permits such a deferral. Conditions applicable to restricted stock and RSUs may be based on continuing service, the attainment of performance goals and/or such other conditions as the plan administrator may determine.
Other stock or cash-based awards. Other stock or cash-based awards are awards of cash, fully vested shares of our Class A common stock and other awards valued wholly or partially by referring to, or otherwise based on, shares of our Class A common stock. Other stock or cash-based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of base salary, bonus, fees or other cash compensation otherwise payable to any individual who is eligible to receive awards. The plan administrator will determine the terms and conditions of other stock or cash-based awards, which may include vesting conditions based on continued service, performance and/or other conditions.
Performance Awards
Performance awards include any of the foregoing awards that are granted subject to vesting and/or payment based on the attainment of specified performance goals or other criteria the plan administrator may determine, which may or may not be objectively determinable. Performance criteria upon which performance goals are established by the plan administrator may include: net earnings or losses (either before or after one or more of interest, taxes, depreciation, amortization and non-cash equity-based compensation expense); gross or net sales or revenue or sales or revenue growth; net income (either before or after taxes) or adjusted net income; profits (including, but not limited to, gross profits, net profits, profit growth, net operation profit or economic profit), profit return ratios or operating margin; budget or operating earnings (either before or after taxes or before or after allocation of corporate overhead and bonus); cash flow (including operating cash flow and free cash flow or cash flow return on capital); return on assets; return on capital or invested capital; cost of capital; return on stockholders’ equity; total stockholder return; return on sales; costs, reductions in costs and cost control measures; expenses; working capital; earnings or loss per share; adjusted earnings or loss per share; price per share or dividends per share (or appreciation in or maintenance of such price or dividends); regulatory achievements or compliance; implementation, completion or attainment of objectives relating to research, development, regulatory, commercial or strategic milestones or developments; market share; economic value or economic value added models; division, group or corporate financial goals; customer satisfaction/growth; customer service; employee satisfaction; recruitment and maintenance of personnel; human resources management; supervision of litigation and other legal matters; strategic partnerships and transactions; financial ratios (including those measuring liquidity, activity, profitability or leverage); debt levels or reductions; sales-related goals; financing and other capital raising transactions; cash on hand; acquisition activity; investment sourcing activity; and marketing initiatives, any of which may be measured in absolute terms or as compared to any incremental increase or decrease. Such performance goals also may be based solely by reference to our performance or the performance of a subsidiary, division, business segment or business unit, or based upon performance relative to performance of other companies or upon comparisons of any of the indicators of performance relative to performance of other companies.
Section 162(m) Considerations
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction for compensation in excess of $1 million paid in a taxable year by a publicly held corporation to certain executives, including its chief executive officer, chief financial officer, and the next three highly compensated executives of such corporation whose compensation is required to be disclosed in its proxy statement. We expect that, following the offering, our Compensation Committee will consider the potential effects of Section 162(m) of the Internal Revenue Code on the deductibility of compensation paid to our named executive officers, but the Compensation Committee will have the flexibility to award compensation that is not tax deductible if it determines that such award is in our shareholders’ best interests.
Provisions of the 2021 Incentive Plan Relating to Director Compensation
The 2021 Incentive Plan provides that the plan administrator may establish compensation for non-employee directors from time to time subject to the 2021 Incentive Plan’s limitations. Prior to commencing this offering, our stockholders will approve the initial terms of our non-employee director compensation program, which is described below under the heading “—Director Compensation.” Our board of directors or its authorized committee may modify the non-employee director compensation program from time to time in the exercise of its business judgment, taking into account such factors, circumstances and considerations as it shall deem relevant from time to time, provided that the sum of any cash compensation or other compensation and the grant date fair value (as determined in accordance with ASC 718, or any successor thereto) of any equity awards granted as compensation for services as a non-employee director during any fiscal year may not exceed $ , increased to $ , in the fiscal year of a non-employee director’s initial service as a non-employee director. The plan administrator may make exceptions to this limit for individual non-employee directors in extraordinary circumstances, as the plan administrator may determine in its discretion, provided that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation or in other contemporaneous compensation decisions involving non-employee directors.
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Certain Transactions
In connection with certain transactions and events affecting our Class A common stock, including a change in control, or change in any applicable laws or accounting principles, the plan administrator has broad discretion to take action under the 2021 Incentive Plan to prevent the dilution or enlargement of intended benefits, facilitate such transaction or event, or give effect to such change in applicable laws or accounting principles. This includes canceling awards in exchange for either an amount in cash or other property with a value equal to the amount that would have been obtained upon exercise or settlement of the vested portion of such award or realization of the participant’s rights under the vested portion of such award, accelerating the vesting of awards, providing for the assumption or substitution of awards by a successor entity, adjusting the number and type of shares available, replacing awards with other rights or property or terminating awards under the 2021 Incentive Plan. In the event of a change in control where the acquirer does not assume awards granted under the 2021 Incentive Plan, awards issued under the 2021 Incentive Plan shall be subject to accelerated vesting such that 100% of the awards will become vested and exercisable or payable, as applicable. In addition, in the event of certain non-reciprocal transactions with our stockholders, or an “equity restructuring,” the plan administrator will make equitable adjustments to the 2021 Incentive Plan and outstanding awards as it deems appropriate to reflect the equity restructuring.
Foreign Participants, Claw-back Provisions, Transferability and Participant Payments
With respect to foreign participants, the plan administrator may modify award terms, establish subplans and/or adjust other terms and conditions of awards, subject to the share limits described above. All awards will be subject to the provisions of any claw-back policy implemented by our company to the extent set forth in such claw-back policy or in the applicable award agreement. With limited exceptions for estate planning, domestic relations orders, certain beneficiary designations and the laws of descent and distribution, awards under the 2021 Incentive Plan are generally non-transferable prior to vesting and are exercisable only by the participant. With regard to tax withholding obligations arising in connection with awards under the 2021 Incentive Plan and exercise price obligations arising in connection with the exercise of stock options under the 2021 Incentive Plan, the plan administrator may, in its discretion, accept cash, wire transfer, or check, shares of our Class A common stock that meet specified conditions, a “market sell order” or such other consideration as it deems suitable or any combination of the foregoing.
Plan Amendment and Termination
Our board of directors may amend or terminate the 2021 Incentive Plan at any time; however, except in connection with certain changes in our capital structure, stockholder approval will be required for any amendment that increases the number of shares available under the 2021 Incentive Plan. The plan administrator will have the authority, without the approval of our stockholders, to amend any outstanding stock option or SAR to reduce its price per share. No award may be granted pursuant to the 2021 Incentive Plan after the tenth anniversary of the date on which our board of directors adopts the 2021 Incentive Plan.
Securities Laws
The 2021 Incentive Plan is intended to conform to all provisions of the Securities Act, and the Exchange Act and any and all regulations and rules promulgated by the SEC thereunder, including, without limitation, Rule 16b-3. The 2021 Incentive Plan will be administered, and awards will be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations.
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Director Compensation
Director Compensation Table. The following table presents summary information regarding the total compensation that was awarded to, earned by or paid to our non-employee directors for services rendered during the years ended December 31, 2019 and 2018.
Name and principal position | Year |
Option
awards ($)(1) |
All other
compensation ($)(2) |
Total
($) |
|||||||||||
Donald M. Soffer | 2019 | - | - | - | |||||||||||
2018 | 89,466 | - | 89,466 | ||||||||||||
Neil E. Hare | 2019 | - | - | - | |||||||||||
2018 | 89,466 | - | 89,466 | ||||||||||||
Rock Soffer(3) | 2019 | - | - | - | |||||||||||
Douglas Losordo, M.D.(4) | 2019 | - | - | - | |||||||||||
Erin Borger(4) | 2019 | - | - | - |
(1) | Option award figures include the value of membership option awards at grant date as calculated under FASB ASC 718. |
(2) | Other compensation represents 401k matching contributions and health insurance costs paid by the Company. |
(3) | Rock Soffer became a director in March 2020. |
(4) | Dr. Losordo and Mr. Borger became directors in , 2021, upon effectuation of the Corporate Conversion. |
During 2019, none of our non-employee directors received any cash or equity compensation. Dr. Hare, who serves as both executive officer and director, did not receive any additional compensation for his service on our board, other than an equity award in 2018, which is reflected in the Summary Compensation Table above. The material terms of the non-employee director compensation program, as it is currently contemplated, are summarized below.
The non-employee director compensation program will provide for annual retainer fees and/or long-term equity awards for our non-employee directors. We expect each non-employee director will receive an annual retainer of $ . A non-employee director serving as chairman of the board or lead independent director will receive an additional annual retainer of $ . Non-employee directors serving as the chairs of the audit, compensation and nominating and corporate governance committees will receive additional annual retainers of $ , $ and $ , respectively. Non-employee directors serving as members of the audit, compensation and nominating and corporate governance committees will receive additional annual retainers of $ , $ and $ , respectively. The non-employee directors will also receive initial equity grants of shares of our Class A common stock, which shall be subject to vesting requirements, upon initial election to the board of directors. On the date of each annual meeting of our stockholders following the completion of this offering, each non-employee director will receive an annual grant of equity with a pre-determined value, subject to vesting requirements.
In addition, pursuant to the director compensation program, each of our non-employee directors will receive a grant of stock options to purchase shares of our Class A common stock pursuant to the 2021 Incentive Plan in connection with this offering, effective as of immediately following the determination of the initial public offering price per share of our Class A common stock. These stock options will have an exercise price per share equal to the initial public offering price per share of our Class A common stock and will vest on the first anniversary of the date of grant.
Compensation under our non-employee director compensation policy will be subject to the annual limits on non-employee director compensation set forth in the 2021 Incentive Plan, as described above, but such limits will not apply prior to the first calendar year following the calendar year in which this offering is completed. Our board of directors or its authorized committee may modify the non-employee director compensation program from time to time in the exercise of its business judgment, taking into account such factors, circumstances and considerations as it shall deem relevant from time to time, subject to the annual limit on non-employee director compensation set forth in the 2021 Incentive Plan. As provided in the 2021 Incentive Plan, our board of directors or its authorized committee may make exceptions to this limit for individual non-employee directors in extraordinary circumstances, as the board of directors or its authorized committee may determine in its discretion.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following includes a summary of transactions since January 1, 2019 to which we have been a party in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock, or 5% Security Holders, or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described under “Executive and Director Compensation.” We also describe below certain other transactions with our directors, executive officers and stockholders.
Related Party Transactions
On March 27, 2015, we entered into a technology services agreement with Optimal Networks, LLC for use of information technology services. The service agreement was with the brother-in-law of Dr. Hare. We agreed to issue the related party equity incentive units in the amount equal to 50% of the charges for invoiced services, with such equity to be issued annually on or about the anniversary date of the agreement. On November 22, 2019 we issued 820 Series C Units as payment for $73,796 of accrued technology services. As of September 30, 2020 and December 31, 2019, we owed $30,000 and $5,000, respectively, pursuant to this agreement, which is included in accounts payable in the accompanying September 30, 2020 and December 31, 2019 balance sheets.
We utilize Global Vision Communications, LLC, a service provider owned by a member of our board, Mr. Neil Hare, for information technology and web development services. Payment of invoices for services provided are made in cash or through the issuance of our Series C Units as mutually agreed to by the parties. Amounts incurred amounted to approximately $51,000 and $43,000 during the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, and December 31, 2019, the Company owed nil and $8,000 to the related entity and these amounts are included in accounts payable in the accompanying September 30, 2020 and December 31, 2019 balance sheets.
We are a licensee under an exclusive license agreement with JMHMD Holdings, LLC, an affiliate of our Chief Science Officer and director, for the use of CD271+ technology, a subpopulation of bone marrow-derived MSCs. We are required to pay a royalty of one percent of the annual net sales of the licensed product(s) used, leased, or sold by or for us by any sub-licensees. If we sublicense the technology, we are also required to pay an amount equal to 10% of the net sales of the sub-licensees. The agreement is to remain in effect until either the date all issued patents and filed patent applications have expired or been abandoned, or 20 years after the date of FDA approval of the last commercialized product or process arising from the patent rights, whichever comes later. There were no license fees due as of September 30, 2020 and December 31, 2019 pertaining to this agreement. We paid legal fees of approximately $21,000 and $42,000 for the nine months ended September 30, 2020 and 2019, in connection with the patent prosecution, issuance, and maintenance fees related to CD271+ technology.
Indemnification Agreements
We intend to enter into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us or will require us to indemnify each director and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director or executive officer. For further information, see “Description of Capital Stock—Limitations on Liability and Indemnification Matters.”
Policies and Procedures for Related
Person Transactions
Our
board has adopted a written related person transaction policy, to be effective immediately prior to the effectiveness of the registration
statement of which this prospectus forms a part, setting forth the policies and procedures for the review and approval or ratification
of related person transactions. This policy will cover, with certain exceptions set forth in Item 404 of Regulation S-K under
the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships,
in which we were or are to be a participant, where the amount involved exceeds $120,000 in any fiscal year and a related person
had, has or will have a direct or indirect material interest, including without limitation, purchases of goods or services by
or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness
and employment by us of a related person. In reviewing and approving any such transactions, our audit committee is tasked to consider
all relevant facts and circumstances, including, but not limited to, whether the transaction is on terms comparable to those that
could be obtained in an arm’s length transaction and the extent of the related person’s interest in the transaction.
All of the transactions described in this section occurred prior to the adoption of this policy.
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The following table sets forth information with respect to the beneficial ownership of our Class A common stock and Class B common stock, giving pro forma effect to the Corporate Conversion, as of , 2020 by:
● | each person, or group of affiliated persons, known by us to beneficially own more than 5% of our outstanding shares of common stock (other than named executive officers and directors); | |
● | each of our named executive officers; | |
● | each of our directors; and | |
● | all of our executive officers and directors as a group. |
The number of shares beneficially owned by each stockholder is determined in accordance with the rules issued by the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. Except as indicated in the footnotes below, we believe, based on the information furnished to us, that the individuals and entities named in the table below have sole voting and investment power with respect to all shares of Class A common stock and/or Class B common stock beneficially owned by them, subject to any community property laws.
Percentage ownership of our common stock before this offering is based on shares of Class A common stock and shares of Class B common stock outstanding as of , 2020, after giving effect to the Corporate Conversion. Percentage ownership of our Class A common stock and Class B common stock after this offering is based on shares of Class A common stock and shares of Class B common stock as of , 2020, after giving effect to the Corporate Conversion and our issuance of shares of our Class A common stock in this offering. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of Class A common stock subject to options, restricted units, warrants or other rights held by such person that are currently exercisable or will become exercisable within 60 days of , 2020 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person.
To calculate a stockholder’s percentage of beneficial ownership of Class A common stock, we must include in the numerator and denominator those shares of Class B common stock (as it is convertible at any time into shares of Class A common stock), as well as those shares of Class A common stock underlying options, warrants and convertible securities, that such stockholder is considered to beneficially own. Shares of Class B common stock, and Class A common stock underlying options, warrants and convertible securities, held by other stockholders, however, are disregarded in this calculation. Therefore, the denominator used in calculating beneficial ownership of each of the stockholders may be different.
Unless otherwise indicated, the address of each beneficial owner listed below is c/o Longeveron LLC, 1951 NW 7th Ave, Suite 520, Miami, FL 33136. To our knowledge, there is no arrangement, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.
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Beneficial Ownership After Corporate Conversion Before the Offering | |||||||||||||||||
Class A
Common Stock |
Class B
Common Stock |
% of Total
Voting Power |
% of Total Common
Stock Beneficially |
||||||||||||||
Name of Beneficial Owner | Shares | % | Shares | % | (1) | Owned | |||||||||||
5% Stockholders: | |||||||||||||||||
DS MED LLC (2) | |||||||||||||||||
Named Executive Officers and Directors: | |||||||||||||||||
Donald M. Soffer (3) | |||||||||||||||||
Joshua M. Hare, M.D. (4) | |||||||||||||||||
Neil E. Hare (5) | |||||||||||||||||
Rock Soffer (6) | |||||||||||||||||
Douglas Losordo, M.D. (6) | |||||||||||||||||
Erin Borger (6) | |||||||||||||||||
Geoff Green (7) | |||||||||||||||||
James Clavijo (8) | |||||||||||||||||
Paul Lehr (9) | |||||||||||||||||
All Executive Officers and Directors as a Group (8 individuals): |
* | Less than 1% |
(1) | Percentage of total voting power represents voting power with respect to all shares of our Class A common stock and Class B common stock, as a single class. The holders of our Class B common stock are entitled to five (5) votes per share, and holders of our Class A common stock are entitled to one (1) vote per share. See the section titled “Description of Capital Stock—Common Stock—Voting Rights” for additional information about the voting rights of our Class A common stock and Class B common stock. |
(2) | DS MED LLC is a Delaware limited liability company for which Donald Soffer, a member of our Board, owns % of the membership interests and serves as managing member. Mr. Soffer disclaims beneficial ownership except to the extent of his pecuniary interest. |
(3) | Shares of Class A common stock consist of shares issuable upon the exercise of stock options. Mr. Soffer is a member of the board of directors. |
(4) | Shares of Class A common stock consist of shares owned by JMGMD Holdings LLC, where Dr. Hare is the managing member, and shares issuable upon the exercise of stock options. Dr. Hare is a member of the Board and CSO. Dr. Hare disclaims beneficial ownership except to the extent of his pecuniary interest. |
(5) | Shares of Class A common stock consist of shares owned by Global Vision Communications, LLC, where Mr. Hare is the managing member, and shares issuable upon the exercise of stock options. Mr. Hare is a member of the Board. Dr. Hare disclaims beneficial ownership except to the extent of his pecuniary interest. |
(6) | Messrs. Soffer and Borger and Dr. Losordo do not have any direct beneficial ownership interest. Messrs. Soffer and Borger and Dr. Losordo are each a member of the Board. |
(7) | Shares of Class A common stock consist of shares issuable upon the exercise of stock options. Mr. Green is the Chief Executive Officer. |
(8) | Mr. Clavijo does not have any direct beneficial ownership interest. Mr. Clavijo is the CFO. |
(9) | Shares of Class A common stock consist of shares issuable upon the exercise of stock options. Mr. Lehr is the International Executive Director, General Counsel, and Secretary. |
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The following description summarizes important terms of our capital stock and certain provisions of our certificate of incorporation and bylaws, each of which will be in effect upon the closing of this offering. Copies of these documents will be filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part. The descriptions of our Class A common stock, Class B common stock and preferred stock reflect the completion of the Corporate Conversion that will occur prior to the closing of this offering.
General
Following the closing of this offering, our authorized capital stock will consist of shares of Class A common stock, par value $0.001 per share, shares of Class B common stock, par value $0.001 per share and shares of preferred stock, par value $0.001 per share. As of September 30, 2020, after giving effect to the Corporate Conversion, there were shares of our Class A common stock, held by approximately stockholders of record. No shares of our preferred stock are designated, issued or outstanding.
As of , 2020 after giving effect to the Corporate Conversion and the filing and effectiveness of our amended and restated certificate of incorporation, there were shares of our Class A common stock outstanding, held by approximately stockholders of record, shares of our Class B common stock outstanding, held by approximately stockholders of record, and no shares of our preferred stock outstanding.
Common Stock
We have two classes of authorized common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion.
Voting. Holders of our Class A common stock will be entitled to one (1) vote for each share held on all matters submitted to a vote of stockholders and holders of our Class B common stock are entitled to five (5) votes for each share of Class B common stock held on all matters submitted to a vote of stockholders. Following this offering, and assuming no exercise of the overallotment option, the holders of our outstanding Class B common stock will hold % of the voting power of our outstanding capital stock. Holders of shares of our Class A common stock and Class B common stock vote together as a single class on all matters (including the election of directors) submitted to a vote of stockholders, unless otherwise required by Delaware law or our certificate of incorporation. Delaware law could require either holders of our Class A common stock or Class B common stock to vote separately as a single class in the following circumstances:
(1) | if we were to seek to amend our certificate of incorporation to increase or decrease the par value of a class of our capital stock, then that class would be required to vote separately to approve the proposed amendment; and | |
(2) | if we were to seek to amend our certificate of incorporation in a manner that alters or changes the powers, preferences, or special rights of a class of our capital stock in a manner that affected its holders adversely, then that class would be required to vote separately to approve the proposed amendment. |
Our certificate of incorporation does not provide for cumulative voting for the election of directors. As a result, the holders of a majority of the voting power of our outstanding capital stock can elect all of the directors then standing for election. Our certificate of incorporation establishes a classified board of directors, to be divided into three classes with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Subject to the supermajority votes for some matters, other matters shall be decided by the affirmative vote of our stockholders having a majority in voting power of the votes cast by the stockholders present or represented and voting on such matter. Our certificate of incorporation and bylaws will also provide that our directors may be removed only for cause and only by the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock entitled to vote thereon. In addition, the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock entitled to vote thereon will be required to amend or repeal, or to adopt any provision inconsistent with, several of the provisions of our certificate of incorporation. See below under “—Anti-Takeover Provisions—Amendment of Charter Provisions” below.
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Dividends. Holders of common stock will be entitled to receive proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of any series of preferred stock that we may designate and issue in the future.
Liquidation. In the event of our liquidation or dissolution, the holders of our Class A common stock and Class B common stock will be entitled to receive proportionately our net assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of our common stock will have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of common stock will be subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.
Change of Control Transactions. In the case of any distribution or payment in respect of the shares of our Class A common stock or Class B common stock upon a merger or consolidation with or into any other entity, or other substantially similar transaction, the holders of our Class A common stock and Class B common stock will be treated equally and identically with respect to shares of Class A common stock or Class B common stock owned by them; provided, however, shares of each class may receive, or have the right to elect to receive, different or disproportionate consideration if the only difference in the per share consideration is that the shares to be distributed to a holder of a share Class B common stock have five (5) times the voting power of any securities distributed to a holder of a share of Class A common stock.
Subdivisions and Combinations. If we subdivide or combine in any manner outstanding shares of Class A common stock or Class B common stock, the outstanding shares of the other class will be subdivided or combined in the same manner, unless different treatment of the shares of each class is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class A common stock and Class B common stock, each voting as a separate class.
Conversion. Each outstanding share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon any transfer, whether or not for value, which occurs after the closing of this offering, except for certain permitted transfers described in our certificate of incorporation, including transfers to family members, trusts solely for the benefit of the stockholder or their family members, distributions or transfers of shares out to owners of a stockholder, or to partnerships, corporations, and other entities exclusively owned by the stockholder or their family members, as well as affiliates, subject to certain exceptions. Once converted or transferred and converted into Class A common stock, the Class B common stock may not be reissued.
Rights and Preferences. Holders of our common stock will have no preemptive, conversion or subscription rights, and there will be no redemption or sinking funds provisions applicable to our common stock. The rights, preferences and privileges of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.
Fully Paid and Nonassessable. All of our outstanding shares of Class A common stock and Class B common stock are, and the shares of Class A common stock to be issued in this offering will be, fully paid and nonassessable.
Preferred Stock
Under our certificate of incorporation that will be in effect upon the closing of this offering, our board of directors will be authorized to direct us to issue shares of preferred stock in one or more series without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock.
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The purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third-party to acquire, or could discourage a third-party from seeking to acquire, a majority of our outstanding voting stock. Upon the closing of this offering, there will be no shares of preferred stock outstanding, and we have no present plans to issue any shares of preferred stock.
Anti-Takeover Provisions
Some provisions of Delaware law and our certificate of incorporation and our bylaws that will be in effect upon the closing of this offering could make the following transactions more difficult: an acquisition of us by means of a tender offer; an acquisition of us by means of a proxy contest or otherwise; or the removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interests or in our best interests, including transactions that provide for payment of a premium over the market price for our shares.
These provisions, summarized below, are intended to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of the increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.
Undesignated Preferred Stock. The ability of our board of directors, without action by our stockholders, to issue up to shares of undesignated preferred stock with voting or other rights or preferences as designated by our board of directors could impede the success of any attempt to effect a change in control of our company. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of our company.
Dual Class Stock. As described above in “—Common Stock—Voting Rights,” our certificate of incorporation provides for a dual class common stock structure, which will provide holders of our Class B common stock with significant influence over matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets.
Stockholder Meetings. Our bylaws will provide that a special meeting of stockholders may be called only by the chairman of our board of directors, our chief executive officer or president (in the absence of a chief executive officer), or by a resolution adopted by a majority of our board of directors.
Requirements for Advance Notification of Stockholder Nominations and Proposals. Our bylaws will establish advance notice procedures with respect to stockholder proposals to be brought before a stockholder meeting and the nomination of candidates for election as directors, other than nominations made by or at the direction of our board of directors of a committee of our board of directors.
Elimination of Stockholder Action by Written Consent. Any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and may not be taken by written consent.
Staggered Board. Our board of directors will be divided into three classes. The directors in each class will serve a three-year term, with one class being elected each year by our stockholders. For more information on our classified board, see “Management—Classified Board of Directors.” This system of electing and removing directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us, because it generally makes it more difficult for stockholders to replace a majority of the directors.
Removal of Directors. Our certificate of incorporation will provide that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of the holders of at least two-thirds in voting power of the outstanding shares of stock entitled to vote in the election of directors.
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Stockholders Not Entitled to Cumulative Voting. Our certificate of incorporation will not permit stockholders to cumulate their votes in the election of directors. Accordingly, the holders of a majority of the outstanding shares of our common stock entitled to vote in any election of directors will be able to elect all of the directors standing for election, if they choose. Further, as discussed above, holders of our Class B common stock will be entitled to five (5) votes for each share of Class B common stock held by them, including with respect to election of directors.
Choice of Forum. Our certificate of incorporation will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, employees or agents to us or our stockholders, (3) any action asserting a claim against us arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, (4) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws, or (5) any action asserting a claim governed by the internal affairs doctrine. Under our certificate of incorporation, this exclusive form provision will not apply to claims which are vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery of the State of Delaware, or for which the Court of Chancery of the State of Delaware does not have subject matter jurisdiction. For instance, the provision would not apply to actions arising under federal securities laws, including suits brought to enforce any liability or duty created by the Securities Act, the Exchange Act, or the rules and regulations thereunder.
Our certificate of incorporation will further provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. Our certificate of incorporation will also provide that any person or entity holding, purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and to have consented to these choice of forum provisions. It is possible that a court of law could rule that the choice of forum provision contained in our certificate of incorporation are inapplicable or unenforceable if they are challenged in a proceeding or otherwise.
Amendment of Charter Provisions. The amendment of any of the above provisions, except for the provision making it possible for our board of directors to issue preferred stock and the provision prohibiting cumulative voting, would require approval by holders of at least two-thirds in voting power of the outstanding shares of stock entitled to vote thereon.
The provisions of Delaware law, and our certificate of incorporation and bylaws that will be in effect upon the closing of this offering, could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our Class A common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in the composition of our board and management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.
Section 203 of the Delaware General Corporation Law. We are subject to Section 203 of the DGCL, which prohibits persons deemed to be “interested stockholders” from engaging in a “business combination” with a publicly held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by our board of directors.
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Limitations on Liability and Indemnification Matters
Our certificate of incorporation, which will be in effect upon the closing of this offering, will limit our directors’ liability to the fullest extent permitted under Delaware law, which prohibits our certificate of incorporation from limiting the liability of our directors for the following:
● | any breach of the director’s duty of loyalty to us or our stockholders; | |
● | acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; | |
● | unlawful payment of dividends or unlawful stock repurchases or redemptions; or | |
● | any transaction from which the director derived an improper personal benefit. |
If Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law, as so amended.
Our bylaws, which will be in effect upon the closing of this offering, will provide that we will indemnify our directors and officers to the fullest extent permitted under Delaware law and that we shall have the power to indemnify our employees and agents to the fullest extent permitted by law. Our bylaws will also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in this capacity, regardless of whether we would have the power to indemnify such person against such expense, liability or loss under the DGCL.
We also intend to enter into separate indemnification agreements with our directors and executive officers, in addition to indemnification provided for in our bylaws. These agreements, among other things, will provide for indemnification of our directors and executive officers for expenses, judgments, fines and settlement amounts incurred by such persons in any action or proceeding arising out of this person’s services as a director or executive officer or at our request. We believe that these provisions in our certificate of incorporation and bylaws and indemnification agreements are necessary to attract and retain qualified persons as directors and executive officers.
The above description of the limitation of liability and indemnification provisions of our certificate of incorporation, our bylaws and our indemnification agreements is not complete and is qualified in its entirety by reference to these documents, each of which will be filed as an exhibit to this registration statement to which this prospectus forms a part.
The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
Insofar as indemnification for liabilities under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.
Listing
We intend to apply to have our Class A common stock listed on The Nasdaq Capital Market under the symbol “LGVN”.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock will be .
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SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to this offering, there was no public market for our units or our common stock, and no predictions can be made about the effect, if any, that market sales of our Class A common stock or the availability of such shares for sale will have on the market price prevailing from time to time. Nevertheless, future sales of our Class A common stock in the public market, or the perception that such sales may occur, could adversely affect the market price of our Class A common stock and could impair our ability to raise capital through future sales of our securities. See “Risk Factors—Risks Related to this Offering and Ownership of Our Class A common stock— Sales of a substantial number of shares of our Class A common stock in the public market could cause our stock price to fall.” Furthermore, although we intend to apply to have our Class A common stock listed on The Nasdaq Capital Market, we cannot assure you that there will be an active public trading market for our Class A common stock.
Upon the closing of this offering, based on the number of shares of our Class A common stock and Class B common stock outstanding as of , 2020 and after giving effect to the Corporate Conversion, we will have an aggregate of shares of our Class A common stock outstanding (or shares of our Class A common stock if the underwriters exercise in full their option to purchase additional shares) and shares of our Class B common stock outstanding. Of these shares of our Class A common stock, all of the shares sold in this offering (or shares if the underwriters exercise in full their option to purchase additional shares) will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act, whose sales would be subject to the Rule 144 resale restrictions described below, other than the holding period requirement.
The remaining shares of our Class A common stock and our Class B common stock will be “restricted securities,” as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rules 144 or 701 under the Securities Act, which are summarized below. We expect that substantially all of these shares will be subject to the 180-day lock-up period under the lock-up agreements described below. Upon expiration of the lock-up period, we estimate that approximately shares of our Class A common stock will be available for sale in the public market, subject in some cases to applicable volume limitations under Rule 144.
Lock-Up and Market Standoff Agreements
All of our directors, executive officers and substantially all of our security holders are subject to lock-up agreements or market standoff provisions that, subject to certain exceptions, prohibit them from directly or indirectly offering, pledging, selling, contracting to sell, selling any option or contract to purchase, purchasing any option or contract to purchase, granting any option, right or warrant to purchase or otherwise transferring or disposing of any shares of our Class A common stock or Class B common stock, options to acquire shares of our Class A common stock or any securities convertible into or exercisable or exchangeable for Class A common stock, whether now owned or hereafter acquired, or entering into any swap or any other agreement or any transaction that transfer, in whole or in part, directly or indirectly, the economic consequence of ownership, for a period of 180 days following the date of this prospectus, without the prior written consent of Kingswood Capital Markets. See the section entitled “Underwriters.”
Rule 144
Affiliate Resales of Restricted Securities. In general, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is an affiliate of ours, or who was an affiliate at any time during the 90 days before a sale, who has beneficially owned shares of our common stock for at least six months would be entitled to sell in “brokers transactions” or certain “riskless principal transactions” or to market makers, a number of shares within any three month-period that does not exceed the greater of:
● | 1% of the number of our common stock then outstanding, which will equal approximately shares of our common stock immediately after this offering; or |
● | the average weekly reported trading volume in shares of our common stock on The Nasdaq Capital Market during the four calendar weeks preceding the date on which a notice of the sale on Form 144 is filed with the SEC with respect to such sale. |
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Affiliate resales under Rule 144 are also subject to the availability of current public information about us. In addition, if the number of shares being sold under Rule 144 by an affiliate during any three-month period exceeds 5,000 shares or has an aggregate sale price in excess of $50,000, the seller must file a notice on Form 144 with the SEC and Nasdaq concurrently with either the placing of a sale order with the broker or the execution directly with a market maker.
Non-Affiliate Resales of Restricted Securities. In general, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is not an affiliate of ours at the time of sale, and has not been an affiliate at any time during the three months preceding a sale, and who has beneficially owned shares of our common stock for at least six months but less than a year, is entitled to sell such shares subject only to the availability of current public information about us. If such person has held our shares for at least one year, such person can resell under Rule 144(b)(1) without regard to any Rule 144 restrictions, including the 90-day public company requirement and the current public information requirement.
Non-affiliate resales are not subject to manner of sale, volume limitation or notice filing provisions of Rule 144.
Rule 701
In general, under Rule 701 of the Securities Act, each of our employees, officers, directors, consultants or advisors who purchases shares of our common stock from us in connection with a compensatory stock or option plan or other written agreement executed before the effective date of the registration statement under the Securities Act is entitled to resell such shares 90 days after such effective date in reliance on Rule 144. An affiliate of ours can resell shares in reliance on Rule 144 without having to comply with the holding period requirement, and non-affiliates of ours can resell shares in reliance on Rule 144 without having to comply with the current public information and holding period requirements.
The SEC has indicated that Rule 701 will apply to typical options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of such options, including exercises after an issuer becomes subject to the reporting requirements of the Exchange Act.
Equity Incentive Plans
We intend to file with the SEC a registration statement on Form S-8 under the Securities Act covering the shares of Class A common stock reserved for issuance under our equity incentive plans. The registration statement is expected to be filed and become effective as soon as practicable after the closing of this offering. Accordingly, shares registered under the Form S-8 registration statement will be available for sale in the open market following the registration statement’s effective date, subject to Rule 144 volume limitations and the lock-up agreements described above, if applicable.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR COMMON STOCK
The following discussion is a summary of the material U.S. federal income tax consequences to non-U.S. holders (as defined below) of the purchase, ownership and disposition of our common stock issued pursuant to this offering, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or foreign tax laws are not addressed herein. This discussion is based on the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service, or IRS, in effect as of the date of this offering. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a non-U.S. holder of our common stock. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position regarding the tax consequences of the purchase, ownership and disposition of our common stock.
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This discussion is limited to non-U.S. holders that hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a non-U.S. holder’s particular circumstances, including the impact of the alternative minimum tax or the unearned income Medicare contribution tax. In addition, it does not address consequences relevant to holders subject to particular rules, including, without limitation:
● | U.S. expatriates and certain former citizens or long-term residents of the United States; | |
● | persons holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment; | |
● | banks, insurance companies, and other financial institutions; | |
● | brokers, dealers or traders in securities or currencies; | |
● | persons that hold more than 5% of our common stock, directly or indirectly; | |
● | “controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax; | |
● | corporations organized outside of the United States, any state thereof or the District of Columbia that are nonetheless treated as U.S. taxpayers for U.S. federal income tax purposes; | |
● | partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein); | |
● | tax-exempt organizations or governmental organizations; | |
● | persons deemed to sell our common stock under the constructive sale provisions of the Code; | |
● | persons for whom our common stock constitutes “qualified small business stock” within the meaning of Section 1202 of the Code; | |
● | persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation; | |
● | qualified foreign pension funds as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds; | |
● | persons subject to special tax accounting rules as a result of any item of gross income with respect to our common stock being taken into account in an applicable financial statement; and | |
● | tax-qualified retirement plans. |
If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.
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THIS DISCUSSION IS FOR INFORMATION PURPOSES ONLY AND IS NOT INTENDED AS LEGAL OR TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Definition of a Non-U.S. Holder
For purposes of this discussion, a “non-U.S. holder” is any beneficial owner of our common stock that is neither a “U.S. person,” nor an entity treated as a partnership for U.S. federal income tax purposes regardless of its place of organization or formation. A U.S. person is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:
● | an individual who is a citizen or resident of the United States; | |
● | a corporation or other entity created or organized under the laws of the United States, any state thereof, or the District of Columbia and treated as a corporation for U.S. federal income tax purposes; | |
● | an estate, the income of which is subject to U.S. federal income tax regardless of its source; or | |
● | a trust that (1) is subject to the primary supervision of a U.S. court and which has one or more U.S. persons (within the meaning of Section 7701(a)(30) of the Code) who have the authority to control all substantial decisions of the trust, or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person. |
Distributions
As described in the section titled “Dividend Policy,” we do not anticipate declaring or paying dividends to holders of our common stock in the foreseeable future. However, if we do make distributions on our common stock, such distributions of cash or property on our common stock will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and first be applied against and reduce a non-U.S. holder’s adjusted tax basis in its common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below under “—Sale or Other Disposition of Common Stock.”
Subject to the discussion below on effectively connected income, backup withholding and foreign accounts, dividends paid to a non-U.S. holder of our common stock that are not effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty).
Non-U.S. holders will be entitled to a reduction in or an exemption from withholding on dividends as a result of either (a) an applicable income tax treaty or (b) the non-U.S. holder holding our common stock in connection with the conduct of a trade or business within the United States and dividends being effectively connected with that trade or business. To claim such a reduction in or exemption from withholding, the non-U.S. holder must provide the applicable withholding agent with a properly executed (a) IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) claiming an exemption from or reduction of the withholding tax under the benefit of an income tax treaty between the United States and the country in which the non-U.S. holder resides or is established, or (b) IRS Form W-8ECI stating that the dividends are not subject to withholding tax because they are effectively connected with the conduct by the non-U.S. holder of a trade or business within the United States, as may be applicable. These certifications must be provided to the applicable withholding agent prior to the payment of dividends and must be updated periodically. If a non-U.S. holder holds stock through a financial institution or other agent acting on the holder’s behalf, the holder will be required to provide appropriate documentation to such agent. The holder’s agent will then be required to provide certification to us or our paying agent, either directly or through other intermediaries. Non-U.S. holders that do not timely provide the applicable withholding agent with the required certification, but that qualify for a reduced rate under an applicable income tax treaty, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.
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If dividends paid to a non-U.S. holder are effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the non-U.S. holder maintains a permanent establishment in the United States to which such dividends are attributable), then, although exempt from U.S. federal withholding tax (provided the non-U.S. holder provides appropriate certification, as described above), the non-U.S. holder will be subject to U.S. federal income tax on such dividends on a net income basis at the regular U.S. federal income tax rates. In addition, a non-U.S. holder that is a corporation may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on its effectively connected earnings and profits for the taxable year that are attributable to such dividends, as adjusted for certain items. Non-U.S. holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.
Sale or Other Disposition of Common Stock
Subject to the discussions below on backup withholding and foreign accounts, a non-U.S. holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:
● | the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the non-U.S. holder maintains a permanent establishment in the United States to which such gain is attributable); | |
● | the non-U.S. holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or | |
● | our common stock constitute U.S. real property interests, or USRPIs, by reason of our status as a U.S. real property holding corporation, or USRPHC, for U.S. federal income tax purposes. |
Gain described in the first bullet point above will generally be subject to U.S. federal income tax on a net income basis at the regular U.S. federal income tax rates. A non-U.S. holder that is a foreign corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on its effectively connected earnings and profits, as adjusted for certain items, which will include such effectively connected gain.
A non-U.S. holder described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on any gain derived from the disposition, which may be offset by certain U.S. source capital losses of the non-U.S. holder (even though the individual is not considered a resident of the United States) provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.
With respect to the third bullet point above, we would be a USRPHC if our USRPIs comprise (by fair market value) at least half of our business assets. We believe we are not currently and do not anticipate becoming a USRPHC. Because the determination of whether we are a USRPHC depends on the fair market value of our USRPIs relative to the fair market value of our other business assets and our non-U.S. real property interests, however, there can be no assurance we are not a USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a non-U.S. holder of our common stock will not be subject to U.S. federal income tax if our common stock are “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and such non-U.S. holder owned, actually and constructively, 5% or less of our common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition or the non-U.S. holder’s holding period. There can be no assurance that our common stock will continue to qualify as regularly traded on an established securities market. If any gain on your disposition is taxable because we are a United States real property holding corporation and your ownership of our common stock exceeds 5%, you will be taxed on such disposition generally in the manner as gain that is effectively connected with the conduct of a U.S. trade or business (subject to the provisions under an applicable income tax treaty), except that the branch profits tax generally will not apply.
Non-U.S. holders should consult their tax advisors regarding potentially applicable income tax treaties that may provide for different rules.
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Information Reporting and Backup Withholding
Subject to the discussion below on foreign accounts, a non-U.S. holder will not be subject to backup withholding with respect to distributions on our common stock we make to the non-U.S. holder, provided the applicable withholding agent does not have actual knowledge or reason to know such holder is a U.S. person and the holder certifies its non-U.S. status, such as by providing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or other applicable certification. However, information returns generally will be filed with the IRS in connection with any distributions (including deemed distributions) made on our common stock to the non-U.S. holder, regardless of whether any tax was actually withheld. Such information returns generally include the amount of any such dividends, the name and address of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the holder to whom any such dividends are paid. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which the non-U.S. holder resides or is established.
Information reporting and backup withholding may apply to the proceeds of a sale or other taxable disposition of our common stock within the United States, and information reporting may (although backup withholding generally will not) apply to the proceeds of a sale or other taxable disposition of our common stock outside the United States conducted through certain U.S.-related financial intermediaries, in each case, unless the beneficial owner certifies under penalty of perjury that it is a non-U.S. holder on IRS Form W-8BEN or W-8BEN-E, or other applicable form (and the payor does not have actual knowledge or reason to know that the beneficial owner is a U.S. person) or such owner otherwise establishes an exemption. Proceeds of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker generally will not be subject to backup withholding or information reporting.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Additional Withholding Tax on Payments Made to Foreign Accounts
Withholding taxes may be imposed under Sections 1471 to 1474 of the Code, such Sections commonly referred to as the Foreign Account Tax Compliance Act, or FATCA, on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends paid on our common stock, or (subject to the proposed Treasury Regulations discussed below) gross proceeds from the sale or other disposition of our common stock paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code) (including, in some cases, when such foreign financial institution or non-financial foreign entity is acting as an intermediary), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.
Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends paid on our common stock. While withholding under FATCA would have applied also to payments of gross proceeds from the sale or other disposition of our common stock, recently proposed Treasury Regulations, if finalized in their present form, would eliminate FATCA withholding on payments of gross proceeds from a sale or other disposition of our common stock. In its preamble to such proposed regulations, the U.S. Treasury Department stated that taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued. Prospective investors should consult their tax advisors regarding the potential application of FATCA.
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EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY RECENT OR PROPOSED CHANGE IN APPLICABLE LAW.
Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below have agreed to purchase, and we have agreed to sell to them, the number of shares indicated below:
Underwriter | Number of Shares | |||
Kingswood Capital Markets, division of Benchmark Investments, Inc. | ||||
Total: |
The underwriters and the representatives are collectively referred to as the “underwriters” and the “representatives,” respectively. The underwriters are offering the shares of Class A common stock subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of Class A common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of Class A common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ over-allotment option described below.
The underwriters initially propose to offer part of the shares of Class A common stock directly to the public at the offering price listed on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $ per share under the public offering price. After the initial offering of the shares of Class A common stock, the offering price and other selling terms may from time to time be varied by the representative.
Over-Allotment Option
We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to additional shares of Class A common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with the offering of the shares of Class A common stock offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of Class A common stock as the number listed next to the underwriter’s name in the preceding table bears to the total number of shares of Class A common stock listed next to the names of all underwriters in the preceding table.
The following table shows the per share and total public offering price, underwriting discounts and commissions, and proceeds before expenses to us. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase up to an additional shares of Class A common stock.
Total | ||||||||||||
Per Share | No Exercise | Full Exercise | ||||||||||
Public offering price | $ | $ | $ | |||||||||
Underwriting discounts and commissions to be paid by us | $ | $ | $ | |||||||||
Proceeds, before expenses, to us | $ | $ | $ |
The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately $ . We have agreed to reimburse the underwriters for expenses relating to this offering up to $150,000.
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Underwriter Warrants.
We have agreed to issue warrants to Kingswood Capital Market, as representative of the underwriters, upon the closing of this offering, which entitle it to purchase up to 4.0% of the total number of shares of Class A common stock being sold in this offering (the “Underwriter Warrants”). The exercise price of the warrants is equal to 120% of the offering price of the Class A common stock offered hereby. The Underwriter Warrants will be exercisable at any time and from time to time, in whole or in part, during the four and a half-year period commencing six months from the closing date of this offering. The Underwriter Warrants shall not be redeemable. The warrants and the shares of common stock underlying the warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The Underwriter Warrants may not be sold, transferred, assigned, pledged or hypothecated or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities for a period of 180 days following the effective date of the registration for this offering, except that they may be assigned, in whole or in part, to any officer or partner of the Representative, and to members of the underwriting syndicate or selling group (or to officers or partners thereof), or as otherwise permitted, in compliance with FINRA Rule 5110(g)(2). The Underwriter Warrants will contain provisions for one demand registration of the sale of the underlying shares of common stock at our expense (in the event that our registration statement covering the Underwriter Warrants and the underlying common stock is no longer effective), and unlimited “piggyback” registration rights for a period of five (5) years after the effective date of the registration statement for this offering at our expense. The book runners will split the Underwriter Warrants on the same pro rata percentage of the amount of the offering each book runner underwrites. The exercise price and number of shares issuable upon exercise of the Underwriters Warrants may be adjusted in certain circumstances including in the event of a stock split or other corporate events and as otherwise permitted under Rule 5110(f)(2)(G) of FINRA.
The underwriters have informed us that they do not intend sales to discretionary accounts to exceed 5% of the total number of shares of Class A common stock offered by them. We, all of our directors, executive officers and substantially all of our security holders are subject to lock-up agreements or market standoff provisions that, subject to certain exceptions, prohibit them from directly or indirectly offering, pledging, selling, contracting to sell, selling any option or contract to purchase, purchasing any option or contract to purchase, granting any option, right or warrant to purchase or otherwise transferring or disposing of any shares of our Class A common stock, options to acquire shares of our Class A common stock or any securities convertible into or exercisable or exchangeable for Class A common stock, whether now owned or hereafter acquired, or entering into any swap or any other agreement or any transaction that transfer, in whole or in part, directly or indirectly, the economic consequence of ownership, for a period of 180 days following the date of this prospectus, without the prior written consent of Kingswood Capital Markets.
We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.
We have also granted Kingswood Capital Markets a 12-month right of first refusal to act as sole investment banker, sole book-runner, and/or sole placement agent, for any public offering made pursuant to a registration statement filed with the Securities and Exchange Commission.
A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of shares of Class A common stock to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations.
Pricing of the Offering
Prior to this offering, there has been no public market for our Class A common stock. The initial public offering price was determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offering price were our future prospects and those of our industry in general, our sales, earnings and certain other financial and operating information in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities, and certain financial and operating information of companies engaged in activities similar to ours.
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At our request, the underwriters have reserved for sale, at the initial public offering price, up to % of the Class A common stock in this offering for sale to our directors, officers, employees and other individuals associated with us and members of their families.
Lock-ups
We, all of our directors, executive officers and substantially all of our security holders are subject to lock-up agreements or market standoff provisions that, subject to certain exceptions, prohibit them from directly or indirectly offering, pledging, selling, contracting to sell, selling any option or contract to purchase, purchasing any option or contract to purchase, granting any option, right or warrant to purchase or otherwise transferring or disposing of any shares of our Class A common stock or Class B common stock, options to acquire shares of our Class A common stock or any securities convertible into or exercisable or exchangeable for Class A common stock, whether now owned or hereafter acquired, or entering into any swap or any other agreement or any transaction that transfer, in whole or in part, directly or indirectly, the economic consequence of ownership, for a period of 180 days following the date of this prospectus, without the prior written consent of Kingswood Capital Markets.
Selling Restrictions
Canada
The shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Regulation, or each, a Relevant Member State, an offer to the public of any shares of our Class A common stock may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any shares of our Class A common stock may be made at any time under the following exemptions under the Prospectus Regulation, if they have been implemented in that Relevant Member State:
(i) | to any legal entity which is a qualified investor as defined in the Prospectus Regulation; | |
(ii) | to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Regulation), subject to obtaining the prior consent of the representatives for any such offer; or | |
(iii) | in any other circumstances falling within Article 1(4) of the Prospectus Regulation, |
provided that no such offer of shares of our Class A common stock shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Regulation.
For the purposes of this provision, the expression an “offer to the public” in relation to any shares of our Class A common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares of our Class A common stock to be offered so as to enable an investor to decide to purchase any shares of our Class A common stock, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
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United Kingdom
Each underwriter has represented and agreed that:
(a) | it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (“FSMA) received by it in connection with the issue or sale of the shares of our Class A common stock in circumstances in which Section 21(1) of the FSMA does not apply to us; and | |
(b) | it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares of our Class A common stock in, from or otherwise involving the United Kingdom. |
Hong Kong
Shares of our Class A common stock may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to shares of our Class A common stock may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares of our Class A common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder.
Japan
No registration pursuant to Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) (the “FIEL”) has been made or will be made with respect to the solicitation of the application for the acquisition of the shares of Class A common stock.
Accordingly, the shares of Class A common stock have not been, directly or indirectly, offered or sold and will not be, directly or indirectly, offered or sold in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements, and otherwise in compliance with, the FIEL and the other applicable laws and regulations of Japan.
For Qualified Institutional Investors (“QII”)
Please note that the solicitation for newly-issued or secondary securities (each as described in Paragraph 2, Article 4 of the FIEL) in relation to the shares of Class A common stock constitutes either a “QII only private placement” or a “QII only secondary distribution” (each as described in Paragraph 1, Article 23-13 of the FIEL). Disclosure regarding any such solicitation, as is otherwise prescribed in Paragraph 1, Article 4 of the FIEL, has not been made in relation to the shares of Class A common stock. The shares of Class A common stock may only be transferred to QIIs.
For Non-QII Investors
Please note that the solicitation for newly-issued or secondary securities (each as described in Paragraph 2, Article 4 of the FIEL) in relation to the shares of Class A common stock constitutes either a “small number private placement” or a “small number private secondary distribution” (each as is described in Paragraph 4, Article 23-13 of the FIEL). Disclosure regarding any such solicitation, as is otherwise prescribed in Paragraph 1, Article 4 of the FIEL, has not been made in relation to the shares of Class A common stock. The shares of Class A common stock may only be transferred en bloc without subdivision to a single investor.
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Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of shares of our Class A common stock may not be circulated or distributed, nor may the shares of our Class A common stock be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA, (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where shares of our Class A common stock are subscribed or purchased under Section 275 by a relevant person which is: (i) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (ii) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired shares of our Class A common stock under Section 275 except: (a) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (b) where no consideration is given for the transfer; or (c) by operation of law.
The validity of the shares of Class A common stock offered hereby and certain other legal matters will be passed upon for us by Buchanan Ingersoll & Rooney PC. Certain legal matters in connection with this offering will be passed upon for the underwriters by Nelson Mullins Riley & Scarborough LLP, Washington, DC. Certain attorneys affiliated with Buchanan Ingersoll & Rooney PC own our units which will be converted into % of our Class A common stock in connection with this offering.
MSL, P.A., our independent registered public accounting firm, has audited our financial statements at December 31, 2019 and 2018 and for the years then ended, as set forth in their report. We have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on MSL, P.A’s report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the shares of Class A common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information about us and the shares of Class A common stock offered hereby, we refer you to the registration statement and the exhibits and schedules filed thereto. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. Upon completion of this offering, we will be required to file periodic reports, proxy statements, and other information with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. You may read and copy this information at the Public Reference Room of the Securities and Exchange Commission, 100 F Street, N.E., Room 1580, Washington, District of Columbia. 20549. You may obtain information on the operation of the public reference rooms by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission also maintains an Internet website that contains reports, proxy statements and other information about registrants, like us, that file electronically with the Securities and Exchange Commission. The address of that site is www.sec.gov.
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INDEX TO FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Members of
Longeveron LLC
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Longeveron LLC (the Company) as of December 31, 2019 and 2018, the related statements of operations, members’ equity, and cash flows for each of the two years in the period ended December 31, 2019 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) “PCAOB” and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ MSL, P.A.
We have served as the Company’s auditor since 2017.
Fort Lauderdale, Florida
September 16, 2020
F-2
BALANCE SHEETS
December 31,
2019 |
December 31,
2018 |
|||||||
$ | $ | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | 1,865,874 | 4,031,728 | ||||||
Accounts and grants receivable | 451,458 | - | ||||||
Prepaid expenses and other current assets | 53,766 | 133,059 | ||||||
Total current assets | 2,371,098 | 4,164,787 | ||||||
Noncurrent assets | ||||||||
Property and equipment, net | 4,188,403 | 4,760,515 | ||||||
Intangible assets, net | 1,480,056 | 1,345,507 | ||||||
Right-of-use (ROU) asset | 2,293,965 | - | ||||||
Other assets | 250,893 | 250,893 | ||||||
Total noncurrent assets | 8,213,317 | 6,356,915 | ||||||
TOTAL ASSETS | 10,584,415 | 10,521,702 | ||||||
LIABILITIES | ||||||||
Current liabilities | ||||||||
Accounts payable | 1,154,732 | 1,205,426 | ||||||
Deferred income | 541,793 | 405,000 | ||||||
Accrued expenses | 304,567 | 43,691 | ||||||
Current portion of lease liability | 485,785 | - | ||||||
Deferred rent payable | - | 209,257 | ||||||
Total current liabilities | 2,486,877 | 1,863,374 | ||||||
Long-term liabilities | ||||||||
Deferred rent payable, less current portion | - | 1,844,051 | ||||||
Lease liability | 3,652,496 | - | ||||||
Total long-term liabilities | 3,652,496 | 1,844,051 | ||||||
TOTAL LIABILITIES | 6,139,373 | 3,707,425 | ||||||
Commitments and contingencies | ||||||||
MEMBERS’ EQUITY | ||||||||
Total members’ equity | 4,445,042 | 6,814,277 | ||||||
Total liabilities and members’ equity | 10,584,415 | 10,521,702 |
The accompanying notes are an integral part of the financial statements.
F-3
STATEMENTS OF OPERATIONS
For the Years Ended
December 31,
2019 |
December 31,
2018 |
|||||||
$ | $ | |||||||
REVENUES | ||||||||
Grant income | 4,149,044 | 1,234,775 | ||||||
Clinical trial income | 1,199,500 | 900,000 | ||||||
Contract manufacturing income | 290,922 | - | ||||||
Total revenues | 5,639,466 | 2,134,775 | ||||||
Cost of revenues | 3,885,390 | 1,454,126 | ||||||
Gross profit | 1,754,076 | 680,649 | ||||||
EXPENSES | ||||||||
Sales | 185,387 | 48,164 | ||||||
Research and development | 1,791,842 | 3,875,842 | ||||||
General and administrative | 2,774,953 | 3,117,260 | ||||||
Total expenses | 4,752,182 | 7,041,266 | ||||||
Operating loss | (2,998,106 | ) | (6,360,617 | ) | ||||
OTHER INCOME AND (EXPENSES) | ||||||||
Interest income | 2,937 | 23,821 | ||||||
Interest expense | (169 | ) | - | |||||
Other income | 35,461 | - | ||||||
Total other income and (expenses) | 38,229 | 23,821 | ||||||
Net loss | (2,959,877 | ) | (6,336,796 | ) |
The accompanying notes are an integral part of the financial statements.
F-4
STATEMENTS OF MEMBERS’ EQUITY
Years Ended December 31, 2019 and 2018
Series A
Units |
Series B
Units |
Series C
Units |
Unit
Subscription Receivable |
Total
Members’ Equity |
||||||||||||||||||||||||||||
Number of
Units |
Amount |
Number of
Units |
Amount |
Number
of
Units |
Amount | Amount | Amount | |||||||||||||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||||||||||||||
Balance – December 31, 2017 | 1,000,000 | 250,000 | 1,000,000 | 10,982,748 | 35,234 | 1,329,459 | (1,200,000 | ) | 11,362,207 | |||||||||||||||||||||||
Series C units issued for cash | - | - | - | - | 3,640 | 455,000 | - | 455,000 | ||||||||||||||||||||||||
Issuance of Series C units as payment for amounts accrued | - | - | - | - | 167 | 10,000 | - | 10,000 | ||||||||||||||||||||||||
Equity-based compensation | - | - | - | - | - | 423,866 | - | 423,866 | ||||||||||||||||||||||||
Cash received pursuant to subscription receivable | - | - | - | - | - | - | 900,000 | 900,000 | ||||||||||||||||||||||||
Net loss | - | - | - | (6,279,765 | ) | - | (57,031 | ) | - | (6,336,796 | ) | |||||||||||||||||||||
Balance – December 31, 2018 | 1,000,000 | 250,000 | 1,000,000 | 4,702,983 | 39,041 | 2,161,294 | (300,000 | ) | 6,814,277 | |||||||||||||||||||||||
Series C units issued for cash | - | - | - | - | 3,334 | 200,000 | - | 200,000 | ||||||||||||||||||||||||
Issuance of Series C units as payment for amounts accrued | - | - | - | - | 1,320 | 103,796 | - | 103,796 | ||||||||||||||||||||||||
Equity-based compensation | - | - | - | - | - | 136,846 | - | 136,846 | ||||||||||||||||||||||||
Cash received pursuant to subscription receivable | - | - | - | - | - | - | 150,000 | 150,000 | ||||||||||||||||||||||||
Net loss | - | - | - | (2,930,279 | ) | - | (29,598 | ) | - | (2,959,877 | ) | |||||||||||||||||||||
Balance – December 31, 2019 | 1,000,000 | 250,000 | 1,000,000 | 1,772,704 | 43,695 | 2,572,338 | (150,000 | ) | 4,445,042 |
The accompanying notes are an integral part of the financial statements.
F-5
STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
2019 |
December 31,
2018 |
|||||||
$ | $ | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | (2,959,877 | ) | (6,336,796 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 768,836 | 745,774 | ||||||
Equity-based compensation | 136,846 | 423,866 | ||||||
Changes in operating activities and liabilities: | ||||||||
Accounts and grants receivable | (451,458 | ) | - | |||||
Prepaid expenses and other current assets | 78,918 | 52,601 | ||||||
Other assets | 375 | 202 | ||||||
Accounts payable | (256,921 | ) | (13,086 | ) | ||||
Deferred income | 136,793 | 117,500 | ||||||
Accrued expenses | 364,675 | 24,881 | ||||||
Lease liability | (208,993 | ) | (193,314 | ) | ||||
Net cash used in operating activities | (2,390,806 | ) | (5,178,372 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Acquisition of property and equipment | (37,573 | ) | (95,963 | ) | ||||
Acquisition of intangible assets | (87,475 | ) | (115,721 | ) | ||||
Net cash used in investing activities | (125,048 | ) | (211,684 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Subscription receivable payments | 200,000 | 900,000 | ||||||
Proceeds from unit subscription agreement | 150,000 | 455,000 | ||||||
Net cash provided by financing activities | 350,000 | 1,355,000 | ||||||
Net decrease in cash and cash equivalents | (2,165,854 | ) | (4,035,056 | ) | ||||
CASH AND CASH EQUIVALENTS – Beginning of Year | 4,031,728 | 8,066,784 | ||||||
CASH AND CASH EQUIVALENTS – End of Year | 1,865,874 | 4,031,728 | ||||||
Supplemental Disclosure of Non-cash Investing and Financing Activities: | ||||||||
Increase in property and equipment and intangible assets included in accounts payable | 206,226 | - |
The accompanying notes are an integral part of the financial statements.
F-6
NOTES
TO THE FINANCIAL STATEMENTS
December 31, 2019 and 2018
1. Nature of Business, Basis of Presentation, and Liquidity
Nature of business:
Longeveron LLC (the “Company”) was incorporated as a Delaware limited liability company on October 9, 2014 and was authorized to transact business in Florida on December 15, 2014. The Company is engaged in developing and commercializing biological solutions for aging from its leased facilities in Miami, Florida.
Basis of presentation:
The financial statements of the Company were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Liquidity:
Since inception, the Company has been engaged in organizational activities, including raising capital, and research and development activities. The Company does not yet have a product that has been approved by the U.S. Food and Drug Administration (“FDA”), has only generated revenues from grants, clinical trials and contract manufacturing. The Company has not yet achieved profitable operations or generated positive cash flows from operations. There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. Further, the Company’s future operations are dependent on the success of the Company’s efforts to raise additional capital, its research and commercialization efforts, regulatory approval, and, ultimately, the market acceptance of the Company’s products.
2. Summary of Significant Accounting Policies
Use of estimates:
The presentation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents:
The Company considers cash to consist of cash on hand and temporary investments having an original maturity of 90 days or less that are readily convertible into cash.
Inventory:
The Company will begin carrying inventory of its biological products on its balance sheets following commercial launch of such products. Inventory will consist of raw materials, biological products in process, and finished goods available for sale. The Company will determine its inventory values using the average cost method. Inventory will be valued at the lower of cost or net realizable value and will exclude units that the Company anticipates distributing for clinical evaluation. As of December 31, 2019, and 2018, all of the Company’s biological products were anticipated to be distributed for clinical evaluation.
The Company does not currently carry any inventory for its biological products, as it has yet to launch a product for commercial distribution. Historically the Company's operations have focused on clinical trials and discovery efforts, and accordingly, manufactured clinical doses of biological product candidates were expensed as incurred, consistent with the accounting for all other research and development costs. Once the Company begins commercial distribution, all newly manufactured biological products will be allocated either for use in commercial distribution, which will be carried as inventory and not expensed, or for research and development efforts, which will continue to be expensed as incurred.
F-7
Accounts and grants receivable:
Accounts and grants receivable include amounts due from customers, granting institutions and others. The amounts for the period ended December 31, 2019, and 2018 are certain to be collected and no amount has been accrued for doubtful accounts. The Alzheimer’s association and Maryland-TEDCO generally advance grant funds and therefore a receivable is not generally recognized. In addition, for clinical trial income, participants pay in advance of receiving the therapy. Advanced grant funds and prepayments for clinical trial income are recorded to deferred income.
Accounts and grants receivable by source, for the years ended:
December 31,
2019 |
December 31,
2018 |
|||||||
Contract Manufacturing | $ | 84,800 | $ | - | ||||
National Institutes of Health - Grant | 342,292 | |||||||
Alzheimer’s Association - Grant | 12,183 | |||||||
Maryland – TEDCO - Grant | 12,183 | - | ||||||
$ | 451,458 | $ | - |
Property and equipment:
Property and equipment, including improvements that extend useful lives, are valued at cost, while maintenance and repairs are charged to operations as incurred. Depreciation is calculated using the straight-line method based on the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the original term of the lease. Depreciation expense is recorded in the research and development line of the Statement of Operations as the assets are primarily related to the Company’s clinical programs.
Intangible assets:
Intangible assets include payments on license agreements with the Company’s co-founder and Chief Science Officer (“CSO”) and UM (see Note 8) and costs incurred to prepare and file the Company’s patents and trademarks. License agreements have been recorded at the value of cash consideration and/or membership units transferred to the respective parties when acquired.
Payments on license agreements are amortized using the straight-line method over the estimated useful life of 20 years. Patents are amortized over their estimated useful life, once issued. The Company considers trademarks to have an indefinite useful life and evaluates them for impairment on an annual basis. Amortization expense is recorded in the research and development line of the Statement of Operations as the assets are primarily related to the Company’s clinical programs.
Impairment of Long-Lived Assets:
The Company evaluates long-lived assets for impairment, including property and equipment and intangible assets, when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Upon the occurrence of a triggering event, the asset is reviewed to assess whether the estimated undiscounted cash flows expected from the use of the asset plus the residual value from the ultimate disposal exceeds the carrying value of the asset. If the carrying value exceeds the estimated recoverable amounts, the asset is written down to the estimated fair value. Any resulting impairment loss is reflected on the statements of operations. There was no impairment of long-lived assets during the years ended December 31, 2019 and 2018.
F-8
Deferred income:
During 2019 and 2018, the Company received grant funds of $3,919,180 and $1,322,275, respectively, to fund stem cell research being conducted by the Company. The grant funds were received from: Maryland Technology Development Corporation, $375,000; the Alzheimer’s Association, $1,650,000; and the National Institutes of Health, $1,894,180. Grants call for the achievement of certain research milestones over a predetermined period of time. For the years ended December 31, 2019 and 2018, the Company had earned and recognized approximately $4,149,000 and $1,235,000 of income pertaining to these grants. The unearned portion of these grants, which will be recognized as income in future years, has been presented as deferred income in the accompanying balance sheets. There was no deferred income associated with clinical trials or contract manufacturing as of December 31, 2019 or 2018.
Deferred rent:
Rent expense on non-cancelable facility leases containing known future scheduled rent increases is recorded on a straight-line basis over the term of the respective leases. The excess of rent expense over rent paid is accounted for as deferred rent. Annual decreases in deferred rent are recorded as a reduction of general and administrative expenses in the accompanying statements of operations. Because of the adoption of Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, “Leases (Topic 842)” in 2019, deferred rent was offset against the right-of-use (ROU) asset as of January 1, 2019 (see New Accounting Pronouncements). As of December 31, 2018, the deferred rent balance associated with straight-line rent was $334,000.
Amounts received from the landlord as reimbursement for costs incurred by the Company on lease space buildout efforts are accounted for as deferred rent. These amounts are amortized on a straight-line basis over the term of the respective leases and recorded as a reduction of general and administrative expenses in the accompanying statements of operations. As of December 31, 2018, the deferred rent balance associated with the landlord reimbursements was approximately $1,720,000 (see Note 8).
Revenue recognition:
On January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, which establishes a single and comprehensive framework on how much revenue is to be recognized, and when. The core principle is that a vendor should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the vendor expects to be entitled in exchange for those goods or services. Revenue will be recognized by a vendor when control over the goods or services is transferred to the customer. The application of the core principle in ASC 606 is carried out in five steps: Step 1 – Identify the contract with a customer: a contract is defined as an agreement (including oral and implied), between two or more parties, that creates enforceable rights and obligations and sets out the criteria for each of those rights and obligations. The contract needs to have commercial substance and it is probable that the entity will collect the consideration to which it will be entitled. Step 2 – Identify the performance obligations in the contract: a performance obligation in a contract is a promise (including implicit) to transfer a good or service to the customer. Each performance obligation should be capable of being distinct and is separately identifiable in the contract. Step 3 – Determine the transaction price: transaction price is the amount of consideration that the entity can be entitled to, in exchange for transferring the promised goods and services to a customer, excluding amounts collected on behalf of third parties. Step 4 – Allocate the transaction price to the performance obligations in the contract: for a contract that has more than one performance obligation, the entity will allocate the transaction price to each performance obligation separately, in exchange for satisfying each performance obligation. The acceptable methods of allocating the transaction price include adjusted market assessment approach, expected cost plus a margin approach, and, the residual approach in limited circumstances. Discounts given should be allocated proportionately to all performance obligations unless certain criteria are met and reallocation of changes in standalone selling prices after inception is not permitted. Step 5 – Recognize revenue as and when the entity satisfies a performance obligation: the entity should recognize revenue at a point in time, except if it meets any of the three criteria, which will require recognition of revenue over time: the entity’s performance creates or enhances an asset controlled by the customer, the customer simultaneously receives and consumes the benefit of the entity’s performance as the entity performs, and the entity does not create an asset that has an alternative use to the entity and the entity has the right to be paid for performance to date. The Company recognizes grant revenue when the performance obligation is met. The Company defines a performance obligation being met when the grant related expense is incurred or supplies, and materials are received. For clinical trial income the Company recognizes revenue when the performance obligation is met; for this revenue source the performance obligation is met when the participant has received the therapy. Contract manufacturing revenue is recognized when the performance obligation is met; for this revenue source the performance obligation being met when the contractual obligation and/or statement of work has been met.
F-9
Revenue by source, for the years ended:
December 31,
2019 |
December 31,
2018 |
|||||||
Contract Manufacturing Revenue | $ | 290,922 | $ | - | ||||
Clinical trial income | 1,199,500 | 900,000 | ||||||
National Institutes of Health - Grant | 2,236,471 | 372,275 | ||||||
Alzheimer’s Association - Grant | 1,163,677 | 300,000 | ||||||
Maryland – TEDCO - Grant | 748,896 | 562,500 | ||||||
$ | 5,639,466 | $ | 2,134,775 |
Cost of revenues:
The Company records cost of revenues based on expenses directly related to revenue. For grants the Company records allocated expenses for research and development costs to a grant as a cost of revenues. For the clinical trial income directly related expenses for that program are allocated and accrued as incurred. These expenses are similar to as described in the research and development expense note.
Research and development expense:
Research and development costs are charged to expense when incurred in accordance with FASB ASC 730, Research and Development. Research and development include costs such as clinical trial expenses, contracted research and license agreement fees with no alternative future use, supplies and materials, salaries, share-based compensation, employee benefits, property and equipment depreciation and allocation of various corporate costs. The Company accrues for costs incurred by external service providers, including contract research organizations and clinical investigators, based on its estimates of service performed and costs incurred. These estimates include the level of services performed by the third parties, patient enrollment in clinical trials, administrative costs incurred by the third parties, and other indicators of the services completed. Based on the timing of amounts invoiced by service providers, the Company may also record payments made to those providers as prepaid expenses that will be recognized as expense in future periods as the related services are rendered.
Concentrations of credit risk:
Financial instruments which potentially subject the Company to credit risk consist principally of cash and cash equivalents, and accounts and grants receivable. Cash and cash equivalents are held in United States financial institutions. At times, the Company may maintain balances in excess of the federally insured amounts.
Income taxes:
The Company is treated as a partnership for federal and state income tax purposes. Consequently, the Company passes its earnings and losses through to its members based on the terms of the Company’s Operating Agreement. Accordingly, no provision for income taxes is recorded in the accompanying financial statements.
The Company recognizes the tax benefits from uncertain tax positions that the Company has taken or expects to take on a tax return. In the unlikely event an uncertain tax position exists in which the Company could incur income taxes, the Company would evaluate whether there is a probability that the uncertain tax position taken would be sustained upon examination by a taxing authority. Reserves for uncertain tax positions would then be recorded if the Company determined it is probable that either a position would not be sustained upon examination or a payment would have to be made to a taxing authority and the amount was reasonably estimable. As of December 31, 2019, the Company does not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authority. It is the Company’s policy to expense any interest and penalties associated with its tax obligations when paid.
F-10
Equity-based compensation:
The Company accounts for equity-based compensation expense by the measurement and recognition of compensation expense for unit-based awards based on estimated fair values on the date of grant. The fair value of the options are estimated at the date of the grant using a Black-Scholes option-pricing model.
The Black-Scholes option-pricing model requires the input of highly subjective assumptions, the most significant of which are the expected unit price volatility, the expected life of the option award, the risk-free rate of return, and dividends during the expected term. Because the option-pricing model is sensitive to changes in the input assumptions, different determinations of the required inputs may result in different fair value estimates of the options.
As the Company’s units do not trade on an active market, the Company estimates the fair value of its membership units by using the Black-Scholes option-pricing model. Volatility is a measure of the amount by which a financial variable, such as a unit price, has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. Given the Company’s limited historical data, the Company utilizes the average historical volatility of publicly traded companies that are similar in the same industry. The risk-free interest rate is the average U.S. treasury rate (having a term that most closely approximates the expected life of the option) for the period in which the option was granted. The expected life is the period of time that the options granted are expected to remain outstanding. Options granted have a maximum term of ten years. The Company had insufficient historical data to utilize in determining its expected life assumptions and, therefore, uses the simplified method for determining expected life.
New accounting pronouncements:
In May 2014, the FASB issued ASU 2014-09 on “Revenue from Contracts with Customers” and the additional related ASUs (“ASC 606”) which provided for a single, principles-based model for revenue recognition and replaced the existing revenue recognition guidance. The Company adopted ASC 606 on January 1, 2018. ASC 606 required additional disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and estimates and changes in those estimates. It permitted the use of either a retrospective or cumulative effect transition method. The Company applied the modified retrospective approach, with no impact on its financial statements. See Note 2. “Revenue Recognition” for additional information.
In February 2016, the FASB issued ASU 2016-02 “Leases”, which amended leasing guidance by requiring companies to recognize a right-of-use (“ROU”) asset and a lease liability for all operating and capital (finance) leases with lease terms greater than twelve months. The lease liability is equal to the present value of lease payments. The lease asset is based on the lease liability, subject to adjustment, such as for initial direct costs. For income statement purposes, leases continue to be classified as operating or capital (finance), with lease expense in both cases calculated substantially the same as under the prior leasing guidance. The Company adopted the new guidance on January 1, 2019. Adoption resulted in the recognition of ROU assets and lease liabilities on the financial statements. Based on the Company’s lease portfolio as of December 31, 2019, which consisted solely of operating leases, the Company recognized approximately $2,294,000 of ROU assets and $4,138,000 of lease liabilities on its balance sheet as of December 31, 2019. Refer to Note 5 (Leases) for further details on leases.
In November 17, 2016 the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. It is intended to reduce diversity in the presentation of restricted cash and restricted cash equivalents in the statement. The statement requires that restricted cash and restricted cash equivalents be included as components of total cash and cash equivalents as presented on the statement of cash flows. The adoption did not have a material effect on the Company’s financial statements.
In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendment of ASU 2018-02 states an entity may elect to reclassify the income tax effects of the Tax Cuts and Jobs Act of 2017 (the “Tax Cuts and Jobs Act”) on items within accumulated other comprehensive income to retained earnings. The amendments in this update are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. The adoption did not have a material effect on the Company’s financial statements.
F-11
Except as noted above, the guidance issued by the FASB during the current year is not expected to have a material effect on the Company’s financial statements.
A variety of proposed or otherwise potential accounting standards are currently under consideration by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, management has not yet determined the effect, if any that the implementation of such proposed standards would have on the Company’s financial statements.
3. Property and Equipment, Net
Major components of property and equipment as of December 31, 2019 and 2018 are as follows:
Useful Lives | 2019 | 2018 | |||||||||
Leasehold improvements | 10 years | $ | 4,299,658 | $ | 4,299,658 | ||||||
Furniture/Lab equipment | 7 years | 1,937,224 | 1,802,152 | ||||||||
Computer equipment | 5 years | 14,307 | 14,307 | ||||||||
Software/Website | 3 years | 38,392 | 38,392 | ||||||||
6,289,581 | 6,154,509 | ||||||||||
Less accumulated depreciation and amortization | 2,101,178 | 1,393,994 | |||||||||
Property and equipment, net | $ | 4,188,403 | $ | 4,760,515 |
Depreciation and amortization expense amounted to approximately $694,000, for the years ended December 31, 2019 and 2018.
4. Intangible Assets, Net
Major classifications of intangible assets as of December 31, 2019 are as follows:
Useful Lives | Cost |
Accumulated
Amortization |
Total | |||||||||||||
License agreements | 20 years | $ | 1,233,046 | $ | (216,403 | ) | $ | 1,016,643 | ||||||||
Patents | - | 359,010 | - | 359,010 | ||||||||||||
Trademarks | - | 104,403 | - | 104,403 | ||||||||||||
$ | 1,696,459 | $ | (216,403 | ) | $ | 1,480,056 |
Major classifications of intangible assets as of December 31, 2018 are as follows:
Useful Lives | Cost |
Accumulated
Amortization |
Total | |||||||||||||
License agreements | 20 years | $ | 1,231,506 | $ | (154,751 | ) | $ | 1,076,755 | ||||||||
Patents | - | 192,867 | - | 192,867 | ||||||||||||
Trademarks | - | 75,885 | - | 75,885 | ||||||||||||
$ | 1,500,258 | $ | (154,751 | ) | $ | 1,345,507 |
Amortization expense related to intangible assets totaled approximately $74,000 and $51,000 for the years ended December 31, 2019 and 2018, respectively.
F-12
Future amortization expense for intangible assets as of December 31, 2019 is as follows:
Year Ending December 31, | Amount | |||
2020 | $ | 62,000 | ||
2021 | 62,000 | |||
2022 | 62,000 | |||
2023 | 62,000 | |||
2024 | 62,000 | |||
Thereafter | 706,643 | |||
Total | $ | 1,016,643 |
5. LEASES
With the implementation of ASU 2016-02, “Leases (Topic 842)”, the Company recorded a ROU asset and a lease liability. The implementation required the analysis of certain criteria in determining its treatment. The Company determined that its corporate office lease met those criteria. The Company’s corporate lease expires in March 2027. The Company implemented the guidance using the alternative transition method. Under this alternative, the effective date would be the date of initial application, which was January 1, 2019. The Company analyzed the lease at its effective date and calculated an initial lease payment amount of $5,623,750 with a present value of $4,600,422 using a 5% discount. In accordance with the guidance, the previously recorded deferred rent payments were offset against the ROU asset at the time of adoption. As of December 31, 2019, the ROU asset and lease liability were approximately $2,294,000 and $4,138,000, respectively.
Approximate future minimum payments under the operating leases as of December 31, 2019 are as follows:
Year Ending December 31, | Amount | |||
2020 | $ | 642,000 | ||
2021 | 656,000 | |||
2022 | 671,000 | |||
2023 | 686,000 | |||
2024 | 702,000 | |||
Thereafter | 1,639,000 | |||
Total | 4,996,000 | |||
Less: Interest | 858,000 | |||
Present Value of Lease Liability | $ | 4,138,000 |
During 2019, the Company paid $681,677 towards the amortization of the lease liability.
The cumulative effect of initially applying the new guidance had no significant impact on the opening balance of members’ equity. The Company does not expect the guidance to have a material impact on its net earnings in future periods. The Company elected the practical expedients permitted under the transition guidance within the new standards, which allowed the Company to carry forward the historical lease classification.
6. Members’ Equity
On November 20, 2014, the Company issued 1,000,000 Series A common membership units (“Series A Units”) to its co-founder and CSO in consideration for his contribution of certain intellectual property rights to the Company. The Company estimated the value of the intellectual property rights at $25,000,000 and reflected that value as the co-founder and CSO’s capital contribution in the Company’s Operating Agreement, but in accordance with U.S. GAAP, no amount has been recorded in the Company’s financial statements. That treatment for U.S. GAAP purposes is separate from and is not intended to reduce or limit in any way the amount of, the co-founder and CSO’s capital contribution as reflected in the Company’s Operating Agreement. On the same date, the Company also issued 1,000,000 Series B common membership units (“Series B Units”) to the financing member for an initial cash contribution of $4,000,000 and the commitment to make subsequent cash contributions of up to $21,000,000. As of December 31, 2019, and 2018, the financing member had contributed $24,900,000 and $24,700,000, respectively, of the $25,000,000 total commitment.
F-13
During 2018, the Company issued 167 Series C Units with an aggregate value of $10,000 as payment for a consulting agreement with a member of the Board of Directors. The Company also issued 3,640 Series C Units for $455,000.
During 2019, the Company issued 1,320 Series C Units with an aggregate value of $103,796 as payment for a consulting agreement. The Company also issued 3,334 Series C Units for $200,000.
As of December 31, 2019, there were 1,000,000 Series A Units, 1,000,000 Series B Units, and 43,695 Series C Units issued and outstanding.
The rights and preferences of the Series A, B, and C Units are as follows:
Voting:
The holders of Series A and Series B Units are entitled to one vote on all matters upon which the members have the right to vote under the operating agreement. The holders of Series C Units do not have the right to vote on such matters.
Notwithstanding anything to the contrary in the operating agreement, the holders of Series A Units as a separate class, have the sole approval and veto authority on behalf of all members on all Company scientific matters.
Pre-emptive rights:
The holders of the Company’s A and B units have the pre-emptive right to purchase a pro-rata portion of any new units offered for sale by the Company in order to maintain their respective ownership interest in the Company.
Distributions:
The holders of the Company’s units are entitled to receive distributions when declared by the Board of Directors and paid by the Company. The first $50,000,000 of distributions are paid to the holders of Series A and Series B Units in proportion to the holder’s respective ownership interest and all remaining amounts to members holding common units and Incentive Units pro rata in proportion to their aggregate holdings of common units and Incentive Units treated as one class of units.
7. Equity Incentive Plan
On July 18, 2017, the Company adopted the Equity Incentive Plan (the “Plan”). The Plan allows certain employees, officers, directors and consultants of the Company, who provide services to the Company, the opportunity to participate in options to acquire the Company’s membership units at predetermined prices. The aggregate number of units that may be issued under the Plan is 200,000 Series C Units. As of December 31, 2019, and 2018, the Company had 171,115 and 164,916, respectively, available for future issuance.
A summary of option activity for the years ended December 31, 2019 and 2018 is as follows:
Units |
Weighted
Average Exercise Price |
Units
Vested |
||||||||||
Outstanding December 31, 2017 | 15,245 | $ | 60.00 | 6,993 | ||||||||
Granted | 19,839 | $ | 60.00 | - | ||||||||
Exercised | - | - | - | |||||||||
Forfeited/Expired | 1,835 | $ | 60.00 | - | ||||||||
Outstanding December 31, 2018 | 33,249 | $ | 60.00 | 26,821 | ||||||||
Granted | - | - | - | |||||||||
Exercised | - | - | - | |||||||||
Forfeited/Expired | 4,364 | $ | 60.00 | - | ||||||||
Outstanding December 31, 2019 | 28,885 | $ | 60.00 | 27,397 |
F-14
As of December 31, 2019, the Company had 1,488 options unvested.
The weighted-average grant date fair value of the options granted as of December 31, 2019 and 2018 was estimated at $884,000, respectively, as there were no options granted in 2019, using the Black-Scholes option-pricing model based on the following weighted-average assumptions:
December 31,
2019 |
December 31,
2018 |
|||||
Dividend yield | 0.00% | 0.00% | ||||
Expected volatility | 65.00% - 85.00% | 65.00% - 85.00% | ||||
Risk-free interest rate | 1.76% - 2.69% | 1.76% - 2.69% | ||||
Expected life (in years) | 5.33-9.1 | 5.33-9.1 | ||||
Contractual life remaining (in years) | 7.8 | 9.1 |
Non-cash equity-based compensation expense relating to these options was calculated by amortizing the value calculated over the vesting period. For the years ended December 31, 2019 and 2018, the equity-based compensation expense relating to these options amounted to approximately $137,000 and $424,000, respectively, which is included in the research and development and general and administrative expenses in the accompanying statements of operations for the years ended December 31, 2019 and 2018.
At December 31, 2019 and 2018, there is approximately $40,000 and $222,000, respectively, of unrecognized compensation costs with respect to options outstanding, which will be charged to operations over 2 years.
8. Commitments and Contingencies
Master Services Agreements:
During 2018, the Company entered into several master services agreements in order to conduct its clinical trials and manage clinical research programs and clinical development services on behalf of the Company. The Company entered into agreements or amended current agreements with total budget expenditure for periods beyond and including 2019 of over $3,000,000. Many of these expenditures are covered under grants awarded to the Company. Amounts expensed pursuant to this agreement approximated $2,501,000 and $2,325,000 during the years ended December 31, 2019 and 2018, respectively, and are included in research and development in the accompanying statements of operations.
Consulting Services Agreement:
On November 20, 2014, the Company entered into a ten-year consulting services agreement with its CSO. Under the agreement, the Company expensed $270,000 in 2019 and 2018. The compensation payments are for scientific knowledge, medical research, technical knowledge, skills, and abilities to be provided by the CSO to further develop the intellectual property rights assigned by the CSO to the Company. This agreement requires the CSO to also assign to the Company the exclusive right, title, and interest on any work product developed from his efforts during the term of this agreement. During the first half of 2019, the CSO deferred a majority of his compensation.
F-15
Technology Services Agreement:
On March 27, 2015, the Company entered into a technology services agreement with a related party for use of information technology services. The Company agreed to issue the related party equity incentive units in the amount equal to 50% of the charges for invoiced services, with such equity to be issued annually on or about the anniversary date of the agreement. On November 22, 2019 the Company issued 820 Series C Units as payment for $73,796 of accrued technology services. As of December 31, 2019, and 2018, the Company owed $5,000 and $52,000, respectively, pursuant to this agreement, which is included in accounts payable in the accompanying 2019 and 2018 balance sheets.
Exclusive Licensing Agreements:
On November 20, 2014, the Company entered into an exclusive license agreement with the University of Miami (“UM”) for the use of certain cell aging-related frailty technology rights developed by the CSO while employed at UM. The Company recorded the value of the membership units issued to obtain this license agreement as an intangible asset. The Company is required to pay UM up to 3% of net sales on products or services developed from the technology. The agreement extends for up to 20 years from the last date a product or process is commercialized from the technology. Under the agreement, the Company is required to pay an annual fee to UM. Annual fees, which were recorded in the sales line of the statements of operations, paid in 2019 and 2018 were $50,000 and $40,000, respectively. The Company will be required to pay a $50,000 licensing fee annually until the expiration or termination of the agreement. Such license fee may be offset by payments made for royalties or milestones. In addition, on November 14, 2014, as required by the license agreement the Company issued 20,000 Series C membership units valued at $500,000 to UM. The Company recorded this $500,000 as an intangible asset that is amortized over the life of the license agreement which was defined as 20 years.
On December 11, 2017, the November 20, 2014 agreement with UM was amended. The amendment provided that for a $5,000 fee the dates of the milestone completions were amended and replaced as follows: (a) by December 31, 2021, to have completed Phase 2 clinical trials for the products; and (b) by June 1, 2025, to have completed Phase 3 clinical trials for products. In addition, one-year extensions may be granted on these milestone dates by making a payment of $5,000. Upon completion of the Phase 2 clinical trials, a milestone payment of $250,000 is due. Upon completion of the Phase 3 clinical trials, a milestone payment of $750,000 is due.
On December 22, 2016, the Company entered into an exclusive license agreement with an affiliated entity of the CSO for the use of CD271+ technology. The Company recorded the value of the cash consideration and membership units issued to obtain this license agreement as an intangible asset. The Company is required to pay as royalty, 1% of the annual net sales of the licensed product(s) used, leased, or sold by or for licensee or its sub-licensees. If the Company sublicenses the technology, it is also required to pay an amount equal to 10% of the net sales of the sub-licensees. In addition, on December 23, 2016, as required by the license agreement the Company issued 10,000 Series C membership units valued at $526,684. The Company recorded this $526,684 as an intangible asset that is amortized over the life of the license agreement which was defined as 20 years. Further, expenses related to the furtherance of the CD271+ technology is being capitalized and amortized as incurred over 20 years.
The agreement is to remain in effect until the date all issued patents and filed patent applications have expired or been abandoned, or 20 years after the date of the last commercialized product or process arising from the patent rights. There were no license fees due during the years ended December 31, 2019 and 2018 pertaining to this agreement. The Company paid legal fees of approximately $25,000 and $53,000 in 2019 and 2018, respectively, in connection with the patent prosecution, issuance, and maintenance fees related to CD271+.
9. Related Party Transactions
The Company utilizes two related entities for information technology and web development and maintenance services. Payment of invoices for services provided are made in cash or through the issuance of the Company’s Series C Units as mutually agreed to by the parties. Amounts incurred amounted to approximately $93,000 and $106,000 during the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, and 2018, the Company owed $8,000 and $52,000 to the related entities and these amounts are included in accounts payable in the accompanying 2019 and 2018 balance sheets. During 2019 and 2018, the Company issued 1,320 and 167 Series C Units for $103,796 and $10,000 in accrued expenses, respectively.
F-16
10. Employee Benefit Plan
The Company sponsors a defined contribution employee benefit plan (the “Plan”) under the provisions of Section 401(k) of the Internal Revenue Code. The Plan covers substantially all full-time employees of the Company who have completed one year of service. Contributions to the Plan by the Company are at the discretion of the stockholder.
The Company contributed approximately $39,000 and $35,000 to the Plan during the years ended December 31, 2019 and 2018, respectively.
11. Subsequent Events
The Company has evaluated subsequent events through September 16, 2020, which is the date the financial statements were available for issuance.
During 2020, the Company issued 18,333 series C units in exchange for $1,100,000.
On April 16, 2020, the Company received a loan from the Small Business Administration (SBA) pursuant to the Paycheck Protection Program (PPP) as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in the amount of $300,390. The loan bears interest at a rate of 1.00%, and matures in 24 months, with the first ten (10) months of principal and interest payments being deferred, with interest accruing, then converting to monthly principal and interest payments, amortized over eighteen (18) months, at the interest rate provided herein, for the remaining months. Lender will apply each payment first to pay interest accrued to the day Lender received the payment, then to bring principal current, and will apply any remaining balance to reduce principal. Payments must be made on the same day as the date of this Note in the months they are due. Lender shall adjust payments at least annually as needed to amortize principal over the remaining term of the Note. Under the provisions of the PPP, the loan amounts will be forgiven as long as: the loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and employee and compensation levels are maintained. In addition, payroll costs are capped at $100,000 on an annualized basis for each employee. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. The Company also received $10,000 from the SBA for the Economic Relief Fund; this amount does not need to be repaid.
On May 12, 2020, the Company received a loan from the SBA pursuant to the Disaster Recovery Plan as part of the CARES Act in the amount of $150,000. This loan will require payments beginning on May 12, 2021 of $731 per month. The note will mature in 30 years and bears an interest rate of 3.75%.
The coronavirus outbreak could adversely impact the Company’s ability to conduct business in the future. In December 2019, it was first reported that there had been an outbreak of a novel strain of coronavirus, SARS-CoV-2, in China. As the coronavirus continues to spread outside of China, including throughout the United States, the Company may experience disruptions that could severely impact its business including:
● | impact to the financial markets; | |
● | disruption in the ability to provide product in foreign markets; | |
● | disruption on the ability to source materials; | |
● | disruption in the ability to manufacture our product; | |
● | delays or difficulties in completing the Company’s regulatory work; | |
● | limitations on the Company’s employee resources ability to work, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; and | |
● | additional repercussions on the Company’s our ability to operate its business. |
F-17
The
global outbreak of coronavirus continues to rapidly evolve. The extent to which the coronavirus impacts the Company’s results
will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge
concerning the severity of the coronavirus, the ultimate geographic spread of the coronavirus, the duration of the outbreak, travel
restrictions imposed by countries the Company conducts business, business closures or business disruption in the world, a reduction
in time spent out of home and the actions taken throughout the world, including in the Company’s markets, to contain the
coronavirus or treat its impact. The future impact of the outbreak is highly uncertain and cannot be predicted, and the Company
cannot provide any assurance that the outbreak will not have a material adverse impact on the Company’s operations or future
results or filings with regulatory authorities. The extent of the impact to the Company, if any, will depend on future developments,
including actions taken to contain the coronavirus.
F-18
BALANCE SHEETS
(Unaudited)
September 30,
2020 |
December 31,
2019 |
|||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 1,393,831 | $ | 1,865,874 | ||||
Accounts and grants receivable | 665,554 | 451,458 | ||||||
Prepaid expenses and other current assets | 140,455 | 53,766 | ||||||
Total current assets | 2,199,840 | 2,371,098 | ||||||
Noncurrent assets | ||||||||
Property and equipment, net | 3,789,894 | 4,188,403 | ||||||
Intangible assets, net | 1,509,883 | 1,480,056 | ||||||
Right-of-use (ROU) asset | 2,088,851 | 2,293,965 | ||||||
Other assets | 226,780 | 250,893 | ||||||
Total noncurrent assets | 7,615,408 | 8,213,317 | ||||||
TOTAL ASSETS | $ | 9,815,248 | $ | 10,584,415 | ||||
LIABILITIES | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 1,520,750 | $ | 1,154,732 | ||||
Current portion of lease liability | 504,309 | 485,785 | ||||||
Accrued expenses | 458,891 | 304,567 | ||||||
Short-term note payable | 57,204 | - | ||||||
Current portion of loans | 100,169 | - | ||||||
Deferred income | 241,961 | 541,793 | ||||||
Total current liabilities | 2,883,284 | 2,486,877 | ||||||
Long-term liabilities | ||||||||
Long-term loans | 350,221 | - | ||||||
Lease liability | 3,271,915 | 3,652,496 | ||||||
Total long-term liabilities | 3,622,136 | 3,652,496 | ||||||
TOTAL LIABILITIES | 6,505,420 | 6,139,373 | ||||||
Commitments and contingencies | ||||||||
MEMBERS’ EQUITY | ||||||||
Total members’ equity | 3,309,828 | 4,445,042 | ||||||
Total liabilities and members’ equity | $ | 9,815,248 | $ | 10,584,415 |
The accompanying notes are an integral part of the unaudited financial statements.
F-19
STATEMENTS OF OPERATIONS
(Unaudited)
FOR
THE NINE MONTHS ENDED
SEPTEMBER 30, |
||||||||
2020 | 2019 | |||||||
REVENUES | ||||||||
Grant income | $ | 3,602,258 | $ | 2,628,587 | ||||
Clinical trial income | 792,000 | 961,500 | ||||||
Contract manufacturing income | 55,426 | 206,122 | ||||||
Total revenues | 4,449,684 | 3,796,209 | ||||||
Cost of revenues | 3,152,446 | 2,649,366 | ||||||
Gross profit | 1,297,238 | 1,146,843 | ||||||
EXPENSES | ||||||||
Selling and marketing | 140,253 | 180,418 | ||||||
Research and development | 1,522,707 | 1,449,275 | ||||||
General and administrative | 2,029,410 | 2,041,221 | ||||||
Total expenses | 3,692,370 | 3,670,914 | ||||||
Operating loss | (2,395,132 | ) | (2,524,071 | ) | ||||
OTHER INCOME AND (EXPENSES) | ||||||||
Interest income | 139 | 2,531 | ||||||
Interest expense | (3,666 | ) | (104 | ) | ||||
Other income | 33,871 | 35,462 | ||||||
Total other income and (expenses) | 30,344 | 37,889 | ||||||
Net loss | (2,364,788 | ) | (2,486,182 | ) |
The accompanying notes are an integral part of the unaudited financial statements.
F-20
STATEMENTS OF MEMBERS’ EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (Unaudited)
Series A Units | Series B Units | Series C Units |
Unit
Subscription Receivable |
Total
Members’ Equity |
||||||||||||||||||||||||||||
Number of
Units |
Amount |
Number of
Units |
Amount |
Number
of
Units |
Amount | Amount | Amount | |||||||||||||||||||||||||
Balance – December 31, 2019 | 1,000,000 | $ | 250,000 | 1,000,000 | $ | 1,772,704 | 43,695 | $ | 2,572,338 | $ | (150,000 | ) | $ | 4,445,042 | ||||||||||||||||||
Series C units issued for cash | - | - | - | - | 18,335 | 1,100,000 | - | 1,100,000 | ||||||||||||||||||||||||
Issuance of Series C units as payment for amounts accrued | - | - | - | - | 734 | 44,000 | - | 44,000 | ||||||||||||||||||||||||
Equity-based compensation | - | - | - | - | - | 35,574 | - | 35,574 | ||||||||||||||||||||||||
Cash received pursuant to subscription receivable | - | - | - | - | - | - | 50,000 | 50,000 | ||||||||||||||||||||||||
Net loss | - | - | - | (2,341,140 | ) | - | (23,648 | ) | - | (2,364,788 | ) | |||||||||||||||||||||
Balance – September 30, 2020 |
1,000,000 | $ | 250,000 | 1,000,000 | $ | (568,436 | ) | 62,764 | $ | 3,728,264 | $ | (100,000 | ) | $ | 3,309,828 | |||||||||||||||||
Balance – December 31, 2018 | 1,000,000 | 250,000 | 1,000,000 | 4,702,983 | 39,041 | 2,161,294 | (300,000 | ) | 6,814,277 | |||||||||||||||||||||||
Equity-based compensation | - | - | - | - | - | 84,385 | - | 84,385 | ||||||||||||||||||||||||
Cash received pursuant to subscription receivable | - | - | - | - | - | - | 200,000 | 200,000 | ||||||||||||||||||||||||
Net loss | - | - | - | (2,461,320 | ) | - | (24,862 | ) | - | (2,486,182 | ) | |||||||||||||||||||||
Balance – September 30, 2019 |
1,000,000 | $ | 250,000 | 1,000,000 | $ | 2,241,663 | 39,041 | $ | 2,220,817 | $ | (100,000 | ) | $ | 4,612,480 |
The accompanying notes are an integral part of the unaudited financial statements.
F-21
STATEMENTS
OF CASH FLOWS
(Unaudited)
FOR
THE
|
||||||||
2020 | 2019 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (2,364,788 | ) | $ | (2,486,182 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 589,567 | 574,062 | ||||||
Equity-based compensation | 35,574 | 84,385 | ||||||
Equity issued for consulting services | 44,000 | |||||||
Changes in operating activities and liabilities: | ||||||||
Accounts and grants receivable | (214,096 | ) | (291,068 | ) | ||||
Prepaid expenses and other current assets | (36,689 | ) | 30,245 | |||||
Other assets | 24,113 | - | ||||||
Accounts payable | 366,019 | (523,192 | ) | |||||
Deferred income | (299,832 | ) | (36,600 | ) | ||||
Accrued expenses | 154,292 | 216,543 | ||||||
ROU asset and lease liability | (156,678 | ) | (156,000 | ) | ||||
Net cash used in operating activities | (1,858,518 | ) | (2,587,807 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Acquisition of property and equipment | (144,520 | ) | (9,303 | ) | ||||
Acquisition of intangible assets | (76,599 | ) | (96,197 | ) | ||||
Net cash used in investing activities |
(221,119 | ) | (105,500 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of Series C units | 1,100,000 | - | ||||||
Proceeds from long-term loans | 450,390 | - | ||||||
Proceeds from short-term note payable | 57,204 | - | ||||||
Subscription receivable payments | 50,000 | 200,000 | ||||||
Prepaid Financing fees | (50,000 | ) | - | |||||
Net cash provided by financing activities | 1,607,594 | 200,000 | ||||||
Net decrease in cash and cash equivalents | (472,043 | ) | (2,493,307 | ) | ||||
CASH AND CASH EQUIVALENTS – Beginning of Period | 1,865,874 | 4,031,728 | ||||||
CASH AND CASH EQUIVALENTS – End of Period | $ | 1,393,831 | $ | 1,538,421 |
The accompanying notes are an integral part of the unaudited financial statements.
F-22
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Business, Basis of Presentation, and Liquidity
Nature of business:
Longeveron LLC (the “Company”) was incorporated as a Delaware limited liability company on October 9, 2014 and was authorized to transact business in Florida on December 15, 2014. The Company is engaged in developing and commercializing biological solutions for the aging from its leased facilities in Miami, Florida.
Basis of presentation:
The financial statements of the Company were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Liquidity:
Since inception, the Company has been engaged in organizational activities, including raising capital, and research and development activities. The Company does not yet have a product that has been approved by the U.S. Food and Drug Administration (“FDA”), has only generated revenues from grants, clinical trials and contract manufacturing. The Company has not yet achieved profitable operations or generated positive cash flows from operations. The Company intends to continue its efforts to raise additional equity financing, develop its intellectual property, and secure regulatory approvals to commercialize its products. There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. Further, the Company’s future operations are dependent on the success of the Company’s efforts to raise additional capital, its research and commercialization efforts, regulatory approval, and, ultimately, the market acceptance of the Company’s products. These financial statements do not include adjustments that might result from the outcome of these uncertainties.
2. Summary of Significant Accounting Policies
Use of estimates:
The presentation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents:
The Company considers cash to consist of cash on hand and temporary investments having an original maturity of 90 days or less that are readily convertible into cash.
Inventory:
The Company will begin carrying inventory of its biological products on its balance sheets following commercial launch of such products. Inventory will consist of raw materials, biological products in process, and finished goods available for sale. The Company will determine its inventory values using the average cost method. Inventory will be valued at the lower of cost or net realizable value and will exclude units that the Company anticipates distributing for clinical evaluation. As of September 30, 2020, and December 31, 2019, all of the Company’s biological products were anticipated to be distributed for clinical evaluation.
F-23
The Company does not currently carry any inventory for its biological products, as it has yet to launch a product for commercial distribution. Historically the Company’s operations have focused on clinical trials and discovery efforts, and accordingly, manufactured clinical doses of biological product candidates were expensed as incurred, consistent with the accounting for all other research and development costs. Once the Company begins commercial distribution, all newly manufactured biological products will be allocated either for use in commercial distribution, which will be carried as inventory and not expensed, or for research and development efforts, which will continue to be expensed as incurred.
Accounts and grants receivable:
Accounts and grants receivable include amounts due from customers, granting institutions and others. The amounts as of September 30, 2020 and December 31, 2019, are certain to be collected and no amount has been recognized for doubtful accounts. The Alzheimer’s association and Maryland-TEDCO generally advance grant funds and therefore a receivable is not usually recognized. In addition, for the Clinical trial income, most participants pay in advance of treatment. Advanced grant funds and prepayments for the Clinical trial income are recorded to deferred income.
Accounts and grants receivable by source, as of:
September 30,
|
December 31,
|
|||||||
National Institutes of Health - Grant | $ | 603,128 | $ | 342,292 | ||||
Contract Manufacturing | 47,426 | 84,800 | ||||||
Clinical Trial receivable | 15,000 | - | ||||||
Alzheimer’s Association - Grant | - | 12,183 | ||||||
Maryland – TEDCO - Grant | - | 12,183 | ||||||
$ | 665,554 | $ | 451,458 |
Property and equipment:
Property and equipment, including improvements that extend useful lives of related assets, are valued at cost, while maintenance and repairs are charged to operations as incurred. Depreciation is calculated using the straight-line method based on the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the original term of the lease. Depreciation expense is recorded in the research and development line of the Statement of Operations as the assets are primarily related to the Company’s clinical programs.
Intangible assets:
Intangible assets include payments on license agreements with the Company’s co-founder and chief scientific officer (“CSO”) and the University of Miami (“UM”) (see Note 8) and legal costs incurred related to patents and trademarks. License agreements have been recorded at the value of cash consideration and/or membership units transferred to the respective parties when acquired.
Payments on license agreements are amortized using the straight-line method over the estimated useful life of 20 years. Patents are amortized over their estimated useful life, once approved. The Company considers trademarks to have an indefinite useful life and evaluates them for impairment on an annual basis. Amortization expense is recorded in the research and development line of the Statement of Operations as the assets are primarily related to the Company’s clinical programs.
F-24
Impairment of Long-Lived Assets:
The Company evaluates long-lived assets for impairment, including property and equipment and intangible assets, when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Upon the occurrence of a triggering event, the asset is reviewed to assess whether the estimated undiscounted cash flows expected from the use of the asset plus the residual value from the ultimate disposal exceeds the carrying value of the asset. If the carrying value exceeds the estimated recoverable amounts, the asset is written down to the estimated fair value. Any resulting impairment loss is reflected on the statements of operations. Management determined that there was no impairment of long-lived assets during the nine months ended September 30, 2020 and 2019.
Deferred income:
The unearned portion of advanced grant funds and prepayments for Clinical trial income, which will be recognized as income when the Company meets the respective performance obligations, has been presented as deferred income in the accompanying balance sheets. For the nine months ended September 30, 2020 and 2019, the Company recognized $541,793 and $405,000, respectively, of funds that were previously classified as deferred income.
Revenue recognition:
The Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, which establishes a single and comprehensive framework on how much revenue is to be recognized, and when, effective January 1, 2018. The core principle is that a vendor should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the vendor expects to be entitled in exchange for those goods or services. Revenue will be recognized by a vendor when control over the goods or services is transferred to the customer. The application of the core principle in ASC 606 is carried out in five steps: Step 1 – Identify the contract with a customer: a contract is defined as an agreement (including oral and implied), between two or more parties, that creates enforceable rights and obligations and sets out the criteria for each of those rights and obligations. The contract needs to have commercial substance and it is probable that the entity will collect the consideration to which it will be entitled. Step 2 – Identify the performance obligations in the contract: a performance obligation in a contract is a promise (including implicit) to transfer a good or service to the customer. Each performance obligation should be capable of being distinct and is separately identifiable in the contract. Step 3 – Determine the transaction price: transaction price is the amount of consideration that the entity can be entitled to, in exchange for transferring the promised goods and services to a customer, excluding amounts collected on behalf of third parties. Step 4 – Allocate the transaction price to the performance obligations in the contract: for a contract that has more than one performance obligation, the entity will allocate the transaction price to each performance obligation separately, in exchange for satisfying each performance obligation. The acceptable methods of allocating the transaction price include adjusted market assessment approach, expected cost plus a margin approach, and, the residual approach in limited circumstances. Discounts given should be allocated proportionately to all performance obligations unless certain criteria are met and reallocation of changes in standalone selling prices after inception is not permitted. Step 5 – Recognize revenue as and when the entity satisfies a performance obligation: the entity should recognize revenue at a point in time, except if it meets any of the three criteria, which will require recognition of revenue over time: the entity’s performance creates or enhances an asset controlled by the customer, the customer simultaneously receives and consumes the benefit of the entity’s performance as the entity performs, and the entity does not create an asset that has an alternative use to the entity and the entity has the right to be paid for performance to date.
The Company recognizes revenue when performance obligations related to respective revenue streams are met. For Grant Revenue, the Company considers the performance obligation met when the grant related expenses are incurred, or supplies and materials are received. For Clinical trial income, the Company considers the performance obligation met when the participant has received the treatment. For Contract Manufacturing Revenue, the Company considers the performance obligation met when the contractual obligation and / or statement of work has been satisfied.
F-25
Revenue by source:
Nine Months Ended September 30, |
||||||||
2020 | 2019 | |||||||
National Institutes of Health - Grant | $ | 2,537,822 | $ | 1,362,993 | ||||
Clinical trial income | 792,000 | 961,500 | ||||||
Alzheimer’s Association - Grant | 1,037,992 | 768,044 | ||||||
Maryland – TEDCO - Grant | 26,444 | 497,550 | ||||||
Contract Manufacturing Revenue | 55,426 | 206,122 | ||||||
$ | 4,449,684 | $ | 3,796,209 |
Cost of revenues:
The Company records cost of revenues based on expenses directly related to revenue. For Grants the Company records allocated expenses for Research and development costs to a grant as a cost of revenues. For the Clinical trial income directly related expenses for that program are allocated and accrued as incurred. These expenses are similar to as described in the Research and development expense note.
Research and development expense:
Research and development costs are charged to expense when incurred in accordance with FASB ASC 730, Research and Development. Research and development include costs such as clinical trial expenses, contracted research and license agreement fees with no alternative future use, supplies and materials, salaries, share-based compensation, employee benefits, property and equipment depreciation and allocation of various corporate costs. The Company accrues for costs incurred by external service providers, including contract research organizations and clinical investigators, based on its estimates of service performed and costs incurred. These estimates include the level of services performed by the third parties, patient enrollment in clinical trials, administrative costs incurred by the third parties, and other indicators of the services completed. Based on the timing of amounts invoiced by service providers, the Company may also record payments made to those providers as prepaid expenses that will be recognized as expense in future periods as the related services are rendered.
Concentrations of credit risk:
Financial instruments which potentially subject the Company to credit risk consist principally of cash and cash equivalents, and accounts and grants receivable. Cash and cash equivalents are held in United States financial institutions. At times, the Company may maintain balances in excess of the federally insured amounts.
Income taxes:
The Company is treated as a partnership for U.S. federal and state income tax purposes. Consequently, the Company passes its earnings and losses through to its members based on the terms of the Company’s Operating Agreement. Accordingly, no provision for income taxes is recorded in the accompanying financial statements.
The Company recognizes the tax benefits from uncertain tax positions that the Company has taken or expects to take on a tax return. In the unlikely event an uncertain tax position exists in which the Company could incur income taxes, the Company would evaluate whether there is a probability that the uncertain tax position taken would be sustained upon examination by a taxing authority. Reserves for uncertain tax positions would then be recorded if the Company determined it is probable that either a position would not be sustained upon examination or a payment would have to be made to a taxing authority and the amount was reasonably estimable. As of September 30, 2020, and December 31, 2019, the Company does not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authority. It is the Company’s policy to expense any interest and penalties associated with its tax obligations when paid.
F-26
Equity-based compensation:
The Company accounts for equity-based compensation expense by the measurement and recognition of compensation expense for unit-based awards based on estimated fair values on the date of grant. The fair value of the options is estimated at the date of the grant using a Black-Scholes option-pricing model.
The Black-Scholes option-pricing model requires the input of highly subjective assumptions, the most significant of which are the expected unit price volatility, the expected life of the option award, the risk-free rate of return, and dividends during the expected term. Because the option-pricing model is sensitive to changes in the input assumptions, different determinations of the required inputs may result in different fair value estimates of the options.
The Company’s units do not trade on an active market. Volatility is a measure of the amount by which a financial variable, such as a unit price, has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. Given the Company’s limited historical data, the Company utilizes the average historical volatility of similar publicly traded companies that are in the same industry. The risk-free interest rate is the average U.S. treasury rate (having a term that most closely approximates the expected life of the option) for the period in which the option was granted. The expected life is the period of time that the options granted are expected to remain outstanding. Options granted have a maximum term of ten years. The Company had insufficient historical data to utilize in determining its expected life assumptions and, therefore, uses the simplified method for determining expected life.
New accounting pronouncements:
A variety of proposed or otherwise potential accounting standards are currently under consideration by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, management has not yet determined the effect, if any that the implementation of such proposed standards would have on the Company’s financial statements.
3. Property and Equipment, Net
Major components of property and equipment are as follows:
Useful Lives |
September 30,
2020 |
December 31,
2019 |
|||||||||
Leasehold improvements | 10 years | $ | 4,309,798 | $ | 4,299,658 | ||||||
Furniture/Lab equipment | 7 years | 2,071,605 | 1,937,224 | ||||||||
Computer equipment | 5 years | 14,307 | 14,307 | ||||||||
Software/Website | 3 years | 38,392 | 38,392 | ||||||||
Total property and equipment | 6,434,102 | 6,289,581 | |||||||||
Less accumulated depreciation and amortization | 2,644,208 | 2,101,178 | |||||||||
Property and equipment, net | $ | 3,789,894 | $ | 4,188,403 |
Depreciation and amortization expense amounted to approximately $542,000 and $518,000 for the nine months ended September 30, 2020 and 2019, respectively.
F-27
4. Intangible Assets, Net
Major components of intangible assets as of September 30, 2020 are as follows:
Useful Lives | Cost |
Accumulated
|
Total |
|||||||||||||
License agreements | 20 years | $ | 1,239,117 | $ | (263,174 | ) | $ | 975,943 | ||||||||
Patent costs | - | 417,482 | - | 417,482 | ||||||||||||
Trademark costs | - | 116,458 | - | 116,458 | ||||||||||||
$ | 1,773,057 | $ | (263,174 | ) | $ | 1,509,883 |
Major components of intangible assets as of December 31, 2019 are as follows:
Useful Lives | Cost |
Accumulated
|
Total | |||||||||||||
License agreements | 20 years | $ | 1,233,046 | $ | (216,403 | ) | $ | 1,016,643 | ||||||||
Patent costs | - | 359,010 | - | 359,010 | ||||||||||||
Trademark costs | - | 104,403 | - | 104,403 | ||||||||||||
$ | 1,696,459 | $ | (216,403 | ) | $ | 1,480,056 |
Amortization expense related to intangible assets totaled approximately $47,000 and $56,000 for the nine months ended September 30, 2020 and 2019, respectively.
Future amortization expense for intangible assets as of September 30, 2020 is as follows:
Year Ending December 31, | Amount | |||
2020 (three months) | $ | 16,000 | ||
2021 | 64,000 | |||
2022 | 64,000 | |||
2023 | 64,000 | |||
2024 | 64,000 | |||
Thereafter | 704,000 | |||
Total | $ | 976,000 |
5. LEASES
With the implementation of ASU 2016-02, “Leases (Topic 842)”, on January 1, 2019 the Company recorded a ROU asset and a lease liability related to its operating leases (there are no finance leases). The implementation required the analysis of certain criteria in determining its treatment. The Company determined that its corporate office lease met those criteria. The Company’s corporate lease expires in March 2027. The Company implemented the guidance using the alternative (modified retrospective) method. Under this alternative, the effective date would be the date of initial application, which was January 1, 2019. The Company analyzed the lease at its effective date and calculated a total initial lease payment amount of $5,623,750 with a present value of $4,600,422 using a 5% discount rate. In accordance with the guidance, the previously recorded deferred rent payments were offset against the ROU asset at the time of adoption. As of September 30, 2020, the ROU asset and lease liability were approximately $2,089,000 and $3,776,000, respectively. As of December 31, 2019, the ROU asset and lease liability were approximately $2,294,000 and $4,138,000, respectively.
F-28
Future minimum payments under the operating leases as of September 30, 2020 are as follows:
Year Ending December 31, |
Amount |
|||
2020 (three months) | $ | 160,000 | ||
2021 | 656,000 | |||
2022 | 671,000 | |||
2023 | 686,000 | |||
2024 | 702,000 | |||
Thereafter | 1,639,000 | |||
Total | 4,514,000 | |||
Less: Interest | 738,000 | |||
Present Value of Lease Liability | $ | 3,776,000 |
During the nine months ended September 30, 2020 and 2019, the Company incurred approximately $608,000 and $605,000, respectively of total lease costs that are included in the general and administrative expenses in the statements of operations.
On July 1, 2020, the Company entered into a sublease agreement for a portion of its leased space for a one year period ending June 30, 2021, with three optional one-year renewal periods, and $10,000 in monthly payments.
6. Members’ Equity
On August 18, 2020, the Company made a $50,000 payment to an investment banker to assist in financing efforts, which is presented within prepaid expenses and other current assets as of September 30, 2020. These costs will be charged against the gross proceeds of the offering when it occurs.
On November 20, 2014, the Company issued 1,000,000 Series A common membership units (“Series A Units”) to its co-founder and CSO in consideration for his contribution of certain intellectual property rights to the Company. The Company estimated agreed-upon value of the intellectual property rights at $25,000,000 and reflected that value as the co-founder and CSO’s capital contribution in the Company’s Operating Agreement, but in accordance with U.S. GAAP, no amount has been recorded in the Company’s financial statements. That treatment for U.S. GAAP purposes is separate from and is not intended to reduce or limit in any way the amount of, the co-founder and CSO’s capital contribution as reflected in the Company’s Operating Agreement. On the same date, the Company also issued 1,000,000 Series B common membership units (“Series B Units”) to the financing member for an initial cash contribution of $4,000,000 and the commitment to make subsequent cash contributions of up to $21,000,000. As of September 30, 2020, and December 31, 2019, the financing member had contributed $24,900,000 and $24,900,000 respectively.
During the nine months ended September 30, 2020, the Company issued 18,335 Series C Common Membership Units (“Series C Units”) for $1,100,000 in cash. The Company also issued 734 Series C Units with an aggregate value of $44,000 as payment for consulting agreements.
The rights and preferences of the Series A, B, and C Units are as follows:
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Voting:
The holders of Series A and Series B Units are entitled to one vote on all matters upon which the members have the right to vote under the operating agreement. The holders of Series C Units do not have the right to vote on such matters.
Notwithstanding anything to the contrary in the operating agreement, the holders of Series A Units as a separate class, have the sole approval and veto authority on behalf of all members on all Company scientific matters.
Pre-emptive rights:
The holders of the Company’s A and B units have the pre-emptive right to purchase a pro-rata portion of any new units offered for sale by the Company in order to maintain their respective ownership interest in the Company.
Distributions:
The holders of the Company’s units are entitled to receive distributions when declared by the Board of Directors and paid by the Company. The first $50,000,000 of distributions are paid to the holders of Series A and Series B Units in proportion to the holder’s respective ownership interest and all remaining amounts to members holding common membership units and Incentive Units pro rata in proportion to their aggregate holdings of common membership units and Incentive Units treated as one class of units.
7. Equity Incentive Plan
On July 18, 2017, the Company adopted the Equity Incentive Plan (the “Plan”). The Plan allows certain employees, officers, directors and consultants of the Company, who provide services to the Company, the opportunity to participate in options to acquire the Company’s membership units at predetermined prices. The aggregate number of units that may be issued under the Plan is 200,000 Series C Units. As of September 30, 2020, and December 31, 2019, the Company had 169,910 and 171,115, respectively, available for future issuance.
A summary of option activity for the nine months ended September 30, 2020 and 2019 is as follows:
Units |
Weighted
Average
Exercise Price |
Units Vested | ||||||||||
Outstanding December 31, 2019 | 28,885 | $ | 60.00 | 27,397 | ||||||||
Granted | 2,516 | $ | 60.00 | - | ||||||||
Exercised | - | - | - | |||||||||
Forfeited/Expired | (1,311 | ) | $ | 60.00 | - | |||||||
Outstanding September 30, 2020 | 30,090 | $ | 60.00 | 26,303 |
Units |
Weighted
Average
Exercise Price |
Units Vested | ||||||||||
Outstanding December 31, 2018 | 33,249 | $ | 60.00 | 26,821 | ||||||||
Granted | - | - | - | |||||||||
Exercised | - | - | - | |||||||||
Forfeited/Expired | (4,364 | ) | $ | 60.00 | - | |||||||
Outstanding September 30, 2019 | 28,885 | $ | 60.00 | 27,397 |
F-30
As of September 30, 2020, and December 31, 2019, the Company had 3,787 and 1,488, respectively, options unvested.
The weighted-average grant date fair value of the options granted for the nine months ended September 30, 2020 and 2019 was estimated at $760,000 and $884,000, respectively using the Black-Scholes option-pricing model based on the following weighted-average assumptions:
September 30,
2020 |
September 30,
2019 |
|||||
Dividend yield | 0.00% | 0.00% | ||||
Expected volatility | 65.00% - 85.00% | 65.00% - 85.00% | ||||
Risk-free interest rate | 1.76% - 2.69% | 1.76% - 2.69% | ||||
Expected life (in years) | 5.33-9.4 | 5.33-9.1 | ||||
Contractual life remaining (in years) | 7.4 | 8.4 |
Non-cash equity-based compensation expense relating to these options was calculated by amortizing the value calculated over the vesting period, which was typically four years. For the nine months ended September 30, 2020 and 2019, the equity-based compensation expense relating to these options amounted to approximately $36,000 and $84,000, respectively, which is included in the research and development and general and administrative expenses in the accompanying statements of operations for the nine months ended September 30, 2020 and 2019.
At September 30, 2020 and December 31, 2019, there is approximately $118,000 and $40,000, respectively, of unrecognized compensation costs with respect to options outstanding, which will be charged to operations over 5 years.
8. Commitments and Contingencies
Master Services Agreements:
During 2018, the Company entered into several master services agreements in order to conduct its clinical trials and manage clinical research programs and clinical development services on behalf of the Company. The Company entered into agreements or amended current agreements with total budget expenditure for periods beyond and including September 30, 2020 and 2019 of over $3,000,000. Many of these expenditures are covered under grants awarded to the Company. Amounts expensed pursuant to these agreements approximated $1,500,000 and $1,800,000 during the nine months ended September 30, 2020 and 2019, respectively, and are included in research and development in the accompanying statements of operations.
Consulting Services Agreement:
On November 20, 2014, the Company entered into a ten-year consulting services agreement with its CSO. Under the agreement, the Company agreed to pay CSO $270,000 annually. The compensation payments are for scientific knowledge, medical research, technical knowledge, skills, and abilities to be provided by the CSO to further develop the intellectual property rights assigned by the CSO to the Company. This agreement requires the CSO to also assign to the Company the exclusive right, title, and interest on any work product developed from his efforts during the term of this agreement. As of September 30, 2020, the Company had an accrued balance due to the CSO of $236,875 and a balance due of $188,125 as of December 31, 2019.
F-31
Technology Services Agreement:
On March 27, 2015, the Company entered into a technology services agreement with Optimal Networks, Inc. (a related company owned by a board member’s brother-in-law) for use of information technology services. The Company agreed to issue the related party equity incentive units in the amount equal to 50% of the charges for invoiced services, with such equity to be issued annually on or about the anniversary date of the agreement. As of September 30, 2020, and December 31, 2019, the Company owed $30,000 and $5,000, respectively, pursuant to this agreement, which is included in accounts payable in the accompanying September 30, 2020 and December 31, 2019 balance sheets.
Exclusive Licensing Agreements:
On November 20, 2014, the Company entered into an exclusive license agreement with UM for the use of certain cell aging-related frailty technology rights developed by the CSO while employed at UM. The Company recorded the value of the membership units issued to obtain this license agreement as an intangible asset. The Company is required to pay UM up to 3% of net sales on products or services developed from the technology. The agreement extends for up to 20 years from the last date a product or process is commercialized from the technology. Under the agreement, the Company is required to pay an annual fee to UM. Annual fees, which were recorded in the sales line of the statements of operations, paid in 2019 and 2018 were $50,000 and $40,000, respectively. The Company will be required to pay a $50,000 licensing fee annually until the expiration or termination of the agreement. Such license fee may be offset by payments made for royalties or milestones. In addition, on November 14, 2014, as required by the license agreement the Company issued 20,000 series C membership units valued at $500,000 to UM. The Company recorded this $500,000 as an intangible asset that is amortized over the life of the license agreement which was defined as 20 years.
On December 11, 2017, the November 20, 2014 agreement with UM was amended. The amendment provided that for a $5,000 fee the dates of the milestone completions were amended and replaced as follows: (a) by December 31, 2021, to have completed Phase 2 clinical trials for the products; and (b) by June 1, 2025, to have completed Phase 3 clinical trials for products. In addition, one-year extensions may be granted on these milestone dates by making a payment of $5,000. Upon completion of the Phase 2 clinical trials, a milestone payment of $250,000 is due. Upon completion of the Phase 3 clinical trials, a milestone payment of $750,000 is due.
On December 22, 2016, the Company entered into an exclusive license agreement with an affiliated entity of the CSO for the use of CD271+ technology. The Company recorded the value of the cash consideration and membership units issued to obtain this license agreement as an intangible asset. The Company is required to pay as royalty, 1% of the annual net sales of the licensed product(s) used, leased, or sold by or for licensee or its sub-licensees. If the Company sublicenses the technology, it is also required to pay an amount equal to 10% of the net sales of the sub-licensees. In addition, on December 23, 2016, as required by the license agreement the Company issued 10,000 Series C membership units valued at $526,684. The Company recorded this $526,684 as an intangible asset that is amortized over the life of the license agreement which was defined as 20 years. Further, expenses related to the furtherance of the CD271+ technology is being capitalized and amortized as incurred over 20 years.
The agreement is to remain in effect until the date all issued patents and filed patent applications have expired or been abandoned, or 20 years after the date of the last commercialized product or process arising from the patent rights. There were no license fees due during the nine months ended September 30, 2020 and 2019 pertaining to this agreement. The Company paid legal fees of approximately $21,000 and $42,000 for the nine months ended September 30, 2020 and 2019, respectively, in connection with the patent prosecution, issuance, and maintenance fees related to CD271+.
F-32
Contingencies – COVID-19 Pandemic
The coronavirus outbreak could adversely impact the Company’s ability to conduct business in the future. In December 2019, it was first reported that there had been an outbreak of a novel strain of coronavirus, SARS-CoV-2, in China. As the coronavirus continues to spread globally, including throughout the United States, the Company may experience disruptions that could severely impact its business including:
● | impact to the financial markets; |
● | disruption in the ability to provide product in foreign markets; |
● | disruption on the ability to source materials; |
● | disruption in the ability to manufacture our product; |
● | delays or difficulties in completing the Company’s regulatory work; |
● | limitations on the Company’s employee resources ability to work, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; and |
● | additional repercussions on the Company’s our ability to operate its business. |
The global outbreak of coronavirus continues to rapidly evolve. The extent to which the coronavirus impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus, the ultimate geographic spread of the coronavirus, the duration of the outbreak, travel restrictions imposed by countries the Company conducts business, business closures or business disruption in the world, a reduction in time spent out of home and the actions taken throughout the world, including in the Company’s markets, to contain the coronavirus or treat its impact. The future impact of the outbreak is highly uncertain and cannot be predicted, and the Company cannot provide any assurance that the outbreak will not have a material adverse impact on the Company’s operations or future results or filings with regulatory health authorities. The extent of the impact to the Company, if any, will depend on future developments, including actions taken to contain the coronavirus.
9. Short-Term Note Payable
On September 27, 2020, the Company entered into a premium finance agreement to finance its insurance policies for approximately $63,000. The note requires monthly payments of $6,499, including interest at 5.353% and matures in June 2021. As of September 30, 2020, the outstanding balance was $57,000.
10. Long-Term Loans
On April 16, 2020, the Company received a loan from the Small Business Administration (SBA) pursuant to the Paycheck Protection Program (PPP) as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in the amount of $300,390. The loan bears interest at a rate of 1.00%, and matures in 24 months, with the first ten (10) months of principal and interest payments being deferred, with interest accruing, then converting to monthly principal and interest payments, amortized over eighteen (18) months, at the interest rate provided herein, for the remaining months. Lender will apply each payment first to pay interest accrued to the day Lender received the payment, then to bring principal current, and will apply any remaining balance to reduce principal. Payments must be made on the same day as the date of this Note in the months they are due. Lender shall adjust payments at least annually as needed to amortize principal over the remaining term of the Note. Under the provisions of the PPP, the loan amounts will be forgiven as long as: the loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8-week period after the loan is made; and employee and compensation levels are maintained. In addition, payroll costs are capped at $100,000 on an annualized basis for each employee. It is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. The Company also received $10,000 from the SBA for the Economic Relief Fund; this amount does not need to be repaid and was recorded as Other Income for the nine months ended September 30, 2020. As of September 30, 2020, the outstanding balance of the PPP loan was $300,390. The Company has applied for the forgiveness of this debt, however there is no assurance that forgiveness will be granted.
F-33
On May 12, 2020, the Company received a loan from the SBA pursuant to the Disaster Recovery Plan as part of the CARES Act in the amount of $150,000. This loan will require payments beginning on May 12, 2021 of $734 per month. The note will mature in 30 years and bears an interest rate of 3.75%.
Due to part of the notes being due within one year, the Company recorded $100,169 in the current portion of loans line on the Balance Sheet as of September 30, 2020.
Future debt obligations at September 30, 2020 for Long-term loans are as follows:
Year Ending December 31, | Amount | |||
2020 (three months) | $ | - | ||
2021 | 139,000 | |||
2022 | 167,000 | |||
2023 | 3,000 | |||
2024 | 3,000 | |||
Thereafter | 138,000 | |||
Total | $ | 450,000 |
11. Related Party Transactions
The Company utilizes Global Vision Communications, LLC (a related company owned by one of the Company’s board members) for information technology and web development and maintenance services. Payment of invoices for services provided are made in cash or through the issuance of the Company’s Series C Units as mutually agreed to by the parties. Amounts incurred amounted to approximately $51,000 and $43,000 during the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, and December 31, 2019, the Company owed $0 and $8,000 to the related entity and these amounts are included in accounts payable in the accompanying September 30, 2020 and December 31, 2019 balance sheets, respectively.
12. Employee Benefit Plan
The Company sponsors a defined contribution employee benefit plan (the “Plan”) under the provisions of Section 401(k) of the Internal Revenue Code. The Plan covers substantially all full-time employees of the Company who have completed one year of service. Contributions to the Plan by the Company are at the discretion of the members.
The Company contributed approximately $34,000 and $30,000 to the Plan during the nine months ended September 30, 2020 and 2019, respectively.
13. Subsequent Events
The Company has evaluated subsequent events through November 12, 2020, which is the date the financial statements were available for issuance.
F-34
Shares
PROSPECTUS
Kingswood Capital Markets
division of Benchmark Investments, Inc.
, 2021
Through and including , 2021 (25 days after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table indicates the expenses to be incurred in connection with the offering described in this registration statement, other than underwriting discounts and commissions, all of which will be paid by us. All amounts are estimated except the Securities and Exchange Commission registration fee, the Financial Industry Regulatory Authority, Inc., or FINRA, filing fee and the Nasdaq listing fee.
Amount | ||||
Securities and Exchange Commission registration fee | $ | * | ||
FINRA filing fee | * | |||
Initial listing fee | * | |||
Accountants’ fees and expenses | * | |||
Legal fees and expenses | * | |||
Blue Sky fees and expenses | * | |||
Transfer Agent’s fees and expenses | * | |||
Printing and engraving expenses | * | |||
Miscellaneous | * | |||
Total expenses | $ | * |
* | To be filed by amendment. |
Item 14. Indemnification of Directors and Officers.
Prior to the closing of the offering to which this Registration Statement relates, Longeveron LLC intends to convert into a Delaware corporation pursuant to a statutory conversion, and will change its name to Longeveron Inc. Section 102 of the DGCL permits a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our certificate of incorporation to be effective upon the corporate conversion will provide that no director of the Registrant shall be personally liable to it or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the DGCL prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.
Section 145 of the DGCL provides that a corporation has the power to indemnify a director, officer, employee, or agent of the corporation, or a person serving at the request of the corporation for another corporation, partnership, joint venture, trust or other enterprise in related capacities against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he was or is a party or is threatened to be made a party to any threatened, ending or completed action, suit or proceeding by reason of such position, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
II-1
Our certificate of incorporation to be effective upon the corporate conversion will provide that we will indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of us) by reason of the fact that he or she is or was, or has agreed to become, a director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. Our restated certificate of incorporation provides that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of us to procure a judgment in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, a director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, except that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such adjudication but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful, on the merits or otherwise, he or she will be indemnified by us against all expenses (including attorneys’ fees) actually and reasonably incurred in connection therewith. Expenses must be advanced to an Indemnitee under certain circumstances.
We intend to enter into indemnification agreements with each of our directors and officers. These indemnification agreements may require us, among other things, to indemnify our directors and officers for some expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of his or her service as one of our directors or officers, or any other company or enterprise to which the person provides services at our request.
We maintain a general liability insurance policy that covers certain liabilities of directors and officers of our corporation arising out of claims based on acts or omissions in their capacities as directors or officers.
In any underwriting agreement we enter into in connection with the sale of Class A common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us within the meaning of the Securities Act, against certain liabilities.
Item 15. Recent Sales of Unregistered Securities.
Set forth below is information regarding unregistered securities issued by us within the past three years. Also included is the consideration received by us for such unregistered securities and information relating to the section of the Securities Act, or rule of the Securities and Exchange Commission, under which exemption from registration was claimed.
1. | In April 2018, we completed the sale of 3,640 Series C units to accredited investors for an aggregate purchase price of $455,000, or $125.00 per unit. | |
2. | In March 2020, we completed the sale of 22,902 Series C units to accredited investors for an aggregate purchase price of $1,374,120, or $60.00 per unit. |
The offer and sale of all securities listed in this item 15 was made to a limited number of accredited investors and qualified institutional buyers in reliance upon exemptions from the registration requirements pursuant to Section 4(a)(2) under the Securities Act and Regulation D promulgated under the Securities Act. Individuals who purchased securities as described above represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates issued in such transactions.
II-2
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
* | To be filed by amendment. |
# | Indicates management contract or compensatory plan. |
† | Portions of this exhibit (indicated by asterisks) have been redacted in compliance with Regulation S-K Item 601(b)(10)(iv). |
II-3
(b) Financial Statement Schedules. Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriter, at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned hereby undertakes that:
(1) | For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. | |
(2) | For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Miami, Florida, on this day of January 19, 2021.
LONGEVERON LLC | ||
By: | /s/ Geoff Green | |
Geoff Green | ||
Chief Executive Officer |
SIGNATURES AND POWER OF ATTORNEY
We, the undersigned officers and directors of Longeveron LLC, hereby severally constitute and appoint Geoff Green and James Clavijo, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them for him and in his name, place and stead, and in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities held on the dates indicated.
Signature | Title | Date | ||
/s/ Geoff Green | ||||
Geoff Green |
Chief Executive Officer (principal executive officer) |
January 19, 2021 | ||
/s/ James Clavijo | ||||
James Clavijo |
Chief Financial Officer (principal financial officer and principal accounting officer) |
January 19, 2021 | ||
/s/ Joshua M. Hare | ||||
Joshua M. Hare | Manager | January 19, 2021 | ||
/s/ Donald M. Soffer | ||||
Donald M. Soffer | Manager | January 19, 2021 | ||
/s/ Neil E. Hare | ||||
Neil E. Hare | Manager | January 19, 2021 | ||
/s/ Rock Soffer | ||||
Rock Soffer | Manager | January 19, 2021 |
II-5
Exhibit 3.3
FIRST AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
BETWEEN
LONGEVERON LLC
and
THE MEMBERS NAMED HEREIN
dated effective as of
December 31, 2014
table of contents
Article I DEFINITIONS | 1 |
Section 1.01 Definitions | 1 |
Section 1.02 Interpretation | 1 |
Article II ORGANIZATION | 2 |
Section 2.01 Formation | 2 |
Section 2.02 Name | 2 |
Section 2.03 Principal Office | 2 |
Section 2.04 Registered Office; Registered Agent | 2 |
Section 2.05 Purpose; Powers | 3 |
Section 2.06 Term | 3 |
Section 2.07 No State Law Partnership | 3 |
Article III UNITS | 3 |
Section 3.01 Units Generally | 3 |
Section 3.02 Authorization and Issuance of Common Units | 3 |
Section 3.03 Authorization and Issuance of Incentive Units | 4 |
Section 3.04 Other Issuances | 6 |
Section 3.05 Certification of Units | 6 |
Article IV MEMBERS | 7 |
Section 4.01 Admission of New Members | 7 |
Section 4.02 Representations and Warranties of Members | 7 |
Section 4.03 No Personal Liability | 8 |
Section 4.04 No Withdrawal | 9 |
Section 4.05 Death | 9 |
Section 4.06 Voting | 9 |
Section 4.07 Meetings | 11 |
Section 4.08 Quorum | 11 |
Section 4.09 Action Without Meeting | 12 |
Section 4.10 Power of Members | 12 |
Section 4.11 No Interest in Company Property | 12 |
Article V CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS | 12 |
Section 5.01 Initial Capital Contributions | 12 |
Section 5.02 Sponsor’s Remaining Commitments. | 13 |
Section 5.03 Additional Capital Contributions | 13 |
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Section 5.04 Maintenance of Capital Accounts | 13 |
Section 5.05 Succession Upon Transfer | 14 |
Section 5.06 Negative Capital Accounts. | 14 |
Section 5.07 No Withdrawal | 14 |
Section 5.08 Treatment of Loans From Members | 14 |
Section 5.09 Modifications | 14 |
Section 5.10 Fiduciary Duty. | 14 |
Article VI ALLOCATIONS | 15 |
Section 6.01 Allocation of Net Income and Net Loss | 15 |
Section 6.02 Regulatory and Special Allocations | 15 |
Section 6.03 Tax Allocations | 16 |
Section 6.04 Allocations in Respect of Transferred Units | 17 |
Section 6.05 Curative Allocations | 17 |
Article VII DISTRIBUTIONS | 17 |
Section 7.01 General | 17 |
Section 7.02 Priority of Distributions | 18 |
Section 7.03 Limitations on Distributions to Incentive Units | 18 |
Section 7.04 Tax Advances | 19 |
Section 7.05 Tax Withholding; Withholding Advances | 19 |
Section 7.06 Distributions in Kind | 21 |
Article VIII MANAGEMENT | 21 |
Section 8.01 Establishment of the Board | 21 |
Section 8.02 Board Composition; Vacancies | 21 |
Section 8.03 Removal; Resignation | 23 |
Section 8.04 Meetings | 23 |
Section 8.05 Quorum; Manner of Acting | 24 |
Section 8.06 Action By Written Consent | 24 |
Section 8.07 Compensation; No Employment | 24 |
Section 8.08 Committees | 28 |
Section 8.09 No Personal Liability | 25 |
Article IX OFFICERS | 25 |
Section 9.01 Officers; Delegation and Duties | 25 |
Section 9.02 Election of Officers | 25 |
Section 9.03 Voting Securities Owned by the Company | 26 |
Section 9.04 Chairman of the Board | 26 |
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Section 9.05 President. | 26 |
Section 9.06 Vice Presidents | 26 |
Section 9.07 Secretary | 26 |
Section 9.08 Treasurer (or Chief Financial Officer) | 27 |
Section 9.09 Chief Science Officer | 28 |
Section 9.10 Delegation of Authority | 28 |
Article X PRE-EMPTIVE RIGHTS | 28 |
Section 10.01 Pre-emptive Right | 28 |
Article XI TRANSFER | 31 |
Section 11.01 General Restrictions on Transfer. | 31 |
Section 11.02 Permitted Transfers | 32 |
Section 11.03 Right of First Refusal | 34 |
Section 11.04 Drag-along Rights. | 36 |
Section 11.05 Tag-along Rights. | |
Section 11.06 Incentive Units Call Right. | 42 |
Article XII COVENANTS | 44 |
Section 12.01 Confidentiality. | 44 |
Section 12.02 Non-compete; Non-solicit. | 45 |
Section 12.03 Other Business Activities | 47 |
Section 12.04 Superseding Agreement | 47 |
Article XIII ACCOUNTING; TAX MATTERS | 47 |
Section 13.01 Financial Statements | 47 |
Section 13.02 Inspection Rights | 48 |
Section 13.03 Budget | 48 |
Section 13.04 Tax Matters Member. | 49 |
Section 13.05 Tax Returns | 50 |
Section 13.06 Company Funds | 50 |
Article XIV DISSOLUTION AND LIQUIDATION | 50 |
Section 14.01 Events of Dissolution | 50 |
Section 14.02 Effectiveness of Dissolution | 50 |
Section 14.03 Liquidation | 51 |
Section 14.04 Cancellation of Certificate | 52 |
Section 14.05 Survival of Rights, Duties and Obligations | 52 |
Section 14.06 Recourse for Claims | 52 |
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Article XV | 52 |
Section 15.01 Exculpation of Covered Persons. | 52 |
Section 15.02 Liabilities and Duties of Covered Persons. | 53 |
Section 15.03 Indemnification. | 53 |
Section 15.04 Survival | 55 |
Article XVI MISCELLANEOUS | 55 |
Section 16.01 Expenses | 55 |
Section 16.02 Further Assurances | 55 |
Section 16.03 Notices | 56 |
Section 16.04 Headings | 57 |
Section 16.05 Severability | 57 |
Section 16.06 Entire Agreement. | 58 |
Section 16.07 Successors and Assigns | 58 |
Section 16.08 No Third-party Beneficiaries | 58 |
Section 16.09 Amendment | 58 |
Section 16.10 Waiver | 58 |
Section 16.11 Governing Law | 59 |
Section 16.12 Dispute Resolution | 59 |
Section 16.13 Attorneys’ Fees | 59 |
Section 16.14 Submission to Jurisdiction | 59 |
Section 16.15 Equitable Remedies | 60 |
Section 16.16 Remedies Cumulative | 60 |
Section 16.17 Counterparts | 60 |
Section 16.18 Initial Public Offering. | 60 |
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FIRST AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
This First Amended and Restated Limited Liability Company Agreement of Longeveron LLC a Delaware limited liability company (the “Company”), is entered into effective as of December 31, 2014 by and among the Company, the Initial Members executing this Agreement as of the date hereof and each other Person who after the date hereof becomes a Member of the Company and becomes a party to this Agreement by executing a Joinder Agreement.
RECITALS
WHEREAS, the Company was formed under the laws of the State of Delaware by the filing of a Certificate of Formation with the Secretary of State of the State of Delaware on October 9, 2014 (the “Certificate of Formation”); and
WHEREAS, Sponsor and the Initial Management Members desire to enter into this Agreement for the purposes of, and on the terms and conditions set forth in, this Agreement; and
WHEREAS, Sponsor and each of the Initial Management Members have, concurrently with their execution of this Agreement, entered into Unit Purchase Agreements and/or Award Agreements, pursuant to which they have acquired their respective Units in the Company on the terms and conditions fully set forth therein; and
WHEREAS, Sponsor and each of the Initial Management Members have, concurrently with their execution of this Agreement, entered into a Unit Purchase Agreement, Assignment of Intellectual Property Rights Agreement; Exclusive License Agreement, Consulting Services Agreement or other agreements in support of the transactions contemplated herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
Article I
DEFINITIONS
Section 1.01 Definitions. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in this Section 1.01: See Exhibit A.
Section 1.02 Interpretation. For purposes of this Agreement, (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein” “hereof;” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. The definitions given for any defined terms in this Agreement shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. Unless the context otherwise requires, references herein; (x) to Articles; Sections, and Exhibits mean the Articles and Sections of, and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.
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Article II
ORGANIZATION
Section 2.01 Formation.
(a) The Company was formed on October 9, 2014, pursuant to the provisions of the Delaware Act, upon the filing of the Certificate of Formation with the Secretary of State of the State of Delaware.
(b) This Agreement shall constitute the “limited liability company agreement” (as that tennis used in the Delaware Act) of the Company. The rights, powers, duties, obligations and liabilities of the Members shall be determined pursuant to the Delaware Act and this Agreement. To the extent that the rights, powers, duties, obligations and liabilities of any Member are different by reason of any provision of this Agreement than they would be under the Delaware Act in the absence of such provision, this Agreement shall, to the extent permitted by the Delaware Act, control.
Section 2.02 Name. The name of the Company is “Longeveron LLC” or such other name or names as the Board may from time to time designate; provided, that the name shall always contain the words “Limited Liability Company” or the abbreviation “L.L.C.” or the designation “LLC.”
Section 2.03 Principal Office. The principal office of the Company is located at 6010 Aqua Path, Miami Beach, Florida 33141, or such other place as may from time to time be determined by the Board. The Board shall give prompt notice of any such change to each of the Members.
Section 2.04 Registered Office; Registered Agent.
(a) The registered office of the Company shall be the office of the initial registered agent named in the Certificate of Formation or such other office (which need not be a place of business of the Company) as the Board may designate from time to time in the manner provided by the Delaware Act and Applicable Law.
(b) The registered agent for service of process on the Company in the State of Delaware shall be the initial registered agent named in the Certificate of Formation or such other Person or Persons as the Board may designate from time to time in the manner provided by the Delaware Act and Applicable Law.
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Section 2.05 Purpose; Powers.
(a) The purpose of the Company is to engage in any lawful act or activity for which limited liability companies may be formed under the Delaware Act and to engage in any and all activities necessary or incidental thereto.
(b) The Company shall have all the powers necessary or convenient to carry out the purposes for which it is formed, including the powers granted by the Delaware Act.
Section 2.06 Term. The term of the Company commenced on the date the Certificate of Formation was filed with the Secretary of State of the State of Delaware and shall continue in existence perpetually until the Company is dissolved in accordance with the provisions of this Agreement.
Section 2.07 No State Law Partnership. The Members intend that the Company shall be treated as a partnership for federal and, if applicable, state and local income tax purposes, and, to the extent permissible; the Company shall elect to be treated as a partnership for such purposes. The Company and each Member shall file all tax returns and shall otherwise take all tax and financial reporting positions in a manner consistent with such treatment and no Member shall take any action inconsistent with such treatment. The Members intend that the Company shall not be a partnership (including, without limitation a limited partnership) or joint venture, and that no Member, Manager or Officer of the Company shall be a partner or joint venturer of any other Member, Manager or Officer of the Company, for any purposes other than as set forth in the first sentence of this Section 2.07.
Article III
UNITS
Section 3.01 Units Generally. The Membership Interests of the Members shall be represented by issued and outstanding Units, which may be divided into one or more types, c1asses or series. Each type, class or series of Units shall have the privileges, preference, duties, liabilities, obligations and rights, including voting rights, if any, set forth in this Agreement with respect to such type, class or series. The Board shall maintain a schedule of all Members, their respective mailing addresses and the amount and series of Units held by them (the “Members Schedule”), and shall update the Members Schedule upon the issuance or Transfer of any Units to any new or existing Member. A copy of the Members Schedule as of the initial execution of this Agreement is attached hereto as Schedule A.
Section 3.02 Authorization and Issuance of Common Units. Subject to compliance with Section 4.06(d), Section 10.01 and Section 11.01(b), the Company is hereby authorized to issue a class of Units designated as Common Units. The Common Units shall be divided into two series: (i) Series A Units, and (ii) Series B Units. As of the date hereof and after giving effect to the transactions contemplated by Unit Purchase Agreements, 1,000,000 Series A Units and 1,000,000 Series B Units are issued and outstanding to the Members in the amounts set forth on the Members Schedule opposite each Member’s name. Additional Series A Units and Series B Units may be authorized and issued by the Company as set forth herein. The Company is further authorized to create a class of Incentive Units as set forth under Section 3.03 hereof.
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Section 3.03 Authorization and Issuance of Incentive Units.
(a) Subject to Section 3.03(b), the Company is hereby-authorized to issue Incentive Units to Managers, Officers, employees, consultants or other service providers of the Company, any Company Subsidiary or their Affiliates (collectively, “Service Providers”). As of the date hereof, zero (0) Incentive Units are issued and outstanding. The Board is hereby authorized and directed to adopt a written plan pursuant to which all Incentive Units shall be granted in compliance with Rule 701 of the Securities Act or another applicable exemption (such plan as in effect from time to time, the “Incentive Plan”). Notwithstanding anything contained herein to the contrary, the number of Incentive Units that the Company may issue pursuant to the Incentive Plan, when combined with any Restricted Incentive Units and any Unrestricted Incentive Units already issued and outstanding, shall not exceed 10% of the aggregate total of Common Units outstanding on a Fully Diluted Basis as of the date of the proposed grant.
(b) In connection with the adoption of the Incentive Plan and issuance of Incentive Units, the Board is hereby authorized to negotiate and enter into award agreements with each Service Provider to whom it grants Incentive Units (such agreements, “Award Agreements”). Each Award Agreement shall include such terms, conditions, rights and obligations as may be determined by the Board, in its sole discretion, consistent with the terms herein below:
(i) The Board shall establish such vesting criteria for the Incentive Units as it determines in its discretion and shall include such vesting criteria in the Incentive Plan and/or the applicable Award Agreement for any grant of Incentive Units. As of the date hereof, none of the issued and outstanding Incentive Units shall be deemed vested. As used in this Agreement:
(A) | any Incentive Units that have not vested pursuant to the terms of the Incentive Plan and any associated Award Agreement are referred to as “Restricted Incentive Units”; and |
(B) | any Incentive Units that have vested pursuant to the terms of the Incentive Plan and any associated Award Agreement are referred to as “Unrestricted Incentive Units.” |
(ii) Immediately prior to each subsequent issuance of Incentive Units following the issuance of any Incentive Units contemplated in the transaction in which this Agreement is adopted, the Board shall determine in good faith the Incentive Liquidation Value. In each Award Agreement that the Company enters into with a Service Provider for the issuance of new Incentive Units, the Board shall include an appropriate Profits Interest Hurdle for such Incentive Units on the basis of the Incentive Liquidation Value immediately prior to the issuance of such Incentive Units.
(iii) The Company and each Member hereby acknowledge and agree that, with respect to any Service Provider, such Service Provider’s Incentive Units constitute a “profits interest” in the Company within the meaning of Rev. Proc. 93-27 (a “Profits Interest”), and that any and all Incentive Units received by a Service Provider are received in exchange for the provision of services by the Service Provider to or for the benefit of the Company in a Service Provider capacity or in anticipation of becoming a Service Provider. The Company and each Service Provider who receives Incentive Units hereby agree to comply with the provisions of Rev. Proc. 2001-43, and neither the Company nor any Service Provider who receives Incentive Units shall perform any act or take any position inconsistent with the application of Rev. Proc. 2001-43 or any future Internal Revenue Service guidance or other Governmental Authority that supplements or supersedes the foregoing Revenue Procedures.
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(iv) Incentive units shall receive the following tax treatment:
(A) | the Company and each Service Provider who receives Incentive Units shall treat such Service Provider as the owner of such Incentive Units from the date of their receipt, and the Service Provider receiving such Incentive. Units shall take into account his Distributive share of Net Income, Net Loss, income, gain, loss and deduction associated with the Incentive Units in. computing such Service Provider’s income tax liability for the entire period during which such Service Provider holds the Incentive Units. |
(B) | each Service Provider that receives Incentive Units shall make a timely and effective election under Code Section 83(b) with respect to such Incentive Units and shall promptly provide a copy to the Company. Except as otherwise determined by the Board, both the Company and all Members shall (A) treat such Incentive Units as outstanding for tax purposes, (B) treat such Service Provider as a partner for tax purposes with respect to such Incentive Units and (C) file all tax returns and reports consistently with the foregoing. Neither the Company nor any of its Members shall deduct any amount (as wages, compensation or otherwise) with respect to the receipt of such Incentive Units for federal income tax purposes. |
(C) | in accordance with the finally promulgated successor rules to Proposed Regulations Section 1.83-3(1) and IRS Notice 2005-43, each Member, by executing this Agreement, authorizes and directs the Company to elect a safe harbor under which the fair market value of any Incentive Units issued after the effective date of such Proposed Regulations (or other guidance) will be treated as equal to the liquidation value (within the meaning of the Proposed Regulations or successor rules) of the Incentive Units as of the date of issuance of such Incentive Units. In the event that the Company makes a safe harbor election as described in the preceding sentence, each Member hereby agrees to comply with all safe harbor requirements with respect to Transfers of Units while the safe harbor election remains effective. |
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(v) For the avoidance of doubt:
(A) | no Incentive Units, including Unrestricted Incentive Units, shall have any pre-emptive right to acquire New Securities pursuant to Section 10.01(a); |
(B) | no Incentive Units, including Unrestricted Incentive Units, shall have any right to participate as a Tag-along Member in any Tag-along Sale pursuant to Section 11.05; and |
(C) | all Incentive Units, including Unrestricted Incentive Units, shall be subject to the rights of the holders of Common Units to drag along the holders of Incentive Units pursuant to Section 11.04. |
Section 3.04 Other Issuances. In addition to the Common Units and Incentive Units, the Company, upon the affirmative vote of a Supermajority of the holders of Common Units, is hereby authorized, subject to compliance with Section 4.06 Section 10.01 and Section 11.01(b), to authorize and issue or sell to any Person any of the following (collectively, “New Interests”) (i) any new type; class or series of Units not otherwise described in this Agreement, which Units may be designated as classes or series of the Common Units or Incentive Units but having different rights; and (ii) Unit Equivalents.
Section 3.05 Certification of Units.
(a) The Board in its sole discretion may, but shall not be required to, issue certificates to the Members representing the Units held by such Member.
(b) In the event that the Board shall issue certificates representing Units in accordance with Section 3.05(a), then in addition to any other legend required by Applicable Law, all certificates representing issued and outstanding Units shall bear a legend substantially in the following form:
THE UNITS REPRESENTED BY TIIIS CERTIFICATE ARE SUBJECT TO A LIMITED LIABILITY COMPANY AGREEMENT AMONG THE COMPANY AND ITS MEMBERS, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICE OF THE COMPANY. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE UNITS REPRESENTED BY THIS CERTIFICATE. MAY BE MADE EXCEPT IN ACCORDANCE WITB THE PROVISIONS OF SUCH LIMITED LIABILITY COMPANY AGREEMENT.
THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED EXCEPT (A) PURSUANT TO A REGISTRATION STATEMENT EFFECTNE UNDER SUCH ACT AND LAWS, OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER.
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Article IV
MEMBERS
Section 4.01 Admission of New Members.
(a) New Members may be admitted from time to time (i) in connection with an issuance of Units by the Company, subject to compliance with the provisions of this Section 4.01, Section 4.06, Section 10.01, Section 11.01(b) and any other provision of this Agreement, as applicable, and (ii) in connection with a Transfer of Units, subject to compliance with the provisions of Article XI, and in either case, following compliance with the provisions of Section 4.01(b).
(b) In order for any Person not already a Member of the Company to be admitted as a Member, whether pursuant to an issuance or Transfer of Units, such Person shall have executed and delivered to the Company a written undertaking substantially in the form of the Joinder Agreement attached hereto as Exhibit B. Upon the amendment of the Members Schedule by the Board and the satisfaction of any other applicable conditions, including, if a condition, the receipt by the Company of payment for the issuance of the applicable Units, such Person shall be admitted as a Member and deemed listed as such n the books and records of the Company and thereupon shall be issued his, her or its Units. The Board shall also adjust the Capital Accounts of the Members as necessary in accordance with Section 5.04.
Section 4.02 Representations and Warranties of Members. By execution and delivery of this Agreement or a Joinder Agreement, as applicable, each of the Members, whether admitted as of the date hereof or pursuant to Section 4.01, represents and warrants to the Company and acknowledges that:
(a) The Units have not been registered under the Securities Act or the securities laws of any other jurisdiction, are issued in reliance upon federal and state exemptions for transactions not involving a public offering and cannot be disposed of unless (i) they are subsequently registered or exempted from registration under the Securities Act and (ii) the provisions of this Agreement have been complied with;
(b) Such Member is an “accredited investor” within the meaning of Rule 501 promulgated under the Securities Act as amended by Section 413(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and agrees that it will not take any action that could have an adverse effect on the availability of the exemption from registration provided by Rule 501 promulgated under the Securities Act with respect to the offer and sale of the Units;
(c) Such Member’s Units are being acquired for its own account solely for investment and not with a view to resale or distribution thereof;
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(d) Such Member has conducted its own independent review and analysis of the business, operations, assets, liabilities, results of operations, financial condition and prospects of the Company and the Company Subsidiaries and such Member acknowledges that it has been provided adequate access to the personnel, properties, premises and records of the Company and the Company Subsidiaries for such purpose;
(e) The determination of such Member to acquire Units has been made by such Member independent of any other Member and independent of any statements or opinions as to the advisability of such purchase or as to the business, operations, assets, liabilities, results of operations, financial condition and prospects of the Company and the Company Subsidiaries that may have been made or given by any other Member or by any agent or employee of any other Member;
(f) Such Member has such knowledge and experience in financial and business matters and is capable of evaluating the merits and risks of an investment in the Company and making an informed decision with respect thereto;
(g) Such Member is able to bear the economic and financial risk of an investment in the Company for an indefinite period of time;
(h) The execution, delivery and performance of this Agreement have been duly authorized by such Member an4 do not require such Member to obtain any consent or approval that has not been obtained and do not contravene or result in a default in any material respect under any provision of any law or regulation applicable to such Member or other governing documents or any agreement or instrument to which such Member is a party or by which such Member is bound;
(i) This Agreement is valid, binding and enforceable against such Member in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, and other similar laws of general applicability relating to or affecting creditors’ rights or general equity principles (regardless of whether considered at law or in equity); and
(j) Neither the issuance of any Units to any Member nor any provision contained herein will entitle the Member to remain in the employment of the Company or any Company Subsidiary or affect the right of the Company or any Company Subsidiary to terminate the Member’s employment at any time for any reason, other than as otherwise provided in such Member’s employment agreement or other similar agreement with the Company or Company Subsidiary, if applicable.
None of the foregoing shall replace, diminish or otherwise adversely affect any Member’s representations and warranties made by it in any Unit Purchase Agreement or Award Agreement, as applicable.
Section 4.03 No Personal Liability. Except as otherwise provided in the Delaware Act, by Applicable Law or expressly in this Agreement, no Member will be obligated personally for any debt, obligation or liability of the Company or of any Company Subsidiaries or other Members, whether arising in contract, tort or otherwise, solely by reason of being a Member.
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Section 4.04 No Withdrawal. A Member shall not cease to be a Member as a result of the Bankruptcy of such Member or as a result of any other events specified in § 18-304 of the Delaware Act. So long as a Member continues to hold any Units, such Member shall not have the ability to withdraw or· resign as a Member prior to the dissolution and winding up of the Company and any such withdrawal or resignation or attempted withdrawal or resignation by a Member prior to the dissolution or winding up of the Company shall be null and void. As soon as any Person who is a Member ceases to hold any Units, such Person shall no longer be a Member; provided, however, that this Agreement shall continue to apply with respect to any Units that have been called in accordance with Section 11.06 until full payment is made therefor in accordance with the terms of this Agreement.
Section 4.05 Death. The death of any Member shall not cause the dissolution of the Company. In such event the Company and its business shall be continued by the remaining Member or Members and the Units owned by the deceased Member shall automatically be Transferred to such Member’s heirs; provided, that within a reasonable time after such Transfer, the applicable heirs shall sign a written undertaking substantially in the form of the Joinder Agreement.
Section 4.06 Voting.
(a) Except as otherwise provided by this Agreement (including this Section 4.06 and Section 16.09) or as otherwise required by the Delaware Act or Applicable Law
(i) each Member shall be entitled to one vote per Common Unit on all matters upon which the Members have the right to vote under this Agreement; and
(ii) the Incentive Units (including the Unrestricted Incentive Units) shall not entitle the holders thereof to vote on any matters required or permitted to be voted on by the Members.
(b) Notwithstanding anything to the contrary contained in this Agreement, at any time that there are any Series A Units outstanding, the holders of the outstanding Series A Units voting separately as a class shall have sole approval and veto authority on behalf of the Members for any Scientific Matter.
(c) Notwithstanding anything to the contrary contained in this Agreement, at any time that there are any Series B Units outstanding, the Company shall not, and shall not permit any of the Company Subsidiaries to, engage in or cause any of the following transactions or take any of the following actions, and the Board shall not permit or cause the Company or any of the Company Subsidiaries to engage in, take or cause any such action except with the prior approval of the Sponsor: any loans to/from, and other material transactions with the Company’s officers.
(d) Unless otherwise provided in this Agreement, the following actions of the Company shall not be authorized unless both the Founder and Sponsor, each voting as a single class, so approve such measures (each a “Protective Provision”):
(i) authorize or issue New Securities, except for Incentive Units authorized herein;
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(ii) subject to Section 16.09, amend this Agreement to reflect such issuance and to fix the relative privileges, preference, duties, liabilities, obligations and rights of any New Interests, including the number of New Interests to be issued, the preference (with respect to Distributions, in Liquidation or otherwise) over any other Units and any contributions required in connection therewith;
(iii) redeem or repurchase of any equity interests other than repurchases of Units (x) from former employees, officers, managers, consultants or other persons who performed services for the Company or any subsidiary in connection with the cessation of such employment or service at the lower of the original purchase price or the then-current fair market value thereof any (y) as approved by the Board;
(iv) increase or decrease of number of equity interests within each Series or equity interests in general;
(v) alter or repeal any Protective Provision;
(vi) liquidate, dissolve or wind-up the business and affairs of the Company, effect any merger or consolidation or material asset sale or disposition or license arrangement involving the Company (unless the individual Series remain untouched/unaffected);
(vii) amend, alter or repeal any provision of this Agreement in a manner that adversely affects the powers, preferences or rights of the Series A Members or Series B Members;
(viii) create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of Units not authorized herein;
(ix) make any distribution on any Units or equity interests of the Company other than distributions payable on a pari passu basis to the holders of Series A Members and Series B Members;
(x) create, or authorize the creation of, or issue, or authorize the issuance of any debt security, or permit any subsidiary to take any such action with respect to any debt security, if the aggregate indebtedness of the Company and its subsidiaries for borrowed money following such action would exceed $1,000,000, other than equipment leases or bank lines of credit;
(xi) create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one or more other subsidiaries) by the Company, or sell, transfer or otherwise dispose of any capital stock or equity interests of any direct or indirect subsidiary of the Company, or permit any direct or indirect subsidiary to sell, lease, transfer, exclusively license or otherwise dispose (in a single transaction or series of related transactions) of all or substantially all of the assets of such subsidiary; or
(xii) increase or decrease the authorized number of managers constituting the Board.
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Section 4.07 Meetings.
(a) Voting Units. As used herein, the term “Voting Units” shall mean:
(i) the Common Units (both Series A and Series B), for purposes of calling or holding any meeting of the Members holding Common Units, providing notice of such a meeting, forming a quorum for such a meeting, or taking any action by vote at a meeting or by written consent without a meeting.
(b) Calling the Meeting. Meetings of the Members may be called by (i) the Board or (ii) by a Member or group of Members holding more than 15% of the then” outstanding votes attributable to the relevant Voting Units. Only Members who hold the relevant Voting Units (”Voting Members”) shall have the right to attend meetings of the Members.
(c) Notice. Written notice stating the place, date and time of the meeting and, in the case of a meeting of the Members not regularly scheduled, describing the purposes for which the meeting is called, shall be delivered not fewer than ten (10) days and not more than thirty (30) days before the date of the meeting to each Voting Member, by or at the direction of the Board or the Member(s) calling the meeting, as the case may be. The Voting Members may hold meetings at the Company’s principal office or at such other place as the Board or the Member(s) calling the meeting may designate in the notice for such meeting.
(d) Participation. Any Voting Member may participate in a meeting of the Voting Members by means of conference telephone or other communications equipment by means of which all Persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting,
(e) Vote by Proxy. On any matter that is to be voted on by Voting Members, a Voting Member may vote in person or by proxy, and such proxy may be granted in writing, by means of Electronic Transmission or as otherwise permitted by Applicable Law. Every proxy shall be revocable in the discretion of the Voting Member executing it unless otherwise provided in such proxy; provided, that such right to revocation shall not invalidate or otherwise affect actions taken under such proxy prior to such revocation.
(f) Conduct of Business. The business to be conducted at such meeting need not be limited to the purpose described in the notice and can include business to be conducted by Voting Members holding Common Units; provided, that the appropriate Voting Members shall have been notified of the meeting in accordance with Section 4.07(c); and provided, further, that any Voting Member holding the appropriate Voting Units shall have the right to request removal from the meeting of any Voting Member holding only Common Units prior to any discussion of business at the meeting for which such Units do not have a vote pursuant to the provisions of this Agreement. Attendance of a Member at any meeting shall constitute a waiver of notice of such meeting, except where a Member attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.
Section 4.08 Quorum. A quorum of any meeting of the Voting Members shall require the presence of the Members holding a majority of the appropriate Voting Units held by all Members. Subject to Section 4.09, no action at any meeting may be taken by the Members unless the appropriate quorum is present. Subject to Section 4.09, no action may be taken by the Members at any meeting at which a quorum is present without the affirmative vote of Members holding a majority of the appropriate Voting Units held by all Members.
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Section 4.09 Action Without Meeting. Notwithstanding the provisions of Section 4.08, any matter that is to be voted on, consented to or approved by Voting Members may be taken without a meeting, without prior notice and without a vote if consented to, in writing or by Electronic Transmission, by a Member or Members holding not less than a majority of the appropriate Voting Units held by all Members. A record shall be maintained by the Board of each such action taken by written consent of a Member or Members.
Section 4.10 Power of Members. The Members shall have the power to exercise any and all rights or powers granted to Members pursuant to the express terms of this Agreement and the Delaware Act. Except as otherwise specifically provided by this Agreement or required by the Delaware Act, no Member, in its capacity as a Member, shall have the power to act for or on behalf of, or to bind, the Company.
Section 4.11 No Interest in Company Property. No real or personal property of the Company shall be deemed to be owned by any Member individually, but shall be owned by, and title shall be vested solely in, the Company. Without limiting the foregoing, each Member hereby irrevocably waives during the term of the Company any right that such Member may have to maintain any action for partition with respect to the property of the Company.
Article V
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
Section 5.01 Initial Capital Contributions. Contemporaneously with the execution of this Agreement and as set forth in the respective Unit Purchase Agreements, each Initial Member owning Common Units has made the Capital Contribution giving rise to such Initial Member’s initial Capital Account (each, an “Initial Capital Contribution”) and is deemed to own the number, type, series and class of Units, in each case, in the amounts set forth opposite such Initial Member1s name on the Members Schedule as in effect on the date hereof.
(a) Founder; Base Capital Contributions; Series A Units. Founder has unconditionally agreed to make contributions of intellectual property to the Company in accordance with and subject to the terms of this Agreement as well as that certain Assignment of Intellectual Property Rights, attached hereto as Exhibit G (the “Hare Assignment Agreement”), and that certain Exclusive License Agreement, attached hereto as Exhibit H (collectively, with the Hare Assignment Agreement the “Assignment Agreement”). The parties hereto agree that the value of the intellectual property contributed in accordance with this Section 5.01(a) is $25,000,000. Founder, upon making its initial Capital Contribution as described in this Section 5.01(a), has been allocated 1,000,000 Series A Units, which shall be set forth in Schedule A.
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(b) Sponsor; Base Capital Contributions; Series B Units. Subject to the terms and limitations of this Agreement and so long as the Founder is acting as the Chief Science Officer, Sponsor has unconditionally agreed to make contributions of cash to the capital of the Company in accordance with the terms of this Section 5.01 and Section 5.02. Sponsor agrees to contribute $25 Million in cash in the aggregate, in accordance with Schedule 5.01, and subject to the terms of Section 5.02. Included as part of the agreement to contribute a total of$25 Million, Sponsor will make an initial cash contribution of $4 Million (as the first installment of the total contribution on the Effective Date), and in exchange for that initial cash contribution and the agreement to make subsequent contributions (each a “Drawdown”), Sponsor will be issued 1,000,000 Series B Units, as set forth in Schedule A. Upon the Founder no longer acting as Chief Science Officer due to his termination for Cause (as the term is then defined in the agreement between him and the Company related to his engagement with the Company) and/or as a result of his voluntary termination of his engagement as Chief Science Officer of the Company, the Sponsor’s obligations under this Agreement to make or fund any remaining un-funded Drawdown will terminate and Sponsor will have no further obligation to make or fund any further Drawdowns.
Section 5.02 Sponsor’s Remaining Commitments.The remaining Drawdowns not funded on the Effective Date shall occur in accordance with Schedule 5.01 hereof, unless Sponsor and the Founder enter into a written agreement (a “Deferral Agreement”) to change or delay the timing of any or all current or subsequent Drawdowns set forth in Schedule 5.01 based on the needs of the Company. Such Deferral Agreements may be in the form of an agreement/exchange of electronic mail between the Founder and the Sponsor. Based on a Deferral Agreement, the timing of a Drawdown will be adjusted accordingly.
Section 5.03 Additional Capital Contributions.
(a) Subject to Section 5.02, no Member shall be required to make any additional Capital Contributions to the Company. Any future Capital Contributions made by any Member shall only be made with the consent of the Board and in connection with an issuance of Units made in compliance with Section 10.01.
(b) No Member shall be required to lend any funds to the Company and no Member shall have any personal liability for the payment or repayment of any Capital Contribution by or to any other Member.
Section 5.04 Maintenance of Capital Accounts. The Company shall establish and maintain for each Member a separate capital account (a “Capital Account”) on its books and records in accordance with this Section 5.04. Each Capital. Account shall be established and maintained in accordance with the following provisions:
(a) Each Member’s Capital Account shall be increased by the amount of:
(i) such Member’s Capital Contributions;
(ii) any Net Income or other item of income or gain allocated to such Member pursuant to Article VI; and
(iii) any liabilities of the Company that are assumed by such Member or secured by any property Distributed to such Member.
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(b) Each Member’s Capital Account shall be decreased by:
(i) the cash amount or Book Value of any property Distributed to such Member pursuant to Article VII and Section 14.03(c);
(ii) the amount of any Net Loss or other item of loss or deduction allocated to such Member pursuant to Article VI; and
(iii) the amount of any liabilities of such Member assumed by the Company or which are secured by any property contributed by such Member to the Company.
Section 5.05 Succession Upon Transfer. In the event that any Units are Transferred in accordance with the terms of this Agreement, the Transferee shall succeed to the Capital Account of the Transferor to the extent it relates to the Transferred Units and, subject to Section 6.04, shall receive allocations and Distributions pursuant to Article VI, Article VII and Article XIV in respect of such Units.
Section 5.06 Negative Capital Accounts.In the event that any Member shall have a deficit balance in his, her or its Capital Account, such Member shall have no obligation, during the term of the Company or upon dissolution or liquidation thereof, to restore such negative balance or make any Capital Contributions to the Company by reason thereof, except as may be required by Applicable Law or in respect of any negative balance resulting from a withdrawal of capital or dissolution in contravention of this Agreement.
Section 5.07 No Withdrawal. No Member shall be entitled to withdraw any part of his, her or its Capital Account or to receive any Distribution from the Company, except as provided in this Agreement. No Member shall receive any interest, salary or drawing with respect to its Capital Contributions or its Capital Account, except as otherwise provided in this Agreement. The Capital Accounts are maintained for the sole purpose of allocating items of income, gain, loss and deduction among the Members and shall have no effect on the amount of any Distributions to any Members, in liquidation or otherwise.
Section 5.08 Treatment of Loans From Members. Loans by any Member to the Company shall not be considered Capital Contributions and shall not affect the maintenance of such Member1s Capital Account, other than to the extent provided in Section 5.04(a)(iii), if applicable.
Section 5.09 Modifications. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Section 1.704-l(b) of the Treasury Regulations and shall be interpreted and applied in a manner consistent with such Treasury Regulations. If the Board determines that it is prudent to modify the manner in which the Capital Accounts, or any increases or decreases to the Capital Accounts, are computed in order to comply with such Treasury Regulations, the Board may authorize such modifications.
Section 5.10 Fiduciary Duty.Notwithstanding Section 15.02 or anything else to the contrary contained herein; Founder agrees when exercising his powers, obligations and duties under this Agreement, any other agreement with the Company, or the Delaware Act, in every case as (i) an officer of the Company (including as Chairman of the Board and Chief Science Officer) and/or (ii) in his role as an officer, Chairman of the Board and/or Chief Science Officer as is required under Article VIII hereof or under Applicable Law; he shall adhere to the fiduciary duties required by Applicable Law and as such agrees when acting in those capacities to take only those actions that he in good faith believes to be in the best interest of the Company and its Members. This Agreement is intended to, and does, create and impose fiduciary duties on the Founder in his capacity as Chief Science Officer and Chairman of the Board. For the avoidance of doubt, each of the Members and the Company hereby do not waive any fiduciary duties that are imposed on the Chief Science Officer and Chairman of the Board under Applicable Law.
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Article VI
ALLOCATIONS
Section 6.01 Allocation of Net Income and Net Loss. For each Fiscal Year (or portion thereof), except as otherwise provided in this Agreement, Net Income and Net Loss (and, to the extent necessary, individual items of income, gain, loss or deduction) of the Company shall be allocated among the Members in a manner such that, after giving effect to the special allocations set forth in Section 6.02, the Capital Account balance of each Member, immediately after making such allocations, is, as nearly as possible, equal to (i) the Distributions that would be made to such Member pursuant to Section 14.03(c) if the Company were dissolved, its affairs wound up and its assets sold for cash equal to their Book Value, all Company liabilities were satisfied (limited with respect to each Nonrecourse Liability to the Book Value of the assets securing such liability); and the net assets of the Company were Distributed, in accordance with Section 14.03(c), to the Members immediately after making such allocations, minus (ii) such Member’s share of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain, computed immediately prior to the hypothetical sale of assets. The Members agree that no Net Losses shall be allocated to a Member which would exceed the adjusted tax basis of such Member1s Membership Interest. Any Net Losses not allocated to a Member due to the foregoing limitation shall be specially allocated to the Members with positive adjusted tax basis in their Membership Interests in proportion to such adjusted tax basis.
Section 6.02 Regulatory and Special Allocations. Notwithstanding the provisions of Section 6.01:
(a) If there is a net decrease in Company Minimum Gain (determined according to Treasury Regulations Section 1.704-2(d)(1)) during any Fiscal Year, each Member shall be specially allocated Net Income for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, determined in accordance with Treasury Regulations Section l.704-2(g). The items to be so allocated shall be determined in accordance with Treasury Regulations Sections 1.704-2(f)(6) and 1.704-20)(2). This Section 6.02(a) is intended to comply with the “minimum gain chargeback” requirement in Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently therewith.
(b) Member Nonrecourse Deductions shall be allocated in the manner required by Treasury Regulations Section 1.704-2(i). Except as otherwise provided in Treasury Regulations Section l.704-2(i)(4), if there is a net decrease in Member Nonrecourse Debt Minimum Gain during any Fiscal Year, each Member that has a share of such Member Minimum Gain shall be specially allocated Net Income for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to that Member’s share of the net decrease in Member Nonrecourse Debt Minimum Gain. Items to be allocated pursuant to this paragraph shall be determined in accordance with Treasury Regulations Sections l.704-2(i)(4) and J.704-2.(j)(2). This Section 6.02(b) is intended to comply with the “minimum gain chargeback” requirements in Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith.
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(c) In the event any Member unexpectedly receives any adjustments, allocations or Distributions described in Treasury Regulations Section 1.704-l(b)(2)(ii)(d)(4), (5) or (6), Net Income shall be specially allocated to such Member in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit created by such adjustments, allocations or Distributions as quickly as possible. This Section 6.02(c) is intended to comply with the qualified income offset requirement in Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(d) The allocations set forth in paragraphs (a), (b) and (c) above (the “Regulatory Allocations”) are intended to comply with certain requirements of the Treasury Regulations under Code Section 704. Notwithstanding any other provisions of this Article VI (other than the Regulatory Allocations), the Regulatory Allocations shall be taken into account in allocating Net Income and Net Losses among Members so that, to the extent possible, the net amount of such allocations of Net Income and Net Losses and other items and the Regulatory Allocations to each Member shall be equal to the net amount that would have been allocated to such Member if the Regulatory Allocations had not occurred.
(e) The Company and the Members acknowledge that allocations like those described in Proposed Treasury Regulation Section 1.704-l(b)(4)(xii)(c) (“Forfeiture Allocations”) result from the allocations of Net Income and Net Loss provided for in this Agreement. For the avoidance of doubt, the Company is entitled to make Forfeiture Allocations and, once required by applicable final or temporary guidance, allocations of Net Income and Net Loss will be made in accordance with Proposed Treasury Regulation Section 1.704-l(b)(4)(xii)(c) or any successor provision or guidance.
Section 6.03 Tax Allocations.
(a) Subject to Section 6.03(b) through Section 6.03(e), all income. gains, losses and deductions of the Company shall be allocated, for federal, state and local income tax. purposes, among the Members in accordance with the allocation of such income, gains, losses and deductions among the Members for computing their Capital Accounts, except that if any such allocation for tax: purposes is not permitted by the Code or other Applicable Law, the Company’s subsequent income, gains, losses and deductions shall be allocated among the Members for tax purposes, to the extent permitted by the Code and other Applicable Law, so as to reflect as nearly as possible the allocation set forth herein in computing their Capital Accounts.
(b) Items of Company taxable income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall be allocated among the Members in accordance with Code Section 704(c) and the traditional method of Treasury Regulations Section 1.704-3(b), so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its Book Value.
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(c) If the Book Value of any Company asset is adjusted pursuant to Treasury Regulation Section 1.704-l(b)(2)(iv)(f) as provided in clause (c) of the definition of Book Value, subsequent allocations of items of taxable income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Book Value in the same manner as under Code Section 704(c).
(d) Allocations of tax credit, tax credit recapture and any items related thereto shall be allocated to the Series B Members according to their interests in such items as determined by the Board taking into account the principles of Treasury Regulations Section 1.704-1(b)(4)(ii).
(e) The Company shall make allocations pursuant to this Section 6.03 in accordance with the traditional method in accordance with Treasury Regulations Section 1.704-3(d).
(f) Allocations pursuant to this Section 6.03 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Net Income, Net Losses, Distributions or other items pursuant to any provisions of this Agreement.
Section 6.04 Allocations in Respect of Transferred Units. In the event of a Transfer of Units during any Fiscal Year made in compliance with the provisions of Article XI, Net Income, Net Losses and other items of income, gain, loss and deduction of the Company attributable to such Units for such Fiscal Year shall be determined using the interim closing of the books method.
Section 6.05 Curative Allocations. In the event that the Tax Matters Member determines, after consultation with counsel experienced in income tax matters, that the allocation of any item of Company income, gain; loss or deduction is not specified in this Article VI (an “Unallocated Item”), or that the allocation of any item of Company income, gain, loss or deduction hereunder is clearly inconsistent with the Members’ economic interests in the Company (determined by reference to the general principles of Treasury Regulations Section 1.704-1(b) and the factors set forth in Treasury Regulations Section 1.704-l(b)(3)(ii)) (a “Misallocated Item”), then the Tax Matters Member may allocate such Unallocated Items, or reallocate such Misallocated Items, to reflect such economic interests; provided, that no such allocation will be made without the prior consent of each Member that would be adversely and disproportionately affected thereby; and provided, further, that no such allocation shall have any material effect on the amounts distributable to any Member, including the amounts to be distributed upon the complete liquidation of the Company.
Article VII
DISTRIBUTIONS
Section 7.01 General.
(a) Subject to Section 7.0l(b), Section 7.02 and Section 7.04, the Board shall have sole discretion regarding the amounts and timing of Distributions to Members, including to decide to forego payment of Distributions in order to provide for the retention and establishment of reserves of, or payment to third parties of, such fim.ds as it deems necessary with respect to the reasonable business needs of the Company (which needs may include the payment or the making of provision for the payment when due of the Company’s obligations, including, but not limited to, present and anticipated debts and obligations, capital needs and expenses, the payment of any management or administrative fees and expenses, and reasonable reserves for contingencies).
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(b) Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make any Distribution to Members if such Distribution would violate § 18-607 of the Delaware Act or other Applicable Law.
Section 7.02 Priority of Distributions. After making all Distributions required for a given Fiscal Year under Section 7.04 and subject to the priority of Distributions pursuant to Section 14.03(c), if applicable, all Distributions determined to be made by the Board pursuant to Section 7.01 shall be made in the following manner:
(a) first, (x) prior to all Drawdowns having been made, to the Members pro rata in proportion to their holdings of Common Units until Distributions under this Section 7.02(a) equals: (i) in the case of the Series A Units, the aggregate amount of Capital Contributions attributable to the holders of Series A Units in respect of their acquisitions of Common Units; and (ii) in the case of the Series B Units, $25 million; and (y) at or after all Drawdowns have been made, to the Member pro rata in proportion to their holdings of Common Units, until Distributions under this Section 7.02(a) equal the aggregate amount of Capital Contributions attributable to the Members in respect of their acquisitions of Common Units; and
(b) second, any remaining amounts to the Members holding Common Units and Incentive Units (subject to Section 7.03) pro rata in proportion to their aggregate holdings of Common Units and Incentive Units treated as one class of Units.
Section 7.03 Limitations on Distributions to Incentive Units.
(a) Notwithstanding the provisions of Section 7.02(b), no Distribution (other than Distributions pursuant to Section 7.04) shall be made to a Member on account of its Restricted Incentive Units. Any amount that would otherwise be Distributed to such a Member but for the application of the preceding sentence shall instead be retained in a segregated Company account to be Distributed in accordance with Section 7.02(b) by the Company and paid to such Member if, as and when the Restricted Incentive Unit to which such retained amount relates vests pursuant to Section 3.03(b).
(b) It is the intention of the parties to this Agreement that Distributions to any Service Provider with respect to his Incentive Units be limited to the extent necessary so that the related Membership Interest constitutes a Profits Interest. In furtherance of the foregoing, and notwithstanding anything to the contrary in this Agreement, the Board shall, if necessary, limit any Distributions to any Service Provider with respect to his Incentive Units so that such Distributions do not exceed the available profits in respect of such Service Provider’s related Profits Interest. Available profits shall include the aggregate amount of profit and unrealized appreciation in all of the assets of the Company between the date of issuance of such Incentive Units and the date of such Distribution, it being understood that such unrealized appreciation shall be determined on the basis of the Profits Interest Hurdle applicable to such Incentive Unit. In the event that a Service Provider’s Distributions and allocations with respect to his Incentive Units are reduced pursuant to the preceding sentence, an amount equal to such excess Distributions shall be treated as instead apportioned to the holders of Common Units and Incentive Units that have met their Profits Interest Hurdle (such Incentive Units, “Qualifying Incentive Units”) pro rata in proportion to their aggregate holdings of Common Units and Qualifying Incentive Units treated as one class of Units.
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Section 7.04 Tax Advances.
(a) Subject to any restrictions in any of the Company’s and/or any Company Subsidiary’s then-applicable debt financing arrangements, and subject to the Board’s sole discretion to retain any other amounts necessary to satisfy the Company’s and/or the Company Subsidiaries1 obligations, at least five (5) days before each date prescribed by the Code for a calendar-year individual to pay quarterly installments of estimated tax, the Company shall use commercially reasonable efforts to Distribute cash to each Member in proportion to and to the extent of such Member’s Quarterly Estimated Tax Amount for the applicable calendar quarter (each such Distribution, a “Tax Advance”).
(b) If, at any time after the final Quarterly Estimated Tax Amount has been Distributed pursuant to Section 7.04(a) with respect to any Fiscal Year, the aggregate Tax Advances to any Member with respect to such Fiscal Year are less than such Member’s Tax Amount for such Fiscal Year (a “Shortfall Amount”), the Company shall use commercially reasonable efforts to Distribute cash in proportion to and to the extent of each Member’s Shortfall Amount. The Company shall use commercially reasonable efforts to Distribute Shortfall Amounts with respect to a Fiscal Year before the 75th day of the next succeeding Fiscal Year; provided, that if the Company has made Distributions other than pursuant to this Section 7.04, the Board may apply such Distributions to reduce any Shortfall Amount.
(c) If the aggregate Tax Advances made to any Member pursuant to this Section 7.04 for any Fiscal Year exceed such Member’s Tax Amount (an “Excess Amount”) such Excess Amount shall reduce subsequent Tax Advances that would be made to such Member pursuant to this Section 7.04, except to the extent taken into account as an advance pursuant to Section 7.04(d).
(d) Any Distributions made pursuant to this Section 7.04 shall be treated for pm-poses of this Agreement as advances on Distributions pursuant to Section 7.02 and shall reduce, dollar-for dollar, the amount otherwise Distributable to such Member pursuant to Section 7.02.
Section 7.05 Tax Withholding; Withholding Advances.
(a) Tax Withholding. If requested by the Board, each Member shall, if able to do so, deliver to the Board:
(i) an affidavit in form satisfactory to the Board that the applicable Member (or its members, as the case may be) is not subject to withholding under the provisions of any federal, state, local, foreign or other Applicable Law;
(ii) any certificate that the Board may reasonably request with respect to any such laws; and/or
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(iii) any other form or instrument reasonably requested by the Board relating to any Member’s status under such law.
If a Member fails or is unable to deliver to the Board the affidavit described in Section 7.05(a)(i), the Board may withhold amounts from such Member in accordance with Section 7.05(b).
(b) Withholding Advances. The Company is hereby authorized at all times to make payments (“Withholding Advances”) with respect to each Member in amounts required to discharge any obligation of the Company (as determined by the Tax Matters Member based on the advice of legal or tax counsel to the Company) to withhold or make payments to any federal, state, local or foreign taxing authority (a “Taxing Authority”) with respect to any Distribution or allocation by the Company of income or gain to such Member and to withhold the same from Distributions to such Member, Any funds withheld from a Distribution by reason of this Section 7.05(b) shall nonetheless be deemed Distributed to the Member in question for all purposes under this Agreement and, at the option of the Board, shall be charged against the Member’s Capital Account.
(c) Repayment of Withholding Advances. Any Withholding Advance made by the Company to a Taxing Authority on behalf of a Member and not simultaneously withheld from a Distribution to that Member shall, with interest thereon accruing from the date of payment at a rate equal to the prime rate published in the Wall Street Journal on the date of payment plus two percent (2.0%) per annum (the “Company Interest Rate”):
(i) be promptly repaid to the Company by the Member on whose behalf the Withholding Advance was made (which repayment by the Member shall not constitute a Capital Contribution, but shall credit the Membe1rs Capital Account if the Board shall have initially charged the amount of the Withholding Advance to the Capital Account); or
(ii) with the consent of the Board, be repaid by reducing the amount of the next succeeding Distribution or Distributions to be made to such Member (which reduction amount shall be deemed to have been Distributed to the Member, but which shall not further reduce the Member’s Capital Account if the Board shall have initially charged the amount of the Withholding Advance to the Capital Account).
Interest shall cease to accrue from the time the Member on whose behalf the Withholding Advance was made repays such Withholding Advance (and all accrued interest) by either method of repayment described above.
(d) Indemnification. Each Member hereby agrees to indemnify and hold harmless the Company and the other Members from and against any liability with respect to taxes, interest or penalties which may be asserted by reason of the Company’s failure to deduct and withhold tax on amounts Distributable or allocable to such Member. The provisions of this Section 7.05(d) and the obligations of a Member pursuant to Section 7.05(c) shall survive the termination, dissolution, liquidation and winding up of the Company and the withdrawal of such Member from the Company or Transfer of its Units. The Company may pursue and enforce all rights and remedies it may have against each Member under this Section 7.05, including bringing a lawsuit to collect repayment with interest of any Withholding Advances.
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(e) Overwithholding. Neither the Company nor the Board shall be liable for any excess taxes withheld in respect of any Distribution or allocation of income or gain to a Member. In the event of an overwithholding, a Member’s sole recourse shall be to apply for a refund from the appropriate Taxing Authority.
Section 7.06 Distributions in Kind.
(a) The Board is hereby authorized, in its sole discretion, to make Distributions to the Members in the form of securities or other property held by the Company; provided, that Tax Advances shall only be made in cash. In any non-cash Distribution, the securities or property so Distributed will be Distributed among the Members in the same proportion and priority as cash equal to the Fair Market Value of such securities or property would be Distributed among the Members pursuant to Section 7.02.
(b) Any Distribution of securities shall be subject to such conditions and restrictions as the Board detetn1ines are required or advisable to ensure compliance with Applicable Law. In furtherance of the foregoing, the Board may require that the Members execute and deliver such documents as the Board may deem necessary or appropriate to ensure compliance with all federal and state securities laws that apply to such Distribution and any further Transfer of the Distributed securities, and may appropriately legend the certificates that represent such securities to reflect any restriction on Transfer with respect to such laws.
Article VIII
MANAGEMENT
Section 8.01 Establishment of the Board. A board of managers of the Company (the “Board”) is hereby established and shall be comprised of natural Persons (each such Person, a “Manager”) who shall be appointed in accordance with the provisions of Section 8.02. The business and affairs of the Company, with the exception of Scientific Matters. shall be managed, operated and controlled by or under the direction of the Board, and the Board shall have, and is hereby granted, the full and complete power, authority and discretion for, on behalf of and in the name of the Company, to take such actions as it may in its sole discretion deem necessary or advisable to carry out any and all of the objectives and purposes of the Company, subject only to the terms of this Agreement.
Section 8.02 Board Composition; Vacancies.
(a) The Company and the Members shall take such actions as may be required to ensure that the number of managers constituting the Board is initially five (5).
(b) The initial Board shall be comprised as follows:
(i) two (2) individuals elected by the Series A Members, which shall initially be Joshua M. Hare, and an individual to be named by the Founder and agreed to by the Sponsor prior to the closing of this agreement (collectively “Series A Managers”);
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(ii) two (2) individuals elected by the Series B Members, which shall initially be two individuals to be named by the Sponsor and agreed to by the Founder prior to the closing of this agreement (collectively “Series B Managers”); and
(iii) one (1) individual mutually agreed upon by the Sponsor and the Founder and elected by the Voting Members (the “Non-Affiliated Manager”).
(c) Upon final payment of the full amount of the Sponsor’s Initial Capital Contribution, the Company and the Members shall take such actions as may be required to ensure that the number of managers constituting the Board shall increase to and at all times thereafter remain seven (7).
(i) This Board expansion will occur as follows:
(A) | Series A Members will name one additional Series A Manager; and |
(B) | Series B Members will name one additional Series B Manager. |
(d) At all times, the composition of any board of managers or board of directors of any Company Subsidiary shall be the same as that of the Board.
(e) In the event that a vacancy is created on the Board at any time due to the death, Disability, retirement, resignation or removal of a Series A Manager then the Series A Members shall have the right to designate an individual to fill such vacancy and the Company and each Member hereby agree to take such actions as may be required to ensure the election or appointment of such designee to fill such vacancy on the Board. In the event that the Series A Members shall fail to designate in writing a representative to fill position on the Board, and such failure shall continue for more than thirty (30) days after notice from the Company to Series B Members with respect to such failure, then the vacant position shall be filled by an individual designated by the Series A Managers then in office; provided, that such individual shall be removed from such position if the Series A Members so direct and simultaneously designate a new Series A Manager.
(f) In the event that a vacancy is created on the Board at any time due to the death, Disability, retirement, resignation or removal of a Series B Manager, then the Sponsor shall have the right to designate an individual to fill such vacancy and the Company and each Member hereby agree to take such actions as may be required to ensure the election or appointment of such designee to fill such vacancy on the Board. In the event that the Sponsor shall fail to designate in writing a representative to fill position on the Board, and such failure shall continue for more than thirty (30) days after notice from the Company to Sponsor with respect to such failure, then the vacant position shall be filled by an individual designated by the Series B Managers then in office; provided, that such individual shall be removed from such position if the Series B Members so direct and simultaneously designate a new Series B Manager.
(g) The Board shall maintain a schedule of all Managers with their respective mailing addresses (the “Managers Schedule”), and shall update the Managers Schedule upon the removal or replacement of any Manager in accordance with this Section 8.02 or Section 8.03. A copy of the Managers Schedule as of the execution of this Agreement is attached hereto as Schedule B.
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Section 8.03 Removal; Resignation.
(a) Series A Manager may be removed or replaced at any time from the Board, with or without cause, upon, and only upon, the written request of the Founder.
(b) A Series B Manager may be removed or replaced at any time from the Board, with or without cause, upon, and only upon, the written request of the Sponsor.
(c) The Non Affiliated Manager may be removed or replaced at any time from the Board, with or without cause, upon, and only upon, the written agreement of both the Founder and the Sponsor.
(d) A Manager may resign at any time from the Board by delivering his written resignation to the Board. Any such resignation shall be effective upon receipt thereof unless it is specified to be effective at some other time or upon the occurrence of some other event. The Board’s acceptance of a resignation shall not be necessary to make it effective.
Section 8.04 Meetings.
(a) Generally. The Board shall meet at such time and at such place as the Board may designate. Meetings of the Board may be held either in person or by means of telephone or video conference or other communications device that permits all Managers participating in the meeting to hear each other, at the offices of the Company or such other place (either within or outside the State of Delaware) as may be determined from time to time by the Board. Written notice of each meeting of the Board shall be given to each Manager at least 24 hours prior to each such meeting.
(b) Special Meetings. Special meetings of the Board shall be held on the call of (i) the Sponsor; or (ii) the Founder; or (iii) any three Managers upon at least five days’ written notice (if the meeting is to be held in person) or one day’s written notice (if the meeting is to be held by telephone communications or video conference) to the Managers, or upon such shorter notice as may be approved by all the Managers. Any Manager may waive such notice as to himself.
(c) Attendance and Waiver of Notice. Attendance of a Manager at any meeting shall constitute a waiver of notice of such meeting, except where a Manager attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of any regular or special meeting of the Board need be specified in the notice or waiver of notice of such meeting.
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Section 8.05 Quorum; Manner of Acting.
(a) Quorum. A majority of the Managers serving on the Board shall constitute a quorum, provided, however, that such majority must include all of the Series A Managers and Series B Managers then serving on the Board for the transaction of business of the Board. At all times when the Board is conducting business at a meeting of the Board, a quorum of the Board must be present at such meeting. If a quorum shall not be present at any meeting of the Board, then the Managers present at the meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. The active refusal to attend a reasonable scheduled meeting of the Boards shall be deemed a breach of a manager’s fiduciary duty.
(b) Participation. Any Manager may participate in a meeting of the Board by means of telephone or video conference or other communications device that permits ail Managers participating in the meeting to hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting. A Manager may vote or be present at a meeting either in person or by proxy, and such proxy may be granted in writing, by means of Electronic Transmission or as otherwise permitted by Applicable Law.
(c) Binding Act. Each Manager shall have one vote on all matters submitted to the Board or any committee thereof. With respect to any matter before the Board, the act of a majority of the Managers constituting a quorum shall be the act of the Board.
Section 8.06 Action By Written Consent. Notwithstanding anything herein to the contrary, any action of the Board (or any committee of the Board) may be taken without a meeting if a written consent constituting all of the Managers on the Board (or committee) shall approve such action. Such consent shall have the same force and effect as a vote at a meeting where a quorum was present and may be stated as such in any document or instrument filed with the Secretary of State of Delaware.
Section 8.07 Compensation; No Employment.
(a) Each Manager shall be reimbursed for his reasonable out-of-pocket expenses incurred in the performance of his duties as a Manager, pursuant to such policies as from time to time established by the Board. Nothing contained in this Section 8.07 shall be construed to preclude any Manager from serving the Company in any other capacity and receiving reasonable compensation for such services.
(b) This Agreement does not, and is not intended to, confer upon any Manager any rights with respect to continued employment by the Company and nothing herein should be construed to have created any employment agreement with any Manager.
Section 8.08 Committees.
(a) Establishment. The Board may, by resolution, designate from among the Managers one or more committees, each of which shall be comprised of one or more Managers; provided, that in no event may the Board designate any committee with all of the authority of the Board. Subject to the immediately preceding proviso, any such committee, to the extent provided in the resolution forming such committee, shall have and may exercise the authority of the Board, subject to the limitations set forth in Section 8.08(b). The Board may dissolve any committee or remove any member of a committee at any time.
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(b) Limitation of Authority. No committee of the Board shall have the authority of the Board in reference to:
(i) taking any action with respect to Scientific Matters;
(ii) authorizing or making Distributions to the Members;
(iii) authorizing the issuance of Common Units;
(iv) approving a plan of merger or sale of the Company;
(v) recommending to the Members a voluntary dissolution of the Company or a revocation thereof;
(vi) filling vacancies in the Board; or
(vii) altering or repealing any resolution of the Board that by its terms provides that it shall not be so amendable or repealable.
Section 8.09 No Personal Liability. Except as otherwise provided in the Delaware Act, by Applicable Law or expressly in this Agreement, no Manager will be obligated personally for any debt, obligation or liability of the Company or of any Company Subsidiaries, whether arising in contract, tort or otherwise, solely by reason of being a Manager.
Article IX
OFFICERS
Section 9.01 Officers; Delegation and Duties. As set forth herein, the Company shall have such officers as shall be necessary or desirable to conduct its business (collectively, “Officers’’) and shall be, at a minimum, one President, a Chief Science Officer, a Secretary, and a Treasurer or Chief Financial Officer. The Board shall also choose a Chairman of the Board (who must be a Manager). The Board may elect a Member, Manager or other Person to serve as an officer of the Company. The Board may assign titles to the officers they elect. If the title is one commonly used for officers of a business corporation, the assignment of that title shall constitute the delegation of the authority and duties that are normally associated with that office, subject to any specific delegation of authority and duties made by the Board herein. Any number of offices may be held by the same Person. The salaries or other compensation, if any, of the officers and agents of the Company shall be fixed from time to time by the Board.
Section 9.02 Election of Officers. The officers of the Company shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board; and all officers of the Company shall hold office until their successors are chosen, and qualified, or until their earlier death, resignation or removal. Except as otherwise set forth herein, any officer elected by the Board may be removed at any time, with or without cause, by the affirmative vote of the Board or upon the Incapacity of such officer. Any vacancy occurring in any office of the Company shall be filled by the Board.
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Section 9.03 Voting Securities Owned by the Company. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Company may be executed in the name of and on behalf of the Company by the President or any Vice President or any other officer authorized to do so by the Board and any such officer may, in the name of and on behalf of the Company, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any entity in which the Company may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Company might have exercised and possessed if present. The Board may, by resolution, from time to time confer like powers upon any other person or persons.
Section 9.04 Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Members and of the Board. The Chairman of the Board shall be selected from time to time by the Board. The Chairman of the Board may possess the same power as the President to sign all contracts, certificates and other instruments of the Company, which may be authorized by the Board. During the absence or disability of the President, the Chairman of the Board shall exercise all the powers and discharge all the duties of the President. The Chairman of the Board shall also perform such other duties and may exercise such other powers as may from time to time be assigned by this Agreement or by the Board.
Section 9.05 President. The President shall, subject to the control of the Board- and the Chairman of the Board, have general supervision of the business of the Company and shall see that all orders and resolutions of the Board are carried into effect. The President shall execute all bonds, mortgages, contracts, documents and other instruments of the Company. In the absence or disability of the Chairman of the Board, the President shall preside at all meetings of the Members and the Board. Unless the Board shall otherwise designate, the President shall be the Chief Executive Officer of the Company. The President shall also perform such other duties and may exercise such other powers as may from time to time be assigned to such officer by this Agreement or by the Board.
Section 9.06 Vice Presidents. At the request of the President or in the President’s absence or disability or in the event of the President’s inability or refusal to act, the Vice President, or the Vice Presidents if there is more than one (in the order designated by the Board), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Each Vice President shall perform such other duties and have such other powers as the Board from time to time may prescribe.
Section 9.07 Secretary. The Secretary shall attend all meetings of the Board and all meetings of Members and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for committees of the Board when required. The Secretary shall give, or cause to be given, notice of all meetings of the Members and special meetings of the Board, and .shall perform such other duties as may be prescribed by the Board, the Chairman of the Board or the President, under whose supervision the Secretary shall act If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the Members and special meetings of the Board, and if there be no Assistant Secretary; then either the Board or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Company, if any, and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board may give general authority to any other officer to affix the seal of the Company and to attest to the affixing by such officer’s signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be.
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Section 9.08 Treasurer (or Chief Financial Officer). The Treasurer (which may be titled as the “Chief Financial Officer”) shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Board. The Treasurer shall disburse the funds of the Company as may be ordered by the Board or such appropriate officer, taking proper vouchers for such disbursements, and shall render to the President and the Board, at its regular meetings, or when the Board so requires, an account of all transactions as Treasurer and of the financial condition of the Company. If required by the Board, the Treasurer shall give the Company a bond in such sum and with such surety or sureties as shall be satisfactory to the Board for the faithful performance of the duties of the office of the Treasurer and for the restoration to the Company, in case of the Treasurer’s death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the Treasurer’s possession or under the Treasurer’s control belonging to the Company.
Section 9.09 Chief Science Officer. For so long as the Founder acts as the chief science officer of the Company (the “Chief Science Officer”) the Chief Science Officer shall be responsible for the quality, innovativeness and conduct of the Company’s scientific and medical research and development, and product development and commercialization programs. The Chief Science Officer shall perform all duties and have all authorities attendant to such position including those duties reasonably assigned to the chief science officer from time to time by the Board, which duties shall specifically include, but not be limited to (collectively, the “Scientific Matters”):
(a) the recruitment, retention, and removal of the Company’s scientific, medical, laboratory, and research and development staff, including employees and consultants;
(b) the identification of the location of, and the proper outfitting of, the Company’s laboratory(ies) and other research and development facilities;
(c) the determination of how the LMSCs; as that term is defined in the Hare Assignment Agreement, shall be developed and used, to include the identification and evaluation of (i) appropriate new indications, (ii) licensing and commercialization opportunities, and (iii) the timing of when such new indications or licensing or commercialization opportunities should be undertaken;
(d) all matters relating to compliance with applicable laws, regulations, and best practice policies and procedures (i) promulgated or recommended by the U.S. Food and Drug Administration (“FDA”) or other governmental organization, or (ii) applicable to the practice of medicine;
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(e) liaison with all applicable governmental authorities regarding scientific, compliance, and/or regulatory matters;
(f) development, maintenance, application, and enforcement of policies and procedures related to scientific matters and product development, specifically including Current Good Manufacturing Practices (“cGMP”) promulgated by the FDA;
(g) allocation, supervision, and management of Company resources for scientific and product research and development activities including, but not limited to, personnel, finances, and technology;
(h) if the Chief Science Officer, in his sole discretion, deems it in the best interests of the Company, to propose, form, and serve as Chairman of, a Scientific Advisory Board for the Company;
(i) serve as the sole spokesperson, or authorize another such spokesperson, for the Company on all scientific, medical, and product research and development questions, issues, and matters, as appropriate.
(j) The Chief Science Officer shall report only to the Board and his engagement with the Company will be governed by the Consulting Services Agreement between the Founder and the Company, as then in effect.
Section 9.10 Delegation of Authority. The specific authorities of any officer may be further delegated to another officer or employee of the Company by the Board or, with the written consent of the majority of the Board; by the President, unless otherwise provided herein.
Article X
PRE-EMPTIVE RIGHTS
Section 10.01 Pre-emptive Right.
(a) Issuance of New Securities. The Company hereby grants to each holder of Common Units (each, a “Pre-emptive Member”) the right to purchase its Applicable Pro Rata Portion of any New Securities that the Company may from time to time propose to issue or sell to any party between the date hereof and the consummation of a Qualified Public Offering.
(b) Definition of New Securities. As used herein:
(i) the term “New Common Securities”. shall mean any authorized but unissued Common Units and any Unit Equivalents convertible into Common Units, exchangeable or exercisable for Common Units, or providing a right to subscribe for, purchase or acquire Common Units; and
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(ii) the term “New Securities” shall mean the New Common Securities, as applicable; provided, the term “New Common Securities” shall not include Units or Unit Equivalents issued or sold by the Company in connection with: (A) a grant to any existing or prospective Managers, Officers or other Service Providers pursuant to any Incentive Plan or similar equity-based plans or other compensation agreement; (B) the conversion or exchange of any securities of the Company into Units, or the exercise of any warrants or other rights to acquire Units; (C) any acquisition by the Company or any Company Subsidiary of any equity interests, assets, properties or business of any Person; (D) any merger, consolidation or other business combination involving the Company or any Company Subsidiary; (E) the commencement of any Public Offering or any transaction or series of related transactions involving a Change of Control; (F) any subdivision of Units (by a split of Units or otherwise), payment of Distributions or any similar recapitalization; (G) any private placement of warrants to purchase Membership Interests to lenders or other institutional investors (excluding the Members) in any arm’s length transaction in which such lenders or investors provide debt financing to the Company or any Company Subsidiary; (H) a joint venture, strategic alliance or other commercial relationship with any Person (including Persons that are customers) suppliers and strategic partners of the Company or any Company Subsidiary) relating to the operation of the Company’s or any Company Subsidiary’s business and not for the primary purpose of raising equity capital; or (I) any office lease or equipment lease or similar equipment financing transaction in which the Company or any Company Subsidiary obtains from a lessor or vendor the use of such office space or equipment for its business.
(c) Additional Issuance Notices. The Company shall give written notice (an “Issuance Notice”) of any proposed issuance or sale described in Section 10.0l(a) to the Pre-emptive Members within five (5) Business Days following any meeting of the Board at which any such issuance or sale is approved. The Issuance Notice shall, if applicable, be accompanied by a written offer from any prospective purchaser seeking to purchase New Securities (a “Prospective Purchaser”) and shall set forth the material terms and conditions of the proposed issuance or sale, including:
(i) the number and description of the New Securities proposed to be issued and the percentage of the Company’s Units then outstanding on a Fully Diluted Basis (both in the aggregate and with respect to each class or series of Units proposed to be issued) that such issuance would represent;
(ii) the proposed issuance date, which shall be at least twenty (20) Business Days from the date of the Issuance Notice;
(iii) the proposed purchase price per unit of the New Securities; and
(iv) if the consideration to be paid by the Prospective Purchaser includes non-cash consideration, the Board’s good-faith determination of the Fair Market Value thereof.
The Issuance Notice shall also be accompanied by a current copy of the Members Schedule indicating the Pre-emptive Members’ holdings of Common Units in a manner that enables each Pre-emptive Member to calculate its Common Pro Rata Portion of any New Common Securities.
(d) Exercise of Pre-emptive Rights. Each Pre-emptive Member shall for a period of ten (10) Business Days following the receipt of an Issuance Notice (the “Exercise Period”) have the right to elect irrevocably to purchase all or any portion of its Common Pro Rata Portion of any New Securities, as applicable, at the respective purchase prices set forth in the Issuance Notice by delivering a written notice to the Company (an “Acceptance Notice”) specifying the number of New Securities it desires to purchase. If the delivery of an Acceptance Notice by a Pre-emptive Member shall be a binding and irrevocable offer by such Member to purchase the New Securities described therein. The failure of a Pre-emptive Member to deliver an Acceptance Notice by the end of the Exercise Period shall constitute a waiver of its rights under this Section 10.01 with respect to the purchase of such New Securities, but shall not affect its rights with respect to any future issuances or sales of New Securities.
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(e) Over-allotment. No later than five (5) Business Days following the expiration of the Exercise Period, the Company shall notify each Pre-emptive Member in writing of the number of New Securities that each Pre-emptive Member has agreed to purchase (including, for the avoidance of doubt, where such number is zero) (the “Over-allotment Notice”). Each Pre-emptive Member exercising its rights to purchase its Applicable Pro Rata Portion of the New Securities in full (an “Exercising Member”) shall have a right of over-allotment such that if any other Pre-emptive Member has failed to exercise its right under this Section 10.01 to purchase its full Applicable Pro Rata Portion of the New Securities (each, a “Non-Exercising Member”), such Exercising Member may purchase its Applicable Pro Rata Portion of such Non Exercising Member’s allotment by giving written notice to the Company within five (5) Business Days of receipt of the Over-allotment Notice (the “Over-allotment Exercise Period”).
(f) Sales to the Prospective Purchaser. Following the expiration of the Exercise Period and, if applicable, the Over-allotment Exercise Period, the Company shall be free to complete the proposed issuance or sale of New Securities described in the Issuance Notice with respect to which Pre-emptive Members declined to exercise the pre-emptive right set forth in this Section 10.01 on terms no less favorable to the Company than those set forth in the Issuance Notice (except that the amount of New Securities to be issued or sold by the Company may be reduced); provided. that: (i) such issuance or sale is closed within twenty (20) Business Days after the expiration of the Exercise Period and, if applicable, the Over-allotment Exercise Period (subject to the extension of such twenty (20) Business Day period for a reasonable time not to exceed forty (40) Business Days to the extent reasonably necessary to obtain any third-party approvals); and (ii) for the avoidance of doubt, the price at which the New Securities are sold to the Prospective Purchaser is at least equal to or higher than the purchase price described in the Issuance Notice. In the event the Company has not sold such New Securities within such time period, the Company shall not thereafter issue or sell any New Securities without first again offering such securities to the Members in accordance with the procedures set forth in this Section 10.01.
(g) Closing of the Issuance. The closing of any purchase by any Pre-emptive Member shall be consummated concurrently with the consummation of the issuance or sale described in the Issuance Notice. Upon the issuance or sale of any New Securities in accordance with this Section 10.01, the Company shall deliver the New Securities free and clear of any liens (other than those arising hereunder and those attributable to the actions of the purchasers thereof), and the Company shall so represent and warrant to the purchasers thereof, and further represent and warrant to such purchasers that such New Securities shall be, upon issuance thereof to the Exercising Members and after payment therefor, duly authorized, validly issued, fully paid and non-assessable. The Company, in the discretion of the Board pursuant to Section 3.05(a), may deliver to each Exercising Member certificates evidencing the New Securities. Each Exercising Member shall deliver to the Company the purchase price for the New Securities purchased by it by certified or bank check or wire transfer of immediately available funds. Each party to the purchase and sale of New Securities shall take all such other actions as may be reasonably necessary to consummate the purchase and sale including, without limitation, entering into such additional agreements as may be necessary or appropriate.
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(h) Waiver of Pre-emptive Right. Any pre-emptive right granted under this Section 10.01 may be waived by any or all series or classes of Common Units, upon a majority vote of the holders of such Units.
Article XI
TRANSFER
Section 11.01 General Restrictions on Transfer.
(a) Each Member acknowledges and agrees that, until the consummation of a Qualified Public Offering, such Member (or any Permitted Transferee of such Member) shall not Transfer any Units or Unit Equivalents except as permitted pursuant to Section 11.02 or in accordance with the procedures described in Section 11.03 through Section 11.06, as applicable. Notwithstanding the foregoing or anything in this Agreement to the contrary,
(i) Transfers of Incentive Units shall not be permitted prior to the consummation of a Qualified Public Offering except:
(A) | pursuant to Section 11.02; |
(B) | when required of a Drag along Member pursuant to Section 11.04; |
(C) | as set forth in Section 11.06; or |
(D) | as set forth in the Incentive Plan or applicable Award Agreement. |
(b) Notwithstanding any other provision of this Agreement (including Section 11.02), prior to the consummation of a Qualified Public Offering, each Member agrees that it will not, directly or indirectly, Transfer any of its Units or Unit Equivalents, and the Company agrees that it shall not issue any Units or Unit Equivalents:
(i) except as permitted under the Securities Act and other applicable federal or state securities or blue sky laws, and then, with respect to a Transfer of Units or Unit Equivalents, if requested by the Company, only upon delivery to the Company of an opinion of counsel in form and substance satisfactory to the Company to the effect that such Transfer may be effected without registration under the Securities Act;
(ii) if such Transfer or issuance would cause the Company to be considered a “publicly traded partnership” under Section 7704(b) of the Code within the meaning of Treasury Regulation Section 1.7704-l(h)(l)(ii), including the look-through rule in Treasury Regulation Section 1.7704-l(h.)(3);
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(iii) if such Transfer or issuance would affect the Company’s existence or qualification as a limited liability company under the Delaware Act;
(iv) if such Transfer or issuance would cause the Company to lose its status as a partnership for federal income tax purposes;
(v) if such Transfer or issuance would cause a termination of the Company for federal income tax purposes;
(vi) if such Transfer or issuance would cause the Company or any of the Company Subsidiaries to be required to register as an investment company under the Investment Company Act of 1940, as amended; or
(vii) if such Transfer or issuance would cause the assets of the Company or any of the Company Subsidiaries to be deemed “Plan Assets” as defined under the Employee Retirement Income Security Act of 1974 or its accompanying regulations or result in any “prohibited transaction” thereunder involving the Company or any Company Subsidiary.
In any event, the Board may refuse the Transfer to any Person if such Transfer would have a material adverse effect on the Company as a result of any regulatory or other restrictions imposed by any Governmental Authority.
(c) Any Transfer or attempted Transfer of any Units or Unit Equivalents in violation of this Agreement shall be null and void, no such Transfer shall be recorded on the Company’s books and the purported Transferee in any such Transfer shall not be treated (and the purported Transferor shall continue be treated) as the owner of such Units or Unit Equivalents for all purposes of this Agreement.
(d) For the avoidance of doubt, any Transfer of Units or Unit Equivalents permitted by Section 11.02 or made in accordance with the procedures described in Section 11.03 through Section 11.06, as applicable, and purporting to be a sale, transfer, assignment or other disposal of the entire Membership Interest represented by such Units or Unit Equivalents, inclusive of all the rights and benefits applicable to such Membership Interest as described in the definition of the term “Membership Interest,” shall be deemed a sale, transfer, assignment or other disposal of such Membership Interest in its entirety as intended by the parties to such Transfer, and shall not be deemed a sale, transfer, assignment or other disposal of any less than all of the rights and benefits described in the definition of the term “Membership Interest,” unless otherwise explicitly agreed to by the parties to such Transfer.
Section 11.02 Permitted Transfers.
(a) The provisions of Section 11.01(a), Section 11.03, Section 11.04 (with respect to the Dragging Member only) and Section 11.05 shall not apply to any of the following Transfers by any Member of any of its Units or Unit Equivalents:
(i) With respect to Sponsor, to (i) any Affiliate of Sponsor, (ii) in the event of a winding up of Sponsor, any of its members in accordance with its constitutive documents (iii) any spouse, former spouse, parent, siblings, descendants (including adoptive relationships and stepchildren) and the spouses of each such natural persons (“Sponsor Family Member”) of any member, partner, officer or equity holder of Sponsor (collectively, “Sponsor Member”), (iv) a trust under which the distribution of Units may be made to such Sponsor Member and/or any Sponsor Family Member, (v) a charitable remainder trust, the income from which will be paid to such Sponsor Member or Sponsor Family Member during his life, (vi) a corporation, partnership or limited liability company, the stockholders, partners or members of which are such Sponsor Members and/or Sponsor Family Members, (vii) any other estate planning vehicle (e.g., trust or foundation) for a Sponsor Member or Sponsor Family Member or (viii) by will or by the laws of intestate succession, to such Sponsor Member’s executors, administrators, testamentary trustees, legatees or beneficiaries; provided, that any Sponsor Member who Transfers Units shall remain bound by the provisions of Section 11.01; provided, that such transferee, together with the equity interest holders (if such transferee is an entity) and trustors, trustees, and beneficiaries (if such transferee is a trust or estate planning vehicle), agrees to be bound by the terms of this Agreement; or
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(ii) With respect to any Management Member, to (i) such Management Member’s spouse, parent, siblings, descendants (including ·adoptive relationships and stepchildren) and the spouses of each such natural persons (collectively, “Family Members”), (ii) a trust under which the distribution of Units may be made only to such Management Member and/or any Family Member of such Management Member, (iii) a charitable remainder trust, the income from which will be paid to such Management Member during his life, (iv) a corporation, partnership or limited liability company, the stockholders, partners or members of which are only such Management Member and/or Family Members of such Management Member, or (v) by will or by the laws of intestate succession, to such Management Member’s executors, administrators, testamentary trustees, legatees or beneficiaries; provided, that any Management Member who Transfers Units shall remain bound by the provisions of Section 11.01; or
(iii) To Service Providers or other agents of the Company or to Service Providers in privity to Series A Members or Series B Members, with the written consent of a majority of the Board, which consent shall not be unreasonably withheld; provided, however, that such transferee agrees in writing to be bound by this Agreement; or
(iv) Pursuant to a Public Offering.
(b) Notwithstanding the forgoing, as to any Permitted Transfer by a Sponsor or an Affiliate of Sponsor and as to any Permitted Transfer by the Founder or any Affiliate of the Founder (or subsequent Permitted Transfer by a transferee of any of the forgoing), it is understood that such transfer shall only occur if at all times; even after such transfers, that the voting authority and power related to any such transferred Units shall remain with (i) in the case of the Sponsor (x) Donald Soffer, or if he is unable to exercise voting authority as a result of death, incapacity or disability then (y) Jeffrey Soffer and (ii) in the case of the Founder (x) Dr. Joshua M. Hare, M.D., or if he is unable to exercise voting authority as a result of death, incapacity or disability then (y) to such individual designated in writing by the Founder with in (45) forty five days of the effective date of the Agreement; who must be reasonably acceptable to the Sponsor (acceptance cannot be unreasonably withheld or delayed), as updated from time to time, and recorded with the Company, subject to Sponsor approval.
(c) No transfer under this Section 11.02 shall impact the Sponsor’s agreements under Sections 5.01 and 5.02.
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Section 11.03 Right of First Refusal.
(a) Offered Units.
(i) At any time prior to the end of Phase III clinical trials of the first product of the Company, and subject to the terms and conditions specified in Section 11.01, Section 11.02 and this Section 11.03, each Member holding Common Units (as applicable), shall have a right of first refusal if any other Member (the “Offering Member”) receives a bona fide offer that the Offering Member desires to accept to Transfer all or any portion of the Common Units (or applicable Unit Equivalents) (the “Offered Common Units”) it owns.
(ii) As used herein, the term “Applicable Offered Units” shall mean the Offered Common Units with respect to those Members holding Common Units (or applicable Unit Equivalents) (the “Applicable Offered Common Units”). As used herein, the term “Applicable ROFR Rightholders” shall mean, in the case of a proposed Transfer of Common Units (or applicable Unit Equivalents), all Members other than the Offering Member holding Common Units (or applicable Unit Equivalents); provided, that in the case of the Sponsor, in each case, Applicable ROFR Rightholder shall include the Sponsor and each of its Affiliates (including funds and other investment vehicles that have affiliated but not identical managing members or general partners).
(b) Offering; Exceptions. Each time the Offering Member receives an offer for a Transfer of any of its Common Units (or applicable Unit Equivalents) (other than Transfers that (i) are permitted by Section 11.02, (ii) are proposed to be made by a Dragging Member or required to be made by a Drag-along Member pursuant to Section 11.04, or (iii) are made by a Tag-along Member upon the exercise of its tag-along right pursuant to Section 11.05 after Applicable ROFR Rightholders have declined to exercise their rights in full under this Section 11.03), the Offering Member shall first make an offering of the Offered Units to the Applicable ROFR Rightholders, all in accordance with the following provisions of this Section 11.03, prior to Transferring such Offered Units to the proposed purchaser.
(c) Offer Notice.
(i) The Offering Member shall, within five (5) Business Days of receipt of the Transfer offer, give written notice (the “Offering Member Notice”) to the Applicable ROFR Rightholders stating that it has received a bona fide offer for a Transfer of its Common Units (or applicable Unit Equivalents) and specifying:
(A) | the number of Offered Common Units to be Transferred by the Offering Member; |
(B) | the proposed date, time and location of the closing of the Transfer, which shall not be less than 60 (sixty) days from the date of the Offering Member Notice; |
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(C) | the purchase price per Applicable Offered Unit (which shall be payable solely in cash) and the other material terms and conditions of the Transfer; and |
(D) | the name of the Person who has offered to purchase such Offered Units. |
(ii) The Offering Member Notice shall constitute the Offering Member’s offer to Transfer the Offered Units to the Applicable ROFR Rightholders, which offer shall be irrevocable until the end of the ROFR Rightholder Option Period described in Section 11.03(d)(ii).
(iii) By delivering the Offering Member Notice, the Offering Member represents and warrants to each Applicable ROFR Rightholder that;
(A) | the Offering Member has full right, title and interest in and to the Offered Units; |
(B) | the Offering Member has all the necessary power and authority and has taken all necessary action to Transfer such Offered Units as contemplated by this Section 11.03; and |
(C) | the Offered Units are free and clear of any and all liens other than those arising as a result of or under the terms of this Agreement. |
(d) Exercise of Right of First Refusal.
(i) Upon receipt of the Offering Member Notice, each Applicable ROFR Rightholder shall have the right to purchase the Applicable Offered Units in the following manner: the Applicable ROFR Rightholders shall have the right to purchase the Applicable Offered Units, in accordance with the procedures set forth in Section 11.03(d)(ii). Notwithstanding the foregoing, the Applicable ROFR Rightholders may only exercise their right to purchase the Offered Units if, after giving effect to all elections made under this Section 11.03(d), no less than all of the Offered Units will be purchased by the Applicable ROFR Rightholders.
(ii) The right of the Applicable ROFR Rightholders to purchase any Offered Units shall be exercisable with the delivery of a written notice (the “Member ROFR Exercise Notice”) by the Applicable ROFR Rightholders to the Offering Member within thirty (30) Business Days of receipt of the Offering Member Notice (the “ROFR Rightholder Option Period”) stating the number (including where such number is zero) and type of Offered Units the ROFR Rightholder elects irrevocably to purchase on the terms and respective purchase prices set forth in the Offering Member Notice. The Member ROFR Exercise Notice shall be binding upon delivery and irrevocable by the Company. In the event that more than one Applicable ROFR Rightholder exercises the right to purchase such offered equity interests, the offered equity interests shall be sold to such ROFR Rightholders on a pari passu basis.
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(iii) The failure of any Applicable ROFR Rightholder to deliver a Member ROFR Exercise Notice by the end of the ROFR Rightholder Option Period, shall constitute a waiver of their respective rights of first refusal under this Section 11.03 with respect to the Transfer of Offered Units, but shall not affect their respective rights with respect to any future Transfers.
(e) Consummation of Sale. In the event that the Applicable ROFR Rightholders shall have, in the aggregate, exercised their respective rights to purchase all and not less than all of the Offered Units, then the Offering Member shall sell such Offered Units to the Applicable ROFR Rightholders, and the Applicable ROFR Rightholders, as the case may be, shall purchase such Offered Units, within sixty (60) days following the expiration of the ROFR Rightholder Option Period (which period may be extended for a reasonable time not to exceed ninety (90) days to the extent reasonably necessary to obtain required approvals or consents from any Governmental Authority), Each Member shall take all actions as may be reasonably necessary to consummate the sale contemplated by this Section 11.03(e), including, without limitation, entering into agreements and delivering certificates and instruments and consents as may be deemed necessary or appropriate. At the closing of any sale and purchase pursuant to this Section 11.03(e), the Offering Member shall deliver to the participating Applicable ROFR Rightholders certificates (if any) representing the Offered Units to be sold, free and clear of any liens or encumbrances (other than those contained in this Agreement) accompanied by evidence of transfer and all necessary transfer taxes paid and stamps affixed, if necessary, against receipt of the purchase price therefor from such Applicable ROFR Rightholders by certified or official bank check or by wire transfer of immediately available funds.
(f) Sale to Proposed Purchaser. In the event that the Applicable ROFR Rightholders shall not have collectively elected to purchase all of the Offered Units, then, provided the Offering Member has also complied with the provisions of Section 11.05, to the extent applicable, the Offering Member may Transfer all of such Offered Units, at a price per Applicable Offered Unit not less than specified in the Offering Member Notice and on other terms and conditions which are not materially more favorable in the aggregate to the proposed purchaser than those specified in the Offering Member Notice, but only to the extent that such Transfer occurs within ninety (90) days after expiration of the ROFR Rightholder Option Period. Any Offered Units not Transferred within such 90-day period will be subject to the provisions of this Section 11.03 upon subsequent Transfer.
Section 11.04 Drag-along Rights.
(a) Participation. At any time prior to the consummation of a Qualified Public Offering, if one or more Members (together with their respective Permitted Transferees) holding no less than eighty-six percent (86%) of all the Common Units (such Member or Members, the “Dragging Member”) proposes to consummate, in one transaction or a series of related transactions, a Change of Control (a “Drag-along Sale”), the Dragging Member shall have the right, after delivering the Drag-along Notice in accordance with Section 11.04(c) and subject to compliance with Section 11.04(d), to require that each other Member (each, a “Drag-along Member”) participate in such sale (including, if necessary, by converting their Unit Equivalents into the Units to be sold in the Drag along Sale) in the manner set forth in Section 11.04(b).
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(b) Sale of Units. Subject to compliance with Section 11.04(d):
(i) If the Drag-along Sale is structured as a sale resulting in a majority of the Common Units of the Company on a Fully Diluted Basis being held by a Third Party Purchaser, then each Drag-along Member shall sell, with respect to each class or series of Units proposed by the Dragging Member to be included in the Drag-along Sale, the number of Units and/or Unit Equivalents of such class or series (with Common Units and Incentive Units treated as one class for this purpose) equal to the product obtained by multiplying (i) the number of applicable Units on a Fully Diluted Basis held by such Drag-along Member (with Common Units and Incentive Units treated as one class) by (ii) a fraction (x) the numerator of which is equal to the number of applicable Units on a Fully Diluted Basis that the Dragging Member proposes to sell in the Drag-along Sale (with Common Units and Incentive Units treated as one class) and (y) the denominator of which is equal to the number of applicable Units on a Fully Diluted Basis held by the Dragging Member at such time (with Common Units and Incentive Units treated as one class); and
(ii) If the Drag-along Sale is structured as a sale of all or substantially all of the consolidated assets of the Company and the Company Subsidiaries or as a merger, consolidation, recapitalization, or reorganization of the Company or other transaction requiring the consent or approval of the Members. then notwithstanding anything to the contrary in this Agreement (including Section 4.06), each Drag-along Member shall vote in favor of the transaction and otherwise consent to and raise no objection to such transaction, and shall take all actions to waive any dissenters’, appraisal or other similar rights that it may have in connection with such transaction. The Distribution of the aggregate consideration of such transaction shall be made in accordance with Section 14.03(c).
(c) Sale Notice. The Dragging Member shall exercise its rights pursuant to this Section 11.04 by delivering a written notice (the “Drag-along Notice”) to the Company and each Drag-along Member no more than ten (10) Business Days after the execution and delivery by all of the parties thereto of the definitive agreement entered into with respect to the Drag-along Sale and, in any event, no later than twenty (20) Business Days prior to the closing date of such Drag-along Sale. The Drag-along Notice shall make reference to the Dragging Members’ rights and obligations hereunder and shall describe in reasonable detail:
(i) The name of the person or entity to whom such Units are proposed to be sold;
(ii) The proposed date, time and location of the closing of the sale;
(iii) The number of each class or series of Units to be sold by the Dragging Member, the proposed amount of consideration for the Drag along Sale and the other material terms and conditions of the Drag-along Sale, including a description of any non-cash consideration in sufficient detail to permit the valuation thereof and including, if available, the purchase price per Unit of each applicable class or series (which may take into account the Profits Interest Hurdle of any Incentive Units to be sold); and
(iv) A copy of any form of agreement proposed to be executed in connection therewith.
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(d) Conditions of Sale. The obligations of the Drag along Members in respect of a Drag-along Sale under this Section 11.04 are subject to the satisfaction of the following conditions:
(i) The consideration to be received by each Drag-along Member shall be the same form and amount of consideration to be received by the Dragging Member per Unit of each applicable class or series (the Distribution of which shall be made in accordance with Section 11.04(b)) and the terms and conditions of such sale shall, except as otherwise provided in Section 11.04(d)(iii), be the same as those upon which the Dragging Member sells its Units;
(ii) If the Dragging Member o:r any Drag-along Member is given an option as to the form and amount of consideration to be received, the same option shall be given to all Drag-along Members; and
(iii) Each Drag-along Member shall execute the applicable purchase agreement; if applicable, and make or provide the same representations, warranties, covenants, indemnities and agreements as the Dragging Member makes or provides in connection with the Drag-along Sale; provided, that each Drag-along Member shall only be obligated to make individual representations and warranties with respect to its title to and ownership of the applicable Units, authorization, execution and delivery of relevant documents, enforceability of such documents against the Drag-along Member, and other matters relating to such Drag-along Member, but not with respect to any of the foregoing with respect to any other Members or their Units; provided, further, that all representations, warranties, covenants and indemnities shall be made by the Dragging Member and each Drag-along Member severally and not jointly and any indemnification obligation shall be pro rata based on the consideration received by the Dragging Member and each Drag-along Member, in each case in an amount not to exceed the aggregate proceeds received by the Dragging Member and each such Drag-along Member in connection with the Drag-along Sale.
(e) Cooperation. Each Drag-along Member shall take all actions as may be reasonably necessary to consummate the Drag-along Sale, including, without limitation, entering into agreements and delivering certificates and instruments, in each case, consistent with the agreements being entered into and the certificates being delivered by the Dragging Member, but subject to Section 11.04(d)(iii).
(f) Expenses. The fees and expenses of the Dragging Member incurred in connection with a Drag-along Sale and for the benefit of all Drag-along Members (it being understood that costs incurred by or on behalf of a Dragging Member for its sole benefit will not be considered to be for the benefit of all Drag-along Members), to the extent not paid or reimbursed by the Company or the Third Party Purchaser, shall be shared by the Dragging Member and all the Drag-along Members on a pro rata basis, based on the consideration received by each such Member; provided, that no Drag-along Member shall be obligated to make any out-of-pocket expenditure prior to the consummation of the Drag-along Sale.
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(g) Consummation of Sale. The Dragging Member shall have ninety (90) days following the date of the Drag-along Notice in which to consummate the Drag along Sale, on the terms set forth in the Drag-along Notice (which 90-day period may be extended for a reasonable time not to exceed one-hundred and twenty (120) days to the extent reasonably necessary to obtain required approvals or consents from any Governmental Authority). If at the end of such period the Dragging Member has not completed the Drag-along Sale) the Dragging Member may not then exercise its rights under this Section 11.04 without again fully complying with the provisions of this Section 11.04.
Section 11.05 Tag-along Rights.
(a) Participation. At any time prior to the consummation of a Qualified Public Offering, and subject to the terms and conditions specified in Section 11.01, Section 11.02 and Section 11.03; if any Member (the “Selling Member”) proposes to Transfer any of its Common Units (or any Unit Equivalents of such Units) to any Person (a “Proposed Transferee”), each other Member (each; a “Tag-along Member”) shall be permitted to participate in such sale (a “Tag-along Sale”) on the terms and conditions set forth in this Section 11.05.
(b) Application of Transfer Restrictions. The provisions of this Section 11.05 shall only apply to Transfers in which:
(i) The Applicable ROFR Rightholders have not exercised their rights in full under Section 11.03 to purchase all of the Offered Units; and
(ii) The Dragging Member has elected to not exercise its drag-along right under Section 11.04.
(c) Sale Notice. Prior to the consummation of any Transfer of Common Units (or any Unit Equivalents of such Units) qualifying under Section 11.05(b), and after satisfying its obligations pursuant to Section 11.03, the Selling Member shall deliver to the Company and each other Member holding Units (or any Unit Equivalents of such Units) of the class or series proposed to be Transferred a written notice (a “Sale Notice”) of the proposed Tag-along Sale as soon as practicable following the expiration of the ROFR Rightholder Option Period, and in no event later than five (5) Business Days thereafter. The Sale Notice shall make reference to the Tag-along Members’ rights hereunder and shall describe in reasonable detail:
(i) The aggregate number of Common Units (or any Unit Equivalents of such Units) the Proposed Transferee has offered to purchase;
(ii) The identity of the Proposed Transferee;
(iii) The proposed date, time and location of the closing of the Tag-along Sale;
(iv) The purchase price per applicable Unit (which shall be payable solely in cash) and the other material terms and conditions of the Transfer; and
(v) A copy of any form of agreement proposed to be executed in connection therewith.
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(d) Exercise of Tag-along Right.
(i) The Selling Member and each Tag-along Member timely electing to participate in the Tag-along Sale pursuant to Section 11.05(d)(ii) shall have the right to Transfer in the Tag along Sale the number of Common Units (and applicable Unit Equivalents, if any), as the case may be, equal to the product of (x) the aggregate number of Common Units (and applicable Unit Equivalents), as the case may be, that the Proposed Transferee proposes to buy as stated in the Sale Notice and (y) a :fraction (A) the numerator of which is equal to the number of Common Units, as the case may be, on a Fully Diluted Basis then held by the applicable Member, and (B) the denominator of which is equal to the number of Common Units, as the case may be, on a Fully Diluted Basis then held by the Selling Member and all of the Tag-along Members timely electing to participate in the Tag-along Sale pursuant to Section 11.05(d)(ii) (such amount with respect to the Common Units (and applicable Unit Equivalents, if any), the “Common Tag-along Portion.”
(ii) Each Tag-along Member shall exercise its right to participate in a Tag-along Sale by delivering to the Selling Member a written notice (a “Tag along Notice”) stating its election to do so and specifying the number of Common Units and/or Unit Equivalents (up to its Common Tag-along Portion), as the case may be, to be Transferred by it no later than ten (10) Business Days after receipt of the Sale Notice (the “Tag-along Period”).
(iii) The offer of each Tag-along Member set forth in a Tag-along Notice shall be irrevocable, and, to the extent such offer is accepted, such Tag-along Member shall be bound and obligated to consummate the Transfer on the terms and conditions set forth in this Section 11.05.
(e) Waiver. Each Tag-along Member who does not deliver a Tag-along Notice in compliance with Section 11.05(d)(ii) shall be deemed to have waived all of such Tag-along Member’s rights to participate in the Tag-along Sale with respect to the Common Units (and/or Unit Equivalents) owned by such Tag-along Member, and the Selling Member shall (subject to the rights of any other participating Tag-along Member) thereafter be free to sell to the Proposed Transferee the Units and/or Unit Equivalents identified in the Sale Notice at a per Unit price that is no greater than the applicable per Unit price set forth in the Sale Notice and on other terms and conditions which are not, either individually or in the aggregate, materially more favorable to the Selling Member than those set forth in the Sale Notice, without any further obligation to the non-accepting Tag-along Members.
(f) Conditions of Sale.
(i) Each Member participating in the Tag-along Sale shall receive the same consideration per Common Unit, as the case may be, after deduction of such Member’s proportionate share of the related expenses in accordance with Section 11.05(h) below.
(ii) Tag-along Member shall make or provide the same representations, warranties, covenants, indemnities and agreements as the Selling Member makes or provides in connection with the Tag along Sale; provided, that each Tag-along Member shall only be obligated to make individual representations and warranties with respect to its title to and ownership of the applicable Units, authorization, execution and delivery of relevant documents, enforceability of such documents against the Tag-along Member, and other matters relating to such Tag-along Member, but not with respect to any of the foregoing with respect to any other Members or their Units; provided, further, that all representations, warranties, covenants and indemnities shall be made by the Selling Member and each Tag-along Member severally and not jointly and any indemnification obligation shall be pro rata based on the consideration received by the Selling Member and each Tag-along Member, in each case in an amount not to exceed the aggregate proceeds received by the Selling Member and each such Tag-along Member in connection with the Tag-along Sale.
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(iii) Each holder of then currently exercisable Unit Equivalents with respect to a class or series of Units proposed to be Transferred in a Tag-along Sale shall be given an opportunity to convert such Unit Equivalents into the applicable class or series of Units prior to the consummation of the Tag-along Sale and participate in such sale as holders of such class or series of Units.
(g) Cooperation. Each Tag-along Member shall take all actions as may be reasonably necessary to consummate the Tag-along Sale, including, without limitation, entering into agreements and delivering certificates and instruments, in each case, consistent with the agreements being entered into and the certificates being delivered by the Selling Member, but subject to Section 11.05(f)(ii).
(h) Expenses. The fees and expenses of the Selling Member incurred in connection with a Tag-along Sale and for the benefit of all Tag-along Members (it being understood that costs incurred by or on behalf of a Selling Member for its sole benefit will not be considered to be for the benefit of all Tag-along Members), to the extent not paid or reimbursed by the Company or the Proposed Transferee, shall be shared by the Selling Member and all the participating Tag-along Members on a pro rata basis, based on the consideration received by each such Member; provided, that no Tag-along Member shall be obligated to make any out-of-pocket expenditure prior to the consummation of the Tag-along Sale.
(i) Consummation of Sale. The Selling Member shall have sixty (60) days following the expiration of the Tag-along Period in which to consummate the Tag-along Sale, on terms not more favorable to the Selling Member than those set forth in the Tag along Notice (which such 60-day period may be extended for a reasonable time not to exceed ninety (90) days to the extent reasonably necessary to obtain required approvals or consents from any Governmental Authority). If at the end of such period the Selling Member has not completed the Tag-along Sale, the Selling Member may not then effect a Transfer that is subject to this Section 11.05 without again fully complying with the provisions of this Section 11.05.
(j) Transfers in Violation of the Tag along Right. If the Selling Member sells or otherwise Transfers to the Proposed Transferee any of its Units in breach of this Section 11.05, then each Tag-along Member shall have the right to sell to the Selling Member, and the Selling Member undertakes to purchase from each Tag-along Member, the number of Units of each applicable class or series that such Tag-along Member would have had the right to sell to the Proposed Transferee pursuant to this Section 11.05, for a per Unit amount and form of consideration and upon the terms and conditions on which the Proposed Transferee bought such Units from the Selling Member, but without indemnity being granted by any Tag-along Member to the Selling Member; provided, that nothing contained in this Section 11.05(j) shall preclude any Member from seeking alternative remedies against such Selling Member as a result of its breach of this Section 11.05. The Selling Member shall also reimburse each Tag-along Member for any and all reasonable and documented out-of-pocket fees and expenses, including reasonable legal fees and expenses, incurred pursuant to the exercise or the attempted exercise of the Tag-along Member’s rights under this Section 11.05(j).
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Section 11.06 Incentive Units Call Right.
(a) Call Right. At any time prior to the consummation of a Qualified Public Offering or a Change of Control, following the termination of employment or other engagement of any Service Provider with the Company or any of the Company Subsidiaries, the Company may, at its election, require the Service Provider and any or all of such Service Provider’s Permitted Transferees to sell to the Company all or any portion of such Service Provider’s Incentive Units at the following respective purchase prices:
(i) For the Restricted Incentive Units, under all circumstances of termination, a price equal to the lesser of their Fair Market Value and their Initial Cost (the “Cause Purchase Price”).
(ii) For the Unrestricted Incentive Units, their Cause Purchase Price, in the event of:
(A) | the termination of such Service Provider’s employment or other engagement by the Company or any of the Company Subsidiaries for Cause; or |
(B) | the resignation of such Service Provider for any reason other than Good Reason at any time prior to the fifth anniversary of the date hereof (or if later, the date that such Service Provider began his employment or other engagement with the Company or Company Subsidiary). |
(iii) For the Unrestricted Incentive Units, a price equal to their Fair Market Value, in the event of:
(A) | the termination of such Service Provider’s employment or other engagement by the Company or any of the Company Subsidiaries for a reason other than for Cause; |
(B) | the resignation of such Service Provider at any time for Good Reason; |
(C) | the resignation of such Service Provider for any reason other than Good Reason at any time following the fifth anniversary of the date hereof (or if later, the date that such Service Provider began his employment or other engagement with the Company or Company Subsidiary); or |
(D) | the dissolution, death or Disability of such Service Provider. |
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(b) Procedures.
(i) If the Company desires to exercise its right to purchase Incentive Units pursuant to this Section 11.06, the Company shall deliver to the Service Provider, within ninety (90) days after the termination of such Service Provider 1s employment or other engagement, a written notice (the “Repurchase Notice”) specifying the number of Incentive Units to be repurchased by the Company (the “Repurchased Incentive Units”) and the purchase price therefor in accordance with Section 11.06(a).
(ii) Each applicable Service Provider shall, at the closing of any purchase consummated pursuant to this Section 11.06, represent and warrant to the Company that:
(A) | such Service Provider has full right, title and interest in and to the Repurchased Incentive Units; |
(B) | such Service Provider has all the necessary power and authority and has taken all necessary action to sell such Repurchased Incentive Units as contemplated by this Section 11.06; and |
(C) | the Repurchased Incentive Units are: free and clear of any and all liens other than those arising as a result of or under the terms of this Agreement. |
(iii) Subject to Section 11.06(c) below, the closing of any sale of Repurchased Incentive Units pursuant to this Section 11.06 shall take place no later than thirty (30) days following receipt by the Service Provider of the Repurchase Notice. Subject to the existence of any Delay Condition, the Company shall pay the Call Purchase Price for the Repurchased Incentive Units by certified or official bank check or by wire transfer of immediately available funds. The Company shall give the Service Provider at least ten (10) days’ written notice of the date of closing, which notice shall include the method of payment selected by the Company.
(c) Delay Condition. Notwithstanding the provisions of Section 11.06(b)(iii), the Company shall not be obligated to repurchase any Incentive Units if there exists a Delay Condition. In such event, the Company shall notify the Service Provider in writing as soon as practicable of such Delay Condition and the Company may thereafter:
(i) Defer the closing and pay the Call Purchase Price at the earliest practicable date on which no Delay Condition exists, in which case, the Call Purchase Price shall accrue interest at the Company Interest Rate from the latest date that the closing could have taken place pursuant to Section 11.06(b)(iii) above (the “Intended Call Closing Date”) to the date the Call Purchase Price is actually paid; or
(ii) Pay the Call Purchase Price with a subordinated note (fully subordinated in right of payment and exercise of remedies to the lenders’ rights under any Financing Document) bearing interest at the Company Interest Rate .from the Intended Call Closing Date until paid in full.
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(d) Cooperation. The Service Provider shall take all actions as may be reasonably necessary to consummate the sale contemplated by this Section 11.06, including, without limitation, entering into agreements and delivering certificates and instruments and consents as may be deemed necessary or appropriate.
(e) Closing. At the closing of any sale and purchase pursuant to this Section 11.06, the Service Provider shall deliver to the Company a certificate or certificates representing the Incentive Units to be sold (if any), accompanied by evidence of transfer and all necessary transfer taxes paid and stamps affixed, if necessary, against receipt of the Call Purchase Price.
Article XII
COVENANTS
Section 12.01 Confidentiality.
(a) Each Management Member acknowledges that during the term of this Agreement, he will have access to and become acquainted with trade secrets, proprietary information and confidential information belonging to the Company, the Company Subsidiaries and their Affiliates that are not generally known to the public, including, but not limited to, information concerning business plans, .financial statements and other information provided pursuant to this Agreement, operating practices and methods, expansion plans, strategic plans, marketing plans, contracts, customer lists or other business documents which the Company treats as confidential, in any format whatsoever (including oral, written, electronic or any other form or medium) (collectively, “Confidential Information”). In addition, each Management Member acknowledges that; (i) the Company has invested, and continues to invest, substantial time, expense and specialized knowledge in developing its Confidential Information; (ii) the Confidential Information provides the Company with a competitive advantage over others in the marketplace; and (iii) the Company would be irreparably harmed if the Confidential Information were disclosed to competitors or made available to the public. Without limiting the applicability of any other agreement to which any Management Member is subject; no Management Member shall, directly or indirectly, disclose or use (other than solely for the purposes of such Management Member monitoring and analyzing his investment in the Company or performing his duties as a Manager, Officer, employee, consultant or other service provider of the Company) at any time, including, without limitation, use for personal, commercial or proprietary advantage or profit, either during his association or employment with the Company or thereafter, any Confidential Information of which such Management Member is or becomes aware. Each Management Member in possession of Confidential Information shall take all appropriate steps to safeguard such information and to protect it against disclosure, misuse, espionage, loss and theft.
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(b) Nothing contained in Section 12.01(a) shall prevent any Management Member from disclosing Confidential Information: (i) upon the order of any court or administrative agency; (ii) upon the request or demand of any regulatory agency or authority having jurisdiction over such Management Member; (iii) to the extent compelled by legal process or required or requested pursuant to subpoena, interrogatories or other discovery requests; (iv) to the extent necessary in connection with the exercise of any remedy hereunder; (v) to other Members; (vi) to such Management Member’s Representatives who, in the reasonable judgment of such Management Member, need to know such Confidential Information and agree to be bound by the provisions of this Section 12.01 as if a Management Member; or (vii) to any potential Permitted Transferee in connection with a proposed Transfer of Units from such Management Member, as long as such Transferee agrees to be bound by the provisions of this Section 12.01 as if a Management Member; provided, that in the case of clause (i) (ii) or (iii), such Management Member shall notify the Company and other Members of the proposed disclosure as far in advance of such disclosure as practicable (but in no event make any such disclosure before notifying the Company and other Members) and use reasonable efforts to ensure that any Confidential Information so disclosed is accorded confidential treatment satisfactory to the Company, when and if available.
(c) The restrictions of Section 12.01(a) shall not apply to Confidential Information that: (i) is or becomes generally available to the public other than as a result of a disclosure by a Management Member in violation of this Agreement; (ii) is or becomes available to a Management Member or any of its Representatives on a non-confidential basis prior to its disclosure to the receiving Management Member and any of its Representatives in compliance with this Agreement; (iii) is or has been independently developed or conceived by such Management Member without use of Confidential Information; or (iv) becomes available to the receiving Management Member or any of its Representatives on a non-confidential basis from a source other than the Company, any other Member or any of their respective Representatives; provided, that such source is not known by the recipient of the Confidential Information to be bound by a confidentiality agreement with the disclosing Member or any of its Representatives.
Section 12.02 Non-compete; Non-solicit.
(a) Non-compete. In light of each Management Member’s access to Confidential Information and position of trust and confidence with the Company. each Management Member hereby agrees that, during the period of his continued employment or other engagement with the Company or any Company Subsidiary and for a period of two (2) years, naming consecutively, beginning on the last day of the Management Member’s employment or other engagement with the Company or any Company Subsidiary for any reason or no reason (the “Restricted Period”), such Management Member shall not (x) render services or give advice to, or affiliate with (as employee, partner, consultant or otherwise), or (y) directly or indirectly through one or more of any of their respective Affiliates, own, manage, operate, control or participate in the ownership, management, operation or control of; any Competitor or any division or business segment of any Competitor; provided, that nothing in this Section 12.02(a) shall prohibit such Management Member or any of his Permitted Transferees or any of their respective Affiliates from acquiring or owning, directly or indirectly:
(i) Up to 2% of the aggregate voting securities of any Competitor that is a publicly traded Person; or
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(ii) Up to 2% of the aggregate voting securities of any Competitor that is not a publicly traded Person, so long as neither such Management Member nor any of its Permitted Transferees, directly or indirectly through one or more of their respective Affiliates, designates a member of the board of directors (or similar body) of such Competitor or its Affiliates or is granted any other governance rights with respect to such Competitor or its Affiliates (other than customary governance rights granted in connection with the ownership of debt securities).
For purposes of this Section 12.02(a), “Competitor” means any other Person engaged, directly or indirectly, in whole or in part, in the same or similar business as the Company, including those engaged in the business of the research, development, commercialization, sales, or marketing of any stem-cell therapy or product in the whole of the world. As of the date of this Agreement, the Persons regarded by the Company as its primary, but not exclusive, competitors are listed on Schedule C attached hereto.
(b) Non-solicit of Employees. In light of each Management Member’s access to Confidential Information and position of trust and confidence with the Company, each Management Member further agrees that, during the Restricted Period, he shall not, directly or indirectly through one or more of any of their respective Affiliates, hire or solicit) or encourage any other Person to hire or solicit, any individual who has been employed by the Company or any Company Subsidiary within one (1) year prior to the date of such hiring or solicitation, or encourage any such individual to leave such employment. This Section 12.02(b) shall not prevent a Management Member from hiring or soliciting any employee or former employee of the Company or any Company Subsidiary who responds to a general solicitation that is a public solicitation of · prospective employees and not directed specifically to any Company or Company Subsidiary employees.
(c) Non-solicit of Clients. In light of each Management Member’s access to Confidential Information and position of trust and confidence with the Company, each Management Member further agrees that, during the Restricted Period, he shall not, directly or indirectly through one or more of any of their respective Affiliates, solicit or entice, or attempt to solicit or entice, any clients, customers or suppliers of the Company or any Company Subsidiary for purposes of diverting their business or services from the Company.
(d) Blue Pencil. If any court of competent jurisdiction determines that any of the covenants set forth in this Section 12.02, or any part thereof: is unenforceable because of the duration or geographic scope of such provision, such court shall have the power to modify any such unenforceable provision in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Section 12.02 or by making such other modifications as it deems warranted to carry out the intent and agreement of the patties as embodied herein to the maximum extent permitted by Applicable Law. The parties hereto expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them.
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Section 12.03 Other Business Activities. The parties hereto expressly acknowledge and agree that: (i) Sponsor and its Affiliates are permitted to have, and may presently or in the future have, investments or other business relationships, ventures, agreements or arrangements with entities engaged in the business of the Company, other than through the Company and the Company Subsidiaries (an “Other Business”); (ii) the Sponsor and its Affiliates have or may develop a strategic relationship with businesses that are or may be competitive with the Company and the Company Subsidiaries; (iii) none of the Sponsor or its Affiliates will be prohibited by virtue of the Sponsor’s investment in the Company from pursuing and engaging in any such activities; (iv) none of the Sponsor or its Affiliates will be obligated to :inform the Company or any Management Member of any such opportunity, relationship or investment (a “Company Opportunity”) or to present Company Opportunity, and the Company hereby renounces any interest in a Company Opportunity and any expectancy that a Company Opportunity will be offered to it; (v) nothing contained herein shall limit, prohibit or restrict any Series B Manager from serving on the board of directors or other governing body or committee of any Other Business; and (vi) the Management Members will not acquire, be provided with an option or opportunity to acquire, or be entitled to any interest or participation in any Other Business as a result of the participation therein of any of the Sponsor or its Affiliates. The parties hereto expressly authorize and consent to the involvement of the Sponsor and/or its Affiliates in any Other Business; provided, that any transactions between the Company and/or the Company Subsidiaries and an Other Business will be on terms no less favorable to the Company and/or the Company Subsidiaries than would be obtainable in a comparable arm’s-length transaction. The parties hereto expressly waive, to the fullest extent permitted by Applicable Law, any rights to assert any claim that such involvement breaches any fiduciary or other duty or obligation owed to the Company or any Member or to assert that such involvement constitutes a conflict of interest by such Persons with respect to the Company or any Member.
Section 12.04 Superseding Agreement. The parties hereto expressly acknowledge and agree that to the extent a Member may have a separate agreement with the Company containing provisions similar in nature to those contained in this Article XII, the terms and conditions of such agreement shall supersede the equivalent sections of this Article XII.
Article XIII
ACCOUNTING; TAX MATTERS
Section 13.01 Financial Statements. The Company shall furnish to each Member holding 5% or more of the Common Units of the Company (each, a “Qualified Member”) the following reports:
(a) Annual Financial Statements. As soon as available, and in any event within one hundred twenty (120) days after the end of each Fiscal Year, audited consolidated balance sheets of the Company and Company Subsidiaries as at the end of each such Fiscal Year and audited consolidated statements of income, cash flows and Members’ equity for such Fiscal Year, in each case setting forth in comparative form the figures for the previous Fiscal Year, accompanied by the certification of independent certified public accountants of recognized national standing selected by the Board, certifying to the effect that, except as set forth therein, such financial statements have been prepared in accordance with GAAP, applied on a basis consistent with prior years, and fairly present in all material respects the financial condition of the Company and Company Subsidiaries as of the dates thereof and the results of their operations and changes in their cash flows and Members’ equity for the periods covered thereby.
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(b) Quarterly Financial Statements. As soon as available, and in any event within forty-five (45) days after the end of each quarterly accounting period in each Fiscal Year (other than the last fiscal quarter of the Fiscal Year), unaudited consolidated balance sheets of the Company and Company Subsidiaries as at the end of each such fiscal quarter and for the current Fiscal Year to date and unaudited consolidated statements of income, cash flows and Members’ equity for such fiscal quarter and for the current Fiscal Year to date, in each case setting forth in comparative form the figures for the corresponding periods of the previous fiscal quarter, all in reasonable detail and all prepared in accordance with GAAP, consistently applied (subject to norm.al year-end audit adjustments and the absence of notes thereto), and certified by the principal financial or accounting officer of the Company.
(c) Monthly Financial Statements. As soon as available, and in any event within thirty (30) days after the end of each monthly accounting period in each fiscal quarter (other than the last month of the fiscal quarter), unaudited consolidated balance sheets of the Company and Company Subsidiaries as at the end of each such monthly period and for the current Fiscal Year to date and unaudited consolidated statements of income, cash flows and Members’ equity for each such monthly period and for the current Fiscal Year to date, an in reasonable detail and all prepared in accordance with GAAP, consistently applied (subject to normal year-end audit adjustments and the absence of notes thereto).
Section 13.02 Inspection Rights. Upon reasonable notice from any Qualified Member, the Company shal4 and shall cause its Managers, Officers and employees to, afford each Qualified Member and its Representatives reasonable access during normal business hours to (i) the Company’s and the Company Subsidiaries’ properties, offices, plants and other facilities, (ii) the corporate, financial and similar records, reports and documents of the Company and the Company Subsidiaries, including, without limitation, all books and records, minutes of proceedings, internal management documents, reports of operations, reports of adverse developments, copies of any management letters and communications with Members or Managers, and to permit each Qualified Member and its Representatives to examine such documents and make copies thereof, and (iii) the Company’s and the Company Subsidiaries’ Officers, senior employees and public accountants, and to afford each Qualified Member and its Representatives the opportunity to discuss and advise on the affairs, finances and accounts of the Company and the Company Subsidiaries with their Officers, senior employees and public accountants (and the Company hereby authorizes said accountants to discuss with such Qualified Member and its Representatives such affairs, finances and accounts).
Section 13.03 Budget. The Company’s current business plan, excluding any budget information or projections therein (the “Business Plan”) which is deemed approved by the Board for the first three (3) Fiscal Years of the Company, is attached Exhibit E hereto. Not later than thirty (30) days prior to the commencement of each Fiscal Year beginning at the end of the Company’s third (3rd) Fiscal Year, the Company shall prepare, submit to and obtain the approval of the Board of a business plan and monthly and annual operating budgets for the Company and Company Subsidiaries in detail for the upcoming Fiscal Year, including capital and operating expense budgets, cash flow projections, covenant compliance calculations of all outstanding and projected indebtedness, and profit and loss projections, an itemized in reasonable detail (including itemization of provisions for Officers’ compensation) (the “Budget”). The Company’s current Budget, which is deemed approved by the Board for the first three (3) Fiscal Years of the Company, is attached Exhibit F hereto. This requirement to prepare a business plan and/or budget may be waived by a majority vote of the Board and the Board may also agree to revise, update or otherwise alter the Budget at any time, including prior to the third (3rd) Fiscal Year. The Company and the Subsidiaries shall use commercially reasonable efforts to operate in all material respects in accordance with the Budget. The Company shall review the Budget periodically and may revise the budget as needed; provided, however, that no revision shall be undertaken to undermine or circumvent any term or condition of this or any other transaction document. Notwithstanding the forgoing, the Board shall use its reasonable commercial efforts during the budgeting process that takes into account in good faith the input and role of the Chief Science Officer and his views and judgment concerning Scientific Matters as they relate to the Budget.
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Section 13.04 Tax Matters Member.
(a) Appointment. The Members shall appoint for the Company the “Tax. Matters Member” who shall serve as the “tax matters partner” as such term is defined in, and as provided in Code Section 6231(a)(7) and the regulations appurtenant thereto. Upon the initial execution of this Agreement, the Members hereby appoint the Sponsor as the initial Tax Matters Member. In carrying out its duties and responsibilities as set forth in this Section 13.04, subject to the provisions of Section 7.04, the Tax Matters Member hereby covenants and agrees to reasonably consult with, and to the greatest extent possible, to make its decisions in agreement with, any Member for which the actions omissions, or decisions of the Tax Matter Member shall result in increased tax liabilities. Except as set forth herein, the Tax Matter Member may only be changed by the written agreement of the Founder and the Sponsor.
(b) Tax Examinations and Audits. The Tax Matters Member is authorized and required to represent the Company (at the Company’s expense) in connection with all examinations of the Company’s affairs by Taxing Authorities, including resulting administrative and judicial proceedings, and to expend Company funds for professional services and costs associated therewith. Bach Member agrees to cooperate with the Tax Matters Member and to do or refrain from doing any or all things reasonably requested by the Tax Matters Member with respect to the conduct of examinations by Taxing Authorities and any resulting proceedings. Each Member agrees that any action taken by the Tax Matters Member in connection with audits of the Company shall be binding upon such Members and that such Member shall not independently act with respect to tax audits or tax litigation affecting the Company.
(c) Income Tax Elections. The Tax Matters Member shall have sole discretion to make any income tax election it deems advisable on behalf of the Company; provided, that the Tax Matters Member will make an election under Section 754 of the Code, if requested in writing by Members holding a majority of the outstanding Common Units. All determinations as to tax elections and accounting principles shall be made solely by the Tax Matters Member.
(d) Tax Returns and Tax Deficiencies. Each Member agrees that such Member shall not treat any Company item inconsistently on such Member’s federal, state, foreign or other income tax return with the treatment of the item on the Company’s return. The Tax Matters Member shall have sole discretion to determine whether the Company (either on its own behalf or on behalf of the Members) will contest or continue to contest any tax deficiencies assessed or proposed to be assessed by any Taxing Authority. Any deficiency for taxes imposed on any Member (including penalties, additions to tax or interest imposed with respect to such taxes) will be paid by such Member and if required to be paid (and actually paid) by the Company, will be recoverable from such Member as provided in Section 7.05(d).
(e) Resignation. The Tax Matters Member may resign at any time. If Sponsor resigns as Tax Matters Member for any reason, the holders of a majority of the Common Units of the Company shall appoint a new Tax Matters Member.
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Section 13.05 Tax Returns. At the expense of the Company, the Board (or any Officer that it may designate pursuant to Section 13.04) shall endeavor to cause the preparation and timely filing (including extensions) of all tax returns required to be filed by the Company pursuant to the Code as well as all other required tax returns in each jurisdiction in which the Company and 1he Company Subsidiaries own property or do business. As soon as reasonably possible after the end of each Fiscal Year, the Board or designated Officer will cause to be delivered to each Person who was a Member at any time during such Fiscal Year, JRS Schedule K-1 to Form 1065 and such other information with respect to the Company as may be necessary for the preparation of such Person’s federal, state and local income tax returns for such Fiscal Year.
Section 13.06 Company Funds. All funds of the Company shall be deposited in its name, or in such name as may be designated by the Board, in such checking, savings or other accounts, or held in its name in the form of such other investments as shall be designated by the Board. The funds of the Company shall not be commingled with the funds of any other Person: All withdrawals of such deposits or liquidations of such investments by the Company shall be made exclusively upon the signature or signatures of such Officer or Officers as the Board may designate.
Article XIV
DISSOLUTION AND LIQUIDATION
Section 14.01 Events of Dissolution. The Company shall be dissolved and is affairs wound up only upon the occurrence of any of the following events:
(a) An election to dissolve the Company made by the holders of Series A Units and Series B Units in accordance with Section 4.06(d);
(b) The sale, exchange, involuntary conversion, or other disposition or Transfer of all or substantially all the assets of the Company; or
(c) The entry of a decree of judicial dissolution under § 18-802 of the Delaware Act.
Section 14.02 Effectiveness of Dissolution. Dissolution of the Company shall be effective on the day on which the event described in Section 14.01 occurs, but the Company shall not terminate until the winding up of the Company has been completed, the assets of the Company have been distributed as provided in Section 14.03 and the Certificate of Formation shall have been cancelled as provided in Section 14.04.
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Section 14.03 Liquidation. If the Company is dissolved pursuant to Section 14.01, the Company shall be liquidated and its business and affairs wound up in accordance with the Delaware Act and the following provisions:
(a) Liquidator. The Board, or, if the Board is unable to do so, a Person selected by the holders of a majority of the Common Units, shall act as liquidator to wind up the Company (the “Liquidator”). The Liquidator shall have full power and authority to sell, assign, and encumber any or all of the Company’s assets and to wind up and liquidate the affairs of the Company in an orderly and business-like manner.
(b) Accounting. As promptly as possible after dissolution and again after final liquidation, the Liquidator shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Company’s assets, liabilities and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable.
(c) Distribution of Proceeds. The Liquidator shall liquidate the assets of the Company and Distribute the proceeds of such liquidation in the following order of priority, unless otherwise required by mandatory provisions of Applicable Law:
(i) First, to the payment of all of the Company’s debts and liabilities to its creditors (including Members, if applicable) and the expenses of liquidation (including sales commissions incident to any sales of assets of the Company);
(ii) Second, to the establishment of and additions to reserves that are determined by the Board in its sole discretion to be reasonably necessary for any contingent unforeseen liabilities or obligations of the Company; and
(iii) Third, to the Members in the same manner as Distributions are made under Section 7.02, provided, however, that in the case of any of the events of liquidation set forth in Section 14.0l(a), 14.01(c) and/or an event of Bankruptcy of the Company or similar state law proceeding, that the manner of Distributions shall be first; to the Series B Members until the aggregate amount of Distributions payable to the Series B Members under Section 7.02(a) are distributed to the Series B Members; second, to the Series A Members until the aggregate amount of Distributions payable to the Series A Members Under Section 7.02(a) are distributed to the Series A Members and; third, any remaining amounts to the Members holding Common Units and Incentive Units (subject to Section 7.03) pro rata in proportion to their aggregate holdings of Common Units and Incentive Units treated as one class of Units.
(d) Discretion of Liquidator. Notwithstanding the provisions of Section 14.03(c) that require the liquidation of the assets of the Company, but subject to the order of priorities set forth in Section 14.03(c), if upon dissolution of the Company the Liquidator determines that an immediate sale of part or all of the Company’s assets would be impractical or could cause undue loss to the Members, the Liquidator may defer the liquidation of any assets except those necessary to satisfy Company liabilities and reserves, and may, in its absolute discretion, Distribute to the Members, in lieu of cash, as tenants in common and in accordance with the provisions of Section 14.03(c), undivided interests in such Company assets as the Liquidator deems not suitable for liquidation. Any such Distribution in kind will be subject to such conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operating of such properties at such time. For purposes of any such Distribution, any property to be Distributed will be valued at its Fair Market Value.
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Section 14.04 Cancellation of Certificate. Upon completion of the Distribution of the assets of the Company as provided in Section 14.03(c) hereof, the Company shall be terminated and the Liquidator shall cause the cancellation of the Certificate of Formation in the State of Delaware and of all qualifications and registrations of the Company as a foreign limited liability company in jurisdictions other than the State of Delaware and shall take such other actions as may be necessary to terminate the Company.
Section 14.05 Survival of Rights, Duties and Obligations. Dissolution, liquidation, winding up or termination of the Company for any reason shall not release any party from any Loss which at the time of such dissolution, liquidation, winding up or termination already had accrued to any other party or which thereafter may accrue in respect of any act or omission prior to such dissolution, liquidation, winding up or termination. For the avoidance of doubt, none of the foregoing shall replace, diminish or otherwise adversely affect any Member’s right to indemnification pursuant to Section 15.03.
Section 14.06 Recourse for Claims. Each Member shall look solely to the assets of the Company for all Distributions with respect to the Company, such Member’s Capital Account, and such Member’s share of Net Income, Net Loss and other items of income, gain, loss and deduction, and shall have no recourse therefor (upon dissolution or otherwise) against the Board, the Liquidator or any other Member.
Article XV
EXCULPATION AND INDEMNIFICATION
Section 15.01 Exculpation of Covered Persons.
(a) Covered Persons. As used herein, the term “Covered Person” shall mean (i) each Member, (ii) each officer, manager, director, shareholder, partner, member, controlling Affiliate, employee, agent or representative of each Member, and each of their controlling Affiliates, and (iii) each Manager, Officer, employee, agent or representative of the Company.
(b) Standard of Care. No Covered Person shall be liable to the Company or any other Covered Person for any loss, damage or claim incurred by reason of any action .taken or omitted to be taken by such Covered Person in good-faith reliance on the provisions of this Agreement, so long as such action or omission does not constitute fraud or willful misconduct by such Covered Person.
(c) Good Faith Reliance. A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements (including :financial statements and information, opinions, reports or statements as to the value or amount of the assets, liabilities, Net Income or Net Losses of the Company or any facts pertinent to the existence and amount of assets from which Distributions might properly be paid) of the following Persons or groups: (i) another Manager; (ii) one or more Officers or employees of the Company; (iii) any attorney, independent accountant, appraiser or other expert or professional employed or engaged by or on behalf of the Company; or (iv) any other Person selected in good faith by or on behalf of the Company, in each case as to matters that such relying Person reasonably believes to be within such other Person’s professional or expert competence. The preceding sentence shall in no way limit any Person’s right to rely on information to the extent provided in § 18-406 of the Delaware Act.
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Section 15.02 Liabilities and Duties of Covered Persons.
(a) Limitation of Liability. This Agreement is not intended to, and does not, create or impose any fiduciary duty on any Covered Person. Furthermore, each of the Members and the Company hereby waives any and all: fiduciary duties that, absent such waiver, may be implied by Applicable Law, and in doing so, acknowledges and agrees that the duties and obligation of each Covered Person to each other and to the Company are only as expressly set forth in this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Members to replace such other duties and liabilities of such Covered Person.
(b) Duties. Whenever in this Agreement a Covered Person is permitted or required to make a decision (including a decision that is in such Covered Person’s “discretion” or under a grant of similar authority or latitude), the Covered Person shall be entitled to consider only such interests and factors as such Covered Person desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Company or any other Person. Whenever in this Agreement a Covered Person is permitted or required to make a decision in such Covered Person’s “good faith,” or in a “reasonable opinion” the Covered Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Agreement or any other Applicable Law.
Section 15.03 Indemnification.
(a) Indemnification. To the fullest extent permitted by the Delaware Act, as the same now exists or may hereafter be amended, substituted or replaced (but, in the case of any such amendment, substitution or replacement only to the extent that such amendment, substitution or replacement permits the Company to provide broader indemnification rights than the Delaware Act permitted the Company to provide prior to such amendment, substitution or replacement), the Company shall indemnify, hold harmless, defend, pay and reimburse any Covered Person against any and all losses, claims, damages, judgments, fines or liabilities, including reasonable legal fees or other expenses incurred in investigating or defending against such losses, claims, damages, judgments, fines or liabilities, and any amounts expended in settlement of any claims (collectively, “Losses” ) to which such Covered Person may become subject by reason of:
(i) Any act or omission or alleged act or omission performed or omitted to be performed on behalf of the Company, any Member or any direct or indirect Subsidiary of the foregoing in connection with the business of the Company; or
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(ii) The fact that such Covered Person is or was acting in connection with the business of the Company as a partner, member, stockholder, controlling Affiliate, manager, director, officer, employee or agent of the Company, any Member, or any of their respective controlling Affiliates, or that such Covered Person is or was serving at the request of the Company as a partner, member, manager, director, officer, employee or agent of any Person including the Company or any Company Subsidiary; provided, that (x) such Covered Person acted in good faith and in a manner believed by such Covered Person to be in, or not opposed to, the best interests of the Company and, with respect to any criminal proceeding, had no reasonable cause to believe his conduct was unlawful, and (y) such Covered Person’s conduct did not constitute fraud or willful misconduct, in either case as determined by a final, nonappealable order of a court of competent jurisdiction. In connection with the foregoing; the termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself: create a presumption that the Covered Person did not act in good faith or, with respect to any criminal proceeding, had reasonable cause to believe that such Covered Person’s conduct was unlawful, or that the Covered Person’s conduct constituted fraud or willful misconduct.
(b) Reimbursement.
The Company shall promptly reimburse (and/or advance to the extent reasonably required) each Covered Person for reasonable legal or other expenses (as incurred) of such Covered Person in connection with investigating, preparing to defend or defending any claim, lawsuit or other proceeding relating to any Losses for which such Covered Person may be indemnified pursuant to this Section 15.03; provided, that if it is finally judicially determined that such Covered Person is not entitled to the indemnification provided by this Section 15.03, then such Covered Person shall promptly reimburse the Company for any reimbursed or advanced expenses.
(c) Entitlement to Indemnity. The indemnification provided by this Section 15.03 shall not be deemed exclusive of any other rights to indemnification to which those seeking indemnification may be entitled under any agreement or otherwise. The provisions of this Section 15.03 shall continue to afford protection to each Covered Person regardless of whether such Covered Person remains in the position or capacity pursuant to which such Covered Person became entitled to indemnification under this Section 15.03 and shall inure to the benefit of the executors, administrators, legatees and distributees of such Covered Person.
(d) Insurance. To the extent available on commercially reasonable terms, the Company may purchase, at its expense, insurance to cover Losses covered by the foregoing indemnification provisions and to otherwise cover Losses for any breach or alleged breach by any Covered Person of such Covered Person’s duties in such amount and with such deductibles as the Board may determine; provided, that the failure to obtain such insurance shall not affect the right to indemnification of any Covered Person under the indemnification provisions contained herein, including the right to be reimbursed or advanced expenses or otherwise indemnified for Losses hereunder. If any Covered Person recovers any amounts in respect of any Losses from any insurance coverage, then such Covered Person shall, to the extent that such recovery is duplicative, reimburse the Company for any amounts previously paid to such Covered Person by the Company in respect of such Losses.
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(e) Funding of Indemnification Obligation. Notwithstanding anything contained herein to the contrary, any indemnity by the Company relating to the matters covered in this Section 15.03 shall be provided out of and to the extent of Company assets only, and no Member (unless such Member otherwise agrees in writing) shall have personal liability on account thereof or shall be required to make additional Capital Contributions to help satisfy such indemnity by the Company.
(f) Savings Clause. If this Section 15.03 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify and hold harmless each Covered Person pursuant to this Section 15.03 to the fullest extent permitted by any applicable portion of this Section 15.03 that shall not have been invalidated and to the fullest extent permitted by Applicable Law.
(g) Amendment The provisions of this Section 15.03 shall be a contract between the Company, on the one hand, and each Covered Person who served in such capacity at any time while this Section 15.03 is in effect, on the other hand, pursuant to which the Company and each such Covered Person intend to be legally bound. No amendment, modification or repeal of this Section 15.03 that adversely affects the rights of a Covered Person to indemnification for Losses incurred or relating to a state of facts existing prior to such amendment, modification or repeal shall apply in such a way as to eliminate or reduce such Covered Person’s entitlement to indemnification for such Losses without the Covered Person’s prior written consent.
Section 15.04 Survival. The provisions of this Article XV shall survive the dissolution, liquidation, winding up and termination of the Company.
Article XVI
MISCELLANEOUS
Section 16.01 Expenses. Except as otherwise expressly provided herein, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with the preparation and execution of this Agreement, or any amendment or waiver hereof and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.
Section 16.02 Further Assurances. In connection with this Agreement and the transactions contemplated hereby, the Company and each Member hereby agrees, at the request of the Company or any other Member, to execute and deliver such additional documents, instruments; conveyances and assurances and to take such further actions as may be required to carry out the provisions hereof and give effect to the transactions contemplated hereby.
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Section 16.03 Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 16.03):
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with a copy to: |
Fuerst Ittleman David & Joseph, PL 1001 Brickell Bay Drive, 32nd Floor Miami, Florida 331311
Facsimile: 305-371-8989
E-mail: mfuerst@fuerstlaw.com
Attention: Mitchell S. Fuerst, Esq.
|
If to Sponsor: |
Turnberry Associates 19950 West Country Club Dr., 10th Floor Aventura, FL 33180 (305) 682-4160
Facsimile: (305) 682-4161
E-mail: jkurry@tumberry.com
Attention: Jonathan Kurry, Esq.
|
with a copy to: |
Buchanan Ingersoll & Rooney PC One Oxford Centre 301 Grant St., 20th Floor Pittsburgh, PA 15219 (412) 562-8879
Facsimile: (412) 562-1041
E-mail: Jack.kessler@bipc.com
Attention: Jack Kessler, Esq. |
If to a Management Member, to such Management Member1s respective mailing address as set forth on the Members Schedule.
Section 16.04 Headings. The headings in this Agreement are inserted for convenience or reference only and are in no way intended to describe, interpret, define, or limit the scope, extent or intent of this Agreement or any provision of this Agreement.
Section 16.05 Severability. If any term or provision of this Agreement is held to be invalid, illegal or unenforceable under Applicable Law in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Subject to Section 12.02(d), upon such determination that any term or other provision is invalid; illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
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Section 16.06 Entire Agreement.
(a) This Agreement, together with the Certificate of Formation, the Incentive Plan, each Award Agreement, each Unit Purchase Agreement, each agreement specifically referenced herein, and all related Exhibits and Schedules, constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.
(b) In the event of an inconsistency or conflict between the provisions of this Agreement and any provision of the Incentive Plan or an applicable Award Agreement with respect to the subject matter of the Incentive Plan or Award Agreement, the Board shall resolve such conflict in its sole discretion.
Section 16.07 Successors and Assigns. Subject to the restrictions on Transfers set forth herein, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and assigns.
Section 16.08 No Third-party Beneficiaries. Except as provided in Article XV, which shall be for the benefit of and enforceable by Covered Persons as described therein, this Agreement is for the sole benefit of the parties hereto (and their respective heirs, executors, administrators, successors and assigns) and nothing herein, express or implied, is intended to or shall confer upon any other Person, including any creditor of the Company, any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 16.09 Amendment. No provision of this Agreement may be amended or modified except by an instrument in writing authorized by the Founder and the Sponsor. Notwithstanding the foregoing, amendments to the Members Schedule following any new issuance, redemption, repurchase or Transfer of Units in accordance with this Agreement may be made by the Board without the consent of or execution by the Members.
Section 16.10 Waiver. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver; whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. For the avoidance of doubt, nothing contained in this Section 16.10 shall diminish any of the explicit and implicit waivers described in this Agreement, including in Section 4.07(f), Section 4.11, Section 8.04(c), Section 10.01(d), Section 10.01(h), Section 11.03(d)(iii), Section 11.04(b)(ii), Section 11.05(e), Section 12.03, Section 15.02(a) and Section 16.14 hereof.
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Section 16.11 Governing Law. All issues and questions concerning the application, construction, validity, interpretation and enforcement of this Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Delaware.
Section 16.12 Dispute Resolution. Any issue, question, dispute, claim or controversy arising out of or relating to this Agreement or any provision thereof; or the breach, termination, enforcement, interpretation or validity thereof, including tl1e determination of the scope or applicability of this Agreement to arbitrate, shall be determined by arbitration in New York, New York as set forth herein. The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures and in accordance with the Expedited Procedures in those Rules. Judgment on the Award may be entered in any court having jurisdiction. This dispute resolution provision shall include urgent or emergency arbitration relief and not preclude any Member from seeking provisional remedies in aid of such urgent or emergency arbitration relief from a court of appropriate jurisdiction.
(a) General Matters. All matters that are not Scientific Matters shall be arbitrated before one arbitrator.
(b) Scientific Matters. All Scientific Matters shall be arbitrated before three arbitrators. The Sponsor and the Founder shall each select one arbitrator and those two arbitrators shall each select a third arbitrator. Each arbitrator so selected by the Sponsor and Founder must either (i) have 10 or more years of applicable experience in stem-cell medicine or the commercialization of drugs, pharmaceuticals, or biological products regulated by the FDA, or (ii) be a retired federal judge who shall attest that he or she has more than 5 years applicable experience in stem-cell medicine or the commercialization of drugs, pharmaceuticals, or biological products regulated by the FDA. The third arbitrator shall have no minimum qualifications.
Section 16.13 Attorneys’ Fees.Should the Company or any party to this Agreement reasonably retail?- counsel for the purpose of enforcing or preventing breach of any provision of this Agreement, including but not limited to instituting any action or proceeding to enforce any provision of this Agreement, for damages by reason of any alleged breach of any provision of this Agreement. for a declaration of such party’s rights or obligations under this Agreement or for any other judicial remedy, then, if the matter settled by judicial determination or arbitration. the prevailing party (whether at trial, on .appeal, or arbitration) shall be entitled, in addition to such other relief as may be granted, to be reimbursed by the losing party for all costs and expenses incurred. including, but not limited to, reasonable attorneys’ fees and costs for services rendered to the prevailing party.
Section 16.14 Submission to Jurisdiction. The parties hereby agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby, whether in contract; tort or otherwise, subject to the mandatory arbitration provisions of Section 16.12, shall be brought in the United States District Court for the District of Delaware or in the Court of Chancery of the State of Delaware (or, if such court lacks subject matter jurisdiction. in the Superior Court of the State of Delaware), so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any case of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of Delaware. Each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient form. Service of process, summons, notice or other document by registered mail to the address set forth in Section 16.03 shall be effective service of process for any suit, action or other proceeding brought in any such court.
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Section 16.15 Equitable Remedies. Bach party hereto acknowledges that a breach or threatened breach by such party of any of its obligations under this Agreement would give rise to irreparable harm to the other parties, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, each of the other parties hereto shall, in addition to any and all other rights and remedies that may be available to them in respect of such breach, be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).
Section 16.16 Remedies Cumulative. The rights and remedies under this Agreement are cumulative and are .in addition to and not in substitution for any other rights and remedies available at law or in equity or otherwise, except to the extent expressly provided in Section 15.02 to the contrary.
Section 16.17 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of Electronic Transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
Section 16.18 Initial Public Offering.
(a) Initial Public Offering. If at any time the Board desires to cause (i) a Transfer of all or a substantial portion of (x) the assets of the Company or (y) the Units to a newly organized corporation or other business entity (an “IPO Entity”), (ii) a merger or consolidation of the Company into or with a IPO Entity as provided under § 18-209 of the Delaware Act or otherwise, or (iii) another restructuring of all or substantially all the assets or Units of the Company into an IPO Entity, including by way of the conversion of the Company into a Delaware corporation as provided under§ 18-216 of the Delaware Act (any such corporation also herein referred to as an “IPO Entity”) in any such case in anticipation of or otherwise in connection with an Initial Public Offering of securities of an IPO Entity or its Affiliate (an “Initial Public Offering”), each Member shall take such steps to effect such Transfer, merger, consolidation, conversion or other restructuring as may be reasonably requested by the Board, including, without limitation, executing and delivering all agreements, instruments and documents as may be reasonably required and Transferring or tendering such Member’s Units to an IPO Entity in exchange or consideration for shares of capital stock or other equity interests of the IPO Entity, determined in accordance with the valuation procedures set forth in Section 16.18(b).
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(b) Fair Market Value. In connection with a transaction described in Section 16.18(a), the Board shall, in good faith but subject to the following sentence, determine the Fair Market Value of the assets and/or Units Transferred to, merged with or converted into shares of the IPO Entity, the aggregate Fair Market Value of the IPO Entity and the number of shares of capital stock or other equity interests to be issued to each Member in exchange or consideration therefor. In determining Fair Market Value, (i) the offering price of the Initial Public Offering shall be used by the Board to determine the Fair Market Value of the capital stock or other equity .interests of the IPO Entity and (ii) the Distributions that the Members would have received with respect to their Units, including Incentive Units, if the Company were dissolved, its affairs wound up and Distributions made to the Members in accordance with Section 14.03(c) shall determine the Fair Market Value of the Units. In addition, any Units (including Incentive Units) to be converted into or redeemed or exchanged for shares of the IPO Entity shall receive shares with substantially equivalent economic, governance., priority and other rights and privileges as in effect immediately prior to such transaction (disregarding the tax treatment of such transaction).
(c) Appointment of Proxy. Each Member hereby makes, constitutes and appoints the Company, with full power of substitution and resubstitution, its true and lawful attorney, for it and in its name, place and stead and for its use and benefit, to act as its proxy in respect of any vote or approval of Members required to give effect to this Section 16.18, including any vote or approval required under§ 18-209 or § 18-216 of the Delaware Act. The proxy granted pursuant to this Section 16.18(c) is a special proxy coupled with an interest and is irrevocable.
(d) Lock-up Agreement. Each Member hereby agrees that in connection with an Initial Public Offering, and upon the request of the managing underwriter in such offering, such Member shall not, without the prior written consent of such managing underwriter, during the period commencing on fifteen (15) days prior to the effective date of such registration and ending on the date specified by such managing underwriter (such period not to exceed one hundred eighty-one (181) days in the case of an Initial Public Offering or nighty-one (91) days in the case of any registration other than an Initial Public Offering), (i) offer, pledge, sell, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, hedge the beneficial ownership of or otherwise dispose of, directly or indirectly, any Units or Unit Equivalents (including any equity securities of the IPO Entity) held immediately before the effectiveness of the registration statement for such offering/(whether such Units or Unit Equivalents or any such securities are then owned by the Member or are thereafter acquired), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Units or Unit Equivalents (including equity securities of the IPO Entity) or such other securities, in cash or otherwise. The foregoing provisions of this Section 16.18(d) shall not apply to sales of securities to be included in such Initial Public Offering or other offering if otherwise permitted, and shall be applicable to the Members only if all officers and managers of the Company and all Members owning more than ninety percent (90%) of the Company’s outstanding Common Units (or the IPO Entity’s equivalent common equity securities) are subject to the same restrictions. Each Member agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the managing underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. Notwithstanding anything to the contrary contained in this Section 16.18(d), each Member shall be released, pro rata, from any lock-up agreement entered into pursuant to this Section 16.18(d) in the event and to the extent that the managing underwriter or the Company permit any discretionary waiver or termination of the restrictions of any lock-up agreement pertaining to any officer, manager or holder of greater than five percent (5%) of the Company’s outstanding Common Units (or the IPO Entity’s equivalent common equity securities).
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
The Company | ||
LONGEVERON LLC | ||
By: | /s/ Joshua Hare | |
Name: | Joshua M. Hare, M.D. | |
Title: | Chairman of the Board | |
The Members: | ||
DS MED, LLC | ||
By: | /s/ Donald Soffer | |
Name: | Donald Soffer | |
Title: | Manager | |
Joshua M. Hare, M.D. | ||
By: | /s/ Joshua Hare | |
Name: | Joshua M. Hare, M.D. |
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EXHIBIT A
DEFINITIONS
“Acceptance Notice” has the meaning set forth in Section 10.01(d).
“Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital. Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:
(a) crediting to such Capital Account any amount which such Member is obligated to restore or is deemed to be obligated to restore pursuant to Treasury Regulations Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(I) and 1.704-2(i); and
(b) debiting to such Capital Account the items described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
“Adjusted Taxable Income” of a Member for a Fiscal Year (or portion thereof) with respect to Units held by such Member means the federal taxable income allocated by the Company to the Member with respect to such Units (as adjusted by any final determination in connection with any tax audit or other proceeding) for such Fiscal Year (or portion thereof); provided, that such taxable income shall be computed (i) minus any excess taxable loss or excess taxable credits of the Company for any prior period allocable to such Member with respect to such Units that were not previously taken into account for purposes of determining such Member’s Adjusted Taxable Income in a prior Fiscal Year to the extent such loss or credit would be available under the Code to offset income of the Member (or, as appropriate, the direct or indirect members of the Member) determined as if the income, loss, and credits from the Company were the only income, loss, and credits of the Member (or, as appropriate, the direct or indirect members of the Member) in such Fiscal Year and all prior Fiscal Years, and (ii) taking into account any special basis adjustment with respect to such Member resulting from an election by the Company under Code Section 754.
“Affiliate” means, with respect to any Person, any other Person who, directly or indirectly (including through one or more intermediaries), controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control,” when used with respect to any specified Person, shall mean the power, direct or indirect, to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities or partnership or other ownership interests, by contract or otherwise; and the terms “controlling” and “controlled” shall have correlative meanings.
“Agreement” means this Amended and Restated Limited Liability Company Agreement, as executed and as it may be amended, modified, supplemented or restated from time to time, as provided herein,
“Applicable Law” means all applicable provisions of (a) constitutions, treaties, statutes, laws (including the common law), rules, regulations, decrees, ordinances, codes, proclamations, declarations or orders of any Governmental Authority; (b) any consents or approvals of any Governmental Authority; and (c) any orders, decisions, advisory or interpretative opinions, injunctions, judgments, awards, decrees of, or agreements with, any Governmental Authority.
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“Applicable Offered Common Units” has the meaning set forth in Section 11.03(a)(ii).
“Applicable Offered Units” has the meaning set forth in Section 11.03(a)(ii).
“Applicable Pro Rata Portion” means:
(a) for purposes of Section 10.01, a Member’s Pro Rata Portion of any New Securities proposed to be issued or sold by the Company; and
(a) for purposes of Section 11.03, a Member’s Pro Rata Portion of any Offered Common Units proposed to be Transferred by an Offering Member.
“Applicable ROHR Rightholders” has the meaning set forth in Section 11.03(a)(ii).
“Assignment Agreement” has the meaning set forth in Section 5.01.
“Award Agreements” has the meaning set forth in Section 3.03(b).
“Bankruptcy” means, with respect to a Member, the occurrence of any of the following: (a) the filing of an application by such Member for, or a consent to, the appointment of a trustee of such Member’s assets; (b) the filing by such Member of a voluntary petition in bankruptcy or the filing of a pleading in any court of record admitting in writing such Member’s inability to pay its debts as they come due; (c) the making by such Member of a general assignment for the benefit of such Member’s creditors; (d) the filing by such Member of an answer admitting the material allegations of; or such Member’s consenting to, or defaulting in answering a bankruptcy petition filed against such Member in any bankruptcy proceeding; or (e) the expiration of sixty (60) days following the entry of an order, judgment or decree by any court of competent jurisdiction adjudicating such Member a bankrupt or appointing a trustee of such Member’s assets.
“Board” has the meaning set forth in Section 8.01.
“Book Depreciation” means, with respect to any Company asset for each Fiscal Year, the Company’s depreciation, amortization, or other cost recovery deductions determined for federal income tax purposes, except that if the Book Value of an asset differs from its adjusted tax basis at the beginning of such Fiscal Year, Book Depreciation shall be an amount which bears the same ratio to such beginning Book Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Fiscal Year bears to such beginning adjusted tax basis; provided, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is zero and the Book Value of the asset is positive, Book Depreciation shall be determined with reference to such beginning Book Value using any permitted method selected by the Board in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g)(3).
“Book Value” means, with respect to any Company asset, the adjusted basis of such asset for federal income tax purposes, except as follows:
(a) the initial Book Value of any Company asset contributed by a Member to the Company shall be the gross Fair Market Value of such Company asset as of the date of such contribution;
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(b) immediately prior to the Distribution by the Company of any Company asset to a Member, the Book Value of such asset shall be adjusted to its gross Fair Market Value as of the date of such Distribution;
(c) the Book Value of all Company assets shall be adjusted to equal their respective gross Fair Market Values, as determined by the Board, as of the following times:
(i) the acquisition of an additional Membership Interest in the Company by a new or existing Member in consideration of a Capital Contribution of more than a de minimis amount;
(ii) the Distribution by the Company to a Member of more than a de minimis amount of property (other than cash) as consideration for all or a part of such Member’s Membership Interest in the Company;
(iii) the grant to a Service Provider of any Incentive Units; and
(iv) the liquidation of the Company within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g);
provided, that adjustments pursuant to clauses (i), (ii) and (iii) above need not be made if the Board reasonably determines that such adjustment is not necessary or appropriate to reflect the relative economic interests of the Members and that the absence of such adjustment does not adversely and disproportionately affect any Member;
(d) the Book Value of each Company asset shall be increased or decreased, as the case may be, to reflect any adjustments to the adjusted tax basis of such Company asset pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Account balances pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m); provided, that Book Values shall not be adjusted pursuant to this paragraph (d) to the extent that an adjustment pursuant to paragraph (c) above is made in conjunction with a transaction that would otherwise result in an adjustment pursuant to this paragraph (d); and
(e) if the Book Value of a Company asset has been determined pursuant to paragraph (a) or adjusted pursuant to paragraphs (c) or (d) above, such Book Value shall thereafter be adjusted to reflect the Book Depreciation taken into account with respect to such Company asset for purposes of computing Net Income and Net Losses.
“Budget” has the meaning set forth in Section 13.03.
“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized or required to close.
“Business Plan” has the meaning set forth in Section 13.03
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“Call Purchase Price” means the Cause Purchase Price or Fair Market Value, as applicable pursuant to Section 11.06(a).
“Capital Account” has the meaning set forth in Section 5.04.
“Capital Contribution” means, for any Member, the total amount of cash and cash equivalents and the Book Value of any property contributed to the Company by such Member.
“Cause,” with respect to any particular Service Provider, has the meaning set forth in any effective Award Agreement, employment agreement or other written contract of engagement entered into between the Company and such Service Provider, or if none, then “Cause“ means any of the following:
(a) such Service Provider’s repeated failure to perform substantially his duties as an employee or other associate of the Company or any of the Company Subsidiaries (other than any such failure resulting from his Disability) which failure, whether committed willfully or negligently, has continued unremedied for more than thirty (30) days after the Company has provided written notice thereof; provided, that a failure to meet financial performance expectations shall not, by itself, constitute a failure by the Service Provider to substantially perform his duties;
(b) such Service Provider’s fraud or embezzlement;
(c) such Service Provider’s material dishonesty or breach of fiduciary duty against the Company or any of the Company Subsidiaries;
(d) such Service Provider’s willful misconduct or gross negligence which is injurious to the Company or any of the Company Subsidiaries;
(e) any conviction of, or the entering of a plea of guilty or nolo contendere to, a crime that constitutes a felony (or any state-law equivalent) and is either (i) a crime of moral turpitude and/or (ii) a crime that has a fundamental element of fraud or dishonesty, or any willful or material violation by such Service Provider of any federal, state or foreign securities laws;
(f) any conviction of any other criminal act or act of material dishonesty, disloyalty or misconduct by such Service Provider that has a material adverse effect on the property, operations, business or reputation of the Company or any of the Company Subsidiaries;
(g) the unlawful use (including being under the influence) or possession of illegal drugs by such Service Provider on the premises of the Company or any of the Company Subsidiaries while performing any duties or responsibilities with the Company or any of the Company Subsidiaries;
(h) the material violation by such Service Provider of any rule or policy of the Company or any of the Company Subsidiaries of which the Service Provider had written notice; or
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(i) the material breach by such Service Provider of any covenant undertaken in Article X11 herein, any effective Award Agreement, employment agreement or any written non-disclosure, non-competition, or non-solicitation covenant or agreement with the Company or any of the Company. Subsidiaries after having been provided written notice of the exact nature of the breach or violation and at least thirty (30) days to cure such breach,
“Cause Purchase Price” has the meaning set forth in Section 11.06(a)(i).
“Certificate of Formation” has the meaning set forth in the Recitals.
“Change of Control” means: (a) the sale of all or substantially all of the consolidated assets of the Company and the Company Subsidiaries to a Third Party Purchaser; (b) a sale resulting in no less than a majority of the Common Units on a Fully Diluted Basis being held by a Third Party Purchaser; or (c) a merger, consolidation, recapitalization or reorganization of the Company with or into a Third Party Purchaser that results in the inability of the Members to designate or elect a majority of the Managers (or the board of directors (or its equivalent) of the resulting entity or its parent company).
“Chief Science Officer” has the meaning set forth in Section 9.09.
“Code“ means the Internal Revenue Code of 1986, as amended.
“Common Pro Rata Portion” means:
(a) for purposes of Section 10.01, with respect to any Pre-emptive Member holding Common Units, on any issuance date for New Securities, a fraction determined by dividing (i) the number of Common Units on a Fully Diluted Basis owned by such Pre-emptive Member immediately prior to such issuance by (ii) the total number of Common Units on a Fully Diluted Basis held by the Members on such date immediately prior to such issuance; and
(b) for purposes of Section 11.03, with respect to an Applicable ROFR Rightholder holding Common Units, on any date of a proposed Transfer by an Offering Member, a fraction determined by dividing (i) the number of Common Units on a Fully Diluted Basis owned by such Applicable ROFR Rightholder immediately prior to such Transfer by (ii) the total number of Common Units on a Fully Diluted Basis held by the Members on such date immediately prior to such Transfer.
“Common Tag-along Portion” has the meaning set forth in Section 11.05(d)(i).
“Common Units” means the Units having the privileges, preference, duties, liabilities, obligations and rights specified with respect to “Common Units” in this Agreement.
“Company” has the meaning set forth in the Preamble.
“Company Interest Rate” has the meaning set forth in Section 7.05(c).
“Company Minimum Gain” means “partnership minimum gain” as defined in Section 1.704-2(b)(2) of the Treasury Regulations, substituting the term “Company” for the term “partnership” as the context requires.
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“Company Opportunity” has the meaning set forth in Section 12.03.
“Company Subsidiary” means a Subsidiary of the Company.
“Competitor” has the meaning set forth in Section 12.02(a).
“Confidential Information” has the meaning set forth in Section 12.01(a).
“Covered Person” has the meaning set forth in Section 15.01(a).
“Deferral Agreement” has the meaning set forth in Section 5.02.
“Delaware Act” means the Delaware Limited Liability Company Act, Title 6, Chapter 18, §§ 18-101, et seq., and any successor statute, as it may be amended from time to time.
“Delay Condition” means any of the following conditions: (a) the Company is prohibited from purchasing any Incentive Units by any Financing Document or by Applicable Law; (b) a default has occurred under any Financing Document and is continuing; (c) the purchase of any Incentive Units would, or in the good-faith opinion of the Board could, result in the occurrence of an event of default under any Financing Document or create a condition that would or could, with notice or lapse of time or both, result in such an event of default; or (d) the purchase of any Incentive Units would, in the good-faith opinion of the Board, be imprudent in view of the financial condition of the Company, the anticipated impact of the purchase of such Incentive Units on the Company’s ability to meet its obligations under any Financing Document or otherwise in connection with its business and operations.
“Disability” with respect to any Service Provider, has the meaning set forth in any effective Award Agreement, employment agreement or other written contract of engagement entered into between the Company and such Service Provider, or if none, then “Disability” means such Service Provider’s incapacity due to physical or mental illness that: (a) shall have prevented such Service Provider from performing his duties for the Company or any of the Company Subsidiaries on a full-time basis for more than ninety (90) or more consecutive days or an aggregate of one hundred eighty (180) days in any 365-day period; or (b)(i) the Board determines, in compliance with Applicable Law, is likely to prevent such Service Provider from performing such dillies for such period of time and (ii) thirty (30) days have elapsed since delivery to such Service Provider of the determination of the Board and such Service Provider has not resumed such performance (in which case the date of termination in the case of a termination for “Disability” pursuant to this clause (b) shall be deemed to be the last day of such 30-day period).
“Distribution” means a distribution made by the Company to a Member, whether in cash, property or securities of the Company and whether by liquidating distribution or otherwise; provided, that none of the following shall be a Distribution: (a) any redemption or repurchase by the Company or any Member of any Units or Unit Equivalents; (b) any recapitalization or exchange of securities of the Company; (c) any subdivision (by a split of Units or otherwise) or any combination (by a reverse split of Units or otherwise) of any outstanding Units; or (d) any fees or remuneration paid to any Member in such Member’s capacity as a Service Provider for the Company or a Company Subsidiary. “Distribute” when used as a verb shall have a correlative meaning.
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“Drag-along Member” has the meaning set forth in Section 11.04(a).
“Drag-along Notice” has the meaning set forth in Section 11.04(c).
“Drag-along Sale” has the meaning set forth in Section 11.04(a).
“Dragging Member” has the meaning set forth in Section 11.04(a).
“Electronic Transmission” means any form. of communication not directly involving the physical transmission of paper that creates a record that may be retained, retrieved and reviewed by a recipient thereof and that may be directly reproduced in paper form by such a recipient through an automated process.
“Estimated Tax Amount” of a Member for a Fiscal Year means the Member’s Tax Amount for such Fiscal Year as estimated in good faith from time to time by the Tax Matters Member. In making such estimate, the Tax Matters Member shall take into account amounts shown on Internal Revenue Service Form 1065 filed by the Company and similar state or local forms filed by the Company for the preceding taxable year and such other adjustments as in the reasonable business judgment of the Board are necessary or appropriate to reflect the estimated operations of the Company for the Fiscal Year.
“Excess Amount” has the meaning set forth in Section 7.04(c).
“Exercise Period” has the meaning set forth in Section 10.01(d).
“Exercising Member” has the meaning set forth in Section 10.01(e).
“Fair Market Value” of any asset as of any date means the purchase price that a willing buyer having all relevant knowledge would pay a willing seller for such asset in an arm’s length transaction, as determined in good faith by the Board based on such factors as the Board, in the exercise of its reasonable business judgment, considers relevant.
“Family Members” has the meaning set forth in Section 11.02(a)(ii).
“Financing Document” means any credit agreement, guarantee, financing or security agreement or other agreements or instruments governing indebtedness of the Company or any of the Company Subsidiaries.
“Fiscal Year” means the calendar year, unless the Company is required to have a taxable year other than the calendar year, in which case Fiscal Year shall be the period that conforms to its taxable year.
“Forfeiture Allocations” has the meaning set forth in Section 6.02(e).
“Founder” means Dr. Joshua M. Hare.
“Fully Diluted Basis” means, as of any date of determination, (a) with respect to all the Units, all issued and outstanding Units of the Company and all Units issuable upon the exercise of any outstanding Unit Equivalents as of such date, whether or not such Unit Equivalent is at the time exercisable, or (b) with respect to any specified type, class or series of Units, all issued and outstanding Units designated as such type, class or series and all such designated Units issuable upon the exercise of any outstanding Unit Equivalents as of such date, whether or not such Unit Equivalent is at the time exercisable.
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“GAAP” means United States generally accepted accounting principles in effect from time to time.
“Good Reason,” with respect to any Service Provider, has the meaning set forth in any effective Award Agreement, employment agreement or other written contract of engagement entered into between the Company and such Service Provider, or if none, then “Good Reason” means any of the following actions taken without the Service Provider’s written consent:
(a) a material reduction in the Service Provider’s base salary or the Service Provider’s ability to participate in Company incentive or bonus plans (other than a general reduction in base salary or bonuses that affects all salaried Service Providers equally);
(b) the failure by the Company to pay to the Service Provider any material portion of the salary, bonus or other benefits owed to such Service Provider;
(c) a substantial adverse change in the Service Provider’s duties and responsibilities or a material diminution in the Service Provider’s title, responsibility, or authority; or
(d) a transfer of the Service Provider’s primary workplace by more than fifty (50) miles from the current workplace;
provided, that Good Reason shall not be deemed to exist unless (a) the Company fails to cure the event giving rise to Good Reason within thirty (30) days after written notice thereof given by the Service Provider to the Board, which notice shall (i) be delivered to the Board no later than twenty (20) days following the Service Provider’s initial detection of the condition, and (ii) specifically set forth the nature of such event and the corrective action reasonably sought by the Service Provider; and (b) the Service Provider terminates his employment within thirty (30) days following the last day of the foregoing cure period.
“Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of law), or any arbitrator, court or tribunal of competent jurisdiction.
“Hare Assignment Agreement” has the meaning set forth in Section 5.01.
“Incentive Liquidation Value” means, as of the date of determination and with respect to the relevant new Incentive Units to be issued, the aggregate amount that would be Distributed to the Members pursuant to Section 7.02, if, immediately prior to the issuance of the relevant new Incentive Units, the Company sold all of its assets for Fair Market Value and immediately liquidated, the Company’s debts and liabilities were satisfied and the proceeds of the liquidation were Distributed pursuant to Section 14.03(c).
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“Incentive Plan” has the meaning set forth in Section 3.03(a).
“Incentive Units” means the Units having the privileges, preference, duties, liabilities, obligations and rights specified with respect to “Incentive Units” in this Agreement and includes both Restricted Incentive Units and Unrestricted Incentive Units.
“Initial Capital Contribution” has the meaning set forth in Section 5.01.
“Initial Cost” means, with respect to any Unit, the purchase price paid to the Company with respect to such Unit by the Member to whom such Unit was originally issued.
“Initial Management Member” means each Person identified as a Management Member as of the date hereof.
“Initial Member” has the meaning set forth in the term Member.
“Initial Public Offering” has the meaning set forth in Section 16.18(a).
“Intended Call Closing Date” has the meaning set forth in Section 11.06(c)(i).
“IPO Entity” has the meaning set forth in Section 16.18(a).
“Issuance Notice” has the meaning set forth in Section 10.01(c).
“Joinder Agreement” means the joinder agreement in form and substance attached hereto.
“Liquidator” has the meaning set forth in Section 14.03(a).
“Losses” has the meaning set forth in Section 15.03(a).
“Management Member” means any Member other than Sponsor.
“Management Subscription Agreements” means, collectively, those certain Subscription Agreements, each dated as of the date hereof and a form of which is attached hereto as Exhibit C, by and between the Company and the respective Initial Management Member named therein, pursuant to which the named Initial Management Member has acquired that number of Common Units set forth opposite such Initial Management Member’s name on the Members Schedule as of the date hereof.
“Manager” has the meaning set forth in Section 8.01.
“Managers Schedule” has the meaning set forth in Section 8.02(g).
“Member” means (a) each Person identified on the Members Schedule as of the date hereof as a Member and who has executed this Agreement or a counterpart thereof (each, an “Initial Member”); and (b) and each Person who is hereafter admitted as a Member in accordance with the terms of this Agreement and the Delaware Act, in each case so long as such Person is shown on the Company’s books and records as the owner of one or more Units. The Members shall constitute the “members” (as that term is defined in the Delaware Act) of the Company.
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“Member Nonrecourse Debt” means “partner nonrecourse debt” as defined in Treasury Regulation Section 1.704-2(b)(4), substituting the term “Company” for the term “partnership” and the term “Member” for the term “partner” as the context requires.
“Member Nonrecourse Debt Minimum Gain” means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if the Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Treasury Regulation Section 1.704-2(i)(3).
“Member Nonrecourse Deduction” means “partner nonrecourse deduction” as defined in Treasury Regulation Section 1.704-2(1), substituting the term “Member” for the term “partner” as the context requires.
“Member ROFR Exercise Notice” has the meaning set forth in Section 11.03(d)(ii).
“Members Schedule” has the meaning set forth in Section 3.01.
“Membership Interest” means an interest in the Company owned by a Member, including such Member’s tight (based on the type and class of Unit or Units held by such Member), as applicable, (a) to a Distributive share of Net Income, Net Losses and other items of income, gain, loss and deduction of the Company; (b) to a Distributive share of the assets of the Company; (c) to vote on, consent to or otherwise participate in any decision of the Members as provided in this Agreement; and (d) to any and all other benefits to which such Member may be entitled as provided in this Agreement or the Delaware Act.
“Membership Interest Purchase Agreement” means that certain Membership Interest Purchase Agreement, dated as of the date hereof and attached hereto as Exhibit D, by and between the Company and Sponsor, pursuant to which Sponsor has acquired those numbers of Common Units set forth on the Members Schedule as of the date hereof.
“Misallocated Item” has the meaning set forth in Section 6.05.
“Net Income” and “Net Loss” mean, for each Fiscal Year or other period specified in this Agreement, an amount equal to the Company’s taxable income or taxable loss, or particular items thereof, determined in accordance with Code Section 703(a) (where, for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or taxable loss), but with the following adjustments:
(a) any income realized by the Company that is exempt from federal income taxation, as described in Code Section 705(a)(1)(B), shall be added to such taxable income or taxable loss, notwithstanding that such income is not includable in gross income;
(b) any expenditures of the Company described in Code Section 705(a)(2)(B), including any items treated under Treasury Regulation Section 1.704-1(b)(2)(iv)(1) as items described in Code Section 705(a)(2)(B), shall be subtracted from such taxable income or taxable loss, notwithstanding that such expenditures are not deductible for federal income tax purposes;
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(c) any gain or loss resulting from any disposition of Company property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Book Value of the property so disposed, notwithstanding that the adjusted tax basis of such property differs from its Book Value;
(d) any items of depreciation, amortization and other cost recovery deductions with respect to Company property having a Book Value that differs from its adjusted tax basis shall be computed by reference to the property’s Book Value (as adjusted for Book Depreciation) in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g);
(e) if the Book Value of any Company property is adjusted as provided in the definition of Book Value, then the amount of such adjustment shall be treated as an item of gain or loss and included in the computation of such taxable income or taxable loss; and
(f) to the extent an adjustment to the adjusted tax basis of any Company property pursuant to Code Sections 732(d), 734(b) or 743(b) is required, pursuant to Treasury Regulation Section 1.704 1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis).
“New Common Securities” has the meaning set forth in Section 10.01(b)(i).
“New Interests” has the meaning set forth in Section 3.04,
“New Securities” has the meaning set forth in Section 10.01(b)(ii).
“Non-Affiliated Manager” is a Manager named by mutual agreement of the Founder and the Sponsor as set forth in Section 8.02(b), the number of which at all times shall equal one (1).
“Non-Exercising Member” has the meaning set forth in Section 10.01(e).
“Nonrecourse Liability” has the meaning set forth in Treasury Regulations Section 1.704-2(b)(3).
“Offered Common Units” has the meaning set forth in Section 11.03(a)(i).
“Offering Member” has the meaning set forth in Section 11.03(a)(i).
“Offering Member Notice” has the meaning set forth in Section 11.03(c)(i).
“Officers” has the meaning set forth in Section 9.01.
“Other Business” has the meaning set forth in Section 12.03.
“Over-allotment Exercise Period” has the meaning set forth in Section 10.01(e).
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“Over-allotment Notice” has the meaning set forth in Section 10.01(e).
“Permitted Transfer” means a Transfer of Common Units carried out pursuant to Section 11.02. “Permitted Transferee” means a recipient of a Permitted Transfer.
“Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.
“Pre-emptive Member” has the meaning set forth in Section 10.01(a).
“Profits Interest” has the meaning set forth in Section 3.03(b)(iii).
“Profits Interest Hurdle” means an amount set forth in each Award Agreement reflecting the Incentive Liquidation Value of the relevant Incentive Units at the time the units are issued.
“Proposed Transferee” has the meaning set forth in Section 11.05(a).
“Prospective Purchaser” has the meaning set forth in Section 10.01(c).
“Protective Provision” has the meaning set forth in Section 4.06(d).
“Public Offering” means any underwritten public offering pursuant to a registration statement filed in accordance with the Securities Act.
“Qualified Member” has the meaning set forth in Section 13.01.
“Qualified Public Offering” means the sale, in a firm commitment underwritten public offering led by a nationally recognized underwriting firm pursuant to an effective registration statement under the Securities Act, of Units (or common stock of the Company or an IPO Entity) having an aggregate offering value (net of underwriters’ discounts and selling commissions) of at least $25,000,000, following which at least 66.67% of the total Units (or common stock of the Company or an IPO Entity) on a Fully Diluted Basis shall have been sold to the public and shall be listed on any national securities exchange or quoted on the NASDAQ Stock Market System.
“Qualifying Incentive Units” has the meaning set forth in Section 7.03(b).
“Quarterly Estimated Tax Amount” of a Member for any calendar quarter of a Fiscal Year means the excess, if any of (a) the product of (i) a quarter (1/4) in the case of the first calendar quarter of the Fiscal Year, half (1/2) in the case of the second calendar quarter of the Fiscal Year, three-quarters (3/4) in the case of the third calendar quarter of the Fiscal Year, and one (1) in the case of the fourth calendar quarter of the Fiscal Year and (ii) the Member’s Estimated Tax Amount for such Fiscal Year over (b) all Distributions previously made during such Fiscal Year to such Member.
“Regulatory Allocations” has the meaning set forth in Section 6.02(d).
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“Representative” means, with respect to any Person, any and all managers, directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.
“Repurchase Notice” has the meaning set forth in Section 11.06(b)(i).
“Repurchased Incentive Units” has the meaning set forth in Section 11.06(b)(i).
“Restricted Incentive Units” has the meaning set forth in Section 3.03(b)(i)(A).
“Restricted Period” has the meaning set forth in Section 12.02(a).
“ROFR Rightholder Option Period” has the meaning set forth in Section 11.03(d)(ii).
“Sale Notice” has the meaning set forth in Section 11.05(c).
“Scientific Matter” has the meaning set forth in Section 9.09.
“Securities Act” means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect at the time.
“Selling Member” has the meaning set forth in Section 11.05(a).
“Series A Manager” is a Manager named by the Series A Members as set forth in Section 8.02(b), the number of which on the Board at all times prior to the final payment of the full amount of Sponsor’s Initial Capital Contribution shall equal two (2), and at all times thereafter shall equal three (3).
“Series A Member” is a Member owning Series A Units.
“Series A Units” shall mean those Units of the Company designated as Series A Units and issued to the Persons identified on the Members Schedule,
“Series B Manager” is a Manager named by the Series B Members as set forth in Section 8.02(b), the number of which on the Board at all times prior to the final payment of the full amount of Sponsor’s Initial Capital Contribution shall equal two (2), and at all times thereafter shall equal three (3).
“Series B Member” is a Member owning Series B Units.
“Series B Units” shall mean those Units of the Company designated as Series B Units and issued to the Persons identified on the Members Schedule,
“Service Provider” has the meaning set forth in Section 3.03(a).
“Shortfall Amount” has the meaning set forth in Section 7.04(b).
“Sponsor” means DS MED, LLC, and, jointly and severally, its successors, assigns and transferees.
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“Sponsor Family Member” has the meaning set forth in Section 11.02(a).
“Sponsor Member” has the meaning set forth in Section 11.02(a).
“Subsidiary” means, with respect to any Person, any other Person of which a majority of the outstanding shares or other equity interests having the power to vote for directors or comparable managers are owned, directly or indirectly, by the first Person.
“Supermajority” means 66,67% or more of a specified group (e.g., a “Supermajority of the holders of Common Units” would be 66.67% or more of the holders of the Common Units of the Company.
“Tag-along Member” has the meaning set forth in Section 11.05(a).
“Tag-along Notice” has the meaning set forth in Section 11.05(d)(ii).
“Tag-along Period” has the meaning set forth in Section 11.05(d)(ii).
“Tag-along Sale” has the meaning set forth in Section 11.05(a).
“Tax Advance” has the meaning set forth in Section 7.04(a).
“Tax Amount” of a Member for a Fiscal Year means the product of (a) the Tax Rate for such Fiscal Year and (b) the Adjusted Taxable Income of the Member for such Fiscal Year with respect to its Units.
“Tax Matters Member” has the meaning set forth in Section 13.04.
“Tax Rate” of a Member, for any period, means the highest marginal blended federal, state and local tax rate applicable to ordinary income, qualified dividend income or capital gains, as appropriate, for such period for an individual residing in Miami, Florida, taking into account for federal income tax purposes, the deductibility of state and local taxes and any applicable limitations on such deductions.
“Taxing Authority” has the meaning set forth in Section 7.05(b).
“Third Party Purchaser” means any Person who, immediately prior to the contemplated transaction, (a) does not directly or indirectly own or have the right to acquire any outstanding Common Units (or applicable Unit Equivalents) or (b) is not a Permitted Transferee of any Person who directly or indirectly owns or has the right to acquire any Common Units (or applicable Unit Equivalents).
“Transfer” means to, directly or indirectly, sell, transfer, assign, pledge, encumber, hypothecate or similarly dispose of, either voluntarily or involuntarily, by operation of law or otherwise, or to enter into any contract, option or other arrangement or understanding with respect to the sale, transfer, assignment, pledge, encumbrance, hypothecation or similar disposition of, any Units owned by a Person or any interest (including a beneficial interest) in any Units or Unit Equivalents owned by a Person. “Transfer” when used as a noun shall have a correlative meaning. “Transferor” and “Transferee” mean a Person who makes or receives a Transfer, respectively.
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“Treasury Regulations” means the final or temporary regulations issued by the United States Department of Treasury pursuant to its authority under the Code, and any successor regulations.
“Unallocated Item” has the meaning set forth in Section 6.05.
“Unit” means a unit representing a fractional part of the Membership Interests of the Members and shall include all types and classes of Units, including the Common Units and the Incentive Units; provided, that any type or class of Unit shall have the privileges, preference, duties, liabilities, obligations and rights set forth in this Agreement and the Membership Interests represented by such type or class or series of Unit shall be determined in accordance with such privileges, preference, duties, liabilities, obligations and rights.
“Unit Equivalents” means any security or obligation that is by its terms, directly or indirectly, convertible into, exchangeable or exercisable for Units, and any option, warrant or other right to subscribe for, purchase or acquire Units.
“Unit Purchase Agreements” means, collectively: with respect to Sponsor, the Membership Interest Purchase Agreement; and with respect to the Initial Management Members owning Common Units as of the date hereof, the Management Subscription Agreements
“Unrestricted Incentive Units” has the meaning set forth in Section 3.03(b)(i)(B).
“Voting Members” has the meaning set forth in Section 4.07(b).
“Voting Units” has the meaning set forth in Section 4.07(a).
“Withholding Advances” has the meaning set forth in Section 7.05(b).
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EXHIBIT B
FORM OF JOINDER AGREEMENT
JOINDER AGREEMENT
This Joinder Agreement is made and entered into as of the __________ day of __________, 20__, by and between LONGEVERON LLC (“Longeveron”) and (the “Investor”).
Admission. Investor is hereby admitted as a Member of Longeveron and shall have all the rights and be subject to all the obligations of a Member under the Longeveron LLC Limited Liability Company Agreement originally dated __________, 2014 as amended from time to time (the “Operating Agreement”).
Agreement to Be Bound By Operating Agreement. Investor acknowledges receipt of a copy of the Operating Agreement and by execution hereof agrees to become a party to and be bound by all the terms and conditions of the Operating Agreement as a Member.
Counterparts. This Joinder Agreement may be executed in multiple counterparts.
Intending to be legally bound hereby, the parties hereto have caused this Joinder Agreement to be executed as of the date first written above by a duly authorized person.
LONGEVERON LLC
By: ______________________________
Name: ______________________________
Title: ______________________________
INVESTOR:
By: ______________________________
Name: ______________________________
Title: ______________________________
SCHEDULE A
MEMBERS
SCHEDULE
(AS OF DECEMBER 31, 2014)
[intentionally deleted- confidential material]
SCHEDULE B
MANAGERS SCHEDULE
[intentionally deleted- confidential material]
Schedule C
PRIMARY COMPETITORS
Mesoblast, Limited (Australia Corp. Headquarters)
55 Collins Street
Level 38
Melbourne 3000
Mesoblast Inc. (U.S. Operations)
505 Fifth A venue
Level 3
New York, NY 10017
Neostem, Inc.
420 Lexington A venue
Suite 350
New York, NY 10170
Aastrom Biosciences, Inc.
Domino’s Farms, Lobby K
24 Frank Lloyd Wright Drive
Ann Arbor, MI 48105
Celgene Corporation
86 Morris A venue
Summit, NI 07901
Human Longevity, Inc.
10835 Road to the Cure #140
San Diego, CA 92121
SCHEDULE 5.01
SPONSOR INITIAL CASH CONTRIBUTION
Subject to Section 5.02, Sponsor’s Initial Cash Contribution will occur as follows:
Date of Contribution/Drawdown | Amount of Contribution/Drawdown |
Effective Date of this Agreement | $4,000,000 |
No later than January 2, 2015 | $4,000,000 |
No later than July 1, 2015 | $9,000,000 |
No later than January 2, 2016 | $8,000,000 |
TOTAL | $25,000,000 |
Exhibit 3.3.1
AMENDMENT
NO. 1
TO
THE LIMITED LIABILITY COMPANY AGREEMENT
OF
LONGEVERON LLC
WHEREAS, The Longeveron LLC, a Delaware limited liability company (the “Company”), has heretofore been formed as a limited liability company pursuant to and in accordance with the Delaware Limited Liability Company Act;
WHEREAS, the Company and its Members have entered into that certain Limited Liability Company Agreement, effective as of November 20, 2014 (the “Operating Agreement”);
WHEREAS, the Company has existing contractual commitments to issue (i) 20,000 Units of common equity to the University of Miami under the terms of the November 20, 2014 License Agreement between the Company and UM, (ii) 10,000 Units of common equity to Dr. Joshua Hare under the terms of the December 22, 2016 License Agreement between the Company and Dr. Hare, (iii) 1,236 Units of common equity to Optimal Networks under a vendor agreement between the Company and Optimal Networks, and (iv) 167 Units of common equity to Global Vision Communications under a vendor agreement between the Company and Global Vision Communications (the “Existing Equity Commitments”);
WHEREAS, pursuant to Section 3.04 of the Operating Agreement, the undersigned Members of the Company, including the Founder and the Sponsor, constituting a Supermajority of the holders of Common Units, desire to amend the Operating Agreement to authorize a new series of Common Units (i) for issuance under that certain 2017 Longeveron LLC, Incentive Plan, effective as of the date hereof (the “Plan”), (ii) to satisfy the Existing Equity Commitments, and (iii) with prior Board and, if required, Member approval, to issue additional equity from time-to-time upon such terms and for such consideration as the Board may determine, and to define the rights and privileges of such new series of Common Units; and
WHEREAS, pursuant to Section 16.09 of the Operating Agreement, the Founder and the Sponsor reserve the right to amend the Operating Agreement.
NOW, THEREFORE, this Amendment No. 1 to the Limited Liability Company Operating Agreement of Longeveron, LLC (“Amendment’’) is hereby adopted this 18th day of July, 2017, as follows:
1. Amendment to the Operating Agreement.
(i) Section 3.02 of the Operating Agreement is hereby amended and restated its entirety to read as follows:
“Section 3.02 Authorization and Issuance of Common Units. Subject to compliance with Section 4.06(d), Section 10.01 and Section 11.01(b), the Company is hereby authorized to issue a class of Units designated as Common Units. The Common Units shall be divided into three series: (i) Series A Units, (ii) Series B Units and (iii) Series C Units. As of the date hereto 1,000,000 Series A Units and 1,000,000 Series B Units are issued and outstanding to the Members in the amounts set forth on the Members Schedule opposite each Member’s name. The Company shall have the authority, subject to compliance with the terms hereof, to issue up to 300,000 Series C Units, provided that 200,000 of such Series C Units shall be reserved for issuance under the Incentive Plan. Additional Series A Units, Series B Units and Series C Units may be authorized and issued by the Company as set forth herein. The Company is further authorized to create a class of Incentive Units as set forth under Section 3.03 hereof.”
(ii) The Heading of Section 3.03(a) of the Operating Agreement are hereby amended and restated in their entirety to read as follows:
“Section 3.03 Authorization and Issuance of Incentive Units and Series C Units
(a) Subject to Section 3.03(b) and Section 3.03(c), the Company is hereby authorized to issue options to acquire Series C Units (“Options”), Incentive Units and Series C Units to Managers, Officers, employees, consultants or other service providers of the Company, any Company Subsidiary or their Affiliates (collectively, “Service Providers”). The Board fs hereby authorized and directed to adopt a written plan pursuant to which all Options, Incentive Units and Series C Units shall be granted in compliance with Rule 701 of the Securities Act or another applicable exemption (such plan as in effect from time to time, the “Incentive Plan”). ·The holders of Options, Incentive Units and Series C Units shall have the rights with respect to profits and losses of the Company and distributions from the Company as are set forth herein, in the Incentive Plan and in the applicable Award Agreement granting such Incentive Units and Series C Units (each an “Award Agreement”). Notwithstanding anything contained herein to the contrary, and subject to the terms of the Incentive Plan, the maximum number of (i) Incentive Units available for grant or issuance pursuant to Award Agreements under the Plan, (ii) Series C Units available for grant or issuance pursuant to Options under the Plan, and (iii) Series C Units available for grant or issuance pursuant to Awards (other than Options) under the Plan, shall not, in the aggregate, exceed 200,000.”
(iii) The first sentence of Section 3.03(b) is hereby amended and restated in its entirely to read as follows:
“In connection with the adoption of the Incentive Plan and issuance of Options or Incentive Units, the Board is hereby authorized to negotiate and enter into Award Agreements with each Service Provider to whom it grants Incentive Units or Options.”
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(iv) A new Section 3.03(c) of the Operating Agreement is hereby added thereto, as follows:
“(c) Series C Units may be issued from time to time for no consideration, de minimis consideration or an amount of consideration up to their Fair Market Value. In addition to the restrictions and limitations imposed under this Agreement, Series C Units (including those obtained upon the exercise of an Option) shall be subject to such restrictions and limitations (such as distribution restrictions, transfer restrictions, call rights of the Company, vesting requirements and forfeiture provisions) as provided in this Agreement, the Incentive Plan and applicable Award Agreement. Notwithstanding the foregoing, Series C Units shall:
(i) | not have any pre-emptive right to acquire New Securities pursuant to Section 10.01(a); |
(ii) | not have any right of first refusal (as an Applicable ROFR Rightholder or otherwise) to acquire any Offered Common Units pursuant to Section 11.03; |
(iii) | not have the right to participate as a Tag-along Member in any Tag-along Sale pursuant to Section 11.05; |
(iv) | be subject to the rights of first refusal of the holders of Common Units pursuant to Section 11.03; and |
(v) | be subject to the rights of the holders of Common Units to drag along the other holders of Units pursuant to Section 11.04.” |
(v) Section 4.02(b) of the Operating Agreement is hereby amended and restated in its entirety to read as follows:
“(b) Such Member is an “accredited investor” within the meaning of Rule 501 promulgated under the Securities Act, as amended by Section 413(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Action, and such Member agrees that it will not take any action that could have an adverse effect on the availability of the exception from registration provided by Rule 501 promulgated under the Securities Act with respect to the offer and sale of Units, provided, however, that, the representations and warranties set forth in this Section 4.02(b) shall not be deemed to be made by any Member holding any Series C Units granted pursuant to the Incentive Plan (including those obtained upon the exercise of an Option issued pursuant to the Incentive Plan) so long as (i) such Series C Units and Options, as applicable, were granted and issued in compliance with Rule 701 of the Securities Act or another applicable exemption and (ii) such Member did not make a similar “accredited investor” representation and warranty in such Member’s Award Agreement.”
(vi) Sections 4.06(a)(i) and 4.06(a)(ii) of the Operating Agreement are hereby amended and restated in their entirety to read as follows:
“(i) each Member shall be entitled to one vote per Common Unit (excluding Series C Units, which are subject to Section 4.06(a)(ii)) on all matters upon which the Members have the right to vote under this Agreement; and
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(ii) Options, the Series C Units and incentive Units (including the Unrestricted Incentive Units) shall not entitle the holders thereof to vote on any matters required or permitted to be voted on by the Members.”
(vii) A new Section 5.04(c) is added to the Operating Agreement, as follows:
“(c) Upon the issuance of a fully vested Series C Unit and, in cases where a Series C Unit is subject to vesting, upon a Series C Unit becoming fully vested (or as otherwise provided under the terms of the Award Agreement with respect to such Series C Unit or upon the holder making an election under Section 83(b) of the Code with respect to the Series C Unit), the holder’s Capital Account shall be credited with (in addition to any amount paid for such Series C Unit and credited under Section 5.04(a)) the excess of the Fair Market Value of such Series C Unit over the amount paid for the Series C Unit by such holder, and such excess shall be treated by the holder as taxable income and by the Company as a compensation expense. Thereafter, such Series C Unit shall be treated as outstanding for purposes of making allocations and distributions.”
(viii) Section 7.02(a) of the Operating Agreement is hereby amended and restated in its entirety to read as follows:
“(a) first, (x) prior to all Drawdowns having been made, to the Members holding Series A and Series B Units pro rata in proportion to such holdings until Distributions under this Section 7.02(a) equal: (i) in the case of the Series A Units, the aggregate amount of Capital Contributions attributable to the holders of Series A Units in respect of their acquisitions of Common Units; and (ii) in the case of the Series B Units, $25 million; and (y) at or after all Drawdowns have been made, to the Members pro rata in proportion to their holdings of Common Units, until Distributions under this Section 7.02(a) equal the aggregate amount of Capital Contributions attributable to the Members in respect of their acquisitions of Common Units”.
(ix) Exhibit A, Definitions – The term “Award Agreements” is hereby amended by deleting the reference to “Section 3.03(b)” and inserting “Section 3.03(a)” in lieu thereof.
Additionally, Exhibit A, is amended by adding the following definitions thereto:
“Series C Member” is a Member owning Series C Units.
“Series C Units” shall mean those Units of the Company designated as Series C Units and issued to the Persons identified on the Members Schedule.
2. Operating Agreement. Except to the extent provided herein, all of the provisions of the Operating Agreement shall remain in full force and effect.
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3. Binding Effect. This Amendment shall be binding upon, and shall inure to the benefit of, the parties hereto and all other parties to the Operating Agreement and their respective successors and assigns.
4. Governing Law. This Amendment shall be governed by, and interpreted in accordance with the laws of the State of Delaware, all rights and remedies being governed by such laws without regard to principles of conflicts of laws.
5. Severability. Each provision of this Amendment shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Amendment that are valid, enforceable and legal.
6. Counterparts. This Amendment may be executed in one or more counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same Amendment. Capitalized terms not otherwise defined herein shall have the meaning assigned thereto in the Operating Agreement.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have executed this Amendment effective as of the Amendment Effective Date.
The Company: | ||
LONGEVERON LLC | ||
By: | /s/ Joshua M. Hare, M.D. | |
Name: | Joshua M. Hare, M.D. | |
Title: | Chairman of the Board | |
The Members: | ||
DS MED, LLC | ||
By: | /s/ Donald Soffer | |
Name: | Donald Soffer | |
Title: | Manager | |
By: | /s/ Joshua M. Hare, M.D. | |
Joshua M. Hare, M.D., an individual |
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JOINDER AGREEMENT
This Joinder Agreement is made and entered into as of the 1st day of January, 2015, by and between LONGEVERON LLC (“Longeveron”) and FUERST ITTLEMAN DAVID & JOSEPH, PL (“FIDJ”).
1. Admission. FIDJ is hereby admitted as a Member of Longeveron and shall have all the rights and be subject to all the obligations of a Member under the Longeveron LLC limited liability Company Agreement originally dated November 20, 2014, as amended from time to time (the “Operating Agreement”).
2. Agreement to Be Bound By Operating Agreement. FIDJ acknowledges receipt of a copy of the Operating Agreement and by execution hereof agrees to become a patty to and be bound by ah the terms and conditions of the Operating Agreement as a Member.
3. Counterparts. This Joinder Agreement may be executed in multiple counterparts.
Intending to be legally bound hereby, the parties hereto have caused this Joinder Agreement to be executed as of the date first written above by a duly authorized person.
FUERST ITTLEMAN DAVID & JOSEPH, PL | ||
/s/ Mitchell S. Fuerst | ||
By: | Mitchell S. Fuerst | |
President, Mitchell S. Fuerst, PA | ||
Managing Member |
Acknowledged and Agreed | ||
LONGEVERON LLC | ||
/s/ Joshua M. Hare | ||
By: | Joshua M. Hare | |
Chairman of the Board of Managers and | ||
Chief Science Officer |
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Exhibit 3.3.2
AMENDMENT
NO. 2
TO
THE FIRST AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
LONGEVERON LLC
WHEREAS, Longeveron LLC, a Delaware limited liability company (the “Company”), has heretofore been formed as a limited liability company pursuant to and in accordance with the Delaware Limited Liability Company Act;
WHEREAS, the Company and its Members have entered into that certain First Amended and Restated Limited Liability Company Agreement, effective as of December 31, 2014, as amended by the Prior Amendments (as defined below), Amendment No. 1 to the Limited Liability Company Agreement (the “First Amendment”), effective as of July 18, 2017 (as amended, the “Operating Agreement”);
WHEREAS, the Members and the Board desire to ratify the Prior Amendments;
WHEREAS, the First Amendment incorrectly referenced that it was amending certain provisions of the Company’s Limited Liability Company Agreement effective as of November 20, 2014 (the “Prior Operating Agreement”);
WHEREAS, the Members and the Board desire to amend the First Amendment to clarify that it amends the Operating Agreement and not the Prior Operating Agreement;
WHEREAS, on April 20, 2017, 10,000 Series A Units and 10,000 Series B Units held by Fuerst Ittleman David and Joseph, PL, a Florida professional limited liability company (“FIDJ”), were transferred to the Founder and the Sponsor, respectively, pursuant to the provisions of Section 3.a. of that certain Settlement Agreement by and among the Company, the Founder and FIDJ, dated as of April 20, 2017;
WHEREAS, the Board previously authorized the issuance of 10,000 Series C Units to Dr. Joshua Hare under the terms of the December 22, 2016 Exclusive License Agreement between the Company and Dr. Hare, however, such Series C Units were not issued to Dr. Hare;
WHEREAS, such Board authorization was incorrect, given that JMHMD Holdings LLC, a limited liability company owned by Dr. Hare, is the party to such Exclusive License Agreement and should instead be the recipient of the 10,000 Series C Units the Board previously authorized to be issued to Dr. Hare;
WHEREAS, JMHMD Holdings LLC has signed a Joinder Agreement, whereby it has agreed to become bound by the terms and conditions of the Operating Agreement;
WHEREAS, pursuant to Section 3.01 and Section 16.09 of the Operating Agreement, the board desires to amend the Members Schedule to reflect such Transfer of Series A Units and Series B Units back to the Founder and the Sponsor and to reflect the issuance of 10,000 Series C Units to JMHMD Holdings LLC;
WHEREAS, pursuant to Section 4.06(d)(iv) and Section 16.09 of the Operating Agreement, the undersigned Members of the Company, including the Founder and the Sponsor, desire to amend the Operating Agreement to authorize an additional 31,403 Series C Units so that the total number of authorized Series C Units is 331,403; and
WHEREAS, pursuant to Section 16.09 of the Operating Agreement, the Founder and the Sponsor desire to further amend the Operating Agreement as provided herein.
NOW, THEREFORE, this Amendment No. 2 to the Limited Liability Company Operating Agreement of Longeveron, LLC (“Amendment”) is hereby adopted as of the 5th day of October, 2017 (the “Amendment Effective Date”), as follows:
1. Prior Amendments. The following amendments to the Original Operating Agreement were adopted through various actions by written consent of the Board and the Members (the “Prior Amendments”), and are hereby confirmed, ratified and approved in all respects by the Members and the Board:
(i) Section 11.02(b)(i), clause (y), of the Original Operating Agreement is amended to delete the reference to “Jeffrey Soffer” and replace it with “Michele King Soffer.”
(ii) Section 8.02(c) of the Original Operating Agreement is deleted in its entirety and replaced with the following:
“(c) Upon final payment of the foil amount of the Sponsor’s Initial Capital Contribution, the Company and the Members may take such actions as they may deem necessary to increase the number of managers constituting the Board, with such increases to always be accomplished by appointing two (2) new managers.
(i) Such Board expansion under Section 8.02(c) will occur as follows:
(A) Series A Members will name one additional Series A Manager; and
(B) Series B Members will name one additional Series B Managers.”
2. Amendment to the First Amendment.
(i) The reference in the title of the First Amendment to “THE LIMITED LIABILITY COMPANY AGREEMENT” is hereby deleted and replaced with “FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT.”
(ii) The reference in second WHEREAS clause in the First Amendment to “Limited Liability Company Agreement, effective as of November 20, 2014” is hereby deleted and replaced with “First Amended and Restated Limited Liability Company Agreement, effective as of December 31, 2014, as amended.”
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(iii) The reference in the NOW, THEREFORE, clause in the First Amendment to “Limited Liability Company Operating Agreement” is hereby deleted and replaced with “First Amended and Restated Limited Liability Company Agreement.”
3. Further Amendments to the Operating Agreement.
(i) The fourth sentence of Section 3.02 of the Operating Agreement is hereby amended and restated its entirety to read as follows:
“The Company shall have the authority, subject to compliance with the terms hereof, to issue up to 331,403 Series C Units, provided that 200,000 of such Series C Units shall be reserved for issuance under the Incentive Plan.”
(ii) Section 6.02 of the Operating Agreement is hereby amended by inserting the following after paragraph (c):
“(d) In the event any Member has a deficit Capital Account at the end of any Company Fiscal Year that is in excess of the sum of (i) the amount such Member is obligated to restore, and (ii) the amount such Member is deemed to be obligated to restore pursuant to Treasury Regulations Sections 1.704-2(g)(1) and 1,704-2(i)(5), each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section 6.02(d) shall be made if and only to the extent that such Member would have a deficit Capital Account balance in excess of such sum after all other allocations provided for in this Article VI have been tentatively made as if Section 6.02(c) hereof and this Section 6.02(d) were not in the Agreement.
(e) Nonrecourse Deductions for any taxable year or other period shall be allocated among the Members in proportion to their respective Common Units.
(f) Any Member Nonrecourse Deductions for any fiscal year or other period shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulation Section 1.704-2(i).
(g) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m)(2) or Treasury Regulation Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of his or her interest, in the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event Regulation Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution was made in the event Regulation Section 1.704-1(b)(2)(iv)(m)(4) applies.”
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Section 6.02 of the Operating Agreement is hereby further amended by relabeling the last two paragraphs of such Section (former paragraphs (d) and (e)) as paragraphs “(h)” and “(i)”, respectively.
Section 6.02 of the Operating Agreement is hereby further amended by deleting the first sentence and header of paragraph (h), and replacing it with the following:
“(h) The allocations set forth in paragraphs (a), (b), (c), (d), (e), (f) and (g) above (the "Regulatory Allocations") are intended to comply with certain requirements of the Treasury Regulations under Code Section 704.”
(iii) Section 6.03(a) of the Operating Agreement is hereby amended by deleting the reference to “Section 6.03(e)” and replacing it with “Section 6.03(i)”.
(iv) Section 7.02(a) of the Operating Agreement is hereby amended and restated in its entirety to read as follows:
“(a) first, (x) prior to all Drawdowns having been made, to the Members holding Series A and Series B Units pro rata in proportion to such holdings until Distributions under this Section 7.02(a) equal: (i) in the case of the Series A Units, the aggregate amount of Capital Contributions attributable to the holders of Series A Units in respect of their acquisitions of such Common Units; and (ii) in the case of the Series B Units, $25 million; and (y) at or after all Drawdowns have been made, to the Members holding Series A Units and Series B Units pro rata in proportion to their holdings of such Common Units, until Distributions under this Section 7.02(a) equal the aggregate amount of Capital Contributions attributable to the Members holding Series A Units and Series B Units in respect of their acquisitions of such Common Units”.
(v) Sections 13.05 and 13.06 of the Operating Agreement are renumbered as Sections 13.06 and 13.07 respectively and a new Section 13.05 is added to the Operating Agreement to read in its entirety as follows:
“Section 13.05 Partnership Representative
(a) | For any taxable year of the Company in which, and to the extent that, the provisions of Subchapter C of Chapter 63 of the Code, as amended by the Bipartisan Budget Act of 2015 (together with any proposed, temporary or final Treasury Regulations promulgated at any time thereunder, the “Post-TEFRA Partnership Audit Rules”) apply to the Company, the Members shall appoint for the Company a person to serve as the “Partnership Representative,” as such term is defined in Section 6223(a) of the Post-TEFRA Partnership Audit Rules. The Members hereby appoint Sponsor as the initial Partnership Representative. The Company shall reimburse the Partnership Representative for all expenses reasonably incurred in connection with all examinations of the Company’s affairs by any taxing authority, including any resulting tax proceedings, and is authorized to expend Company funds for professional services and costs associated therewith. The Partnership Representative may rely on the advice or services of any lawyers, accountants, tax advisers, or other professional advisers or experts and shall not be liable for any damages, costs or losses to any persons, any diminution in value or any liability whatsoever arising as a result of its so relying. |
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(b) | The Partnership Representative shall promptly provide the Company and all Members with copies of any material notices received by the Partnership Representative in connection with any proceeding or potential adjustment relating to the Company that is subject to the Post-TEFRA Partnership Audit Rules, and shall use commercially reasonable efforts to keep the Members informed of all such proceedings or potential adjustments. |
(c) | The Partnership Representative shall have authority to act on behalf of the Company and, subject to the approval of an affirmative vote of the Members holding at least a majority of the outstanding Common Units entitled to vote as to any material decisions, make all relevant decisions regarding application of the Post-TEFRA Partnership Audit Rules, including, but not limited to, any elections under the Post-TEFRA Partnership Audit Rules or any decisions to settle, compromise, challenge, litigate or otherwise alter the defense of any proceeding before the Internal Revenue Service if the Members or any of their constituent partners or members could be affected thereby. |
(d) | Notwithstanding other provisions of this Agreement to the contrary, if any “partnership adjustment” (as defined in Section 6241(2) of the Code) is determined with respect to the Company, the Partnership Representative, subject to the approval of affirmative vote of the Members holding at least a majority of the outstanding Common Units entitled to vote, may cause the Company to elect pursuant to Section 6226 of the Code to have such adjustment passed through to the Members for the year to which the adjustment relates (i.e., the “reviewed year” within the meaning of Section 6225(d)(1) of the Code). In the event that the Partnership Representative has not caused the Company to so elect pursuant to Section 6226 of the Code, then any “imputed underpayment” (as determined in accordance with Section 6225 of the Code) or “partnership adjustment” that does not give rise to an “imputed underpayment” shall be apportioned among the Members of the Company for the taxable year in which the adjustment is finalized in such manner as may be necessary (as determined by the Partnership Representative in good faith), so that, to the maximum extent possible, the tax and economic consequences of the partnership adjustment and any associated interest and penalties are borne by the Members based upon their interests in the Company for the reviewed year. |
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(e) | The Members agree to cooperate in good faith to timely provide information requested by the Partnership Representative as needed to comply with the Post-TEFRA Partnership Audit Rules, including without limitation to make (and take full advantage of) any elections available to the Company under the Post-TEFRA Partnership Audit Rules. Each Member agrees that, upon request of the Partnership, such Member shall take such actions as may be necessary or desirable (as determined by the Partnership Representative) to (i) allow the Company to comply with the provisions of Section 6226 of the Code so that any “partnership adjustments” are taken into account by the Members rather than the Company or (ii) file amended tax returns with respect to any “reviewed year” (within the meaning of Section 6225(d)(1) of the Code) to reduce the amount of any “partnership adjustment” otherwise required to be taken into account by the Company. The provisions contained in this Section 13.05(e) shall survive the dissolution of the Company, the withdrawal of any Member, and/or transfer of any Member’s interest in the Company.” |
(vi) Section 15.01(a) of the Operating Agreement is hereby amended and restated to read in its entirety as follows:
“(a) Covered Persons. As used herein the term “Covered Person” shall mean (i) each Member, (ii) each officer, manager, director, shareholder, partner, member, controlling Affiliate, employee, agent or representative of each Member, and each of their controlling Affiliates, and (iii) each Manager, Officer, employee, agent, tax matters partner, Partnership Representative or representative of the Company.”
(vii) Exhibit A of the Operating Agreement is hereby amended by inserting the following alter the definition of “Non-Exercising Member” and before the definition of “Nonrecourse Liability”:
““Nonrecourse Deductions” shall mean deductions having the meaning set forth in Treasury Regulations Sections 1.704-2(b)(1) and 1.704-2(c).”
(viii) The Members Schedule is hereby amended and restated in its entirety as set forth on Schedule A attached hereto and incorporated herein by reference.
(ix) The Managers Schedule is hereby amended and restated in its entirety as set forth on Schedule B attached hereto and incorporated herein by reference.
4. Operating Agreement. Except as otherwise provided herein, all of the provisions of the Operating Agreement shall remain in full force and effect.
5. Binding Effect. This Amendment shall be binding upon, and shall inure to the benefit of, the parties hereto and all other parties to the Operating Agreement and their respective successors and assigns.
6. Governing Law. This Amendment shall be governed by, and interpreted in accordance with the laws of the State of Delaware, all rights and remedies being governed by such laws without regard to principles of conflicts of laws.
7. Severability. Each provision of this Amendment shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Amendment that are valid, enforceable and legal.
8. Counterparts; Defined Terms. This Amendment may be executed in one or more counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same Amendment. Capitalized terms not otherwise defined herein shall have the meaning assigned thereto in the Operating Agreement.
[Remainder of Page Intentionally Left
Blank]
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have executed this Amendment effective as of the Amendment Effective Date.
The Company: | ||
LONGEBERON LLC | ||
By: | /s/ Joshua M. Hare, M.D. | |
Name: | Joshua M. Hare, M.D. | |
Title: | Chairman of the Board | |
The Members: | ||
DS MED, LLC | ||
By: | /s/ Donald Soffer | |
Name: | Donald Soffer | |
Title: | Manager | |
Joshua M. Hare, M.D. | ||
By: | /s/ Joshua M. Hare, M.D. | |
Joshua M. Hare, M.D. | ||
The Board: | ||
/s/ Joshua M. Hare, M.D. | ||
Joshua M. Hare, M.D. | ||
/s/ Donald M. Soffer | ||
Donald M. Soffer | ||
/s/ Neil E. Hare | ||
Neil E. Hare |
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SCHEDULE A
MEMBERS
SCHEDULE
(AS OF OCTOBER 15, 2018)
[intentionally deleted- confidential material]
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SCHEDULE B
MANAGERS
SCHEDULE
(AS OF OCTOBER 5, 2017)
[intentionally deleted- confidential material]
9
JOINDER AGREEMENT
This Joinder Agreement is made and entered into effective as of the 9th day of October, 2017, by and between LONGEVERON LLC (“Longeveron”) and JMHMD HOLDINGS LLC (the “Investor”).
Admission. Investor is hereby admitted as a Member of Longeveron and shall have all the rights and be subject to all the obligations of a Member under the Longeveron LLC First Amended and Restated Limited Liability Company Agreement originally dated December 31, 2014, as amended by Amendment No. 1 to the Limited Liability Company Agreement dated July 18, 2017, Amendment No. 2 to the Limited Liability Company Agreement effective as of October 5, 2017, as further amended from time to time (the “Operating Agreement”).
Agreement to Be Bound By Operating Agreement. Investor acknowledges receipt of a copy of the Operating Agreement and by execution hereof agrees to become a party to and be bound by all the terms and conditions of the Operating Agreement as a Member.
Counterparts. This Joinder Agreement may be executed in multiple counterparts.
Intending to be legally bound hereby, the parties hereto have caused this Joinder Agreement to be executed as of the date first written above by a duly authorized person.
LONGEVERON LLC | ||
By: | /s/ Dr. Joshua M. Hare, M.D. | |
Name: | Dr. Joshua M. Hare, M.D. | |
Title: | Co-Founder / Chief Scientific Officer | |
INVESTOR: | ||
JMHMD Holdings LLC | ||
By: | /s/ Joshua M. Hare | |
Name: | Joshua M. Hare | |
Title: | Manager |
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Exhibit 3.3.3
AMENDMENT
NO. 3
TO
THE FIRST AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
LONGEVERON LLC
WHEREAS, Longeveron LLC, a Delaware limited liability company (the “Company”), has heretofore been formed as a limited liability company pursuant to and in accordance with the Delaware Limited Liability Company Act;
WHEREAS, the Company and its Members have entered into that certain First Amended and Restated Limited Liability Company Agreement, effective as of December 31, 2014, as amended by the Prior Amendments (as defined below), Amendment No. 1 to the Limited Liability Company Agreement (the “First Amendment”), effective as of July 18, 2017 and Amendment No. 2 to Limited Liability Company Agreement (the “Second Amendment”) effective as of October 5, 2017 (collectively, as amended, the “Operating Agreement”);
WHEREAS, pursuant to Section 4.06(d)(iv) and Section 16.09 of the Operating Agreement, the undersigned Members of the Company, including the Founder and the Sponsor, desire to amend the Operating Agreement to authorize an additional 103,333 Series C Units so that the total number of authorized Series C Units is 434,736; and
WHEREAS, pursuant to Section 16.09 of the Operating Agreement, the Founder and the Sponsor desire to further amend the Operating Agreement as provided herein.
NOW, THEREFORE, this Amendment No. 3 to the Limited Liability Company Operating Agreement of Longeveron, LLC (“Amendment”) is hereby adopted as of the 23rd day of October, 2017 (the “Amendment Effective Date”), as follows:
1. Further Amendments to the Operating Agreement.
(i) The fourth sentence of Section 3.02 of the Operating Agreement is hereby amended and restated its entirety to read as follows:
“The Company shall have the authority, subject to compliance with the terms hereof, to issue up to 434,736 Series C Units, provided that 200,000 of such Series C Units shall be reserved for issuance under the Incentive Plan.”
(ii) The Members Schedule is hereby amended and restated in its entirety as set forth on Schedule A attached hereto and incorporated herein by reference.
2. Operating Agreement. Except as otherwise provided herein, all of the provisions of the Operating Agreement shall remain in full force and effect.
3. Binding Effect. This Amendment shall be binding upon, and shall inure to the benefit of, the parties hereto and all other parties to the Operating Agreement and their respective successors and assigns.
4. Governing Law. This Amendment shall be governed by, and interpreted in accordance with the laws of the State of Delaware, all rights and remedies being governed by such laws without regard to principles of conflicts of laws.
5. Severability. Each provision of this Amendment shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Amendment that are valid, enforceable and legal.
6. Counterparts; Defined Terms. This Amendment may be executed in one or more counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same Amendment. Capitalized terms not otherwise defined herein shall have the meaning assigned thereto in the Operating Agreement.
[Remainder
of Page Intentionally Left Blank]
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have executed this Amendment effective as of the Amendment Effective Date.
The Company: | ||
LONGEVERON LLC | ||
By: | /s/ Joshua M. Hare, M.D. | |
Name: | Joshua M. Hare, M.D. | |
Title: | Chairman of the Board | |
The Members: | ||
DS MED, LLC | ||
By: | /s/ Donald Soffer | |
Name: | Donald Soffer | |
Title: | Manager |
Joshua M. Hare, M.D. | ||
By: | /s/ Joshua M. Hare | |
Joshua M. Hare, M.D. |
The Board: | |
/s/ Joshua M. Hare | |
Joshua M. Hare, M.D. | |
/s/ Donald M. Soffer | |
Donald M. Soffer | |
/s/ Neil E. Hare | |
Neil E. Hare |
3
SCHEDULE A
MEMBERS
SCHEDULE
(AS OF OCTOBER 15, 2018)
[intentionally deleted- confidential material]
4
EXHIBIT B
Joinder
JOINDER AGREEMENT
This Joinder Agreement is made and entered into as of the _____ day of _____________, 20__, by and between LONGEVERON LLC (“Longeveron”) and __________________ (the “Investor”).
Admission. Investor is hereby admitted as a Member of Longeveron and shall have all the rights and be subject to all the obligations of a Member under the Longeveron LLC First Amended and Restated Limited Liability Company Agreement effective as of December 31, 2014, as amended by Amendment No. 1 effective as of July 18, 2017, Amendment No. 2 effective as of October 5, 2017, and as further amended from time to time (the “Operating Agreement”).
Agreement to Be Bound By Operating Agreement. Investor acknowledges receipt of a copy of the Operating Agreement and by execution hereof agrees to become a party to and be bound by all the terms and conditions of the Operating Agreement as a Member.
Counterparts. This Joinder Agreement may be executed in multiple counterparts.
Intending to be legally bound hereby, the parties hereto have caused this Joinder Agreement to be executed as of the date first written above by a duly authorized person.
LONGEVERON LLC | ||
By: | ||
Name: | ||
Title: | ||
INVESTOR: | ||
By: | ||
Name: | ||
Title: |
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Joinder
JOINDER AGREEMENT
This Joinder Agreement is made and entered into as of the 21st day of October, 2017, by and between LONGEVERON LLC (“Longeveron”) and EB Pharm LLC (the “Investor”).
Admission. Investor is hereby admitted as a Member of Longeveron and shall have all the rights and be subject to all the obligations of a Member under the Longeveron LLC First Amended and Restated Limited Liability Company Agreement effective as of December 31, 2014, as amended by Amendment No. 1 effective as of July 18, 2017, Amendment No. 2 effective as of October 5, 2017, and as further amended from time to time (the “Operating Agreement”).
Agreement to Be Bound By Operating Agreement. Investor acknowledges receipt of a copy of the Operating Agreement and by execution hereof agrees to become a party to and be bound by all the terms and conditions of the Operating Agreement as a Member.
Counterparts. This Joinder Agreement may be executed in multiple counterparts.
Intending to be legally bound hereby, the parties hereto have caused this Joinder Agreement to be executed as of the date first written above by a duly authorized person.
LONGEVERON LLC | ||
By: | /s/ Joshua Hare | |
Name: | Joshua Hare | |
Title: | Manager | |
INVESTOR: EB PHARM LLC | ||
By: | /s/ Erin Borger | |
Name: | Erin Borger | |
Title: | Owner |
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JOINDER AGREEMENT
This Joinder Agreement is made and entered into effective as of the 2nd day of January, 2018, by and between LONGEVERON LLC (“Longeveron”) and GLOBAL VISION COMMUNICATIONS, LLC (the “Investor”).
Admission. Investor is hereby admitted as a Member of Longeveron and shall have all the rights and be subject to all the obligations of a Member under the Longeveron LLC First Amended and Restated Limited Liability Company Agreement originally dated December 31, 2014, as amended by Amendment No. 1 to the Limited Liability Company Agreement dated July 18, 2017, Amendment No. 2 to the Limited Liability Company Agreement effective as of October 5, 2017, and Amendment No. 3 to the Limited Liability Company Agreement effective as of October 23, 2017, as further amended from time to 1ime (the “Operating Agreement”).
Agreement to Be Bound By Operating Agreement. Investor acknowledges receipt of a copy of the Operating Agreement and by execution hereof agrees to become a party to and be bound by all the terms and conditions of the Operating Agreement as a Member.
Issuance. Investor acknowledges that the issuance of 167 Series C Units to Investor in connection herewith satisfies all outstanding obligations of Longeveron to issue Units or Unit Equivalents (both as defined in the Operating Agreement) to Investor.
Counterparts. This Joinder Agreement may be executed in multiple counterparts.
Intending to be legally bound hereby, the parties hereto have caused this Joinder Agreement to be executed as of the date first written above by a duly authorized person.
LONGEVERON LLC | ||
By: | /s/ Suzanne L. Page | |
Name: | Suzanne L. Page, JD | |
Title: | Chief Operating Officer | |
INVESTOR: | ||
Global Visions Communications, LLC | ||
By: | /s/ Neil E. Hare | |
Name: | Neil E. Hare | |
Title: | President |
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JOINDER AGREEMENT
This Joinder Agreement is made and entered into effective as of the 15th day of November, 2017, by and between LONGEVERON LLC (“Longeveron”) and OPTIMAL NETWORKS, INC. (the “Investor”).
Admission. Investor is hereby admitted as a Member of Longeveron and shall have all the rights and be subject to all the obligations of a Member under the Longeveron LLC First Amended and Restated Limited Liability Company Agreement originally dated December 31, 2014, as amended by Amendment No. 1 to the Limited Liability Company Agreement dated July 18, 2017, Amendment No. 2 to the Limited Liability Company Agreement effective as of October 5, 2017, and Amendment No. 3 to the Limited Liability Company Agreement effective as of October 23, 2017, as further amended from time to time (the “Operating Agreement”).
Agreement to Be Bound By Operating Agreement. Investor acknowledges receipt of a copy of the Operating Agreement and by execution hereof agrees to become a party to and be bound by all the terms and conditions of the Operating Agreement as a Member.
Issuance. Investor acknowledges that the issuance of 1,901 Series C Units to Investor in connection herewith satisfies all outstanding obligations of Longeveron to issue Units or Unit Equivalents (both as defined in the Operating Agreement) to Investor, subject to terms of the Overall Agreement between Optimal Networks, Inc. and Longeveron, LLC effective April 11, 2015.
Counterparts. This Joinder Agreement may be executed in multiple counterparts.
Intending to be legally bound hereby, the parties hereto have caused this Joinder Agreement to be executed as of the date first written above by a duly authorized person.
LONGEVERON LLC | ||
By: | /s/ Dr. Joshua M. Hare | |
Name: | Dr. Joshua M. Hare | |
Title: | Co-Founder / Chief Scientific Officer | |
INVESTOR: | ||
Optimal Networks, Inc. | ||
By: | /s/ Heinan Landa | |
Name: | Heinan Landa | |
Title: | CEO |
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JOINDER AGREEMENT
This Joinder Agreement is made and entered into effective as of the 21st_ day of December, 2017, by and between LONGEVERON LLC (“Longeveron”) and UNIVERSITY OF MIAMI (the “Investor”).
Admission. Investor is hereby admitted as a Member of Longeveron and shall have all the rights and be subject to all the obligations of a Member under the Longeveron LLC First Amended and Restated Limited Liability Company Agreement originally dated December 31, 2014, as amended by Amendment No. 1 to the Limited Liability Company Agreement dated July 18, 2017, as further amended from time to time (the “Operating Agreement”).
Agreement to Be Bound By Operating Agreement. Investor acknowledges receipt of a copy of the Operating Agreement and by execution hereof agrees to become a party to and be bound by all the terms and conditions of the Operating Agreement as a Member.
Issuance. Investor acknowledges that the 20,000 Series C Units being issued to Investor in connection herewith satisfy all outstanding obligations of Longeveron to Investor as of the date hereof; however, future issuances may become issuable to Investor under the terms of that certain License Agreement dated November 20, 2014, by and between Longeveron and Investor.
Counterparts. This Joinder Agreement may be executed in multiple counterparts.
Intending to be legally bound hereby, the parties hereto have caused this Joinder Agreement to be executed as of the date first written above by a duly authorized person.
LONGEVERON LLC | ||
By: | /s/ Joshua M. Hare | |
Name: | Dr. Joshua M. Hare | |
Title: | Co-Founder/Chief Scientific Officer | |
INVESTOR: | ||
By: | /s/ Norma Sue Kenyen | |
Name: | Norma Sue Kenyen | |
Title: | Vice Provost for Innovation |
9
Exhibit 3.3.4
AMENDMENT
NO. 4
TO
THE FIRST AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
LONGEVERON LLC
WHEREAS, Longeveron LLC, a Delaware limited liability company (the “Company”), has heretofore been formed as a limited liability company pursuant to and in accordance with the Delaware Limited Liability Company Act;
WHEREAS, the Company and its Members have entered into that certain First Amended and Restated Limited Liability Company Agreement, effective as of December 31, 2014, as amended by the Prior Amendments (as defined below), Amendment No. 1 to the Limited Liability Company Agreement (the “First Amendment”), effective as of July 18, 2017, Amendment No. 2 to Limited Liability Company Agreement (the “Second Amendment”) effective as of October 5, 2017, and Amendment No. 3 to the Limited Liability Company Agreement (the “Third Amendment”) (collectively, as amended, the “Operating Agreement”);
WHEREAS, pursuant to Section 4.06(d)(iv) and Section 16.09 of the Operating Agreement, the undersigned Members of the Company, including the Founder and the Sponsor, desire to amend the Operating Agreement to authorize an additional 137,638 Series C Units so that the total number of authorized Series C Units is 572,374; and
WHEREAS, pursuant to Section 16.09 of the Operating Agreement, the Founder and the Sponsor desire to further amend the Operating Agreement as provided herein.
NOW, THEREFORE, this Amendment No. 4 to the Limited Liability Company Operating Agreement of Longeveron, LLC (“Amendment”) is hereby adopted as of the 15th day of October, 2018 (the “Amendment Effective Date”), as follows:
1. Further Amendments to the Operating Agreement.
(i) The fourth sentence of Section 3.02 of the Operating Agreement is hereby amended and restated its entirety to read as follows:
“The Company shall have the authority, subject to compliance with the terms hereof, to issue up to 572,374 Series C Units, provided that 200,000 of such Series C Units shall be reserved for issuance under the Incentive Plan.”
(ii) The Members Schedule is hereby amended and restated in its entirety as set forth on Schedule A attached hereto and incorporated herein by reference.
2. Operating Agreement. Except as otherwise provided herein, all of the provisions of the Operating Agreement shall remain in full force and effect.
3. Binding Effect. This Amendment shall be binding upon, and shall inure to the benefit of, the parties hereto and all other parties to the Operating Agreement and their respective successors and assigns.
4. Governing Law. This Amendment shall be governed by, and interpreted in accordance with the laws of the State of Delaware, all rights and remedies being governed by such laws without regard to principles of conflicts of laws.
5. Severability. Each provision of this Amendment shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Amendment that are valid, enforceable and legal.
6. Counterparts; Defined Terms. This Amendment may be executed in one or more counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same Amendment. Capitalized terms not otherwise defined herein shall have the meaning assigned thereto in the Operating Agreement.
[Remainder
of Page Intentionally Left Blank]
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned have executed this Amendment effective as of the Amendment Effective Date.
The Company: | ||
LONGEVERON LLC | ||
By: | /s/ Joshua M. Hare, M.D. | |
Name: | Joshua M. Hare, M.D. | |
Title: | Chairman of the Board | |
The Members: | ||
DS MED, LLC | ||
By: | /s/ Donald Soffer | |
Name: | Donald Soffer | |
Title: | Manager | |
Joshua M. Hare, M.D. | ||
By: | /s/ Joshua M. Hare, M.D. | |
Joshua M. Hare, M.D. | ||
The Board: | ||
/s/ Joshua M. Hare, M.D. | ||
Joshua M. Hare, M.D. | ||
/s/ Donald M. Soffer | ||
Donald M. Soffer | ||
/s/ Neil E. Hare | ||
Neil E. Hare |
3
SCHEDULE A
MEMBERS
SCHEDULE
(AS OF OCTOBER 15, 2018)
[intentionally deleted- confidential material]
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EXHIBIT B
Joinder
JOINDER AGREEMENT
This Joinder Agreement is made and entered into as of the _____ day of _____________, 20__, by and between LONGEVERON LLC (“Longeveron”) and __________________ (the “Investor”).
Admission. Investor is hereby admitted as a Member of Longeveron and shall have all the rights and be subject to all the obligations of a Member under the Longeveron LLC First Amended and Restated Limited Liability Company Agreement effective as of December 31, 2014, as amended by Amendment No. 1 effective as of July 18, 2017, Amendment No. 2 effective as of October 5, 2017, Amendment No. 3 effective as of October 23, 2017, and as further amended from time to time (the “Operating Agreement”).
Agreement to Be Bound By Operating Agreement. Investor acknowledges receipt of a copy of the Operating Agreement and by execution hereof agrees to become a party to and be bound by all the terms and conditions of the Operating Agreement as a Member.
Counterparts. This Joinder Agreement may be executed in multiple counterparts.
Intending to be legally bound hereby, the parties hereto have caused this Joinder Agreement to be executed as of the date first written above by a duly authorized person.
LONGEVERON LLC | ||
By: | ||
Name: | ||
Title: | ||
INVESTOR: | ||
By: | ||
Name: | ||
Title: |
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Joinder
JOINDER AGREEMENT
This Joinder Agreement is made and entered into as of the 22nd day of March, 2018, by and between LONGEVERON LLC (“Longeveron”) and Budge Collinson (the “Investor”).
Admission. Investor is hereby admitted as a Member of Longeveron and shall have all the rights and be subject to all the obligations of a Member under the Longeveron LLC First Amended and Restated Limited Liability Company Agreement effective as of December 31, 2014, as amended by Amendment No. 1 effective as of July 18, 2017, Amendment No. 2 effective as of October 5, 2017, Amendment No. 3 effective as of October 23, 2017, and as further amended from time to time (the “Operating Agreement”).
Agreement to Be Bound By Operating Agreement. Investor acknowledges receipt of a copy of the Operating Agreement and by execution hereof agrees to become a party to and be bound by all the terms and conditions of the Operating Agreement as a Member.
Counterparts. This Joinder Agreement may be executed in multiple counterparts.
Intending to be legally bound hereby, the parties hereto have caused this Joinder Agreement to be executed as of the date first written above by a duly authorized person.
LONGEVERON LLC | ||
By: | ||
Name: | ||
Title: | ||
INVESTOR: | ||
By: | /s/ Budge Collinson | |
Name: | Budge Collinson | |
Title: |
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Joinder
JOINDER AGREEMENT
This Joinder Agreement is made and entered into as of the 22nd day of March, 2018, by and between LONGEVERON LLC (“Longeveron”) and Linda Collinson (the “Investor”).
Admission. Investor is hereby admitted as a Member of Longeveron and shall have all the rights and be subject to all the obligations of a Member under the Longeveron LLC First Amended and Restated Limited Liability Company Agreement effective as of December 31, 2014, as amended by Amendment No. 1 effective as of July 18, 2017, Amendment No. 2 effective as of October 5, 2017, Amendment No. 3 effective as of October 23, 2017, and as further amended from time to time (the “Operating Agreement”).
Agreement to Be Bound By Operating Agreement. Investor acknowledges receipt of a copy of the Operating Agreement and by execution hereof agrees to become a party to and be bound by all the terms and conditions of the Operating Agreement as a Member.
Counterparts. This Joinder Agreement may be executed in multiple counterparts.
Intending to be legally bound hereby, the parties hereto have caused this Joinder Agreement to be executed as of the date first written above by a duly authorized person.
LONGEVERON LLC | ||
By: | ||
Name: | ||
Title: | ||
INVESTOR: | ||
By: | /s/ Linda Collinson | |
Name: | Linda Collinson | |
Title: |
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JOINDER AGREEMENT
This Joinder Agreement is made and entered into effective as of the 27th day of January, 2018, by and between LONGEVERON LLC (“Longeveron”) and FIDJ Investments LLC (the “Transferee”).
1. Admission. Transferee is hereby admitted as a Member of Longeveron and shall have all the rights and be subject to all the obligations of a Member under the Longeveron LLC Limited Liability Company Agreement originally dated November 20, 2014, as amended and restated from time to time (the “Operating Agreement”).
2. Agreement to Be Bound By Operating Agreement. Transferee acknowledges receipt of a copy of the Operating Agreement and by execution hereof agrees to become a party to and be bound by all the terms and conditions of the Operating Agreement as a Member.
3. Counterparts. This Joinder Agreement may be executed in multiple counterparts.
Intending to be legally bound hereby, the parties hereto have caused this Joinder Agreement to be executed as of the date first written above by a duly authorized person.
LONGEVERON LLC | ||
Signature | ||
By: | ||
Printed Name | ||
Its: | ||
Title | ||
FIDJ Investments LLC (the Transferee) | ||
/s/ Alan A. Joseph | ||
By: | Alan A. Joseph | |
Managing Member |
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EXHIBIT B
Joinder
JOINDER AGREEMENT
This Joinder Agreement is made and entered into as of the 13th day of April, 2018 by and between LONGEVERON LLC (“Longeveron”) and Frontview Technology Co., Ltd., (the “Investor”).
Admission. Investor is hereby admitted as a Member of Longeveron and shall have all the rights and be subject to all the obligations of a Member under the Longeveron LLC First Amended and Restated Limited Liability Company Agreement effective as of December 31, 2014, as amended by Amendment No. 1 effective as of July 18, 2017, Amendment No. 2 effective as of October 5, 2017, Amendment No. 3 effective as of October 23, 2017, and as further amended from time to time (the “Operating Agreement”).
Agreement to Be Bound By Operating Agreement. Investor acknowledges receipt of a copy of the Operating Agreement and by execution hereof agrees to become a party to and be bound by all the terms and conditions of the Operating Agreement as a Member.
Counterparts. This Joinder Agreement may be executed in multiple counterparts.
Intending to be legally bound hereby, the parties hereto have caused this Joinder Agreement to be executed as of the date first written above by a duly authorized person.
LONGEVERON LLC | ||
By: | /s/ Joshua M. Hare | |
Name: | Joshua M. Hare, M.D. | |
Title: | Co-Founder/Chief Scientific Officer | |
INVESTOR: | ||
By: | /s/ Maria Plyladen | |
Name: | Maria Plyladen | |
Title: | Director |
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JOINDER AGREEMENT
This Joinder Agreement is made and entered into effective as of the 31st day of January, 2018, by and between LONGEVERON LLC (“Longeveron”) and FIDJ Partners, LLC (the “Transferee”).
1. Admission. Transferee is hereby admitted as a Member of Longeveron and shall have all the rights and be subject to all the obligations of a Member under the Longeveron LLC Limited Liability Company Agreement originally dated November 20, 2014, as amended and restated from time to time (the “Operating Agreement”).
2. Agreement to Be Bound By Operating Agreement. Transferee acknowledges receipt of a copy of the Operating Agreement and by execution hereof agrees to become a party to and be bound by all the terms and conditions of the Operating Agreement as a Member.
3. Counterparts. This Joinder Agreement may be executed in multiple counterparts.
Intending to be legally bound hereby, the parties hereto have caused this Joinder Agreement to be executed as of the date first written above by a duly authorized person.
LONGEVERON LLC | ||
Signature | ||
By: | ||
Printed Name | ||
Its: | ||
Title | ||
MANYA DELENGOWSKI FUERST (the Transferee) | ||
/s/ Manya Delengowski Fuerst | ||
By: | Manya Delengowski Fuerst |
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Exhibit 10.1
[Certain identified information has been excluded from this exhibit because it is not material to a reader and would be competitively harmful if publicly disclosed]
EXCLUSIVE LICENSE AGREEMENT
This License Agreement (the “Agreement”) is entered Into and made effective this 20th day of November, 2014 (the “Effective Date”), between the University of Miami, a Florida not-for-profit corporation, having business offices at 1951 NW 7th Avenue, (C234), Miami, Florida 33136 (“UNIVERSITY”), and LONGEVERON LLC, a limited liability company organized under the laws of Delaware, having business offices at 6010 Aqua Path, Miami Beach, Florida 33141 (“LICENSEE”). For purposes of this Agreement, each of UNIVERSITY and LICENSEE may be individually referred to as a “Party,” and collectively referred to as the “Parties.”
BACKGROUND
UNIVERSITY has been assigned and owns all rights and title to certain inventions, works, processes of its employee, Joshua M. Hare, M,D., as described In Appendix A and UNIVERSITY wants to have the technology perfected and marketed as soon as possible so that resulting products may be available for public use and benefit. LICENSEE wants to acquire an exclusive license for the Technology Rights for the purposes of making, having made for Its own use and sale, using and selling Products and practicing the invention(s) disclosed and claimed In the Technology Rights, in the Territory and in the Field of Use as set forth and defined below,
1. | DEFINITIONS |
1.1 | “Field of Use” shall mean all fields. |
1.2 | “Net Sales” shall be calculated as set forth in this section and shall mean gross amounts invoiced by LICENSEE and/or its Sublicensees on commercial sales of Products or use of Process thereof to third parties (excluding Sublicensees), less deductions for the following, determined In accordance with generally accepted accounting principles: |
a. | sales and excise taxes, value added taxes, and duties which fall due and are paid by the purchaser as a direct consequence of such sales and any other governmental charges imposed upon the importation, use or sale of Products, but only to the extent that such taxes and duties are actually Included and itemized in the gross sales amounts invoiced to and specifically paid by the purchaser over and above the price of the Products; |
b. | trade, quantity and cash discounts actually allowed and taken; |
c. | allowances or credits to customers on account of shelf adjustments, failure to supply, rejection, withdrawal, recall or return of Products or on account of retroactive price reductions affecting Products, to the extent that such allowances or credits are actually allowed and taken; |
d. | amounts not collectible after reasonable collection efforts; |
e. | any charges for freight, postage, shipping or transportation or for shipping insurance; |
f. | rebates and charge backs specifically related to Products on an actual credited or paid basis, Including those granted to government agencies (such rebates and charge backs to be accrued as an estimate in the month in which the related Products is sold by using generally accepted accounting principles) to the extent that such rebates and charge backs are actually allowed and taken; and, |
g. | sales contract administrative fees, fees paid to distributors, wholesaler fees or service charges and other payments to customers or other third parties in connection with the sale of Products, to the extent actually allowed and taken. |
1.3 | “Technology Rights” shall mean: |
a. | all technology specifically set forth in Appendix A. |
1.4 | “Product” shall mean any product or part thereof made, used or sold by the LICENSEE or a Sublicensee of the LICENSEE, which: |
a. | arises from, uses or incorporates the Technology Rights; or |
b. | is manufactured by using a Process which arises from, uses or incorporates the Technology Rights. |
1.5 | “Process” shall mean any process used by the LICENSEE or a Sublicensee of the LICENSEE which arises from, uses or Incorporates the Technology Rights. |
1.6 | “Sublicensee” as used in this Agreement shall mean any third party to whom LICENSEE has granted a license to make, have made, use and/or sell the Product or the Process under the Technology Rights, provided LICENSEE has requested and obtained prior written approval from UNIVERSITY, which approval shall not be unreasonably withheld. Sublicensee shall agree in writing with LICENSEE to accept the conditions and restrictions agreed to by LICENSEE in this Agreement, and LICENSEE shall, within thirty (30) days of request by UNIVERSITY, provide to UNIVERSITY a fully signed, non-redacted copy of each agreement executed by a Sublicensee, with all exhibits, appendixes, attachments and any amendments thereto, as applicable. |
1.7 | “Territory” shall mean the world, |
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2. | GRANT |
2.1 | UNIVERSITY hereby grants to LICENSEE and LICENSEE hereby accepts an exclusive license, subject to any rights of the government in the Territory for the Field of Use, with the right to sublicense, under the Technology Rights and an exclusive license to the technology developed as of the Effective Date by Joshua M. Hare, M.D., that is not encumbered by any third party rights, which in UNIVERSITY’s sole discretion, Is necessary to practice the Technology Rights to research, develop, make, have made, use, sell and import the Product(s) and to practice the Process(es) described and/or claimed In the Technology Rights, |
2.2 | UNIVERSITY retains a non-sublicensable, non-exclusive, royalty-free, perpetual, irrevocable, worldwide right to make and to use the subject matter described and/or claimed in the Technology Rights for internal research and educational, and clinical purposes, including sponsored research and collaborations between Joshua Hare and commercial entities. Further, the United States Government may also have certain rights, title and/or interest In/to the licensed Technology(s) and/or Technology application(s), including but not limited to the rights to use the licensed Technology(s) and/or Technology application(s) for internal, non-commercial and educational purposes only. |
3. ROYALTIES AND OTHER CONSIDERATION
3.1 | In consideration of the license herein granted, LICENSEE shall pay fees and royalties to UNIVERSITY as follows: |
a. | License Issue fee of $5,000 is due to UNIVERSITY within thirty (30) days of the Effective Date of this Agreement. |
b. | Running royalty in an amount equal to 3% of the annual Net Sales of the Product(s) used, leased or sold by or for LICENSEE or its Sublicensees (“Running Royalty”). In the event LICENSEE Is required to pay royalties to a third party or third parties for the same Product or Process as licensed under this Agreement to avoid potential infringement of third party Technology rights as a result of sales of Products, then LICENSEE may reduce the Running Royalty by fifty cents ($0.50) for each one dollar ($1.00) in royalties which LICENSEE is obligated to pay to a third party or third parties under such licenses, provided however, that the royalties payable to UNIVERSITY under this section shall not be reduced to less than two percent (2%) of annual Net Sales of the Product(s) used, leased or sold by or for LICENSEE or its Sublicensees. If, in any one calendar year, LICENSEE is not able to fully recover its fifty percent (50%) portion of the payments due to a third party, it shall be entitled to carry forward such right of off-set to future calendar years with respect to the excess amount. |
c. | By the first (1st) day of each anniversary of the Effective Date LICENSEE agrees to pay UNIVERSITY an annual fee of $10,000, (2nd) $15,000, (3rd) $25,000, (4th) $40,000, and (5th until expiration or termination of this Agreement) $50,000. Such annual fee is creditable towards, or may be offset by, any other consideration, including royalty and milestone payments that are, as set forth herein, due to the UNIVERSITY by LICENSEE. |
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d. | Royalties are payable on a country-by-country basis beginning on the date of first commercial sale and ending on expiration or termination of this Agreement. |
3.2 | All payments hereunder shall be made In U.S. dollars. |
3.3 | In the event that any taxes, withholding or otherwise, are levied by any taxing authority in connection with accrual or payment of any royalties payable to UNIVERSITY under this Agreement, the LICENSEE shall be solely responsible to pay such taxes to the local tax authorities on behalf of UNIVERSITY is a nonprofit, tax-exempt organization as defined in Section 501(c)(3) of the Internal Revenue Code. Should LICENSEE be required under any law or regulation of any government entity or authority to withhold or deduct any portion of the payments on royalties due to UNIVERSITY, then the sum payable to UNIVERSITY shall be increased by the amount necessary to yield to UNIVERSITY an amount equal to the sum it would have received had no withholdings or deductions been made. UNIVERSITY shall cooperate reasonably with LICENSEE in the event LICENSEE elects to assert, at its own expense, any exemption from any such tax or deduction. |
3.4 | As partial consideration for the license granted pursuant to this Agreement, LICENSEE shall issue to UNIVERSITY that number of shares of common stock of LICENSEE equal to 1% of the total number of LICENSEE-Issued and outstanding units of LICENSEE as of the Effective Date. If at any time after the Effective Date and before LICENSEE receives a total of Ten Million Dollars ($10,000,000.00) cash in exchange for the issuance of (i) LICENSEE’s equity securities and/or (ii) debt securities that are convertible into or exercisable or exchangeable for LICENSEE’S equity securities, LICENSEE issues any (a) shares of LICENSEE’s units or (b) securities that are convertible into or exercisable for shares of LICENSEE’s units, then in such event, LICENSEE shall issue additional units of LICENSEE to UNIVERSITY such that immediately after such issuance to UNIVERSITY the total number of units issued to UNIVERSITY under this Section 3.4 remains and constitutes 1% of the total number of Issued and outstanding units of LICENSEE calculated on a fully diluted basis. The issuance of units to UNIVERSITY shall be made in accordance with the Award Agreement between UNIVERSITY and LICENSEE, a copy of which is attached and incorporated by reference herein. |
3.5 | SUBLICENSING: If LICENSEE receives any fees, minimum royalties, or other cash payments in consideration for any rights granted under a sublicense of the Technology Rights, and such payments are not based directly upon the amount or value of Products or Processes sold by the Sublicensee nor represent payment of costs to LICENSEE for a development program which LICENSEE is obligated to perform under such sublicense, then LICENSEE shall pay UNIVERSITY a percentage of such payments as follows: |
a. | 15%: sublicenses entered into before the end of Phase II Clinical Trials; |
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b. | 10%: sublicenses entered into before the end Phase III Clinical Trials; and |
c. | 5%: sublicenses entered into after completion of Phase ill Clinical Trials. |
3.6 | Notwithstanding the Sublicensee’s payment obligation to LICENSEE, LICENSEE shall be directly responsible for all royalties and payments due to the UNIVERSITY pursuant to this Section 3. |
4. | COMMERCIAL DILIGENCE AND MILESTONES |
4.1 | LICENSEE shall use commercially reasonable efforts to develop, manufacture, market and sell Product in the Territory and will exert commercially reasonable efforts to create a demand for Product, |
4.2 | LICENSEE agrees to submit annual reports, as to its efforts to develop Product and markets for Product. Such reports shall Include assurance by LICENSEE of its Intent to actively develop commercial embodiments of the Technology Rights and a summary of its efforts in this regard. |
4.3 | LICENSEE, at Its sole expense, shall make commercially reasonable efforts to accomplish the following: |
a. |
(i) | by December 31, 2017, to have completed Phase II clinical trials for the Products; and |
(ii) | by December 31, 2020, to have completed Phase III clinical trials for the Products. |
b. | LICENSEE, upon written request to UNIVERSITY, may be granted an extension of one or more of the milestones above by six (6) months up to three (3) times for a total possible extension of eighteen (18) months provided LICENSEE pays UNIVERSITY a payment of a Five Thousand Dollars ($5,000.00) fee per extension. If LICENSEE extends a particular milestone, all subsequent milestones will be extended by the same time period. |
c. | The Parties agree to the following milestones and payments. For the avoidance of doubt, if the same milestone is achieved by a Sublicensee of the Technology Rights, then UNIVERSITY shall share In any payments LICENSEE receives from a Sublicensee according to Section 3,5 above, and the following milestones and payments will not be due. The following milestone payments shall not be creditable towards any other monies UNIVERSITY is due from LICENSEE, including but not limited to: payment of past Technology Rights costs, payment of future Technology Rights costs, royalty payments, and royalty payments associated with a Sub licensee’s sale of any Product(s): |
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d. | Upon reaching milestones in subsection 4.3 a, LICENSEE will pay UNIVERSITY as follows: |
(i) | Upon completion of Phase II clinical trials for the Products, two hundred and fifty thousand dollars ($250,000); and |
(ii) | Upon completion of Phase IR clinical trials for the Products, seven hundred and fifty thousand dollars ($750,000). |
4.4 | In the event that either Party is prevented from performing under the Agreement as a result of an act of God, hurricane, war, or terrorism, any delays In or failure of performance under the Agreement shall be excused If and to the extent that such delays or failures are beyond such Party’s reasonable control, UNIVERSITY and LICENSEE shall notify the other promptly upon learning of any event that may result in any delay or failure to perform. If the force majeure event occurs and continues to prevent substantial performance for more than thirty (30) days the other Party has the right to terminate this Agreement. |
5. | SPONSORED RESEARCH |
LICENSEE will In good faith negotiate with the UNIVERSITY Office of Research Administration to have UNIVERSITY conduct certain sponsored research projects, which projects LICENSEE believes are best performed by the UNIVERSITY. The result of these negotiations will be memorialized in a separate agreement(s) signed by both Parties.
6. | TERM |
The term of this Agreement shall commence on the Effective Date and shall remain in effect for 20 years after the date of the last commercialized Product or Process arising from the Technology Rights.
7. | UNITED STATES LAWS |
7.1 | LICENSEE understands that the Technology Rights may have been developed under a funding agreement with the Government of the United States of America and, if so, that the Government may have certain rights relative thereto. This Agreement is explicitly made subject to the Government’s rights under any agreement and any applicable law or regulation. If there Is a conflict between an agreement, applicable law or regulation and this Agreement, the terms of the Government agreement, applicable law or regulation shall prevail. Specifically, this Agreement is subject to all of the terms and conditions of Title 35 United States Code Sections 200 through 212 (to the extent applicable), including an obligation that Product(s) sold or produced in the United States be “manufactured substantially in the United States,” and LICENSEE agrees to take all reasonable action necessary on its part as licensee to enable UNIVERSITY to satisfy its obligation thereunder, relating to the Technology Rights. |
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7.2 | It is understood that UNIVERSITY and LICENSEE are subject to United States laws and regulations controlling the export of technical data, computer software, laboratory prototypes and other commodities (including the Arms Export Control Act, as amended and the Export Administration Act of 1979), and that its obligations hereunder are contingent on compliance with applicable United States export laws and regulations. The transfer of certain technical data and commodities may require a license from the cognizant agency of the United States Government and/or written assurances by LICENSEE that LICENSEE shall not export data or commodities to certain foreign countries without prior approval of such agency. UNIVERSITY neither represents that a license shall or shall not be required nor that, if required, it shall be issued. LICENSEE represents and warrants that it will comply with, and will cause its Sublicensees to comply with all United States export control laws, rules and regulations. LICENSEE Is solely responsible for any violation of such laws and regulations by itself or Its Sublicensees, and It will indemnify, defend and hold UNIVERSITY harmless for the consequences of any such violation. |
8. | INDEMNIFICATION AND LIMITATION OF LIABILITY |
8.1 | LICENSEE will defend, indemnify and hold harmless the UNIVERSITY, its trustees, officers, faculty, employees and students (“University Indemnitees”) against any and all losses, expenses, claims, actions, lawsuits and judgments thereon (including attorney’s fees through the appellate levels) (collectively “Liabilities”) which may be brought against University Indemnities by third parties as a result of or arising out of: (a) any negligent act or omission of LICENSEE, its Sublicensees, or Its or their agents or employees, or (b) the use, production, manufacture, sale, lease, consumption or advertisement by LICENSEE, Its Sublicensees or its or their agents or employees of any Products; provided, however, LICENSEE shall not indemnify or hold harmless any University indemnitee from any Liabilities to the extent that such Liabilities are finally determined to have resulted from the willful negligent acts or omissions of such University Indemnitee. |
8.2 | LICENSEE will defend, indemnify and hold harmless the University Indemnities against any and all judgments and damages arising from any and all third party claims of infringement which may be asserted against University Indemnities because of the manufacture, use, promotion and sale of Products. LICENSEE will bear all costs and expenses incurred in connection with the defense of any such claims or as a result of any settlement made or judgment rendered on the basis of such claims. LICENSEE agrees to provide attorneys which shall be approved by University Indemnities at their sole and absolute discretion to defend against any actions brought or filed against any University indemnitee hereunder with respect to the subject of indemnity contained herein, whether or not such actions are rightfully brought; provided, however, that any University Indemnitee shall have the right to retain its own counsel, at the reasonable expense of LICENSEE, if representation of such University indemnitee by counsel retained by LICENSEE would be inappropriate because of conflict of interests or otherwise. LICENSEE agrees to keep UNIVERSITY informed of the progress in the defense and disposition of such claim, and to consult with UNIVERSITY prior to any proposed settlement. |
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8.3 | UNIVERSITY shall have no further liability to LICENSEE for any loss or damages LICENSEE may Incur as a result of the invalidity of UNIVERSITY’s Technology Rights. |
8.4 | UNIVERSITY shall have no responsibility with respect to LICENSEE’s own trademarks and |
tradename, and LICENSEE in respect to the use thereof will defend, indemnify and hold harmless UNIVERSITY against any and all third party claims.
8.5 | UNIVERSITY is not liable for any special, consequential, lost profit, expectation, punitive or other indirect damages in connection with any claim arising out of or related to this Agreement, whether grounded in tort (including negligence), strict liability, contract, or otherwise. |
8.6 | This Agreement to reimburse and indemnify under the circumstances set forth above shall continue after the expiration or termination of this Agreement. |
9. | WARRANTIES |
9.1 | UNIVERSITY MAKES NO WARRANTIES, EXPRESS OR IMPLIED, AND HEREBY DISCLAIMS ALL SUCH WARRANTIES, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE CONDITION OF ANY INVENTION (S) OR PRODUCT, WHETHER TANGIBLE OR INTANGIBLE, LICENSED UNDER THIS AGREEMENT; OR THE MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE INVENTION OR PRODUCT; OR THAT THE USE OF THE LICENSED PRODUCT WILL NOT INFRINGE ANY PATENTS, COPYRIGHTS, TRADEMARKS, OR OTHER RIGHTS. |
10. | REPORTS AND RECORDS |
10.1 | Prior to first Net Sale, LICENSEE agrees to provide UNIVERSITY with an annual written report specifying the progress of research, development, and marketing activities. Commencing with the first (1) calendar quarter after the first Net Sale, the LICENSEE shall provide to UNIVERSITY a written report specifying during the preceding calendar quarter (a) the number or amount of Products sold hereunder by LICENSEE and its Sublicensees, (b) the total billings for all Product(s) sold, (c) deductions as applicable to calculate Net Sales, (d) total royalties due, (e) names and addresses of all Sublicensees. Such reports shall be due within forty-five (45) days following the last day of each calendar quarter in each year during the term of this Agreement. Each such report shall be accompanied by payment in full of the amount due UNIVERSITY in United States dollars. |
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10.2 | For a period of three (3) years from the date of each report pursuant to Section 10.1, LICENSEE, shall keep records adequate to verify each such report and accompanying payment made to UNIVERSITY under this Agreement, and an independent Certified Public Accountant or Accounting Firm selected by UNIVERSITY and acceptable to LICENSEE may have access, on reasonable notice during regular business hours, not to exceed twice per year, to such records to verify such reports and payments. LICENSEE’s acceptance of UNIVERSITY’s selection of said Certified Public Accountant or Accounting firm shall not be unreasonably withheld. Such Accountant or Accounting Firm shall not disclose to UNIVERSITY any Information other than that information relating solely to the accuracy of, or necessity for, the reports and payments made hereunder. The fees and expense of the Certified Public Accountant or Accounting Firm performing such verification shall be borne by UNIVERSITY unless in the event that the audit reveals an underpayment of royalty by more than five (5%) percent, In which case the cost of the audit shall be paid by LICENSEE. |
11. | MARKING AND STANDARDS |
11.1 | LICENSEE agrees to mark and have its Sublicensees mark any and all Products (or their containers or labels) that are made, sold, or otherwise disposed of by LICENSEE or Sublicensees under the license granted in this Agreement, in accordance with and to the extent required by the applicable patent marking statute; provided that LICENSEE does not need to mark Products (or their containers or labels) if such Products are used solely for LICENSEE’s own internal research purposes and/or used for validation studies on LICENSEE’s behalf. |
11.2 | LICENSEE shall act in good faith to maintain satisfactory standards in respect to the nature of the Product manufactured and/or sold by LICENSEE. LICENSEE, shall act in good faith to ensure that all Product manufactured and/or sold by it shall be of a quality which Is appropriate to Products of the type here involved. LICENSEE agrees that similar provisions shall be included by sublicenses of all tiers. |
12. | ASSIGNMENT |
12.1 | LICENSEE may not assign or delegate any rights or obligations under this Agreement without the written consent of UNIVERSITY. UNIVERSITY will respond to written notice within seven (7) calendar days of receipt. Any other attempt to assign this Agreement by LICENSEE is null and void. |
12.2 | If the Parties agree to assign this Agreement, the new assignee must agree in writing to UNIVERSITY to be bound by this Agreement |
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13. | NOTICE |
13.1 | Any notice, payment, report or other correspondence (hereinafter collectively referred to as “correspondence”) required or permitted to be given hereunder shall be mailed by certified mall or delivered by hand to the Party to whom such correspondence Is required or permitted to be given hereunder. If mailed, any such notice shall be deemed to have been given when mailed as evidenced by the postmark at point of mailing. If delivered by hand, any such correspondence shall be deemed to have been given when received by the Party to whom such correspondence is given, as evidenced by written and dated receipt of the receiving Party. |
All correspondence to LICENSEE shall be addressed as follows:
Joshua M. Hare, M.D.
Longeveron LLC
6010 Aqua Path
Miami Beach, FL 33141
WITH A COPY TO: | Mitchell S. Fuerst, Esq. |
Fuerst Ittleman David & Joseph, PL | |
1001 Brickell Bay Drive, 32nd Floor | |
Miami, FL 33131 |
All correspondence to UNIVERSITY shall be addressed, in duplicate, as follows:
FOR NOTICE: | Humberto M. Speziani |
Assistant Vice President | |
Financial Operations | |
University of Miami | |
1320 South Dixie Highway, Suite 1230 | |
Gables One Tower | |
Coral Gables, FL 33145 |
WITH A COPY TO: | Office of the General Counsel | |
University of Miami | ||
1320 South Dixie | ||
Highway, Suite 1250 | ||
Gables One Tower | ||
Coral Gables, FL 33146 |
FOR NOTICE AND PAYMENT:
Director | |
Office of Technology Transfer | |
University of Miami | |
1951 NW 7th Avenue | |
Miami, FL 33136 |
13.2 | Either Party may change the address to which correspondence to it is to be addressed by notification as provided herein. |
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14. | MISCELLANEOUS PROVISIONS |
14.1 | TERMINATION |
a. | LICENSEE shall have the right to terminate this Agreement upon sixty (60) days prior written notice to UNIVERSITY. |
b. | UNIVERSITY and LICENSEE shall have the right to terminate this Agreement if the other Party commits a material breach of an obligation under this Agreement and falls to cure any such breach within thirty (30) days of receipt of written notice from non-breaching Party. A material breach shall include but not be limited to the following: (a) failure to deliver to UNIVERSITY any payment at the time such payment is due under this Agreement, (b) failure to meet or achieve milestones as’ provided in Section 4.3, (c) failure to possess and maintain required insurance coverage. UNIVERSITY shall have the right to terminate this Agreement In the event LICENSEE provides a false report and continues in default for more than thirty (30) days after receiving written notice of such default or false report. Such termination shall be effective upon further written notice to the breaching Party after failure by the breaching Party to cure. If UNIVERSITY commits a material breach or defaults, then LICENSEE has no duty to continue the payment of royalties as set forth in Section 3 of this Agreement. |
c. | The license and rights granted in this Agreement have been granted on the basis of the special capability of LICENSEE to perform research and development work leading to the manufacture and marketing of the Product(s). Accordingly, LICENSEE covenants and agrees that In the event any proceedings under the Bankruptcy Act or any amendment thereto, be commenced by or against LICENSEE, and, if against LICENSEE, said proceedings shall not be dismissed with prejudice before either an adjudication in bankruptcy or the confirmation of a composition, arrangement, or plan of reorganization, or in the event LICENSEE shall be adjudged insolvent or make an assignment for the benefit of its creditors, or if a writ of attachment or execution be levied upon the license hereby created and not be released or satisfied within ten (10) days thereafter, or if a receiver be appointed in any proceeding or action to which LICENSEE is a party with authority to exercise any of the rights or privileges granted hereunder and such receiver be so discharged within a period of forty-five (45) days after his appointment, any such event shall be deemed to constitute a breach of this Agreement by LICENSEE and, UNIVERSITY, at the election of UNIVERSITY, but not otherwise, ipso facto, and without notice or other action by UNIVERSITY, shall terminate this Agreement and all rights of LICENSEE hereunder and all rights of any and all persons claiming under LICENSEE. |
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d. | Any termination of this Agreement shall be without prejudice to UNIVERSITY’s right to recover all amounts accruing to UNIVERSITY prior to such termination and cancellation. Except as otherwise provided, should this Agreement be terminated for any reason, LICENSEE shall have no rights, express or Implied, under any property which is the subject matter of this Agreement, nor have the right to recover any royalties paid UNIVERSITY hereunder. Upon termination, LICENSEE shall have the right to dispose of Products then In their possession and to complete existing contracts for such Products, so long as contracts are completed within six (6) months from the date of termination, subject to the payment of royalties to UNIVERSITY as provided in section 3 hereof. Failure to terminate on any basis shall not prejudice or impact the UNIVERSITY’s rights and ability to subsequently terminate for the same or a related basis. |
14.2 | INSURANCE |
a. | As soon as practicable after the Effective Date, the party conducting clinical trials using the Technology Rights, which may be either LICENSEE or its Sublicensee as the case may be (the “Insuring Party”), must maintain commercial general liability insurance in the amounts of not less than One Million Dollars ($1,000,000) per incident and $1,000,000 annual aggregate. After the commencement of the first clinical trial for the first Product but prior to the first commercial sale of a Licensed Product, insuring Party must maintain commercial general liability insurance of not less than One Million Dollars ($1,000,000) per incident and clinical trials liability Insurance of not less than Three Million Dollars ($3,000,000). After the first commercial sale of a Product, Insuring Party must maintain commercial general liability insurance in the amounts of not less than Three Million Dollars ($3,000,000) per incident and Five Million Dollars ($5,000,000) annual aggregate. Immediately prior to the commencement of the first clinical trial for the first Product, UNIVERSITY, its employees and agents, will be named as additional insured. After the first commercial sale of a Product, Insuring Party shall maintain products liability/completed operations and clinical trials insurance coverage in the amount of Ten Million Dollars ($10,000,000). |
b. | Insuring Party shall not cancel such insurance without thirty (30) days prior notice to UNIVERSITY. Such cancellation shall be cause for termination. |
c. | The terms of this provision shall extend beyond termination of the agreement. |
14.3 | USE OF NAME |
LICENSEE shall not use the name of the University of Miami, or any of its trustees, faculty, students or employees, or any adaptation thereof, in any publication, including advertising, promotional or sales literature without the prior written consent of Mr. Humberto M. Speziani, Assistant Vice President, Financial Operations, 1320 South Dixie Highway, Suite 1230, Gables One Tower, Coral Gables, FL 33146,
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14.4 | GOVERNING LAW |
This Agreement shall be considered as having been entered into in the State of Florida, United States of America, and shall be construed and interpreted in accordance with the laws of the State of Florida, in any action or proceeding arising out of or relating to this Agreement (an “Action”), each of the Parties hereby irrevocably submits to the jurisdiction of any federal or state court sitting in Miami, Florida, and further agrees that any Action shall be heard and determined in such Florida federal court or in such state court. Each Party hereby Irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of any Action in Miami, Florida.
14.5 | CAPTIONS |
The captions and section headings of this Agreement are solely for the convenience of reference and shall not affect its interpretation.
14.6 | SEVERABILITY |
Should any part or provision of this Agreement be held unenforceable or in conflict with the applicable laws or regulations of any jurisdiction, the invalid or unenforceable part or provision shall be replaced with a provision which accomplishes, to the extent possible, the original business purpose of such part or provision in valid and enforceable manner, and the remainder of the Agreement shall remain binding upon the Parties hereto,
14.7 | SURVIVAL |
a. | The provisions of Sections 1, 7, 8, 9, 11, 13, 14.3, 14.4, 14.9 and 14.13 shall survive the termination or expiration of this Agreement and shall remain in full force and effect. |
b. | The provisions of this Agreement which do not survive termination or expiration hereof (as the case may be) shall, nonetheless, be controlling on, and shall be used In construing and interpreting, the rights and obligations of the Parties hereto with regard to any dispute, controversy or claim which may arise under, out of, in connection with, or relating to this Agreement. |
c. | Sublicenses in good standing shall survive termination of this license as a direct license from UNIVERSITY, provided that Sublicensees assume the obligations set forth in the definitive agreement, UNIVERSITY will enter into a direct agreement with such Sublicensees upon LICENSEE’s written request. |
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14.8 | AMENDMENT |
No amendment or modification of the terms of this Agreement shall be binding on either Party unless reduced to writing and signed by an authorized officer of the Party to be bound.
14.9 | NON-WAIVER |
No failure or delay on the part of a Party in exercising any right hereunder will operate as a waiver of, or impair, any such right. No waiver of any of the provisions of this Agreement shall be effective unless it is In writing, and signed by the Party against whom It is asserted, and any such written waiver shall only be applicable to the specific Instance to which it relates and shall not be deemed to be a continuing or future waiver. No single or partial exercise of any such right will preclude any other or further exercise thereof or the exercise of any other right. No waiver of any such right will be deemed a waiver of any other right hereunder.
14.10 | INDEPENDENT CONTRACTOR RELATIONSHIP |
This Agreement Is not intended to create nor shall be construed to create any relationship between LICENSEE and UNIVERSITY other than that of independent entities contracting for the purpose of effecting provisions of this Agreement. It is further expressly agreed that no work, act, commission or omission of any Party, its agents, servants or employees, pursuant to the terms and conditions of this Agreement, shall be construed to make or render any Party, its agents, servants or employees, an agent, servant, representative, or employee of, or joint venturer with, the other Party, Neither Party shall have any right to bind or obligate the other Party in any way nor shall it represent that it has any right to do so.
14.11 | REPRESENTATION BY COUNSEL |
Each Party acknowledges that it has had the opportunity to be represented by counsel of such Party’s choice with respect to this Agreement. In view of the foregoing and notwithstanding any otherwise applicable principles of construction or interpretation, this Agreement shall be deemed to have been drafted jointly by the Parties and in the event of any ambiguity, shall not be construed or interpreted against the drafting Party.
14.12 | NO THIRD PARTY BENEFICIARIES |
No third persons or entities are intended to be or are third party beneficiaries of or under this Agreement, including, without limitation, Sublicensees, Nothing in this Agreement shall be construed to create any liability on the part of the Parties or their respective directors, officers, shareholders, employees or agents, as the case may be, to any such third parties for any act or failure to act of any Party hereto.
14.13 | CONFIDENTIALITY |
Parties shall hold each other’s Confidential information in confidence and shall not disclose Confidential Information to any third party without each other’s prior written consent. “Confidential Information” means any information disclosed by Party that is not generally known to the public or, by its nature, should be reasonably considered confidential. The Parties acknowledge and agree that a breach of this Section 14.13 would cause irreparable harm and that either Party shall be entitled to seek equitable relief from such breach.
The Parties agree to keep the terms of this Agreement confidential provided that each Party may disclose this Agreement to its authorized agents and investors who are bound by similar confidentiality provisions and to the extent required by law.
14.14 | ENTIRE AGREEMENT |
This Agreement constitutes the entire agreement between the Parties hereto respecting the subject matter hereof, and supersedes and terminates all prior agreements respecting the subject matter hereof, whether written or oral, and may be amended only by an instrument in writing executed by both Parties hereto.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized to be effective as of the Effective Date.
LICENSEE | ||
LONGEVERON | ||
Date: 11/20/2014 | By: | /s/ Joshua Hare |
Joshua M. Hare | ||
Chairman of the Board and | ||
Chief Science Officer |
UNIVERSITY | ||
UNIVERSITY OF MIAMI | ||
Date: 11/19/2014 | By: | /s/ Norma Sue Kenyon |
Norma Sue Kenyon | ||
Vice Provost for Innovation |
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APPENDIX A
Technology Rights
[Information intentionally redacted in accordance with Item 601(b) of Regulation S-K]
A-1
Exhibit 10.1.1
AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT
This Amendment to the Exclusive License Agreement (the “Agreement”) is made as of December 11, 2017 (“Effective Date”) between UNIVERSITY OF MIAMI, a Florida not-for-profit corporation, having business offices located at 1951 NW 7th Avenue, Miami, Florida 33136 (the “LICENSOR”) and Longeveron LLC, a Delaware limited liability company, whose principal place of business is at 1951 NW 7th Avenue, Miami, Florida 33136 (the “LICENSEE”).
WITNESSETH
WHEREAS, LICENSOR and LICENSEE are parties to that certain Exclusive License Agreement dated November 20, 2014 (the “Agreement”); and
WHEREAS, UNIVERSITY and LICENSEE have agreed to further amend the License Agreement as set for below.
NOW THEREFORE, for these and other valuable considerations, the receipt of which is hereby acknowledged, the parties agree as follows:
1. | Section 4.3. |
i. | Section 4.3(a) of the Agreement is hereby amended and replaced as follows: |
(a) | by December 31, 2021, to have completed Phase II clinical trials for the Products; and |
(b) | by June 1, 2025, to have completed Phase III clinical trials for Products. |
ii. | Section 4.3(b) of the Agreement is hereby amended and replaced as follows: |
LICENSEE, upon written request to UNIVERSITY, shall be granted extension(s) of one or more of the milestones above by one (1) year intervals so long as LICENSEE is making commercially reasonable efforts to accomplish the milestones and so long as LICENSEE pays UNIVERSITY a payment of a Five Thousand Dollars ($5,000) fee per extension, If LICENSEE extends a particular milestone, all subsequent milestones will be extended by the same time period.
2. | Ratification. Except as specifically set forth herein, the Agreement and obligations of the UNIVERSITY and LICENSEE thereunder are hereby ratified and confirmed and shall remain in full force and effect. |
3. | Entire Agreement. The Agreement, as amended by this Amendment constitutes the entire agreement between the parties with respect to the subject matter hereof and thereof and supersedes all previous written or oral representations, agreements, understandings and negotiations with respect thereto. |
4. | Choice of Law. This Amendment No. 1 shall be governed by and interpreted in accordance with the laws of the State of Florida, excluding any principle of conflict or choice of law provisions. |
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5. | Representations and Warranties. The UNIVERSITY, on the one hand, and LICENSEE, on the other hand, hereby represent and warrant to each other as follows: |
i. | Each of them has taken all necessary action to authorize the execution, delivery and performance of this Amendment; |
ii. | This Amendment has been duly executed and delivered by each of them and constitutes such party’s legal, valid and binding obligations, enforceable in accordance with its terms, except as such enforceability may be subject to (A) bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and (B) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity); and (iii) No consent, approval, authorization or order of, or filing, registration, or qualification with, any court or governmental authority, or third party is required in connection with the execution, delivery or performance of this Amendment by either of the parties. |
iii. | To the best of each party’s knowledge, both parties have performed all of their respective obligations under the Agreement (except to the extent such obligations are amended by the terms of this Amendment), and neither party has knowledge of any event which with the giving of notice, the passage of time, or both would constitute a breach of the Agreement by the other party. |
6. | Counterparts. This Amendment may be executed in any number of counterparts, each of which so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. |
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized to be effective as of the Effective Date written above.
[Signatures appear on next page]
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Longeveron LLC | ||
Date: December 13, 2017 | By: | /s/ Suzanne Page |
Suzanne Page | ||
Printed Name | ||
COO | ||
Title | ||
UNIVERSITY OF MIAMI | ||
Date: December 11, 2017 | By: | /s/ Norma Sue Kenyon |
Norma Sue Kenyon | ||
Vice Provost for Innovation |
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Exhibit 10.2
EXCLUSIVE LICENSE AGREEMENT
This License Agreement (the “Agreement”) is entered into and made effective the 22 day of December 2016 (the “Effective Date”) between JMH MD Holdings, having business offices at 6010 Aqua Path, Miami Beach, Florida 33141 (hereinafter referred to as “JMHMD”) and Longeveron, LLC, organized under the laws of Delaware, having business offices 1951 NW 7th Avenue, Suite 300, Miami, FL 33136, (hereinafter referred to as “LICENSEE”).
BACKGROUND
JMHMD has an assignment of an invention Bone Marrow Derived CD271 Precursor Cells for Cardiac Repair listed in Appendix A. JMHMD wants to have the Invention perfected and marketed as soon as possible so that resulting products may be available for public use and benefit. LICENSEE desires to acquire an exclusive license for the Patent Rights and any Technology Rights for the purposes of making, having made for its own use and sale, using and selling Products and practicing the invention disclosed and claimed in the Patent and Technology Rights in the Territory in the Field of Use as set forth and defined below.
1. | DEFINITIONS: |
1.1 | “Affiliate” shall mean any corporation or other business entity controlled by, controlling or under common control with JMHMD or LICENSEE. For this purpose, “control” shall mean direct or indirect beneficial ownership of at least a fifty percent (50%) of the voting stock of, or at least a fifty percent (50%) interest in the income of such corporation or other business entity, or such other relationship as in fact, constitutes actual control. |
1.2 | “Sublicensee” as used in this Agreement shall mean any third party to whom LICENSEE has granted a license to make, have made, use and/or sell the Product or the Process under the Patent Rights, provided LICENSEE has requested and obtained prior written approval from JMHMD, which approval shall not be unreasonably withheld. Sublicensee shall agree in writing with LICENSEE to accept the conditions and restrictions agreed to by LICENSEE in this Agreement. |
1.3 | “Patent Rights” shall mean: |
a. | the patent applications and invention disclosures specifically set forth in Appendix A and any United States Patent(s) that issue therefrom or on inventions disclosed therein (including any and all claims, divisionals, continuations, and continuations-in-part solely to the extent that all of the claims of any such continuation-in-part are wholly supported by the patent application(s) and/or invention disclosure(s) set forth in Appendix A) together with re-examinations or reissue of such United States Patent(s); Parties agree to negotiate in good faith terms and conditions of licensing any improvements on a case by case basis. |
b. | any foreign (non-United States) patent applications claiming priority to any patent application(s) specifically set forth in Appendix A and any patents issuing therefrom (including any and all divisionals, continuations, and continuations-in-part solely to the extent that all of the claims of any such continuation-in-part are wholly supported by the patent application(s) and/or invention disclosure(s) set forth in Appendix A) together with any re-examinations or reissue of such foreign patent(s). |
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1.4 | “Product” shall mean any product or part thereof made, used or sold by the LICENSEE or a Sublicensee of the LICENSEE, which: |
a. | is covered by an issued, or a pending claim contained in the Patent Rights in the country in which any Product is made, used or sold; |
b. | is manufactured by using a process which is covered by an issued, or a pending claim contained in the Patent Rights in the country in which any licensed process is used or in which such product or part thereof is used or sold. |
1.5 | “Process” shall mean any process used by the LICENSEE or a Sublicensee of the LICENSEE which is covered by an issued, unexpired claim or pending claim contained in the Patent Rights. |
1.6 | “Net Sales” shall be calculated as set forth in this paragraph, and shall mean gross amounts invoiced by LICENSEE and/or its Sublicensees on commercial sales of Products or use of Process after regulatory approval thereof to third parties (excluding Sublicensees), less deductions for the following, determined in accordance with generally accepted accounting principles: |
(i) | sales and excise taxes, value added taxes, and duties which fall due and are paid by the purchaser as a direct consequence of such sales and any other governmental charges imposed upon the importation, use or sale of Products, but only to the extent that such taxes and duties are actually included and itemized in the gross sales amounts invoiced to and specifically paid by the purchaser over and above the price of the Products; |
(ii) | trade, quantity and cash discounts actually allowed and taken; |
(iii) | allowances or credits to customers on account of shelf adjustments, failure to supply, rejection, withdrawal, recall or return of Products or on account of retroactive price reductions affecting Products, to the extent that such allowances or credits are actually allowed and taken; |
(iv) | amounts not collectible after reasonable collection efforts; |
(v) | any charges for freight, postage, shipping or transportation or for shipping insurance; |
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(vi) | rebates and charge backs specifically related to Products on an actual credited or paid basis, including those granted to government agencies (such rebates and charge backs to be accrued as an estimate in the month in which the related Products is sold by using generally accepted accounting principles) to the extent that such rebates and charge backs are actually allowed and taken; and, |
(vii) | sales contract administrative fees, fees paid to distributors, wholesaler fees or service charges and other payments to customers or other third parties in connection with the sale of Products, to the extent actually allowed and taken. |
(viii) | Royalties are payable on a country-by-country basis beginning on the date of first commercial sale and ending the latter of (a) expiration of the last to expire Patent Rights in such country; or (b) 10 years from first commercial sale in such country; provided that if all claims within the Patent Rights have expired or been finally deemed invalid then the royalty will be reduced by 50%. |
1.7 | “Territory” shall mean worldwide. |
1.8 | “Field of Use” shall mean any aging related diseases or indications including frailty, metabolic syndrome, loss of muscle due to aging or frailty, and neurocognitive disorders. To avoid any doubt, Licensed Field shall further exclude the field of cardiac uses for human and animal. Cardiac shall mean (i) cardiomyopathy; (ii) chemotherapy induced cardiac disease; (iii) ischemic ventricular remodeling; and (iv) chronic angina pectoris. |
1.9 | “Technology” means the “Patent Rights” and additional information or materials listed in Appendix A including any data, know-how and standard operating procedures that will be provided by JMHMD to LICENSEE. Technology may or may not be confidential in nature. |
2. | GRANT: |
2.1 | In consideration for payment of royalties, JMHMD hereby grants to LICENSEE an exclusive license, subject to any rights of the government in the Territory for the Field of Use, with the right to sublicense, under the Patent Rights and Technology to research, develop, make, have made, use, sell and import the Product(s) and to practice the Process claimed in the Patent Rights. |
2.2 | JMHMD retains to itself as well as its Affiliates a non-sublicensable, non-exclusive, royalty- free, perpetual, irrevocable, worldwide right to make and to use the subject matter described and/or claimed in the Patent Rights and Technology (and the right to allow JMHMD’s Affiliates to make and to use the subject matter described and/or claimed in the Patent Rights and Technology) for internal research and educational, and clinical purposes (“Non-Commercial Research Purposes”), including sponsored research and collaborations. Further, the US Government may also have certain rights, title and/or interest in/to the licensed patent(s) and/or patent application(s) and use the licensed patent(s) and/or patent application(s) for internal, non-commercial and educational purposes only. |
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2.3 | Subject to third party’s rights, LICENSEE shall have the right of first negotiation to future patent(s) and patent application(s), the practice of which would infringe at least one claim within the Patent Rights, which is developed from any laboratory owned or controlled by JMHMD, and which is not encumbered by any third party’s rights, during the term of the Agreement. |
3. | ROYALTIES AND OTHER CONSIDERATIONS: |
3.1 | In consideration of the license herein granted, LICENSEE shall pay fees and royalties to JMHMD as follows: |
a. | License Issue Fee of zero dollars ($250,000.00) is due to JMHMD within five (5) days of the Effective Date of the Agreement. |
b. | Running Royalty in an amount equal to 1% of the annual Net Sales of the licensed Product(s) used, leased or sold by or for LICENSEE or its Sublicensees. In the event LICENSEE is required to pay royalties to a third party or third parties for the same Product or Process as licensed under this Agreement to avoid potential infringement of third party patent rights as a result of Sales of Products, then LICENSEE may reduce the Running Royalty by fifty cents ($0.50) for each one dollar ($1.00) in royalties which LICENSEE is obligated to pay to a third parties or third parties under such licenses, provided however, that the royalties payable to JMHMD under this Paragraph shall not be reduced to less than two percent (2%) of annual Net Sales of the licensed Product(s) used, leased or sold by or for LICENSEE or its Sublicensees. |
c. | By the first (1st) day of each anniversary of the Effective Date and until expiration or termination of this Agreement, LICENSEE agrees to pay JMHMD a minimum royalty of: (i) Ten-thousand dollars ($10,000.00) on the second (2nd) and every anniversary thereafter. |
3.2 | All payments shall be made hereunder in U.S. dollars; provided however, that if the proceeds of the sales upon which such royalty payments are based are received by the LICENSEE in a foreign currency or other form that is not convertible or exportable in dollars, and the LICENSEE does not have ongoing business operations or bank accounts in the country in which the currency is not convertible or exportable, the LICENSEE shall pay such royalties in the currency of the country in which such sales were made by depositing such royalties in JMHMD’s name in a bank designated by JMHMD in such country. Royalties in dollars shall be computed by converting the royalty in the currency of the country in which the sales were made at the exchange rate for dollars prevailing at the close of the business day of the LICENSEE’S quarter for which royalties are being calculated as published the following day in the Wall Street Journal (or, if it ceases to be published, a comparable publication to be agreed upon from time to time by the parties), and with respect to those countries for which rates are not published in the Wall Street Journal, the exchange rate fixed for such date by the appropriate United States governmental agency. |
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3.3 | In the event the royalties set forth herein are higher than the maximum royalties permitted by the law or regulations of a particular country, the royalty payable for sales in such country shall be equal to the maximum permitted royalty under such law or regulation. |
3.4 | In the event that any taxes, withholding or otherwise, are levied by any taxing authority in connection with accrual or payment of any royalties payable to JMHMD under this Agreement, the LICENSEE shall have the right at its sole discretions to pay such taxes to the local tax authorities on behalf of JMHMD and the payment to JMHMD of the net amount due after reduction by the amount of such taxes, shall fully satisfy the LICENSEE’S royalty obligations under this Agreement. |
3.5 | As partial consideration for the license granted pursuant to this Agreement, LICENSEE shall issue to JMHMD that number of shares of common stock of LICENSEE equal to one half of a percent (0.5%) of the total number of LICENSEE issued and outstanding shares of LICENSEE as of the Effective Date on a fully diluted basis. The issuance of common stock to JMHMD shall be made in accordance with the Shareholders Agreement between JMHMD and LICENSEE. |
3.6 | SUBLICENSING: For a sublicense, LICENSEE shall pay to JMHMD an amount equal to ten percent (10%) of what LICENSEE would have been required to pay to JMHMD had LICENSEE sold the amount of Licensed Products sold by the Sublicensee. |
4. | COMMERCIAL DILIGENCE AND MILESTONES: |
4.1 | LICENSEE shall use commercially reasonable efforts to manufacture, market and sell the Products in the Territory and will exert commercially reasonable efforts to create a demand for the Products. |
4.2 | LICENSEE agrees to submit annual reports, as to its efforts to develop markets for the licensed Products. Such reports shall include assurance by LICENSEE of its intent to actively develop commercial embodiments of the Patent Rights and a summary of its efforts in this regard. |
4.3 | LICENSEE shall at its sole expense, make commercially reasonable efforts to accomplish the following: |
a. | Submit an Investigational New Drug application to the FDA, or international equivalent, within one (1) year of the Effective Date of this Agreement; |
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b. | Initiate a clinical trial utilizing Bone Marrow Derived CD271 Precursor Cells within three (3) years of the Effective Date of this Agreement; |
c. | LICENSEE may extend any of the above milestones (a)-(d) by six months up to three (3) times (for a total possible extension of eighteen (18) months) by notice to JMHMD and payment of a five thousand dollar ($5,000.00) extension fee per extension. If LICENSEE extends a particular milestone, all subsequent milestones will be extended by the same time period. |
4.4 | Subject to any applicable cure period, LICENSEE agrees that JMHMD may terminate this Agreement in its sole discretion in the event that LICENSEE fails to perform any of the obligations contained in this Paragraph 4 within five (5) years of the Effective Date of this Agreement. |
5. | TERM: |
The term of this Agreement shall commence on the later of Effective Date and shall remain in effect until the date on which all issued patents and filed patent applications within the Patent Rights have expired or been abandoned, unless this Agreement is terminated earlier in accordance with any of the other provisions of Paragraph 14.1, or 20 years after the date of the last commercialized Product or Process arising from the Patent Rights. For the purposes of clarity, upon expiration of the Patent Rights in a particular country, LICENSEE shall retain a fully-paid-up, royalty free, and irrevocable license to practice such Patent Rights and any Know-How in such country.
6. | UNITED STATES LAWS: |
6.1 | LICENSEE understands that the Patent Rights may have been developed under a funding agreement with the Government of the United States of America and, if so, that the Government may have certain rights relative thereto. This Agreement is explicitly made subject to the Government’s rights under any agreement and any applicable law or regulation. If there is a conflict between an agreement, applicable law or regulation and this Agreement, the terms of the Government agreement, applicable law or regulation shall prevail. Specifically, this Agreement is subject to all of the terms and conditions of Title 35 United States Code Sections 200 through 212 (to the extent applicable), including an obligation that Product(s) sold or produced in the United States be “manufactured substantially in the United States,” and LICENSEE agrees to take all reasonable action necessary on its part as licensee to enable JMHMD to satisfy its obligation thereunder, relating to Invention(s). |
6.2 | It is understood that JMHMD is subject to United States laws and regulations controlling the export of technical data, computer software, laboratory prototypes and other commodities (including the Arms Export Control Act, as amended and the Export Administration Act of 1979), and that its obligations hereunder are contingent on compliance with applicable United States export laws and regulations. The transfer of certain technical data and commodities may require a license from the cognizant agency of the United States Government and/or written assurances by LICENSEE that LICENSEE shall not export data or commodities to certain foreign countries without prior approval of such agency. JMHMD neither represents that a license shall not be required nor that, if required, it shall be issued. LICENSEE hereby gives written assurance that it will comply with, and will cause its Affiliates and sublicensees to comply with all United States export control laws and regulations, that it bears sole responsibility for any violation of such laws and regulations by itself or its Affiliates or sublicensees, and it will indemnify, defend and hold JMHMD harmless for the consequences of any such violation. |
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7. | PATENT PROTECTION AND INFRINGEMENT: |
7.1 | LICENSEE shall reimburse JMHMD one-hundred percent (100%) of third party expenses reasonably incurred by and paid for by JMHMD in seeking and securing the Patent Rights with JMHMD prior to the Effective Date not to exceed $100,000.00 USD, within thirty (30) days of the Effective Date of this Agreement upon receipt of all documentation, less any amounts paid by LICENSEE prior to the Effective Date, that amount identified in Appendix B. If Patent Rights in another Field are licensed to any third party, then that third party shall share pro rata in such expenses. |
7.2 | LICENSEE, during the term of this Agreement, is responsible for the prosecution, maintenance and enforcement of Patent Rights with JMHMD in JMHMD’s name for JMHMD’s benefit, provided that LICENSEE: (a) keeps JMHMD informed in writing of all material actions taken in this regard, (b) does not add inventors who do not have an obligation to assign their ownership interest to the JMHMD to any patent or patent application among the Patent Rights without the permission of JMHMD, (c) does not abandon any pending patent applications or issued patents without providing JMHMD the opportunity to assume control of Patent Rights as provided below, and (d) shall notify JMHMD no less than forty-five (45) days prior to any deadline for action set forth by the US Patent and Trademark Office or its foreign counterparts (a “Patent Office”). In the event LICENSEE desires to abandon any Patent Rights filed in a particular country, LICENSEE shall provide JMHMD with no less than sixty (60) days written notice prior to the Patent Office deadline for action in which LICENSEE shall document: (x) the patent/patent application number; (y) the patent/patent application title; (z) the country in which such patent/patent applications is issued/pending. Upon JMHMD’s receipt of such written notice, any and all rights granted to LICENSEE by JMHMD to said patent/patent application in said country shall promptly terminate. For clarity, upon such termination of such patent/patent application, JMHMD shall be free to license, sell, assign, dispose of, and/or take any other action with respect to the rights to said patent/patent application at its sole and absolute discretion and with no obligation to LICENSEE. If Patent Rights in another Field are licensed to any third party, JMHMD shall notify LICENSE promptly and this Section 6.2 shall be renegotiated. |
7.3 | LICENSEE will defend, indemnify and hold harmless JMHMD, its Trustees, officers, directors, employees and its Affiliates against any and all judgments and damages arising from any and all third party claims of Patent Rights infringement which may be asserted against JMHMD, and Affiliates because of the manufacture, use, promotion and sale of Products. LICENSEE will bear all costs and expenses incurred in connection with the defense of any such claims or as a result of any settlement made or judgment rendered on the basis of such claims. JMHMD shall have no further liability to LICENSEE for any loss or damages LICENSEE may incur as a result of the invalidity of JMHMD’s Patent Rights. JMHMD will have the right, but not the obligation to retain counsel at its expense in connection with any such claim. JMHMD at its option, shall have the right, within thirty (30) days after commencement of such action, to intervene and take over the sole defense of the action at its own expense. |
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7.4 | Upon learning of any infringement of Patent Rights by third parties in any country, LICENSEE and JMHMD will promptly inform each other, as the case may be, in writing of that fact and will supply the other with any available evidence pertaining to the infringement. LICENSEE at its own expense, shall have the option to take whatever steps are necessary to stop the infringement at its expense and recover damages therefore, and will be entitled to retain all damages so recovered. If LICENSEE brings suit against an alleged infringer and JMHMD is a necessary party to such suit, JMHMD agrees to be named in such suit at LICENSEE’S expense. In the event that JMHMD and LICENSEE mutually agree to bring suit, costs and expenses shall be shared equally and any recovery in excess of expenses shall be shared equally. In any event, no settlement, consent, judgment or other voluntary final disposition of the suit that would materially and adversely affect the interests of the JMHMD may be entered into without the consent of JMHMD, which shall not be unreasonably withheld. In the event LICENSEE does not take steps to stop the infringement within 180 days after notice of same by either party, JMHMD shall have the right to take whatever steps are necessary to stop the infringement at its expense and recover damages therefore, and will be entitled to retain all damages so recovered. |
7.5 | JMHMD shall have no responsibility with respect to LICENSEE’S own trademarks and trade name, and LICENSEE in respect to the use thereof will defend, indemnify and hold harmless JMHMD against any and all third party claims. |
8. | INDEMNIFICATION: |
8.1 | LICENSEE agree to indemnify and hold harmless the JMHMD its , officers, and employees (“JMHMD Indemnitees”) against any and all losses, expenses, claims, actions, lawsuits and judgments thereon (including attorney’s fees through the appellate levels) (collectively “Liabilities”) which may be brought against them by third parties as a result of or arising out of: (a) any negligent act or omission of LICENSEE, its agents, or employees, or (b) the use, production, manufacture, sale, lease, consumption or advertisement by LICENSEE, its Affiliates or Sublicensees or its or their agents or employees of any Products; provided, however, LICENSEE shall not indemnify or hold harmless any JMHMD Indemnitee from any Liabilities to the extent that such Liabilities are finally determined to have resulted from the acts or omissions of such JMHMD Indemnitee. |
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8.2 | JMHMD shall indemnify and hold harmless the LICENSEE and its owners, Board of Members, officers, employees and consultants for any and all losses, expenses, claims, actions, lawsuits and judgments including attorney’s fees through the appellate level as a result of or arising from (a) any breach of this Agreement, or (b) any negligent act or omission of JMHMD, provided, however, JMHMD shall not indemnify or hold harmless LICENSEE from any Liabilities to the extent that such Liabilities are finally determined to have resulted from the acts or omissions of s LICENSEE. |
8.3 | Neither party is liable for any special, consequential, lost profit, expectation, punitive or other indirect damages in connection with any claim arising out of or related to this Agreement, whether grounded in tort (including negligence), strict liability, contract, or otherwise. |
8.4 | This Agreement to reimburse and indemnify under the circumstances set forth above shall continue after the termination of this Agreement. |
9. | WARRANTIES: |
JMHMD WARRANTS THAT ALL RIGHTS, TITLE AND INTERESTS TO THE LICENSED PRODUCT HAVE BEEN ASSIGNED BY THE UNIVERSITY OF MIAMI TO JOSHUA M. HARE, MD, THE BENEFICIAL OWVER OF JMHMD, AND THATTO THE BEST OF ITS KNOWLEDGE, THERE ARE NO KNOWN INFRINGEMENTS OF ANY PATENTS, COPYRGHTS OR TRADEMARKS OF THE LICENSED PRODUCT. THE ASSIGNMENT OF INVENTION IS ATTACHED HERETO AS EXHIBIT C. NOTWITHSTANDING THE FOREGOING, JMHMD MAKES NO WARRANTIES, EXPRESS OR IMPLIED, AND HEREBY DISCLAIMS ALL SUCH WARRANTIES, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE CONDITION OF ANY INVENTION (S) OR PRODUCT, WHETHER TANGIBLE OR INTANGIBLE, LICENSED UNDER THIS AGREEMENT; OR THE MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE INVENTION OR PRODUCT; OR THAT THE USE OF THE LICENSED PRODUCT WILL NOT INFRINGE ANY PATENT, COPYRIGHTS, TRADEMARKS, OR OTHER RIGHTS. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL, PUNITIVE, SPECIAL, INCIDENTAL OR INDIRECT DAMAGES ARISING OUT OF THIS AGREEMENT, HOWEVER CAUSED, UNDER ANY THEORY OF LIABILITY.
10. | REPORTS AND RECORDS: |
10.1 | Commencing the first (1st) calendar quarter after the first sale, the LICENSEE shall furnish to JMHMD a report in writing specifying during the preceding calendar quarter (a) the number or amount of Products sold hereunder by LICENSEE, and/or its Affiliates or Sublicensees, (b) the total billings for all licensed Products sold, (c) deductions as applicable to calculate Net Sales, (d) total royalties due, (e) names and addresses of all Sublicensees. Such reports shall be due within forty-five (45) days following the last day of each calendar quarter in each year during the term of this Agreement. Each such report shall be accompanied by payment in full of the amount due JMHMD in United States dollars calculated in accordance with Paragraph 3.1 hereof. |
10.2 | For a period of three (3) years from the date of each report pursuant to Paragraphic.1, LICENSEE, shall keep records adequate to verify each such report and accompanying payment made to JMHMD under this Agreement, and an independent Certified Public Accountant or Accounting Firm selected by JMHMD and acceptable to LICENSEE may have access, on reasonable notice during regular business hours, not to exceed once per year, to such records to verify such reports and payments. Such Accountant or Accounting Firm shall not disclose to JMHMD any information other than that information relating solely to the accuracy of, or necessity for, the reports and payments made hereunder. The fees and expense of the Certified Public Accountant or Accounting Firm performing such verification shall be borne by JMHMD unless in the event that the audit reveals an underpayment of royalty by more than ten (10%) percent, in which case the cost of the audit shall be paid by LICENSEE. |
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11. | MARKING AND STANDARDS: |
11.1 | LICENSEE agrees to mark and have Sublicensees mark any and all Products (or their containers or labels) that are made, sold, or otherwise disposed of by LICENSEE and/or Sublicensees under the license granted in this Agreement in the United States, in accordance with and to the extent required by the applicable patent marking statute; provided that LICENSEE does not need to mark Products (or their containers or labels) if such Products are used solely for LICENSEE’S own internal research purposes and/or used for validation studies on LICENSEE’S behalf. |
11.2 | LICENSEE shall act in good faith to maintain satisfactory standards in respect to the nature of the Product manufactured and/or sold by LICENSEE. LICENSEE, shall act in good faith to ensure that all Product manufactured and/or sold by it shall be of a quality which is appropriate to Products of the type here involved. LICENSEE agrees that similar provisions shall be included by sublicenses of all tiers. |
12. | ASSIGNMENT: |
12.1 | Permitted Assignment by LICENSEE. LICENSEE may assign this Agreement as part of a sale or change of control, regardless of whether such a sale or change of control occurs through an asset sale, stock sale, merger or other combination, or any other transfer of: (A) LICENSEE’S entire business; or (B) that part of LICENSEE’S business that exercises all rights granted under this Agreement. |
12.2 | Any Other Assignment by LICENSEE. Any other attempt to assign this Agreement by LICENSEE is null and void. |
12.3 | Conditions of Assignment. Prior to any assignment, the following conditions must be met: (A) LICENSEE must give JMHMD 30 days prior written notice of the assignment, including the new assignee’s contact information; and (B) the new assignee must agree in writing to JMHMD to be bound by this Agreement. |
12.4 | After the Assignment. Upon a permitted assignment of this Agreement pursuant to Paragraph 12, LICENSEE will be released of liability under this Agreement and the term “LICENSEE” in this Agreement will mean the assignee. |
12.5 | Bankruptcy. In the event of a bankruptcy, assignment is permitted only to a party that can provide adequate assurance of future performance, including diligent development and sales, of Products. |
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13. | NOTICE: |
13.1 | Any notice, payment, report or other correspondence (hereinafter collectively referred to as “correspondence”) required or permitted to be given hereunder shall be mailed by certified mail or delivered by hand to the party to whom such correspondence is required or permitted to be given hereunder. If mailed, any such notice shall be deemed to have been given when mailed as evidenced by the postmark at point of mailing. If delivered by hand, any such correspondence shall be deemed to have been given when received by the party to whom such correspondence is given, as evidenced by written and dated receipt of the receiving party. |
All correspondence to LICENSEE shall be addressed as follows:
Suzanne Liv Page
Chief Operating Officer
Longeveron LLC
19511 NW 7th Avenue, Suite 300
41Miami, Florida 33136
With a copy to:
Christine M. Hansen
Buchanan Ingersoll & Rooney PC
919 North Market Street, Ste. 1500
Wilmington, DE 19801-3046
All correspondence to JMHMD shall be addressed, in duplicate, as follows:
FOR NOTICE:
Joshua M. Hare, MD
6010 Aqua Path
Miami Beach, Florida 33141
Either party may change the address to which correspondence to it is to be addressed by notification as provided herein.
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14. | MISCELLEANEOUS PROVISIONS: |
14.1 | TERMINATION: |
a. | JMHMD and LICENSEE shall have the right to terminate this Agreement if the other party commits a material breach of an obligation under this Agreement and fails to cure any such breach within sixty (60) days of receipt of written notice from nonbreaching party. A material breach shall include but not be limited to the following: (a) failure to deliver to JMHMD any payment at the time such payment is due under this Agreement, (b) failure to meet or achieve milestone schedule, (c) failure to possess and maintain required insurance coverage. JMHMD shall have the right to terminate this Agreement in the event LICENSEE provides a false report and continues in default for more than sixty (60) days after receiving written notice of such default or false report. Such termination shall be effective upon further written notice to the breaching party after failure by the breaching party to cure. If JMHMD commits a material breach or defaults, then LICENSEE has no duty to continue the payment of royalties as set forth in Paragraph 3 of this Agreement. |
b. | The license and rights granted in this Agreement have been granted on the basis of the special capability of LICENSEE to perform research and development work leading to the manufacture and marketing of the Products. Accordingly, LICENSEE covenants and agrees that in the event any proceedings under the Bankruptcy Act or any amendment thereto, be commenced by or against LICENSEE, and, if against LICENSEE, said proceedings shall not be dismissed with prejudice before either an adjudication in bankruptcy or the confirmation of a composition, arrangement, or plan of reorganization, or in the event LICENSEE shall be adjudged insolvent or make an assignment for the benefit of its creditors, or if a writ of attachment or execution be levied upon the license hereby created and not be released or satisfied within ten (10) days thereafter, or if a receiver be appointed in any proceeding or action to which LICENSEE is a party with authority to exercise any of the rights or privileges granted hereunder and such receiver be so discharged within a period of forty-five (45) days after his appointment, any such event shall be deemed to constitute a breach of this Agreement by LICENSEE and, JMHMD, at the election of JMHMD, but not otherwise, ipso facto, and without notice or other action by JMHMD, shall terminate this Agreement and all rights of LICENSEE hereunder and all rights of any and all persons claiming under LICENSEE. |
c. | LICENSEE shall have the right to terminate this Agreement upon sixty (60) days prior written notice to JMHMD. |
d. | Any termination of this Agreement, except for breach, shall be without prejudice to JMHMD’s right to recover all amounts accruing to JMHMD prior to such termination and cancellation. Except as otherwise provided, should this Agreement be terminated for any reason, LICENSEE shall have no rights, express or implied, under any patent property which is the subject matter of this Agreement, nor have the right to recover any royalties paid JMHMD hereunder. Upon termination, LICENSEE shall have the right to dispose of Products then in its possession and to complete existing contracts for such Products, so long as contracts are completed within six (6) months from the date of termination, subject to the payment of royalties to JMHMD as provided in Paragraph 3 hereof. |
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14.2 | USE OF NAME: |
Neither party may use the name of the other, or any of its employees, or any adaptation thereof, in any publication, including advertising, promotional or sales literature without the prior written consent of the individual listed in the Notice section of this Agreement, except that LICENSEE may use the name of Dr. Hare as needed to conduct commercial and research and development activities in the ordinary course of its operations.
14.3 | GOVERNING LAW: |
This Agreement shall be governed by and interpreted in accordance with the laws of the State of Florida.
14.4 | CAPTIONS: |
The captions and paragraph heading of this Agreement are solely for the convenience of reference and shall not affect its interpretation.
14.5 | SEVERABILITY: |
Should any part or provision of this Agreement be held unenforceable or in conflict with the applicable laws or regulations of any jurisdiction, the invalid or unenforceable part or provision shall be replaced with a provision which accomplishes, to the extent possible, the original business purpose of such part or provision in valid and enforceable manner, and the remainder of the Agreement shall remain binding upon the parties hereto.
14.6 | SURVIVAL: |
a. | Any provision that by its nature or context is intended to survive any termination or expiration, including but not limited to provisions relating to payment of outstanding fees, confidentiality, indemnification and liability, shall so survive. |
b. | The provisions of this Agreement which do not survive termination or expiration hereof (as the case may be) shall, nonetheless, be controlling on, and shall be used in construing and interpreting, the rights and obligations of the parties hereto with regard to any dispute, controversy or claim which may arise under, out of, in connection with, or relating to this Agreement. |
c. | Sublicenses in good standing shall survive termination of this license as a direct license from JMHMD, provided that sublicensees assume the obligations set forth in the definitive agreement. JMHMD will enter into a direct agreement with such sublicensees upon COMPANY’S written request. |
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14.7 | AMENDMENT: |
No amendment or modification of the terms of this Agreement shall be binding on either party unless reduced to writing and signed by an authorized officer of the party to be bound.
14.8 | WAIVER: |
No failure or delay on the part of a party in exercising any right hereunder will operate as a waiver of, or impair, any such right. No single or partial exercise of any such right will preclude any other or further exercise thereof or the exercise of any other right. No waiver of any such right will be deemed a waiver of any other right hereunder.
14.9 | CONFIDENTIALITY: |
Parties agree to keep the terms of this Agreement confidential provided that each party may disclose this Agreement to its authorized agents and investors who are bound by similar confidentiality provisions and to the extent required by law.
14.10 | ENTIRE AGREEMENT: |
This Agreement constitutes the entire agreement between the parties hereto respecting the subject matter hereof, and supersedes and terminates all prior agreements respecting the subject matter hereof, whether written or oral, and may be amended only by an instrument in writing executed by both parties hereto.
[Signature Page Follows]
Page 14 of 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized to be effective as of the Effective Date.
Longeveron LLC | |||
Date: | February 6, 2017 | /s/ Suzanne Liv Page | |
Suzanne Liv Page | |||
Chief Operating Officer | |||
JMH MD Holdings | |||
Date: | February 6, 2017 | /s/ Joshua M. Hare, M.D. | |
Joshua M. Hare, M.D. | |||
Manager |
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APPENDIX A: Technologies/Intellectual Property
To include Patents and Technology known as:
CD271 Family of patents
Dr. Joshua M. Hare (062138)
Bone Marrow Derived CD271 Precursor Cells For Cardiac Repair
A&B Ref. No. | Country | Filing Date | Application No. | Publication Date | Publication No. | Issue Date | Patent No. | Status | ||||||||
062138-430346 | Australia | 08/29/2011 | 2011293144 | 04/23/2015 | 08/06/2015 | 2011293144 | ISSUED | |||||||||
062138-430349 | Brazil | 08/29/2011 | BR1120130047003 | 12/31/2013 | ||||||||||||
062138-430350 | Canada | 08/29/2011 | 2,842,181 | |||||||||||||
062138-471634 | Switzerland | 08/29/2011 | 11820774.5 | 09/23/2015 | 2608797 | ISSUED | ||||||||||
062138-430351 | China | 08/29/2011 | 201180051933.8 | 07/24/2013 | CN 103221058 A | 07/29/2015 | ZL201180051933.8 | ISSUED | ||||||||
062138-471635 | Germany | 08/29/2011 | 11820774.5 | 09/23/2015 | 2608797 | ISSUED | ||||||||||
062138-430345 | Europe | 08/29/2011 | 11820774.5 | 07/03/2013 | 2608797 | 09/23/2015 | 2608797 | ISSUED | ||||||||
062138-471636 | Spain | 08/29/2011 | 11820774.5 | 2556961 | 09/23/2015 | 2608797 | ISSUED | |||||||||
062138-471637 | France | 08/29/2011 | 11820774.5 | 09/23/2015 | 2608797 | ISSUED | ||||||||||
062138-471638 | Great Britain | 08/29/2011 | 11820774.5 | 09/23/2015 | 2608797 | ISSUED | ||||||||||
062138-440574 | Hong Kong | 08/29/2011 | 13114356.4 | 03/28/2014 | 1186962A | PUBLISHED |
Dr. Joshua M. Hare (062138)
Bone Marrow Derived CD271 Precursor Cells For Cardiac Repair
A&B Ref. No. | Country | Filing Date | Application No. | Publication Date | Publication No. | Issue Date | Patent No. | Status | ||||||||
062138-430391 | Israel | 08/29/2011 | 224917 | PENDING | ||||||||||||
062138-430393 | India | 08/29/2011 | 2357/CHENP/2013 | PENDING | ||||||||||||
062138-471639 | Italy | 08/29/2011 | 11820774.5 | 09/23/2015 | 2608797 | ISSUED | ||||||||||
062138-430353 | Japan | 08/29/2011 | 2013-526199 | 11/21/2013 | 2013-542178 | PUBLISHED | ||||||||||
062138-430354 | South Korea | 08/29/2011 | 10-2013-7007719 | 09/27/2013 | 10-2013-0106381 | PUBLISHED | ||||||||||
062138-430357 | Mexico | 08/29/2011 | MX/a/2013/002381 | 06/29/2016 | 340185 | ISSUED | ||||||||||
062138-430358 | New Zealand | 08/29/2011 | 608734 | 09/26/2014 | 01/06/2015 | 608734 | ISSUED | |||||||||
062138-471640 | Sweden | 08/29/2011 | 11820774.5 | 09/23/2015 | 2608797 | ISSUED | ||||||||||
062138-430392 | Singapore | 08/29/2011 | 201301424-6 | 08/31/2015 | 188305 | ISSUED | ||||||||||
062138-430451 | United States | 10/10/2013 | 13/819,154 | 01/23/2014 | 2014-0023621 | PUBLISHED |
4831-1385-3911, v. 1
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APPENDIX B: Summary of Current Outstanding Patent Costs
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
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Appendix C: Assignment of Invention
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
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Exhibit 10.2.1
FIRST AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT
This First Amendment to the Exclusive License Agreement (the "Agreement") is entered into and made effective the December 22, 2016 (the "Effective Date") between JMH MD Holdings, having business offices at 6010 Aqua Path, Miami Beach, Florida 33141 (hereinafter referred to as "JMH MD") and Longeveron, LLC, organized under the laws of Delaware, having business offices 1951 NW 7th Avenue, Suite 520, Miami, FL 33136, (hereinafter referred to as " LICENSEE").
WHEREAS, the Agreement JMH MD and Licensee have agreed to amend the Agreement as follows:
1) | Section 3.l (a) of the Agreement is amended to state: |
License Issue Fee of two hundred and fifty thousand ($250,000.00) is due to JMH MD within five (5) days of the Effective Date of the Agreement.
2) | Section 13 of the Agreement is amended to change LICENSEE's Suite Number to 520. |
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized to be effective as of the Effective Date.
Longeveron Inc. | ||
By: | /s/ Suzanne Page | |
Suzanne Liv Page, J.D. | ||
Date: April 25, 2018 | Chief Operating Officer |
JMH MD Holdings | ||
By: | /s/ Joshua Hare | |
Joshua M. Hare, M.D. | ||
Date: April 26, 2018 | Manager |
Page 1 of 1
Exhibit 10.3
CONSULTING SERVICES AGREEMENT
This CONSULTING SERVICES AGREEMENT (this “Agreement”) is entered into by and between Longeveron LLC, a Delaware limited liability company (the “Company”) and Joshua M. Hare, M.D. (the “Consultant”), is made effective as of the 20th day of November, 2014 (the “Effective Date”). The Company and the Consultant are each a “Party” hereto and collectively are the “Parties.”
WHEREAS, the Company is in the business of researching and developing technologies, and commercializing products and services, related to certain Intellectual Property Rights (the “Business”); and
WHEREAS, the Consultant has certain scientific, medical, and technical knowledge, skills, and abilities pertaining to the business in which Company engages which is essential to the business and success of the Company; and
WHEREAS, pursuant to that certain Assignment of Intellectual Property Rights Agreement between the Consultant and the Company, dated of even date herewith (the “Assignment Agreement”), the Consultant has assigned certain Intellectual Property Rights, as that term is defined in the Assignment Agreement, to the Company; and
WHEREAS, the Company desires to employ the Consultant, and the Consultant desires to accept such employment with the Company, pursuant to the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE
1
DEFINITIONS
1.1 “Absolute Care” means to take all steps commercially possible to achieve the desired outcome. Absolute Care is intended to be a standard higher than that of “reasonable care” or “best efforts.”
1.2 “Agreement” is as defined in the preamble.
1.3 “Assignment Agreement” means that certain Assignment of Intellectual Property Rights Agreement between the Consultant and the Company dated of even date with this Agreement.
1.4 “Arbitrator” means that person empowered hereunder to resolve questions, issues, disputes, or claims arising under, or related to, this Agreement as set forth herein.
1.5 “Associates” means, collectively, the vendors, suppliers, customers, research and development partners, investors, and consultants of the Company.
1.6 “Board” means the Board of Managers of the Company.
1.7 “Bonus Program” means any program established and/or maintained by the Company providing merit- or performance-based remuneration, including stock options, warrants, and other equity security grants, to the Consultants of the Company outside of Fees.
1.8 “Business” means the business of the Company, to wit, the research and development of technologies utilizing stem cells and/or mesenchymal stem cells in therapies related to aging frailty and the commercialization of products and services derived therefrom.
1.9 “Business Purpose” means the purpose of this Agreement, to wit, to set forth the terms and conditions of the relationship between the Consultant and the Company.
1.10 “Buy-Out Period” means the period commencing on the Effective Date hereof and continuing through the Term plus three (3) years.
1.11 “Cause” has that meaning assigned to such term in Section 9.1 hereof.
1.12 “Commercialized” means the Company has (i) sold a given product or service in the stream of commerce to the public, either directly or by or through a third party; or (ii) entered into a binding agreement with a third party to manufacture, distribute, or sell such product or service in the stream of commerce to the public within 90 days of any date of termination.
1.13 “Company” is as defined in the preamble.
1.14 “Company Policies” means any reasonable policies and written manuals of the Company that are applicable generally to the Company’s employees and consultants, as may be promulgated from time to time by the Company in the ordinary course of business.
1.15 “Competing Business” means a program, entity, or person that competes with the Business of the Company; provided, however that any program, entity, or person for or in which the Consultant performs or participates under Section 7.2(6)(i)-(v) hereof shall not be considered to be a “Competing Business” for the purposes of Section 7.2.
1.16 “Confidential Information” means any info1mation disclosed, either orally or in writing, either purposely or inadvertently, either directly or indirectly, by a Disclosing Party to a Receiving Party concerning the Disclosing Party’s intellectual property, business dealings, research and development efforts, medical therapies and records, customers, operations, affairs, products, services, or other information of a competitively sensitive or proprietary nature. Confidential Information shall also include any information that is “Confidential Information” under the Operating Agreement.
The term “Confidential Information” does not, however, include information that the Receiving Party can demonstrate: (i) is now, or hereafter becomes, through no act or failure to act on the part of the Receiving Party, generally known or available to the public; (ii) was known by the Receiving Party before receiving such information from the Disclosing Party; (iii) is hereafter rightfully obtained by the Receiving Party from a third party, without breach of any obligation to the Disclosing Party; or (iv) is independently developed by the Receiving Party without use of, or reference to, the Confidential Information or the Company’s resources, personnel, assets or data (collectively, “Public Information”).
2
1.17 “Consultant” means Joshua M. Hare, M.D.
1.18 “D&O Policies” means those directors’ and officers’ liability insurance policies obtained and/or maintained by the Company during the Term.
1.19 “Devices” means the computer(s), mobile telephone(s), cloud computer account(s), and any other devices, files, accounts, or property of a Party on which information may be stored, in any media or form.
1.20 “Disability” means the inability of the Consultant to perform the Services, because of physical or mental illness or incapacity, for a period of 270 days in any one-year period (as reasonably determined by the Board in conjunction with the Consultant’s medical advisor or practitioner).
1.21 “Disclosing Party” means the Party disclosing Confidential Information, either orally or in writing, either purposely or inadvertently, or either directly or indirectly.
1.22 “Disclosing Party Executive” means the CEO of the Company (if the Company is the Disclosing Party) or the Consultant himself, if the Consultant is the Disclosing Party.
1.23 “Effective Date” means November e, 2014, the date on which this Agreement enters into legal effect as between the Parties.
1.24 “Employees” means, collectively, the employees of the Company.
1.25 “Excluded Work Product” means any work product prepared by the Consultant pursuant to his employment with the University or his professional relationships with any Outside Companies.
1.26 “Expenses” means reasonable travel and other reasonable expenses (e.g., for means, transportation, supplies, equipment, entertainment) incurred by the Consultant in performing his obligations under this Agreement.
1.27 “Faculty Manual” means that certain Faculty Manual of the University of Miami, as shall be then in effect.
1.28 “Good Reason” has that meaning assigned to such term in Section 9.3 hereof.
1.29 “FDA” means the U.S. Food and Drug Administration.
1.30 “Fees” means the fees paid by the Company to the Consultant for the Services.
1.31 “Incentive Program” has that meaning assigned to such term in Section 3.3 hereof.
3
1.32 “Institute” means the University of Miami, Miller School of Medicine, Interdisciplinary Stem Cell Institute.
1.33 “Intellectual Property Rights” has that meaning assigned to such term in the Assignment Agreement.
1.34 “Key Person Insurance” means those life and/or disability insurance policies obtained and/or maintained by the Company to compensate the Company, or its assigns, for financial losses that would arise from the death or extended incapacity of the Consultant.
1.35 “NIH” means the National Institutes of Health.
1.36 “Outside Companies” means those biomedical/biotechnical companies with which the Consultant has a pre-existing professional relationship either as an equityholder, manager, director, officer, employee, consultant, or representative, and that is disclosed on Schedule 2.5 hereto.
1.37 “Operating Agreement” means the Limited Liability Company Agreement between Longeveron LLC and the members named therein, as then amended.
1.38 “Party” means each of the Company and the Consultant and “Parties” means the Company together with the Consultant.
1.39 “Protected Parties” means a Party hereto together with any of its equity holders, managers, directors, officers, employees, or Affiliates, to which a covenant of non-disparagement applies as set forth herein.
1.40 “Public Information” means Confidential Information that: (i) is now, or hereafter becomes, through no act or failure to act on the part of the Receiving Party, generally known or available to the public; (ii) was known by the Receiving Party before receiving such information from the Disclosing Party; (iii) is hereafter rightfully obtained by the Receiving Party from a third party, without breach of any obligation to the Disclosing Party; or (iv) is independently developed by the Receiving Party without use of, or reference to, the Confidential Information or the Company’s resources, personnel, assets or data.
The term “Public Information” specifically does not include any Confidential Info1mation known or used within the University of Miami, regardless of its level of dissemination or disclosures made by the University to third parties, unless such Confidential Information separately meets one of the criterion set forth in Section 1.40(i) - (iv) above.
1.41 “Receiving Party” means the Party receiving Confidential Information, either orally or in writing, either purposely or inadvertently, or either directly or indirectly.
1.42 “Restricted Period” means that period of time commencing on the Effective Date hereof and continuing for 2 years beyond the end of the Term.
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1.43 “Separation Benefit” means any grant, payment, or acceleration of payment of any amount under this Agreement upon the separation of the Consultant from the Company, whether by termination or expiration of this Agreement.
1.44 “Term” means the initial term of this Agreement together with any subsequent term hereof, except as provided in Section 9.6 hereof.
1.45 “University of Miami” or the “University” means the University of Miami, Coral Gables, Florida, and all schools, colleges, institutions, or facilities under its dominion or control.
1.46 “Work Product” is as defined in Section 6.1.
Any defined term used herein that is not otherwise defined herein shall have the meaning ascribed to it in the Operating Agreement.
ARTICLE
2
SERVICES
2.1 Appointment. The Consultant shall provide such services to the Company as described on Exhibit A, attached hereto, for the Term and upon the other terms and conditions set forth in this Agreement.
2.2 Performance.
(a) During the Term, the Consultant shall devote such time, energy, skill reasonably necessary for, and best efforts to the performance of, the Services.
(b) Notwithstanding Section 2.2(a), the Consultant may engage in:
(i) civic, charitable, and other professional or trade activities that neither interfere nor conflict·with the performance of the Services;
(ii) non-commercial activities that neither interfere nor conflict with the performance of the Services; and
(iii) all professional activities of the University and the Consultant’s Other Employers that neither interfere nor conflict with the performance of the Services.
(c) The Consultant shall comply with any reasonable policies and written manuals of the Company that are applicable generally to the Company’s employees and consultants, as may be promulgated from time to time by the Company in the ordinary course of business (the “Company Policies”).
(d) The Company agrees that, in the event the terms of this Agreement or any Company Policy conflict with that certain University Faculty Manual then in effect (the “Faculty Manual”), the terms of the Faculty Manual will apply.
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2.3 Place of Work. The Consultant shall perform the Services at the Company’s principal offices and laboratory facilities located in the Miami, Florida, metropolitan area, and at such other place or places as the Consultant’s duties and responsibilities may require. The Consultant understands and agrees that he may be required to travel in connection with the performance of his duties.
2.4 Board Membership. During the Term, the Company shall use its best efforts to cause the Consultant to be elected and re-elected (a) as a member of the Board; and (b) as a member of the board of directors (or equivalent body) of any entity which becomes a majority-owned subsidiary of the Company after the Effective Date of this Agreement. Consultant agrees to serve on the foregoing boards or bodies during the Term, without compensation in excess of that provided under this Agreement.
2.5 Primary and Other Employers. Company acknowledges that the Consultant is employed by The University of Miami (the “University”) and that the Consultant is subject to the University’s policies, as they may be revised from time to time, including, among others, policies concerning outside employment, conflicts of interest, conflicts of commitment, and intellectual property, provided however, that Consultant hereby confirms that he is permitted to enter into this Agreement and serve as the Company’s Chief Science Officer under the University’s current policies and under the current Faculty Manual. Company further acknowledges that the Consultant is a consultant to one or more biomedical/biotechnical companies (collectively, the “Outside Companies”), which have been disclosed to the Company by the Consultant on Schedule 2.5 hereto, and that the Consultant is subject to such company’s(ies’) policies, as they may be revised from time to time, including, among others, policies concerning consulting, conflicts of interest, conflicts of commitment, and intellectual property. Consultant has informed the Company that the policies of neither the University nor the Outside Companies prohibit or materially limit the Consultant’s performance under this Agreement or his adherence to its terms. Consultant hereby represents that none of the Outside Companies are a “Competing Business,” and that Consultant will promptly notify the Board in writing if, to his knowledge, any Outside Company becomes a Competing Business. Consultant and the Company agree in good faith to resolve any actual or potential matter that could give rise to an Outside Company competing or having the appearance of competing with the Company.
(a) Nothing in this Agreement shall restrict or enjoin the Consultant from becoming employed by any other public or private educational institution either after, or simultaneously with, his employment by the University. In the event of such employment for the Consultant other than at the University, all terms and conditions applicable to the University shall apply with equal power and effect to such other institution.
(b) If Consultant should leave the University and/or accept employment with another institution, Consultant shall promptly notify the Company in writing.
2.6 Directors’ and Officers’ Liability Insurance. To the extent that the Company maintains one or more policies of directors’ and officers’ liability insurance during the Consultant’s Term (the “D&O Policies”), then the Company will, to the extent permitted by such policy and such coverage would be obtainable at commercially reasonable rates, provide the Consultant coverage under the D&O Policies for acts or omissions by the Consultant in the performance of Services to the Company under this Agreement as an officer of the Company.
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2.7 Key Person Insurance. To the extent that the Company maintains or desires to maintain one or more insurance policies to compensate the Company, or its assigns, for financial losses that would arise from the death or extended incapacity of the Consultant (the “Key Person Insurance”), the Consultant shall cooperate with the Company in the provision of such Key Person Insurance and hereby agrees to waive, in perpetuity on his own behalf and on behalf of all Affiliates, heirs, and successors, all rights, benefits, interests, and claims to and under such Key Person Insurance.
ARTICLE
3
COMPENSATION AND BENEFITS
3.1 Fees. In consideration for the Services and the restrictive covenants granted by the Consultant herein, the Company shall pay the Consultant $250,000 per annum, commencing on the Effective Date hereof, which the Company shall pay to the Consultant in equal monthly installments (the “Fees”). The Fees for any period that is less than one month shall be pro-rated based upon the number of calendar days elapsed. The Fees may be increased at the sole discretion of the Board, which shall review the Fees not less frequently than on an annual basis.
3.2 Expenses. Except as otherwise provided herein, Consultant agrees that he shall be responsible for all costs and expenses incident to the performance of Services for the Company including, but not limited to, all costs of equipment, all fees, dues, fines, licenses, bonds or taxes required of or imposed against Consultant, and all of Consultant’s other costs of doing business. The Company shall reimburse the Consultant for all reasonable expenses that have been approved in advance, in writing, by the Company, including travel (the “Expenses”). Consultant shall submit appropriate written documentation regarding such Expenses for which reimbursement is requested. All such reimbursements shall be paid to the Consultant not later than 15 days after the submission of the properly documented request for reimbursement.
3.3 Incentive Compensation. During the Term, the Consultant is also eligible to participate in any incentive compensation program that the Board may establish for the Company (the “Incentive Program”). The opportunity to earn incentive compensation and the amount of any such compensation under the Incentive Program will be determined in accordance with criteria established by the Board and may include cash remuneration and/or options for equity of the Company. The Consultant acknowledges that any compensation under the Incentive Program will be discretionary, with the sole discretion resting with the Board.
3.4 Taxes. The Consultant is solely responsible for the payment of all taxes owed on all Fees, Expenses and Incentive Compensation, whether federal, state or local in nature including, but not limited to, income taxes, Social Security taxes, Federal Insurance Contribution Act, the Social Security Act, the provisions of the Internal Revenue Code of 1986, as amended, including any successor law thereto (the “Code”), Federal Unemployment Compensation taxes, and any other fees, charges, licenses or other payments required by law relating to Consultant’s engagement by the Company hereunder. The Consultant shall indemnify, hold harmless, defend, pay and reimburse any the Company and any Affiliate of the Company (other than Consultant), as well all officers, directors, employees, agents, representatives, equity holders, and managers of the Company and any Affiliate of the Company, against any and all losses, claims, damages, judgments, fines or liabilities, including reasonable legal fees or other expenses incurred in investigating or defending against such losses, claims, damages, judgments, fines or liabilities, and any amounts expended in settlement of any claims due to Consultant’s failure to pay any required taxes under this Agreement.
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ARTICLE
4
TERM
4.1 Term. This Agreement shall become effective on the Effective Date and shall continue through an initial term ending on the tenth (10th) anniversary of the Effective Date hereof. Unless earlier terminated in accordance with its terms, this Agreement shall automatically renew for subsequent terms of four (4) years each unless either Party provides the other with written notice of its intent not to renew this Agreement, and such notice is received by such party no less than 60 days before the end of any term period. The initial term together with any subsequent term(s) shall comprise the “Term” under this Agreement.
ARTICLE
5
CONFIDENTIAL INFORMATION
5.1 Definition of Confidential Information. “Confidential Information” means any information disclosed, either orally or in writing, either purposely or inadvertently, either directly or indirectly, by one Party (the “Disclosing Party”) to the other Party (the “Receiving Party”) concerning the Disclosing Party’s intellectual property, business dealings, research and development efforts, medical therapies and records, customers, operations, affairs, products, services, or other information of a competitively sensitive or proprietary nature. The term “Confidential Information” does not, however, include information that the Receiving Party can demonstrate: (i) is now, or hereafter becomes, through no act or failure to act on the part of the Receiving Party, generally known or available to the public; (ii) was known by the Receiving Party before receiving such information from the Disclosing Party; (iii) is hereafter rightfully obtained by the Receiving Party from a third party, without breach of any obligation to the Disclosing Party; or (iv) is independently developed by the Receiving Party without use of, or reference to, the Confidential Information or the Company’s resources, personnel, assets or data (collectively, “Public Information”).
5.2 Obligations. Each Party, as a Receiving Party of Confidential Information hereby agrees:
(a) to hold the Disclosing Party’s Confidential Information in strict confidence;
(b) not to disclose such Confidential Information to any third party except as specifically authorized herein or as specifically authorized by the Disclosing Party Executive in writing;
(c) not to use any Confidential Information for any purpose whatsoever other than as agreed, in writing, by the Parties, and then, only as necessary to carry out the intent of this Agreement and the business relationship created hereby (the “Business Purpose”);
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(d) to restrict access to the Disclosing Party’s Confidential Information to only those of its employees, representatives, contractors or advisors (each of whom becomes, through such disclosure, a Receiving Party) to whom such access is absolutely necessary or appropriate for carrying out the Business Purpose, and to verify with the Disclosing Party Executive before any such disclosure is made, that such Receiving Party has signed a written agreement of confidentiality substantially identical to this Agreement; and
(e) to take all steps commercially possible, which standard is intended to be higher than that of “reasonable care” or “best efforts” (“Absolute Care”) to prevent the unauthorized disclosure of the Disclosing Party’s Confidential Information.
(f) Failure to obtain the prior written approval of the Disclosing Party Executive for any disclosure or use of Confidential Information shall be deemed a breach of this Agreement, and the Parties agree that such breaches are not curable.
(g) Consultant recognizes and agrees that Consultant has no expectation of privacy with respect to Company’s telecommunications, networking or information processing systems (including stored computer files, e-mail messages and voice messages), and that Consultant’s activity, and any files or messages, on or using any of those systems may be monitored by the Company or a third-party agent of the Company at any time without notice.
5.3 Permitted Disclosures. The Receiving Party may only disclose the Disclosing Party’s Confidential Information:
(a) to third parties (including employees, representatives, vendors, customers, potential customers and agents, etc.) (i) whom the Disclosing Party Executive has confirmed in writing have signed a written agreement of confidentiality substantially in the form of this Agreement, (ii) that have agreed to a form of confidentiality agreement approved by the Company’s Board and/or chief legal counsel and (iii) that are provided information in accordance with any Board approved confidentiality policy of the Company; or
(b) to third parties to which consent has been given in advance, in writing, by the Disclosing Party Executive, and then only with such Confidential Information, and only to the extent, so consented; provided, however, that the consent of the Disclosing Party shall not be unreasonably withheld; or
(c) to the University pursuant to the Consultant’s primary employment relationship therewith if the Consultant reasonably believes such disclosure is required by University policy, the Faculty Manual, any contractual requirement Consultant is under with the University and/or if Consultant reasonably believes such disclosure is in the best interest of the Company; or
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(d) to the National Institutes of Health (“NIH”) or another publicly funded agency in support of (i) a grant or program benefitting the Company, (ii) the Intellectual Property Rights benefitting the Company; or (iii) any NIH-sponsored clinical trial benefitting the Company;
provided, however, that any such permitted disclosure is not intended to harm the Business of the Company or to provide an advantage to any Competing Business.
5.4 Required Disclosures. The Receiving Party may disclose the Disclosing Party’s Confidential Information if and to the extent that such disclosure is required by Applicable Law pursuant to a legal order or subpoena signed by a competent authority; provided that:
(a) the Receiving Party uses Absolute Care to limit the disclosure by means of a protective order or a request for confidential treatment; and
(b) the Receiving Party provides written notice to the Disclosing Party Executive within two (2) days of the Receiving Party’s receipt of any subpoena, order, or other process of any court, governmental body or tribunal requiring disclosure of Disclosing Party’s Confidential Information to allow the Disclosing Party to object to the disclosure.
(c) the Receiving Party gives the Disclosing Party a reasonable opportunity to review the disclosure before it is made and to interpose its own objection to the disclosure.
(d) The requirements of this Section 5.4 are not waivable by any Party; furthermore, failure to perform the obligations for the Receiving Party set forth in this Section 5.4 shall be deemed a breach of this Agreement, and the Parties agree that such breaches are not curable.
5.5 Disclosure of Public Information.
(a) In the event that a Receiving Party either discloses or attempts to disclose, or uses or attempts to use, any Confidential Information without obtaining the approvals, or performing the requirements, for authorized disclosure set forth above, in reliance on the assertion that such Confidential Information is, in fact, Public Information, the Receiving Party must be able to prove through clear and convincing evidence that, at the time of the receipt of such Confidential Information and not at the time of the disclosure by the Receiving Party of such Confidential Information, the Confidential Information met one or more of the requirements for Public Information.
(b) The requirements of Section 5.5 are intended to prevent the continued or further disclosure or use of Confidential Information by a Receiving Party regardless of whether such Confidential Information later becomes Public Information.
(c) If the Receiving Party is unable to demonstrate through clear and convincing evidence that disclosed or used Confidential Information was Public Information at the time of such initial disclosure or use by the Receiving Party, then the Receiving Party hereby agrees that:
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(i) such initial disclosure or use by the Receiving Party shall be deemed a material breach of this Agreement that is not curable;
(ii) in any action seeking equitable relief or damages by the Disclosing Party, the Receiving Party hereby waives all affirmative defenses that the disclosed Confidential Information was Public Information.
5.6 Copies and Abstracts. To the extent necessary to carry out the Business Purpose, the Receiving Party may make copies or abstracts of the Disclosing Party’s Confidential Information; provided that (a) all such copies and abstracts are themselves marked as “confidential”; and (b) the Receiving Party maintains a written record of the location and distribution of all such copies and abstracts.
5.7 Audit and Inspection Rights.
(a) Each Party shall have the absolute right to audit and inspect, without prior notice to the other Party, the computer(s), mobile telephone(s), cloud computer account(s), email and social media accounts, and any other devices, files, accounts, or property of the Receiving Party on which information may be stored, in any media or form (collectively, the “Devices”), in order to review such Devices for the presence of Confidential Information.
(b) The Receiving Party agrees to give the Disclosing Party immediate physical access to, and any user identification, password, or other data required for access for, such Devices to allow the Disclosing Party to perform any such audit and/or inspection and/or to make a pristine copy of the hard-drive of such Devices.
(c) In the event that unauthorized Confidential Information is found on such Devices, the Receiving Party hereby authorizes the Disclosing Party to destroy, remove, delete, or order the deletion of such unauthorized Confidential Information on such Devices.
5.8 Return of Confidential Information.
(a) Confidential Information shall be deemed the exclusive property of the Disclosing Party, and upon the Disclosing Party’s request, the Receiving Party will promptly:
(i) return to the Disclosing Party all copies of the Disclosing Party’s Confidential Information that is in hard copy form; and
(ii) grant the Disclosing Party immediate access to all Devices of the Receiving Party, in accordance with Section 5.7 hereof, such that the Disclosing Party itself may destroy, erase, delete, or order the deletion of, any Confidential Information that is in electronic or digital form.
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(b) The Receiving Party agrees that it shall not delete or attempt to delete any Confidential Information ordered returned by the Disclosing Party.
5.9 No Implied Licenses, Representations or Warranties.
(a) Each Party acknowledges and agrees that the Confidential Information of the Disclosing Party is the exclusive property of the Disclosing Party and the Receiving Party has no right or interest in or to such Confidential Information.
(b) Nothing in this Agreement will be construed as granting any rights or interests in or to the Receiving Party, by license or otherwise, to any of the Disclosing Party’s Confidential Information, except as specifically stated in this Agreement.
(c) The Parties jointly and severally acknowledge and agree that the Disclosing Party makes no representation or warranty as to the reliability, accuracy or completeness of Confidential Information. It is agreed that neither Party, nor any of its Affiliates, nor any of its respective equity holders, managers, members, officers, directors, employees, or agents, shall have any liability to the other party or any of its representatives arising from the use of Confidential Information in accordance with this Agreement.
5.10 Term of Confidentiality.
(a) Unless otherwise provided herein, the covenant of confidentiality made under this Article 5 will remain in effect for five (5) years after the later of (i) the end of the Term, or (ii) the date of the last disclosure of Confidential Information hereunder, at which time this covenant of confidentiality will terminate, or until such time as the Parties agree in writing to terminate this covenant of confidentiality.
(b) With respect to any Confidential Information related to any trade secret, know-how, or other proprietary information applicable or incidental to, or derived from, any patent or patent application of a Disclosing Party, the obligations of this Agreement will remain in effect for five (5) years after the later of (i) the end to the Term, or (ii) the date of the last disclosure of Confidential Information hereunder, or (iii) the expiration of any such patent or patent application, at which time this covenant of confidentiality will terminate, or until such time as the Parties agree in writing to terminate this covenant of confidentiality.
ARTICLE
6
OWNERSHIP OF INFORMATION, INVENTIONS, AND ORIGINAL WORK
6.1 Definition of Work Product. As used in this Agreement, the term “Work Product” means all patents and patent applications, all inventions, innovations, improvements, cells, cell-based technologies, pharmaceuticals, similar technologies, developments, methods, designs, analyses, drawings, reports, creative works, discoveries, software, computer programs, modifications, enhancements, know-how, product, formula or formulations, concepts and ideas, and all similar or related information (in each case whether or not patentable), all copyrights and copyrightable works, all trade secrets, Confidential Information, and all other intellectual property and intellectual property rights that (in any case above) are conceived, reduced to practice, created, developed or made by the Consultant, either alone or with others, during the Term and in the course of providing the Services to the Company; provided however, that the term “Work Product” specifically excludes, subject to Article 5, any such work product prepared by the Consultant pursuant to his employment with (i) the University or (ii) his professional relationships with any Outside Companies so long as such Company is not a Competing Business (the “Excluded Work Product”).
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6.2 Ownership and Assignment of Work Product.
(a) The Consultant hereby agrees that all Work Product will be the exclusive property of the Company, and in consideration of this Agreement, without further compensation, hereby assigns, and (as necessary) agrees to assign, to the Company all right, title, and interest to all work Product that:
(i) relates to any and all current and future aspects of the Company’s Business; or
(ii) is conceived, created, reduced to practice, developed, or made entirely or in any part:
(A) during the Consultant’s Term with the Company while the Consultant is performing the Services for the Company; or
(B) using any equipment, supplies, facilities, assets, materials, information (including, without limitation, Confidential Information) or resources of the Company (including, without limitation, any intellectual property rights of the Company);
(iii) but specifically excluding any Excluded Work Product.
(b) The Company hereby agrees that it shall have no rights by reason of this Agreement in any publication, invention, discovery, improvement, or other intellectual property whatsoever, whether or not publishable, patentable, or copyrightable, which is not a direct result of the Consultant performing the Services for the Company under this Agreement or utilizing any Company resources. For the avoidance of doubt, the Company shall have no rights in such intellectual property that is (i) is developed as a result of a program of research financed, in whole or in part, by funds under the control of the University or any Outside Company, or (ii) arises directly in connection with, or as an extension of, research conducted by, in, or under the direction of the laboratories of the University or of any Outside Company, assuming in both cases that Company resources are not used.
(c) If for any reason the foregoing assignment is determined to be unenforceable, the Consultant grants to the Company a perpetual, irrevocable, worldwide, royalty-free, exclusive, sub-licensable right and license to exploit and exercise all such Work Product.
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(d) The ownership and assignment rights granted under this Section 6.2 shall not be superior to, and shall not be used to prevent or inhibit the return of any Intellectual Property to the Consultant under Article 9 hereof.
6.3 Disclosure and Cooperation. The Consultant shall promptly disclose Work Product to the CEO and perform all actions reasonably requested by the Company (whether during or after the Term) to establish and confirm the ownership and proprietary interest of the Company in any Work Product (including, without limitation, the execution of assignments, consents, powers of attorney, applications and other instruments). The Consultant agrees to assist the Company in obtaining any patent for, copyright on or other intellectual-property protection for the Work Product, and to execute and deliver or otherwise provide such documentation and provide such other assistance as is necessary to or reasonably requested by the Company or its agents or counsel to obtain such patent, copyright, or other protection. The Consultant shall maintain adequate written records of the Work Product, in such format as may be specified by the Company, and make such records available to, as the sole property of, the Company at all times. The Consultant shall not file any patent or copyright applications related to any Work Product except with the written consent of the CEO. Consultant will be free to publish the portions of results of any research related to his work with the University which do not include Confidential Information, and use any non-Confidential Information for purposes of research, teaching, and other educationally-related matters. In order to avoid loss of patent rights as a result of premature disclosure of patentable information, Consultant shall submit any prepublication or pre-disclosure material related any matter involving or related to the Company’s Business at least ninety (90) days prior to planned submission for publication or disclosure. The Company shall notify Consultant within thirty (30) days after it receives such material whether it desires to file patent applications on any inventions contained in the material and in such case, the Company shall proceed to file a patent application at the expense of Company. If reasonably needed, the Company may request a delay in publication, and the Parties shall negotiated in good faith to resolve the need for such delay or accommodate such request.
ARTICLE
7
RESTRICTIVE COVENANTS
7.1 Acknowledgements.
(a) Ancillary Agreement. The Consultant acknowledges and agrees that each of the restrictive covenants contained in this Article 7 are ancillary to, and part of, an otherwise enforceable agreement, such being the agreements concerning Confidential Information and other consideration as stated in this Agreement.
(b) Valuable Information. The Consultant acknowledges and agrees that the Confidential Information and business opportunities provided by the Company are highly valuable to the Company and, therefore, that the Company’s investment in the protection and maintenance of the Confidential Information and the development of business opportunities constitute a legitimate interest to be protected by the Company by the restrictive covenants set forth in this Article 7.
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(c) Unique Relationships with Associates and Employees. The Consultant acknowledges and agrees that (i) in the highly competitive business in which the Company is engaged, personal contact is of primary importance in securing new and retaining present vendors, suppliers, customers, research and development partners, investors, and consultants (collectively, the “Associates”) and employees of the Company (the “Employees”); (ii) the Company has a legitimate interest in maintaining its relationships with its Associates and Employees; and (iii) it would be unfair for the Consultant to solicit the business of the Company’s Associates and/or the future work of the Company’s Employees, exploiting the personal relationships the Consultant develops with the Company’s Associates and Employees by virtue of the Consultant’s employment by the Company.
(d) Reasonableness. The Consultant acknowledges and agrees that at the time that the restrictive covenants of this Article 7 are made, the limitations as to time, geographic scope, and activity to be restrained, as described herein, are reasonable and do not impose a greater restraint than necessary to protect the good will and other legitimate business interests of the Company, including (without limitation) Confidential Information, Associate and Employee relationships, and goodwill.
(e) Termination. The Consultant acknowledges and agrees that he has carefully read this Agreement and has given careful consideration (in consultation with independent legal counsel of his choice) to the restraints imposed upon him by this Agreement, and consents to the terms of the restrictive covenants in this Article 7 in conjunction with the provisions in this Agreement for the termination of his employment, with no expectation or promise of employment for a substantial period of time.
(f) Post-Termination Enforcement. The Consultant acknowledges and agrees that, based on the benefits to him and new consideration as recited herein, the restrictive covenants of this Article 7, as applicable according to their terms, shall remain in full force and effect even in the event of the cessation or termination of his employment under this Agreement for any reason, whether voluntary or involuntary or with or without Cause.
(g) Other Employment. The Consultant acknowledges and agrees that (i) in the event of the cessation or termination of his employment under this Agreement, his experiences and capabilities are such that he can obtain gainful employment without violating this Agreement, in a business engaged in other lines and/or of a different nature, without his incurring undue hardship; and (ii) the enforcement of a remedy under this Article 7 by way of injunction will not prevent the him from earning a livelihood.
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(h) Definition of “Company.” Notwithstanding the provisions of Sections 1.13 and 11.13, the Parties agree that for purposes of this Article 7, “Company” shall be defined to include the Company’s assignee or successor in interest (in any form), and that this Agreement shall be enforceable by Company’s assignee or successor interest to the fullest extent permitted by applicable law. The enforceability of this Agreement shall not be affected by any change in the name of Company, or by merger, acquisition or assignment of its business, operations or this Agreement by Company, and shall be automatically assigned to any such re-named, successor, surviving or assignee corporation of Company, who shall have authority to enforce this Agreement, and continue in full force and effect thereafter in accordance with these terms. Company may assign its rights hereunder, and same shall be enforceable by any such assignee, including but not limited to cooperative or coordinated efforts between Company and all other direct and indirect related or affiliated entities of Company. Company’s obligations under Article 7 of this Agreement shall be automatically assumed by the Company’s assignee or successor in interest and any and all successive assignees or successors in interest. Consultant’s performance hereunder is personal in nature and, therefore, is not assignable under any circumstances, and this Agreement, to the extent applicable and excepting personal services, shall be binding upon Consultant’s heirs, administrators, and personal representative. In the event Company transfers its rights under this Agreement as contemplated by this section 7.1(h), Consultant’s obligations under this Agreement shall be automatically owed to the Company’s assignee or successor in interest and any and all successors thereto. In the event that Employee becomes employed by the Subsequent Employer, this Agreement shall be construed as if it were originally entered into by and between Employee and the Subsequent Employer(s).
7.2 Non-Competition.
(a) Consultant hereby covenants and agrees that, during the Term and for two years thereafter (the “Restricted Period”), the Consultant will not:
(i) directly or indirectly, on his own behalf or on the behalf of any others, perform or participate in any program, entity, or person which competes with the Business of the Company (each, a “Competing Business”) including, without limitation, owning, taking a financial interest in, managing, operating, controlling, being employed by, being associated or affiliated with, being a spokesperson for, providing services as a consultant or independent contractor to, or participating in the ownership, management, operation or control of, any Competing Business; provided, however; that this Section 7.2 does not preclude ownership of less than 5% of the outstanding equity securities of any public reporting company; or
(ii) serve as an investigator as part of any commercially-sponsored pre-clinical study or clinical investigation that relates to the Business of the Company (unless, in either case, a waiver is granted by the Board in its sole discretion); or
(iii) promote, develop, or assist in the conception or reduction to practice of any process, procedure, material, machine, manufacture, or composition of matter, whether patentable or not, that is or would be competitive with the Business of the Company.
The parties agree that the Company’s business is World-wide and therefore the restrictions contained herein are without geographic scope.
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(b) Notwithstanding anything to the contrary in this Section 7.2, the Consultant shall have no restrictions whatsoever on performing or participating in:
(i) any personal services in his capacity as a physician on a patient-by- patient, medical care basis; or
(ii) any trial sponsored by the NIH or another publicly funded agency relating to the Company’s Business; or
(iii) any other NIH-sponsored trial (but provided that, in respect to any such trial, the Consultant may not enter into any agreement granting intellectual property rights to or confirming such rights ·with any commercial entity); or
(iv) any currently on-going, privately-funded, sponsored research program at the University; or
(v) any personal services rendered by the Consultant under his employment with the University; or
(vi) any personal services rendered by the Consultant under any contractual or other relationship with any of the Outside Companies; provided however, that such services are not within the scope of the Business.
(c) Any program, entity, or person for or in which the Consultant performs or participates under Section 7.2(6) (i)-(v) hereof shall not be considered to be a “Competing Business” for the purposes of Section 7.2.
(d) Company acknowledges that the Consultant serves as Founding Director of the University of Miami, Miller School of Medicine, Interdisciplinary Stem Cell Institute (the “Institute”) and that other professors and professionals may conduct competitive research from time to time in conjunction with the Institute. Consultant represents and warrants that no relationship presently exists that would be in conflict with the provisions of this Section 7.2 and that he has disclosed to the Company any other consulting or business relationships that may possibly be related to this Agreement, including the beneficial ownership of equity securities for companies that may be competitive with the Company.
7.3 Non-Solicitation. During the Restricted Period, the Consultant shall not, in any manner, directly or indirectly, on his own behalf or on the behalf of any other person or entity, influence, induce, solicit, or attempt to influence, induce, or solicit:
(a) any Associate to (i) do business with a Competing Business; or (ii) reduce, cease, restrict, terminate or otherwise adversely alter business or business relationships with the Company for the benefit of a Competing Business, regardless of whether the Consultant initiates contact for that pm-pose; or
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(b) any Employee to (i) cease or leave their employment or contractual or other relationship with the Company, regardless of whether the Consultant initiates contact for such purposes, or (ii) hire, employ or otherwise attempt to establish, for any person or entity, any employment, agency, consulting, independent contractor or other business relationship with any person who is or was an Employee of the Company, for the benefit of a Competing Business.
7.4 Non-Disparagement. Each Party agrees that, during the Term or at any time thereafter, neither Consultant nor, in the case of the Company, any then member of the Board (excluding Consultant) will make any public statements, comments, or communications in any form, oral, written, electronic or digital, to any third party, which:
(a) would constitute libel, slander, or disparagement of the other Party or any of its equity holders, managers, directors, officers, employees, or Affiliates (collectively, with the other Party, the “Protected Parties”) including without limitation, any such statements, comments, or communications that criticize, ridicule or are derogatory to the Protected Parties; or
(b) may be considered to be derogatory or detrimental to the good name or business reputation of the Protected Parties; provided however, that the terms of this Section 7.4 shall not apply to communications between either Party and, as applicable, its attorneys or other persons or entities with whom or which communications would be subject to a claim of privilege existing under common law, statute or rule of procedure.
Each Party further agrees that he or it will not in any way solicit any such statements, comments or communications from others. Notwithstanding the foregoing, this Section does not, in any way, restrict or impede any Party from exercising protected rights to the extent that such rights cannot be waived by agreement or under Applicable Law. This Section also does not, in any way, restrict or impede any Party from complying with any Applicable Law or regulation, the Board’s fiduciary duties or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation, duty or order.
7.5 Media Nondisclosure. Both Parties agrees that, both during and after the Term, except as may be authorized in writing by the other Party or Applicable Law, neither Party will directly or indirectly disclose or release to any third party any information concerning or relating to any aspect of the employment relationship between the Parties, or any expiration, cessation, or termination thereof, or any aspect of any dispute, claim, or issue that is the subject of, or arises out of, this Agreement.
7.6 Survival. This Article 7 shall survive the cessation or termination of the Consultant’s employment under this Agreement, subject to the time and scope limitations set forth in this Article 7.
7.7 Substitution/Revision. If, at the time of enforcement of the restrictive covenants in this Article 7, a court holds that the restrictions stated in this Article 7 are unreasonable under circumstances then existing, then the maximum duration, scope or geographical area reasonable under such circumstances shall automatically be substituted for the stated duration, scope or geographic area and the court shall be allowed and is hereby requested to revise the restrictions contained herein to cover the maximum duration, scope and geographic area permitted by law. The covenants contained in Sections 7.2, 7.3, 7.4, and 7.5 hereof are independent of and severable from one another.
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7.8 Covenants Independent. The Consultant’s restrictive covenants in this Article 7 shall be construed as covenants independent of any other covenant or provisions in this Agreement or any other agreement which the Company may have with the Consultant. The existence of any claim, cause of action or defense of the Consultant against the Company, or its assignee or successor in interest, whether predicated upon another covenant or provision of this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of any other covenant including the covenants in this Article 7.
ARTICLE
8
REMEDIES
8.1 Remedies. In the event of a breach of this Agreement by either Party, the non- breaching Party shall be entitled to all appropriate equitable and legal relief, including, but not limited to: (a) an injunction to enforce this Agreement or prevent conduct in violation of this Agreement; (b) damages incurred by the non-breaching Party as a result of the breach; and
(a) attorneys’ fees and costs (at all arbitration, trial, and appellate levels) incurred by the non-breaching Party in enforcing the terms of this Agreement.
*** THE FOLLOWING IS A MANDATORY ARBITRATION PROVISION ***
8.2 Dispute Resolution. Any issue, question, dispute, claim or controversy arising out of or relating to this Agreement or any provision thereof, or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this Agreement to arbitrate, shall be determined by arbitration in Miami, Florida, provided however, that, any Scientific Matter will be determined by arbitration in New York, New York, as set forth herein. The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures and in accordance with the Expedited Procedures in those Rules. Judgment on the Award may be entered in any court having jurisdiction. This dispute resolution provision shall include urgent or emergency arbitration relief and not preclude any Member from seeking provisional remedies in aid of such urgent or emergency arbitration relief from a court of appropriate jurisdiction.
(a) General Matters. All matters that are not Scientific Matters shall be arbitrated before one arbitrator.
(b) Scientific Matters. All Scientific Matters shall be arbitrated before three arbitrators. The Sponsor and the Founder shall each select one arbitrator and those two arbitrators shall each select a third arbitrator. Each arbitrator so selected by the Sponsor and Founder must either (i) have 10 or more years of applicable experience in stem-cell medicine or the commercialization of drugs, pharmaceuticals, or biological products regulated by the FDA, or (ii) be a retired federal judge who shall attest that he or she has more than 5 years applicable experience in stem-cell medicine or the commercialization of drugs, pharmaceuticals, or biological products regulated by the FDA. The third arbitrator shall have no minimum qualifications.
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8.3 Effects of Mandatory Arbitration. The Parties understand, acknowledge, and agree that by agreeing to arbitrate in the manner required under this Article 8, they are each waiving any right they may have to bring before a court (for other than injunctive relief as provided below), any claim that such Party may have arising out of, or for any violation of, any federal, state, local, or other law, regulation, or ordinance, or any other rights protected or arising under (for example, and without limitation (a) the Age Discrimination in Employment Act, as amended (29 U.S.C. §§ 621 - 634); (b) the Older Workers Benefit Protection Act, as amended (29 U.S.§§ 621, 623); (c) Title VII of the Civil Rights Act of 1964, as amended (42 U.S.C. §§ 2000E - 2000E-17); (d) the Equal Pay Act of 1963, as amended (29 U.S.C. §§ 206(D), et seq.); (e) the Employee Retirement Income Security Act of 1974, as amended (29 U.S.C. §§ 1001 -1461); (f) the Worker Adjustment and Retraining Notification Act, as amended (29 U.S.C. §§ 2101, et seq.); (g) the National Labor Relations Act, as amended (29 U.S.C. §§ 151-169); (h) Family and Medical Leave Act of 1993, as amended (29 U.S.C. §§ 825, et seq.); (i) the Americans with Disability Act of 1990, as amended (42 U.S.C. §§ 12101, et seq.); G) the Occupational Safety and Health Act of 1970 (29 U.S.C. §§ 651, et seq.); (k) the Florida Civil Rights Act (Fla. Stat. 760.01, et seq.); (1) the Florida Constitution; (m) the Florida False Claims Act (Fla. Stat. 68.081, et seq.); (n), the Florida Whistleblower Act (Fla. Stat.§ 448.101-448.105); (o) the Florida Workers Compensation Retaliation Statute (Fla. Stat. §440.205); (p) the Florida Wage Discrimination Law (Fla. Stat. § 448.07); (q) the Florida Equal Pay Law (Fla. Stat. 448.07); (r) the Florida AIDS Act (Fla. Stat. §§ 110.125, 381.00 and 760.50); (s) Florida OSHA (Fla. Stat. § 442.018(2)); (t) Florida Wage Payment Laws; and (u) Florida Discrimination on the Basis of Sickle Cell Trait Law (Fla. Stat. § 448.075). Nevertheless, both Parties agree to waive all such rights they may have and agree to submit all disputes to binding arbitration in accordance with the terms of this Article 8.
*** THE FOLLOWING IS A WAIVER OF RIGHTS TO A CLASS ACTION ***
8.4 Waiver of Class Action. All arbitrations under this Agreement must be on an individual basis. This means that neither the Company nor the Individual may consolidate its claims in arbitration by or against any other party, or litigate in court, or arbitrate any dispute, claim, or controversy as a representative or member of a class or in a private attorney general capacity. To the extent that a dispute arises as to this Section 8.4, only a court, and not an arbitrator, shall determine the validity and effect of this class action waiver.
8.5 Authority and Decision. The Arbitrator shall have the authority to award the same damages and other relief that a court could award. The Arbitrator shall issue a reasoned award explaining the decision and any damages awarded. The Arbitrator’s decision will be final and binding upon the Parties. The Parties will abide by, and fully perform, any award rendered by the Arbitrator. In rendering the award, the Arbitrator shall state the reasons therefore, including (without limitation) any computations of actual damages or offsets, if applicable.
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8.6 Fees and Costs. In the event of arbitration under the terms of this Agreement, the fees charged by JAMS or other arbitration administrator and the Arbitrator shall be borne by the Parties as determined by the Arbitrator, except for any initial registration fee, which the Parties shall bear equally. Otherwise, the Parties shall each bear their own costs, expenses and attorneys’ fees incurred in arbitration, except as otherwise decided by the Arbitrator.
8.7 Limited Scope. The following are excluded from binding arbitration under this Agreement: (a) claims for workers’ compensation benefits or unemployment benefits; (b) replevin; and (c) any claims for which a binding arbitration agreement is invalid as a matter of law.
8.8 Statutes of Limitations. All statutes of limitations that would otherwise be applicable (as well as other laws and statutes of applicability to any question, issue, claim, or dispute) shall apply to any arbitration proceeding hereunder, and the arbitrator is specifically empowered to decide any question pertaining to limitations.
8.9 Injunctive Relief.
(a) The Parties may seek injunctive relief in arbitration; provided, ho1veve1; that as an exception to the arbitration agreement set forth this Section 8.2, the Parties, in addition to all other available remedies, shall each have the right to initiate an action in any court of competent jurisdiction in order to request injunctive or other equitable relief regarding the terms of this Agreement. The exclusive venue of any such proceeding shall be in the venue set forth herein.
(b) The Parties agree (i) to submit to the jurisdiction of any competent court in the venue set forth herein, (ii) to waive any and all defenses the Parties may have on the grounds of lack of jurisdiction of such court, and (iii) that neither Party shall be required to post any bond, undertaking or other financial deposit or guarantee in seeking or obtaining such equitable relief.
(c) Evidence adduced in any such proceeding for an injunction may be used in arbitration as well.
(d) The existence of this right to injunctive relief shall not preclude or otherwise limit the applicability or exercise of any other rights and remedies that a Party may have at law or in equity.
(e) The Parties stipulate and agree that any breach of this Agreement by the Parties may result in immediate and irreparable harm to the other Party, the amount of which will be extremely difficult to ascertain, and that other Party could not be reasonably or adequately compensated by damages in an action at law. For these reasons, the Parties shall have the right to obtain such preliminary, temporary or pe1manent injunctions or restraining orders or decrees as may part of any injunctive relief.
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ARTICLE
9
TERMINATION OF ARRANGEMENT
9.1 Termination of Consultant for Cause. Notwithstanding anything to the contrary in this Agreement, the Company shall have the right to automatically and immediately terminate this Agreement for “Cause,” which for purposes of this Agreement means:
(a) an act of fraud or embezzlement by the Consultant, whether or not related to the Company, as determined by Company upon (i) completion of an internal investigation in accordance with the then current policies of the Company, or (ii) filing of a report of such fraud or embezzlement with law enforcement officers of the application jurisdiction;
(b) the conviction of the Consultant of, or plea of “guilty” or “nolo contendere” by the Consultant to a felony that is either (i) a crime of moral turpitude and/or (ii) a crime that has a fundamental element of fraud or dishonesty; provided, however, that the entry of a withholding of adjudication by a court shall not constitute a plea of “guilty” or “nolo contendere;”
(c) the deliberate and intentional failure by Consultant to perform his duties to the Company as Chief Science Officer (other than any such failure resulting from his incapacity due to physical or mental illness or disability) as set forth in this Agreement and/or the Operating Agreement, after a written demand for substantial performance is delivered to Consultant by the Board which specifically identifies the manner in which the Board believes that Consultant has not substantially performed his duties and Consultant has had a reasonable period of time (not less than ten (10) days) to cure such failure;
(d) gross negligence, recklessness, or willful misconduct in the execution of Consultant’s duties; provided however, that if Consultant takes action(s) pursuant to a Board vote or written consent of the Board, then such action will not constitute gross negligence, recklessness, or willful misconduct.
(e) Consultant’s material breach of this Agreement, after having been provided written notice of the exact nature of the breach or violation and at least thirty (30) days to cure such breach, provided however, that such thirty (30) day period will be tolled during any period in which both Parties are in good faith negotiations or otherwise attempting in good faith to resolve the matter(s) that gives rise to the breach.
For purposes of this definition, no act, or failure to act, on Consultant’s part shall be considered “grossly negligent,” “reckless” or “willful” unless done, or omitted to be done, by Consultant not in good faith and without reasonable belief that Consultant’s action or omission was in the best interests of the Company.
9.2 Compensation upon Termination for Cause. In the event the Company terminates this Agreement for Cause, the Consultant shall receive such portion of his Fees to which the Consultant otherwise would have been entitled hereunder through the date of termination as well as remuneration for any Expenses accrued but unpaid through the date of termination. The Consultant shall not be entitled to any other compensation whatsoever and the Company shall have no further obligations hereunder.
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9.3 Termination for Good Reason. Notwithstanding anything to the contrary in this Agreement, the Consultant shall have the right to automatically and immediately terminate this Agreement for “Good Reason,” which for purposes of this Agreement means any of the following, provided: (i) the Consultant gives written notice to the Company within ninety (90) days after the initial existence of such condition, and (ii) the Company does not remedy such condition within thirty (30) days after receipt of such notice thereof given by the Consultant, provided further however, that if Consultant agrees or consents with any such of the foregoing actions via a Board vote or written consent of the Board and/ or otherwise agrees in writing, then such action will not constitute Good Reason:
(a) the Company materially reduces the Consultant’s position (including title), authority, duties, or responsibilities as contemplated by this Agreement, excluding for this purpose any isolated and insubstantial action not taken in bad faith and which is remedied by the Company within thirty (30) days after receipt of notice thereof given by the Consultant; or
(b) relocation of Consultant to a work location more than twenty five (25) driving miles from the then current offices of the Company (it being understood that Consultant will agree and consult with the initial location of the Company’s offices and his work location); or
(c) any failure by the Company to materially comply with any of the provisions of this Agreement applicable to it, after reasonable notice thereof from the Consultant and Company has had a reasonable period of time (not less than ten (10) days) to cure such failure.
9.4 Compensation upon Termination for Good Reason. In the event the Consultant terminates this Agreement for Good Reason, the Consultant shall receive in a lump sum in cash of (i) the Consultant’s annual Fees through the date of termination to the extent not theretofore paid; (ii) the Consultant’s annual Fees from the date of termination through the end of the Term (had such termination not occurred) plus 3 years (the “Buy-Out Period”); including an increase in the Fees of 10% per annum for each year of the Buy-Out Period; and (iii) any Expenses accrued but unpaid as of the date of termination.
9.5 Termination without Cause or Good Reason.
(a) Right to Terminate without Cause or Good Reason. Either Party may terminate this Agreement without Cause or without Good Reason by giving to the other Party not less than 90 days’ advance notice of such termination in writing, subject to Section 9.5(d) of this Agreement.
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(b) Compensation upon Termination without Cause. In the event this Agreement is terminated by the Company without Cause pursuant to Section 9.5(a), the Consultant shall receive in a lump sum in cash in full settlement of any and all claims which the Consultant may have against the Company, the sum of (i) the Consultant’s annual Fees through the date of termination to the extent not theretofore paid; (ii) the Consultant’s annual Fees from the date of termination through the end of the Term (had such termination not occurred); and (iii) any Expenses accrued but unpaid as of the date of termination. The Consultant shall not be entitled to any other severance or compensation whatsoever and the Company shall have no further obligations hereunder.
(c) Compensation upon Termination without Good Reason. In the event this Agreement is terminated by the Consultant without Good Reason pursuant to Section 9.5(a), the Consultant shall receive, in full settlement of any and all claims which the Consultant may have against the Company: (i) such portion of his Fees to which the Consultant otherwise would have been entitled under this Agreement through the date of termination; and (ii) remuneration for any Expenses accrued but unpaid through the date of termination. The Consultant shall not be entitled to any other severance or compensation whatsoever and the Company shall have no further obligations hereunder.
(d) Limitation on Consultant’s Right to Terminate. Consultant may not terminate without Good Reason during the period commencing on the Effective Date hereof and continuing through the fifth (5th) anniversary of the Effective Date. Following that period Consultant has all applicable rights under this Section 9.5.
9.6 Calculation of Term. For the purposes of this Article 9 alone, the term “Term” means that period commencing on the Effective Date hereof and continuing through the tenth (10th anniversary of the Effective Date.
9.7 Duties of Consultant upon Termination. Upon termination of this Agreement for any reason, the Consultant shall, without prejudice to any claim for damages or other remedy which either Party might have against the other:
(a) upon the request of the Company immediately resign from any offices and appointments held by him in or on behalf of the Company; and
(b) immediately deliver to the Company all correspondence, documents, specifications, papers, magnetic disks, tapes or other software storage media and property belonging to the Company which may be in the Consultant’s possession or under his control (including such as may have been made or prepared by or have come into the possession or under the control of the Consultant and relate in any way to the business or affairs of the Company or any Associate) and the Consultant shall not, without the written consent of the Company, retain any copies thereof.
(c) If the Company is a Public Company. If, upon termination of this Agreement, any of the Company’s equity securities are registered pursuant to the Securities Act of 1933, as amended, the Securities and Exchange Act of 1934, as amended, or is otherwise “publicly traded,” any payments to Consultant owed pursuant to this Agreement shall be paid upon the earlier of: (i) 6 months after the date of termination, and/or (ii) such other date as required to comply with applicable law.
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9.8 Termination Notices. Any termination by the Company for Cause, or by Consultant for Good Reason, shall be communicated by a written notice to the other Party hereto given in accordance with Article 9 and Section 11.4 of this Agreement. For purposes of this Agreement, such notices shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Consultant’s engagement under the provision so indicated and (iii) specifies the termination date.
9.9 Death or Disability. Upon the Consultant’s death or Disability, this Agreement shall immediately terminate and payment of all compensation and benefits to the Consultant shall cease and no further duties or obligations shall be owed by the Company to the Consultant; except, however; that any accrued and unremunerated Fees or Expenses shall be paid immediately by the Company to the Consultant’s estate. Notwithstanding the foregoing, however, the Board may decide, in its sole discretion, to continue to pay Fees to the Consultant for any period of time after his Disability. For purposes of this Agreement, the term “Disability” of the Consultant means the inability of the Consultant to perform the Services, because of physical or mental illness or incapacity, for a period of 270 days in any one-year period (as reasonably determined by the Board in conjunction with the Consultant’s medical advisor or practitioner).
9.10 Post-Consulting Cooperation. Upon and after the termination of this Agreement, the Consultant will cooperate fully with the Company in connection with (a) any matter related to the Company’s business and activities by being available, at mutually agreeable times in person or by telephone, and without any unreasonable interference with his other activities, to provide such info11nation as may from time to time be requested by the Company regarding various matters in which he was involved during the Term, and (b) any and all pending or future litigation or administrative claims, investigations, or proceedings involving the Company, including (without limitation) Ins meeting with the Company’s counsel and advisors at reasonable times upon their request and providing testimony (in court or arbitration hearing or at depositions) that is truthful, and complete in accordance with information known to him.
9.11 Release. As a mandatory condition precedent to Consultant receiving any payments under this Article 9 for post-separation payment (except in the case of death or Disability), Consultant must first sign a separation agreement and general release of all claims against the Company and its Affiliates, in a form reasonably satisfactory to Company and Consultant. Unless otherwise required by applicable law, in all cases any release must become final, binding and irrevocable within thirty (30) days following the Consultant’s termination. Any post-separation payments will be paid, in lump sum, no later than sixty (60) days after the date of Consultant’s termination. If Consultant fails or refuses to timely enter into the release, or timely revokes the release, the Company shall not be obligated to make any separation payments under this Article 9.
ARTICLE
10
REPRESENTATION BY CONSULTANT
10.1 No Conflict. The Consultant hereby represents and warrants to the Company that his execution of this Agreement and his performance of his duties and obligations hereunder will not conflict with, cause a default under, or give any party a right to damages under any other agreement or obligation to which the Consultant is a party or is bound.
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ARTICLE
11
GENERAL
11.1 Independent Contractor Status. The Consultant’s relationship with the Company will be that of an independent contractor, and nothing in this Agreement shall be construed to create a partnership, joint venture, or employer-employee relationship. The Consultant is not the agent of the Company and is not authorized to make any representation, contract, or commitment on behalf of the Company except as authorized under the Services. Consultant shall have sole control over the means and the manner by which it performs the Services. The Consultant is responsible, where necessary to secure, at his sole cost, workers’ compensation insurance, disability benefits insurance, and any other insurance as may be required by law. The Consultant acknowledges and agrees that the Consultant shall not be eligible for any pension, vacation, sick pay, or other benefits that the Company may provide to its employees. The Consultant shall indemnify, hold harmless, defend, pay and reimburse any the Company and any Affiliate of the Company (other than Consultant) against any and all losses, claims, damages, judgments, fines or liabilities, including reasonable legal fees or other expenses incurred in investigating or defending against such losses, claims, damages, judgments, fines or liabilities, and any amounts expended in settlement of any claims due to Consultant’s failure to perform its obligations under this Section 11, including any claim, liability or expense arising out of any determination by any governmental agency that Consultant is not an independent contractor with respect to this Agreement or the Services to be provided hereunder.
11.2 Governing Law. Notwithstanding the place where this Agreement may be executed by any of the Parties hereto, the Parties expressly agree that all the terms, conditions, and provisions hereof shall be construed under, and governed by, the laws of the State of Florida, without regard to its principles of conflicts of law.
11.3 Jurisdiction and Venue. In the event that a judicial proceeding is necessary in support of the mandatory arbitration provision set forth above, the sole forum for any such proceeding arising out of, or relating to, this Agreement, is the courts of the State of Florida in and for Miami-Dade County, or the federal courts for such state and county, and all related appellate courts. The Parties hereby irrevocably consent to the jurisdiction of such courts and agree to said venue.
11.4 Notices. All notices required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given and received (a) when personally delivered, or delivered by same-day courier; or (b) on the third business day after mailing by registered or certified mail, postage prepaid, return receipt requested; or (c) upon delivery when sent by prepaid overnight express delivery service (e.g., FedEx, UPS); or (d) when sent by email or facsimile and upon the receipt by the sending party of written confirmation by the receiving party; provided, however, that an automated facsimile or email confirmation of delivery or read receipt shall not constitute such confirmation; and, in any case addressed to either Party, and in the case of the Company, to the CEO, at its normal business or residential address, which address may be updated by either Party in writing from time to time.
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11.5 Incorporation by Reference. The Parties agree that the preamble, recitals, and any exhibits to this Agreement are material to this Agreement and are hereby incorporated into this Agreement in their entirety.
11.6 Interpretation. The Parties hereto acknowledge and agree that (a) each Party and its counsel has had the opportunity to review and negotiate the terms and provisions of this Agreement and contribute to its revision; (b) the rule of construction to the effect that any ambiguities are resolved against the drafting Party shall not be employed in the interpretation of this Agreement; and (c) the terms and provisions of this Agreement shall be construed fairly as to all Parties hereto and not in favor of or against any Party, regardless of which Party was generally responsible for the preparation of this Agreement.
11.7 Waiver. Any waiver by either Party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of the same or any other provision hereof. All waivers by either Party shall be in writing.
11.8 Entire Agreement. This Agreement, together with any Unit Purchase Agreement and Assignment Agreement, sets forth the complete and exclusive agreement of the Parties regarding the subject matter of this Agreement and supersedes all prior agreements, understandings and communications, oral or written, between the Parties regarding the subject matter of this Agreement.
11.9 Severability; Reformation. In case any one or more of the provisions or parts of a provision contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement; and this Agreement shall, to the fullest extent lawful, be reformed and construed as if such invalid or illegal or unenforceable provision, or part of a provision, had never been contained herein, and such provision or part reformed so that it would be valid, legal and enforceable to the maximum extent possible. Without limiting the foregoing, if any provision (or part of provision) contained in this Agreement shall for any reason be held to be excessively broad as to duration, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the fullest extent compatible with then existing applicable law.
11.10 Survival. The provisions of this Agreement that are intended, by their nature, to survive the expiration or termination of this Agreement, shall so survive such expiration or termination; such surviving provisions specifically include, but are not limited to, Articles 5, 6, 7, 8, and Sections 9.2, 9.4 through 9.11, 11.1, 11.2 and this Section 11.10.
11.11 Modification; Amendment. This Agreement may not be terminated, modified, amended or waived orally but only through a writing signed by an authorized representative of the party against whom it is sought to be enforced.
11.12 Warranties. There are no representations or warranties except as expressly stated herein.
11.13 Assignment. Due to the personal nature of this Agreement, neither Party shall assign or transfer its rights, obligations or duties under this Agreement to any third party, without the prior written consent of the other Party. Any attempt to assign this Agreement in circumvention of this Section 11.12 shall be considered a material breach hereof.
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11.14 Authority. Each Party expressly agrees that each of them, individually, or any manager or officer of any entity under their dominion or control shall have the authority to bind the Party collectively without further authorization or affirmation of such authority by the Party.
11.15 Execution; Counterparts. This Agreement may be executed and signatures exchanged by facsimile or other electronic means and in any number of counterparts, each of which shall constitute an original, but all of which, when taken together, shall be considered one document. Electronic and digital format signatures (e.g., .JPG, .PDF) shall be considered as original signatures.
11.16 Section 409A. The provisions of this Agreement will be administered, interpreted and construed in a manner intended to comply with Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”), the regulations issued thereunder or any exception thereto. Notwithstanding anything in this Agreement to the contrary, any compensation that is designated under this Agreement as payable upon the Consultant’s termination of service or this Agreement shall be payable only upon the Consultant’s “separation from service” with the Company within the meaning of Section 409A. The Consultant shall have no right to designate the date of any payment under this Agreement. Notwithstanding any provision of this Agreement to the contrary, Consultant acknowledges and agrees that the Company and any Affiliate of the Company shall not be liable for, and nothing provided or contained in this Agreement will be construed to obligate or cause the Company and any Affiliate of the Company or any of their respective officers, directors, employees and agents to be liable for, any tax, interest or penalties imposed on the Consultant related to or arising with respect to this Agreement, including any violation of Section 409A.
11.17 Review by Consultant and Counsel. Consultant specifically and expressly represents and warrants that (a) he has reviewed and agreed to the restrictive covenants and other terms and conditions contained in this Agreement and their contemplated operation after receiving the advice of counsel of his own choosing or knowingly waiving the right to review by such counsel; and (b) he believes, after receiving such advice (or executing such waiver), that the restrictive covenants and other terms and conditions hereof, and their contemplated operation, are fair and reasonable.
[Signature page to follow.]
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IN WITNESS WHEREOF, the Parties, intending to be legally bound, have duly entered into this Agreement effective as of the Effective Date.
CONSULTANT | |
/s/ Joshua M. Hare | |
Joshua M. Hare, M.D. | |
COMPANY | |
LONGEVERON LLC | |
A Delaware limited liability company | |
/s/ Joshua M. Hare | |
Signature |
By: | Joshua M. Hare, M.D. | |
Printed Name | ||
Its: | Chairman of the Board | |
Title |
Company /s/ JMH | |
Consultant /s/ JMH |
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EXHIBIT A
SERVICES
The following shall comprise the services to be provided by the Consultant to the Company during the Term (collectively, the “Services”):
1. The Consultant shall serve as, and with the titles, offices and authority of, the Chairman of the Board, and Chief Science Officer of the Company. The Chief Science Officer shall be responsible for the quality, innovativeness, and conduct of the Company’s scientific and medical research and development, and product development and commercialization programs. The Chief Science Officer shall perform all duties and have all authorities attendant to such position including those duties reasonably assigned to the Consultant from time to time by the Board, which duties shall specifically include, but not be limited to:
(a) the recruitment, retention, and removal of the Company’s scientific, medical, laboratory, and research and development staff, including employees and consultants;
(b) the identification of the location of, and the proper outfitting of, the Company’s laboratory(-ies) and other research and development facilities;
(c) the determination of how the Cell Line, as that term is defined in the Assignment Agreement, shall be developed and used, to include the identification and evaluation of (i) appropriate new indications, (ii) licensing and commercialization opportunities, and (iii) the timing of when such new indications or licensing or commercialization opportunities should be undertaken;
(d) all matters relating to compliance with applicable laws, regulations, and best practice policies and procedures (i) promulgated or recommended by the U.S. Food and Drug Administration (“FDA”) or other governmental organization, or (ii) applicable to the practice of medicine;
(e) liaison with all applicable governmental authorities regarding scientific, compliance, and/or regulato1y matters;
(f) development, maintenance, application, and enforcement of policies and procedures related to scientific matters and product development, specifically including Current Good Manufacturing Practices (“cGMP”) promulgated by the FDA;
(g) allocation, supervision, and management of Company resources for scientific and product research and development activities including, but not limited to, personnel, finances, and technology;
(h) if the Consultant, in his sole discretion, deems it in the best interests of the Company, to propose, form, and serve as Chairman of, a Scientific Advisory Board for the Company
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(i) subject to University restrictions, assist in fund raising efforts for the Company (including road shows); and;
(j) serve as the sole spokesperson, or authorize another such spokesperson, for the Company on all scientific, medical, and product research and development questions, issues, and matters, as appropriate.
2. In performing the Services, the Consultant shall work no more than 10 hours in any given week and, cumulatively, no more than 500 hours in any given year.
3. In performing the Services, the Consultant shall not utilize any space, facilities, materials, funding, or resources of the University or any Outside Company on behalf of the Company, unless approved in advance, in writing, by the Board.
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SCHEDULE 2.5
OUTSIDE COMPANIES
As of the Effective Date hereof, the Consultant serves as a consultant to the following entities:
1. | Vestion, Inc., a Delaware corporation with offices located at 41219 Fisher Island Dr., Miami, Florida 33109 |
2. | Heart Genomics, LLC, a Florida limited liability company with offices located at 523 Michigan Avenue, Miami Beach, Florida 33139 |
3. | Biscayne Pharmaceuticals Inc., a Florida corporation with offices located at 4770 Biscayne Blvd., Suite 660, Miami, Florida 33137 |
[Nothing follows.]
Exhibit 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is entered by and between Longeveron, LLC, a Delaware limited liability company with offices located at 1951 NW 7th Ave., Ste. 520, Miami, Florida 33136 (the “Company”), and James Clavijo, an individual with a legal address of 1720 Jefferson Street, Apt 204, Hollywood, FL 33020 (the “Employee”), as of the date(s) set forth on the signature page(s) hereto, effective as of August 12th, 2020 (the “Effective Date”).
WHEREAS, the Company and the Employee desire to enter into this Agreement and to commence the employment of Employee upon the terms and conditions set forth herein;
WHEREAS, Employee acknowledges that during his/her employment with the Company, the Employee will have access to certain confidential, proprietary information and trade secrets belonging to the Company’s (existing and future) business and that Employee has an obligation not to disclose, misappropriate, use for his own personal or a third party’s purposes and/or unfairly benefit from the Company’s confidential, proprietary, information, trade secrets, customers, prospective customers and good will;
NOW, THEREFORE, intending to be legally bound, and for good and valuable consideration, the Company and Employee hereby agree as follows:
1. Reaffirmation of Recitals. The foregoing recitals are complete, true and correct and are incorporated herein and made part hereof by this reference. Employee acknowledges the Company’s reliance thereon as a material inducement to enter into this Agreement.
2. Term. Subject to Section 5 below, the term of this Agreement shall be one (1) year commencing on the date of this Agreement (the “Initial Term”). After the Initial Term, this Agreement shall be automatically renewed for successive one (1) year periods (each a “Renewed Term”), unless, at sixty (60) days prior to the end of the Initial Term or a Renewed Term, either party delivers written notice to the other that the Agreement is not to be renewed, in which case, the Agreement and Employee’s employment hereunder shall be terminated as of the end of the applicable Initial Term or Renewed Term. The Initial Term and any Renewed Term shall be collectively referred to as the “Term.”
3. Position and Duties.
(a) During the Term, Employee shall be employed as the Chief Financial Officer and Treasurer (“CFO”), and shall report to the President. Employee shall have such duties and responsibilities as are reasonably commensurate with Employee’s position, including those duties specified in the attached Schedule A, and such other duties and responsibilities as the President may reasonably assign to Employee from time to time. Employee shall devote all of Employee’s working time to the fulfillment of Employee’s duties and responsibilities under this Agreement, and Employee shall perform such duties and responsibilities to the best of Employee’s abilities, and in a trustworthy, businesslike and efficient manner. Employee shall not be actively involved in any other trade or business or as an Employee of any other trade or business. Employee shall at all times comply with and be subject to such policies and procedures as the Company may establish or change from time to time (“Policies”); provided, however, that in the event of a conflict between the terms of this Agreement and the provisions of any such Policies, the terms of this Agreement shall control.
(b) Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity, and allegiance to act at all times in the best interests of the Company and to do no act which would, directly or indirectly, injure the Company’s business, interests, or reputation. In keeping with Employee’s fiduciary duties to the Company, Employee agrees that Employee shall not become involved in a conflict of interest with the Company, or upon discovery thereof, allow such a conflict to continue. Moreover, Employee shall not engage in any activity that might involve a possible conflict of interest without first obtaining approval in accordance with the Company’s Policies.
(c) The Company recognizes that Employee may, without violating this Agreement, engage in or continue to engage in outside activities that do not involve a conflict of interest, such as serving on community boards or the boards of professional or trade organizations, volunteering for community organizations or professional or trade organizations, managing personal investments, engaging (to an extent that does not interfere with Employee’s performance of his duties) in business ventures that do not involve a conflict of interest, or engaging in charitable activities.
(d) Employee shall perform Employee’s duties at the Company’s office located at Life Science & Technology Park, 1951 NW 7th Avenue, Suite 520, Miami, FL 33136, or at such other locations as the Company may designate. Employee’s duties also shall include travel reasonably commensurate with Employee’s position.
4. Compensation and Benefits. During the Term, Employee shall receive the following compensation:
(a) Base Salary. The Company shall pay Employee an annual salary of one hundred and fifty thousand dollars ($150,000.00) (the “Base Salary”), in accordance with the Company’s normal payroll practices (subject to appropriate tax and other withholdings). Employee’s Base Salary will be subject to annual review and adjustment by the Board, and to increase based on financial metrics specified in Schedule A.
(b) Annual Bonus. Employee will be eligible to receive a discretionary annual bonus (“Annual Bonus”), and bonuses tied to the financial metrics specified in Schedule A. The Annual Bonus will be tied to the performance metrics specified in the attached Schedule A. All determinations relating to the performance metrics, Employee’s level of participation and payout opportunity, and the extent to which Employee has met the applicable goals, shall be made in the sole discretion of the President or such person or committee to which such authority has been granted by the Board and President. Employee must be employed by the Company on the date that the Annual Bonus, if any, is actually paid in order to be eligible to receive any such Annual Bonus.
(c) Incentive Unit Plan. Promptly following the completion of the valuation of the Company’s Series C Units, Employee shall be granted an option (“Option”) to purchase Series C Units (“Units”), or other such equity, including but not limited to Restricted Stock Units, of the Company in accordance with, and subject to the terms and conditions of the Plan and Option Award Agreement attached hereto. The Option’s exercise price shall be equal to the fair market value of a Series C Unit on the date of the grant.
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(d) Vacation. Employee shall be entitled to twenty (20) days of paid vacation per year (prorated for partial years), to be taken at times mutually acceptable to Employee and the Company, and to such paid holidays as are observed by the Company from time to time. Paid vacation that is not used in a year will be handled in accordance with Company Policies. For purposes of this Section 4(d), the word “year” means the twelve (12) month period the Company uses administratively for purposes of vacation records.
(e) Welfare and Retirement Benefits. Employee shall be eligible to participate in each of the Company’s employee benefit plans and programs, in accordance with the terms thereof and as they may be changed from time to time, that the Company offers to similarly situated employees, if any, for so long as the Company shall continue to offer said plans and programs, and subject to Employee’s payment of any required contributions. Notwithstanding any provision of this Agreement to the contrary, nothing contained herein shall be construed to limit, condition, or otherwise encumber the rights of the Company, in its sole discretion, to amend, discontinue, substitute or maintain any benefit plan, program, or perquisite applicable to employees of the Company generally.
(f) Tax Withholding. The Company shall withhold from any compensation, benefits or amounts payable under this Agreement all federal, state, city or other taxes as may be required pursuant to any law or governmental regulation or ruling. Except where the Company is so required to withhold and remit any such taxes, Employee shall be responsible for any and all federal, state, city or other taxes that arise out of any compensation, benefits or amounts payable to Employee hereunder.
(g) Expenses. During the Term, and subject to the provisions of Section 21(d) of this Agreement, Employee shall be entitled to receive prompt reimbursement for all reasonable and documented business expenses Employee incurs in accordance with the policies and procedures established by the Company from time to time, provided that Employee properly accounts therefor in accordance with Company policy, as may be amended from time to time.
5. Termination and Termination Compensation.
(a) General. This Agreement and Employee’s employment with the Company hereunder shall be terminated prior to the end of the Term in accordance with the provisions of this Section 5: (i) automatically upon Employee’s death, (ii) at any time by the Company in the event of Employee’s Disability, (iii) at any time by the Company upon written notice to Employee for Cause, (iv) voluntarily at any time by Employee or the Company upon sixty (60) days’ advance written notice to the other, or (v) at any time by Employee for Good Reason.
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(b) Definitions. For purposes of this Agreement:
(i) “Cause” means, as determined by the Company: (A) the commission by Employee of an act of theft, fraud, embezzlement, falsification of the Company or customer documents, misappropriation of funds or other assets of the Company or its affiliates, involving the property or affairs of the Company or its affiliates; (B) the conviction of Employee (by trial, upon a plea or otherwise) or the admission of guilt or a plea of nolo contender by Employee, of any felony or criminal act of moral turpitude; (C) the failure of Employee to substantially perform his duties or responsibilities under this Agreement, or follow the reasonable instructions of the Company, provided that if such failure is capable of cure in the determination of the Company, Employee is given written notice of any such failure, which notice shall specify in reasonable detail the nature of the failure to substantially perform, and Employee fails to remedy the same within thirty (30) days of receipt of such notice; (D) the breach by Employee of any provision of this Agreement, or of any fiduciary duty to the Company or violation of any other contractual, statutory, common law or other legal duty to the Company or its affiliates; (E) gross negligence or willful misconduct by Employee the performance of Employee’s duties; (F) Employee’s material violation of any written policy or procedure of the Company, provided that if such violation is capable of cure in the Company’s determination, Employee is given written notice of any such violation, which notice shall specify in reasonable detail the nature of the violation, and Employee fails to remedy the same within thirty (30) days of receipt of such notice; or (G) conduct that brings the Company into public disgrace or disrepute in any material respect.
(ii) “Disability” means, if the Company or any of its affiliates sponsors a long-term disability plan that covers Employee, the standard such long-term disability plan uses to determine a participant’s eligibility for benefits, provided, that the long-term disability insurer had accepted Employee’s claim, and provided further, that Employee’s incapacity is likely to be continuous for at least six (6) months or be permanent. If Employee is not covered by such a long- term disability plan, however, then “Disability” means Employee becomes physically or mentally incapacitated so as to be unable to perform the essential function of Employee’s job, with or without a reasonable accommodation, and such incapacity is likely to be continuous for at least six (6) months or be permanent. Any disputes as to whether Employee meets the standard of Disability set forth herein shall be resolved initially through consultation between Employee’s treating physician and a physician retained by the Company (collectively the “Treating Physicians”). If the Treating Physicians cannot agree, then the Treating Physicians shall select an independent physician who is a recognized specialist in the condition(s) causing the incapacity, who shall render a binding determination as to Disability after full consultation with the Treating Physicians, examination of any relevant medical records, and reviewing the results of relevant medical tests.
(iii) “Good Reason” means, without Employee’s express written consent, a material diminution in Employee’s authority, duties, or responsibilities (excluding any change made in connection with the termination of Employee’s employment for Cause, or on account of Employee’s death or Disability, or temporarily as a result of Employee’s incapacity or other absence for an extended period); a change in the geographic location where Employee must render services by more than fifty (50) miles, provided that any such relocation materially increases the length of Employee’s normal daily work commute; or a material breach of this Agreement by the Company. In order for Employee to resign for Good Reason: (A) the Company must be notified by Employee in writing within sixty (60) days of the event constituting Good Reason; (B) the event must remain uncorrected by the Company for thirty (30) days following such notice (the “Company Notice Period”); and (C) if the Company fails to cure the same during the Company Notice Period, then the termination must occur within sixty (60) days after the expiration of the Notice Period. Notwithstanding the foregoing, an across-the-board salary reduction affecting Employee and other similarly situated Employees of the Company shall not constitute Good Reason.
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(c) Termination by the Company for Cause or as a result of Death or Disability; Resignation by Employee without Good Reason; and Nonrenewal of a Term.
(i) If the Company terminates this Agreement and Employee’s employment hereunder for Cause, if this Agreement and Employee’s employment hereunder are terminated because of Employee’s death or Disability, if Employee terminates this Agreement and his employment hereunder without Good Reason, or the Agreement and Employee’s employment hereunder is not renewed at the expiration of the Term, Employee shall be entitled to receive only the following compensation (collectively, the “Accrued Rights”):
(A) the Base Salary through the date of termination;
(B) payment for any earned but unused vacation time (as described in Section 4(d));
(C) such welfare and retirement benefits, if any, as to which Employee may be entitled under the terms thereof (as described in Section 4(e)); and
(D) such reimbursable business expenses as may be due and owing to Employee under Section 4(g), provided Employee submits a claim for such expenses within thirty (30) days after Employee’s employment is terminated.
(ii) The amount due under Section 5(c)(i)(A) and (B) shall be paid on the first regular payday following the date of Employee’s termination (or sooner if required by law). The amount due under Section 5(c)(i)(C) shall be paid in accordance with the terms of the plans that provide those benefits. The amount due under Section 5(c)(i)(D) shall be paid in accordance with time period set forth in Section 4(g).
(d) Termination by the Company without Cause or by Employee for Good Reason.
(i) If the Company terminates this Agreement and Employee’s employment hereunder without Cause (other than by reason of Disability), or if Employee terminates this Agreement and Employee’s employment hereunder for Good Reason, Employee shall receive only the following compensation:
(A) the Accrued Rights; and
(B) after the first year of employment (date employment began with Company is 24 June 2019), a severance benefit equal to 6 months of the Employee’s then existing annual Base Salary.
Severance benefit payment shall be made in equal installments, at least monthly, in accordance with the Company’s established payroll procedures, beginning after the release referred to in Section 5(d)(ii) becomes effective, but in no event later than the sixtieth (60th) day following Employee’s termination date. The first such payment shall include payment of all amounts of severance pay that otherwise would have been due prior to such date, applied as though such payments commenced on the next normal pay date immediately following Employee’s termination date; provided that after the Initial Term, Employee shall accrue one additional month of severance for each additional full year of employment after the Initial Term up to a maximum of twelve (12) months; and
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(C ) in the event that a change of control is the cause for termination of employment, severance shall be accelerated to provide for the full payment of twelve (12) months of severance.
(D) If Employee timely elects to continue health benefits coverage under COBRA, the Company will reimburse Employee, subject to the provisions of Section 21(d) of this Agreement, the amount of the COBRA premiums paid by for the initial two (2) months of COBRA continuation coverage.
(ii) As a condition to the receipt of the severance benefits set forth in clause (i)(B) and (C) of this Section 5(d), Employee must (A) execute and not timely revoke a release, substantially in the form attached hereto as Exhibit A within twenty-one (21) days after Employee’s employment is terminated (within forty-five (45) days after Employee’s employment is terminated in the case of a group termination), and (B) Employee must continue to comply with Employee’s obligations under Sections 5(g), 6, 7, 8, and 9 of this Agreement.
(iii) Employee shall not be under any duty or obligation to seek or accept other employment following a termination of employment pursuant to which a severance benefit payment under this Section 5 is owing and the amounts due to Employee pursuant to Section 5 shall not be reduced or suspended if Employee accepts subsequent employment or earns any amounts as a self-employed individual, provided that in the event Employee breaches any of Employee’s obligations under Section 6, 7, 8 or 9 of this Agreement, then, in addition to the Company’s right to specific performance pursuant to Section 10 or any other rights that the Company may have under this Agreement or otherwise, the Company shall have the right to terminate the payment of any remaining amounts to which Employee would otherwise be entitled pursuant to Section 5(d)(i).
(e) Board and Officer Resignations. Upon termination of Employee’s employment hereunder for any reason, Employee shall be deemed to have resigned, effective as of the date of such termination and to the extent applicable, from all Board or Officer positions held with the Company and any affiliates of the Company.
(f) Employee’s Continuing Obligations. Notwithstanding anything in this Agreement to the contrary, the termination of this Agreement and Employee’s employment hereunder for any reason shall not terminate Sections 5(g), 6, 7, 8, 9, and 10 or Employee’s obligations thereunder, each of which shall survive such termination.
(g) Assistance by Employee. During any period in which any severance benefits are being paid to Employee under this Agreement after the date of termination, Employee shall provide to the Company reasonable levels of assistance in answering questions concerning the business of the Company, transition of responsibility, or litigation, provided that all out of pocket expenses Employee reasonably incurs in connection with such assistance shall be fully and promptly reimbursed by the Company, and any such assistance shall not interfere or conflict with the obligations which Employee may owe to any other employer.
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6. Confidential Information and Trade Secrets.
(a) Except as set forth in Section 6(b), during Employee’s employment and perpetually after the termination of such employment, Employee: (i) shall not communicate or divulge to any person, firm, corporation or business entity, either directly or indirectly, and shall hold in strict confidence for the benefit of the Company, all Confidential Information and Trade Secrets (as defined below); and (ii) shall not use any Confidential Information or Trade Secrets for Employee’s personal benefit, for the benefit of any third party or other than in the course and within the scope of Employee’s employment with the Company.
(b) Notwithstanding the foregoing, Employee may disclose such Confidential Information and Trade Secrets: (i) during the course of and within the scope of Employee’s employment to persons, firms or corporations who have a legitimate need to know such Confidential Information or Trade Secrets, including, but not limited to, the Company’s Affiliates; (ii) as part of truthful testimony in response to compulsory legal process; (iii) while participating or assisting in any investigation or inquiry by a governmental agency acting within the scope of its statutory or regulatory jurisdiction; (iv) to a government official or to an attorney for the purpose of reporting or investigating a suspected violation of law, in conformity with the Defend Trade Secrets Act; or (v) in a complaint or other document filed in a lawsuit or other legal proceeding, so long as such filing is made under seal and in conformity with the Defend Trade Secrets Act.
(c) As used herein, “Confidential Information” means the whole or any portion or phase of any data or information relating to the Company’s or an Affiliate’s business, services, products, solutions, processes or techniques (whether or not copyrighted, patented or patentable) which: (i) has been disclosed to Employee orally or in writing or about which Employee became or shall become aware as a consequence of, through or during Employee’s employment by the Company; (ii) has value to the Company; and (iii) is not generally known by others; provided, however, that Confidential Information shall not include any “Excluded Information,” as defined below. Confidential Information includes non-public regulatory filings with the Food & Drug Administration, information describing patents in progress, etc.
(d) As used herein, “Trade Secrets” means: (i) any useful process, machine or other device or composition of matter which is new or which Employee has a reasonable basis to believe may be new, and which is being used or studied by the Company or its Affiliates and is not described in a patent or described in any literature already published and distributed externally by the Company or its Affiliates; (ii) any software, data, design, plan, tool, process or method employed by the Company or its Affiliates, whether patentable or not, which is not generally known to others; (iii) marketing plans and concepts; (iv) product development plans and proposals; (v) financial information or projections regarding the Company or its Affiliates; (vi) financial, pricing and/or credit information regarding clients, licensors or vendors of the Company or its Affiliates; (vii) a listing of names, postal addresses, email addresses or telephone numbers of customers or clients of the Company or its Affiliates; (viii) contracts and other legal documents belonging to the Company or its Affiliates; (ix) internal corporate policies and procedures of the Company or its Affiliates; (x) any other information designated as a Trade Secret by the Company or its Affiliates at the time of its disclosure to Employee; and (xi) any other information otherwise falling within the definition of a “Trade Secret” pursuant to the Defend Trade Secrets Act and the Florida Uniform Trade Secrets Act, F.S. Section 688.001, et.seq.; provided, however, that “Trade Secrets” shall not include any “Excluded Information,” as defined below. “Trade Secrets” shall also include matters which have been disclosed to the Company by a third party which would otherwise fall within the foregoing categories and with respect to which the Company owes a duty of confidentiality.
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(e) As used herein, “Excluded Information” means any data or information that Employee can establish is or was: (i) already known to or otherwise in the possession of Employee when Employee received it from the Company or its Affiliates; (ii) publicly available or otherwise in the public domain; (iii) rightfully obtained by Employee from a third party not under any obligation to the Company or its Affiliates to maintain its secrecy and without breach of this Agreement by Employee; or (iv) independently developed hereafter by Employee without use of Confidential Information or Trade Secrets.
(f) As used herein, “Affiliates” means any person or entity that controls, directly or indirectly, the Company, and all persons or entities that are controlled, directly or indirectly, by the Company, where control may be by management authority, equity interest or otherwise.
7. Non-Competition; Non-Solicitation.
(a) Employee acknowledges that the Company and the Company’s Affiliates have a legitimate business interest in maintaining its customers and goodwill. In light of the foregoing and as part of the consideration for Employee’s employment and the compensation now or hereafter paid to Employee, Employee agrees as follows:
(i) To the fullest extent permitted by law during the term of Employee’s employment with the Company under this Agreement, and for the period of twenty-four (24) months after the date of termination of Employee’s employment under this Agreement for any reason (the “Non-Compete Period”), Employee will not, directly or indirectly, participate in the ownership, management, operation or control of, or work for or provide consulting services to, any person or entity that is engaged in, or attempting to engage in, any line of business or project which, directly or indirectly, provides any of the services, products or research the Company or the Company’s Affiliates provide, in any of the areas where the Company or the Company’s Affiliates do business; provided, however, that this restriction applies only with respect to the Company’s Affiliates from whom or with respect to which Employee received or had access to Confidential Information and Trade Secrets;
(ii) During the Non-Compete Period, Employee will not directly or indirectly, for Employee’s benefit or as an agent or Employee of any other person or entity, solicit the employment or services of any Person Employed by the Company or the Company’s Affiliates, induce any Person Employed by the Company or the Company’s Affiliates to leave his or her employment with the Company or the Company’s Affiliates, or hire any Person Employed by the Company or the Company’s Affiliates. For purposes of this Section 7, the term “Person Employed by the Company or the Company’s Affiliates” means any person who is or was an Employee of the Company at the time of or within the twelve (12) months preceding the solicitation, inducement, or hiring; and
(iii) During the Non-Compete Period, Employee will not, directly or indirectly, for Employee’s benefit or as an agent or Employee of any other person or entity, solicit or induce any customers, distributors, vendors, licensors or suppliers of the Company or the Company’s Affiliates with whom Employee had contact during Employee’s employment, or for whom Employee received Confidential Information and Trade Secrets, to divert their business from the Company or the Company’s Affiliates to any other person or entity or in any way interfere with the relationship between any such customer, distributor, vendor, licensor or supplier and the Company or the Company’s Affiliates (including, without limitation, making any negative statements or communications about the Company or the Company’s Affiliates).
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(b) Employee understands that the provisions of Sections 6 and 7 of this Agreement may limit Employee’s ability to earn a livelihood in a business similar to the business in which Employee is involved, but as an Employee member of the management group of the Company, Employee nevertheless agrees and hereby acknowledges that: (i) such provisions do not impose a greater restraint than is necessary to protect the goodwill or other legitimate business interests of the Company; (ii) such provisions contain reasonable limitations as to time, scope of activity, and geographical area to be restrained; (iii) the consideration provided under this Agreement, including without limitation, any amounts or benefits provided under Sections 4 or 5 of this Agreement, is sufficient to compensate Employee for the restrictions contained in Section 6 and 7 of this Agreement; and (iv) the Company’s Affiliates are intended third party beneficiaries of the protections afforded by Sections 6 and 7 of this Agreement.
(c) In consideration of the foregoing and in light of Employee’s education, experience, skills and abilities, Employee agrees that Employee will not assert that, and it should not be considered that, any provisions of Section 6 or 7 otherwise are void, voidable or unenforceable or should be voided or held unenforceable. If, at the time of enforcement of Section 6 or 7 of this Agreement, a court shall hold that the duration, scope, or area restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum period, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed and directed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law.
8. Copyrightable Works.
(a) Employee hereby acknowledges and agrees that each of the copyrightable works authored by Employee (including, without limitation, all bio-tech, software and related documentation), alone or with others, during Employee’s employment by Company shall be deemed to have been to be works prepared by Employee within the scope of Employee’s employment by Company. As such, Employee acknowledges and agrees that all such copyrightable works shall be deemed to be “works made for hire” under the United States copyright laws from the inception of creation of such works. To the extent possible, Employee waives any “moral rights” or other rights of attribution, throughout the world.
(b) In the event that any of such works shall be deemed by a court of competent jurisdiction not to be a “work made for hire,” this Agreement shall operate as an irrevocable assignment by Employee to the Company of all right, title and interest in and to such works, including, without limitation, all worldwide copyright interests therein, in perpetuity. Employee hereby assigns all right, title and interest in and to any such works to the Company, including the right to sue for and recover damages for past infringement. The fact that such copyrightable works are created by Employee outside of the Company’s facilities or other than during Employee’s working hours with the Company shall not diminish the Company’s rights with respect to such works which otherwise fall within this paragraph.
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(c) Employee shall execute and deliver to the Company such further instruments or documents as may be requested by Company in order to effectuate the purposes of this Section 8.
9. Inventions.
(a) Employee does not have any right, title or interest in, nor has Employee made or conceived, wholly or in part, prior to the execution of this Agreement, any ideas, inventions, discoveries and improvements, except as disclosed on the attached Exhibit B.
(b) All ideas, inventions, discoveries and improvements Employee makes or conceives, solely or with others, while employed by the Company, where the subject matter of such ideas, inventions, discoveries and improvements results from or is suggested by any work that Employee does for or on behalf of the Company or relates in any way to the Company’s products, services or businesses (“Inventions”), shall belong to the Company, whether they are patentable or not. The fact that such Inventions are made or conceived by Employee outside of the Company’s facilities or other than during Employee’s working hours at the Company shall not diminish the Company’s rights with respect to such Inventions that otherwise fall within this paragraph;
(c) Employee hereby assigns all right, title and interest it may possess in and to such Inventions to the Company or its nominee, including the right to sue for and recover damages for past infringement and the right to claim priority to any applications filed that include those Inventions;
(d) At the request of the Company, either during or after the termination of Employee’s employment under this Agreement, Employee shall execute or join in executing all papers or documents required for the filing of patent applications in the United States and such foreign countries as the Company may elect relating to Inventions covered by this Agreement, and Employee shall execute or join in executing all papers or documents needed to assign all such patent applications to the Company or its nominee, and shall provide the Company or its agents or attorneys with all reasonable assistance in the preparation and prosecution of patent applications, drawings, specifications and the like, all at the expense of the Company, and shall do all that may be necessary to establish, protect and maintain the rights of the Company or its nominee in such Inventions, patent applications, and Letters Patent in accordance with the spirit of this Agreement; and
(e) In the event Employee is unable or unwilling to execute any documents as reasonably required to protect the Company’s Inventions, and to file copyright, patent, patent application and/or associated documents, Employee hereby irrevocably appoints the President of the Company as Employee’s attorney to execute and deliver such documents on Employee’s behalf and in Employee’s name and to do all other lawfully permitted acts to transfer the Inventions to the Company and further the transfer, issuance, prosecution and maintenance of all intellectual property rights therein, to the fullest extent permitted by law. All such Inventions shall remain the sole and exclusive property of the Company, whether patentable or not.
(f) Employee shall execute and deliver to the Company such further instruments or documents as may be requested by the Company in order to effectuate the purposes of this Section 9.
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10. Injunction.
(a) In the event of a breach or a threatened breach of the provisions in this Agreement, the Company shall be entitled to specific performance, including, without limitation, an injunction restraining such breach, it being recognized that any injury arising from a breach would be irreparable and would have no adequate remedy at law; however, nothing herein shall be construed as prohibiting the Company from enforcing its rights under this Agreement (which are not intended to be exclusive) or from pursuing any other remedy available for such breach or threatened breach at law or in equity.
(b) In addition, in the event of an alleged breach or violation by Employee of Section 6 of this Agreement, the Non-Compete Period set forth therein shall be tolled until such breach or violation has been cured. In the event that an action is commenced due to an actual, alleged or threatened breach of this Agreement, all costs of the dispute resolution contemplated by this Section 10 (including, without limitation, the attorneys’ fees of the parties) shall be borne by the party who is the least successful in such dispute resolution, which shall be determined by the court by comparing (i) the position asserted by each party on all disputed matters taken together to (ii) the final decision of such presiding party on all disputed matters taken together.
11. Choice of Law and Jurisdiction.
(a) This Agreement shall be governed by, and construed in accordance with, the laws of the State of Florida, excluding choice of law principles.
(b) Employee consents to the exclusive jurisdiction of any state or federal court of competent jurisdiction located within Miami-Dade County in the State of Florida, and Employee irrevocably agrees that all actions or proceedings relating to this Agreement may be litigated in such courts. Employee irrevocably waives Employee’s right to object to or challenge the above selected forum on the basis of inconvenience or unfairness under 28 U.S.C. § 1404, or similar state or federal statutes.
12. Jury Trial Waiver. To the extent permitted by law, the parties agree to, and do hereby, waive trial by jury in any action, proceeding, or counterclaim brought by either of the parties against the other on any matter whatsoever arising out of or in any way connected with this Agreement or the parties’ performance hereunder, or any claim of damage resulting from any act or omission of the parties, or either of them, in any way connected with the Agreement.
13. Arbitration of Disputes. Should any Dispute arise, such Dispute shall be resolved by the dispute resolution procedures set forth herein, which procedures shall be exclusive and shall be final and binding.
(a) For purpose of this Agreement, the term “Dispute” means: (i) a contention by either party that this Agreement has been breached; (ii) a dispute as to the meaning or interpretation of this Agreement or any provision thereof; (iii) a dispute as to the validity or enforceability of this Agreement or any provision thereof; or (iv) a contention that the Company or any of its affiliates or their Employees violated any federal or state law (including common law) or statute regarding Employee’s employment, termination of employment, consideration for continued employment, or wages or benefits. Notwithstanding the foregoing, any disagreement over whether something constitutes an arbitrable Dispute shall be resolved by a court; the arbitrator shall not have jurisdiction to resolve such disputes unless the parties mutually agree to submit that dispute to the arbitrator.
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(b) A Dispute shall be brought to the attention of the other party in writing within six (6) months of the date the material facts giving rise to the Dispute first occurred. If the parties are unable to resolve the Dispute within thirty (30) days, the Dispute shall be processed and resolved by a single arbitrator in accordance with the National Rules for the Resolution of Employment Disputes. The place of the arbitration shall be within 35 miles of the Company’s principal place of business.
(c) Notwithstanding anything to the contrary in the National Rules for the Resolution of Employment Disputes, the Company shall pay the administrative fees due to the American Arbitration Association and all Disputes shall be processed on an individual basis between only the parties to this Agreement and not on a class, collective, private attorney general, or other representative basis absent mutual consent of the Parties.
(d) Nothing in this Agreement prohibits Employee from filing charges against the Company or with any federal, state, or local agency; however, Employee shall inform the agency of this Agreement if the underlying dispute or claim constitutes a Dispute.
(e) Disputes DO NOT INCLUDE the following types of claims and disputes:
ii. Claims seeking workers’ compensation or unemployment compensation benefits;
ii. Claims seeking benefit under an Employee benefit plan that provides its own claim procedures;
iii. Claims seeking equitable relief relating to the alleged breach of a restrictive covenant or confidentiality agreement or the alleged misappropriation of trade secrets; and
iv. Any other claims that, as a matter of law, the parties cannot agree to arbitrate.
14. Company Property. All rights, title and interest in all records, documents or files concerning the business of the Company, including, but not limited to, customer data, materials, processes, letters, Trade Secrets and Confidential Information, or other written or electronically recorded material, whether or not produced by Employee, shall be and remain the property of the Company. Upon termination of employment, Employee shall not have the right to remove any such records from the offices or premises of the Company even if such records are commingled with Employee’s personal records. In addition, Employee agrees to conduct a reasonably diligent search and return promptly to the Company all things of whatsoever nature that belong to the Company and all records (in whatsoever form, format or medium) containing or related to Trade Secrets and Confidential Information. If, following the termination of employment and a reasonably diligent search, Employee finds that he has inadvertently retained in his possession any things that belong to the Company or records containing or related to Trade Secrets and Confidential Information, then he shall promptly return same.
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15. Separateness; Construction. It is a desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any provision or clause of this Agreement, or portion thereof shall be held by any court or other tribunal of competent jurisdiction to be illegal, invalid, or unenforceable in such jurisdiction, the remainder of such provision shall not be thereby affected and shall be given full effect, without regard to the invalid portion. It is the intention of the parties that, if any court construes any provision or clause of this Agreement, or any portion thereof, to be illegal, void or unenforceable because of the duration of such provision or the area or matter covered thereby, such court shall reduce the duration, area, or matter of such provision, and, in its reduced form, such provision shall then be enforceable and shall be enforced.
16. Entire Agreement. This Agreement, and the Option Award Agreement executed of even date as this Agreement, contains the entire agreement between the parties pertaining to the terms of Employee’s employment, non-competition, trade secrets and confidential documents and information of the Company. No modification thereof shall be binding upon the parties unless the same is in writing signed by the respective parties.
17. Representations and Warranties. Employee hereby represents, warrants and agrees that: (a) Employee has the full power to enter into this Agreement and perform the services required of Employee as an Employee of the Company, without any restriction whatsoever; (b) in the course of performing services as an Employee of the Company, Employee will not violate the terms or conditions of any agreement between Employee and any third party or infringe or wrongfully appropriate any patents, copyrights, trade secrets or other intellectual property rights of any person or entity anywhere in the world; (c) Employee has not and will not disclose or use during his employment by the Company any confidential information that Employee acquired as a result of any previous employment or consulting arrangement or under a previous obligation of confidentiality; and (d) Employee has disclosed to the Company in writing any and all continuing obligations to others that require Employee not to disclose any information to the Company.
18. Assignment. This Agreement shall be binding upon and inure to the benefit of the Company, its successors in interest, or any other person, association, or entity which may hereafter acquire or succeed to all or substantially all of the business assets of the Company by any means, whether indirectly or directly, and whether by purchase, merger, consolidation, or otherwise. No such assignment shall relieve Employee of any of Employee’s obligations under this Agreement. Employee’s rights and obligations under this Agreement are personal and such rights, benefits, and obligations of Employee shall not be voluntarily or involuntarily assigned, alienated, or transferred by Employee, whether by operation of law or otherwise, without the prior written consent of the Company.
19. Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
20. Construction. The essential terms and conditions contained in this Agreement have been mutually negotiated between the parties hereto. No ambiguity in this instrument shall be construed or interpreted as against the drafter of this Agreement, as each party contributed to drafting of the provisions hereof.
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21. Code Section 409A.
(a) General. The intent of the parties is that the payments and benefits under this Agreement comply with or be excepted from Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. Each payment under this Agreement, including each installment payment, shall be considered a separate and distinct payment. For purposes of this agreement, each payment is intended to be excepted from Section 409A to the maximum extent provided as follows: (i) each payment made within the applicable 2½ month period specified in Treas. Reg. § 1.409A-1(b)(4) is intended to be excepted under the short-term deferral exception; post-termination medical benefits are intended to be excepted under the medical benefits exceptions as specified in Treas. Reg. § 1.409A-1(b)(9)(v)(B); and (iii) to the extent payments are made as a result of an involuntary separation, each payment that is not otherwise excepted under the short-term deferral exception or medical benefits exception is intended to be excepted under the involuntary pay exception as specified in Treas. Reg. § 1.409A-1(b)(9)(iii). With respect to any payment subject to Section 409A (and not excepted therefrom), if any, it is intended that each payment is paid on a permissible distribution event and at a specified time consistent with Section 409A. The Employee shall have no right to designate the date of any payment under this Agreement. Except as otherwise permitted under Section 409A, no payment hereunder shall be accelerated or deferred unless such acceleration or deferral would not result in additional tax or interest pursuant to Section 409A.
(b) Separation from Service. Notwithstanding anything in this Agreement to the contrary, any compensation or benefits payable under this Agreement that is designated under this Agreement as payable upon Employee’s termination of employment shall be payable only upon Employee’s “separation from service” with the Company and all of its controlled group members within the meaning of Section 409A and Treas. Reg. § 1.409A-1(h). Whether Employee has a separation from service will be determined based on all of the facts and circumstances and in accordance with the guidance issued under Section 409A.
(c) Specified Employee. Notwithstanding anything in this Agreement to the contrary, if Employee is deemed by the Company at the time of Employee’s Separation from Service to be a “specified Employee” for purposes of Section 409A, to the extent delayed commencement of any portion of the benefits to which Employee is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A, such portion of Employee’s benefits shall not be provided to Employee prior to the earlier of (i) the expiration of the six-month period measured from the date of Employee’s Separation from Service with the Company or (ii) the date of Employee’s death. Upon the first business day following the expiration of the applicable Section 409A period, all payments deferred pursuant to the preceding sentence shall be paid in a lump sum to Employee (or Employee’s estate or beneficiaries), and any remaining payments due to Employee under this Agreement shall be paid as otherwise provided herein.
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(d) Expense Reimbursements. Except as otherwise expressly provided herein, all taxable reimbursements of expenses, in-kind benefits and/or cash allowances/premiums provided or paid by the Company to the Employee under this Agreement shall be made in accordance with and subject to the following terms and conditions: (i) reimbursements shall only be made to the extent that the expense was actually incurred and reasonably substantiated; (ii) no reimbursement of any expense incurred in one taxable year will affect the amount available for reimbursement in any other taxable year; (iii) reimbursements of eligible expenses shall be made on or before the last day of the Employee’s taxable year following the taxable year in which the expense was incurred; and (iv) the right to reimbursement shall not be subject to liquidation or exchange for another benefit. To the extent required by applicable law, the Company will annually report as taxable wages and/or impute income to the Employee the value of any taxable benefits and/or payments to the Employee.
(e) Acknowledgement. Notwithstanding any provision of this Agreement to the contrary, Employee acknowledges and agrees that the Company and its Employees, officers, directors, subsidiaries and affiliates shall not be liable for, and nothing provided or contained in this Agreement will be construed to obligate or cause the Company and/or its Employees, officers, directors, subsidiaries and affiliates to be liable for, any tax, interest or penalties imposed on Employee related to or arising with respect to any violation of Section 409A.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date set forth above.
Longeveron, LLC
By: | /s/ Geoff Green | |
Name: | Geoff Green | |
Title: | Chief Executive Officer | |
Date: | 12/19/2020 |
Employee
/s/ James Clavijo | |
Date: 12/18/2020 |
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SCHEDULE A
The Chief Financial Officer/Treasurer (“CFO”) is an Executive-level role, with the holder being responsible for the finances of the Company. As a corporate officer position, the CFO reports directly to the Chief Executive Officer (“CEO”) and shall maintain the following responsibilities under the supervision of the President, consistent with the Company’s Business Plan and stated objectives, and subject to the performance metrics below:
● | The CFO agrees to devote his full business time, attention, skill and efforts to the faithful performance and discharge of his duties and responsibilities as CFO in conformity with the highest professional standards, in a prudent and workmanlike manner and in a manner consistent with the obligations imposed under applicable law. |
● | Provide leadership, direction and management of the finance and accounting (and team when applicable) in all areas of Company business |
● | Provide strategic recommendations to the President and members of the executive management team |
● | Maintain a system of policies and procedures that impose an adequate level of control over finance, accounting and treasury activities |
● | Manage the processes for financial forecasting and budgets, and overseeing the preparation of all financial reporting and year-end tax planning |
● | Advising on long-term business and financial planning |
● | Ensure full transparency over the financial performance of the company |
● | Provide advice on how to increase revenue and reduce costs, which includes the Company’s Bahamas and other foreign or off shore business activities, Contract Manufacturing, Grant Awards, etc. |
● | Effectively and clearly communicate risks in a timely manner |
● | Propose action plans to ensure that annual financial objectives are attained |
● | Support President and other Executives/Senior management with preparation of periodic financial reports that can be shared with the board, stockholders, and financial auditors |
● | Manage existing grant award finances according to awarded budgets, and related financial reporting |
● | Assist in developing the budget for future Company grant applications. |
● | Forecast cash flow positions, related financing needs, and funds available for operations and investment |
● | Ensure that sufficient funds are available to meet ongoing operational and capital investment requirements |
● | Maintain banking relationships |
● | Arrange for equity financing and debt financing |
Specific CFO Metrics tied to compensation:
● | Employee agrees that compensation may be subject to approval by a Board of Directors-appointed Compensation Committee. Beginning on the Effective Date of this Agreement. |
o | For every $5.0 million (gross) invested in the Company, Employee will receive a cash bonus of $15,000.00, paid on the first business day of the first quarter that follows the receipt of the investment funds. |
o | Salary adjustments associated with fund raising: |
● | From and after the date December 1, 2020 until such time as Company becomes a publicly listed company, if at all, Employee’s annual base salary will be increased to $210,000 per annum, notwithstanding paragraph 4(a) of this Agreement. However, until such time as Company has raised at least $10.0 million (gross) after the Effective Date of this Agreement, Employee shall continue to be paid at the $150,000 annual base salary referenced in paragraph 4(a) of this Agreement, and the $60,000 difference between the $150,000 base salary and the $210,000 adjusted base salary shall be accrued on a monthly basis and not paid to Employee until the quarter following the completion and receipt of a capital raise of $10.0 million or more after the Effective Date of this Agreement. |
● | If the Company becomes a publicly listed company, Employee base salary will increase to $250,000 beginning on the date the company becomes a publicly listed company. |
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EXHIBIT A
FORM OF RELEASE
SEPARATION AGREEMENT AND GENERAL RELEASE
This Separation Agreement and General Release (“Agreement”) is between Longeveron, LLC (“Company”) and James Clavijo (“Employee”).
WHEREAS, the Company terminated Employee’s employment on (“Termination Date”);
WHEREAS, the Company is willing to pay Employee certain severance in exchange for a release of claims and other commitments.
NOW THEREFORE, intending to be legally bound and for good and valuable consideration, Company and Employee agree as follows:
1. Recitals. The foregoing recitals are true and correct and incorporated herein.
2. Termination of Employment.
(a) The Company timely paid or will timely pay Employee, in accordance with its normal payroll and other procedures (or as otherwise required by law), for (i) Employee’s work through the Termination Date, (ii) Employee’s accrued but unused vacation pay for calendar year _____, and (iii) Employee’s properly reported and reimbursable business expenses, less all required tax withholdings and other deductions.
(b) Employee’s eligibility to participate in the Company’s group insurance and other welfare benefit plans and programs ceased as of the Termination Date, except that Employee’s group insurance medical benefits ceased or will cease on ____________, unless otherwise extended under COBRA.
(c) The foregoing payments and benefits have been or will be provided to Employee regardless of whether Employee signs or revokes this Agreement.
3. Severance Benefits.
(a) The Company will pay Employee severance, after the first year of employment (date employment began with Company is 24 June 2019), in an amount equal to 6 months of the Employee’s then existing annual Base Salary. (excluding bonuses, commissions, incentive payments and any other form of supplemental compensation) (a total of $ ________) (“Severance”), less all required tax withholdings and other deductions. The Company will pay the Severance to Employee within fourteen (14) days after this Agreement becomes effective (as described below), but in no event later than the sixtieth (60th) day following the Termination Date. Employee shall accrue one additional month of Severance for each additional full year of employment after the Initial Term, up to a maximum of twelve (12) months; and
(b) In the event that a change of control is the cause for termination of employment, severance shall be accelerated to provide for the full payment of twelve (12) months of severance; and
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(c) If Employee timely elects to continue Employee’s group health benefits under COBRA, the Company will reimburse Employee, upon presentment of satisfactory proof of payment, the amount of Employee’s paid COBRA premiums for two (2) months.1
4. Release of Claims.
(a) Employee, on behalf of Employee and Employee’s heirs and personal representatives, hereby releases and forever discharges the Company, its direct and indirect subsidiaries, divisions, parents, affiliates, companies under common control of any of the foregoing, predecessors, successors, and assigns, and its and their past, present and future shareholders, partners, principals, managers, members, directors, officers, Employees, agents, attorneys, insurers, Employee benefit plans, trustees and all others acting in concert with them (collectively, the “Released Parties”), from any and all claims, actions, suits, proceedings, complaints, causes of action, grievances, debts, costs and expenses (including attorney’s fees), at law or in equity, known or unknown, suspected or unsuspected, whether legal or equitable, fixed or contingent, liquidated or un-liquidated, asserted or un-asserted, whether based in common law, statute, contract, warranty, tort or otherwise, that Employee has or may have through the date Employee signs this Agreement, arising out of, based on, or relating in any way to any acts or omissions that occurred, in whole or in part, prior to the time that Employee signs this Agreement, including, but not limited to, claims that arise out of, result from, or are in any manner related to Employee’s employment with the Company or separation from the Company, claims that arise out of, result from, or are in any manner related to the negotiation and execution of this Agreement, claims for wages, salary, commission, Employee benefits, vacation pay or other paid time off, severance pay, pension or profit sharing benefits, health or welfare benefits, bonus compensation, commissions, deferred compensation or other remuneration arising out of the employment relationship with the Company, claims for breach of any express or implied contract, wrongful termination, retaliation, invasion of privacy, negligence, gross negligence, misrepresentation, express or implied duty of good faith and fair dealing, fraud, refusal to perform an illegal act, whistleblower, malicious prosecution, abuse of process, defamation of character, personal injury, intentional or negligent infliction of emotional distress, discrimination, retaliation or harassment based on race, religion, sex, marital status, genetic information, sexual stereotypes, gender identity, age, color, handicap and/or disability, national origin or any other protected class and any other claim based on or related to Employee’s employment with the Company or Employee’s departure therefrom, including, but not limited to, claims for violation of the Employee Retirement Income Security Act of 1974, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Older Workers’ Benefit Protection Act of 1990, the Americans with Disabilities Act, the Americans With Disabilities Act Amendments Act, the Worker Adjustment and Retraining Notification Act, the Equal Pay Act of 1963 as amended, the Ledbetter Fair Pay Act, the Civil Rights Acts of 1866, 1871 and 1991, the Immigration Reform and Control Act, the Rehabilitation Act of 1973, the Occupational Safety and Health Act of 1970, the Fair Credit Reporting Act, the Family and Medical Leave Act, the False Claims Act, the Florida Civil Rights Act of 1992, the Florida Whistleblower Act (Fla. Stat. §448.101-448.105), the Florida Constitution, the Florida False Claims Act, the Florida Workers Compensation Retaliation Statute (Fla. Stat. §440.205), the Florida Wage Discrimination Law (Fla. Stat. §448.07), the Florida Equal Pay Law, the Florida AIDS Act (Fla. Stat. §§110.125, 381.00 and 760.50), Florida OSHA (Fla. Stat. §442.018(2)), Florida Wage Payment Laws, Florida Discrimination on the Basis of Sickle Cell Trait Law, the Florida Family and Medical Leave Act, and any other international, federal, state or local law, ordinance, Employee order, code, rule, regulation, or statute, all as amended.
1 Be aware that if you cancel COBRA coverage in the future, then that may be deemed a voluntary relinquishment (and not a “qualifying event”) and, if so, this can delay the time when you could acquire coverage through an Affordable Care Act marketplace plan.
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(b) Notwithstanding anything in this Agreement to the contrary, the release set forth in Section 4(a) does not and is not intended to release any claims that cannot be released by law, such as claims for vested pension benefits or claims for workers’ compensation benefits, or release any rights to a defense or indemnification from the Company or its insurers for actions Employee took or failed to take during the course of Employee’s employment with the Company.
(c) Notwithstanding anything in this Agreement to the contrary, the release set forth in Section 4(a) does not and is not intended to prevent, restrict or otherwise interfere with Employee’s right to (i) file a charge or complaint with any appropriate federal, state or local agency or court, (ii) testify, assist, participate in, or cooperate with the investigation of any charge or complaint pending before or being investigated by such agency or court, (iii) enforce this Agreement, (iv) seek a judicial determination of the validity of the release of Employee’s rights under the Age Discrimination in Employment Act, or (v) report violations of any law administered by the Securities and Exchange Commission (“SEC”) or Occupational Safety and Health Administration (“OSHA”), receive any financial awards from the SEC or OSHA for reporting possible violations of federal law or regulation, or make other disclosures protected under the whistleblower provisions of state or federal law or regulation.
(d) If an administrative agency or court assumes jurisdiction over any charge or complaint involving claims that are released by Section 4(a) of this Agreement, Employee hereby agrees to not, directly or indirectly, accept, recover or receive any resulting monetary damages or other equitable relief that otherwise would be due, and Employee hereby expressly waives any rights to any such recovery or relief, except as permitted by Section 4(c)(v).
5. Time Limits, Revocation and Effective Date.
(a) Employee acknowledges and agrees that Employee received this Agreement on the Termination Date. Employee has up to twenty-one (21) days from the date Employee received this Agreement to consider its terms. Any changes to this Agreement during that period, whether material or not, will not extend the 21-day period. If Employee signs this Agreement, Employee may still revoke Employee’s acceptance of the Agreement for up to seven (7) days after Employee signs it, by notifying the Company in writing before the expiration of that seven-day period. The written notice should be delivered in person or, if sent by mail, postmarked no later than the 7th day and mailed to:
[Insert name and address.]
(b) If not revoked, this Agreement will become effective on the 8th day after Employee signs it. If Employee does not sign this Agreement within the 21-day period, or if Employee timely revokes this Agreement during the seven-day revocation period, this Agreement will not become effective and Employee will not be entitled to the Severance Benefits provided for in Section 3.
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6. Consult with an Attorney. The Company hereby advises Employee to consult with an attorney of Employee’s choice (at Employee’s expense) before Employee signs this Agreement. The Company will rely on Employee’s signature on this Agreement as Employee’s representation that Employee read this Agreement carefully before signing it, and that Employee has a full and complete understanding of its terms.
7. Representations. By signing below, Employee represents and agrees that the following are true and correct:
(a) Except for the wages and benefits to be paid to Employee regardless of whether Employee signs this Agreement, as described in Section 2, the Severance Benefits to be paid under this Agreement, and any vested pension benefits Employee may be entitled to receive, the Company does not owe Employee any other wages, compensation, or benefits of any kind or nature;
(b) The Company has provided Employee with all leave to which Employee was entitled and, to the best of Employee’s knowledge, Employee is not suffering from any work- related injuries;
(c) Employee has not received, is not receiving, and has not applied for Medicare:
(d) Employee has notified the Company of any charge or complaint Employee filed with any agency or court that is still pending before such court or agency;
(e) The Severance Benefits described in Section 3 are things that Employee is not entitled to receive in the absence of this Agreement;
(f) Employee has returned to the Company all property and information that belongs to the Company, including, but not limited to the following (where applicable): automobile; computers (desktop and laptop); phone; tablet; iPad; devices (including usb, external hard drives, etc.); handheld devices; keys, access cards, passwords, and/or ID cards; all electronically stored and paper copies of all financial data, customer information, business plans and reports, and Company files; and all records, customer lists, written information, forms, plans, and other documents, including electronically stored information. Employee shall search Employee’s electronic devices, device back-ups, residence, and automobile and agrees that by signing below, Employee has disclosed all Company property in Employee’s possession or control and returned such property as directed by Company; and
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(g) Employee has not asserted any claim for sexual harassment or sexual abuse by any of the Released Parties and is not aware of any facts supporting such a claim.
(h) Employee is not aware of any violations of the law or Company agreements or policies, and is not aware of wrongdoing by the Company or its officers, including any alleged corporate fraud, that should be reported to authorities.
(i) Employee hereby voluntarily resigns as an Officer and/or Director of the Company or any Released Party effective as of the Termination Date.
8. No Re-employment. Employee acknowledges and agrees that he shall not knowingly re-apply for employment with the Released Parties, nor will Employee knowingly accept any employment or otherwise work for the Released Parties. Further, Employee agrees that his forbearance to seek future employment with the Released Parties is purely contractual and is in no way involuntary, discriminatory, retaliatory, or in violation of any contract or policy of the Released Parties. If Employee applies for employment with the Released Parties, the Released Parties are not under any obligation to process or otherwise act upon such application.
9. Confidentiality. Employee will keep this Agreement and its terms (other than the fact that Employee was terminated on the Termination Date) confidential and will not disclose such information to anyone other than Employee’s immediate family and professional advisors, each of whom must, as a condition to the disclosure, agree to keep the information confidential. Employee will be responsible for any breach of this Section by Employee’s immediate family members and professional advisors. Notwithstanding the foregoing, this Agreement does not prohibit Employee from (a) providing truthful testimony in response to compulsory legal process, (b) participating or assisting in any investigation or inquiry by a governmental agency acting within the scope of its statutory or regulatory jurisdiction, or (c) making truthful statements in connection with any claim permitted to be brought by Employee under Sections 4(b) or (c).
10. Confidential Information.
(a) Employee will not disclose to any third parties any of the trade secrets and other confidential proprietary information of the Company, including, but not limited to, information regarding the Company’s operations, products, services, suppliers, customers, research, development, new products, marketing, marketing plans, business plans, budgets, finances, licenses, prices, and costs (“Confidential Information”) without the express written consent of the Company, which consent may be withheld by the Company in its sole and absolute discretion. Notwithstanding the foregoing, this Agreement does not prohibit Employee from disclosing Confidential Information (i) as part of truthful testimony in response to compulsory legal process, (ii) while participating or assisting in any investigation or inquiry by a governmental agency acting within the scope of its statutory or regulatory jurisdiction, (iii) to a government official or to an attorney for the purpose of reporting or investigating a suspected violation of law, in conformity with the Defend Trade Secrets Act, or (iv) in a complaint or other document filed in a lawsuit or other legal proceeding, so long as such filing is made under seal and in conformity with the Defend Trade Secrets Act.
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(b) Employee’s obligations under this Section include, but are not limited to, any and all Confidential Information the Company provided to Employee, Employee developed on behalf of the Company, or to which Employee had access, as well as information third parties provided to the Company that the Company is obligated to keep confidential.
11. Applicable Law; Jurisdiction and Venue.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without giving effect to the principles of conflicts of law.
(b) Employee consents to the exclusive jurisdiction of any state or federal court of competent jurisdiction located within Miami-Dade County in the State of Florida, and Employee irrevocably agrees that all actions or proceedings relating to this Agreement may be litigated in such courts. Employee irrevocably waives Employee’s right to object to or challenge the above selected forum on the basis of inconvenience or unfairness under 28 U.S.C. § 1404 or similar state or federal statutes.
12. Entire Agreement; Other Agreements. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof, and no representation, promise, or agreement, oral or written, relating hereto that is not contained herein shall be of any force or effect. Moreover, if Employee entered in any other enforceable agreements with the Company that contain provisions that are not in direct conflict with the provisions of this Agreement, those other agreements shall remain in effect and the terms of this Agreement shall be in addition to such other such agreements.
13. No Disparagement. Employee will not make any defamatory or intentionally disparaging statements to any third parties regarding the Company, its services, or any of its Employees, officers, or owners. Notwithstanding the foregoing, this Agreement does not prohibit Employee from (a) providing truthful testimony in response to compulsory legal process,
(b) participating or assisting in any investigation or inquiry by a governmental agency acting within the scope of its statutory or regulatory jurisdiction, or (c) making truthful statements in connection with any claim permitted to be brought by Employee under Sections 4(b) or (c).
14. No Admissions. Neither the execution of this Agreement nor the performance of its terms and conditions shall be construed or considered by any party or by any other person as an admission of liability or wrongdoing by either party.
15. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be considered an original instrument and all of which together will be considered one and the same agreement and will become effective when all executed counterparts have been delivered to the respective parties. Delivery of executed pages by facsimile transmission or e-mail will constitute effective and binding execution and delivery of this Agreement.
16. Assignment. This Agreement shall be binding upon and shall inure to the benefit of the Company and its respective successors and assigns, and any such successors and assigns shall be considered third-party beneficiaries of this Agreement. Employee has no rights to assign this Agreement.
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17. Acknowledgements. Employee hereby acknowledges that Employee (a) has read this Agreement and understands all of its provisions; and (b) voluntarily enters into this Agreement, which is contractual in nature and contains a general release of claims.
18. Severability. If any term, provision or Section of this Agreement is determined by a court of competent jurisdiction to be invalid or unenforceable for any reason, such determination shall be limited to the narrowest possible scope in order to preserve the enforceability of the remaining portions of the term, provision or Section, and such determination shall not affect the remaining terms, provisions or paragraphs of this Agreement, which shall continue to be given full force and effect.
19. 409A. The provisions of this Agreement will be administered, interpreted and construed in a manner intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended, the regulations issued thereunder, or any exception thereto (or disregarded to the extent such provision cannot be so administered, interpreted, or construed). Each payment under this Agreement shall be considered a separate and distinct payment. Employee shall have no right to designate the date of any payment under this Agreement. Nothing contained in this Agreement shall constitute any representation or warranty by the Company regarding compliance with Section 409A. The Company has no obligation to take any action to prevent the assessment of any tax under Section 409A on any person and neither the Company, nor its subsidiaries or affiliates, nor any of their Employees, officers, directors or other representatives shall have any liability to Employee with respect thereto.
20. Further Assurances. Employee and the Company each agree to execute and deliver, after the date hereof, without additional consideration, any additional documents, and to take any further actions, as may be necessary to fulfill the intent of this Agreement and the transactions contemplated hereby.
21. Cooperation.
(a) Employee will (i) cooperate with the Company in all reasonable respects concerning any transitional matters which require Employee’s assistance, cooperation or knowledge, including communicating with persons inside or outside the Company as directed by the Company, and (ii) in the event that the Company (or any of its affiliates or other related entities) becomes involved in any legal action relating to events which occurred during Employee’s employment with the Company, cooperate to the fullest extent possible in the preparation, prosecution or defense of their case, including, but not limited to, the execution of affidavits or documents, testifying or providing information requested by the Company.
(b) To the extent that Employee incurs (i) travel-related expenses, (ii) out-of- pocket expenses, and/or (iii) loss of wages as a result of Employee’s cooperation with the Company as contemplated by this Section 21 (“Cooperation Expenses”), the Company will promptly reimburse Employee (or will cause Employee to be promptly reimbursed) for such Cooperation Expenses, provided they are reasonable and were approved by the Company in advance.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date(s) set forth below.
Longeveron, LLC
By | ||
Name | ||
Title | ||
Date |
Date |
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EXHIBIT B
EMPLOYEE’S PRIOR INVENTIONS
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Exhibit 10.5
LEASE AGREEMENT
FROM
WEXFORD
MIAMI, LLC,
LANDLORD
TO
LONGEVERON,
LLC,
TENANT
PREMISES:
1951
NW 7TH AVENUE,
MIAMI, FL 33136
DATED: October 6, 2015
Table of Contents
Page | ||
1. | PREMISES DEMISED. | 1 |
2. | TERM. | 2 |
3. | RENTAL. | 2 |
4. | POSSESSION AND COMMENCEMENT DATE. | 10 |
5. | USE. | 12 |
6. | TENANT’S CARE OF THE PREMISES. | 14 |
7. | LANDLORD’S SERVICES AND OBLIGATIONS. | 18 |
8. | HAZARDOUS WASTES/ENVIRONMENT AL COMPLIANCE. | 20 |
9. | ASSIGNMENT AND SUBLEASE. | 24 |
10. | DAMAGE OR DESTRUCTION. | 28 |
11. | CONDEMNATION. | 30 |
12. | INSURANCE. | 30 |
13. | INDEMNIFICATION AND HOLD HARMLESS. | 34 |
14. | SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT. | 35 |
15. | LANDLORD’S RIGHT OF ENTRY. | 37 |
16. | TENANT’S DEFAULT; LANDLORD’S REMEDIES. | 38 |
17. | HOLDING OVER. | 41 |
18. | QUIET ENJOYMENT. | 42 |
19. | MUTUAL REPRESENTATION OF AUTHORITY. | 42 |
20. | LANDLORD’S LIABILITY. | 42 |
21. | REAL ESTATE BROKERS. | 43 |
22. | ATTORNEYS’ FEES. | 43 |
23. | ESTOPPEL CERTIFICATE. | 43 |
24. | NO RECORDING. | 44 |
25. | WAIVERS. | 44 |
26. | GOVERNING LAW. | 44 |
27. | NOTICES. | 45 |
28. | COUNTERPARTS, FAX AND E-MAIL SIGNATURES. | 46 |
29. | ENTIRE AGREEMENT. | 46 |
30. | SEVERABILITY AND INTERPRETATION. | 46 |
31. | HEIRS, SUCCESSORS, AND ASSIGNS - PARTIES. | 47 |
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32. | SURVIVAL. | 47 |
33. | FORCE MAJEURE. | 48 |
34. | TIME OF THE ESSENCE. | 48 |
35. | HEADINGS. | 48 |
36. | RULES AND REGULATIONS. | 48 |
37. | LEASE BINDING UPON DELIVERY; NO OPTION. | 48 |
38. | TENANT’S FINANCIAL STATEMENTS. | 48 |
39. | RENEWAL OPTION. | 49 |
40. | GROUND LEASE PROVISIONS. | 50 |
41. | SECURITY DEPOSIT. | 51 |
42. | PARKING. | 54 |
43. | EB-5 / REPORTING. | 54 |
44. | SIGNAGE. | 55 |
45. | RIGHT OF FIRST REFUSAL. | 56 |
46. | RIGHT OF FIRST OFFER. | 57 |
47. | RELOCATION TO NEW BUILDING. | 58 |
SCHEDULES
1 | Payment Instructions |
EXHIBITS
A | Drawing of the Premises |
B | The Land |
C-1 | Work Letter |
C-2 | Form of Additional TI Allowance Acceptance Letter |
C-3 | Insurance Requirements |
C-4 | Form of Lien Waiver |
D | Rules and Regulations |
E | Form of Rent Commencement Certificate |
F | Hazmat Rules |
G | Form of Report |
H | Letter of Credit |
I | Form of Estoppel Certificate |
J | Reserved Parking |
K | Temporary Banner |
L | Existing Building Systems and Equipment |
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LEASE AGREEMENT
THIS LEASE AGREEMENT made this 6th day of October 2015 (the “Effective Date”) between WEXFORD MIAMI, LLC., a Delaware limited liability company (“Landlord”) and LONGEVERON, LLC, a Delaware limit liability company (“Tenant”).
W I T N E S S E T H:
1. PREMISES DEMISED.
(a) Landlord leases and demises to Tenant, and Tenant rents and leases from Landlord, the following described space (the “Premises”), which Premises are shown on Exhibit A attached hereto and made a part hereof and are located in that certain research and office building commonly known as University of Miami Life Science & Technology Park Building #l, Miami, Florida (the “Building”):
Floor(s): | Fifth (5th) Floor |
Rentable Square Footage (“RSF”): | Approximately 15,000 RSF |
The Building is located upon the land more particularly described on Exhibit B attached hereto and made a part hereof (the “Land”), which is located in the University of Miami Life Science & Technology Park (the “Park”) and which Land has been ground leased to Landlord by the University of Miami and 7th Avenue Market, LLC (collectively, “Ground Lessor”) pursuant to a Ground Lease Agreement dated April 16, 2009 (as it has been and may hereafter be amended, the “Ground Lease”). The Land, together with the Building and the Common Areas (as hereinafter defined), is hereinafter collectively referred to as the “Property”.
(b) The parties agree that (i) the Building contains 251,80l RSF, (ii) the Premises contains approximately 15,000 RSF, and (iii) the “Tenant’s Pro Rata Share” hereunder shall equal 5.96%.
(c) The Premises shall include the appurtenant right to use, in common with others, the public lobbies, lavatories, entrances, stairs, corridors, elevators, and other public portions of the Building and the sidewalks, driveways, access roads, parking areas and garages, and other Park amenities available to the Landlord (the “Common Areas”), subject in all instances and under all circumstances to (i) the terms and conditions of this Lease, including, without limitation, the limitations and conditions regarding parking set forth in Section 42 hereof, (ii) any restrictions, limitations obligations or covenants imposed on Landlord relating to any of the foregoing areas, (iii) that certain reciprocal easement agreement dated February19, 2010 (as the same may be amended, the “REA”), and (iv) Landlord’s right to alter, improve, modify and, to the extent necessary, temporarily block off access to, portions of such Common Areas to the extent necessary and reasonable to do so, and further subject to the provisions of this Lease. The Common Areas, and the use thereof and access thereto through the Premises for the purposes of operation, maintenance, inspection, display and repairs are hereby reserved to Landlord. No easement for light, air or view is granted or implied hereunder, and the reduction or elimination of Tenants light, air or view will not affect Tenant’s liability or obligations under this Lease.
(d) Upon written request of Tenant received by Landlord no later than thirty (30) days after Substantial Completion of the Tenant Improvements (as hereinafter defined) or upon written request of Landlord received by Tenant no later than thirty (30) days after Substantial Completion of the Tenant Improvements, the Premises (as completed in accordance with the Tenant Improvement Construction Documents (as defined in Exhibit C attached hereto and made a pan hereof (the “Work Letter”)), shall be measured by Landlord’s third-party architect (the “Architect”) using the 1996 BOMA, ANSI Z65.1 standard for rentable square footage. The Architect’s determination of the RSF of the Premises shall be binding upon the parties. Upon receipt of such Architect’s determination the parties shall amend this Lease to reflect the correct size of the Premises and “Tenant’s Pro Rata Share” hereunder which shall be based on the RSF of the Premises compared to the RSF of the Building.
(e) Tenant acknowledges and agrees that this Lease is subject and subordinate to all of the terms and conditions of the Ground Lease and all matters recorded against the Land and to any and all modifications, extensions or replacements thereof now or hereinafter occurring. Landlord hereby represents that it has provided to Tenant a true and correct copy of the Ground Lease, and during the Term will provide true and correct copies of any and all modifications, extensions or replacements thereof. Landlord represents and warrants that it has the right and authority to enter into this Lease with Tenant. Landlord shall have the right to enter into any modifications, extensions or replacements of the Ground Lease in its sole discretion, provided that Tenant shall not be bound by any such modification, extension or replacement to the extent that it materially and adversely affects the rights and obligations of Tenant under this Lease. Tenant agrees to perform all of the obligations of Landlord as tenant under the Ground Lease to the extent applicable to the Premises.
2. TERM.
(a) The term of this Lease (the “Term”) shall commence on the Term Commencement Date (as hereinafter defined) and shall expire on 11:59 p.m. the last day of the one hundred twenty-sixth (126th) full calendar month after the Term Commencement Date (as hereinafter defined) (the “Expiration Date”), unless sooner terminated as herein provided. This Lease shall be effective and enforceable between Landlord and Tenant upon the Effective Date, whether such Effective Date occurs on, prior to, or after the Term Commencement Date.
(b) “Lease Year” as used herein shall mean (i) each and every consecutive twelve (12) month period during the Term of this Lease, or (ii) in the event of Lease expiration or termination, the period between the last complete Lease Year and said expiration or termination. The first such twelve (12) month period shall commence on the Term Commencement Date. If the Tern Commencement Date is any day other than the first day of the month, then the first Lease Year shall include the partial month in which the Term Commencement Date occurs and the next consecutive twelve (12) months.
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3. RENTAL.
(a) Base Rental. Tenant shall pay to Landlord at the address set forth in the payment instructions attached hereto as Schedule 1, or at such other place as Landlord may designate in writing, without demand, deduction or setoff, an annual base rental (said rent, as the same may be adjusted from time to time, is herein referred to as the “Base Rental”), due and payable in equal monthly installments (the “Monthly Base Rental”) in advance commencing on the Tern Commencement Date and continuing on the first (1st) day of each calendar month during the Term. The annual Base Rental and monthly Base Rental for each Lease Year falling within the Term shall be in amounts as set forth below:
Period | Base Rental/RSF | Annual Base Rental |
Monthly
Bose Rental |
|||||||||
Lease Year l | $ | 34.00 | $ | 510,000.00 | $ | 42,500.00 | ||||||
Lease Year2 | $ | 34.85 | $ | 522,750.00 | $ | 43,562.50 | ||||||
Lease Year 3 | $ | 35.72 | $ | 535,800.00 | $ | 44,650.00 | ||||||
Lease Year4 | $ | 36.61 | $ | 549,150.00 | $ | 45,762.50 | ||||||
Lease Year 5 | $ | 37.53 | $ | 562,950.00 | $ | 46,912.50 | ||||||
Lease Year 6 | $ | 38.47 | $ | 577,050.00 | $ | 48,087.50 | ||||||
Lease Year 7 | $ | 39.43 | $ | 591,450.00 | $ | 49,287.50 | ||||||
Lease Year 8 | $ | 40.42 | $ | 606,300.00 | $ | 50,525.00 | ||||||
Lease Year 9 | $ | 41.43 | $ | 621,450.00 | $ | 51,787.50 | ||||||
Lease Year l0 | $ | 42.46 | $ | 637,050.00 | $ | 53,087.50 |
Should this Lease commence on other than the first (1st) day or terminate at any time other than the last day of a calendar month, the amount of Base Rental due from Tenant shall be proportionately adjusted based on that portion of the month that this Lease is in effect. Tenant shall also pay all other sums of money that shall become due from Tenant under this Lease other than Base Rental (including, without limitation, Tenant’s Pro Rata Share of Operating Expenses and Taxes, parking fees, taxes, fees and charges for Tenant Utilities (as hereinafter defined), indemnification payments, and excess tenant improvement costs) (“Additional Rent”) without deduction, offset or counterclaim within the time periods set forth herein, and if no such period is established, then within thirty (30) days of receipt of Landlord’s written demand therefor containing the amount due and a reasonably detailed statement as to the nature of such Additional Rent. As used in this Lease, “Rent” shall mean Base Rental and Additional Rent.
(b) Notwithstanding the foregoing, the Base Rental (but not any Additional Rent) shall be abated for the first six (6) calendar months of the Term. Upon the occurrence of any Event of Default by Tenant under this Lease that is declared by Landlord to be an Event of Default and that continues beyond applicable notice and cure periods, and as a result of which Landlord exercises any of its rights or remedies under Section 16 of this Lease, the abatement of Base Rental provided herein shall automatically and forever terminate, and, from and after such Event of Default, Tenant shall be required to pay the full Base Rental provided herein without any abatement whatsoever.
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(c) Triple Net Lease. This is a “triple net” lease. Tenant’s payment of Rent shall be completely net to Landlord so that this Lease yields to Landlord the net annual Base Rental and Tenant shall pay any and all Base Rental. Additional Rent and costs, expenses and obligations of every kind and nature whatsoever relating to the Premises without setoff, deduction, counterclaim or abatement, except as specifically and expressly (and not impliedly) provided in this Lease. Except as otherwise expressly set forth in the Lease, Tenant’s obligation to pay Rent shall not be discharged or otherwise affected by (i) any Legal Requirements now or hereafter applicable to the Premises, (ii) any other restriction on Tenant’s use, (iii) except as expressly provided herein, any casualty or taking or (iv) any other occurrence; and Tenant waives all rights now or hereafter existing to terminate e or cancel this Lease or quit or surrender the Premises or any part hereof, or to assert any defense in the nature of constructive eviction to any action seeking to recover rent. Tenant’s obligation to pay Rent with respect to any period or obligations arising, existing or pertaining to the period prior to the date of the expiration or earlier termination of the Term of this Lease shall survive any such expiration or earlier termination; provided, however, that nothing in this sentence shall in any way affect Tenant’s obligations with respect to any other period.
(d) Payment of Operating Expenses and Taxes.
(i) Upon the Term Commencement Date, and then at least thirty (30) days prior to each subsequent calendar year during the Term, Landlord shall advise Tenant in writing of its reasonable estimate of Tenant’s Pro Rata Share of the annual Operating Expenses for each calendar year and Taxes for each calendar year. Commencing on the Term Commencement Date and continuing on the first day of each calendar month thereafter during the Term, Tenant shall pay as Additional Rent, one-twelfth (1/12th) of the estimated Tenant’s Pro Rata Share of such Operating Expenses and Taxes concurrently with the Monthly Base Rental payment.
(ii) Within one hundred five (105) days after the close of each calendar year, Landlord shall deliver to Tenant an itemized statement prepared by Landlord’s property management company or chief operating officer, or by a certified public accountant (“Landlord’s Statement”) showing in reasonable detail the (A) actual Operating Expenses and Taxes for the previous year broken down by component expenses and, upon the request of Tenant, a copy of the applicable tax bill; (B) Tenant’s Pro Rata Share of such amounts; (C) the amount paid by Tenant during the year towards Operating Expenses and the amount paid by Tenant during the year towards the Taxes; and (D) the amount Tenant owes to Landlord, or the amount of the refund Landlord owes to Tenant on account of any underpayment or overpayment by Tenant. Any such amount due from Tenant to Landlord shall be paid within twenty (20) days after receipt of the most recent Landlord’s Statement. Any such refund due from Landlord to Tenant shall be credited against the next due payment of the estimated Tenant’s Pro Rata Share of Operating Expenses and Taxes or, if at the end of the Term, refunded to Tenant.
(iii) Landlord’s failure to submit a Landlord’s Statement to Tenant within one hundred five (105) days after the expiration of any calendar year shall not affect Tenant’s obligations to pay Tenant’s Pro Rota Share of Operating Expenses and Taxes.
(iv) If the Building is less than ninety-five percent (95%) occupied during any calendar year or pan thereof, Operating Expenses shall include all costs and expenses that Landlord reasonably determines that it would have paid or incurred during such calendar year if the Building had been ninety-five percent (95%) occupied. Upon request, Landlord shall provide reasonable details supporting Landlord’s calculation of these expenses.
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(e) Tenant shall also pay (i) before any penalties or fines are assessed to the appropriate governmental authority any use and occupancy tax in connection with the Premises. In the event Landlord is required by law to collect such tax, Tenant shall pay such use and occupancy tax to Landlord as Additional Rent within twenty (20) days of demand and Landlord shall remit any amounts so paid to Landlord to the appropriate governmental authority in a timely fashion and shall provide Tenant with a record of such payment within twenty (20) days following a request from Tenant, and (ii) Tenant shall also pay to Landlord the applicable state sales tax on all Rent (including without limitation, the Parking Fees (hereinafter defined)) simultaneously with the payment by Tenant of the Rent as otherwise required by applicable legal Requirements.
(f) For the purposes hereof, the following definitions shall apply:
(i) “Operating Expenses” shall mean:
(A) All costs and expenses incurred or made by Landlord or charged to Landlord in the operation and management of the Property, exclusive of Taxes (as hereinafter defined). Operating Expenses shall expressly include, without limitation, (i) costs of cleaning, security, janitorial service, rubbish removal, heating, electricity air conditioning, utilities, risers/shafts and Building cable maintenance, tempered water and water for customary lavatory use, window cleaning, and maintenance and repairs, maintenance of the grounds, sidewalks, access roads, parking lots and/or garages and park amenities (ii) service contracts or other agreements with independent contractors for any of the foregoing (to the extent the same are priced at market rates for comparable services), including, but not limited to, elevator and HVAC maintenance, (iii) management fees, (iv) wages, salaries, benefits, payroll taxes and unemployment compensation insurance for employees of Landlord or any contractor of Landlord engaged in the cleaning, operating, maintenance or security of the Property, (v) the cost of all insurance including, without limitation, casualty, liability and loss of rent insurance equal to eighteen (18) month’s rent for the gross rent roll (including Additional Rent), and the amount of any insurance deductibles, (vi) reasonable legal fees, (vii) an allowance for depreciation over the useful life (as determined by Landlord) of any items or improvements properly chargeable to the capital account, (viii) payments. other than Taxes, to the city and/or county in which the Building is located and other agencies or governmental agencies including, but not limited to, water and sewer charges, (ix) fees and charges of the Park or of any association, or special district affecting the Property, (x) fees and charges, under any agreements affecting the Common Areas such as any reciprocal easement agreements, operation and maintenance agreements and park covenant and restriction agreements and the like, (xi) all rent, additional rent, and all other charges payable under the Ground Lease or any other ground lease or other lease to which this Lease is subject. (xii) supplies, (xiii) capital expenditures incurred (a) in replacing obsolete equipment, (b) for the primary purpose of reducing Operating Expenses or (c) required by any Governmental Authority to comply with changes in Applicable Laws that take effect after the Effective Date or to ensure continued compliance with Applicable Laws in effect as of the Effective Date, in each case amortized over the useful life thereof, as reasonably determined by Landlord, in accordance with GAAP, and (xiv) (A) all costs of maintaining, managing, reporting, commissioning, and recommissioning the Building or any part thereof that was designed and/or built to be sustainable and conform with the U.S. EPA’s Energy Star® rating, the Green Building Initiative’s Green GlobesTM for Continual Improvement of Existing Buildings (Green GlobesTM-CIEB), or the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) rating system, and (B) all costs of applying, reporting and commissioning the Building or any part thereof to seek certification under the U.S. EPA’s Energy Star® rating, the Green Building Initiative’s Green GlobesTM for Continual Improvement of Existing Buildings (Green GlobesTM-CIEB), or the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) rating system; provided, however, the cost of such applying, reporting and commissioning of the Building or any part thereof to seek certification shall be a cost capitalized and thereafter amortized as an Operating Expense under generally accepted accounting principles consistently applied (“GAAP”).
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(B) The term “Operating Expenses” shall not include: (a) repairs or other work (including rebuilding) occasioned by fire, windstorm or other casualty or condemnation to the extent covered by Landlord’s insurance (but any deductibles may be included in Operating Expenses), (b) any cost (such as electricity or overtime services) to the extent such costs are separately charged to and payable by Tenant hereunder, (c) leasing commissions and expenses associated with procuring tenants, including, without limitation, lease concessions, lease take-over obligations, (d) interest on and amortization of debt, (e) interest and penalties for late payment of taxes, (f) wages or salaries of employees over the rank of property or building manager, (g) expenses resulting from any violation by Landlord of the terms of any ground or underlying lease or mortgage to which this Lease is subordinate, (h) fines and penalties (to the extent not attributable to any act or omission of Tenant or its agents, employees or contractors) which, under this Lease, are the responsibility or Landlord, (i) fees and costs of vendors providing services to or supplies for the Property for Landlord materially in excess of rates then customarily charged by vendors for the same services or supplies to buildings in the area, (j) fees and costs associated with any refinancing, of mortgage debt on the Property, or (k) any item for which reimbursement is actually made to Landlord from another source (e.g., insurance proceeds or payment from another tenant), (l) costs for repairs or other work to extent reimbursement is actually made from insurance proceeds, condemnation awards or other sources of payment: (m) court costs, fees of counsel and any other ancillary expenses incurred in connection with any other lease, (n) any amount payable by Landlord to any other tenant by reason of Landlord’s default in obligations to such tenant or as damages, reimbursement or indemnity to any person because of any act or omission of Landlord or its agents, (o) any expense in connection with services or other benefits of a type which Tenant is not entitled to receive under this Lease but which are provided without reimbursement or by direct payment to another tenant or occupant of the Building, (p) capital expenditures, except to the extent permitted under Section 3(f)(i)(A), and (q) any duplication of costs.
(C) Operating Expenses shall be determined in accordance with GAAP based upon reasonable projections.
(ii) “Taxes” shall mean:
(A) All payments in lieu of taxes (including payments in connection with so called tax investment financing transactions or similar transactions (collectively, “TIFs”), real estate taxes, personal property taxes, assessments (special or otherwise), sewer and water rents, rates and charges, and any other governmental levies, impositions and charges of a similar nature (“Impositions”), which may be levied, assessed or imposed on or in respect of all or any part of the Property and any improvements, fixtures and equipment of Landlord, real or personal, located in or around the Property.
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(B) Any reasonable and appropriate expenses incurred by Landlord in contesting any of the foregoing or the assessed valuation of all or any part of the Property.
(C) If at any time during the Terms the methods of taxation prevailing at the Effective Date shall be altered so that in lieu of or as a substitute for the whole or any part of the Impositions now levied, assessed or imposed on all or any part of the Property, there shall be levied, assessed or imposed (a) an Imposition based on the income or rents received therefrom whether or not wholly or partially as a capital levy or otherwise, or (b) an Imposition measured by or based in whole or in part upon all or any part of the Property and imposed on Landlord, then all Impositions shall be deemed to be Taxes.
(D) If an appropriate governmental authority levies any use and occupancy tax, any payments for such use and occupancy tax (other than those paid or required to be paid by Tenant in respect of the Premises in accordance with Section 3(d) above, which shall be paid in accordance with Section 3(d)).
(E) “Taxes” shall not include any penalties or interest paid by Landlord on account of taxes.
(g) Tenant Utility Charge.
(i) Notwithstanding the foregoing, the Premises shall be separately sub-metered (i) for all electricity used at or in connection with the Premises, including, but not limited to, electricity for lights, office machinery and equipment, any appliances, and air conditioning, (ii) for all water consumption for customary lavatory use and Tenant’s permitted use; (iii) for gas service, and (iv) for use of any back-up generator serving the Premises (“Tenant Utilities”). Landlord shall bill Tenant and Tenant shall pay separately for the Tenant Utilities based upon the sub-meter measuring consumption at the Premises and such utilities shall be considered Additional Rent hereunder (which sub meter shall be installed by Tenant as part of the Tenant Improvements (as hereinafter defined) at Tenant’s sole cost and expense) and at the same rate that Landlord is billed by the applicable utility company. Utility costs for Building systems (including, without limitation, HVAC and elevators) and Common Areas shall be Operating Expenses and shall not be included as pan of the Tenant Utilities charges.
(ii) For any utilities serving the Premises for which Tenant is billed directly by such utility provider. Tenant agrees to furnish to Landlord (a) any invoices or statements for such utilities within thirty (30) days after Tenant’s receipt thereof, (b) within thirty (30) days after Landlord’s request, any other utility usage information reasonably requested by Landlord, and (c) within thirty (30) days after each calendar year during the Term, authorization to allow Landlord to access Tenant’s usage information necessary for Landlord to complete an ENERGY STAR® Statement or Performance (or similar comprehensive utility usage report (e.g., related to Labs 21), if requested by Landlord) and any other information reasonably requested by Landlord for the immediately preceding year. Tenant shall retain records of utility usage at the Premises, including invoices and statements from the utility provider, for at least sixty (60) months, or such other period of time as may be reasonably requested by Landlord. Tenant acknowledges that any utility information for the Premises, the Building and the Property may be shared with third parties, including Landlord’s consultants and governmental authorities. In the event that Tenant fails to comply with this Section, Tenant hereby authorizes Landlord to collect utility usage information directly from the applicable utility providers. The provisions of this Section shall survive the expiration or earlier termination of this Lease.
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(iii) Notwithstanding anything to the contrary contained herein, Tenant shall be responsible for paying Tenant Utilities prior to the Term Commencement Date from and after the installation of the sub meter for each applicable Tenant Utility.
(h) Adjustment for Partial Years. Should the Term commence at any time other than the first day or terminate on other than the last day or a calendar year the amount of Additional Rent due from Tenant shall be proportionately adjusted based on that portion of the year that this Lease was in effect. If the Term has expired or the Lease has been terminated, the obligation of Tenant to pay Tenant’s Pro Rata Share of Taxes for the final Tax Year through the date on which this Lease expired or was terminated, and Landlord’s obligation to reimburse Tenant for any overpayment on account thereof, shall each survive such expiration or termination.
(i) Additional Rent Not Base Rental. Tenant’s payments of Additional Rent shall not be deemed payments of Base Rental as that term is construed relative to governmental wage and price controls or analogous governmental actions affecting the amount of Rent which Landlord may charge Tenant for the Premises.
(j) Late Charge. Tenant acknowledges that Tenant’s failure to pay Base Rental and Additional Rent promptly may cause Landlord to incur unanticipated costs which are impractical or extremely difficult to ascertain and may include, without limitation, processing and accounting charges and late charges imposed on Landlord by any ground lease, mortgage or deed of trust. As a result, if Landlord does not receive any payment within five (5) days of the due date, and such failure continues for a period of ten (10) days after written notice to Tenant (provided, however, in no event shall Landlord be obligated to give Tenant more than two (2) such written notices during any twelve (l2) month period), Tenant shall pay Landlord, a late charge equal to five percent (5%) of the overdue amount, which charge Landlord and Tenant agree represents a fair and reasonable estimate of the costs Landlord will incur by reason of late payment. Landlord’s acceptance of the late charge shall in no event constitute a waiver of Tenant’s default with respect to any overdue amount nor prevent Landlord from exercising any other rights or remedies granted under this Lease and/or applicable law. In addition, any payment of Base Rent, Additional Rent or other sum due under this Lease which is not paid to Landlord within five (5) days of when due and payable shall bear interest at the lesser of the rate of interest which is two percent (2%) over the announced prime rate of Bank of America, N.A., or any successor thereto or the highest rate permitted by law (the “Default Rate”).
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(k) Landlord’s Statement shall be final and binding upon Tenant unless Tenant, within sixty (60) days after Tenant’s receipt thereof, shall contest any item therein by giving written notice to Landlord, specifying each item contested and the reasons therefor; provided that Tenant shall in all events pay the amount specified in Landlord’s Statement, pending the results of the Independent Review and determination of the Accountant(s), as applicable and as each such term is defined below. If, during such thirty (30)-day period, Tenant reasonably and in good faith questions or contests the correctness of Landlord’s Statement, Landlord shall provide Tenant with reasonable access to Landlord’s books and records to the extent relevant to determination of Operating Expenses, and such information as Landlord reasonably determines to be responsible to Tenant’s written inquiries. In the event that, after Tenant’s review of such information, Landlord and Tenant cannot agree upon the amount of Tenant’s Pro Rata Share of Operating Expenses, then Tenant shall have the right to have an independent public accounting firm hired by Tenant on an hourly basis and not on a contingent fee basis (at Tenant’s sole cost and expense) and approved by Landlord (which approval Landlord shall not unreasonably withhold or delay) audit and review such of Landlord’s books and records for the year in question as directly related to the determination of Operating Expenses for such year (the “Independent Review”), but not books and records of entities other than Landlord. Landlord shall make such books and records available at the location where Landlord maintains them in the ordinary course of its business. Landlord need not provide copies of any books or records. Tenant shall commence the Independent Review within fifteen (15) days after the date Landlord bas given Tenant access to Landlord’s books and records for the Independent Review. Tenant shall complete the Independent Review and notify Landlord in writing of Tenant’s specific objections to Landlord’s calculation of Operating Expenses (including Tenant’s accounting firm’s written statement of the basis, nature and amount of each proposed adjustment) no later than sixty (60) days after Landlord has first given Tenant access to Landlord’s books and records for the Independent Review. Landlord shall review the results of any such Independent Review. The parties shall endeavor to agree promptly and reasonably upon Operating Expenses taking into account the results of such Independent Review. If, as of sixty (60) days after Tenant has submitted the Independent Review to Landlord, the parties have not agreed on the appropriate adjustments to Operating Expenses, then the parties shall engage a mutually agreeable independent third party accountant with at least ten (10) years’ experience in commercial real estate accounting in the Miami metropolitan area (the “Accountant”). If the parties cannot agree on the Accountant, each shall within ten (10) days after such impasse appoint an Accountant (different from the accountant and accounting firm that conducted the Independent Review) and, within ten (10) days after the appointment of both such Accountants, those two Accountants shall select a third (which cannot be the accountant and accounting firm that conducted the Independent Review). If either party fails to timely appoint an Accountant, then the Accountant the other party appoints shall be the sole Accountant. Within ten (10) days after appointment of the Accountant(s), Landlord and Tenant shall each simultaneously give the Accountants (with a copy to the other party) its determination of Operating Expenses, with such supporting data or information as each submitting party determines appropriate. Within ten (10) days after such submissions, the Accountants shall by majority vote select either Landlord’s or Tenant’s determination of Operating Expenses. The Accountants may not select or designate any other determination of Operating Expenses. The determination of the Accountant(s) shall bind the parties. If the parties agree or the Accountant(s) determine that the Operating Expenses actually paid by Tenant for the calendar year in question exceeded Tenant’s obligations for such calendar year, then Landlord shall, at Tenant’s option, either (a) credit the excess to the next succeeding installments of estimated Additional Rent or (b) pay the excess to Tenant within thirty (30) days after delivery of such results. If the parties agree or the Accountant(s) determine that Tenant’s payments of Operating Expenses for such calendar year were less than Tenant’s obligation for the calendar year, then Tenant shall pay the deficiency to Landlord within thirty (30) days after delivery of such results. If the Independent Review reveals or the Accountant(s) determine that the Operating Expenses billed to Tenant by Landlord and paid by Tenant to Landlord for the applicable calendar year in question exceeded by more than ten percent (10%) what Tenant should have been billed during such calendar year, then Landlord shall pay the reasonable cost of the Independent Review, and the reasonable cost of the Accountant(s). In all other cases Tenant shall pay the cost of the Independent Review and the Accountant(s).
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4. POSSESSION AND COMMENCEMENT DATE.
(a) The “Term Commencement Date” shall be the date that is ten (10) months after the Effective Date of this Lease (provided, however, that if Tenant provides written notice within such 10-month period, along with evidence reasonably satisfactory to Landlord, that it has encountered delays in permitting or other matters related to the Tenant Improvements that are beyond its control, then Landlord shall grant an extension of such 10-month period by an additional two (2) months). When the Term Commencement Date has been established, the parties shall execute and deliver an instrument in substantially the form attached hereto as Exhibit E specifying the actual Term Commencement Date and the Expiration Date of the Term. Failure to execute and deliver such acknowledgement, however, shall not affect the Term Commencement Date or Landlord’s or Tenant’s liability hereunder. Failure by Tenant to obtain validation by any medical review board or other similar governmental licensing of the Premises required for the Permitted Use (hereinafter defined) by Tenant shall not serve to extend the Term Commencement Date. The terms “Substantially Complete” or “Substantial Completion” mean that the Tenant Improvements are substantially complete in accordance with the Tenant Improvement Construction Documents (as defined in the Work Letter), except for minor punch list items, as evidenced by a certificate of occupancy or local equivalent (temporary or final) issued by the appropriate governmental authority, provided that under no circumstances shall Landlord be required to obtain any GMP validation or certification.
(b) Tenant shall cause the Tenant Improvements to the Premises to be constructed pursuant to the work letter attached hereto as Exhibit C-1 (the “Work Letter”) at a cost to Landlord not to exceed (a) One Million Seven Hundred Twenty-Five Thousand Dollars ($1,725,000) (based upon $115 per RSF and subject to change based upon the RSF of the Premises as of the Term Commencement Date) (the “Base TI Allowance”), plus (b) if properly requested by Tenant pursuant to this Section, an additional Three Hundred Seventy-Five Thousand Dollars ($375,500) (based upon $25 per RSF and subject to change based upon the RSF of the Premises as of the Term Commencement Date) (the “Additional TI Allowance”), for a total of Two Million One Hundred Thousand ($2,100,000) (based upon $140 per RSF and subject to change based upon the RSF of the Premises as of the Term Commencement Date). The Base TI Allowance, together with the Additional TI Allowance (if properly requested by Tenant pursuant to this Section), shall be referred to herein as the “TI Allowance.” The TI Allowance may be applied to the costs of (o) construction, (p) space planning, architect, engineering and other related services performed by third parties unaffiliated with Tenant, (q) building permits and other taxes, fees, charges and levies by governmental authorities for permits or for inspections of the Tenant Improvements, (r) costs and expenses for labor, material, equipment and fixtures, (s) trash and debris removal, (t) insurance costs, (u) costs associated with sustainability practices, and (v) documentation, registration and certification costs. In no event shall the TI Allowance be used for (w) payments to Tenant or any affiliates of Tenant (which shall not include third-party contractors or consultants engaged under arm’s-length contracts in connection with the Tenant Improvements), (x) the purchase of any furniture, personal property, information technology or audio/visual improvements, or other non-building system equipment (provided that wiring shall be Permitted), (y) costs resulting from any default by Tenant of its obligations under this Lease or (z) costs that are recoverable by Tenant from a third party (e.g., insurers, warrantors, or tortfeasors).
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(c) If Tenant requests all or any portion of the Additional TI Allowance, then Base Rental shall be increased by Fourteen Cents ($0.14) per One Dollar ($l.00) of the Additional TI Allowance disbursed by Landlord in accordance with this Lease, to include the amount of the Additional TI Allowance amortized over the initial Term. Tenant shall have until the date that is one (1) year after the Effective Date of this Lease (the “TI Deadline”), to expend the unused portion of the TI Allowance, after which date Landlord’s obligation to fund such costs shall expire. The amount by which Base Rental shall be increased shall be determined (and Base Rental shall be increased accordingly) as of the Term Commencement Date and, if such determination does not reflect use by Tenant of all of the Additional TI Allowance, shall be determined again as of the TI Deadline, with Tenant paying (on the next succeeding day that Base Rental is due under this Lease (the “TI True-Up Date”)) any underpayment of the further adjusted Base Rental for the period beginning on the Term Commencement Date and ending on the TI True-Up Date.
(d) To the extent that the total projected cost of the Tenant Improvements (as reasonably projected by Landlord based on the TI Construction Contract) exceeds the TI Allowance (such excess, the “Excess TI Costs”), Tenant shall pay the costs of the Tenant Improvements on a pari passu basis with Landlord as such costs are paid, in the proportion of Excess TI Costs payable by Tenant to the Base TI Allowance (and, if properly requested by Tenant pursuant to this Lease, the Additional TI Allowance) payable by Landlord. If the actual Excess TI Costs are less than the Excess TI Costs paid by Tenant, Landlord shall credit Tenant with the overage paid by Tenant against Tenant’s Rent (as defined below) obligations, beginning after Landlord has completed the final accounting for the Tenant Improvements. Landlord shall not be obligated to expend any portion of the Additional TI Allowance until Landlord shall have received from Tenant a letter in the form attached as Exhibit C-2 hereto executed by an authorized officer of Tenant. In no event shall any unused TI Allowance entitle Tenant to a credit against Rent payable under this Lease. Landlord’s funding of the TI Allowance shall be in accordance with the terms of the Work Letter, and Landlord shall not be required to fund any Fund Request until Tenant has satisfied the conditions set forth in the Work Letter.
(e) Prior to entering upon the Premises, Tenant shall furnish to Landlord evidence reasonably satisfactory to Landlord that insurance coverages required of Tenant under the provisions of Section 12 are in effect, and such entry shall be subject to all the Terms and conditions of this Lease other than the payment of Base Rental or Tenant’s Pro Rata Share of Operating Expenses and Taxes.
(f) By taking possession of the Premises to perform the Tenant Improvements, Tenant shall be deemed to have accepted the Premises as being in good and satisfactory order, condition and repair for the use intended under this Lease, except for the existence of latent defects not ascertainable as of the Effective Date of which Tenant notifies Landlord in writing within twelve (12) months of the Effective Date. Except for such latent defects, Landlord shall have no obligation whatsoever to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof except as otherwise expressly provided herein or agreed upon in writing by Landlord, and the parties hereto affirm that Landlord has made no representations to Tenant respecting the condition of the Premises or the Property, except as specifically herein set forth in writing.
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5. USE.
(a) Tenant shall have access to the Premises twenty-four (24) hours per day, three hundred sixty-five (365) days per year. Tenant shall occupy and use the Premises only for laboratory, research and development, biological manufacturing, and research-related functions, including but not limited to examinations and interviews of trial participants, donor specimen collection, and patient care and interaction (but in no event may Tenant conduct Phase I-IIA clinical research trials for unaffiliated third panics), and office purposes that promote, encourage and stimulate medical educational programs of the University of Miami through translational research that is academically related to or ancillary to the academic function of the University of Miami, including research in the natural, social and biological sciences, and including office use and other facilities incidental or ancillary to such activities. All permitted uses shall comply with Legal Requirements relating to the use, condition, access to and occupancy of the Premises. Tenant agrees to conduct its business in the manner and according to the generally accepted business principles of the business or profession in which Tenant is engaged. In all events, the uses of the Premises shall remain consistent with those of other facilities within the Park. Any material change in use shall be subject to the Landlord’s review and reasonable approval.
(b) Notwithstanding anything to the contrary provided in this Section 5, Tenant shall not use or occupy the Premises or any portion thereof, permit or suffer the same to be used or occupied and/or do, or permit or suffer anything so be done, in or on the Premises or any part thereof, that would, in any manner or respect:
(i) violate any certificate of occupancy or Legal Requirement in force relating to the Premises or the Rules (as hereinafter defined) or cause an unreasonable amount of use of any of the services provided in the Building;
(ii) make void or voidable any insurance then in force with respect to the Premises, or render it impracticable to obtain fire or other insurance thereon required to be furnished by Landlord or Tenant under this Lease;
(iii) cause structural or other injury to the Premises or the Property (or any portion thereof), or constitute a private or public nuisance or waste;
(iv) render the Premises incapable of being used or occupied after the expiration or sooner Termination of the Term of this Lease for the purposes for which the same were permitted to be used and occupied on the day upon which Tenant shall first open the Premises for business to the public, except for ordinary wear and tear and damage by fire or other casualty and repairs for which Tenant is not responsible under this Lease;
(v) violate the provisions of Section 8 hereof; and/or
(vi) violate the Ground Lease, the REA or any other recorded document affecting the use and occupancy of the Building.
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(c) Landlord has financed, or may in the future finance from time to time, all or a portion of the construction of certain improvements on portions of the Property (or other property owned or leased by Landlord or its affiliates in the vicinity of the Property) with certain loans and/or grants that require Landlord to submit reports and information to the lending and/or granting organization. For this purpose, Tenant hereby agrees (i) to fully and accurately complete and deliver to Landlord as reasonably requested, within a reasonable time after written request by Landlord, such reports and/or other commercially reasonable information (including, without limitation, employee counts and anonymous general salary information regarding Tenant’s employees at the Premises, but not salary information for particular persons) as may be required by the aforementioned lending and/or granting organization(s) from time to time, and (ii) to cooperate with Landlord in complying with the commercially reasonable requirements of such loans and/or grants and to provide any commercially reasonable information related thereto and requested by Landlord from time to time within a reasonable time after reasonable written request therefor. An example of a form currently required to be provided to a lending or granting institution is attached hereto as Exhibit G.
(d) In addition to the general requirements set forth above, Tenant shall not use, operate, maintain or alter the Premises, or allow or suffer the actions of third parties in their use, operation, maintenance or alteration of the Premises, so as to violate the Tax Credit Requirements, as defined and set forth below.
(i) The terms that follow have the indicated definitions:
(A) “Code” means the Internal Revenue Code of 1986, as amended.
(B) “IRS” means the Internal Revenue Service.
(C) “New Markets Tax Credits” means federal income tax credits available under Section 45D of the Code, as subsequently modified, amended or replaced to provide substantially the same economic benefits.
(D) “Tax Credit Requirements” means all present and future applicable laws, statutes, treaties, rules, orders, ordinances, codes, regulations, requirements, permits, and interpretations by, and applicable judgments, decrees, injunctions, writs and like action, even if unforeseen or extraordinary, necessary or applicable under the Tax Credits for the use and/or maintenance and/or replacement of any part of the Building.
(E) “Tax Credits” means New Markets Tax Credits.
(F) “Treasury Regulations” means regulations, rulings and explanations issued to implement, explain, clarify and define provisions of the Code.
(ii) In particular, as may be required under the New Markets Tax Credits, Tenant shall not allow the Premises or any part thereof to be used for any of the following uses:
(A) any trade or business consisting of the operation of (l) a private or commercial golf course, (2) a country club, (3) a massage parlor, (4) a hot tub facility, (5) a suntan facility, (6) a racetrack, (7) any facility used for gambling, or (8) any residential purpose;
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(B) any store the principal business of which is the sale of alcoholic beverages for consumption off-premises; or
(C) any other trade, business or activity prohibited to be carried on by any amendment to Section 45D of the Code and the Treasury Regulations thereto, or any other guidance published by the IRS.
(e) Provided that no Event of Default, or event which, with the giving of notice or the passage of time, or both, could result in an Event of Default, exists under this Lease, Landlord shall not lease, demise, license or grant any use or occupancy rights to any other party, as a primary use at the Property, for the production and/or manufacturing of autologous and/or allogeneic stem cells sourced from bone marrow, adipose tissue, blood, cardiac tissue or other human or animal sources including umbilical cord (the “Exclusive Use”). The Exclusive Use shall not apply to or restrict occupants under any existing leases at the Property as of the Effective Date of this Lease, or Miami CIC, LLC or its licensees (collectively, the “Existing Users”), or any renewal or extension of an existing lease by an Existing User, or any new lease at the Property entered into with an Existing User. Tenant’s right to the Exclusive Use shall be of no force or effect if Tenant elects to cease using the Premises for the Exclusive Use. Tenant shall notify Landlord of Tenant’s election to cease such use within thirty (30) days after the cessation of such use. Landlord shall not be in breach of this Section if a tenant or occupant at the Building, under a lease with Landlord that prohibits such use, nonetheless uses its premises for an Exclusive Use. In such event, Landlord shall use reasonable commercial efforts (not including terminating such lease) to cause such tenant or occupant to cease such use.
6. TENANT’S CARE OF THE PREMISES.
(a) Tenant will take good care of the Premises and the fixtures and appurtenances therein, so as to maintain the Premises in a first-class condition and state of repair, reasonable wear and tear and other damage beyond Tenant’s reasonable control expressly excepted, and will neither intentionally commit nor suffer any active or permissive waste or injury thereof that is within Tenant’s reasonable control. Without limiting the foregoing, Tenant shall, at Tenant’s sole cost and expense, promptly make all needed maintenance, repairs, and replacements, internal and external, foreseeable or unforeseeable, in and to:
(i) the Premises including, without limitation, the interior windows and window frames, and doors and door frames, entrances, floors and signs;
(ii) the water, electric, sewer, gas, telephone, telecommunications, standpipe, sprinkler and other utility connections, lines, pipes, mains and other installations located within and which exclusively serve the Premises, as well as all fixtures, machinery and equipment, now or hereafter servicing, belonging to, or used in connection with the Premises exclusively and/or Tenant’s use, occupancy, or operation of the same;
(iii) any supplemental air conditioning system and the components of all heating and air conditioning systems located in the Premises and serving the Premises;
(iv) all fire and life safety machinery and equipment exclusively serving the Premises;
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(v) all of Tenant’s signage (both interior and exterior) and all other facilities and equipment of Tenant located outside of the Premises;
(vi) all improvements, systems, equipment, and other installations, including, without limitation, all related lines, conduits, pipes, cabling, connections and the like, located outside of the Premises that were installed by Tenant or installed by Landlord for Tenant as part of the Tenant Improvements or otherwise pursuant to this Lease;
(vii) any generator serving the Premises exclusively; and
(viii) all non-structural, non-capital repairs and replacements, ordinary and extraordinary, foreseen or unforeseen, in and to the Premises.
(b) All such maintenance, repairs and replacements and any alterations permitted or required hereunder shall be done at Tenant’s sole cost and expense by persons requested by Tenant, and any alterations or improvements shall require the prior consent in writing of Landlord, as provided in Section 6(c) below. Tenant shall, at Tenant’s sole expense, by persons requested by Tenant and consented to in writing by Landlord, promptly repair any injury or damage to the Premises, the Common Areas, the Building and its systems, and other portions of the Building not constituting the Premises or the Property caused by the misuse or neglect thereof by Tenant, by Tenant’s contractors, subcontractors, customers, employees, licensees, agents, or invitees permitted or invited (whether by express or implied invitation) on the Premises by Tenant, or by Tenant moving in or out of the Premises. All bulbs, tubes and lighting fixtures for the Premises installed or maintained by Tenant must comply with Landlord’s sustainability practices, including any third-party rating system concerning the environmental compliance of the Building or the Premises, as the same may change from time to time. Tenant is responsible for reporting lighting purchases to Landlord in a format suitable to Landlord. All maintenance and repairs made by Tenant must comply with Landlord’s reasonable sustainability practices, including any third-party rating system concerning the environmental compliance of the Building or the Premises, as the same may change from time to time and as notified by Landlord to Tenant in writing, Landlord shall notify Tenant of any and all sustainability practice requirements imposed on the Premises by any Mortgage encumbering the Building.
(c) Except for the Tenant Improvements made in accordance with the Work Letter, and as otherwise provided below, Tenant will not, without Landlord’s prior written consent, which shall not be unreasonably withheld, conditioned, or delayed, make alterations, additions or improvements in or to the Premises or engage in any construction, demolition, reconstruction, renovation, or other work (whether major or minor) of any kind in, at, or serving the Premises (“Alterations”) without Landlord’s prior written approval, which approval Landlord shall not unreasonably withhold; provided, however, that in the event any proposed Alteration affects (i) any structural portions of the Building, including exterior walls, roof, foundation, foundation systems (including barriers and subslab systems), or core of the Building, (ii) the exterior of the Building or (iii) any Building systems, including elevator, plumbing, air conditioning, heating, electrical, security, life safety and power, then Landlord may withhold its approval with respect thereto in its sole and absolute discretion. Tenant shall, in making any such Alterations, use only those architects, contractors, suppliers and mechanics of which Landlord has given prior written approval, which approval shall be in Landlord’s sole and absolute discretion. In seeking Landlord’s approval, Tenant shall provide Landlord, at least fourteen (14) days in advance of any proposed construction, with plans, specifications, bid proposals, certified stamped engineering drawings and calculations by Tenant’s engineer of record or architect of record, (including connections to the Building’s structural system, modifications to the Building’s envelope, non-structural penetrations in slabs or walls, and modifications or tie-ins to life safety systems), work contracts, requests for laydown areas and such other information concerning the nature and cost of the Alterations as Landlord may reasonably request. Notwithstanding the foregoing, Tenant may make strictly cosmetic changes to the Premises (“Cosmetic Alterations”) without Landlord’s consent; provided that (y) the cost of any Cosmetic Alterations does not exceed Twenty-Five Thousand Dollars ($25,000) in any one instance, (z) such Cosmetic Alterations do not (i) require any structural or other substantial modifications to the Premises, (ii) require any changes to, or adversely affect, the Building systems, (iii) affect the exterior of the Building or (iv) trigger any requirement under Legal Requirements that would require Landlord to make any alteration or improvement to the Premises, the Building or the Property. Tenant shall give Landlord at least ten (10) days’ prior written notice of any Cosmetic Alterations.
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(d) No later than the last day of the Term or earlier termination as provided herein, Tenant will remove all Tenant’s personal property, telephone, data and other cabling, and repair all injury done by or in connection with installation or removal of said property and surrender the Premises (together with all keys, access cards or entrance passes to the Premises and/or Building) in as good a condition as they were at the beginning of the Term, reasonable wear and tear, unrepaired casualty not caused by Tenant and condemnation excepted. All property of Tenant remaining in the Premises after expiration or earlier termination of the Term shall be deemed conclusively abandoned and may be removed by Landlord, and Tenant shall reimburse Landlord for the cost of removing the same, subject however, to Landlord’s right to require Tenant to remove any improvements or additions made to the Premises by Tenant pursuant to the preceding Section.
(e) In doing any work in the Premises, Tenant will use only contractors or workers consented to by Landlord in writing prior to and mutually agreed upon by Tenant, the time such work is commenced and such consent shall not be unreasonably withheld, conditioned, or delayed. Within twenty (20) days of notice thereof, Tenant shall remove or bond in a manner satisfactory to Landlord any lien or claim of lien for material or labor claimed against the Premises or the Property or any portion thereof, or both, by such contractors or workmen if such claim should arise, and hereby indemnifies and holds Landlord harmless from and against any and all losses, costs, damages, expenses or liabilities including, but not limited to, reasonable attorney’s fees, incurred by Landlord, as a result of or in any way related to such claims or such liens. All work shall be performed in accordance with the Legal Requirements. Should Tenant fail to discharge or bond against any such lien or claim of lien, Landlord may, at Landlord’s election, pay such claim or post a statutory lien bond or otherwise provide security to eliminate the lien as a claim against title, and Tenant shall within twenty (20) days reimburse Landlord for the costs thereof as Additional Rent.
(f) All personal property brought into the Premises by Tenant, its employees, licensees and invitees shall be at the sole risk of Tenant, and Landlord shall not be liable for theft thereof or of money deposited therein or for any damages thereto, such theft or damage being the sole responsibility of Tenant.
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(g) Tenant, at its expense, shall comply with all present or future laws, statutes, ordinances, rules, orders, regulations and rulings of any Federal, state or local government or governmental authority, board or agency affecting the Premises (the “Legal Requirements”) and with any reasonable requirements of the insurance companies insuring Landlord against damage, loss or liability for accidents in or connected with the Premises to the extent that the same shall affect or be applicable to (i) Tenant’s particular manner of use of the Premises (as opposed to its mere use thereof), (ii) Alterations and improvements made by Tenant, or (iii) a breach by Tenant of its obligations under this Lease, it being understood that Landlord shall be responsible for complying with Legal Requirements or insurance requirements imposed on the Building generally and which would have to be complied with whether or not Tenant was then in occupancy of the Premises, subject to reimbursement by Tenant to Landlord pursuant to Section 3(c) hereof. Nothing herein contained, however, shall be deemed to impose any obligation upon Tenant to make any structural changes or repairs unless necessitated by Tenant’s acts or omissions or by reason of a particular use by Tenant of the Premises.
(h) The parties acknowledge that Title Ill of the Americans With Disabilities Act or 1990 and the regulations and rules promulgated thereunder, as all of the same may be amended and supplemented from time to time (collectively referred to herein as the “ADA”) establish requirements for accessibility and barrier removal, and that such requirements may or may not apply to the Premises and the Property depending on, among other things: (i) whether Tenant’s business is deemed a “public accommodation” or “commercial facility”, (ii) whether such requirements are “readily achievable”, and (iii) whether a given alteration affects a “primary function area” or triggers “path of travel” requirements. The parties hereby agree that: (x) Landlord shall be responsible for ADA Title III compliance in the Common Areas, (y) Tenant shall be responsible for ADA Title III compliance within the Premises, and (z) Landlord may perform, or require that Tenant perform, and Tenant shall be responsible for the cost of, ADA Title III “path of travel” requirements triggered by alterations within the Premises made subsequent to the commencement of the Term at the request of Tenant.
(i) Landlord and Tenant expressly agree and acknowledge that no interest of Landlord in the Premises or the Building shall be subject to any lien for improvements made by Tenant in or for the Premises. Landlord shall not be liable for any lien for any improvements made by Tenant, such liability being expressly prohibited by the Terms of this Lease, and Tenant agrees to inform all contractors and material suppliers performing work in or for or supplying materials to the Premises or the existence of said prohibition. In accordance with applicable laws of the State of Florida, Landlord may file in the Public Records of Miami-Dade County, Florida, a public notice containing a true and correct copy of this paragraph.
(j) Tenant shall not construct or permit to be constructed partitions or other obstructions that might interfere with free access to mechanical installations or service facilities or the Building or with other tenants’ components located within the Building, or interfere with the moving of Landlord’s equipment to or from the enclosures containing such installations or facilities.
(k) Tenant shall accomplish any work performed on the Premises or the Building in such a manner as to permit any life safety systems to remain fully operable at all times.
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(l) Any work performed on the Premises or the Building by Tenant or Tenant’s contractors shall be done at such times and in such manner as Landlord may reasonably from time to time designate. Tenant covenants and agrees that all work done by Tenant or Tenant’s contractors shall be performed in full compliance with Legal Requirements. Within thirty (30) days after completion of any Alterations, Tenant shall provide Landlord with complete “as built” drawing print sets and electronic CADD files on disc (or files in such other current format in common use as Landlord reasonably approves or requires) showing any changes in the Premises. Any such “as built” plans shall show the applicable Alterations as an overlay on the Building as-built plans; provided that Landlord provides the Building “as built” plans to Tenant.
(m) Before commencing any Alterations or Tenant Improvements, Tenant shall give Landlord at least fourteen (14) days’ prior written notice of the proposed commencement of such work and shall, if required by Landlord, secure, at Tenant’s own cost and expense, a completion and lien indemnity bond satisfactory to Landlord for such work.
7. LANDLORD’S SERVICES AND OBLIGATIONS.
(a) During the Term of the Lease, Landlord shall furnish, or cause to be furnished, the following services (the cost of which services shall be reimbursed to Landlord in accordance with Section 3 herein):
(i) Elevator service for passenger and delivery needs.
(ii) Air conditioning during summer operations and heat during winter operations at temperature levels similar to other similarly situated office/research buildings in the Miami metropolitan area during Ordinary Business Hours (as defined in the Rules (hereinafter defined)), but consistent with and subject to all Federal and local energy conservation regulations.
(iii) Security services similar to other similarly situated office/research buildings in the Miami metropolitan area.
(iv) Either hot or cold running water for all common area restrooms and lavatories in the Building.
(v) Janitorial service for the Common Areas in the Building (but not the Premises) in accordance with standards for other similarly situated research/office buildings in the Miami metropolitan area.
(vi) Electricity to operate the Common Areas during hours similar to other similarly situated office/research buildings in the Miami metropolitan area, and to operate the Premises twenty-four (24) hours per day and seven (7) days per week, by providing electric current in reasonable amounts necessary for normal office and laboratory uses, lighting, and heating, ventilating and air conditioning (“HVAC”).
(vii) Grounds care, including the sweeping of sidewalks, access roads and parking areas and the maintenance of landscaping in accordance with standards for other similarly situated research/office buildings in the Miami metropolitan area.
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(viii) General management, including supervision, inspections and management functions.
(b) The services provided for in Section 7(a) herein are predicated on and are in anticipation of certain usage of the Premises by Tenant as follows:
(i) Services shall be provided for the Building during Ordinary Business Hours unless expressly provided otherwise.
(ii) That said usage of the Premises by Tenant will not require the HVAC system to function beyond design loads currently applicable to the Building.
(iii) Electric power usage and consumption for the Premises shall be based on (a) lighting of the Premises on a level suitable for normal office use and power for small desk-top machines and devices using no more than 110 volt, 20 amp circuits, and (b) operating the improvements and equipment contemplated by the Tenant Improvement Construction Documents twenty-four (24) hours per day and seven (7) days per week. Heavier use items shall not be used or installed, unless expressly permitted elsewhere herein or by separate written consent of Landlord.
(c) Landlord shall not be liable for, nor shall any eviction of Tenant result from, the failure to furnish any utility or service, whether or not such failure is caused by accidents; breakage; casualty; Severe Weather Conditions (as defined below); physical natural disasters (but excluding weather conditions that are not Severe Weather Conditions); strikes, lockouts or other labor disturbances or labor disputes; acts of terrorism; riots or civil disturbances; wars or insurrections; shortages of materials; regulations, moratoria or other actions, inactions or delays; failures by third parties to deliver gas, oil or other another suitable fuel supply, or inability of the party claiming Force Majeure, by exercise of reasonable diligence, to obtain gas, oil or another suitable fuel; or other causes beyond the reasonable control or the party claiming that Force Majeure has occurred (collectively, “Force Majeure”) or, to the extent permitted by Legal Requirements, Landlord’s negligence, “Severe Weather Conditions” means weather conditions that are materially worse than those that reasonably would be anticipated for the Property at the applicable time based on historic meteorological records. In the event of such failure, Tenant shall not be entitled to termination of this Lease or any abatement or reduction of Rent, nor shall Tenant be relieved from the operation of any covenant or agreement or this Lease.
(d) Landlord shall have no obligation or liability with respect to or in any way connected with the Premises, or service to the Premises, except as set forth in Section 7(a) above. Landlord shall not be deemed to have committed a breach of any repair obligations unless it makes repairs negligently. Tenant shall be responsible for janitorial services in the Premises.
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(e) Landlord reserves the right to stop service of the elevator, plumbing, ventilation, air conditioning and utility systems, when Landlord deems reasonably necessary or desirable, due to accident, emergency or the need to make repairs, alterations or improvements, until such repairs, alterations or improvements shall have been completed, and Landlord shall further have no responsibility or liability for failure to supply elevator facilities, plumbing, ventilation, air conditioning or utility service when prevented from doing so by Force Majeure or, to the extent permitted by Legal Requirements, Landlord’s negligence. Without limiting the foregoing, it is expressly understood and agreed that any covenants on Landlord’s part to furnish any service pursuant to any of the terms, covenants, conditions, provisions or agreements of this Lease, or to perform any act or thing for the benefit of Tenant, shall not be deemed breached if Landlord is unable to furnish or perform the same by virtue of Force Majeure or, to the extent permitted by Legal Requirements, Landlord’s negligence.
(f) Notwithstanding anything to the contrary in this Lease, if, for more than five (5) consecutive business days following written notice to Landlord and as a direct result of the acts or omissions of Landlord or Landlord’s employees or contractors (and except to the extent that such failure is caused in whole or in part by the action or inaction of a Tenant Party (as defined below)), the provision of HVAC or other utilities to all or a material portion of the Premises that Landlord must provide pursuant to this Lease is interrupted (a “Material Services Failure”), then Tenant’s Base Rent and Operating Expenses (or, to the extent that less than all of the Premises are affected, a proportionate amount of Base Rent and Operating Expenses based on the Rentable Area of the Premises that is rendered unusable) shall thereafter be abated until the Premises are again usable by Tenant for the Permitted Use; provided, however, that, if Landlord is diligently pursuing the restoration of such HVAC and other utilities and Landlord provides substitute HVAC and other utilities reasonably suitable for Tenant’s continued use and occupancy of the Premises for the Permitted Use (e.g., supplying potable water or portable air conditioning equipment), then neither Base Rent nor Operating Expenses shall be abated. During any Material Services Failure, Tenant will cooperate with Landlord to arrange for the provision of any interrupted utility services on an interim basis via temporary measures until final corrective measures can be accomplished, and Tenant will permit Landlord the necessary access to the Premises to remedy such Material Service Failure. In the event of any interruption of HVAC or other utilities that Landlord must provide pursuant to this Lease, regardless of the cause, Landlord shall diligently pursue the restoration of such HVAC and other utilities. Notwithstanding anything in this Lease to the contrary, but subject to Article 10 (which shall govern in the event of a casualty), the provisions of this Section shall be Tenant’s sole recourse and remedy in the event of an interruption of HVAC or other utilities to the Premises.
(g) The HVAC and generator systems and equipment currently in place at the Building as of the Effective Date of the Lease are identified on Exhibit L attached hereto. Landlord shall maintain, repair and replace such Building systems and equipment as necessary to comply with Landlord’s obligations under the Lease, and shall ensure that the level of service provided with respect to HVAC and generator equipment is not materially reduced below the level of service provided as of the Effective Date of the Lease.
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8. HAZARDOUS WASTES/ENVIRONMENT AL COMPLIANCE.
(a) Landlord and Tenant acknowledge that in connection with Tenant’s business on or about the Premises, Tenant may store, use, produce or dispose of substances, pollutants, or other contaminants which would or could be deemed or determined to be a “hazardous substance” or “hazardous waste” under any federal, state or local statute, law, ordinance or regulation now or hereinafter in effect (“Hazardous Substances”) and/or (i) ”chemotherapeutic waste” and “infectious waste” as each term is defined by any applicable law, statute, order, ordinance or regulation, (ii) ”radioactive waste” as defined by any applicable law. statute, order, ordinance or regulation, (iii) human corpses, remains and anatomical parts that are donated and used for scientific or medical education, research or treatment, (iv) body fluids or biologicals which are being stored at a laboratory prior to laboratory testing, (v) similar laboratory wastes and materials; and/or (vi) discarded sharps used in medical research or laboratories, including but not limited to hypodermic, intravenous, and other medical needles and syringes, scalpel blades, blood vials and glassware in contact with infectious waste, including slides and cover slips (the items described in clauses (i) through (vi) are collectively “Regulated Waste”). Tenant shall, at Tenant’s sole expense, comply in all respects with all federal, state and local laws, statutes, governmental orders, ordinances and regulations applicable now or in the future to the handling, transportation, generation, management, disposal, processing, treatment, storage and use of Hazardous Substances and Regulated Waste. Tenant is solely responsible for obtaining, at Tenant’s expense, any and all governmental permits or approval (“Permits”) required to handle, transport, generate, manage, dispose, process, treat, store or use Hazardous Substances and Regulated Waste at the Premises. Tenant shall comply in all respects with all terms and conditions of such Permits. Within ten (10) days of a written request from Landlord, Tenant shall deliver to Landlord copies of all such Permits. Under no circumstances shall Tenant be permitted under this Lease to accept at the Premises for processing, treatment, storage, use, or disposal any radioactive, infectious or chemotherapeutic waste generated by any other entity or facility. This Section 8(a) should not be interpreted to abridge or to modify Tenant’s obligation under this Lease to comply with any other provision of federal, state or local law.
(b) As a material inducement to Landlord to allow Tenant to use Hazardous Substances and/or Regulated Waste in connection with its business, Tenant agrees to deliver to Landlord (A) a list identifying each type of Hazardous Substances and/or Regulated Waste to be present at the Premises that is subject to regulation under any environmental Legal Requirements, (B) a list of any and all approvals or permits required under Legal Requirements in connection with the presence of such Hazardous Substances and/or Regulated Waste at the Premises and (C) correct and complete copies of (i) notices of violations of Legal Requirements related to Hazardous Substances and/or Regulated Waste and (ii) plans relating to the installation of any storage tanks to be installed in, on, under or about the Building (provided that installation of storage tanks shall only be permitted after Landlord has given Tenant its written consent to do so, which consent Landlord may withhold in its sole and absolute discretion) and closure plans or any other documents required by any and all Governmental Authorities for any storage tanks installed in, on, under or about the Building for the closure of any such storage tanks (collectively, “Hazardous Materials Documents”). Tenant shall deliver to Landlord updated Hazardous Materials Documents (l) no later than thirty (30) days prior to the initial occupancy of any portion of the Premises or the initial placement of equipment anywhere at the Property, (m) if there are any changes to the Hazardous Materials Documents, annually thereafter no later than December 31 of each year, and (n) thirty (30) days prior to the initiation by Tenant of any Alterations or changes in Tenant’s business that involve any material increase in the types or amounts of Hazardous Substances and/or Regulated Waste. For each type of Hazardous Substances and/or Regulated Waste listed, the Hazardous Materials Documents shall include (t) the chemical name, (u) the material state (e.g., solid, liquid, gas or cryogen), (v) the concentration, (w) the storage amount and storage condition (e.g., in cabinets or not in cabinets), (x) the use amount and use condition (e.g., open use or closed use), (y) the location (e.g., room number or other identification) and (z) if known, the chemical abstract service number. Notwithstanding anything in this Section to the contrary, Tenant shall not be required to provide Landlord with any Hazardous Materials Documents containing information of a proprietary nature, which Hazardous Materials Documents, in and of themselves, do not contain a reference to any Hazardous Materials or activities related to Hazardous Substances. Landlord may, at Landlord’s expense, cause the Hazardous Materials Documents to be reviewed by a person or firm qualified to analyze Hazardous Substances to confirm compliance with the provisions of this Lease and with Legal Requirements. In the event that a review of the Hazardous Materials Documents indicates non-compliance with this Lease or Legal Requirements, Tenant shall, at its expense, diligently take steps to bring its storage and use of Hazardous Substances into compliance. Notwithstanding anything in this Lease to the contrary or Landlord’s review into Tenant’s Hazardous Materials Documents or use or disposal of Hazardous Substances, however, Landlord shall not have and expressly disclaims any liability related to Tenant’s or other tenants’ use or disposal of Hazardous Substances, it being acknowledged by Tenant that Tenant is best suited to evaluate the safety and efficacy of its Hazardous Substances usage and procedures.
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(c) Tenant agrees to indemnify and hold Landlord, Ground Lessor, BioMed Realty Trust, Inc., BioMed Realty L.P., Wexford Science & Technology, LLC and their respective affiliates, subsidiaries, and parents (collectively, “Affiliates”) and each of their (including Landlord’s) respective officers, directors, shareholders, partners and members (“Affiliated Officers”) harmless from and against all claims, costs, and liabilities, including but not limited to reasonable attorneys’ fees and costs of litigation, incurred as arising from or as a result of or relating to (i) a release or threatened release of Hazardous Substances and/or Regulated Waste (A) on or about the Premises not caused by Landlord, its employees, agents, invitees or contractors, and (B) elsewhere on or about the Property to the extent caused in whole or in part by Tenant or its agents, employees, invitees, contractors, licensees, subtenants or assignees or such parties’ respective agents, employees, invitees, contractors, licensees, subtenants or assignees (each a “Tenant Party” and collectively, the “Tenant Parties”), (ii) a breach by Tenant or any Tenant Party of the covenants contained in this Section, (iii) Tenant’s (or any Tenant Party’s) handling, transportation, generation, management, disposal, processing, treatment, storage and/or use of Regulated Waste and/or Hazardous Substances, (iv) the presence of any Regulated Waste and/or Hazardous Substances at the Premises not caused by Landlord, its employees, agents or contractors and not existing at the Premises as of the Term Commencement Date. The foregoing indemnification of Landlord, Landlord’s Affiliates and Landlord’s Affiliated Officers by Tenant includes, without limitation, all costs incurred by or imposed upon Landlord in connection with any judgments, damages, penalties, fines, liabilities or losses (including, without limitation, diminution in value of the Premises, damages for the loss or restriction on use of any space or of any amenity in or around the Premises, damages arising from any adverse impact on marketing of space, and sums paid in settlement of claims, attorneys’ fees, consultant fees and expert fees) or in connection with the investigation of site conditions or any clean-up, or remedial removal or restoration work required by any federal, state or local governmental agency or political subdivision occurring as a result of the presence of any Hazardous Substance and/or Regulated Wastes in the Premises caused by Tenant or any Tenant Party or permitted by Tenant or for which Tenant is legally liable. Tenant further agrees to maintain insurance to cover such claims, costs, and liabilities, in amounts and with coverages and insurance carriers reasonably satisfactory to Landlord. Any default under this Section 8 shell be a material default enabling Landlord to exercise any of the remedies set forth in this Lease.
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(d) The handling, transportation, generation, management, disposal, processing, treatment, storage and use by Tenant of Hazardous Substances and/or Regulated Waste in or about the Premises shall be subject to the rules and regulations set forth in Exhibit F hereof and any and all additional rules and regulations promulgated by Landlord from time to time regarding the same or any aspect thereof (which rules and regulations may be amended, modified deleted or added from time to time by Landlord) (collectively, the ‘“Hazmat Rules”). All of the Hazmat Rules shall be effective upon written notice thereof to Tenant. Tenant will cause all Tenant Parties, or any others permitted by Tenant to occupy or enter the Premises to at all times abide by the Hazmat Rules. In the event of any breach of any Hazmat Rules, Landlord shall have all remedies in this Lease provided for in the Event of Default by Tenant and shall, in addition, have any remedies available at law or in equity, including but not limited to, the right to enjoin any breach of such Hazmat Rules.
(e) Without limiting any other provision of this Lease, Landlord and Tenant hereby acknowledge and agree that neither Landlord’s acknowledgement of the presence of Hazardous Substances and/or Regulated Wastes in the Premises nor Landlord’s promulgating or amending the Hazmat Rules nor Landlord’s requesting or reviewing the information described in Section 8(a) above, shall constitute an assumption of responsibility or liability for any aspect of the foregoing, or a representation, warranty, certification, acknowledgment or agreement by Landlord that the presence of Hazardous Substances and/or Regulated Wastes in the Premises or Tenant’s (or any Tenant Party’s) handling, transportation, generation, management, disposal, processing, treatment, storage and use of such Hazardous Substances and/or Regulated Wastes complies with federal, state and local laws, statutes, governmental orders, ordinances and regulations regarding the same, or that the facilities or procedures utilized by Tenant (or any Tenant Party) with respect to such Hazardous Substances and/or Regulated Wastes are adequate, appropriate, suitable or sufficient to comply with Legal Requirements or to protect the health, safety and welfare of Tenant and the Tenant Parties and other occupants of the Building. The provisions of this Section 8(d) shall survive the expiration or earlier termination of this Lease.
(f) At any time, and from time to time, prior to the expiration of the Term, Landlord shall have the right to conduct appropriate tests of the Property or any portion thereof to demonstrate that Hazardous Substances are present or that contamination has occurred due to the acts or omissions of Tenant or any Tenant Party. Tenant shall pay all reasonable costs of such tests if such tests reveal that Hazardous Substances exist at the Property in violation of this Lease.
(g) If underground or other storage tanks storing Hazardous Substances installed or utilized by Tenant are located on the Premises or the Property, or are hereafter placed on the Premises or the Property by Tenant (or by any other party, if such storage tanks are utilized by Tenant), then Tenant shall monitor the storage tanks, maintain appropriate records, implement reporting procedures, properly close any underground storage tanks, and take or cause to be taken all other steps necessary or required under Legal Requirements. Tenant shall have no responsibility or liability for underground or other storage tanks installed by anyone other than Tenant unless Tenant utilizes such tanks, in which case Tenant’s responsibility for such tanks shall be as set forth in this Section.
(h) Tenant shall promptly report to Landlord any actual or suspected presence of mold or water intrusion at the Premises.
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(i) Tenant’s obligations under this Section 8 shall survive the expiration or earlier Termination of this Lease. During any period of time needed by Tenant or Landlord after the Termination of this Lease to complete the removal from the Premises of any such Hazardous Substances, Tenant shall be deemed a holdover tenant and subject to the provisions of Section 17.
(j) Notwithstanding anything to the contrary in this Lease, Landlord shall have sole control over the equitable allocation of fire control areas (as defined in the Uniform Building Code as adopted by the city or municipality(ies) in which the Property is located (the “UBC”)) within the Property for the storage of Hazardous Substances. Notwithstanding anything to the contrary in this Lease, the quantity of Hazardous Substances allowed by this Section 8 is specific to Tenant and shall not run with the Lease in the event of an assignment or sublease. In the event of an assignment or sublease, if the use of Hazardous Substances by such new tenant (“New Tenant”) is such that New Tenant utilizes fire control areas in the Building in excess of New Tenant’s Pro Rata Share of the Building, then New Tenant shall, at its sole cost and expense and upon Landlord’s written request, establish and maintain a separate area of the Premises classified by the UBC as an “H” occupancy area for the use and storage of Hazardous Substances, or take such other action as is necessary to ensure that its share of the fire control areas of the Building is not greater than New Tenant’s Pro Rata Share of the Building. Notwithstanding anything in this Lease to the contrary, Landlord shall not have and expressly disclaims any liability related to Tenant’s or other tenants’ use or disposal of fire control areas, it being acknowledged by Tenant that Tenant and other tenants are best suited to evaluate the safety and efficacy of its Hazardous Substances usage and procedures.
(k) Landlord shall deliver the Premises to Tenant free of all Hazardous Substances and Regulated Waste. If any such Hazardous Substance or Regulated Waste is discovered within the Premises and the same was shown to be present as of the Effective Date, Landlord shall remove the same at its sole cost and expense, in compliance with all applicable laws. To the extent Tenant is unable to operate its business in the Premises or is delayed in its initially opening in the Premises as a result of such removal by Landlord, Base Rental and all items of Additional Rent shall abate during such removal or in the case of Tenant’s work being delayed, and the Term Commencement Date shall be extended for each day caused by such delay, but in no event post the date Tenant opens for business in the Premises.
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9. ASSIGNMENT AND SUBLEASE.
(a) Tenant shall not sublet any part of the Premises, nor assign, pledge or encumber this Lease or any interest herein, without the prior written consent of Landlord, which consent may not be unreasonably withheld, conditioned or delayed by Landlord (any of the foregoing, a “Transfer”). Landlord shall be entitled to deny consent to a Transfer if, by way of illustration but not limitation, the financial statements of the proposed assignee or sublessee are not reasonably satisfactory, if the proposed use of the Premises by the subtenant or assignee is not reasonably satisfactory, if the proposed use of the Premises by the subtenant or assignee is not in compliance with Legal Requirements or documents recorded against the Property, or if the proposed use is not reasonably compatible with other uses in the Building or violates an exclusive granted to another tenant in the Building or violates any exclusive granted to another tenant in the Building. In no event shall Landlord be deemed to be unreasonable for declining to consent to a Transfer to a transferee, assignee or sublessee lacking financial qualifications (unless Tenant remains liable under a sublease), or of poor reputation, or seeking a change in the Permitted Use, or jeopardizing directly or indirectly the status of Landlord or any of Landlord’s affiliates as a Real Estate Investment Trust under the Internal Revenue Code of 1986 (as the same may be amended from time to time, the “Revenue Code”). Notwithstanding anything contained in this Lease to the contrary, (w) no Transfer shall be consummated on any basis such that the rental or other amounts to be paid by the occupant, assignee, manager or other transferee thereunder would be based, in whole or in part, on the income or profits derived by the business activities of such occupant, assignee, manager or other transferee; (x) Tenant shall not furnish or render any services to an occupant, assignee, manager or other transferee with respect to whom transfer consideration is required to be paid, or manage or operate the Premises or any capital additions so transferred, with respect to which transfer consideration is being paid; (y) Tenant shall not consummate a Transfer with any person in which Landlord owns an interest, directly or indirectly (by applying constructive ownership rules set forth in Section 856(d)(5) of the Revenue Code); and (z) Tenant shall not consummate a Transfer with any person or in any manner that could cause any portion of the amounts received by Landlord pursuant to this Lease or any sublease, license or other arrangement for the right to use, occupy or possess any portion of the Premises to fail to qualify as “rents from real property” within the meaning of Section 856(d) of the Revenue Code, or any similar or successor provision thereto or which could cause any other income of Landlord to fail to qualify as income described in Section 856(c)(2) of the Revenue Code. Consent by Landlord to one Transfer shall not destroy or waive this provision, and all later Transfers shall likewise be made only upon prior written consent of Landlord. In the event a Transfer is consented to by Landlord, any sublessees or assignees shall become liable directly to Landlord for all obligations of Tenant hereunder without relieving or in any way modifying Tenant’s liability hereunder, but rather Tenant and its transferee shall be jointly and severally liable therefor. In the event Landlord gives its consent to any such assignment or sublease, fifty percent (50%) of any Profits (as hereinafter defined) relating to such sublease or assignment for such space shall be due and payable, and shall be paid, to Landlord. The “Profits” resulting from the sublease or assignment shall be the rent or other cost paid by the assignee or subtenant for all or any portion of the Premises over and above the Rent payable by Tenant, but less Tenant’s cost incurred including, but not limited to, legal review, commissions, architectural plans, advertising, legal fees, and fees paid to Landlord for such sublease or assignment. In the event a Transfer is made as herein provided, Tenant shall pay Landlord a charge equal to the actual costs reasonably incurred by Landlord for all of the necessary legal and accounting services required to accomplish such Transfer, as the case may be, and all such costs shall be documented and provided to Tenant to prove the incurrence thereof. In no event shall such amount exceed Two Thousand Dollars ($2,000.00). Any Transfer made without Landlord’s consent shall be void ab initio and of no force or effect. Landlord’s consent to any Transfer hereunder shall not waive Landlord’s rights as to any subsequent Transfer. For the purposes of determining whether Landlord acted reasonably in granting or withholding its consent or approval to any Transfer to the extent required hereunder, Tenant acknowledges and agrees that Landlord may refuse to give such consent or approval if, and to the extent that, Ground Lessor or the Mortgagee (as defined herein) has refused to provide any required consent or approval with respect to such Transfer.
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(b) In the event Tenant desires to effect a Transfer, then, at least thirty (30) but not more than ninety (90) days prior to the date when Tenant desires the Transfer to be effective (the “Transfer Date”), Tenant shall provide written notice to Landlord (the “Transfer Notice”) containing information (including references) concerning the character of the proposed transferee, assignee or sublessee; the Transfer Date; the most recent unconsolidated financial statements of Tenant and of the proposed transferee, assignee or sublessee satisfying the requirements of Section 38 hereof (“Required Financials”); any ownership or commercial relationship between Tenant and the proposed transferee, assignee or sublessee; and the consideration and all other material terms and conditions of the proposed Transfer, all in such detail as Landlord shall reasonably require. If Tenant or the proposed transferee, assignee or sublessee does not or cannot deliver the Required Financials, then Landlord may elect to have either Tenant’s ultimate parent company or the proposed transferee’s, assignee’s or sublessee’s ultimate parent company provide a guaranty of the applicable entity’s obligations under this Lease, in a form acceptable to Landlord, which guaranty shall be executed and delivered to Landlord by the applicable guarantor prior to the Transfer Date.
(c) In addition, Tenant shall deliver to Landlord a list of Hazardous Substances and/or Regulated Wastes (as such terms are defined below), certified by the proposed transferee, assignee or sublessee to be true and correct, that the proposed transferee, assignee or sublessee intends to use or store in the Premises. Additionally, Tenant shall deliver to Landlord, on or before the date any proposed transferee, assignee or sublessee takes occupancy of the Premises, all of the items relating to Hazardous Substances of such proposed transferee, assignee or sublessee as described in Section 8(a).
(d) Notwithstanding the foregoing, Tenant shall have the right to Transfer, upon thirty (30) days’ advance written notice to Landlord but without Landlord’s prior written consent, Tenant’s interest in this Lease or the Premises or any part thereof to any of the following (each a “Exempt Transfer’’), subject to the terms and conditions set forth below:
(i) Any person that as of the date of determination and at all times thereafter directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with Tenant (“Tenant’s Affiliate”). For purposes of the immediately preceding sentence, “control” requires both (a) owning (directly or indirectly) more than fifty percent (50%) of the stock or other equity interests of another person and (b) possessing, directly or indirectly, the power to direct or cause the direction of the management and policies of such person.
(ii) Any corporation or other entity into which Tenant may merge or to any corporation or other entity arising out of a consolidation or merger of Tenant with another corporation or other entity or to a corporation or other entity acquiring all or substantially all the assets of Tenant or all of the issued and outstanding voting stock or membership interests of or in Tenant.
In connection with any Exempt Transfer, Tenant shall notify Landlord in writing at least thirty (30) days prior to the effectiveness of such Exempt Transfer, and otherwise comply with the requirements of this Lease regarding such Transfer. Each Exempt Transfer shall be conditioned on a net worth test requiring that the tenant under this Lease after the Exempt Transfer has a net worth (as of both the day immediately prior to and the day immediately after the Exempt Transfer) that is at least the lesser of (A) $50,000,000 or (B) the net worth of the transferring Tenant as of the date of the Exempt Transfer (the “Net Worth Requirement”). At least thirty (30) days prior to the effectiveness of such Exempt Transfer, Tenant shall supply such documentation to Landlord as is reasonably necessary for Landlord to determine whether the proposed Transfer satisfies the foregoing Net Worth Requirement and otherwise qualifies as an Exempt Transfer.
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(e) Notwithstanding anything contained in this Lease to the contrary, a transfer of membership interests among the current members of Tenant and/or members of their immediate families (i.e., spouses, parents, brothers, sisters, children, grandchildren or any spouse of any such parent, brother, sister, child or grandchild) for estate-planning purposes, or a transfer of membership interests in trust for the benefit of such members or their immediate families, or a transfer of membership interests by will or devise, shall not constitute a Transfer for the purposes of this Lease.
(f) In the event of any Transfer, Tenant shall not be released from any of its obligations under this Lease and Tenant shall remain fully liable under this Lease during the unexpired Term. Tenant agrees that it shall not be (and shall not be deemed to be) a guarantor or surety of this Lease, however, and waives its right to claim that it is a guarantor or surety or to raise in any legal proceeding any guarantor or surety defenses Permitted by this Lease or by Legal Requirements. Notwithstanding the foregoing, in the event of an Exempt Transfer in which the transferee has a tangible net worth (as of both the day immediately prior to and the day immediately after the Exempt Transfer) that is at least $200,000,000, and provided that such transferee affirmatively assumes all obligations of the original Tenant under this Lease, Landlord shall provide a release of the original Tenant from all obligations under this Lease that arise from and after the date of such Transfer (but not those obligations arising prior to the date of such Transfer). At least thirty (30) days prior to the effectiveness of such Exempt Transfer, Tenant shall supply such documentation to Landlord as is reasonably necessary for Landlord to determine whether the proposed Transfer satisfies the foregoing net worth requirement and otherwise qualifies as an Exempt Transfer.
(g) Nothing contained in this Lease shall be deemed to prohibit Tenant from encumbering its personal property, trade fixtures and trade equipment with security agreements, but no security interest shall be permitted as to any alterations, installations or improvements which by the terms of this Lease become part of the Premises and which Tenant does not have the right to remove from the Premises. In the event that Tenant leases or finances the acquisition of office equipment, furnishings or other personal property of a removable nature utilized by Tenant in the operation of Tenant’s business, Tenant warrants that any Uniform Commercial Code financing statement shall, upon its face or by exhibit thereto, indicate that such financing statement is applicable only to removable personal property of Tenant located within the Premises. In no event shall the address of the Premises or the Building be furnished on a financing statement without qualifying language as to applicability of the lien only to removable personal property located in an identified suite leased by Tenant. Should any holder of a financing statement record or place of record a financing statement that appears to constitute a lien against any interest of Landlord or against equipment that may be located other than within an identified suite leased by Tenant, Tenant shall, within ten (10) days after filing such financing statement, cause (a) a copy of the Lender security agreement or other documents to which the financing statement pertains to be furnished to Landlord to facilitate Landlord’s ability to demonstrate that the lien of such financing statement is not applicable to Landlord’s interest and (b) Tenant’s Lender to amend such financing statement and any other documents of record to clarify that any liens imposed thereby are not applicable to any interest of Landlord in the Premises or the Building. With respect to any office equipment, furnishings or other personal property of a removable nature purchased by Tenant (but excluding any such items purchased in whole or in part with the TI Allowance), at Tenant’s request, Landlord shall provide a lien waiver in a form reasonably satisfactory to Landlord.
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10. DAMAGE OR DESTRUCTION.
(a) Tenant shall promptly notify Landlord of any damage to the Premises occasioned by fire, the elements, casualty or any other cause. If the Premises are totally destroyed (or so substantially damaged as to be untenantable for Tenant to carry on its critical business lines, in the reasonable determination of the Architect) by storm, fire, earthquake or other casualty or any other cause, Landlord shall notify Tenant within ninety (90) days from the date of such damage or destruction of Landlord’s decision either:
(i) To cancel this Lease as of the date of the occurrence of the storm, earthquake, fire or other casualty or any other cause; or
(ii) To commence, within ninety (90) days from the date of receipt by Landlord of all of the insurance proceeds paid with respect to such casualty, the process of restoration of the Premises (as limited by Section 10(c) below) to a tenantable condition that is suitable for Tenant’s Permitted Use, and proceed with due diligence to complete such restoration of the Premises using standard working methods and procedures.
(b) Notwithstanding the foregoing, in the event Landlord, subject to Force Majeure (as defined below) or delays caused by Tenant’s acts or omissions, fails to complete such restoration with reasonable diligence within two hundred seventy (270) days after the casualty, this Lease may be terminated upon written notice from either party to the other given not more than thirty (30) days following the expiration of such two hundred seventy (270) day period, which notice shall specify a termination date of not less than ninety (90) days after the date such notice is given; provided, however, that if either party exercises such right to terminate this Lease, then such written termination shall be of no force or effect if Landlord substantially completes the Premises within ninety (90) days of receipt of such notice. In the event such notice is not given, then this Lease shall remain in force and effect and Rent shall commence upon delivery of the Premises to Tenant in substantially the condition initially required under this Lease for the delivery of the Premises to Tenant (evidenced by notice to Tenant that the Premises are in Landlord’s reasonable judgment substantially repaired). In the event such damage or destruction occurs within twelve (12) months of the expiration of the Term, Tenant may, at its option on written notice to Landlord given within thirty (30) days of such destruction or damage, terminate this Lease as of the date of such destruction or damage. Tenant shall not have the right to cancel this Lease if the damage to the Premises is the result of Tenant’s negligence or willful misconduct.
(c) Unless this Lease is terminated pursuant to Section 10(a) above, in the event of damage to the Premises or the Building occasioned by fire, the elements, casualty or any other cause, Landlord shall commence and thereafter pursue diligently and as expeditiously as practicable, the repair and restoration of damage to the Premises, using standard working methods and procedures; provided, however, that for purposes of this Section 10, Landlord shall not be obligated to commence any repair or restoration unless and until insurance proceeds are actually received by Landlord and Landlord’s repair obligations shall be limited to the extent of the insurance proceeds actually received by Landlord therefor which have not been required by the Mortgagee to be applied toward the reduction of any indebtedness secured by the Property.
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(d) Rent shall abate in proportion to that part of the Premises rendered unfit for use in Tenant’s business as a result of such damage or casualty. The nature and extent of interference to Tenant’s ability to conduct business in the Premises shall be considered in determining the amount of such abatement, and the abatement shall commence and continue from the date the damage occurred until the date Landlord substantially completes the repair and restoration of the Premises and gives notice to Tenant that such repairs and restoration are substantially completed, or until Tenant again uses the Premises or the portions thereof rendered unusable for the Permitted Use, whichever occurs first.
(e) Notwithstanding anything to the contrary contained or implied elsewhere in this Lease. Landlord is not and shall not be obligated to repair or restore damage to Tenant’s trade fixtures, furniture, furnishings, equipment or other personal property, or other improvements made to the Premises by Tenant.
(f) If during the Term of this Lease, the Building is so damaged by fire or other casualty or any other cause (regardless of whether the Premises also are damaged) such that (i) in Landlord’s reasonable judgment repair and restoration of the Building is not economically feasible or the proceeds from Landlord’s insurance are insufficient to pay for all of the costs and expenses to repair and restore the Building; (ii) the Mortgagee shall not allow adequate insurance proceeds to be made available for repair and restoration; or (iii) the damage is not covered by Landlord’s insurance; then Landlord may cancel this Lease by giving written notice thereof within sixty (60) days after Landlord knows of the damage to the Building or Mortgagee notifies Landlord of its decision regarding the use of insurance proceeds for restoration, whichever is later, provided that Landlord’s Termination right shall be conditioned upon Landlord Terminating the leases for the majority of the RSF of similarly situated tenants in the Building (but excluding the University of Miami). Any such cancellation notice must specify the cancellation date, which shall be at least thirty (30) but no more than ninety (90) days after the date notice of cancellation is given.
(g) If during the Term of this Lease, the Building is damaged by fire or other casualty or any other cause, and if the damage is substantial and the Lease is in the last twelve (12) months of the Term, then either Landlord or Tenant may cancel this Lease by giving written notice thereof within sixty (60) days after Landlord knows of the damage to the Building. Any such cancellation notice must specify the cancellation date, which shall be at least thirty (30) but no more than ninety (90) days after the date notice of cancellation is given. Notwithstanding the foregoing, if Tenant validly exercises its renewal option under Article 39 of this Lease prior to delivery of a cancellation notice under this Section 10(g), then neither Landlord nor Tenant shall have any right to terminate this Lease under this Section 10(g).
(h) If either party cancels this Lease as permitted under this Section 10, then this Lease shall end on the date specified in the cancellation notice. The Rent, including any Additional Rent, and other charges shall be payable up to the cancellation date, after taking into account any applicable abatement. Landlord shall promptly refund to Tenant any prepaid, unaccrued Rent and Additional Rent (after taking into account any applicable abatement), plus any security deposit, less any sums then owing by Tenant to Landlord.
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11. CONDEMNATION.
If all of the Premises, or a part of such Premises such that the Premises in the judgment of Architect are untenantable so as to allow Tenant to carry on its critical business lines, are taken by exercise of the power of eminent domain or other similar proceeding (or are conveyed by Landlord in lieu of such taking), this Lease will terminate on a date which is the earlier of the date upon which the condemning authority takes possession of the Premises or the date on which title to the Premises is vested in the condemning authority. In the event of a partial taking where this Lease is not terminated, the Base Rental and Additional Rent will be abated in the proportion of the rentable area of the Premises so taken to the rentable area of the Premises immediately before such taking. In the event of any such taking, the entire award relating to the Building or the Property will be paid to Landlord, and Tenant will have no right or claim to any part of such award; however, Tenant will have the right to assert a claim against the condemning authority for loss of its business at the Premises, the value of the leasehold lost in the condemnation and any leasehold improvements installed by Tenant which were subject to the condemnation, so long as Landlord’s award is not reduced or otherwise impacted as a consequence of such claim, for Tenant’s moving expenses and trade fixtures owned by Tenant and interruption to Tenant’s business.
12. INSURANCE.
(a) Landlord shall maintain insurance for the Building in amounts equal to full replacement cost (exclusive of the costs of excavation, foundations and footings, engineering costs or such other costs that would not be incurred in the event of a rebuild and without reference to depreciation taken by Landlord upon its books or tax returns) or such lesser coverage as Landlord may elect, provided that such coverage shall not be less than the amount of such insurance Landlord’s Lender, if any, requires Landlord to maintain, providing protection against any peril generally included within the classification “Fire and Extended Coverage,” together with insurance against sprinkler damage (if applicable), vandalism and malicious mischief, wind and flood damage. Landlord, subject to availability thereof, shall further insure, if Landlord deems it appropriate, coverage against environmental hazard, earthquake, loss or failure of building equipment, rental loss during the period of repairs or rebuilding. Workers’ Compensation insurance and fidelity bonds for employees employed to perform services. Notwithstanding the foregoing, Landlord may, but shall not be deemed required to, provide insurance for any improvements installed by Tenant or that are in addition to the standard improvements customarily furnished by Landlord, without regard to whether or not such are made a part of or are affixed to the Building.
(b) In addition, Landlord shall carry Commercial General Liability insurance with limits of not less than One Million Dollars ($1,000,000) per occurrence general aggregate for bodily injury (including death), or property damage with respect to the Property.
(c) Tenant shall, at its own cost and expense, procure and maintain during the Term the insurance coverages described in clauses (v) through (vii) below with minimum unimpaired limits as specified therein, for the benefit of Tenant and Landlord (as their interests may appear) with insurers financially acceptable and lawfully authorized to do business in the state where the Premises are located. Commercial General Liability, Commercial Automobile Liability and Umbrella Liability insurance as required below shall name Landlord, BioMed Realty, L.P., BioMed Realty Trust, Inc., Wexford Science & Technology, LLC, Ground Lessor, Mortgagee and their respective officers, employees, agents, general partners, members, subsidiaries, affiliates and Lenders (“Landlord Parties”) as additional insureds as respects liability arising from work or operations performed by or on behalf of Tenant, Tenant’s use or occupancy of Premises, and ownership, maintenance or use of vehicles by or on behalf of Tenant. Tenant shall maintain in effect the following insurance coverages:
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(i) Commercial General Liability insurance on a broad-based occurrence coverage form, with limits of not less than One Million Dollars (Sl,000,000) per occurrence and in the aggregate for bodily injury (including death) and for property damage (including loss of use resulting therefrom) with respect to the Premises (including $100,000 fire legal liability (each loss)) with a ($2,000,000) products and completed operations aggregate, personal & advertising injury, and contractual liability aggregate; and Umbrella Liability insurance with limits of not less than Five Million Dollars ($5,000,000).
(ii) Commercial Automobile Liability insurance covering liability arising from the use or operation of any auto, including those owned, hired or otherwise operated or used by or on behalf of the Tenant. The coverage shall be on a broad-based occurrence form with combined single limits of not less than $1,000,000 per accident for bodily injury and property damage.
(iii) Commercial Property insurance covering property damage to the full replacement cost value and business interruption. Covered property shall include all tenant improvements in the Premises and Tenant’s Property including personal property, furniture, fixtures, machinery, equipment, stock, inventory and improvements and betterments, which may be owned by Tenant or Landlord and required to be insured hereunder, or which may be leased, rented, borrowed or in the care custody or control of Tenant, or Tenant’s agents, employees or subcontractors. Such insurance, with respect only to all Tenant Improvements, shall name Landlord and Landlord’s mortgagees from time to time as loss payees as their interests may appear. Such insurance shall be written on an “all risk” of physical loss or damage basis including the perils of fire, extended coverage, electrical injury, mechanical breakdown, windstorm, vandalism, malicious mischief, sprinkler leakage, back-up of sewers or drains, flood, terrorism and such other risks Landlord may from time to time designate, for the full replacement cost value of the covered items with an agreed amount endorsement with no co-insurance. Business interruption coverage shall have limits sufficient to cover Tenant’s lost profits and necessary continuing expenses, including rents due Landlord under the Lease. The minimum period of indemnity for business interruption coverage shall be twelve (12) months.
(iv) Workers’ Compensation insurance as is required by statute or law, or as may be available on a voluntary basis and Employers’ Liability insurance with limits of not less than the following: each accident, Five Hundred Thousand Dollars ($500,000); disease (policy limit), Five Hundred Thousand Dollars ($500,000); disease (each employee), Five Hundred Thousand Dollars ($500,000).
(v) Pollution Legal Liability insurance is required if Tenant stores, handles, generates or treats Hazardous Substances, as determined solely by the Landlord, on or about the Premises. Such coverage shall include bodily injury, sickness, disease, death or mental anguish or shock sustained by any person; property damage including physical injury to or destruction of tangible property including the resulting loss of use thereof, cleanup costs, and the loss of use of tangible property that has not been physically injured or destroyed; and defense costs, charges and expenses incurred in the investigation, adjustment or defense of claims for such compensatory damages. Coverage shall apply to both sudden and non-sudden pollution conditions including the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water. Claims-made coverage is permitted, provided the policy retroactive date is continuously maintained prior to the commencement date of this agreement, and coverage is continuously maintained during all periods in which Tenant occupies the Premises. Coverage shall be maintained with limits of not less than $1,000,000 per incident with a $2,000,000 policy aggregate.
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(vi) During all construction by Tenant at the Premises, including the initial Tenant Improvements performed in accordance with the Work Letter, with respect to tenant improvements being constructed, adequate builder’s risk insurance (naming Landlord and Landlord’s mortgagees from time to time as loss payees as their interests may appear), together with the insurance required in Exhibit C-3.
(d) Said insurance shall be with companies at all times having a current rating of not less than A- and financial category rating of at least Class VII in “A.M. Best’s Insurance Guide” current edition. Tenant shall obtain for Landlord from the insurance companies or cause the insurance companies to furnish certificates of insurance evidencing all coverages required herein to Landlord. Landlord reserves the right to require complete, true and correct copies of all required insurance policies including any endorsements. No such policy shall be cancelable or subject to reduction of coverage or other modification or cancellation except after twenty (20) days’ prior written notice to Tenant, and to the extent available, to Landlord (except in the event of non-payment of premium, in which case ten (10) days written notice shall be given), provided that if any insurer will not provide such notices directly to Landlord, then Tenant shall promptly deliver to Landlord copies of such notices. All such policies shall be written as primary policies, not contributing with and not in excess of the coverage that Landlord may carry. Tenant’s required policies shall contain severability of interests clauses stating that, except with respect to limits of insurance, coverage shall apply separately to each insured or additional insured Tenant’s policies, if applicable, shall contain dedicated or per location limits endorsements so that the amounts of insurance required herein shall not be prejudiced by losses at other locations. Tenant shall, at least five (5) days prior to the expiration of such policies, furnish Landlord with renewal certificates of insurance or binders. Tenant agrees that if Tenant does not take out and maintain such insurance, Landlord may (but shall not be required to) procure said insurance on Tenant’s behalf and at its cost to be paid by Tenant as Additional Rent.
(e) Tenant assumes the risk of damage to any fixtures, goods, inventory, merchandise, equipment and leasehold improvements, and Landlord shall not be liable for injury to Tenant’s business or any loss of income therefrom, relative to such damage, all as more particularly set forth within this Lease. Tenant shall, at Tenant’s sole cost and expense, carry such insurance as Tenant desires for Tenant’s protection with respect to personal property of Tenant or business interruption.
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(f) In each instance where insurance is to name Landlord Parties as additional insureds, Tenant shall, upon Landlord’s written request, also designate and furnish certificates evidencing such Landlord Parties as additional insureds to (a) any Lender of Landlord holding a security interest in the Building or the Property, (b) the landlord under any lease whereunder Landlord is a tenant of the real property upon which the Building is located if the interest of Landlord is or shall become that of a tenant under a ground lease rather than that of a fee owner, and (c) any management company retained by Landlord to manage the Property.
(g) Landlord, Tenant and each of their respective insurers hereby waive any and all rights of recovery or subrogation against one another or against the officers, directors, employees, agents and representatives of the other as respects any loss, damage, claims, suits or demands, howsoever caused, that are covered, or should have been covered, by valid and collectible insurance, including any deductibles or self-insurance maintained thereunder. If necessary, each party agrees to endorse the required insurance policies to permit waivers of subrogation as required hereunder and hold harmless and indemnify the other party for any loss or expense incurred as a result of a failure to obtain such waivers of subrogation from insurers. Such waivers shall continue so long as their respective insurers so permit. Any termination of such a waiver shall be by written notice to the other party, containing a description of the circumstances hereinafter set forth in this Section 12(g). Landlord and Tenant, upon obtaining the policies of insurance required or permitted under this Lease, shall give notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Lease. If such policies shall not be obtainable with such waiver or shall be so obtainable only at a premium over that chargeable without such waiver, then the party seeking such policy shall notify the other of such conditions, and the party so notified shall have ten (10) days thereafter to either (a) procure such insurance with companies reasonably satisfactory to the other party or (b) agree to pay such additional premium (in Tenant’s case, in the proportion that the area of the Premises bears to the insured area). If the parties do not accomplish either (a) or (b), then this Section 12(g) shall have no effect during such time as such policies shall not be obtainable or the party in whose favor a waiver of subrogation is desired refuses to pay the additional premium. If such policies shall at any time be unobtainable, but shall be subsequently obtainable, then neither party shall be subsequently liable for a failure to obtain such insurance until a reasonable time after notification thereof by the other party. If the release of either Landlord or Tenant, as set forth in the next sentence of this Section l2(g), shall contravene Legal Requirements, then the liability of the party in question shall be deemed not released but shall be secondary to the other party’s insurer.
(h) No more than once every two (2) years, Landlord may require insurance policy limits required under this Lease to be raised to conform with requirements of Landlord’s Mortgagee or to bring coverage limits to levels then being required of similarly situated tenants in comparable buildings in the Miami metropolitan area.
(i) Any costs incurred by Landlord pursuant to this Section shall constitute a portion of Operating Expenses.
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13. INDEMNIFICATION AND HOLD HARMLESS.
(a) Subject to Section 12(g) of this Lease, Tenant agrees to indemnify, save, defend (at Landlord’s option and with counsel reasonably acceptable to Landlord) and hold the Landlord Indemnitees (hereinafter defined) harmless from and against any and all demands, claims, liabilities, losses, costs, expenses, actions, causes of action, damages, suits or judgments, and all reasonable expenses (including reasonable attorneys’ fees, charges and disbursements, regardless of whether the applicable demand, claim, action, cause of action or suit is voluntarily withdrawn or dismissed) incurred in investigating or resisting the some (collectively, “Claims”) of any kind or nature, real or alleged, arising from injury to or death of any person or damage to any property occurring within or about the Premises, the Building or the Property, arising directly or indirectly out of the presence at or use or occupancy of the Premises or Property by Tenant or any Tenant Party, (b) an act or omission on the part of Tenant or any Tenant Party, (c) a breach or default by Tenant in the performance of any of its obligations hereunder, (d) injury to or death of persons or damage to or loss of any property, real or alleged, arising from the serving of alcoholic beverages at the Premises or Property, including liability under any dram shop law, host liquor law or similar Legal Requirements, except to the extent directly caused by Landlord’s negligence or willful misconduct. Tenant’s obligations under this Section shall not be affected, reduced or limited by any limitation on the amount or type of damages, compensation or benefits payable by or for Tenant under workers’ compensation acts, disability benefit acts, employee benefit acts or similar legislation. Tenant’s obligations under this Section shall survive the expiration or earlier termination of this Lease.
(b) Subject to Sections 12(g), 13(c), and any subrogation provisions contained in the Work Letter, Landlord agrees to indemnify, save, defend (at Tenant’s option and with counsel reasonably acceptable to Tenant) and hold the Tenant Parties harmless from and against any and all Claims arising from injury to or death of any person or damage to or loss of any physical property occurring within or about the Premises, the Property, or the Park to the extent directly arising out of Landlord’s negligence or willful misconduct. As used herein, the term “Landlord Indemnitees’’ shall mean Landlord and its affiliates, employees, agents and contractors, and any lender, mortgagee or beneficiary.
(c) Notwithstanding anything in this Lease to the contrary, Landlord shall not be liable to Tenant for and Tenant assumes all risk of (a) damage or losses caused by fire, electrical malfunction, gas explosion or water damage of any type (including broken water lines, malfunctioning fire sprinkler systems, roof leaks or stoppages of lines), unless any such loss is due to Landlord’s intentional misconduct or willful disregard of written notice by Tenant of need for a repair that Landlord is responsible to make for an unreasonable period of time, and (b) damage to personal property or scientific research, including loss of records kept by Tenant within the Premises. Tenant further waives any claim for injury to Tenant’s business or loss of income relating to any such damage or destruction of personal property as described in this Section.
(d) Notwithstanding anything in the foregoing or this Lease to the contrary, except (y) as may be provided by Legal Requirements or (z) in the event of Tenant’s breach of Section 8 or Section 17, in no event shall Landlord or Tenant be liable to the other for any consequential, special or indirect damages arising out of this Lease.
(e) Landlord shall not be liable for any damages arising from any act, omission or neglect of any other tenant in the Building.
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(f) Tenant acknowledges that security devices and services, if any, while intended to deter crime, may not in given instances prevent theft or other criminal acts. Landlord shall not be liable for injuries or losses caused by criminal acts of third parties, and Tenant assumes the risk that any security device or service may malfunction or otherwise be circumvented by a criminal. If Tenant desires protection against such criminal acts, then Tenant shall, at Tenant’s sole cost and expense, obtain appropriate insurance coverage.
(g) The provisions of this Article shall survive the expiration or earlier termination of this Lease.
(h) Tenant agrees to report in writing to Landlord any defective condition in or about the Premises known to Tenant, and further agrees to attempt to contact Landlord by telephone immediately in such instance.
14. SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT.
(a) This Lease is and shall be subject and subordinate to all mortgages and deeds of trust and to all renewals, modifications, consolidations, replacements, and extensions of such documents (collectively, “Mortgages;” and the holder of any Mortgage is a “Mortgagee’’) which may now or hereafter affect the Premises; provided, however, that at Landlord’s election, this Lease shall be superior to any or all Mortgages. The subordination in this Section 14(a) is self-executing and no further instrument shall be required to establish the subordination set forth herein. Upon request of Tenant, and at Tenant’s sole cost and expense, Landlord shall use commercially reasonable efforts to obtain and deliver to Tenant from any present or future Mortgagee such Mortgagee’s customary and reasonable form of written subordination, non-disturbance and attornment agreement in recordable form providing, among other things, that so long as Tenant performs all of the terms, covenants and conditions of this Lease and agrees to attorn to the Mortgagee, on such customary terms and conditions as such Mortgagee may reasonably require, Tenant’s rights under this Lease shall not be disturbed and shall remain in full force and effect for the Term, and Tenant shall not be joined by the Mortgagee in any action or proceeding to foreclose thereunder. In addition, this Lease is and shall be subject and subordinate to the existing Ground Lease and any other existing underlying leases affecting the Premises and to all renewals, modifications, consolidations, replacements, and extensions thereof. If any Mortgagee requests an SNDA from Tenant, then Tenant shall execute and deliver to Mortgagee such Mortgagee’s commercially reasonable customary form of SNDA in recordable form within twenty (20) days of such request.
(b) After receiving notice and a notice address from any Mortgagee, no notice from Tenant to Landlord alleging any default by Landlord shall be effective unless and until a copy of the same is given to such Mortgagee. Any such Mortgagee shall have thirty (30) days for the cure of any such default and if such default cannot reasonably be cured within such thirty (30) days, then Mortgagee shall have thirty (30) days within which to commence a cure and provided such Mortgagee is proceeding diligently, such longer period as may be reasonably necessary to complete such cure. The curing of any of Landlord’s defaults by such Mortgagee shall be treated as performance by Landlord.
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(c) With respect to any assignment by Landlord of Landlord’s interest in this Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made to any Mortgagee, Tenant agrees that the execution thereof by Landlord, and the acceptance thereof by the Mortgagee, shall never be deemed an assumption by such Mortgagee of any of the obligations of Landlord hereunder, unless such Mortgagee shall, by written notice sent to Tenant, specifically elect, or unless such Mortgagee shall foreclose the Mortgage and take possession of the Premises. Tenant, upon receipt of written notice from a Mortgagee that such Mortgagee is entitled to collect Rent hereunder may in good faith remit such Rent to Mortgagee without incurring liability to Landlord for the non-payment of such Rent.
(d) If the Mortgagee, or any party deriving its interest therefrom shall succeed to the rights of Landlord in the Premises or under this Lease, whether through possession or foreclosure action or delivery of a new lease or deed, then Tenant shall attorn to and recognize such party succeeding to Landlord’s rights (the party so succeeding to Landlord’s rights herein sometimes called the “Successor Landlord”) as Tenant’s Landlord under this Lease, and shall promptly execute and deliver any instrument that such Successor Landlord may reasonably request to confirm such attornment. This Lease shall continue in full force and effect as, or as if it were, a direct lease between the Successor Landlord and Tenant, and all of the terms, conditions and covenants set forth in this Lease shall be applicable after such attornment, except that the Successor Landlord shall not:
(i) be liable for any previous net or omission or Landlord under this Lease;
(ii) be subject to any offset that shall have theretofore accrued to Tenant against Landlord; or
(iii) be bound by:
(A) any previous modification of this Lease, not expressly provided for in this Lease unless consented to by such Successor Landlord; or
(B) any security deposit not delivered to such Successor Landlord or previous prepayment of more than one (l) month’s Rent or any Additional Rent then due, unless such prepayment shall have been expressly approved in writing by the Mortgagee through or by reason of which the Successor Landlord shall have succeeded to the rights of Landlord under this Lease.
The provisions for attornment set forth in this Section 14(d) shall be self-operative and shall not require the execution of any further instrument. However, if any Successor Landlord reasonably requests a further instrument confirming such attornment, Tenant agrees to execute and deliver the same within twenty (20) days after a request is made to do so in accordance with the provisions of this Lease.
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15. LANDLORD’S RIGHT OF ENTRY.
(a) Except as set forth below, Landlord, its agents or employees may enter the Premises upon at least twenty-four (24) hours’ advance notice, or at any time in the event of an emergency after first making all reasonable attempts to receive permission from Tenant before entry: (a) to exhibit the Premises to prospective purchasers of the Building or the Property, or prospective Tenants of the Premises within the last eight (8) months of the Term; (b) to inspect the Premises to see that Tenant is complying with its obligations hereunder; (c) to make repairs, alterations, improvements and additions required of Landlord under the terms hereof, or that are reasonably required to preserve the integrity, safety and good order of all or any part of the Premises or the Building, including any systems serving the Building which run through the Premises, or which may be necessary to comply with applicable laws, ordinances or other requirements of any governmental entity or agency having jurisdiction; (d) if requested by Tenant, to provide janitorial or other services required under this Lease; (e) to remove any alterations, additions or improvements made by Tenant in violation of Section 6(b) hereof; and (f) to make, repairs, alterations, improvements and additions to portions of the Building (including other tenant’s spaces) other than the Premises for which access to the Premises is reasonably necessary.
(b) Landlord and Tenant acknowledge and agree that Tenant may, from time to time, have certain security or confidentiality requirements such that portions or the Premises shall be locked and inaccessible to all Persons unless specifically authorized by Tenant (any such areas, the “Secure Areas”). Notwithstanding anything to the contrary contained herein, it is agreed that Landlord’s right of access to any Secure Areas shall be restricted upon the following conditions: (a) Tenant shall deliver to Landlord floor plans of the Premises designating any Secure Areas, (b) Tenant shall seek to limit such designated area to the extent reasonably necessary as determined by Tenant acting in good faith and taking into account the then-current nature of Tenant’s Permitted Use, (c) except in cases of emergency, any access to the Secure Areas by Landlord shall be upon no less than three (3) Business Days prior written notice to Tenant, and such access shall be granted to Landlord or its designated managing agent for the Building, in either case accompanied by a representative of Tenant, whom Tenant agrees to make available, and (d) Landlord shall have no obligation to provide any HVAC services or any other services or repairs to the Secure Areas unless Tenant shall provide Landlord with such access for the purposes of providing such services at those times that Landlord shall reasonably designate in accordance with the ordinary schedule for the Building.
(c) Landlord reserves full control over the Building and the Property to the extent not inconsistent with Tenant’s enjoyment of the Premises as provided by this Lease. This reservation includes Landlord’s right to subdivide the Property; convert the Building to condominium units; change the size of the Property by selling all or a portion of the Property or adding real property and any improvements thereon to the Property; grant easements and licenses to third parties; maintain or establish ownership of the Building separate from fee title to the Property; make additions to or reconstruct portions of the Building and the Property; install, use, maintain, repair, replace and relocate for service to the Premises and other parts of the Building or the pipes, ducts, conduits, wires and appurtenant fixtures, wherever located in the Premises (provided same are relocated above or along the ceiling, below the floor, in the perimeter walls, or within the column space), the Building or elsewhere at the Property; and alter or relocate any other Common Area or facility, including private drives, lobbies and entrances; provided, however, that such rights shall be exercised in a way that does not materially adversely affect Tenant’s beneficial use and occupancy of the Premises, including the Permitted Use and Tenant’s access to the Premises. Possession of areas of the Premises necessary for utilities, services, safety and operation of the Building is reserved to Landlord.
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(d) Landlord shall use reasonable efforts to perform any work at the Premises at a time and in a manner so as to not unreasonably interfere with Tenant’s use of the Premises. Notwithstanding the provisions of this Section to the contrary, if such repairs, alterations, improvements or additions in the Building or Premises shall render the Premises untenantable for more than three (3) consecutive days, and Tenant is not otherwise in default of any term or provision of this Lease past the expiration of any applicable notice and/or cure period, then Base Rental and all items of Additional Rent shall abate after said three (3) day period and such abatement shall continue until such time as the Premises are again tenantable; provided, however, if such repairs, alterations, improvements or additions are work which Tenant has covenanted herein to do and has failed so to do, then Base Rental and all items of Additional Rent shall in no manner abate.
16. TENANT’S DEFAULT; LANDLORD’S REMEDIES.
(a) The occurrence of any of the following shall constitute an event of default (each, an “Event of Default”) hereunder by Tenant:
(i) The Rent or any other sum of money due of Tenant hereunder is not paid (A) within ten (10) days after Tenant’s receipt of written notice from Landlord of such failure;
(ii) Any petition is filed by or against Tenant under any section or chapter of the National or Federal Bankruptcy Act or any other applicable Federal or State bankruptcy, insolvency or other similar law, and, in the case of a petition filed against Tenant, such petition is not dismissed within thirty (30) days after the date of such filing; if Tenant shall become insolvent or transfer property to defraud creditors; if Tenant shall make an assignment for the benefit of creditors; or if a receiver is appointed for any of Tenant’s assets;
(iii) Tenant fails to bond off or otherwise remove any lien filed against the Premises or the Building by reason of Tenant’s actions, within ten (10) business days after Tenant has notice of the filing of such lien;
(iv) Tenant fails to observe, perform and keep the covenants, agreements, provisions, stipulations, conditions, and Rules and Regulations herein contained to be observed, performed and kept by Tenant and persists in such failure after thirty (30) days written notice by Landlord requiring that Tenant remedy, correct, desist or comply (or if any such failure to comply on the part of Tenant would reasonably require more than thirty (30) days to rectify, unless Tenant commences rectification within the thirty (30) day period and thereafter promptly, effectively and continuously proceeds with the rectification of the failure to comply on the part of Tenant and, in all such events, cures such failure to comply on the part of Tenant no later than ninety (90) days after such notice);
(v) If all or any part of this Lease shall be assigned, or if all or any part of the Premises shall be sublet, either voluntarily or by operation of law, except in strict accordance with the requirements of Section 9 hereof;
(vi) Tenant or any guarantor of Tenant’s obligations (“Guarantor”) (if either is a corporation) is liquidated or dissolved or its charter expires or is revoked, or Tenant or Guarantor (if either is a partnership or business association) is dissolved or partitioned, or Tenant or Guarantor (if either is a trust) is terminated or expires, or if Tenant or Guarantor (if either is an individual) dies; or
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(vii) If Tenant shall fail to comply with the terms and conditions of Section 43 hereof within ten (10) days of written notice from Landlord.
(b) Upon the occurrence of an Event of Default, Landlord shall have the option to do and perform any one or more of the following:
(i) Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord. If Tenant shall fail to do so, Landlord may, without further notice and without prejudice to any other remedy Landlord may have, enter upon the Premises without the requirement of resorting to the dispossessory procedures and expel or remove Tenant and Tenant’s effects without being liable for any claim for trespass or damages therefor. Upon any such termination, Tenant shall remain liable to Landlord for damages, due and payable monthly on the day Rent would have been payable hereunder, in an amount equal to the Rent and any other amounts which would have been owing by Tenant for the balance of the Term, had this Lease not been terminated, less the net proceeds, if any, of any reletting of the Premises by Landlord, after deducting all of Landlord’s costs and expenses (including, without limitation, brokerage and attorneys’ fees and expenses) incurred in connection with or in any way related to the termination of this Lease, eviction of Tenant and such reletting; and/or
(ii) Declare the entire amount of Rent calculated on the current rate being paid by Tenant, including, without limitation, Base Rental and a reasonable estimate of Tenant’s Pro Rata Share of Operating Expenses and Tax, which in Landlord’s reasonable determination would become due and payable during the remainder of the Term, discounted to present value by using a reasonable discount rate selected by Landlord, to be due and payable immediately. Upon such acceleration of such amounts, Tenant agrees to pay the same at once, together with all Rent and other amounts theretofore due, at Landlord’s address as provided herein; provided however, that such payment shall not constitute a penalty or forfeiture but shall constitute liquidated damages for Tenant’s failure to comply with the terms and provisions of this Lease (Landlord and Tenant agreeing that Landlord’s actual damages in such an event are impossible to ascertain and that the amount set forth above is a reasonable estimate thereof). Notwithstanding the foregoing, if Landlord elects to enforce accelerated payment, and provided Tenant has vacated the Premises, then Landlord shall be obligated to use reasonable efforts to mitigate its damages in connection with an Event of Default by Tenant. Notwithstanding the foregoing, Landlord’s obligation to use reasonable efforts to mitigate its damages shall not require Landlord to (A) favor leasing the Premises over leasing any other vacant space held by Landlord at such time; (B) lease the Premises to a tenant or tenants at less than fair market rental rates or on terms less acceptable to Landlord than the terms typically used by Landlord in similar leases; (C) lease the Premises to tenants which, in the absence of a duty to mitigate, Landlord would find unsuitable for any reason; or (D) provide any tenant improvement allowance or construct any tenant improvements. Upon making such payment, Tenant shall receive from Landlord all rents received by Landlord from other tenants renting the Premises during the Term, provided that the monies to which Tenant shall so become entitled shall in no event exceed the entire amount actually paid by Tenant to Landlord pursuant to the preceding sentence, less all of Landlord’s costs and expenses (including, without limitation, brokerage and attorneys’ fees and expenses) incurred in connection with or in any way related to Termination of this Lease, eviction of Tenant and the reletting of the Premises. The acceptance of such payment by Landlord shall not constitute a waiver of rights or remedies to Landlord for any failure of Tenant thereafter occurring to comply with any term, provision, condition or covenant of this Lease; and/or
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(iii) Enter the Premises as the agent of Tenant without the requirement of resorting to the dispossessory procedures and without being liable for any claim for trespass or damages therefor, and, in connection therewith, rekey the Premises, remove Tenant’s effects therefrom and store the same at Tenant’s expense, without being liable for any damage thereto, and relet the Premises as the agent of Tenant, with or without advertisement, by private negotiations or otherwise, for any term Landlord deems proper, and receive the rent therefor. Tenant shall pay Landlord on demand any deficiency that may arise by reason of such reletting, but Tenant shall not be entitled to any surplus so arising. Provided Tenant has vacated the Premises, Landlord shall be obligated to use reasonable efforts to mitigate its damages in connection with an Event of Default by Tenant. Notwithstanding the foregoing, Landlord’s obligation to use reasonable efforts to mitigate its damages shall not require Landlord to (A) favor leasing the Premises over leasing any other vacant space held by Landlord at such time; (B) lease the Premises to a tenant or tenants at less than fair market rental rates or on terms less acceptable to Landlord than the terms typically used by Landlord in similar leases; (C) lease the Premises to tenants which, in the absence of a duty to mitigate, Landlord would find unsuitable for any reason; or (D) provide any tenant improvement allowance or construct any tenant improvements. Tenant shall reimburse Landlord for all costs and expenses (including, without limitation, reasonable brokerage and reasonable attorneys’ fees and expenses) incurred in connection with or in any way related to the eviction of Tenant and reletting the Premises, and for the amount of any other Rent which would have been due from Tenant to Landlord hereunder which is not recovered from reletting or due to inability to relet the Premises. Landlord, in addition to but not in lieu of or in limitation of any other right or remedy provided to Landlord under the terms of this Lease or otherwise (but only to the extent such sum is not reimbursed to Landlord in conjunction with any other payment made by Tenant to Landlord), shall have the right to be immediately repaid by Tenant the amount of all sums expended by Landlord and not repaid by Tenant in connection with preparing or improving the Premises to Tenant’s specifications and any and all costs and expenses incurred in renovating or altering the Premises to make it suitable for reletting; and/or
(iv) As agent of Tenant, do whatever Tenant is obligated to do by the provisions of this Lease, including, but not limited to, entering the Premises, without being liable to prosecution or any claims for damages in order to accomplish this purpose. Tenant agrees to reimburse Landlord immediately upon demand for reasonable expenses which Landlord may incur in thus effecting compliance with this Lease on behalf of Tenant, and Tenant further agrees that Landlord shall not be liable for any damages resulting to Tenant from such action, whether caused by the negligence of Landlord or otherwise; and/or
(v) Pursue any other right or remedy available to Landlord at law or in equity.
(c) Pursuit by Landlord of any of the foregoing remedies shall not preclude the pursuit of any damages incurred, or of any of the other remedies provided herein or available, at law or in equity.
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(d) No act or thing done by Landlord or Landlord’s employees or agents during the Term shall be deemed an acceptance of a surrender of the Premises. Neither the mention in this Lease of any particular remedy, nor the exercise by Landlord of any particular remedy hereunder, or at law or in equity, shall preclude Landlord from any other remedy Landlord might have under this Lease, or at law or in equity. Any waiver of or redress for any violation of any covenant or condition contained in this Lease or any of the Rules now or hereafter adopted by Landlord, shall not prevent a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation. The receipt by Landlord of Rent with knowledge of the breach of any covenant in this lease shall not be deemed a waiver of such breach.
17. HOLDING OVER.
(a) At least thirty (30) days prior to Tenant’s surrender of possession of any part of the Premises, Tenant shall provide Landlord with a facility decommissioning and Hazardous Substances closure plan for the Premises (“Exit Survey”) prepared by an independent third party state-certified professional with appropriate expertise, which Exit Survey must be reasonably acceptable to Landlord. The Exit Survey shall comply with the American National Standards Institute’s Laboratory Decommissioning guidelines (ANSI/AIHA Z9.11-2008) or any successor standards published by ANSI or any successor organization (or, if ANSI and its successors no longer exist, a similar entity publishing similar standards). In addition, at least ten (10) days prior to Tenant’s surrender of possession of any part of the Premises, Tenant shall (i) provide Landlord with written evidence of all appropriate governmental releases obtained by Tenant in accordance with Legal Requirements, including laws pertaining to the surrender of the Premises, (ii) place Laboratory Equipment Decontamination Forms on all decommissioned equipment to assure safe occupancy by future users and (iii) conduct a site inspection with Landlord. In addition, Tenant agrees to remain responsible after the surrender of the Premises for the remediation of any recognized environmental conditions set forth in the Exit Survey and comply with any recommendations set forth in the Exit Survey. Tenant’s obligations under this Section shall survive the expiration or earlier Termination of the Lease.
(b) On the Expiration Date, Tenant shall yield up the Premises to Landlord in the same condition and repair in which the Premises were on the Term Commencement Date, or as the same may have been improved during the Term, reasonable wear and tear, obsolescence excepted, and subject to fire and casualty and condemnation which shall be governed by the applicable provisions of this Lease. Tenant shall not be required to remove any Tenant Improvements or alterations or other improvements to the Premises permitted by Landlord unless Landlord’s consent thereto was conditioned in writing upon removal thereof. Tenant shall, however, have the right to remove any trade fixtures or equipment, provided it shall repair any damage to the Premises resulting therefrom.
(c) If Tenant remains in possession of the Premises for not more than sixty (60) days after expiration of the Term, or after any permitted termination of the Lease by Landlord, with Landlord’s acquiescence and without any written agreement between the parties, such tenancy shall be subject to all the provisions hereof, except that the Monthly Base Rental for said holdover period shall be one hundred fifty (150%) of the amount of Rent due in the last full month of the Term, and in addition, Tenant shall be liable to Landlord for any and all damages suffered by Landlord as a result of such holdover, including any lost rent or consequential, special and indirect damages. There shall be no renewal of this Lease by operation of law. Nothing in this Section shall be construed as a consent by Landlord to the possession of the Premises by Tenant after the expiration or earlier termination of the Term.
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(d) If Tenant remains in possession of the Premises for more than sixty (60) days after expiration of the Term, or after any permitted termination of the Lease by Landlord, with Landlord’s acquiescence and without any written agreement between the parties, Tenant shall be a tenant at sufferance and such tenancy shall be subject to all the provisions hereof, except that the Monthly Base Rental for said holdover period shall be double the amount of Rent due in the last full month of the Term and in addition, Tenant shall be liable to Landlord for any and all damages suffered by Landlord as a result of such holdover, including any lost rent or consequential, special and indirect damages. There shall be no renewal of this Lease by operation of law. Nothing in this Section shall be construed as a consent by Landlord to the possession of the Premises by Tenant after the expiration or earlier termination of the Term.
18. QUIET ENJOYMENT.
Landlord covenants that Tenant, upon paying the Rent and performing its obligations contained in this Lease, may peacefully and quietly have, hold and enjoy the Premises, free from any claim by Landlord or persons claiming under Landlord, but subject to all of the terms and provisions hereof, provisions of Legal Requirements and rights of record to which this Lease is or may become subordinate, including the REA and the Ground Lease. This covenant is in lieu of any other quiet enjoyment covenant, either express or implied.
19. MUTUAL REPRESENTATION OF AUTHORITY.
(a) Landlord and Tenant represent and warrant to each other that they have full right, power and authority to enter into this Lease without the consent or approval of any other entity or person and each party makes these representations knowing that the other party will rely thereon.
(b) The signatories on behalf of Landlord and Tenant further represent and warrant that each has full right, power and authority to act for and on behalf of Landlord and Tenant in entering into this Lease.
20. LANDLORD’S LIABILITY.
(a) Tenant hereby agrees for itself and each succeeding holder of Tenant’s interest, or any portion thereof, hereunder, that any judgment, decree or award obtained against Landlord, or any succeeding owner of Landlord’s interest, which is in any manner related to this Lease, the Premises, or Tenant’s use or occupancy of the Premises, whether at law or in equity, shall be satisfied only out of Landlord’s interest in the Property and neither Landlord nor any of its partners, Affiliates or Affiliated Officers shall have any personal liability under this Lease or be liable for any special, exemplary or consequential damages arising under this lease.
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21. REAL ESTATE BROKERS.
(a) Tenant represents that Tenant has dealt directly with and only with Richard Schuchts of Savills Studley Occupier Services (“Tenant’s Broker”) and Landlord’s Broker (as defined below) in connection with this Lease. Tenant’s Broker shall be paid by Landlord’s Broker pursuant to a separate agreement between Landlord’s Broker and Tenant’s Broker, and neither Tenant nor Tenant’s Broker shall have any claim against Landlord for any commission or other payment owed or claimed to be owed to Tenant’s Broker. Tenant agrees to defend, indemnify and save harmless Landlord against all claims, liabilities, losses, damages, costs and expenses (including reasonable attorneys’ fees and other costs of defense) arising from Tenant’s breach of this representation.
(b) Landlord represents that Landlord has dealt directly with and only with Blanca Commercial Real Estate (“Landlord’s Broker”) and Tenant’s Broker in connection with this Lease, and Landlord’s Broker’s commission shall be paid by Landlord pursuant to separate agreement. Landlord hereby agrees to defend, indemnify and save harmless Tenant against all claims, liabilities, losses, damages, costs and expenses (including reasonable attorneys’ fees and other costs of defense) arising from Landlord’s breach of this representation.
22. ATTORNEYS’ FEES.
In the event either party institutes legal proceedings against the other for breach of or interpretation of any of the terms, conditions or covenants of this Lease, the party against whom a judgment is entered shall pay all reasonable costs and expenses relative thereto, including reasonable attorneys’ fees of the prevailing party.
23. ESTOPPEL CERTIFICATE.
(a) At any time during the period beginning on the Effective Date and ending with the termination of this Lease, Tenant shall, within twenty (20) days of the request by Landlord, execute, acknowledge and deliver to Landlord, any Mortgagee, prospective Mortgagee, Lessor, or any prospective purchaser or transferee of the Property, the Building, or both (as designated by Landlord), or any mortgagee or prospective mortgagee of such prospective purchaser or transferee, an estoppel certificate substantially in the form attached to this Lease as Exhibit I or in such other form as Landlord or such other requesting party may from time to time require, evidencing (a) whether or not this Lease is in full force and effect; (b) whether or not this Lease has been amended in any way (and indicating any such amendments); (c) whether or not Tenant has accepted and is occupying the Premises; (d) to the best of its knowledge whether or not there are any existing defaults on the part of Landlord hereunder or defenses or offsets against the enforcement of this Lease to the knowledge of Tenant (specifying the nature of such defaults, defenses or offsets, if any); (e) the date to which Rent and other amounts due hereunder, if any, have been paid, including any amounts which are paid in advance; (f) the specific dates of any milestone dates contained in the Lease; and (g) any such other information as may be reasonably requested by Landlord. Each certificate delivered pursuant to this Section may be relied on by Landlord, any prospective purchaser or transferee of Landlord’s interest hereunder, or any Mortgagee or prospective Mortgagee, or any Ground Lessor.
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(b) At any time during the period beginning with the execution of this Lease and ending with the Termination of this lease, Landlord shall, within twenty (20) days of the request by Tenant, but not more than two (2) times in any calendar year, execute, acknowledge and deliver to Tenant an estoppel certificate in recordable form, or in such other form as Tenant may from time to time require, evidencing (i) whether or not this Lease is in full force and effect; (ii) whether or not this Lease has been amended in any way (and indicating any such amendments); (iii) whether or not Tenant has accepted and is occupying the Premises; (iv) whether or not there are any existing defaults on the part of Tenant hereunder or defenses or offsets against the enforcement of this Lease to the knowledge of Landlord (specifying the nature of such defaults, defenses or offsets, if any); (v) the date to which Rent and other amounts due hereunder, if any, have been paid; (vi) the specific dates of any milestone dates contained in the Lease; and (vii) any such other information as may be reasonably requested by Tenant. Each certificate delivered pursuant to this Section may be relied on by Tenant, any prospective purchaser or transferee of Tenant.
(c) Any estoppel certificate executed by Landlord or Tenant shall be for the sole benefit of the third party named in such estoppel certificate or its designee(s). No estoppel certificate, regardless of its contents, shall effectuate an amendment of the terms and provisions of this Lease.
24. NO RECORDING.
Landlord and Tenant agree not to record this Lease or any memorandum thereof.
25. WAIVERS.
LANDLORD AND TENANT EACH HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY CLAIM, ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE OTHER IN CONNECTION WITH ANY MATIER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT HEREUNDER, TENANT’S USE OR OCCUPANCY OF THE PREMISES, OR ANY CLAIM OR INJURY OR DAMAGE. TENANT HEREBY WAIVES ANY RIGHT TO FILE A NON-MANDATORY COUNTERCLAIM AGAINST LANDLORD IN ANY SUMMARY DISPOSSESS OR SIMILAR PROCEEDING.
26. GOVERNING LAW.
This lease shall be construed and interpreted in accordance with the laws of the state where the Premises are located, except for its conflict of law rules, and the parties hereby agree that any disputes involving this Lease shall be resolved in Miami Dade County, Florida.
27. NOTICES.
Any notice by either party to the other shall be in writing and shall be deemed to be duly given only if delivered personally or sent by registered or certified mail return receipt requested, or overnight delivery service, to the following:
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If to Tenant prior to the Term Commencement Date:
Longeveron,
LLC
1951 NW 7th Avenue
Suite 300
Miami, FL 33136
Attention: Suzanne Liv Page, Chief Operating Officer
Email: spage@longeveron.com
If to Tenant after the Term Commencement Date:
Longeveron,
LLC
1951 NW 7th Avenue
Suite 520
Miami, FL 33136
Attention: Suzanne Liv Page, Chief Operating Officer
Email: spage@longeveron.com
with a copy to:
Fuerst
Ittleman David & Joseph, PL
1001 Brickell Bay Drive
32nd Floor
Miami, Florida 33131
Attention: Mitchell S. Fuerst
Email: mfuerst@fuerstlaw.com
If to Landlord:
Wexford
Miami, LLC
17190 Bernando Center Drive
San Diego, California 92128
Attn: Vice President, Real Estate Legal
And:
c/o
Wexford Science & Technology
801 W. Baltimore Street, Suite 505
Baltimore, MD 21201
Attention: |
S.
Nelson Weeks, Senior Vice President
and General Counsel and Mark S. Korczakowski, Vice President |
Fax No.: (410) 864-6860
sandy.weeks@wexfordscitech.com
mark.korczakowski@wexfordscitech.com
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with a copy to:
Ballard
Spahr LLP
1735 Market Street
51st Floor
Philadelphia, PA 19103-7599
Attention: Bart I. Mellits, Esquire
Fax No.: (215) 864-9895
mellits@ballardspahr.com
Notices shall also be effective if sent by either fax or e-mail to the fax numbers and e-mail addresses set forth above upon system confirmation, provided that an additional notice is given in accordance with one of the other methods set forth in the first sentence of this section. Notice shall be deemed to have been given on the date received or refused, if delivered personally, by overnight delivery service, by fax or e-mail or, if mailed, three (3) business days after the date postmarked. Notices under this Lease may be given by counsel.
28. COUNTERPARTS, FAX AND E-MAIL SIGNATURES.
This Lease may be executed in one or more counterparts each one of which shall be deemed an original. E-mail and facsimile signatures shall also be sufficient to bind the parties hereto.
29. ENTIRE AGREEMENT.
This Lease and the Exhibits and Schedules hereto constitute the entire agreement between the parties, there being no other terms, oral or written, except as herein expressed. The failure of either party to insist in any instance on strict performance of any covenant or condition hereof, or to exercise any option herein contained, shall not be construed as a waiver of such covenant, condition or option in any other instance. No modification of this Lease shall be binding on the parties unless it is in writing and signed by both parties hereto.
30. SEVERABILITY AND INTERPRETATION.
(a) If any clause or provision of this Lease shall be deemed illegal, invalid or unenforceable under present or future laws effective during the Term, the remainder of this Lease shall not be affected by such illegality, invalidity or unenforceability, and in lieu of each clause or provision of this Lease that is illegal, invalid or unenforceable, there shall be added as a part of this Lease a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable.
(b) Should any provisions of this Lease require judicial interpretation, it is agreed that the court interpreting or construing the same shall not apply a presumption that the terms of any such provision shall be more strictly construed against one party or the other by reason of the rule of construction that a document is to be construed most strictly against the party who itself or through its agent prepared the same, it being agreed that the agents of all parties hereto have participated in the preparation of this Lease.
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(c) Each provision of this Lease performable by Tenant shall be deemed both a covenant and a condition. Notwithstanding anything to the contrary contained in this Lease, Tenant’s obligations under this Lease are independent and shall not be conditioned upon performance by Landlord.
31. HEIRS, SUCCESSORS, AND ASSIGNS - PARTIES.
(a) The provisions of this Lease shall bind and inure to the benefit of Landlord and Tenant, and their respective permitted successors, heirs, legal representatives and assigns, it being understood that the term “Landlord” as used in this Lease means only the owner or prime lessee (or the ground lessee) for the time being of the Property and Building of which the Premises are a part, so that in the event of any sale or sales of said Property or assignment of the prime lease (or of any ground lease thereof), Landlord named herein shall be and hereby is entirely released of all covenants and obligations of Landlord hereunder accruing thereafter, and it shall be deemed without further agreement that the purchaser, assignee, or the ground lessee, as the case may be, has assumed and agreed to carry out any and all covenants and obligations of Landlord hereunder during the period such party has possession of the Property and Building. Should the Property and the entire Building be severed as to ownership by sale and/or lease, then the owner of the entire Building or lessee of the entire Building that has the right to lease space in the Building to tenants shall be deemed “Landlord”. Tennant shall be bound to any such succeeding party for performance by Tenant of all the terms, covenants, and conditions of this Lease and agrees to attorn (and execute any attornment agreement not in conflict with the terms and provisions of this Lease at the request of any such party) to any such succeeding party.
(b) The parties “Landlord” and “Tenant” and pronouns relating thereto, as used herein, shall include male, female, singular and plural, corporation, partnership or individual, as may fit the particular parties.
32. SURVIVAL.
Except as otherwise set forth herein, any obligations of Tenant and Landlord, as set forth herein (including, without limitation, Tenant’s rental and other monetary obligations, repair obligations, and obligations to indemnify Landlord), shall survive the expiration or earlier termination of this Lease.
33. FORCE MAJEURE.
Except as provided for herein, Landlord and Tenant shall be excused for the period of any delay and shall not be deemed in default with respect to the performance of any of the terms, covenants, and conditions of this Lease when prevented from so doing by Force Majeure, provided, however, that Force Majeure shall not excuse delays in the payment of money.
34. TIME OF THE ESSENCE.
All time for payments and performance herein and all notice and cure periods are of the essence of the agreement between the parties hereto.
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35. HEADINGS.
The headings in this Lease are included for convenience only and shall not be taken into consideration in any construction or interpretation of any part of this Lease.
36. RULES AND REGULATIONS.
The Rules and Regulations set forth in Exhibit D (the “Rules”) are a part of this Lease. Landlord may from time to time amend, modify, delete or add new and additional and non-discriminatory Rules for the use, operation, safety, cleanliness and care of the Premises, the Common Area and the Property. Such new or modified Rules shall be effective upon notice thereof to Tenant, but shall not materially increase Tenant’s obligations under the Lease or decrease Tenant’s rights hereunder. Tenant will cause its employees and agents, or any others permitted by Tenant to occupy or enter the Premises to at all times abide by all reasonable and non-discriminatory Rules. In the event of any breach of any Rules, Landlord shall have all remedies in this Lease provided for in the Event of Default by Tenant and shall, in addition, have any remedies available at law or in equity, including but not limited to, the right to enjoin any breach of such Rules. Landlord shall not be responsible to Tenant for the nonobservance by any other tenant or person of any Rules. Landlord agrees to use commercially reasonable efforts to enforce the Rules uniformly against all tenants at the Building.
37. LEASE BINDING UPON DELIVERY; NO OPTION.
Submission of this Lease for examination and negotiation does not constitute an option to lease or reservation of space for the Premises. This Lease shall be effective only when executed by both parties and received by Landlord. If this Lease has been submitted to Tenant in form already signed by Landlord, it evidences only Landlord’s offer to enter into this Lease on the exact terms provided as delivered, which offer may be revoked at any time and which may additionally expire at any certain time established by Landlord in writing.
38. TENANT’S FINANCIAL STATEMENTS.
To induce Landlord to enter into this Lease, Tenant agrees that it shall promptly furnish to Landlord, from time to time, upon Landlord’s written request, the most recent year-end unconsolidated financial statements reflecting Tenant’s current financial condition audited by a nationally recognized accounting firm. Tenant shall, within ninety (90) days after the end of Tenant’s financial year, furnish Landlord with a certified copy of Tenant’s year-end unconsolidated financial statements for the previous year audited by a nationally recognized accounting firm. Tenant represents and warrants that all financial statements, records and information furnished by Tenant to Landlord in connection with this Lease are true, correct and complete in all respects. If audited financials are not otherwise prepared, unaudited financials complying with generally accepted accounting principles and certified by the chief financial officer of Tenant as true, correct and complete in all respects shall suffice for purposes of this Section. Notwithstanding the foregoing, Landlord, its employees and agents shall keep confidential any such financial statements or information is released to Landlord.
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39. RENEWAL OPTION.
Tenant shall have two (2) options (each and “Option”) to extend the Term by consecutive periods of sixty (60) months each, as to the entire Premises (and no less than the entire Premises), upon the following terms and conditions. Any extension of the Term pursuant to an Option shall be on all the same terms and conditions as this Lease, except as follows:
(a) Base Rental at the commencement of the applicable Option term shall equal ninety-five percent (95%) the then-current fair market value for comparable office and laboratory space in tile Miami metropolitan submarket of comparable age, quality, and level of finish (“FMV”), and in each case shall be further increased on each annual anniversary of the Option term commencement date by two and one-half percent (2.5%). Tenant may, no more than twelve (12) months prior to the date the Term is then scheduled to expire, request Landlord’s estimate of the FMV for the next Option term. Landlord shall, within fifteen (15) days after receipt of such request, give Tenant a written proposal of such FMV. If Tenant gives written notice to exercise an Option, such notice shall specify whether Tenant accepts Landlord’s proposed estimate of FMV. If Tenant does not accept the FMV, then the parties shall endeavor to agree upon the FMV, taking into account all relevant factors, including (i) the size of the Premises, (ii) the length of the Option term, (iii) rent in comparable buildings in the relevant market, including concessions offered to new tenants, such as free rent, tenant improvement allowances and moving allowances, (iv) Tenant’s creditworthiness. In the event that the parties are unable to agree upon the FMV within thirty (30) days after Tenant notifies Landlord that Tenant is exercising an Option, then either party may request that the same be determined as follows: a senior officer of a nationally recognized leasing brokerage firm with local knowledge of laboratory research and development leasing in the applicable submarket of Miami (the “Baseball Arbitrator”) shall be selected and paid for jointly by Landlord and Tenant. If Landlord and Tenant are unable to agree upon the Baseball Arbitrator, then the same shall be designated by the local chapter of the American Arbitration Association or any successor organization thereto (the “AAA”). The Baseball Arbitrator selected by the parties or designated by the AAA shall (y) have at least ten (l0) years’ experience in the leasing of laboratory/research and development space in the applicable submarket and (z) not have been employed or retained by either Landlord or Tenant or any affiliate of either for a period of at least ten (10) years prior to appointment pursuant hereto. Each of Landlord and Tenant shall submit to the Baseball Arbitrator and to the other party its determination of the FMV. The Baseball Arbitrator shall grant to Landlord and Tenant a hearing and the right to submit evidence. The Baseball Arbitrator shall determine which of the two (2) FMV determinations more closely represents the actual FMV. The arbitrator may not select any other FMV for the Premises other than one submitted by Landlord or Tenant. The FMV selected by the Baseball Arbitrator shall be binding upon Landlord and Tenant and shall serve as the basis for determination of Base Rental payable for the applicable Option term. If, as of the commencement date of an Option term, the amount of Base Rental payable during the Option term shall not have been determined, then, pending such determination, Tenant shall pay Base Rental equal to the Base Rental payable with respect to the last year of the then-current Term. After the final determination of Base Rental payable for the Option term, the parties shall promptly execute a written amendment to this Lease specifying the amount of Base Rental to be paid during the applicable Option term. Any failure of the parties to execute such amendment shall not affect the validity of the FMV determined pursuant to this Section.
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(b) An Option is not assignable separate and apart from this Lease.
(c) Each Option is conditional upon Tenant giving Landlord written notice of its election to exercise the Option at least nine (9) months prior to the end of the expiration of the then-current Term. Time shall be of the essence as to Tenant’s exercise of each Option. Tenant assumes full responsibility for maintaining a record of the deadlines to exercise the Option. Tenant acknowledges that it would be inequitable to require Landlord to accept any exercise of an Option after the date provided for in this Section.
(d) Notwithstanding anything contained in this Article to the contrary, Tenant shall not have the right to exercise an Option:
(i) During the time commencing from the date Landlord delivers to Tenant a written notice that Tenant is in default under any provisions of this Lease and continuing until Tenant has cured the specified default to Landlord’s reasonable satisfaction; or
(ii) At any time after any Event of Default as described in Section 16 of the lease (provided, however, that, for purposes of this Section 39(d), Landlord shall not be required to provide Tenant with notice of such Event of Default) and continuing until Tenant cures any such Event of Default, if such Event of Default is susceptible to being cured.
(e) The period of time within which Tenant may exercise an Option shall not be extended or enlarged by reason of Tenant’s inability to exercise such Option because of the provisions of Section 39(d).
40. GROUND LEASE PROVISIONS.
(a) Attornment.
(i) If for any reason the Ground Lease is terminated, then at Ground Lessor’s request, Tenant shall attorn to Ground Lessor and shall recognize Ground Lessor as Tenant’s Landlord under this Lease.
(ii) Tenant shall execute and deliver, upon the request of Ground Lessor, an instrument evidencing its agreement to attorn to Ground Lessor, except that no such document may materially increase any of the Tenant’s obligations under this Lease or materially decrease any of Tenant’s rights under this Lease.
(iii) Tenant waives the provisions of any statute or rule of law which may give Tenant any right of election to terminate this Lease or to surrender possession of the Premises in the event the Ground Lease terminates, and agrees that this Lease shall not be affected in any way whatsoever by such termination.
(b) Required Provisions.
(i) In no event shall the Term of this Lease end later than one day prior to the Term Expiration Date (as defined in the Ground Lease) of the Ground Lease.
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(ii) An executed copy of this Lease shall be delivered to Ground Lessor within thirty (30) days of the Effective Date.
(iii) This Lease shall be subject and subordinate to the Ground Lease, to all of the terms, covenants, conditions, provisions, agreements and conditions contained in the Ground Lease and to the matters to which the Ground Lease is or shall be subordinate, so that, without limitation, all of the terms with which Landlord is bound to comply under the Ground Lease shall be binding upon Tenant with respect to the Property (as defined in the Ground Lease), including without limitation, the restrictions on use, prohibitions on encumbrances on the interest of Ground Lessor in the Property (as defined in the Ground Lease), the Improvements (as defined in the Ground Lease) and the Surrounding Area (as defined in the Ground Lease) and the rights of Ground Lessor to enter onto the Premises.
(iv) Tenant shall not pay its monthly payment of Rent more than thirty (30) days in advance of when due.
(v) Tenant shall not use the name “University of Miami” or any words or phrases similar thereto or suggesting any affiliation with the University of Miami (except in connection with Tenant’s street address or other reference relating to location) without the prior written consent of Ground Lessor; provided, however, Tenant may use the name “University of Miami Life Science & Technology Park”, the approved logo for the Park and pictures of the Building in its advertising and promotional materials, as each of the same may be modified or updated from time to time.
(vi) Tenant shall comply with any and all provisions and make any necessary notifications and/or disclosures required by any applicable Governmental Authority (as defined in the Ground Lease).
(vii) Section 42 of this Lease requires payment by Tenant of parking rent and/or charges in amounts not less than market rents and/or charges as they may exist from time to time throughout the Term and any Renewal Terms.
41. SECURITY DEPOSIT.
(a) Tenant shall deposit with Landlord on or before the Effective Date a sum equal to nine (9) months of Base Rental due under this Lease (the “Security Deposit”), which sum shall be held by Landlord as security for the faithful performance by Tenant of all of the terms, covenants and conditions of this Lease to be kept and performed by Tenant during the period commencing on the Effective Date and ending upon the expiration or termination of Tenant’s obligations under this Lease. If Tenant defaults with respect to any provision of this Lease, including any provision relating to the payment of Rent, then Landlord may (but shall not be required to) use, apply or retain all or any part of the Security Deposit for the payment of any Rent or any other sum in default, or to compensate Landlord for any other loss or damage that Landlord may suffer by reason of Tenant’s default. If any portion of the Security Deposit is so used or applied, then Tenant shall, within ten (10) business days following demand therefor, deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its original amount, and Tenant’s failure to do so shall be a material breach of this Lease. The provisions of this Section 41 shall survive the expiration or earlier termination of this Lease.
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(b) In the event of bankruptcy or other debtor-creditor proceedings against Tenant, the Security Deposit shall be deemed to be applied first to the payment of Rent and other charges due Landlord for all periods prior to the filing of such proceedings.
(c) Landlord may deliver to any purchaser of Landlord’s interest in the Premises the funds deposited hereunder by Tenant, and thereupon Landlord shall be discharged from any further liability with respect to such deposit. This provision shall also apply to any subsequent transfers.
(d) If Tenant shall fully and faithfully perform every provision of this Lease to be performed by it, then the Security Deposit, or any balance thereof, shall be returned to Tenant (or, at Landlord’s option, to the last assignee of Tenant’s interest hereunder) within thirty (30) days after the expiration or earlier termination of this Lease.
(e) If the Security Deposit shall be in cash, Landlord shall hold the Security Deposit in an account at a banking organization selected by Landlord; provided, however, that Landlord shall not be required to maintain a separate account for the Security Deposit, but may intermingle it with other funds or Landlord. Landlord shall be entitled to all interest and/or dividends, if any, accruing on the Security Deposit. Landlord shall not be required to credit Tenant with any interest on the Security Deposit.
(f) The Security Deposit may be in the form of cash, a letter of credit or any other security instrument acceptable to Landlord in its sole discretion. Tenant may at any time, except when Tenant is in default, delivery a letter of credit (the “L/C Security”) as the entire Security Deposit, as follows:
(i) If Tenant elects to deliver L/C Security, then Tenant shall provide Landlord, and maintain in full force and effect throughout the Term and until the date that is three (3) months after the then-current Expiration Date, a letter of credit in the form of Exhibit H issued by an issuer reasonably satisfactory to Landlord, in the amount of the Security Deposit, with an initial term of at least one year. Landlord may require the L/C Security to be re-issued by a different issuer at any time during the Term if Landlord reasonably believes that the issuing bank of the L/C Security is or may soon become insolvent; provided, however, Landlord shall return the existing L/C Security to the existing issuer immediately upon receipt of the substitute L/C Security. If any issuer of the L/C Security shall become insolvent or placed into FDIC receivership, then Tenant shall immediately deliver to Landlord (without the requirement of notice from Landlord) substitute L/C Security issued by an issuer reasonably satisfactory to Landlord, and otherwise conforming to the requirements set forth in this Article. As used herein with respect to the issuer of the L/C Security, “insolvent” shall mean the determination of insolvency as made by such issuer’s primary bank regulator (i.e., the state bank supervisor for state chartered banks; the OCC or OTS, respectively, for federally chartered banks or thrifts; or the Federal Reserve for its member banks). If, at the Expiration Date, any Rent remains uncalculated or unpaid, then (i) Landlord shall with reasonable diligence complete any necessary calculations, (ii) Tenant shall extend the expiry date of such L/C Security from time to time as Landlord reasonably requires and (iii) in such extended period, Landlord shall not unreasonably refuse to consent to an appropriate reduction of the L/C Security. Tenant shall reimburse Landlord’s legal costs (as estimated by Landlord’s counsel) in handling Landlord’s acceptance of L/C Security or its replacement or extension.
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(ii) If Tenant delivers to Landlord satisfactory L/C Security in place of the entire Security Deposit, Landlord shall remit to Tenant any cash Security Deposit Landlord previously held.
(iii) Landlord may draw upon the L/C Security, and hold and apply the proceeds in the same manner and for the same purposes as the Security Deposit, if (i) an uncured default exists, (ii) as of the date forty-five (45) days before any L/C Security expires (even if such scheduled expiry date is after the Expiration Date) Tenant has not delivered to Landlord an amendment or replacement for such L/C Security, reasonably satisfactory to Landlord, extending the expiry date to the earlier of (1) six (6) months after the then-current Expiration Date or (2) the date one year after the then-current expiry date of the L/C Security, (iii) the L/C Security provides for automatic renewals, Landlord asks the issuer to confirm the current L/C Security expiry date, and the issuer fails to do so within ten (l0) business days, (iv) Tenant fails to pay (when and as Landlord reasonably requires) any bank charges for Landlord’s transfer of the L/C Security or (v) the issuer of the L/C Security ceases, or announces that it will cease, to maintain an office in the city where Landlord may present drafts under the L/C Security (and fails to permit drawing upon the L/C Security by overnight courier or facsimile). This Section does not limit any other provisions of this Lease allowing Landlord to draw the L/C Security under specified circumstances.
(iv) Tenant shall not seek to enjoin, prevent, or otherwise interfere with Landlord’s draw under L/C Security, even if it violates this Lease. Tenant acknowledges that the only effect of a wrongful draw would be to substitute a cash Security Deposit for L/C Security, causing Tenant no legally recognizable damage. Landlord shall bold the proceeds of any draw in the same manner and for the same purposes as a cash Security Deposit. In the event of a wrongful draw, the parties shall cooperate to allow Tenant to post replacement L/C Security simultaneously with the return to Tenant of the wrongfully drawn sums, and Landlord shall upon request confirm in writing to the issuer of the L/C Security that Landlord’s draw was erroneous.
(g) If Landlord transfers its interest in the Premises, then Tenant shall at Tenant’s expense, within five (5) business days after receiving a request from Landlord, deliver (and, if the issuer requires, Landlord shall consent to) an amendment to the L/C Security naming Landlord’s grantee as substitute beneficiary. If the required Security Deposit changes while L/C Security is in force, then Tenant shall deliver (and, if the issuer requires, Landlord shall consent to) a corresponding amendment to the L/C Security.
(h) If Tenant receives outside funding in excess of $12 million dollars (the “Outside Funding”), then the amount of the Security Deposit shall be reduced to a sum equal to four (4) months of Base Rental. In such event, Tenant shall provide evidence of receipt of such funding that is reasonably acceptable to Landlord (including an updated balance sheet showing a net worth of at least $12 million dollars that is certified by an officer of Tenant), and Landlord shall refund the balance of the Security Deposit within thirty (30) days thereafter. In addition, if Tenant has received the Outside Funding, then one (1) year after the Term Commencement Date, the amount of the Security Deposit shall be further reduced to a sum equal to three (3) months of Base Rental, and Landlord shall refund the balance of the Security Deposit within thirty (30) days thereafter.
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42. PARKING.
Landlord intends that parking for the Building (and the occupants thereof, including, without limitation, the Tenant, and their respective employees, guests and invitees) shall be provided by a parking lot located adjacent to the Building (hereinafter, the “Parking Lot”). Beginning on the Term Commencement Date and continuing throughout the Term hereof (for so long as the Parking Lot remains open and is not the subject of a casualty or condemnation), and to the extent spaces are available Tenant shall have the non-exclusive, revocable license to use (and Tenant shall be obligated to pay Landlord, as set forth below, for) up to thirty (30) parking space(s) in the Parking Lot for use by Tenant and its employees, guests and invitees, of which five (5) shall be reserved spaces and the balance shall be unreserved. Commencing on the Term Commencement Date and continuing throughout the Term, Tenant shall pay to Landlord (or, upon notice from Landlord, shall pay directly to such other party as Landlord shall direct) in advance on the first day of each month the applicable parking fee for such parking space, which shall be the then-current monthly rate charged to the general public by Landlord or the operator of the Parking Lot, as the same may change from time to time (the “Parking Rate”). The location of Tenant’s reserved parking spaces shall be as shown on Exhibit J attached hereto. Upon the occurrence of an Event of Default that continues beyond applicable notice and cure periods, Landlord shall have the right to revoke any reserved parking spaces, in which case such spaces shall become unreserved spaces. The parking fee for each reserved parking space shall be double the Parking Rate for an unreserved space, and Tenant shall be responsible for the costs of any signage identifying the reserved spaces. In no event may Tenant sublet, assign or otherwise transfer the right to use any of the parking spaces. Notwithstanding the foregoing, Landlord may terminate Tenant’s right to use the Parking Lot if and when any substitute parking lot or parking garage is made available to Tenant. In such event, the Parking Fee for parking spaces at the new parking lot or parking garage may be increased to an amount not to exceed the then-current rate being charged for monthly parking in such parking lot or garage. Notwithstanding the foregoing, if the Parking Lot shall not be accessible to Tenant, Landlord agrees that it shall provide the same number of substitute parking for the use of Tenant and its employees, guests and invitees at the then-current market rate at all times during the Term and any extensions thereof in a location within a reasonable proximity to the Building.
43. EB-5 / REPORTING.
(a) Tenant acknowledges that Landlord has financed a portion of the cost of constructing the Building through a loan (the “EB-5 Loan”) from BirchLEAF Miami Life Science Fund, L.P. (the “BirchLEAF Fund”). The EB-5 Loan was a material inducement to Landlord to undertake the construction and development of the Building, and compliance (a) by Landlord with the regulations, guidelines and/or reporting requirements established by the BirchLEAF Fund from time to time (the “Loan Requirements”), and (b) by Landlord’s tenants with the reporting requirements established by the BirchLEAF Fund from time to time regarding the number of employment and jobs created at the Building and such tenants’ premises, is necessary for Landlord’s continuing eligibility for the EB-5 Loan. For this purpose, Tenant hereby agrees (i) to fully and accurately complete and deliver to Landlord, within a reasonable time after written request by Landlord, such reporting forms provided by Landlord regarding employment and jobs created at the Premises as may be required by the BirchLEAF Fund from time to time, and (ii) to cooperate with Landlord in complying with the Loan Requirements and to provide any information related thereto and requested by Landlord from time to time within a reasonable time after written request therefor. Tenant hereby designates Suzanne Page as Tenant’s contact person to assist Landlord with its compliance with the Loan Requirements. Notwithstanding anything contained herein to the contrary, Tenant shall not be an obligor under such loon and shall not be liable if Tenant fails to create new jobs or if Landlord fails to comply with the Loon Requirements (unless Landlord’s failure to comply with the Loan Requirements is due to Tenant’s failure to comply with the Terms of this Section 43).
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(b) Landlord has financed, or may in the future finance from time to time, all or a portion of the construction of certain improvements on portions of the Property (or other property owned or leased by Landlord or its affiliates in the vicinity of the Property) with certain loans and/or grants that require Landlord to submit reports and information to the lending and/or granting organization. For this purpose, Tenant hereby agrees (i) to fully and accurately complete and deliver to Landlord, within a reasonable time after written request by Landlord, such reports and/or other information (including, without limitation, salary information regarding Tenant’s employees at the Premises) as may be required by the aforementioned lending and/or granting organization(s) from time to time, and (ii) to cooperate with Landlord in complying with the requirements of such loans and/or grants and to provide any information related thereto and requested by Landlord from time to time within a reasonable time after written request therefore.
44. SIGNAGE.
Signs on Tenant’s entrance door will be provided for Tenant by Landlord at Tenant’s expense. No advertisement, sign or other notice shall be inscribed, painted or affixed on any part of the outside or inside of the Building, except upon the interior doors as permitted by Landlord, which advertisement, signs or other notices shall be of Building standard order, size and style, and at such places as shall be designated by Landlord. In addition, Landlord shall provide in the lobby of the Building, at Landlord’s expense, a building directory which shall include Tenant’s name. Tenant shall have the right to affix a panel to the existing exterior monument sign at the Project, and any sign replacing the existing monument sign. Tenant’s monument sign panel shall be designed by Tenant, and may include only Tenant’s name and logo, and shall be consistent with Landlord’s design criteria. Tenant’s monument sign panel shall be fabricated by Tenant at Tenant’s sole cost and expense. In addition, Tenant shall have the right to install a temporary banner sign, with dimensions of approximately 60 feet wide by 13 feet high (the “Temporary Banner”), in the location shown on Exhibit K attached hereto, for a period of up to three (3) months after the Effective Date. The design of the Temporary Banner shall be subject to Landlord’s approval in its reasonable discretion. Installation and maintenance of the Temporary Banner shall be subject to all Applicable Laws, and Tenant shall be responsible at its sole expense for obtaining any required approvals for the Temporary Banner. Tenant shall immediately remove the Temporary Banner if Landlord, Tenant or any Governmental Authority determines that the Temporary Banner is not permitted. Landlord makes no representation that the Temporary Banner is permitted under Applicable Laws.
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45. RIGHT OF FIRST REFUSAL.
(a) During the first (1st) year following the Effective Date only (The “ROFR Period”), subject to any other parties’ pre-existing rights with respect to Available ROFR Premises (as defined below), Tenant shall have a right of first refusal (“ROFR”) as to any rentable premises the fifth (5th) floor of the Building that is contiguous to the Premises for which Landlord is seeking a tenant (“Available ROFR Premises”); provided, however, that in no event shall Landlord be required to lease any Available ROFR Premises to Tenant for any period past the date on which this Lease expires or is terminated pursuant to its Terms. To the extent that Landlord renews or extends a then-existing lease with any then-existing tenant or subtenant of any space, or enters into a new lease with such then-existing tenant or subtenant for the same premises, the affected space shall not be deemed to be Available ROFR Premises. In the event Landlord receives from a third party a bona fide offer to lease Available ROFR Premises, Landlord shall provide written notice thereof to Tenant (the “Notice of Offer”), specifying the terms and conditions of a proposed lease to Tenant of the Available ROFR Premises.
(b) Within ten (10) days following its receipt of a Notice of Offer, Tenant shall advise Landlord in writing whether Tenant elects to lease all (not just a portion) of the Available ROFR Premises on the terms and conditions set forth in the Notice of Offer. If Tenant fails to notify Landlord of Tenant’s election within such ten (10) day period, then Tenant shall be deemed to have elected not to lease the Available ROFR Premises.
(c) If Tenant timely notifies Landlord that Tenant elects to lease the Available ROFR Premises on the terms and conditions set forth in the Notice of Offer, then Landlord shall lease the Available ROFR Premises to Tenant upon the terms and conditions set forth in the Notice of Offer.
(d) If Tenant notifies Landlord that Tenant elects not to lease the Available ROFR Premises on the terms and conditions set forth in the Notice of Offer, or if Tenant fails to notify Landlord of Tenant’s election within the ten (l0)-day period described above, then Landlord shall have the right to consummate the lease of the Available ROFR Premises on the same terms as set forth in the Notice of Offer following Tenant’s election (or deemed election) not to lease the Available ROFR Premises.
(e) Notwithstanding anything in this Article to the contrary, Tenant shall not exercise the ROFR during such period of time that Tenant is in default under any provision of this Lease. Any attempted exercise of the ROFR during a period of time in which Tenant is so in default shall be void and of no effect. In addition, Tenant shall not be entitled to exercise the ROFR if Landlord has given Tenant two (2) or more notices of default under this Lease, whether or not the defaults are cured, during the twelve (l2) month period prior to the date on which Tenant seeks to exercise the ROFR.
(f) Notwithstanding anything in this Lease to the contrary, except in connection with an Exempt Transfer, Tenant shall not assign or transfer the ROFR, either separately or in conjunction with an assignment or transfer of Tenant’s interest in the Lease, without Landlord’s prior written consent, which consent Landlord may withhold in its sole and absolute discretion.
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(g) If Tenant exercises the ROFR, Landlord does not guarantee that the Available ROFR Premises will be available on the anticipated commencement date for the Lease as to such Premises due to a holdover by the then-existing occupants of the Available ROFR Premises or for any other reason beyond Landlord’s reasonable control.
46. RIGHT OF FIRST OFFER.
(a) During 1he first two (2) years following the Term Commencement Date only, and subject to any other parties’ pre-existing rights with respect to Available ROFO Premises (as defined below), Tenant shall have a right of first offer (“ROFO”) as to any rentable premises on the fifth (5th) floor of the Building that is contiguous to the Premises and for which Landlord is seeking a tenant (“Available ROFO Premises”); provided, however, that in no event shall Landlord be required to lease any Available ROFO Premises to Tenant for any period past the date on which this Lease expires or is terminated pursuant to its Terms. To the extent that Landlord renews or extends a then-existing lease with any then-existing tenant or subtenant of any space, or enters into a new lease with such then-existing tenant or subtenant, the affected space shall not be deemed to be Available ROFO Premises. In the event Landlord intends to market Available ROFO Premises, Landlord shall provide written notice thereof to Tenant, including a description of the Available ROFO Premises and the terms and conditions (including the rental rate) at which Landlord intends to offer the Available ROFO Premises (the “Notice of Marketing”).
(b) Within twenty (20) days following its receipt of a Notice of Marketing, Tenant shall advise Landlord in writing whether Tenant elects to lease all (not just a portion) of the Available ROFO Premises on the terms and conditions contained in the Notice of Marketing. If Tenant fails to notify Landlord of Tenant’s election within such twenty (20) day period, then Tenant shall be deemed to have elected not to lease the Available ROFO Premises.
(c) If Tenant timely notifies Landlord that Tenant elects to lease all of the Available ROFO Premises, then Landlord and Tenant shall promptly enter into an amendment to the Lease adding the Available ROFO Premises to the Premises on the terms and conditions contained in the Notice of Marketing (provided, however, that notwithstanding the terms and conditions contained in the Notice of Marketing, Tenant shall be required to lease the Available ROFO Premises for at least the remainder of the then-current Term).
(d) If (i) Tenant notifies Landlord that Tenant elects not to lease the Available ROFO Premises, (ii) Tenant fails to notify Landlord of Tenant’s election within the twenty (20)-day period described above, then Landlord shall have the right to consummate a lease of the Available ROFO Premises at base rent not less than ninety percent (90%) of that stated in the Notice of Marketing. If Landlord does not lease the Available ROFO Premises within one hundred eighty (180) days after Tenant’s election (or deemed election) not to lease the Available ROFO Premises, then the ROFO shall be fully reinstated, and Landlord shall not thereafter lease the Available ROFO Premises without first complying with the procedures set forth in this Article.
(e) Notwithstanding anything in this Article to the contrary, Tenant shall not exercise the ROFO during such period of time that Tenant is in default under any provision of this Lease. Any attempted exercise of the ROFO during a period of time in which Tenant is so in default shall be void and of no effect. In addition, Tenant shall not be entitled to exercise the ROFO if Landlord has given Tenant two (2) or more notices of default under this Lease, whether or not the defaults are cured, during the twelve (12) month period prior to the date on which Tenant seeks to exercise the ROFO.
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(f) Notwithstanding anything in this Lease to the contrary, except in connection with an Exempt Transfer, Tenant shall not assign or transfer the ROFO, either separately or in conjunction with an assignment or transfer of Tenant’s interest in the Lease, without Landlord’s prior written consent, which consent Landlord may withhold in its sole and absolute discretion.
(g) If Tenant exercises the ROFO, Landlord does not guarantee that the Available ROFO Premises will be available on the anticipated commencement date for the Lease as to such Premises due to a holdover by the then-existing occupants of the Available ROFO Premises or for any other reason beyond Landlord’s reasonable control.
47. RELOCATION TO NEW BUILDING.
Landlord and Tenant acknowledge and agree that Tenant has expressed an interest in relocating to any newly constructed building at the Park. In the event Landlord or an affiliate of Landlord constructs a new building at the Park, Tenant may request to relocate to such new building and to terminate this Lease upon such relocation, provided that Landlord may grant or deny such request in its sole discretion.
[Signatures Follow]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Lease as of the day and year first written.
LANDLORD: | ||||
WITNESSES: | WEXFORD MIAMI, LLC, | |||
a Delaware limited liability company | ||||
/s/ Jennifer Armstrong | ||||
Print Name: | Jennifer Armstrong | |||
By: | /s/ Mark Korczakowski | |||
/s/ Teresa Monteiro | Name: | Mark Korczakowski | ||
Print Name: | Teresa Monteiro | Title: | V.P. |
TENANT: | ||||
WITNESSES: | LONGEVERON, LLC, | |||
a Delaware limited liability company | ||||
/s/ Suzanne Page | ||||
Print Name: | Suzanne Page | |||
By: | /s/ Joshua Hare | |||
/s/ Richard R. Schuchts | Name: | Joshua Hare, MD | ||
Print Name: | Richard R. Schuchts | Title: | Chief Science Officer |
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schedule 1
payment instructions
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
Sch. 1-1
exhibit a
drawing of the premises
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
A-1
exhibit b
the land
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
B-1
exhibit c-1
work letter
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
C1-1
exhibit c-2
form of additional ti allowance acceptance letter
[tenant letterhead]
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
C2-1
exhibit c-3
insurance requirements
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
C3-1
exhibit c-4
form of lien waiver
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
C4-1
exhibit d
rules and regulations
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
D-1
exhibit e
form of rent commencement certificate
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
E-1
exhibit f
hazmat rules
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
F-1
exhibit g
form of report
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
G-1
exhibit h
letter of credit
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
H-1
exhibit i
form of estoppel certificate
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
I-1
exhibit j
reserved parking
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
J-1
exhibit k
temporary banner
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
K-1
exhibit l
existing building systems and equipment
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
L-1
Exhibit 10.6
GRANT AGREEMENT
THIS GRANT AGREEMENT (as it may be amended, this “Agreement”) is effective as of the 1st day of October, 2020 (“Effective Date”), by and between the MARYLAND STEM CELL RESEARCH COMMISSION (“Commission”), acting by and through the MARYLAND TECHNOLOGY DEVELOPMENT CORPORATION (“TEDCO” or the “Grantor”), a body politic and corporate and a public instrumentality of the State of Maryland (“State”) and LONGEVERON, LLC, a Delaware limited liability company (“Grantee”).
RECITALS
A. The Grantor administers for the Commission the Maryland Stem Cell Research Fund (“Fund”) to promote State-funded stem cell research and cures through financial assistance to public and private entities within the State.
B. The Commission has agreed to make a Grant to the Grantee in a total amount not to exceed Six Hundred Fifty Thousand and 00/100 Dollars ($650,000.00) (the “Grant”), which Grantor will disburse to the Grantee pursuant to this Agreement.
C. The Grant will be used by the Grantee solely to finance the costs to conduct the research project entitled “The RECOVER Trial: Longeveron Mesenchymal Stem Cells (LMSCs) for ARDS due to COVID-19 and Flu” (“Project”) and described in the Grantee’s application to the Fund (“Application”) which the Commission has approved and is attached hereto and, to the extent that it is consistent herewith, incorporated herein as Exhibit A.
D. The Grantee, Commission and Grantor agree that the Grantee shall expend best scientific efforts to accomplish the aims described in the Application and approved by the Commission.
NOW, THEREFORE, in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE
I
DEFINITIONS
All accounting terms not specifically defined herein shall have the meanings determined by generally accepted accounting principles, consistently applied. All terms previously defined are incorporated in this Agreement by reference. Capitalized terms not previously defined hereinabove and used in this Agreement have the meanings defined below:
“Completion Date” means no later than two (2) years after the Effective Date, unless the parties agree to a different date in writing, in accordance with Section 7.06 below.
“Data” means recorded information of any kind, regardless of the form or method of recording, that is owned by the Grantee and collected, developed, or acquired by the Grantee in the performance of the Project.
“Default” means any default under Section 6.01 of this Agreement.
“Eligible Project Costs” means those costs incurred for the Project in accordance with the Project Budget approved by the Grantor and included in the Application.
“(E)SCRO” means an Embryonic Stem Cell Research Oversight Committee, Institutional Stem Cell Research Oversight Committee, or Stem Cell Research Oversight Committee providing review, oversight, and approval of the scientific and ethical issues related to the procurement, derivation, and research use of human embryonic stem cell lines. The (E)SCRO should have its own established written policies or adhere to the guidelines issued by the National Academy of Sciences or the International Society for Stem Cell Research.
“(E)SCRO Approval” means the determination of either the Grantee’s (E)SCRO or an independent (E)SCRO that the Project has been reviewed and may be conducted within the constraints set forth by the (E)SCRO and any other institutional or federal requirements.
“Expenses” means all costs and expenses incurred by the Grantor (whether before or after a Default) in connection with, or in exercising or enforcing any rights, powers and remedies provided in, any of the Grant Documents.
“Grant Documents” means all documents executed and delivered in connection with or as a precondition of the Grant and the Obligations, including this Agreement, Exhibit A to this Agreement, any amendments to this Agreement executed in accordance with Section 7.06 below, and any documents that the Grantee is required to provide to the Grantor in accordance with this Agreement, including by way of illustration, documents evidencing approvals of the IRB and/or IACUC and any other document evidencing or satisfying a precondition of the Grant, as any of them may be amended.
“Governmental Authority” means the United States, the State, or any of their political subdivisions, agencies, or instrumentalities, including any local authority having jurisdiction over either party; provided, however, that notwithstanding any other provision of this Agreement, Governmental Authority shall not include Grantor.
“IACUC” means an institutional animal care and use committee established in accordance with and for the purposes expressed in 9CFR2 Subpart C (U.S. Department of Agriculture Policy for Care and Use of Animals).
“IACUC Approval” means the determination of the Grantee’s IACUC that the Project has been reviewed and may be conducted within the constraints set forth by the IACUC and any other institutional or federal requirements.
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“Invention” means any discovery or invention that is or may be patentable or otherwise protected under Title 35 U.S.C., or any novel variety of plant that is or may be patentable under the Plant Variety Act (Title 15 U.S.C., Section 3703(9)), that is conceived or first actually reduced to practice in the performance of the Project.
“IRB” means an institutional review board established in accordance with and for the purposes expressed in 45CFR46 Subpart A (U.S. Department of Health & Human Services Policy for Protection of Human Research Subjects).
“IRB Approval” means the determination of the Grantee’s IRB that the Project has been reviewed and may be conducted within the constraints set forth by the IRB and any other institutional or federal requirements.
“Laws” means any current or future federal, state and local laws, statutes, rules, ordinances, regulations, codes, decisions, interpretations, orders, or decrees of any court or other Governmental Authority having jurisdiction that are pertinent to the performance of the Project or that affect either party’s responsibilities or rights under this Agreement.
“Obligations” means all duties of payment, performance, or completion owed by the Grantee to the Grantor as specified under the Grant Documents and by law, including but not limited to the obligation to strictly observe and perform all of the provisions of the Grant Documents, time being of the essence.
“Principal Investigator” means Dr. Anthony Oliva. The identity of the Principal Investigator shall not be changed without the advance written consent of the Grantor.
“Project Budget” means the expected costs to perform the Project as included in Exhibit A and approved by the Grantor
“Project IP” means all Inventions, Data, copyrightable works, source code, other intellectual property and related information and know-how conceived, first actually reduced to practice, developed or created, collected or acquired in the course of and arising out of performance of the Project.
ARTICLE
II
TERMS OF THE GRANT AND DISBURSEMENT
Section 2.01. The Grant.
Subject to the further terms and conditions hereof and of any other Grant Documents, and to the availability of funds for this purpose as determined by Grantor in its sole discretion, the Grantor agrees to extend the Grant to the Grantee.
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Section 2.02. Disbursements.
(a) In General. Subject to the continued compliance by the Grantee with all of the terms of all of the Grant Documents, the continued satisfaction of all conditions precedent to disbursing Grant proceeds under this Agreement, the satisfactory review of any reports due pursuant to Section 3.02(j), and the continued non-existence of a Default or any event, circumstance, act or omission which with the giving of notice, the passage of time, or both, would constitute a Default, the Grantor shall tender to the Grantee: (i) a um not to exceed $325,000.00 as soon as is practicable following the execution of this Agreement (the “Initial Payment”); and (ii) a sum equal to $325,000.00 on or about one year after the date of the Initial Payment.
(b) Disbursements to the Grantee. All disbursements shall be made directly to the Grantee by check or wire transfer payable and sent to the Grantee.
(c) Conditions for All Disbursements. The obligation of the Grantor to make any disbursement of the Grant is subject to the satisfaction of the following conditions as of the date the disbursement is made:
(i) No representation or warranty of the Grantee contained in this Agreement shall be or have become materially incorrect or inaccurate.
(ii) There shall be no breach, default, or event of default (including a Default) under the terms of any of the Grant Documents, and no event, circumstance, act, or omission shall exist which with the giving of notice, the passage of time, or both, would constitute breach, default, or event of default (including a Default) under any of the Grant Documents.
(iii) In the event that the terms of any IRB Approval, or IACUC Approval for the Project, or any determination that the Project is exempt from the need for IRB Approval or IACUC Approval, require any subsequent review, exemption or approval, the Grantor shall receive evidence, in form and substance acceptable to the Grantor and its counsel, that the Grantee has obtained any such review, exemption and/or approval.
(iv) Grantee shall provide certification of its 1:1 matching investment of cash or approved in-kind goods or services (“Grantee’s Match”). The Grantee shall submit such additional documentation of any Grantee’s Match as Grantor may require.
(v) Grantor’s continued authorization from the State to administer the Fund on behalf of the State.
(d) Availability of Funds. Disbursements of Grant proceeds are subject to the continuing availability of funds for such purpose, and compliance with all applicable Laws.
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(e) Upon each disbursement, the Grantee shall be deemed to have issued each of the representations and warranties contained in Section 3.01 of this Agreement.
(f) In no event shall the Grantor be obligated to make any disbursement under this Agreement if a Default has occurred, if the disbursement would cause the amount disbursed in that year to exceed the annual limit set forth in subsection (a) above, or if the disbursement would cause the total amount disbursed to exceed the amount of the Grant.
Section 2.03. Conditions Precedent to Initial Disbursement.
(a) Before disbursing any Grant proceeds, and in any event on or before six (6) months after the Effective Date, the Grantor shall receive evidence, in form and substance acceptable to the Grantor and its counsel, that the Grantee has obtained IRB Approval for the Project or a determination that the Project is exempt from the need for IRB Approval.
(b) Before disbursing any Grant proceeds, the Grantor shall receive evidence, in form and substance acceptable to the Grantor and its counsel, that the Grantee has obtained any required IACUC Approval for the Project.
ARTICLE
III
REPRESENTATIONS, WARRANTIES, AND COVENANTS
Section 3.01. Representations and Warranties of the Grantee.
The Grantee represents and warrants as follows:
(a) Organization. The Grantee is a Delaware limited liability company.
(b) Due Authorization. The Grantee has the full power and authority to enter into this Agreement and consummate the transaction contemplated by the Grant Documents, to accept the Grant as contemplated hereby, to execute and deliver all of the Grant Documents to which it is a party, and to comply with the terms set forth in all of the Grant Documents, all of which have been duly authorized by any and all necessary action of the Grantee. No approval of any other person or public authority or regulatory body is required as a condition to the validity of any of the Grant Documents, or, if required, the approval has been obtained.
(c) Validity of Grant Documents. All of the Grant Documents have been properly executed and will:
(i) Not violate any Laws;
(ii) Not violate any provision, or result in a breach, of any document or agreement binding on the Grantee or affecting its property; and
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(iii) Constitute the valid and legally binding obligations of the Grantee, fully enforceable against the Grantee, in accordance with their terms.
(d) Legal Actions. There is no: (1) claim pending or, to the best of the Grantee’s knowledge threatened, in any court or before any governmental agency; or (2) investigation by or before any Governmental Authority, that:
(i) Questions the validity or enforceability of any of the Grant Documents, or any action taken, or to be taken, under any of them;
(ii) Is likely to result in any material adverse change in the authority, properties, assets, liabilities, or conditions (financial or otherwise) of the Grantee that would materially impair the Grantee’s ability to perform any of its obligations under all of the Grant Documents; or
(iii) Affects the Project.
(e) Grant Document Defaults. There is no event of default (including a Default) on the part of the Grantee under any of the Grant Documents, and no event has occurred or is continuing that, with notice, or the passage of time, or both, would constitute an event of default (including a Default) under any of the Grant Documents.
(f) Compliance With Laws. Upon Grantee’s knowledge, information and belief, the Grantee has complied with all Laws.
(g) State Drug Policy. The Grantee is in compliance with the State’s policy concerning drug and alcohol free workplaces, as set forth in COMAR 01.01.1989.18 and 21.11.08.
(h) Approvals. The Grantee has obtained, or expects to obtain prior to the commencement of the Project, all approvals from and reviews by all Governmental Authorities required by all Laws applicable to the Project.
(i) Project Budget. The Project Budget sets forth all of the expected costs of, and sources of funds for, the Project, and has been approved by the Grantor.
(j) Resolution. A resolution has been duly adopted as an official act of the Grantee’s governing body, authorizing the execution and delivery of all of the Grant Documents by the Grantee, and authorizing and directing the person executing the Financing Documents to do so on behalf of the Grantee.
(k) Taxes. All taxes imposed upon the Grantee and its properties have been paid prior to the date when any interest or penalty would accrue for nonpayment, except for those taxes being contested in good faith and by appropriate proceedings.
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Section 3.02. Covenants of the Grantee.
The Grantee shall:
(a) Performance. Promptly perform all of its obligations in the manner provided in the Grant Documents.
(b) Use of Grant Proceeds. Use the Grant for Eligible Project Costs, as set forth in the Project Budget, and in further compliance with the following: (i) an adjustment in the use of the Grant within an existing category set forth in the Project Budget shall not require an amendment to this Agreement if the adjustment is consistent with the purpose of the Grant as set forth in Recital C above; (ii) an adjustment in the use of the Grant between existing categories set forth in the “Budget Overview” section of the Project Budget in an amount not to exceed ten percent (10%) of the category from which the Grant proceeds are to be deducted shall not require an amendment to this Agreement if the adjustment is consistent with the purpose of the Grant as set forth in Recital C above; and (iii) no other adjustments to the Project Budget shall be permitted without the advance written authorization of the Grantor.
(c) Completion. Use its best scientific efforts to cause the Project to be completed by the Completion Date;
(d) Existence. Maintain its existence in good standing in the State.
(e) Compliance With Laws. Comply with all Laws applicable to the Project.
(f) Drug and Alcohol Free Workplace. Comply with the State’s policy concerning drug and alcohol free workplaces, as set forth in COMAR 01.01.1989.18 and 21.11.08, and remain in compliance during the term of the Grant Agreement.
(g) Fair Practices. Certify that it complies with all laws prohibiting discrimination in employment or otherwise on the basis of political or religious opinion or affiliation, marital status, sexual orientation, genetic information, race, color, creed or national origin, sex, age, or the physical or mental disability of a qualified individual with a disability; and will submit to the Grantor, upon request, information relating to Grantee’s operations with regard to political or religious opinion or affiliation, marital status, sexual orientation, genetic information, physical or mental disability, race, color, creed, national origin, sex or age, on a form to be prescribed by the Grantor.
(h) Records. Keep, in accordance with generally accepted accounting principles, any books, records, and other documents as may be reasonably necessary to fully account for the amount and disposition of the Grant, the costs incurred to perform the Project, and the source of all funds expended towards the costs of the Project (“Project Records”). All Project Records shall be maintained at the offices of the Grantee and Grantee shall make Project Records available to Grantor or its duly authorized representative for inspection, copying, audit and examination during normal business hours. All Project Records shall be maintained until three years after discharge of all duties owed to Grantor or longer if required by Grantee’s document retention policies.
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(i) Indemnification. Release the Grantor, Commission and Fund from, and protect, indemnify and save each of them harmless against, any claims and Expenses incurred by, or asserted against, any of them, arising in connection with the Project.
(j) Project and Financial Reports. With the cooperation of the Principal Investigator, file:
(i) Midterm Report- No later than thirty (30) days before the anniversary of the Effective Date the Grantee shall submit to TEDCO a written Midterm Report covering the research performed and the results thereof, and a financial reporting of expenditures providing personnel, budget, and other required financial information for the preceding period, and shall attend an in-person meeting at TEDCO’s offices to present a PowerPoint summary of the report. Each Midterm Report shall be accompanied by a letter requesting the continuation of Grant funding for the following year (“Funding Letter”). The format of the Midterm Report and of the Funding Letter shall be as periodically determined by TEDCO.
(ii) Final Report- Within 45 days after the end of the term of the Grant, a Final Report describing the research performed and the results thereof, and a financial reporting of expenditures providing personnel, budget, and other required financial information. In the event that any of the research proposed in the Application was not conducted, was not completed, or was materially modified, the Final Report shall include an explanation justifying such failure or modification. The Final Report shall also describe the translation potential and significance of the results of the Project. The format of the Final Report shall be as periodically determined by TEDCO.
(k) Annual Symposium Presentations. During each year of the term of the Grant and during the year immediately following the term of the Grant, upon the request of the Grantor, cause the Principal Investigator to make a presentation at an annual in- State symposium to report to the public on the progress made under the Project, including a description of the research being conducted, its translational potential and significance, and the interim or final results, as the case may be; provided, however, that such presentation shall be subject to the provisions of Article V of this Agreement, and further provided that the Grantee shall not be required to include in such a presentation any information the release of which would be premature in the light of the progress of the Project or would jeopardize intellectual property rights of the Grantee in Inventions, Data or other intellectual property.
(l) Taxes and Claims. Pay all applicable taxes, assessments and claims as they become due, except for those being contested in good faith by appropriate proceedings.
(m) Good Standing. Maintain its corporate or other existence, in good standing, in Delaware, Florida, and in each other jurisdiction where the failure to so qualify would have a material effect on the Grantee’s business or financial condition.
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(n) Meeting with Award Manager. Ensure that the Principal Investigator will, upon request, meet periodically with the Award Manager appointed by TEDCO to oversee awards from the Fund.
The Grantee shall not:
(o) Equal Employment. Engage in employment practices which deny equal employment rights to persons by reason of race, color, national origin, political or religious affiliation or opinion, marital status, sex, sexual orientation, genetic information, physical or mental disability or age (except when sex, disability or age involves a bona fide job requirement).
ARTICLE
IV
INTELLECTUAL PROPERTY
Section 4.01. Title to Intellectual Property. All rights and incidents of ownership in Project IP shall be determined solely in accordance with Grantee’s Policy on Intellectual Property (“IP Policy”). When Grantee is the sole owner of Project IP under Grantee’s IP Policy, Grantee shall determine, in its sole discretion, whether and to what extent to apply for patents or otherwise protect any such Project IP, and in any event shall do so at its sole cost and expense, it being expressly agreed that no portion of the Grant may be expended on any costs or fees incurred in so doing.
Section 4.02. Sharing of Project Results and Cell Lines. Notwithstanding the foregoing provisions of Section 4.01, and subject to the provisions of Article V of this Agreement, upon the reasonable written request of any other Fund grantee in good standing with the Grantor (“Other Fund Grantee”), the Grantee shall share the final results of the Project and any cell lines initially developed under this Agreement with the principal investigator of such Other Fund Grantee (“Receiving PI”), so long as the Other Fund Grantee and the Receiving PI execute Grantee’s Confidentiality and Non-disclosure Agreement and Grantor certifies to Grantee that the Other Fund Grantee is in good standing with Grantor. Grantee may charge the Other Fund Grantee only for reimbursement of actual out-of-pocket costs directly incurred in complying with this Section 4.02.
ARTICLE
V
CONFIDENTIAL INFORMATION
Section 5.01. Public Communications about the Project. To the extent reasonably permitted by Title 10, Subtitle 6, of the State Government Article of the Annotated Code of Maryland Grantor shall not make any public statements or announcements concerning the details of the Project and shall not release or publicly discuss Confidential Information (as defined in Section 5.02) without the prior written consent of the Grantee.
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Section 5.02. Confidential Information: Confidential Information means (a) Commercial Information, as defined in State Government Article, Title 10, subsection 617(d) of the Annotated Code of Maryland (“Maryland Public Records Act”) that is disclosed by a third party to Grantee in the course of performing the Project and (b) all Project IP that is owned by Grantee and has not been disclosed, published or disseminated by the Principal Investigator in the course of scholarly activities or released in a published patent, and that Grantee wishes to withhold from public release (x) to evaluate whether to patent or market the Project IP and pursue economic development and licensing opportunities or (y) because the Project IP is not sufficiently developed or tested such that Grantee considers, in its reasonable judgment, that release is premature and could be misinterpreted and/or hinder future Project work, and/or (z) because the release of such Project IP could undermine or jeopardize the security of Grantee’s facilities, property or endanger the integrity or safety of the Project and/or other Grantee research activities. Confidential Information may exist in written, oral, graphic, electronic, digital and any other form or format not existing or that comes into use in the future physical form. Confidential Information does not include information that is developed independently and without the benefit of Confidential Information; is lawfully obtained from a third party under no obligation of confidentiality; is or becomes publicly available through no wrongful act of the recipient; is known to the recipient prior to receiving the information from the Grantee; or was not designated as confidential by Grantee.
ARTICLE
VI
DEFAULT AND REMEDIES
Section 6.01. Defaults.
The following events shall constitute a Default under this Agreement:
(a) Any Grant proceeds are used for any purpose other than Eligible Project Costs.
(b) The Grantee breaches any covenant, representation, warranty, or other provision of this Agreement, which breach is not cured within 30 calendar days from the date of receipt of written notice (as provided in Section 7.01 below) of the breach from the Grantor.
(c) The Grantee breaches any covenant, representation, warranty, or other provision in any other Grant Document, which breach continues beyond any applicable grace or cure period.
(d) Any statement made in any certificate, report or opinion (including legal opinions), financial statement, or other document furnished in connection with the Grant was incorrect in any material respect when made.
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(e) The Grantee fails to comply with any requirement imposed by any Governmental Authority in connection with the Project within 30 days after written notice of the requirement is made or within any other time period set by the Governmental Authority; or if any proceeding is commenced or action taken to enforce any remedy for a violation of any requirement of a Governmental Authority in connection with the Project.
(f) The Project is not completed by the Completion Date as required by Section 3.02(c) above.
(g) A permanent or preliminary injunction, excluding an ex parte injunction, is issued by a court of competent jurisdiction that lasts for more than 90 days and prohibits the Grantee from carrying out any of its Obligations as set forth herein.
(h) Without the prior written consent of the Grantor, the Grantee is dissolved by operation of law or in any other manner.
(i) Any court of competent jurisdiction makes a final order: (i) adjudicating the Grantee a bankrupt, (ii) appointing a trustee or receiver of a substantial part of the property of the Grantee, (iii) approving a petition for, or affecting an arrangement in, bankruptcy, a reorganization pursuant to federal bankruptcy law, or any other judicial modification or alterations of the rights of the Grantor or of creditors of the Grantee, (iv) assuming custody or sequestering any substantial part of the property of the Grantee; or (v) attaching or garnishing any substantial part of the property of the Grantee; or if the Grantee (a) files such petition; (b) takes or consents to any other actions seeking any such judicial order; (c) makes an assignment for the benefit of creditors; (d) fails to pay debts generally as they become due; or (e) makes an admission in writing of inability to pay debts generally as they become due.
Section 6.02. Remedies.
(a) Upon the occurrence of any Default, the Grantor may:
(i) Require the immediate repayment of the entire disbursed amount of the Grant, and immediate payment of any Obligations, with interest from the date of default at the rate then set forth in Section 11-107(a), Courts and Judicial Proceedings Article of the Annotated Code of Maryland;
(ii) At any time proceed to protect and enforce all rights and remedies available to the Grantor under this Agreement or by Law, by any other proceedings, whether for specific performance of any agreement contained in this Agreement, damages, or other relief;
(iii) Suspend or terminate the Grantee’s authority to receive any undisbursed Grant proceeds at any time by written notice to the Grantee; and
(iv) Exercise any of its rights and remedies under any of the Grant Documents.
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(b) All remedies provided for in this Agreement or by Law are cumulative and are in addition to any other rights and remedies available to the Grantor under any Law. The exercise of any right or remedy by the Grantor shall not constitute a cure or waiver of any Default, nor invalidate any act done pursuant to any notice of Default, nor prejudice the Grantor in the exercise of those rights.
(c) The failure of the Grantor to insist upon performance of any term of this Agreement shall not constitute a waiver of any term of this Agreement. No act of the Grantor shall be construed as an election to proceed under any one provision in this Agreement to the exclusion of any other provision.
(d) If the Grantor suspends or terminates this Agreement, the rights and remedies available to the Grantor shall survive the suspension or termination.
(e) In no event shall Grantee’s total liability to Grantor be greater than the actual amount of funds disbursed by Grantor to Grantee for the Project under this Agreement, plus any interest due pursuant to Subsection (a)(i) above..
ARTICLE
VII
MISCELLANEOUS
Section 7.01. Notices.
(a) All communications between the parties made pursuant to this Agreement shall be in writing.
(b) All communications shall: (a) when mailed, be effective three business days after deposit in the mails; (b) when sent for next day delivery by a reputable overnight courier service, be effective one business day after dispatch; and (c) when sent by fax, be effective when faxed and receipt of the communication is confirmed by a fax receipt. Communications shall be delivered to the office of the addressee, as follows:
(i) | Communications to the Grantor shall be sent to: |
Maryland
Technology Development Corporation
7021 Columbia Gateway Drive, Suite 200
Columbia,
Maryland 21046
Attention: Dan Gincel, Ph.D.
Fax: (410) 740-9422
With
a copy to Counsel for the Grantor:
Ira Schwartz, Esq.
Office
of the Attorney General
401 East Pratt Street, 5th Floor
Baltimore, Maryland 21202
Fax: (410) 333-8298
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(ii) | Communications to the Grantee shall be mailed to: |
Longeveron,
LLC
1951 NW 7th Avenue- Suite 520
Miami, FL 33136
Attn.: Anthony A. Oliva, Ph.D.
(c) The parties may change their notice addresses by sending written notice to the other parties.
Section 7.02. Assignment/Delegation.
No benefit inuring to the Grantee under this Agreement may be assigned, and no duty imposed on the Grantee may be delegated, without the prior written consent of the Grantor.
Section 7.03. Successors Bound.
This Agreement shall inure to the benefit of, and shall be binding upon, each of the parties and their successors and permitted assigns.
Section 7.04. Severability.
The invalidity of any part of this Agreement shall not affect the validity of the remaining provisions of this Agreement.
Section 7.05. Entire Agreement.
This Agreement, including Exhibit A and any subsequent amendments the parties may execute in accordance with Section 7.06 below, constitutes the entire agreement between the parties and supersedes all prior oral and written agreements, representations, and negotiations between the parties concerning the Grant and the Obligations.
Section 7.06. Amendment of Agreement.
This Agreement may be amended only in writing executed by the parties.
Section 7.07. Headings.
The headings used in this Agreement are for convenience only and do not constitute a part of this Agreement.
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Section 7.08. Disclaimer of Relationships.
The Grantee acknowledges that the obligation of the Grantor and Commission is limited to making the Grant on the terms set forth in this Agreement. Nothing in this Agreement, and no act of the parties or any one or more of them, shall be deemed to create any relationship of third-party beneficiary, principal and agent, limited or general partnership, joint venture, or any other relationship between the Grantor or Commission and the Grantee.
Section 7.09. Governing Law.
This Agreement and any other Grant Documents shall be governed by the laws of the State of Maryland.
Section 7.10. Term of Agreement.
Except as otherwise provided in this Agreement, unless sooner terminated by the written consent of the parties this Agreement shall remain in full force and effect from the Effective Date until all Grantee’s obligations under the Agreement have been satisfied.
Section 7.11. Illegality.
If performance of any Obligation would require the performing party to violate the Law, then the performance shall be reduced to the level permitted by Law, and if any provision of this Agreement is determined to be illegal or invalid by a court of competent jurisdiction, then such provision only shall be void as though not set forth in this Agreement, and the remainder of this Agreement shall remain in full force and effect.
Section 7.12. WAIVER OF JURY TRIAL.
THE PARTIES HEREBY VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER AND IN CONNECTION WITH THE GRANT OR ANY OF THE GRANT DOCUMENTS.
Section 7.13. Force Majeure.
Neither party is liable for failure or delay in performing any of its obligations under this Agreement if the failure or delay is required in order to comply with any governmental regulation, request or order, or necessitated by other circumstances beyond the reasonable control of the party so failing or delaying, including but not limited to Acts of God, war (declared or undeclared), insurrection, fire, flood, accident, labor strikes, work stoppage or slowdown (whether or not such labor event is within the reasonable control of the parties), or inability to obtain raw materials, supplies, power or equipment necessary to enable a party to perform its obligations. Each party will: (a) promptly notify the other party in writing of an event of force majeure, the expected duration of the event and its anticipated effect on the ability of the party to perform its obligations; and (b) make reasonable efforts to remedy the event of force majeure.
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Section 7.14. Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be an original, but all of which, when taken together, shall constitute one document.
[Signatures on following page]
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IN WITNESS WHEREOF, the Grantor and the Grantee have caused this Agreement to be executed and delivered as of the date first above written.
WITNESS: | GRANTOR | |||
By: | ||||
Name: | Troy A. Lemaile-Stovall | |||
Executive Director & CEO | ||||
WITNESS: | GRANTEE | |||
/s/ Paul Lehr | By: | /s/ James Clavijo | ||
Paul Lehr
Secretary |
James
Clavijo
Chief Financial Officer |
STATE OF MARYLAND, CITY/COUNTY ________________ OF , TO WIT:
I HEREBY CERTIFY that on this ____ day of _______________, 2020, before me, a Notary Public in the State of Maryland, personally appeared Troy A. Lemaile-Stovall, who acknowledged himself to be the Executive Director & CEO of the Grantor, known or satisfactorily proven to me to be the person whose name is subscribed to this document, and acknowledged that he executed it on behalf of the Grantor as its duly authorized officer.
AS WITNESS my hand and Notarial Seal.
Notary Public |
My Commission expires: ____________________
STATE OF TENNESSEE, CITY/COUNTY OF WILLIAMSON, TO WIT:
I HEREBY CERTIFY that on this 13 day of October, 2020, before me, a Notary Public in the State of Florida, personally appeared James Clavijo, who acknowledged him/herself to be the Chief Financial Officer, of the Grantee, known or satisfactorily proven to me to be the person whose name is subscribed to this document, and acknowledged that s/he executed it on behalf of the Grantee, as its duly authorized official.
AS WITNESS my hand and Notarial Seal.
/s/ Sonya Y. Windrow | |
Notary Public |
My Commission expires: January 25, 2021
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APPROVED
FOR FORM &
LEGAL SUFFICIENCY:
Ira Schwartz, Esq., TEDCO General Counsel Office of the Attorney General |
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EXHIBIT A
(see attached)
A-1
EXHIBIT A
The information herein has been redacted pursuant to Item 601 of Regulation S-K because it (1) is not material to investors and (2) is the type that the registrant treats as private or confidential.
A-2
Exhibit 10.7
April 11, 2019
Anthony
A. Oliva, PhD
Longeveron LLC
1951 NW 7th Avenue, Suite 520
Miami, FL 33136
Via e-mail: aoliva@longeveron.com
Re: The Part the Cloud Challenge on Neuroinflammation Supplement
Dear Dr. Oliva:
The Alzheimer’s Association is pleased to confirm that your application PTC-CS-19-623225, “Clinical Evaluation of Allogeneic Mesenchymal Stem Cells for Mild Alzheimer” has been approved for funding.
The grant will be funded beginning April 1, 2019. The granting period is April 1, 2019 to March 31, 2022. The total amount of the grant is $3,000,000.00 |
The award is $3,000,000.00 and bi-annual payments will be aligned with the milestone activities as outlined and attached in Appendix A. Payment timing will be dependent on achieving milestones as outlined in Appendix A.
The requirements for this grant are detailed in this document which includes the Award Letter, Conditions of Award, Patent Policy and Appendix A as one document. The document must be signed, initialed where required by the institution/organization authorized signature and the study’s principle investigator and uploaded to your online file as a “pdf”.
The Alzheimer’s Association also requires the following electronic files to be uploaded to pcCentral at: https://ProposalCentral.com/login.asp
● | Signed/initialed Award Letter, Conditions of Award, Patent Policy and Appendix A documentation as a “pdf” |
● | A 5” x 7” black and white or color photograph of you in your lab |
All of the above are required and must be submitted electronically to activate the award. Hard copies of the required documents will not be accepted.
The Alzheimer’s Association depends upon private support to meet its goals and to fund research grants. Therefore, your help and support are very important in the efforts to educate the general public and the scientific community about the disease and the Association. In accepting this research grant award, you agree to credit the Alzheimer’s Association for providing funds for this research whenever you present the research or publish articles about the project. In addition, your acceptance allows the Alzheimer’s Association to use your likeness in presenting your findings through press releases, interviews, or other activities such as hosting lay language abstracts on alz.org, and sharing Alzheimer’s Association funding information to public databases (i.e. International Alzheimer’s & Dementia Research Portfolio, IADRP).. Please note the attached Conditions of Award for details of this commitment.
It is necessary for both you and a representative from the business office or Office of Sponsored Research from the applicant Institution, to sign the form below. The signatures verify that the award is accepted by the Institution with the attendant requirements and that no part of this research project has been funded from another source. Also, complete the included form requesting the information for the business official that has fiscal responsibility for this award. Please retain a copy for your files and upload the complete Award Letter, Conditions of Award, and Patent Policy document to the pcCentral site.
Thank you for your support of the Alzheimer’s Association and commitment to research on Alzheimer’s disease. If you have any questions, please call Mary Grilli, Post Award Specialist, Medical and Scientific Relations department at (312) 335-5727.
Sincerely,
/s/ Maria C. Carrillo
Maria C. Carrillo, PhD.
Chief Science Officer
Alzheimer’s Association
Medical & Scientific Relations
Sincerely,
/s/ Heather M. Snyder
Heather M. Snyder, PhD.
Senior Director
Alzheimer’s Association
Medical & Scientific Relations
cc: | Suzanne Liv Page, Signing Official, spage@longeveron.com |
This FY2019 Research Grant is accepted on behalf of Longeveron LLC. The requirements as specified in the Award Letter documentation are accepted. While it is acceptable for a project to have multiple funding sources, no part of this application has overlapping funding from another source.
The Alzheimer’s Association depends on volunteers for its exemplary grant review process. Your grant could not have been funded without the hard work of those volunteers. The Association assumes you will want to repay those volunteers by remaining an active reviewer in our system by connecting to the Alzheimer’s Association in your community (as applicable) and by responding to the Association’s requests to engage in additional outreach. It is imperative that you respond when called upon to contribute to this support of the Alzheimer’s and dementia research community.
By signing this document you are agreeing to all of the above terms and conditions.
Institutional Official | /s/ Suzanne Page | Date | April 11, 2019 |
Although not a party to this entire agreement, I have reviewed the Agreement and understand the provisions in the Agreement regarding the role of the Grantee for this Project.
Principal Investigator | Date |
PTC-CS-19-623225, Anthony A. Oliva, PhD
Please provide us with the following information:
Check Payable to: | ||
Institution EIN: | ||
(Required for payment to be sent to the Institution) | ||
Send Check(s) to: | ||
Name | ||
Title | ||
Institution | ||
Address | ||
Phone: | ||
Fax: | ||
Send Financial Report Request Notice to: | ||
Name | ||
Title | ||
Phone: | ||
Fax: | ||
Email: |
Please contact Mary Grilli, Post-Award Specialist at (312) 335-5727 of any changes to the above information. Fax: 1-866-801-5501 |
Conditions of Award - PTC-CS- (2/2019)
C O N D I T I O N S O F A W A R D
GRANT TIMELINE
The Alzheimer’s Association expects that your Project will be completed according to the agreed upon timeline as outline in Appendix A. Continued funding will be determined by progress and satisfactory assessment by the Alzheimer’s Association.
To this end, you are required to do the following:
a) | Payment to begin work will not be issued without IRB approval. |
b) | Participate in regularly scheduled assessment meetings and/or teleconferences as requested by the Alzheimer’s Association. Failure to participate in these assessments and to demonstrate satisfactory progress may result in withholding of future payments. The first assessment will be held approximately at the six-month mark of your Award by teleconference to review initial progress. Assessment meetings will be held at the midpoint and completion of your Award. The individual grantee is required to attend both assessment meetings via teleconference, unless otherwise informed by the Alzheimer’s Association. |
c) | Complete progress and expense reports detailing your progress against milestones and your associated expenditures. These reports will be due before the midpoint assessment meeting and at the completion of your award. When appropriate, additional reports may be requested before other assessment meetings and teleconferences. Templates will be provided to you to facilitate this reporting. These reports will be reviewed by the Alzheimer’s Association against the Assessment Criteria and you may receive suggestions, critique, and feedback. |
d) | Participate openly in discussions regarding your Project with the Alzheimer’s Association scientific and research staff, and advisors. |
Failure to meet milestones, furnish scheduled deliverables, including any reports, satisfactorily meet all Assessment Criteria or comply with this Agreement may serve as one or more bases for termination of funding by the Alzheimer’s Association.
If at any time circumstances arise that prohibit completion of the Project on schedule, you are required to notify the Alzheimer’s Association immediately. The Alzheimer’s Association will consider granting a no-cost extension on a case by case basis. To apply for a no-cost extension, submit a letter detailing the request. The letter should include reasons for delays or changes, associated rationale, a timeline for continuing the work, and an expense report detailing remaining funds.
1 | Initial that you accept the terms stated on this page |
Conditions of Award - PTC-CS- (2/2019)
HUMAN RESEARCH SUBJECTS PROTECTIONS
The institution that receives a grant from the Alzheimer’s Association is accountable and has the primary responsibility for protecting the rights and welfare of individual human subjects who consent to participate in investigations supported by these funds. Investigators may consult the Public Health Service Grants Policy Statement, or Section 474(a) of the Public Health Service Act, implemented by 45 CFR Part 46 or The Office of Protection from Research Risks, National Institutes of Health, Bethesda, Maryland 20892 for additional guidance on the necessary safeguards for human research subjects.
Certification of Institutional Review Board (IRB) review and approval is not required at the time of submission of an application. Documentation is required at the time of award of the grant and on the anniversary date of the award (in conjunction with scientific and financial reporting). No more than 10% of overall budget may be back-charged for costs incurred in obtaining IRB approvals.
ANIMAL WELFARE ASSURANCE
The Alzheimer’s Association uses the PHS Policy on Humane Care and Use of Laboratory Animals by Awardee Institutions. As stated in the PHS Grants Policy Statement, it “:requires that applicant organizations establish and maintain appropriate policies and procedures to ensure the humane care and use of live vertebrate animals involved in research activities.......” It is the responsibility of institutions applying for a grant to the Alzheimer’s Association to ensure that the policies for the humane care and use of vertebrate animals are appropriately implemented. Investigators may contact The Office for Protection from Research Risks (OPRR), National Institutes of Health, Bethesda, Maryland 20892, for further information.
Animal welfare assurances for research using vertebrate animals are not required at the time of submission of an application. Documentation indicating Institutional Animal Care and Use Committee (IACUC) review and approval is required at the time of award of a grant and on the anniversary date of the award (in conjunction with scientific and financial reporting).
RECOMBINANT DNA APPROVAL
The Alzheimer’s Association expects documentation from the Institutional Biosafety Committee rDNA Approval annually. It is the responsibility of institutions applying for a grant to the Alzheimer’s Association to ensure that the policies for the use of recombinant DNA are appropriately implemented.
Recombinant DNA (rDNA) review and approval is required at the time of award of a grant and on the anniversary date of the award (in conjunction with scientific and financial reporting).
ALLOWABLE COSTS AND OWNERSHIP OF EQUIPMENT
Allowable costs are specified in the Program Announcement for each research mechanism. It is required that most of the funds awarded be used for the direct support of the research project in general, allowable costs include, but are not limited to:
● | purchase and care of laboratory animals, |
● | small pieces of laboratory or clinical research equipment, |
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Conditions of Award - PTC-CS- (2/2019)
● | Special use computer hardware and software for neuropsychological or imaging studies, |
● | laboratory or clinical supplies, |
● | salary for the Principal Investigator, |
● | salary for scientific staff (including post-doctoral fellows and graduate students) and technical staff (including laboratory technicians and modest secretarial support), |
● | support for travel -- a total of $5,000 over a two-three year period not to exceed $2,500 per year (if you request the full $2,500 for 2 years and are requesting a 3 year award you will not be able to request travel funds for one of those years). Please note, the AARG/AARG-D awardees are required to participate at least once during the award period in the Alzheimer’s Association International Conference (AAIC); travel funds may be allocated to support registration and travel. |
● | open access publication fees for journal articles related to the funded research project |
● | membership to ISTAART, the professional society of the Alzheimer’s Association |
Costs not allowed include:
● | computer hardware and software for general office/word processing use. |
● | tuition costs for students, |
● | construction costs or renovation costs, |
● | rent costs, |
● | currency conversion costs for International Awards, |
Title for any approved equipment purchased by the organization with Alzheimer’s Association grant funds belongs to the grantee organization
**IMPORTANT NOTE**
The Alzheimer’s Association reserves the right to disallow any expenditure(s) that are deemed unacceptable costs.
INDIRECT COSTS
Indirect costs are capped at 10 percent (rent for laboratory/office space is expected to be covered by indirect costs paid to the organization).
PART THE CLOUD DISTRIBUTION OF INCOME
The attached Patent Policy the Alzheimer’s Association details distribution of net income derived from new patents and/or inventions. In addition, the Alzheimer’s Association revenue share for any revenue derived with respect to the award intellectual property, licensing, including upfront and periodic payments, milestone and royalty payments, but excluding funds received for research support that is not in lieu of Revenue. This revenue share shall be limited to a maximum of five (5) times the Alzheimer’s Association Award.
3 | Initial that you accept the terms stated on this page |
Conditions of Award - PTC-CS- (2/2019)
AWARDEE VOLUNTEER ACTIVITIES
The Alzheimer’s Association depends on volunteers to support the scientific enterprise, including the International Research Grant Program. The Association assumes you will want to repay those volunteers by remaining an active reviewer in our system by connecting to the Alzheimer’s Association in your community (as applicable) and by responding to the Association’s requests to engage in additional outreach.
INTERIM/ SCIENTIFIC AND FINANCIAL REPORTS
The Alzheimer’s Association requires bi-annual scientific and financial progress reports for the receipt of continued funding for multi-year grants. The Interim financial report is due on the anniversary date of the award and must be signed by the responsible business official of the grantee institution. Both reports must be submitted ELECTRONICALLY. Paper submissions will NOT be accepted. In some cases a hard copy of the financial report may be requested due to legibility. The Alzheimer’s Association reserves the right to ask for additional information pertaining to details included in these reports. Scientific reports should include progress to approved milestones, and are required to initiate subsequent payments.
To download templates for the required reports, and to submit your annual reports; go to the same location that you used previously to submit your application:
https://ProposalCentral.com/login.asp
A tutorial for the submission of annual reports as well as other capabilities of the online system for grantees is available at the login page. Scroll down to the tutorial called “Grantee Instructions to access award information” or use the following link in your web browser to download the tutorial directly:
https://docs.proposalcentral.com/Instructions_Award_Info.pdf?version=2017.10.0.619
Follow the instructions in the tutorial to download the REQUIRED scientific progress report and financial report forms to be used for the submission of your annual reports and to attach the completed documents prior to the deadlines listed in your award.
**IMPORTANT NOTE**
Delinquent reports may cause funding to be delayed or terminated. Reports must be submitted by the requested due date.
4 | Initial that you accept the terms stated on this page |
Conditions of Award - PTC-CS- (2/2019)
FINAL SCIENTIFIC AND FINANCIAL REPORTS
Investigators are required to submit final scientific and financial reports on all research grants funded by the Alzheimer’s Association. All final financial reports must be signed by the responsible business official for the institution. Final scientific and financial reports must be submitted ELECTRONICALLY within 90 days of the end of the award. Paper submissions will NOT be accepted. In some cases a hard copy of the financial report may be requested due to legibility. The Alzheimer’s Association reserves the right to ask for additional information pertaining to details included in these reports.
To download templates for the required reports, and to submit your annual reports; go to the same location that you used previously to submit your application:
https://ProposalCentral.altum.com /login.asp
A tutorial for the submission of annual reports as well as other capabilities of the online system for grantees is available at the login page. Scroll down to the tutorial called “Grantee Instructions to access award information” or use the following link in your web browser to download the tutorial directly:
https://docs.proposalcentral.com/Instructions_Award_Info.pdf?version=2017.10.0.619
Follow the instructions in the tutorial to download the REQUIRED scientific progress report and financial report forms to be used for the submission of your annual reports and to attach the completed documents prior to the deadlines listed in your award.
**IMPORTANT NOTE**
Final Progress Reports must be submitted by the requested due date. Delinquent reports will prevent future submission of the Letter of Intent (LOI) for consideration of possible funding.
DATA SHARING
The Alzheimer’s Association is committed to data sharing for Alzheimer’s Association International Research Grant Program grantees. Data sharing is a necessary means to advance Alzheimer research results into systemic knowledge, usable products, and research procedures, leading to the overall improvement of human health.
The Alzheimer’s Association requires the timely release and the sharing of final research data and other research resources generated from Alzheimer’s Association funded research studies be shared and administered in accordance with this policy. Examples included in the “final research data” are the data, samples, physical conditions and other supporting materials created or gathered during the course of the work.
For clinical data, the rights and privacy of people who participate in Alzheimer’s Association – sponsored research must be protected at all times. When applicable, data collected during these studies and shared for broader use should be free of identifiers and variables related to individual subjects.
5 | Initial that you accept the terms stated on this page |
Conditions of Award - PTC-CS- (2/2019)
The Alzheimer’s Association provides the Global Alzheimer’s Association Interactive Network (GAAIN) as a resource to link all data generated as a result of this funding (see below for exemption) to be available for sharing. GAAIN – located at gaain.org - is cloud-based, grid network infrastructure spanning centralized computational facilities in North America and Europe. The Alzheimer’s Association recognizes there may be difficulties, limitations or other potential complications regarding an individual’s or an institution’s ability to comply with the Alzheimer’s Association’s data sharing policy as a result of institutional policies; local, state and federal laws and regulations, including the Privacy Rule; or local IRB regulations. The rights and privacy of people who participate in Alzheimer’s Association – sponsored research must be protected at all times. When data sharing may be limited, applicants should be prepared to explain such limitations to the Alzheimer’s Association.
For non-clinical (i.e. animal related studies testing/ evaluating potential therapeutics in these models), the Alzheimer’s Association expects researchers to submit their data within 12 months of the conclusion of their project to the AlzPED database, hosted by the National Institute on Aging/NIH. To submit data through AlzPED, awardees are expected to establish an account at https://alzped.nia.nih.gov/node/add/alzped-study and provide documentation of their data being submitted to the appropriate tool. AlzPED provides transgenic model and cross-transgenic model information across relevant translational criteria data sets such as therapeutic agents, and targets. AlzPED is designed to feature published and unpublished reports and to help identify the critical data, design elements and methodology missing from studies in order to increase transparent reporting, reproducibility and translatability of animal model efficacy testing studies. Following submission of data to AlzPED, researchers will receive a citable d.o.i (digital object identifier); investigators are expected to include the AlzPED d.o.i. in their final progress report.
In addition, awardees are encouraged to discuss potential impediments to data sharing with their Association contact at the time they negotiate grant agreement to accept the Alzheimer’s Association grant award.
**IMPORTANT NOTE**
Failure to comply with the Alzheimer’s Association Data Sharing Policy will result in ineligibility of the investigator for future funding from the Alzheimer’s Association.
Public Access Policy
The Alzheimer’s Association funds biomedical research related to Alzheimer’s and related dementias. The main output of this research is new knowledge. To ensure this knowledge can be accessed, read, applied, and built upon in fulfillment of our goals, the Alzheimer’s Association expects its researchers to publish their findings in peer-reviewed journals.
In addition, it is a condition of funding from the Alzheimer’s Association that all peer-reviewed articles supported in whole or in part by its grants must be made available in the PubMed Central online archive in accordance with the following conditions:
● | Authors are to deposit an electronic copy of their final peer-reviewed manuscripts in PubMed Central immediately upon acceptance for journal publication. (http://www.healthra.org/resources.publicaccess.html) |
● | The manuscript is to be made publicly available in PubMed Central no later than 12 months after the official date of journal publication. This requirement applies to all Alzheimer’s Association grants awarded. |
6 | Initial that you accept the terms stated on this page |
Conditions of Award - PTC-CS- (2/2019)
PubMed Central is a database of full-text biomedical journal articles available online without a fee. It is hosted by the National Library of Medicine in the National Institutes of Health. Once posted in PubMed Central, results of research become more accessible, prominent, and integrated within the context of other research findings, making it easier for scientists worldwide to pursue Alzheimer’s and related dementia research. Equally important, families, clinicians, patients, educators, funders, and students reap the benefits of information arising from funding by accessing publications on PubMed Central at no charge.
An author must acknowledge the Alzheimer’s Association’s support in every article arising from such funding. The acknowledgement statement must include the applicable Alzheimer’s Association grant number. This will enable the Association to link the published outputs of research to the support it has provided.
All scientific progress reports must include the PMC ID number (PMCnnnnn) to publications in PubMed Central supported by the Alzheimer’s Association.
**IMPORTANT NOTE**
Failure to comply with the Alzheimer’s Association Public Access Policy will result in ineligibility of the investigator for future funding from the Alzheimer’s Association.
NOTIFICATION OF PUBLICATIONS
One electronic copy of manuscripts and meeting abstracts reporting research acknowledging funds from the Alzheimer’s Association must be submitted ELECTRONICALLY at the time of publication. This copy will become part of the official file of the grant and will be provided to the Communications Division to assist in the efforts to further inform the public about the research program of the Association. These submissions must be made electronically using the same system outlined above for report submissions.
The Association will provide publicity assistance when the Principal Investigator notifies the staff prior to the release of findings in any scientific journal or major meeting presentations and will work with the Public Relations Officer of the institution to ensure coordination of efforts. Please contact the Communications Division, Media Relations Department at 312-335-5776 as early as possible in the process, for instance as soon as the manuscript is accepted for publication or presentation.
An acknowledgment of support provided by the Association must be included in any responses to or interviews with radio, television or print journalists when an Association funded grant is discussed.
ACKNOWLEDGEMENT OF FUNDING SOURCE
An acknowledgment of support provided by the Alzheimer’s Association must appear in publications of any material whether copyrighted or not, if the data is based on or developed under Association- supported grants. The following wording should be used: This work was supported by an Alzheimer’s Association Part the Cloud Challenge on Neuroinflammation Supplement (PTC-CS-19-623225).
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Conditions of Award - PTC-CS- (2/2019)
In addition, an acknowledgement of support provided by the Alzheimer’s Association must appear in presentations of any material, if the data is based on or developed under Association-supported grants.
Whenever the Principal Investigator is informed of sponsorship through the generosity of a donor, the specific grant name should be used. For example, the Alzheimer’s Association/Samuel A. Blank Research Grant.
RIGHT TO AUDIT
In accordance with generally accepted accounting principles, the grantee institution (“Grantee”) shall maintain reasonably full and complete records of the cost and completion of services performed under this Grant Award and the Conditions of Award Agreement (together, “Agreements”). During the term of the funding agreement with the Alzheimer’s Association, and for a period of two years after their termination or completion, the Alzheimer’s Association reserves the right to inquire and/or audit the Grantee’s records as they pertain to the performance of the Agreements at Grantee’s office. Upon fifteen business days written notice from the Alzheimer’s Association, Grantee agrees to make available all records for inspection or audit at its offices during normal business hours (Monday through Friday, 8 a.m. - 5 p.m. local time).
RESTRICTIONS ON FUTURE FUNDING ELIGIBILITY
As of the posting of this policy, the Alzheimer’s Association will not accept new research grant applications from investigators who are delinquent in submitting interim/final scientific or interim/final financial reports on current and/or previous grants or are in conflict with the conditions put forth in this document.
This policy will be strictly adhered to, no exceptions.
REQUESTS FOR ADMINISTRATIVE ACTIONS
Submit requests for administrative actions electronically through the proposalCENTRAL online system used for Interim and Final report submissions (described above). When the request has been uploaded, please advise Mary Grilli, Post Award Grant Specialist that a request has been filed (mgrilli@alz.org).
** IMPORTANT NOTE**
ALL letters and reports must be submitted electronically (see instructions above in reporting requirements).
8 | Initial that you accept the terms stated on this page |
Conditions of Award - PTC-CS- (2/2019)
Requests for administrative actions (e.g. re-budgeting, carry-over of unexpended funds, replacement of Principal Investigator, transfer of institution, overlap, extension of award, administrative supplements) must be submitted electronically via letter which has been signed by the Principal Investigator of the application or grant and the responsible, bonded business official of the institution. Any request must be submitted 45 days prior to the desired date of action. Association staff will review draft letters for content and appropriateness prior to submission of the final signed request. The preliminary review does not indicate advance approval of the request, rather the preliminary review will ensure that all necessary information has been included.
Review and approval of requests for administrative actions is the responsibility of the staff of the Alzheimer’s Association.
Re-budgeting
Requests for re-budgeting of more than 10% of the total awarded amount (direct + indirect costs) for that year must be submitted electronically for prior approval to the Alzheimer’s Association. Requests to re-budget must be clearly explained and justified against the timely achievement of the specific aims of the grant. If possible, re-budgeting requests should be submitted with the interim/non- competing continuation report. If necessary, re-budgeting requests will be accepted mid-grant year.
Carry over of Unexpended Funds
In general, permission to carry forward unexpended balances into future funding years is allowed. For example, a $10,000 unexpended balance at the end of the 02 year, of a three year award, will be carried forward automatically and used to supplement to the $60,000 continuation funding of the 03 year (which would provide the investigator a total of $70,000 for the 03 year).
Replacement of the Principal Investigator
For most programs (exceptions named below), the request to replace a Principal Investigator must be submitted electronically (see instructions above in reporting requirements) by the appropriate faculty member (usually the Department Chair or Dean) and countersigned by the responsible business official of the grantee institution. The letter requesting replacement of the Principal Investigator must contain a curriculum vita of the proposed replacement Principal Investigator. Approval of a replacement Principal Investigator is the responsibility of the Association and subject to review by staff; the Association reserves the right to terminate a grant if replacement Principal Investigator is not approved.
For Strategic Grants (SG) and Zenith, the grantee institution may request the replacement of a Principal Investigator. If the Principal Investigator of a Zenith or Strategic Grant(SG) award leaves research work for some reason, the Alzheimer’s Association reserves the right to terminate the grant and the remaining funds minus non-cancellable obligations/ fees returned to the Alzheimer’s Association.
Transfer of Institution
The Association will review requests to transfer a grant to another organization, if applicable. For a Part the Cloud grant, the Alzheimer’s Association reserves the right to approve the transfer or to terminate the funded grant.
The request to transfer a grant should be submitted electronically at least 60 days in advance of the planned move to ensure Association staff have adequate time to review the request and ask for and receive additional information should it be necessary. You may request a six-month extension to complete work proposed in the grant for time loss during your move to the new institution.
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Conditions of Award - PTC-CS- (2/2019)
Overlap with other Funded Applications
Investigators must inform the Association of any overlap, or concern about possible overlap, with other non-Alzheimer’s Association grants. Overlap is defined as “two or more grants by the same Principal Investigator which shares at least one specific aim”; in addition, overlap means that the budget line items for each funding mechanism are also shared It is not necessary to provide information about applications that share specific aims with an Association grant. The concern about overlap arises only when an investigator has been notified that he/she will be awarded a grant by another organization and that application, soon to be awarded, shares specific aim(s) with a grant from the Association and has overlap of proposed resources.
Extension of Award
An extension of the term of a grant without funds (no-cost extension) or with funds remaining at the end of the grant period (extension with cost) may be approved when requested electronically 45 days prior to the grant expiration. Typically, requests range from six to twelve months however you are allowed a 6 month extension for each year of the award (e.g. a two year award will be eligible for 2 no- cost extensions, up to 6 months each whereas a three year award will be eligible for 3 no-cost extensions, up to 6 months each). The Principal Investigator and responsible business official must countersign the letter requesting the extension, whether the extension is with funds unexpended at the end of the grant period or at no cost. Although requests may not be made for the sole purpose of spending remaining funds, you may expend remaining funds during the no-cost extension period. The duration of the extension and the expected products/accomplishments must be detailed in the letter. An extension of term may only be requested to complete work proposed in the grant.
Absence from work
Awardees must notify the Alzheimer’s Association of any absence from the funded research project longer than 60 days, planned, unplanned or due to illness. In certain extreme cases when the Awardee is unable to communicate with the Association due to illness or accident, the department chairperson and/or authorized personnel from the institution may submit the request on their behalf. The Award is subject to early termination unless the absence has been requested and authorized in advance by the Alzheimer’s Association
A written request should be submitted to Alzheimer’s Association indicating the dates of the leave, the reasons for the request and the Principal Investigator’s intention to resume their work on the funding project. The Alzheimer’s Association will review the request and determine the most appropriate course of action.
10 | Initial that you accept the terms stated on this page |
Conditions of Award - PTC-CS- (2/2019)
Change of Names and Addresses
If an investigator moves while an application is under review by the Association, it is necessary to submit electronic notification of the new address and the date of the move by updating the PI profile in proposalCENTRAL. In some instances, great difficulty has been encountered trying to find an investigator to inform him/her of the award of a grant.
If the business official responsible for the grant or application at the institution is changed, the investigator and new business official should update information electronically in the proposalCENTRAL profile as soon as possible.
Prompt online notification through proposalCENTRAL, of changes in names, titles, addresses, phone and fax numbers, email addresses will help to avoid delays in processing any actions or requests.
Other Administrative Actions
For other administrative actions not covered in this document, the investigator should submit an electronic letter detailing the request and the rationale.
** IMPORTANT NOTE**
ALL letters and reports must be submitted electronically (see instructions above in reporting requirements).
REEARCH INTEGRITY
Research misconduct by a Grantee receiving Alzheimer Association support is contrary to the interests of Alzheimer Association and the patients and their families it seeks to serve, as well as to the integrity of research, and to the conservation of donor funds. The Parties hereby agree to follow, and Sponsoring Institution shall cause Grantee and Sponsor to follow, the Sponsoring Institution’s policies as they relate to Research Misconduct and confirm that they are at least as rigorous as those followed by the NIH (Public Health Service Policies on Research Misconduct 42 CFR 93).
For the avoidance of doubt, the NIH defines “Research Misconduct” to mean fabrication, falsification, or plagiarism (further defined below) in proposing, performing, or reviewing research, or in reporting research results. Research misconduct does not include honest error or differences of opinion.
a) | Fabrication: Making up data or results and recording or reporting them. |
b) | Falsification: Manipulating research materials, equipment, or processes, or changing or omitting data or results such that the research is not accurately represented in the research record. |
c) | Plagiarism: The appropriation of another person’s ideas, processes, results or words without giving appropriate credit. |
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Conditions of Award - PTC-CS- (2/2019)
**IMPORTANT NOTE**
Upon completion of projects, the Association encourages grantees to consider submitting an article describing results to Alzheimer’s & Dementia: The Journal of the Alzheimer’s Association or its two companion open access journals: Translational Research & Clinical Interventions (TRCI) or Diagnosis, Assessment & Disease Monitoring (DADM. Note, payments of open access publication fees are eligible grant expenses, not limited to these two OA journals. For submission information, visit www.elsevier.com/authors.
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PATENT POLICY OF THE ALZHEIMER’S ASSOCIATION®
The primary purpose of the Alzheimer’s Association (the “Association”) funding scientifically meritorious research is to advance its mission to eliminate Alzheimer’s disease through the advancement of research; to provide and enhance care and support for all affected; and to reduce the risk of dementia through the promotion of brain health. The Association recognizes that patentable Inventions (defined below) having public health, scientific, business or commercial application or value may be made in the course of research supported by the Association. It is the desire of the Association that such Inventions will be administered in such a manner that they are brought into public use at the earliest possible time. The Association recognizes that this may be best accomplished through the filing of applications for registration of patents and/or copyrights in such Inventions and the commercial licensing of such Inventions to third parties. Discoveries, works of authorship, or Inventions derived from research performed, supervised or subcontracted for by the grantee institution during the term of the grant will be subject to the Association’s Patent Policy as set forth below:
1. | “Invention” is any discovery, data, material, method, process, device, product, program, software, proprietary know-how or other work of authorship, whether or not patentable or copyrightable, that is created, conceived or discovered in the course of research supported in whole or in part by the Association, or that arises from research supported in whole or part by the Association. |
2. | All notices of disclosure of Invention patents must be reported in a timely manner to the Medical & Scientific Relations Division of the Association. Upon the Association’s request, all documentation relating to the filing or assertion of rights shall be provided to the Association. The Association shall agree to maintain the confidentiality of such documentation by executing a confidentiality agreement mutually agreed to by the grantee institution /inventor and the Association. All expenses of the Invention patent process should be borne by the grantee institution or individual awardee. |
3. | Unless otherwise indicated or requested by the grantee institution, title to any invention shall reside in the grantee institution. |
4. | Distribution of income derived from an Invention shall be according to the policies of the grantee institution, except that the Association shall participate in net income derived from the Invention (unless waived in writing by the Association) to the extent, and at a rate of remuneration, to be determined by mutual agreement between the grantee institution and the Association at the time a patent application is filed. If the grantee institution has no established and applicable patent, intellectual property, or technology transfer policy and procedure for administering Inventions, the Association shall have the sole right to determine the disposition of the Invention rights in a manner consistent with this Patent Policy. |
5. | The grantee institution shall not abandon all patents and patent applications without first notifying the Medical & Scientific Relations Division of the Association and to the extent the grantee institution has the legal right to do so giving the Association the opportunity to take title to the Invention and to continue the patent or patent application at its own expense. |
13 | Initial that you accept the terms stated on this page |
6. | The grantee institution shall agree that if it has not taken effective steps, within a reasonable time frame for the research project advancement after a U.S. patent issues on an Invention supported by Association funds and administered by the institution, to bring that invention to the point of practical application, or has not made such Invention available for licensing, the Association shall have the right to request grantee institution terminate the license for lack of diligence, grant title to the Association and to locate and proceed with another licensee. |
7. | If any Invention is made with the joint support of the Association and any agency or department of the United States Government, the Association may defer to the patent policy of that agency or department upon written statement by the appropriate agency of government notifying the Association of its position with respect to the Invention in question. |
8. | If any Invention is made with the joint support of the Association and some other organization, not an agency or department of the U.S. Government, that organization, the institution, the inventor(s), and the Association will confer to arrive at a mutually satisfactory disposition of the Invention rights. |
Address all correspondence regarding this policy to:
Mary Grilli
Post Award Grant Specialist
Alzheimer’s Association®
Medical & Scientific Relations – Grant Operations
225 N. Michigan Avenue – 17th Floor
Chicago, IL 60601-7633
14 | Initial that you accept the terms stated on this page |
Appendix A
|
Longeveron LLC 1951 NW 7th Avenue, Suite 520 Miami, Florida 33136 305-989-2014 | aoliva@longeveron.com |
Months 1 – 6: $850,000
1. | Continue enrollment and treatment of subjects on the trial. |
a. | Target 8 subjects |
2. | Production of lots of LMSCs for remainder of trial. |
3. | Develop final protocol for MRI volumetric analyses (new milestone from original application) |
4. | Analyze inflammatory markers from enrolled subjects. |
5. | Analyzing AD markers from enrolled subjects. |
6. | Analyze MRI volumetric changes for subjects. |
7. | Continue trial management activities (IRB renewal, site monitoring, etc.). |
8. | Perform interim analyses on safety and efficacy. |
a. | Target date 5/2019 |
9. | Hold DSMB meeting. |
a. | Target date 5/2019 |
Months 7 – 12: $800,000
1. | Complete enrollment and treatment of all subjects on the trial (i.e., last subject is enrolled). |
a. | Target 10 subjects (full enrollment = 30 subjects) |
2. | Advance LMSC production to meet requirements for next trial phase. |
a. | Develop scale-up procedures and required potency and efficacy assays. |
3. | Analyze inflammatory markers from enrolled subjects. |
4. | Analyzing AD markers from enrolled subjects. |
5. | Analyze MRI volumetric changes for subjects. |
6. | Continue trial management activities (IRB renewal, site monitoring, etc.). |
7. | Perform interim analyses on safety and efficacy. |
a. | Target date 11/2019 |
8. | Hold DSMB meeting. |
a. | Target date 11/2019 |
Months 13 – 18: $750,000
1. | Advance LMSC production to meet requirements for next trial phase. |
2. | Analyze inflammatory markers from enrolled subjects. |
3. | Analyzing AD markers from enrolled subjects. |
4. | Analyze MRI volumetric changes for subjects. |
5. | Continue trial management activities (IRB renewal, site monitoring, etc.). |
6. | Perform interim analyses on safety and efficacy. |
a. | Target date 5/2020 |
7. | Hold DSMB meeting. |
a. | Target date 5/2020 |
A-1
|
Longeveron LLC 1951 NW 7th Avenue, Suite 520 Miami, Florida 33136 305-989-2014 | aoliva@longeveron.com |
Months 19 – 24: $600,000
1. | All enrolled subjects complete study (i.e., last subjects completes the 12-month follow-up). |
a. | Last subject completes study in Q7 grant period. |
9. | Advance LMSC production to meet requirements for next trial phase. |
a. | Develop scale-up procedures and required potency and efficacy assays. |
2. | Complete analyses of inflammatory markers from all subjects at all time-points. |
3. | Complete analyses of AD markers from all subjects at all time-points. |
4. | Complete analyses of MRI volumetric changes for subjects. |
5. | Complete efficacy analyses from all subjects at all time-points. |
6. | Final data lock, analyses, and unblinding, and trial close-out. Target date: 11/2020 |
7. | Final DSMB meeting |
a. | Target date 11/2020 |
8. | Prepare publications of final results. |
9. | Apply for Regenerative Advanced Medicine Therapy (RMAT) designation with FDA |
10. | Prepare for Phase II trial (Q8 of grant award). |
a. | Have End-of-Phase (EOP) meeting with FDA. |
b. | Obtain guidance from Scientific Advisory Board. |
c. | Prepare protocol for next Study Phase. |
Graphic timeline and milestones. Milestones are denoted with an asterisk, and major trial milestones are shown in green.
A-2
|
Longeveron LLC 1951 NW 7th Avenue, Suite 520 Miami, Florida 33136 305-989-2014 | aoliva@longeveron.com |
Enrollment projection graph.
A-3
Exhibit 10.8
Notice of Award
|
||||
|
SMALL
BUSINESS INNOVATION RESEARCH PROG
|
Federal Award Date: 04/26/2019
|
|
|
NATIONAL INSTITUTE ON AGING |
Grant Number: | 4R44AG062015-02 |
FAIN: | R44AG062015 |
Principal Investigator(s):
Joshua M Hare, MD
Anthony Andrew Oliva (contact), PHD
Project Title: A Phase 2b Clinical Trial to Study the Efficacy of Longeveron Mesenchymal Stem Cells (LMSCs) to Treat Aging Frailty
Ms.
Page, Suzanne , JD
Chief Operating Officer
1951 NW 7th Ave.
Ste.
520
Miami, FL 331361112
Award e-mailed to: spage@longeveron.com
Period Of Performance:
Budget Period: 05/01/2019 – 02/28/2020
Project Period: 09/30/2018 – 02/28/2021
Dear Business Official:
The National Institutes of Health hereby awards a grant in the amount of $1,983,531 (see “Award Calculation” in Section I and “Terms and Conditions” in Section III) to LONGEVERON, LLC in support of the above referenced project. This award is pursuant to the authority of 42 USC 241 15 USC 638 42 CFR 52 and is subject to the requirements of this statute and regulation and of other referenced, incorporated or attached terms and conditions.
Acceptance of this award including the “Terms and Conditions” is acknowledged by the grantee when funds are drawn down or otherwise obtained from the grant payment system.
Each publication, press release, or other document about research supported by an NIH award must include an acknowledgment of NIH award support and a disclaimer such as “Research reported in this publication was supported by the National Institute On Aging of the National Institutes of Health under Award Number R44AG062015. The content is solely the responsibility of the authors and does not necessarily represent the official views of the National Institutes of Health.” Prior to issuing a press release concerning the outcome of this research, please notify the NIH awarding IC in advance to allow for coordination.
Award recipients must promote objectivity in research by establishing standards that provide a reasonable expectation that the design, conduct and reporting of research funded under NIH awards will be free from bias resulting from an Investigator’s Financial Conflict of Interest (FCOI), in accordance with the 2011 revised regulation at 42 CFR Part 50 Subpart F. The Institution shall submit all FCOI reports to the NIH through the eRA Commons FCOI Module. The regulation does not apply to Phase I Small Business Innovative Research (SBIR) and Small Business Technology Transfer (STTR) awards. Consult the NIH website http://grants.nih.gov/grants/policy/coi/ for a link to the regulation and additional important information.
If you have any questions about this award, please contact the individual(s) referenced in Section IV.
Sincerely yours,
Ryan
Blakeney
Grants Management Officer
NATIONAL INSTITUTE ON AGING
Additional information follows
SECTION I – AWARD DATA – 4R44AG062015-02
Award Calculation (U.S. Dollars) | ||||
Salaries and Wages | $ | 256,904 | ||
Fringe Benefits | $ | 56,911 | ||
Personnel Costs (Subtotal) | $ | 313,815 | ||
Equipment | $ | 100,000 | ||
Materials & Supplies | $ | 313,564 | ||
Travel | $ | 8,000 | ||
Other | $ | 700,000 | ||
Publication Costs | $ | 5,000 | ||
ADP/Computer Services | $ | 5,000 | ||
Federal Direct Costs | $ | 1,445,379 | ||
Federal F&A Costs | $ | 538,152 | ||
Approved Budget | $ | 1,983,531 | ||
Total Amount of Federal Funds Obligated (Federal Share) | $ | 1,983,531 | ||
TOTAL FEDERAL AWARD AMOUNT | $ | 1,983,531 | ||
AMOUNT OF THIS ACTION (FEDERAL SHARE) | $ | 1,983,531 |
SUMMARY TOTALS FOR ALL YEARS
YR | THIS AWARD | CUMULATIVE TOTALS | |||||
2
|
$ |
1,983,531
|
$ | 1,983,531 | |||
3 | $ | 1,974,282 | $ | 1,974,282 |
Recommended future year total cost support, subject to the availability of funds and satisfactory progress of the project
Fiscal Information: | |
CFDA Name: | Aging Research |
CFDA Number: | 93.866 |
EIN: | 1472174146A1 |
Document Number: | RAG062015B |
PMS Account Type: | P (Subaccount) |
Fiscal Year: | 2019 |
IC | CAN | 2019 | 2020 | |||
AG | 8470732 | $1,983,531 | $1,974,282 |
Recommended future year total cost support, subject to the availability of funds and satisfactory progress of the project
NIH Administrative Data:
PCC: 4CCTSSR / OC: 414E / Released: BLAKENEYR 04/23/2019
Award Processed: 04/26/2019 12:02:33 AM
SECTION II – PAYMENT/HOTLINE INFORMATION – 4R44AG062015-02
For payment and HHS Office of Inspector General Hotline information, see the NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
SECTION III – TERMS AND CONDITIONS – 4R44AG062015-02
This award is based on the application submitted to, and as approved by, NIH on the above-titled project and is subject to the terms and conditions incorporated either directly or by reference in the following:
a. | The grant program legislation and program regulation cited in this Notice of Award. |
b. | Conditions on activities and expenditure of funds in other statutory requirements, such as those included in appropriations acts. |
c. | 45 CFR Part 75. |
Page- 2
d. | National Policy Requirements and all other requirements described in the NIH Grants Policy Statement, including addenda in effect as of the beginning date of the budget period. |
e. | Federal Award Performance Goals: As required by the periodic report in the RPPR or in the final progress report when applicable. |
f. | This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW. |
(See NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm for certain references cited above.)
Research and Development (R&D): All awards issued by the National Institutes of Health (NIH) meet the definition of “Research and Development” at 45 CFR Part§ 75.2. As such, auditees should identify NIH awards as part of the R&D cluster on the Schedule of Expenditures of Federal Awards (SEFA). The auditor should test NIH awards for compliance as instructed in Part V, Clusters of Programs. NIH recognizes that some awards may have another classification for purposes of indirect costs. The auditor is not required to report the disconnect (i.e., the award is classified as R&D for Federal Audit Requirement purposes but non-research for indirect cost rate purposes), unless the auditee is charging indirect costs at a rate other than the rate(s) specified in the award document(s).
This award is subject to the life cycle certification requirements set forth in Section 18.5.5.4 of the NIH Grants Policy Statement. Awardees are not required to submit this certification directly to NIH but must instead complete the certification, maintain it on file in accordance with the records and retention policy in Section 8.4.2 of the NIH Grants Policy Statement, and make these certifications available to Federal officials upon request.
A certification is required at the following times:
● | For SBIR Phase I Awardees: At the time of receiving final payment or disbursement from the Payment Management System. |
● | For SBIR Phase II Awardees: Prior to receiving more than 50% of the total award amount and prior to final payment or disbursement from the Payment Management System. |
If the grantee cannot complete this certification or cannot ensure compliance with the certification process, it should notify the GMO immediately. If resolution cannot be reached, the GMO will void or terminate the grant, as appropriate.
The certification form is available in fillable format at: http://grants.nih.gov/grants/forms.htm#sbir.
An unobligated balance may be carried over into the next budget period without Grants Management Officer prior approval.
This grant is subject to Streamlined Noncompeting Award Procedures (SNAP).
This award is subject to the requirements of 2 CFR Part 25 for institutions to receive a Dun & Bradstreet Universal Numbering System (DUNS) number and maintain an active registration in the System for Award Management (SAM). Should a consortium/subaward be issued under this award, a DUNS requirement must be included. See http://grants.nih.gov/grants/policy/awardconditions.htm for the full NIH award term implementing this requirement and other additional information.
This award has been assigned the Federal Award Identification Number (FAIN) R44AG062015. Recipients must document the assigned FAIN on each consortium/subaward issued under this award.
Based on the project period start date of this project, this award is likely subject to the Transparency Act subaward and executive compensation reporting requirement of 2 CFR Part 170. There are conditions that may exclude this award; see http://grants.nih.gov/grants/policy/awardconditions.htm for additional award applicability information.
Page- 3
In accordance with P.L. 110-161, compliance with the NIH Public Access Policy is now mandatory. For more information, see NOT-OD-08-033 and the Public Access website: http://publicaccess.nih.gov/.
This award provides support for one or more clinical trials. By law (Title VIII, Section 801 of Public Law 110-85), the “responsible party” must register “applicable clinical trials” on the ClinicalTrials.gov Protocol Registration System Information Website. NIH encourages registration of all trials whether required under the law or not. For more information, see http://grants.nih.gov/ClinicalTrials_fdaaa/
In accordance with the regulatory requirements provided at 45 CFR 75.113 and Appendix XII to 45 CFR Part 75, recipients that have currently active Federal grants, cooperative agreements, and procurement contracts with cumulative total value greater than $10,000,000 must report and maintain information in the System for Award Management (SAM) about civil, criminal, and administrative proceedings in connection with the award or performance of a Federal award that reached final disposition within the most recent five-year period. The recipient must also make semiannual disclosures regarding such proceedings. Proceedings information will be made publicly available in the designated integrity and performance system (currently the Federal Awardee Performance and Integrity Information System (FAPIIS)). Full reporting requirements and procedures are found in Appendix XII to 45 CFR Part 75. This term does not apply to NIH fellowships.
Treatment of Program Income:
Additional Costs
SECTION IV – AG Special Terms and Conditions – 4R44AG062015-02
Clinical
Trial Indicator: Yes
This award supports one or more NIH-defined Clinical Trials. See the NIH Grants Policy
Statement Section 1.2 for NIH definition of Clinical Trial.
Restriction: Recruitment for this award is restricted until an NIA-appointed Data and Safety Monitoring Board has met and approved the study’s IRB-approved protocol and consent documents, and manual of procedure.
This award includes funds for twelve months of support. The competing budget period is awarded for less than 12 months. Continuation awards will cycle each year on March 1. The Research Performance Progress Reports (RPPR) are due 45 days prior to this date.
Intellectual property rights: Normally, the awardee(s) organization retains the principal worldwide patent rights to any invention developed with United States Government support. Under Title 37 Code of Federal Regulations Part 401, the Government receives a royalty-free license for its use, reserves the right to require the patent holder to license others in certain circumstances, and requires that anyone exclusively licensed to sell the invention in the United States must normally manufacture it substantially in the United States.
Rights and obligations related to inventions created or reduced to practice as a result of this award are detailed in 35 U.S.C. 205 and 37 CFR Part 401. These inventions must be reported to the Extramural Invention Reporting and Technology Resources Branch, OPERA, NIH, 6701 Rockledge Drive, MSC 7750, Bethesda, MD 20892-7750, (301) 435-1986. For additional information, access the NIH link on the Interagency Edison web site at www.iedison.gov which includes an electronic invention reporting system, reference information and the text to 37 CFR 401.
To the extent authorized by 35 U.S.C., Section 205, the Government will not make public any information disclosing an NIH-supported invention for a 4-year period to allow the awardee organization a reasonable time to file a patent application, nor will the Government release any information that is part of that patent application.
Page- 4
The fee provided as part of this Notice of Grant Award is in addition to direct and facilities and administrative costs. The fee is to be drawn down from the DHHS Payment Management System in increments proportionate to the draw-down of costs.
Allowable costs conducted by for-profit organizations will be determined by applying the cost principles of Contracts with Commercial Organizations set forth in 48 CFR, Subpart 31.2.
STAFF CONTACTS
The Grants Management Specialist is responsible for the negotiation, award and administration of this project and for interpretation of Grants Administration policies and provisions. The Program Official is responsible for the scientific, programmatic and technical aspects of this project. These individuals work together in overall project administration. Prior approval requests (signed by an Authorized Organizational Representative) should be submitted in writing to the Grants Management Specialist. Requests may be made via e-mail.
Grants Management Specialist: John Bladen
Email: bladenj@nia.nih.gov Phone: 301-496-1472 Fax: 301-402-3672
Program Official: Sergei Romashkan
Email: romashks@nia.nih.gov Phone: (301) 435-3047 Fax: (301) 402 - 1784
SPREADSHEET SUMMARY
GRANT NUMBER: 4R44AG062015-02
INSTITUTION: LONGEVERON, LLC
Budget | Year 2 | Year 3 | ||||||
Salaries and Wages | $ | 256,904 | $ | 256,904 | ||||
Fringe Benefits | $ | 56,911 | $ | 56,911 | ||||
Personnel Costs (Subtotal) | $ | 313,815 | $ | 313,815 | ||||
Equipment | $ | 100,000 | $ | 100,000 | ||||
Materials & Supplies | $ | 313,564 | $ | 306,958 | ||||
Travel | $ | 8,000 | $ | 8,000 | ||||
Other | $ | 700,000 | $ | 700,000 | ||||
Publication Costs | $ | 5,000 | $ | 5,000 | ||||
ADP/Computer Services | $ | 5,000 | $ | 5,000 | ||||
TOTAL FEDERAL DC | $ | 1,445,379 | $ | 1,438,773 | ||||
TOTAL FEDERAL F&A | $ | 538,152 | $ | 535,509 | ||||
TOTAL COST | $ | 1,983,531 | $ | 1,974,282 |
Facilities and Administrative Costs | Year 2 | Year 3 | ||||||
F&A Cost Rate 1 | 40 | % | 40 | % | ||||
F&A Cost Base 1 | $ | 1,345,379 | $ | 1,338,773 | ||||
F&A Costs 1 | $ | 538,152 | $ | 535,509 |
Page- 5
Exhibit 10.9
Notice of Award
|
||||
|
SMALL BUSINESS TECHNOLOGY TRANSFER PROG
Department
of Health and Human Services
|
Federal Award Date: 06/24/2020 |
|
|
NATIONAL INSTITUTE ON AGING |
Grant Number: | 5R42AG054322-03 |
FAIN: | R42AG054322 |
Principal Investigator(s):
Joshua M Hare (contact), MD
Sean Xiao Leng, MD
Anthony Andrew Oliva, PHD
Project Title: A Randomized, Blinded, Placebo-Controlled Clinical Trial to Evaluate Longeveron Mesenchymal Stem Cell (LMSC) Therapy for Treating The Metabolic Syndrome
Ms. Suzanne Liv, Page J.D.
Chief Operating Officer
Longeveron LLC
1951 NW 7th Ave.
Ste. 300
Miami, FL 331361112
Award e-mailed to: spage@longeveron.com
Period Of Performance:
Budget Period: 07/01/2020 – 03/31/2021
Project Period: 09/30/2017 – 03/31/2021
Dear Business Official:
The National Institutes of Health hereby awards a grant in the amount of $435,997 (see “Award Calculation” in Section I and “Terms and Conditions” in Section III) to LONGEVERON, LLC in support of the above referenced project. This award is pursuant to the authority of 42 USC 241 15 USC 638 42 CFR 52 and is subject to the requirements of this statute and regulation and of other referenced, incorporated or attached terms and conditions.
Acceptance of this award including the “Terms and Conditions” is acknowledged by the grantee when funds are drawn down or otherwise obtained from the grant payment system.
Each publication, press release, or other document about research supported by an NIH award must include an acknowledgment of NIH award support and a disclaimer such as “Research reported in this publication was supported by the National Institute On Aging of the National Institutes of Health under Award Number R42AG054322. The content is solely the responsibility of the authors and does not necessarily represent the official views of the National Institutes of Health.” Prior to issuing a press release concerning the outcome of this research, please notify the NIH awarding IC in advance to allow for coordination.
Award recipients must promote objectivity in research by establishing standards that provide a reasonable expectation that the design, conduct and reporting of research funded under NIH awards will be free from bias resulting from an Investigator’s Financial Conflict of Interest (FCOI), in accordance with the 2011 revised regulation at 42 CFR Part 50 Subpart F. The Institution shall submit all FCOI reports to the NIH through the eRA Commons FCOI Module. The regulation does not apply to Phase I Small Business Innovative Research (SBIR) and Small Business Technology Transfer (STTR) awards. Consult the NIH website http://grants.nih.gov/grants/policy/coi/ for a link to the regulation and additional important information.
If you have any questions about this award, please contact the individual(s) referenced in Section IV.
Sincerely yours,
E. C. Melvin
Grants Management Officer
NATIONAL INSTITUTE ON AGING
Additional information follows
SECTION I – AWARD DATA – 5R42AG054322-03
Award Calculation (U.S. Dollars) | ||||
Salaries and Wages | $ | 100,680 | ||
Fringe Benefits | $ | 18,121 | ||
Personnel Costs (Subtotal) | $ | 118,801 | ||
Materials & Supplies | $ | 36,715 | ||
Travel | $ | 8,000 | ||
Subawards/Consortium/Contractual Costs | $ | 167,800 | ||
ADP/Computer Services | $ | 2,500 | ||
Federal Direct Costs | $ | 333,816 | ||
Federal F&A Costs | $ | 102,181 | ||
Approved Budget | $ | 435,997 | ||
Total Amount of Federal Funds Obligated (Federal Share) | $ | 435,997 | ||
TOTAL FEDERAL AWARD AMOUNT | $ | 435,997 | ||
AMOUNT OF THIS ACTION (FEDERAL SHARE) | $ | 435,997 |
SUMMARY TOTALS FOR ALL YEARS
YR | THIS AWARD | CUMULATIVE TOTALS | |||||
3 | $ | 435,997 | $ | 435,997 |
Fiscal Information: | |
CFDA Name: | Aging Research |
CFDA Number: | 93.866 |
EIN: | 1472174146A1 |
Document Number: | RAG054322B |
PMS Account Type: | P (Subaccount) |
Fiscal Year: | 2020 |
IC | CAN | 2020 | ||
AG | 8470736 | $435,997 |
NIH Administrative Data:
PCC: 4CCTSSR / OC: 41025 / Released: MELVINEC 06/19/2020
Award Processed: 06/24/2020 12:02:26 AM
SECTION II – PAYMENT/HOTLINE INFORMATION – 5R42AG054322-03
For payment and HHS Office of Inspector General Hotline information, see the NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
SECTION III – TERMS AND CONDITIONS – 5R42AG054322-03
This award is based on the application submitted to, and as approved by, NIH on the above-titled project and is subject to the terms and conditions incorporated either directly or by reference in the following:
a. | The grant program legislation and program regulation cited in this Notice of Award. |
b. | Conditions on activities and expenditure of funds in other statutory requirements, such as those included in appropriations acts. |
c. | 45 CFR Part 75. |
d. | National Policy Requirements and all other requirements described in the NIH Grants Policy Statement, including addenda in effect as of the beginning date of the budget period. |
e. | Federal Award Performance Goals: As required by the periodic report in the RPPR or in the final progress report when applicable. |
f. | This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW. |
(See NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm for certain references cited above.)
Page- 2
Research and Development (R&D): All awards issued by the National Institutes of Health (NIH) meet the definition of “Research and Development” at 45 CFR Part§ 75.2. As such, auditees should identify NIH awards as part of the R&D cluster on the Schedule of Expenditures of Federal Awards (SEFA). The auditor should test NIH awards for compliance as instructed in Part V, Clusters of Programs. NIH recognizes that some awards may have another classification for purposes of indirect costs. The auditor is not required to report the disconnect (i.e., the award is classified as R&D for Federal Audit Requirement purposes but non-research for indirect cost rate purposes), unless the auditee is charging indirect costs at a rate other than the rate(s) specified in the award document(s).
An unobligated balance may be carried over into the next budget period without Grants Management Officer prior approval.
This grant is subject to Streamlined Noncompeting Award Procedures (SNAP).
This award is subject to the requirements of 2 CFR Part 25 for institutions to receive a Dun & Bradstreet Universal Numbering System (DUNS) number and maintain an active registration in the System for Award Management (SAM). Should a consortium/subaward be issued under this award, a DUNS requirement must be included. See http://grants.nih.gov/grants/policy/awardconditions.htm for the full NIH award term implementing this requirement and other additional information.
This award has been assigned the Federal Award Identification Number (FAIN) R42AG054322. Recipients must document the assigned FAIN on each consortium/subaward issued under this award.
Based on the project period start date of this project, this award is likely subject to the Transparency Act subaward and executive compensation reporting requirement of 2 CFR Part 170. There are conditions that may exclude this award; see http://grants.nih.gov/grants/policy/awardconditions.htm for additional award applicability information.
In accordance with P.L. 110-161, compliance with the NIH Public Access Policy is now mandatory. For more information, see NOT-OD-08-033 and the Public Access website: http://publicaccess.nih.gov/.
This award provides support for one or more clinical trials. By law (Title VIII, Section 801 of Public Law 110-85), the “responsible party” must register “applicable clinical trials” on the ClinicalTrials.gov Protocol Registration System Information Website. NIH encourages registration of all trials whether required under the law or not. For more information, see http://grants.nih.gov/ClinicalTrials_fdaaa/
This award represents the final year of the competitive segment for this grant. See the NIH Grants Policy Statement Section 8.6 Closeout for complete closeout requirements at: http://grants.nih.gov/grants/policy/policy.htm#gps.
A final expenditure Federal Financial Report (FFR) (SF 425) must be submitted through the eRA Commons (Commons) within 120 days of the period of performance end date; see the NIH Grants Policy Statement Section 8.6.1 Financial Reports, http://grants.nih.gov/grants/policy/policy.htm#gps, for additional information on this submission requirement. The final FFR must indicate the exact balance of unobligated funds and may not reflect any unliquidated obligations. There must be no discrepancies between the final FFR expenditure data and the Payment Management System’s (PMS) quarterly cash transaction data. A final quarterly federal cash transaction report is not required for awards in PMS B subaccounts (i.e., awards to foreign entities and to Federal agencies). NIH will close the awards using the last recorded cash drawdown level in PMS for awards that do not require a final FFR on expenditures or quarterly federal cash transaction reporting. It is important to note that for financial closeout, if a grantee fails to submit a required final expenditure FFR, NIH will close the grant using the last recorded cash drawdown level. If the grantee submits a final expenditure FFR but does not reconcile any discrepancies between expenditures reported on the final expenditure FFR and the last cash report to PMS, NIH will close the award at the lower amount. This could be considered a debt or result in disallowed costs.
Page- 3
A Final Invention Statement and Certification form (HHS 568), (not applicable to training, construction, conference or cancer education grants) must be submitted within 120 days of the expiration date. The HHS 568 form may be downloaded at: http://grants.nih.gov/grants/forms.htm. This paragraph does not apply to Training grants, Fellowships, and certain other programs—i.e., activity codes C06, D42, D43, D71, DP7, G07, G08, G11, K12, K16, K30, P09, P40, P41, P51, R13, R25, R28, R30, R90, RL5, RL9, S10, S14, S15, U13, U14, U41, U42, U45, UC6, UC7, UR2, X01, X02.
Unless an application for competitive renewal is submitted, a Final Research Performance Progress Report (Final RPPR) must also be submitted within 120 days of the period of performance end date. If a competitive renewal application is submitted prior to that date, then an Interim RPPR must be submitted by that date as well. Instructions for preparing an Interim or Final RPPR are at: https://grants.nih.gov/grants/rppr/rppr_instruction_guide.pdf. Any other specific requirements set forth in the terms and conditions of the award must also be addressed in the Interim or Final RPPR. Note that data reported within Section I of the Interim and Final RPPR forms will be made public and should be written for a lay person audience.
NIH strongly encourages electronic submission of the final invention statement through the Closeout feature in the Commons, but will accept an email or hard copy submission as indicated below.
Email: The final invention statement may be e-mailed as PDF attachments to: NIHCloseoutCenter@mail.nih.gov.
Hard copy: Paper submissions of the final invention statement may be faxed to the NIH Division of Central Grants Processing, Grants Closeout Center, at 301-480-2304, or mailed to:
National Institutes of Health
Office of Extramural Research
Division of Central Grants Processing
Grants Closeout Center
6705 Rockledge Drive
Suite 5016, MSC 7986
Bethesda, MD 20892-7986 (for regular or U.S. Postal Service Express mail)
Bethesda, MD 20817 (for other courier/express deliveries only)
NOTE: If this is the final year of a competitive segment due to the transfer of the grant to another institution, then a Final RPPR is not required. However, a final expenditure FFR is required and should be submitted electronically as noted above. If not already submitted, the Final Invention Statement is required and should be sent directly to the assigned Grants Management Specialist.
In accordance with the regulatory requirements provided at 45 CFR 75.113 and Appendix XII to 45 CFR Part 75, recipients that have currently active Federal grants, cooperative agreements, and procurement contracts with cumulative total value greater than $10,000,000 must report and maintain information in the System for Award Management (SAM) about civil, criminal, and administrative proceedings in connection with the award or performance of a Federal award that reached final disposition within the most recent five-year period. The recipient must also make semiannual disclosures regarding such proceedings. Proceedings information will be made publicly available in the designated integrity and performance system (currently the Federal Awardee Performance and Integrity Information System (FAPIIS)). Full reporting requirements and procedures are found in Appendix XII to 45 CFR Part 75. This term does not apply to NIH fellowships.
Treatment of Program Income:
Additional Costs
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SECTION IV – AG Special Terms and Conditions – 5R42AG054322-03
Clinical Trial Indicator: Yes
This award supports one or more NIH-defined Clinical Trials. See the NIH Grants Policy Statement Section 1.2 for NIH definition of Clinical Trial.
This award includes funds awarded for consortium activity with the University of Miami. Consortiums are to be established and administered as described in the NIH Grants Policy Statement (NIH GPS). The referenced section of the NIH Grants Policy Statement, 2017 is available at: http://grants.nih.gov/grants/policy/nihgps/HTML5/section_15/15_consortium_agreements.htm n keeping with NOT-OD-06-054 (http://grants.nih.gov/grants/guide/notice-files/NOT-OD-06- 054.html), as this grant has multiple Principal Investigators (PIs), although the signatures of the PIs are not required on prior approval requests submitted to the agency, the grantee institution must secure and retain the signatures of all of the PIs within their own internal processes.
Intellectual property rights: Normally, the awardee(s) organization retains the principal worldwide patent rights to any invention developed with United States Government support. Under Title 37 Code of Federal Regulations Part 401, the Government receives a royalty-free license for its use, reserves the right to require the patent holder to license others in certain circumstances, and requires that anyone exclusively licensed to sell the invention in the United States must normally manufacture it substantially in the United States.
Rights and obligations related to inventions created or reduced to practice as a result of this award are detailed in 35 U.S.C. 205 and 37 CFR Part 401. These inventions must be reported to the Extramural Invention Reporting and Technology Resources Branch, OPERA, NIH, 6701 Rockledge Drive, MSC 7750, Bethesda, MD 20892-7750, (301) 435-1986. For additional information, access the NIH link on the Interagency Edison web site (www.iedison.gov) which includes an electronic invention reporting system, reference information and the text to 37 CFR 401.
To the extent authorized by 35 U.S.C., Section 205, the Government will not make public any information disclosing an NIH-supported invention for a 4-year period to allow the awardee organization a reasonable time to file a patent application, nor will the Government release any information that is part of that patent application.
The fee provided as part of this Notice of Grant Award is in addition to direct and facilities and administrative costs. The fee is to be drawn down from the DHHS Payment Management System in increments proportionate to the drawdown of costs.
Allowable costs conducted by for-profit organizations will be determined by applying the cost principles of Contracts with Commercial Organizations set forth in 48 CFR, Subpart 31.2.
The format for the Final Report is as follows:
1. | State the beginning and ending dates for the period covered by the STTR Phase Phase II grant. |
2. | List all key personnel who have worked on the project during that period, their titles, dates of service, and number of hours devoted to the project. |
3. | Summarize the specific aims of the Phase I grant. |
4. | Provide a succinct account of published and unpublished results, indicating progress toward their achievement. Summarize the importance of the findings. Discuss any changes in the specific aims since the project was initiated. Include the Inclusion Enrollment Report with the final enrollment data for clinical research (MS Word or PDF). |
5. | List titles and complete references to publications, and manuscripts accepted for publication, if any, that resulted from the project’s effort. Submit five copies of such items, except patent and invention reports, as an Appendix. |
6. | List patents, copyrights, trademarks, invention reports and other printed materials, if any, that resulted from the project or describe patent status, trade secrets or other demonstration of IP protection. |
7. | Describe the technology developed from this SBIR/STTR, its intended use and who will use it. |
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8. | Describe the current status of the product (e.g., under development, commercialized, in use, discontinued). |
9. | If applicable, describe the status of FDA approval for your product, process, or service (e.g., continuing pre-IND studies, filed an IND, in Phase I (or II or III) clinical trials, applied for approval, review ongoing, approved, not approved). |
10. | Describe how your company has benefited from the program and/or the technology developed (e.g., firm’s growth, follow-on funding, increased technical expertise, licensing agreements, spin-off companies, public offering [include stock exchange and symbol]). |
11. | List of the generic and/or commercial name of product, process, or service, if any, that resulted from SBIR/STTR funding. If applicable, indicate the number of products sold. |
12. | Provide the current number of employees (total full time equivalents [FTEs]). |
STAFF CONTACTS
The Grants Management Specialist is responsible for the negotiation, award and administration of this project and for interpretation of Grants Administration policies and provisions. The Program Official is responsible for the scientific, programmatic and technical aspects of this project. These individuals work together in overall project administration. Prior approval requests (signed by an Authorized Organizational Representative) should be submitted in writing to the Grants Management Specialist. Requests may be made via e-mail.
Grants Management Specialist: John Bladen
Email: bladenj@nia.nih.gov Phone: 301-496-1472 Fax: 301-402-3672
Program Official: Sergei Romashkan
Email: romashks@nia.nih.gov Phone: (301) 435-3047 Fax: (301) 402 - 1784
SPREADSHEET SUMMARY
GRANT NUMBER: 5R42AG054322-03
INSTITUTION: LONGEVERON, LLC
Budget | Year 3 | |||
Salaries and Wages | $ | 100,680 | ||
Fringe Benefits | $ | 18,121 | ||
Personnel Costs (Subtotal) | $ | 118,801 | ||
Materials & Supplies | $ | 36,715 | ||
Travel | $ | 8,000 | ||
Subawards/Consortium/Contractual Costs | $ | 167,800 | ||
ADP/Computer Services | $ | 2,500 | ||
TOTAL FEDERAL DC | $ | 333,816 | ||
TOTAL FEDERAL F&A | $ | 102,181 | ||
TOTAL COST | $ | 435,997 |
Facilities and Administrative Costs | Year 3 | |||
F&A Cost Rate 1 | 30.61 | % | ||
F&A Cost Base 1 | $ | 333,816 | ||
F&A Costs 1 | $ | 102,181 |
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Exhibit 10.10
Notice of Award | ||||
|
Ph 1 Explor./Developmental Coop. Agreement Department of Health and Human Services National Institutes of Health |
Federal Award Date: 09/09/2020 |
|
|
NATIONAL HEART, LUNG, AND BLOOD INSTITUTE |
Grant Number: | 1UG3HL148318-01A1 |
FAIN: | UG3HL148318 |
Principal Investigator(s):
Joshua M Hare, MD
Sunjay Kaushal (contact), MD
Project Title: 1/2 Allogeneic Human Mesenchymal Stem Cell (MSC) Injection in Patients with Hypoplastic Left Heart Syndrome: A Phase IIb Clinical Trial
Shelley Tiemann
University of Maryland, Baltimore
620 West
Lexington Street 4155
Baltimore, MD 212011508
Award e-mailed to: nga@ordmail.umaryland.edu
Period Of Performance:
Budget Period: 09/15/2020 – 08/31/2021
Project Period: 09/15/2020 – 08/31/2021
Dear Business Official:
The National Institutes of Health hereby awards a grant in the amount of $657,935 (see “Award Calculation” in Section I and “Terms and Conditions” in Section III) to UNIVERSITY OF MARYLAND BALTIMORE in support of the above referenced project. This award is pursuant to the authority of 42 USC 241 42 CFR PART 52 and is subject to the requirements of this statute and regulation and of other referenced, incorporated or attached terms and conditions.
Acceptance of this award including the “Terms and Conditions” is acknowledged by the grantee when funds are drawn down or otherwise obtained from the grant payment system.
Each publication, press release, or other document about research supported by an NIH award must include an acknowledgment of NIH award support and a disclaimer such as “Research reported in this publication was supported by the National Heart, Lung, And Blood Institute of the National Institutes of Health under Award Number UG3HL148318. The content is solely the responsibility of the authors and does not necessarily represent the official views of the National Institutes of Health.” Prior to issuing a press release concerning the outcome of this research, please notify the NIH awarding IC in advance to allow for coordination.
Award recipients must promote objectivity in research by establishing standards that provide a reasonable expectation that the design, conduct and reporting of research funded under NIH awards will be free from bias resulting from an Investigator’s Financial Conflict of Interest (FCOI), in accordance with the 2011 revised regulation at 42 CFR Part 50 Subpart F. The Institution shall submit all FCOI reports to the NIH through the eRA Commons FCOI Module. The regulation does not apply to Phase I Small Business Innovative Research (SBIR) and Small Business Technology Transfer (STTR) awards. Consult the NIH website http://grants.nih.gov/grants/policy/coi/ for a link to the regulation and additional important information.
If you have any questions about this award, please contact the individual(s) referenced in Section IV.
Sincerely yours,
John Diggs
Grants Management Officer
NATIONAL HEART, LUNG, AND BLOOD INSTITUTE
Additional information follows
SECTION I – AWARD DATA – 1UG3HL148318-01A1
Award Calculation (U.S. Dollars) | ||||
Salaries and Wages | $ | 219,825 | ||
Personnel Costs (Subtotal) | $ | 219,825 | ||
Subawards/Consortium/Contractual Costs | $ | 438,110 | ||
Federal Direct Costs | $ | 657,935 | ||
Approved Budget | $ | 657,935 | ||
Total Amount of Federal Funds Obligated (Federal Share) | $ | 657,935 | ||
TOTAL FEDERAL AWARD AMOUNT | $ | 657,935 | ||
AMOUNT OF THIS ACTION (FEDERAL SHARE) | $ | 657,935 |
SUMMARY TOTALS FOR ALL YEARS
YR | THIS AWARD | CUMULATIVE TOTALS | |||||
1 | $ | 657,935 | $ | 657,935 |
Fiscal Information: | |
CFDA Name: | Cardiovascular Diseases Research |
CFDA Number: | 93.837 |
EIN: | 1526002036A1 |
Document Number: | UHL148318A |
PMS Account Type: | P (Subaccount) |
Fiscal Year: | 2020 |
IC | CAN | 2020 | ||
HL | 8475146 | $657,935 |
NIH Administrative Data:
PCC: HHDCPN / OC: 41026 / Released: DIGGSJ 09/01/2020
Award Processed: 09/09/2020 12:14:42 AM
SECTION II – PAYMENT/HOTLINE INFORMATION – 1UG3HL148318-01A1
For payment and HHS Office of Inspector General Hotline information, see the NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
SECTION III – TERMS AND CONDITIONS – 1UG3HL148318-01A1
This award is based on the application submitted to, and as approved by, NIH on the above-titled project and is subject to the terms and conditions incorporated either directly or by reference in the following:
a. | The grant program legislation and program regulation cited in this Notice of Award. |
b. | Conditions on activities and expenditure of funds in other statutory requirements, such as those included in appropriations acts. |
c. | 45 CFR Part 75. |
d. | National Policy Requirements and all other requirements described in the NIH Grants Policy Statement, including addenda in effect as of the beginning date of the budget period. |
e. | Federal Award Performance Goals: As required by the periodic report in the RPPR or in the final progress report when applicable. |
f. | This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW. |
(See NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm for certain references cited above.)
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Research and Development (R&D): All awards issued by the National Institutes of Health (NIH) meet the definition of “Research and Development” at 45 CFR Part§ 75.2. As such, auditees should identify NIH awards as part of the R&D cluster on the Schedule of Expenditures of Federal Awards (SEFA). The auditor should test NIH awards for compliance as instructed in Part V, Clusters of Programs. NIH recognizes that some awards may have another classification for purposes of indirect costs. The auditor is not required to report the disconnect (i.e., the award is classified as R&D for Federal Audit Requirement purposes but non-research for indirect cost rate purposes), unless the auditee is charging indirect costs at a rate other than the rate(s) specified in the award document(s).
Carry over of an unobligated balance into the next budget period requires Grants Management Officer prior approval.
This award is subject to the requirements of 2 CFR Part 25 for institutions to receive a Dun & Bradstreet Universal Numbering System (DUNS) number and maintain an active registration in the System for Award Management (SAM). Should a consortium/subaward be issued under this award, a DUNS requirement must be included. See http://grants.nih.gov/grants/policy/awardconditions.htm for the full NIH award term implementing this requirement and other additional information.
This award has been assigned the Federal Award Identification Number (FAIN) UG3HL148318. Recipients must document the assigned FAIN on each consortium/subaward issued under this award.
Based on the project period start date of this project, this award is likely subject to the Transparency Act subaward and executive compensation reporting requirement of 2 CFR Part 170. There are conditions that may exclude this award; see http://grants.nih.gov/grants/policy/awardconditions.htm for additional award applicability information.
In accordance with P.L. 110-161, compliance with the NIH Public Access Policy is now mandatory. For more information, see NOT-OD-08-033 and the Public Access website: http://publicaccess.nih.gov/.
This award provides support for one or more clinical trials. By law (Title VIII, Section 801 of Public Law 110-85), the “responsible party” must register “applicable clinical trials” on the ClinicalTrials.gov Protocol Registration System Information Website. NIH encourages registration of all trials whether required under the law or not. For more information, see http://grants.nih.gov/ClinicalTrials_fdaaa/
This award represents the final year of the competitive segment for this grant. See the NIH Grants Policy Statement Section 8.6 Closeout for complete closeout requirements at: http://grants.nih.gov/grants/policy/policy.htm#gps.
A final expenditure Federal Financial Report (FFR) (SF 425) must be submitted through the eRA Commons (Commons) within 120 days of the period of performance end date; see the NIH Grants Policy Statement Section 8.6.1 Financial Reports, http://grants.nih.gov/grants/policy/policy.htm#gps, for additional information on this submission requirement. The final FFR must indicate the exact balance of unobligated funds and may not reflect any unliquidated obligations. There must be no discrepancies between the final FFR expenditure data and the Payment Management System’s (PMS) quarterly cash transaction data. A final quarterly federal cash transaction report is not required for awards in PMS B subaccounts (i.e., awards to foreign entities and to Federal agencies). NIH will close the awards using the last recorded cash drawdown level in PMS for awards that do not require a final FFR on expenditures or quarterly federal cash transaction reporting. It is important to note that for financial closeout, if a grantee fails to submit a required final expenditure FFR, NIH will close the grant using the last recorded cash drawdown level. If the grantee submits a final expenditure FFR but does not reconcile any discrepancies between expenditures reported on the final expenditure FFR and the last cash report to PMS, NIH will close the award at the lower amount. This could be considered a debt or result in disallowed costs.
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A Final Invention Statement and Certification form (HHS 568), (not applicable to training, construction, conference or cancer education grants) must be submitted within 120 days of the expiration date. The HHS 568 form may be downloaded at: http://grants.nih.gov/grants/forms.htm. This paragraph does not apply to Training grants, Fellowships, and certain other programs—i.e., activity codes C06, D42, D43, D71, DP7, G07, G08, G11, K12, K16, K30, P09, P40, P41, P51, R13, R25, R28, R30, R90, RL5, RL9, S10, S14, S15, U13, U14, U41, U42, U45, UC6, UC7, UR2, X01, X02.
Unless an application for competitive renewal is submitted, a Final Research Performance Progress Report (Final RPPR) must also be submitted within 120 days of the period of performance end date. If a competitive renewal application is submitted prior to that date, then an Interim RPPR must be submitted by that date as well. Instructions for preparing an Interim or Final RPPR are at: https://grants.nih.gov/grants/rppr/rppr_instruction_guide.pdf. Any other specific requirements set forth in the terms and conditions of the award must also be addressed in the Interim or Final RPPR. Note that data reported within Section I of the Interim and Final RPPR forms will be made public and should be written for a lay person audience.
NIH strongly encourages electronic submission of the final invention statement through the Closeout feature in the Commons, but will accept an email or hard copy submission as indicated below.
Email: The final invention statement may be e-mailed as PDF attachments to: NIHCloseoutCenter@mail.nih.gov.
Hard copy: Paper submissions of the final invention statement may be faxed to the NIH Division of Central Grants Processing, Grants Closeout Center, at 301-480-2304, or mailed to:
National Institutes of Health
Office of Extramural
Research
Division of Central Grants Processing
Grants
Closeout Center
6705 Rockledge Drive
Suite 5016, MSC 7986
Bethesda, MD 20892-7986 (for regular or U.S. Postal Service Express mail)
Bethesda, MD 20817 (for other courier/express deliveries only)
NOTE: If this is the final year of a competitive segment due to the transfer of the grant to another institution, then a Final RPPR is not required. However, a final expenditure FFR is required and should be submitted electronically as noted above. If not already submitted, the Final Invention Statement is required and should be sent directly to the assigned Grants Management Specialist.
In accordance with the regulatory requirements provided at 45 CFR 75.113 and Appendix XII to 45 CFR Part 75, recipients that have currently active Federal grants, cooperative agreements, and procurement contracts with cumulative total value greater than $10,000,000 must report and maintain information in the System for Award Management (SAM) about civil, criminal, and administrative proceedings in connection with the award or performance of a Federal award that reached final disposition within the most recent five-year period. The recipient must also make semiannual disclosures regarding such proceedings. Proceedings information will be made publicly available in the designated integrity and performance system (currently the Federal Awardee Performance and Integrity Information System (FAPIIS)). Full reporting requirements and procedures are found in Appendix XII to 45 CFR Part 75. This term does not apply to NIH fellowships.
Treatment of Program Income:
Additional Costs
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SECTION IV – HL Special Terms and Conditions – 1UG3HL148318-01A1
Clinical Trial Indicator: Yes
This award supports one or more NIH-defined Clinical Trials. See the NIH Grants Policy Statement Section 1.2 for NIH definition of Clinical Trial.
RESTRICTION - LACK OF IRB APPROVAL: The present award is being made without a currently valid certification of IRB approval for this project with the following restriction: Only activities that are clearly severable and independent from activities that involve human subjects may be conducted pending the NHLBI’s acceptance of the certification of IRB approval.
No funds may be drawn down from the payment system and no obligations may be made against Federal funds for any research involving human subjects prior to the NHLBI’s notification to the recipient that the identified issues have been resolved and this restriction removed.
RFA NOTICE
The Terms and Conditions of this award incorporate the operating guidelines in PAR 19-329, (Clinical Coordinating Center for Multi-Site Investigator-Initiated Clinical Trials (Collaborative UG3/UH3)), which can be found at: https://grants.nih.gov/grants/guide/pa-files/PAR-19-329.html
Phased Transition Application
The -02 Application, due on June 1, 2021 shall be submitted on a PHS 398 application in PDF format to the Grants Management Specialist listed on this award. Failure to submit by that date may result in not being considered for the UH3.
The application shall include;
· | PHS398 Face Page, PHS398 pages 2,4, and 5 including detailed budget, justification, and checklist page. Please note that the budget cannot exceed the annual direct costs proposed in the initial peer reviewed application. |
· | An updated research plan and specific aims should reflect current plans for the UH3 Phase, and general progress. |
· | Detailed budget pages for a non-ÂÂmodular budget and budget justification. |
· | Updated as Just-In-Time Materials as appropriate: IRB approvals, Other Support, Human Subjects Certifications, Bio sketches for new proposed key personnel. |
· | Copy of any relevant F&A rate agreements. |
In addition, in appendix form, a description of the progress related to the mutually agreed upon negotiated milestones (Recipient concurrence dated August 29, 2020). The appendix should also include proposed milestones for a proposed UH3 Project Period.
Failure to adhere to this Phased Transition Application may result in enforcement actions as described by the NIH GPS, including requiring the submission of a close-out plan for early phase- out of the award if adequate progress is not achieved
Administrative Review
The NHLBI will conduct an Administrative Review (referred to as a transition meeting per the FOA https://grants.nih.gov/grants/guide/pa-files/PAR-19-329.html. This review will determine whether satisfactory progress has been made towards the mutually agreed upon milestones. Those awardees that are not successful will be permitted to extend the existing budget and project periods up to one year without prior NHLBI approval. This decision will be communicated via a counter-signed letter from the assigned program officer and Office of Grants Management. If considered for funding, the NHLBI will begin negotiations with the Recipient for formal milestones prior to the issuance of the UH3 award.
Milestones
The awardee is expected to adhere to these mutually agreed upon milestones; subsequent funding will be contingent on meeting these milestones and achieving satisfactory progress.
Budget Period 01 (19/15/2020 – 08/31/2021)
· | 25% of sites activated |
· | Complete finalized protocol and informed consent documents |
· | DSMB review and approval of final protocol, template consent(s) and/or assent(s), and data and safety monitoring plan |
· | Enrollment of the first participant during the UG3 phase |
· | IRB approval of final protocol and consent and/or assent |
Failure to adhere to these Milestones may result in enforcement actions as described by the NIH GPS, including requiring the submission of a close-out plan for early phase-out of the award if adequate progress is not achieved.
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eConnect
The NHLBI utilizes a reporting system, eConnect, for both Clinical Trial Milestones and Participate Enrollment/Milestone Accrual. eConnect utilizes the existing Electronic Research Administration (eRA) logon system and current institutional accounts so no Authorized Organizational Representative or Principal Investigator will be required to create new accounts with the NHLBI. The system is designed to facilitate NHLBI monitoring traditionally accomplished through standard paper submissions for Quarterly/Annual Reporting of Patient Recruitment per the NHLBI Milestones Policy as well as the reporting of Clinical Trial Milestones negotiated and/or peer reviewed on this award. The NHLBI encourages the recipient to report when milestones are achieved through eConnect as well as report on a quarterly basis recruitment that has occurred under this award.
Clinical Trial Dissemination Plan
The clinical trial(s) supported by this award is subject to the plan included in the application dated November 11, 2019 submitted to NIH and the NIH policy on Dissemination of NIH-Funded Clinical Trial Information. The plan states that the clinical trial(s) funded by this award will be registered in ClinicalTrials.gov not later than 21 calendar days after enrollment of the first participant and primary summary results reported in ClinicalTrials.gov, not later than one year after the completion date. The reporting of summary results is required by this term of award even if the primary completion date occurs after the period of performance.
1. This award is subject to additional certification requirements with each submission of the Annual, Interim, and Final Research Performance Progress Report (RPPR). The recipient must agree to the following annual certification when submitting each RPPR. By submitting the RPPR, the AOR signifies compliance, as follows:
In submitting this RPPR, the SO (or PD/PI with delegated authority), certifies to the best of his/her knowledge that, for all clinical trials funded under this NIH award, the recipient and all investigators conducting NIH-funded clinical trials are in compliance with the recipient’s plan addressing compliance with the NIH Policy on Dissemination of NIH-Funded Clinical Trial Information. Any clinical trial funded in whole or in part under this award has been registered in ClinicalTrials.gov or will be registered not later than 21 calendar days after enrollment of the first participant. Summary results have been submitted to ClinicalTrials.gov or will be submitted not later than one year after the completion date, even if the completion date occurs after the period of performance.
NHLBI FUNDING GUIDELINES
This award is being issued in accordance with the NHLBI FY 2020 Operating Guidelines which can be found at: https://www.nhlbi.nih.gov/current-operating-guidelines
MULTIPLE PI - Prior Approvals
In keeping with NOT-OD-06-054 (http://grants.nih.gov/grants/guide/notice-files/NOT-OD-06- 054.html), as this award has multiple Principal Investigators (PIs), although the signatures of all the PIs are not required on prior approval requests submitted to the agency, the recipient institution must secure and retain the signatures of all of the PIs for their own internal processes.
CONSORTIUM/CONTRACTUAL
This award includes funds awarded for consortium activity with Cincinnati Children’s Hospital Medical Center, Emory University, Johns Hopkins University, Longeveron, LLC., University of Utah,Children’s Hospital Los Angeles, and Advocate Health Care Network. The recipient, as the direct and primary recipient of NIH grant funds, is accountable to NIH for the performance project, the appropriate expenditures of grant funds by all parties, and all other obligations of the recipient, as specified in the NIH Grants Policy Statement. In general, the requirements that apply to the recipient, including the intellectual property requirements also apply to consortium participant(s).
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STAFF CONTACTS
The Grants Management Specialist is responsible for the negotiation, award and administration of this project and for interpretation of Grants Administration policies and provisions. The Program Official is responsible for the scientific, programmatic and technical aspects of this project. These individuals work together in overall project administration. Prior approval requests (signed by an Authorized Organizational Representative) should be submitted in writing to the Grants Management Specialist. Requests may be made via e-mail.
Grants Management Specialist: Amy Gipson
Email: amy.gipson@nih.gov Phone: 301-827-8026
Program Official: Kristin Burns
Email: burnskr@mail.nih.gov Phone: 301-594-6859
SPREADSHEET SUMMARY
GRANT NUMBER: 1UG3HL148318-01A1
INSTITUTION: UNIVERSITY OF MARYLAND BALTIMORE
Budget | Year 1 | |||
Salaries and Wages | $ | 219,825 | ||
Personnel Costs (Subtotal) | $ | 219,825 | ||
Subawards/Consortium/Contractual Costs | $ | 438,110 | ||
TOTAL FEDERAL DC | $ | 657,935 | ||
TOTAL FEDERAL F&A | $ | 0 | ||
TOTAL COST | $ | 657,935 |
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Exhibit 10.11
|
U.S. Small Business Administration Note |
SBA Loan # | 53452071-02 |
SBA Loan Name | LONGEVERON LLC |
Date | 4/16/2020 |
Loan Amount | 300390.00 |
Interest Rate | 1.00% FIXED |
Borrower | LONGEVERON LLC |
Operating Company | N/A |
Lender | Synovus Bank |
1. | PROMISE TO PAY: |
In return for the Loan, Borrower promises to pay to the order of Lender the amount of Three Hundred Thousand Three Hundred Ninety and 00/100 Dollars, interest on the unpaid principal balance, and all other amounts required by this Note.
2. | DEFINITIONS: |
“Collateral” means any property taken as security for payment of this Note or any guarantee of this Note.
“Guarantor” means each person or entity that signs a guarantee of payment of this Note.
“Loan” means the loan evidenced by this Note.
“Loan Documents” means the documents related to this loan signed by Borrower, any Guarantor, or anyone who pledges collateral.
“SBA” means the Small Business Administration, an Agency of the United States of America.
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3. | PAYMENT TERMS: |
Borrower must make all payments at the place Lender designates. The payment terms for this Note are:
This loan is made pursuant to the Paycheck Protection Program as part of the Coronavirus Aid, Relief, and Economic Security Act.
The term of this loan will be twenty-four (24) months, with the first six (6) months of principal and interest payments being deferred, with interest accruing, then converting to monthly principal and interest payments, amortized over eighteen (18) months, at the interest rate provided herein, for the remaining eighteen (18) months. Lender will apply each payment first to pay interest accrued to the day Lender received the payment, then to bring principal current, and will apply any remaining balance to reduce principal. Payments must be made on the same day as the date of this Note in the months they are due. Lender shall adjust payments at least annually as needed to amortize principal over the remaining term of the Note.
All remaining unpaid principal and accrued interest is due and payable twenty-four (24) months from the date of the Note.
The interest rate will be fixed at 1.00% for the life of the loan. Interest will accrue on an Actual/365 day basis. Interest shall accrue from the date hereof on the unpaid principal balance and shall continue to accrue until this Note is paid in full.
Late Charge: To the extent permitted, if a payment on this Note is more than 10 days late, Lender may charge Borrower a late fee of up to 5% of the unpaid portion of the regularly scheduled payment. |
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4. | DEFAULT: |
Borrower is in default under this Note if Borrower does not make a payment when due under this Note, or if Borrower or Operating Company:
A. | Fails to do anything required by this Note and other Loan Documents; |
B. | Defaults on any other loan with Lender; |
C. | Does not preserve, or account to Lender’s satisfaction for, any of the Collateral or its proceeds; |
D. | Does not disclose, or anyone acting on their behalf does not disclose, any material fact to Lender or SBA; |
E. | Makes, or anyone acting on their behalf makes, a materially false or misleading representation to Lender or SBA; |
F. | Defaults on any loan or agreement with another creditor, if Lender believes the default may materially affect Borrower’s ability to pay this Note; |
G. | Fails to pay any taxes when due; |
H. | Becomes the subject of a proceeding under any bankruptcy or insolvency law; |
I. | Has a receiver or liquidator appointed for any part of their business or property; |
J. | Makes an assignment for the benefit of creditors; |
K. | Has any adverse change in financial condition or business operation that Lender believes may materially affect Borrower’s ability to pay this Note; |
L. | Reorganizes, merges, consolidates, or otherwise changes ownership or business structure without Lender’s prior written consent; or |
M. | Becomes the subject of a civil or criminal action that Lender believes may materially affect Borrower’s ability to pay this Note. |
5. | LENDER’S RIGHTS IF THERE IS A DEFAULT: |
Without notice or demand and without giving up any of its rights, Lender may:
A. | Require immediate payment of all amounts owing under this Note; |
B. | Collect all amounts owing from any Borrower or Guarantor; |
C. | File suit and obtain judgment; |
D. | Take possession of any Collateral; or |
E. | Sell, lease, or otherwise dispose of, any Collateral at public or private sale, with or without advertisement. |
6. | LENDER’S GENERAL POWERS: |
Without notice and without Borrower’s consent, Lender may:
A. | Bid on or buy the Collateral at its sale or the sale of another lienholder, at any price it chooses; |
B. | Incur expenses to collect amounts due under this Note, enforce the terms of this Note or any other Loan Document, and preserve or dispose of the Collateral. Among other things, the expenses may include payments for property taxes, prior liens, insurance, appraisals, environmental remediation costs, and reasonable attorney’s fees and costs. If Lender incurs such expenses, it may demand immediate repayment from Borrower or add the expenses to the principal balance; |
C. | Release anyone obligated to pay this Note; |
D. | Compromise, release, renew, extend or substitute any of the Collateral; and |
E. | Take any action necessary to protect the Collateral or collect amounts owing on this Note. |
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7. | WHEN FEDERAL LAW APPLIES: |
When SBA is the holder, this Note will be interpreted and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA, or preempt federal law.
8. | SUCCESSORS AND ASSIGNS: |
Under this Note, Borrower and Operating Company include the successors of each, and Lender includes its successors and assigns.
9. | GENERAL PROVISIONS: |
A. | All individuals and entities signing this Note are jointly and severally liable. |
B. | Borrower waives all suretyship defenses. |
C. | Borrower must sign all documents necessary at any time to comply with the Loan Documents and to enable Lender to acquire, perfect, or maintain Lender’s liens on Collateral. |
D. | Lender may exercise any of its rights separately or together, as many times and in any order it chooses. Lender may delay or forgo enforcing any of its rights without giving up any of them. |
E. | Borrower may not use an oral statement of Lender or SBA to contradict or alter the written terms of this Note. |
F. | If any part of this Note is unenforceable, all other parts remain in effect. |
G. | To the extent allowed by law, Borrower waives all demands and notices in connection with this Note, including presentment, demand, protest, and notice of dishonor. Borrower also waives any defenses based upon any claim that Lender did not obtain any guarantee; did not obtain, perfect, or maintain a lien upon Collateral; impaired Collateral; or did not obtain the fair market value of Collateral at a sale. |
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10. | STATE-SPECIFIC PROVISIONS: |
If Borrower is a resident of Georgia, the following language applies:
The undersigned Borrower hereby waives the right to require the Holder of this obligation to confirm any foreclosure sale as a condition for taking action to collect on this Note. |
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11. | BORROWER’S NAME(S) AND SIGNATURE(S): |
By signing below, each individual or entity becomes obligated under this Note as Borrower.
LONGEVERON LLC | ||||
By: | /s/ James Clavijo | |||
James Clavijo
As Authorized Signer |
||||
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|
This Statement of Policy is Posted
In Accordance with Regulations of the
Small Business Administration
This Organization Practices
Equal Employment Opportunity |
We do not discriminate on the ground of race, color, religion, sex, age, disability or national origin in the hiring, retention, or promotion of employees; nor in determining their rank, or the compensation or fringe benefits paid them.
This Organization Practices
Equal Treatment of Clients
We do not discriminate on the basis of race, color, religion, sex, marital status, disability, age or national origin in services or accommodations offered or provided to our employees, clients or guests.
These policies and this notice comply with regulations
of the United States Government.
Please report violations of this policy to :
Administrator | |
Small Business Administration | |
Washington, D.C. 20416 |
In order for the public and your employees to know their rights under 13 C.F.R Parts 112, 113, and 117, Small Business Administration Regulations, and to conform with the directions of the Administrator of SBA, this poster must be displayed where it is clearly visible to employees, applicants for employment, and the public.
Failure to display the poster as required in accordance with SBA Regulations may be considered evidence of noncompliance and subject you to the penalties contained in those Regulations.
|
Esta Declaración De Principios Se Publica De
Acuerdo Con Los Reglamentos De La
Agencia Federal Para el Desarrollo de la Pequen:a Empresa |
Esta Organizacion Practica
lgual Oportunidad De Empleo
No discriminamos por razón de raza, color, religión, sexo, edad, discapacidad o nacionalidad en el empleo, retención o ascenso de personal ni en la determinación de sus posiciones, salarios o beneficios marginales.
Esta Organizacion Practica
Igualdad En El Trato A Su Clientela
No discriminamos por razón de raza, color, religión, sexo, estado civil, edad, discapacidad o nacionalidad en los servicios o facilidades provistos para nuestros empleados, clientes o visitantes.
Estos principios y este aviso cumplen con los reglamentos del Gobierno
de los Estados Unidos de América.
Favor de informar violaciones a lo aquí indicado a:
Administrador | |
Agencia Federal Para el Desarrollo de la Pequeña Empresa | |
Washington, D.C. 20416 |
A fin de que el público y sus empleados conozcan sus derechos según lo expresado en las Secciones 112 , 113 y 117 del Codigo de Regulaciaones Federales No. 13, de los Reglamentos de la Agenc.ia Federal Para el Desarrollo de la Pequen:a Empresa y de acuerdo con las instrucciones del Administrador de dicha agencia, esta notificación debe fijarse en un lugar claramente visible para los empleados, solicitantes de empleo y público en general. No fijar esta notificación según lo requerido por los reglamentos de la Agencia Federal Para el Desarrollo de la Pequen:a Empresa, puede ser interpretado como evidencia de falta de cumplimiento de los mismos y conllevará la ejecución de los castigos impuestos en estos reglamentos.
Upon signing and submitting this loan agreement, a deposit in the amount of $300390.00 will be made into your Synovus account for LONGEVERON LLC within one to two business days. This amount will represent 100% of your loan proceeds for your loan 53452071-02 under the Paycheck Protection Program. As you are aware, no fees have been charged to you in connection with this loan, and these loan proceeds are to be used by you in accordance with the Paycheck Protection Program.
Please let us know if there is anything additional we can do for you. We’re here to help.
For assistance, call 1-888-SYNOVUS and say “SBA” to speak with a specialist.
Certificate Of Completion | ||
Envelope
Id: 0A17E42F98AC4A68AD9B88093D19BED7
Subject: Please Complete Your Synovus Loan Package |
Status: Completed | |
Source Envelope: | ||
Document Pages: 9 | Signatures: 1 | Envelope Originator: |
Certificate Pages: 4 | Initials: 0 | Christina McLaughlin |
AutoNav: Enabled EnvelopeId Stamping: Enabled Time Zone: (UTC-05:00) Eastern Time (US & Canada) |
1111 Bay Ave
Columbus,
GA 31901
IP Address: 136.147.46.8 |
|
Record Tracking | ||
Status: Original | Holder: Christina McLaughlin | Location: DocuSign |
4/16/2020 6:36:31 PM | christinamclaughlin@synovus.com | |
Signer Events | Signature | Timestamp |
James Clavijo | /s/ James Clavijo |
Sent:
4/16/2020 6:38:42 PM
|
jclavijo@longeveron.com | Viewed: 4/16/2020 6:39:26 PM | |
Security Level: Email, Account Authentication (None) |
|
Signed: 4/16/2020 6:40:25 PM |
Signature
Adoption: Pre-selected Style
Using IP Address: 192.31.135.1 |
||
Electronic Record and Signature Disclosure: Accepted: 4/16/2020 6:39:26 PM ID: 82fffe12-d987-4c87-8d53-3c9b35fa538c |
Electronic Record and Signature Disclosure created on: 4/7/2020 2:20:57 PM
Parties agreed to: James Clavijo
ELECTRONIC RECORD AND SIGNATURE DISCLOSURE
From time to time, Synovus Financial Corp. (Main) (we, us or Company) may be required by law to provide to you certain written notices or disclosures. Described below are the terms and conditions for providing to you such notices and disclosures electronically through the DocuSign system. Please read the information below carefully and thoroughly, and if you can access this information electronically to your satisfaction and agree to this Electronic Record and Signature Disclosure (ERSD), please confirm your agreement by selecting the check-box next to ‘I agree to use electronic records and signatures’ before clicking ‘CONTINUE’ within the DocuSign system.
Getting paper copies
At any time, you may request from us a paper copy of any record provided or made available electronically to you by us. You will have the ability to download and print documents we send to you through the DocuSign system during and immediately after the signing session and, if you elect to create a DocuSign account, you may access the documents for a limited period of time (usually 30 days) after such documents are first sent to you. After such time, if you wish for us to send you paper copies of any such documents from our office to you, you will be charged a $0.00 per-page fee. You may request delivery of such paper copies from us by following the procedure described below.
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If you decide to receive notices and disclosures from us electronically, you may at any time change your mind and tell us that thereafter you want to receive required notices and disclosures only in paper format. How you must inform us of your decision to receive future notices and disclosure in paper format and withdraw your consent to receive notices and disclosures electronically is described below.
Consequences of changing your mind
If you elect to receive required notices and disclosures only in paper format, it will slow the speed at which we can complete certain steps in transactions with you and delivering services to you because we will need first to send the required notices or disclosures to you in paper format, and then wait until we receive back from you your acknowledgment of your receipt of such paper notices or disclosures. Further, you will no longer be able to use the DocuSign system to receive required notices and consents electronically from us or to sign electronically documents from us.
All notices and disclosures will be sent to you electronically
Unless you tell us otherwise in accordance with the procedures described herein, we will provide electronically to you through the DocuSign system all required notices, disclosures, authorizations, acknowledgements, and other documents that are required to be provided or made available to you during the course of our relationship with you. To reduce the chance of you inadvertently not receiving any notice or disclosure, we prefer to provide all of the required notices and disclosures to you by the same method and to the same address that you have given us. Thus, you can receive all the disclosures and notices electronically or in paper format through the paper mail delivery system. If you do not agree with this process, please let us know as described below. Please also see the paragraph immediately above that describes the consequences of your electing not to receive delivery of the notices and disclosures electronically from us.
How to contact Synovus Financial Corp. (Main):
You may contact us to let us know of your changes as to how we may contact you electronically, to request paper copies of certain information from us, and to withdraw your prior consent to receive notices and disclosures electronically as follows:
To contact us by email send messages to: info@synovus.com
To advise Synovus Financial Corp. (Main) of your new email address
To let us know of a change in your email address where we should send notices and disclosures electronically to you, you must send an email message to us at info@synovus.com and in the body of such request you must state: your previous email address, your new email address. We do not require any other information from you to change your email address.
If you created a DocuSign account, you may update it with your new email address through your account preferences.
To request paper copies from Synovus Financial Corp. (Main)
To request delivery from us of paper copies of the notices and disclosures previously provided by us to you electronically, you must send us an email to info@synovus.com and in the body of such request you must state your email address, full name, mailing address, and telephone number. We will bill you for any fees at that time, if any.
To withdraw your consent with Synovus Financial Corp. (Main)
To inform us that you no longer wish to receive future notices and disclosures in electronic format you may:
i. | decline to sign a document from within your signing session, and on the subsequent page, select the check-box indicating you wish to withdraw your consent, or you may; |
ii. | send us an email to info@synovus.com and in the body of such request you must state your email, full name, mailing address, and telephone number. We do not need any other information from you to withdraw consent.. The consequences of your withdrawing consent for online documents will be that transactions may take a longer time to process.. |
Required hardware and software
The minimum system requirements for using the DocuSign system may change over time. The current system requirements are found here: https://support.docusign.com/guides/signer-guide- signing-system-requirements.
Acknowledging your access and consent to receive and sign documents electronically
To confirm to us that you can access this information electronically, which will be similar to other electronic notices and disclosures that we will provide to you, please confirm that you have read this ERSD, and (i) that you are able to print on paper or electronically save this ERSD for your future reference and access; or (ii) that you are able to email this ERSD to an email address where you will be able to print on paper or save it for your future reference and access. Further, if you consent to receiving notices and disclosures exclusively in electronic format as described herein, then select the check-box next to ‘I agree to use electronic records and signatures’ before clicking ‘CONTINUE’ within the DocuSign system.
By selecting the check-box next to ‘I agree to use electronic records and signatures’, you confirm that:
● | You can access and read this Electronic Record and Signature Disclosure; and |
● | You can print on paper this Electronic Record and Signature Disclosure, or save or send this Electronic Record and Disclosure to a location where you can print it, for future reference and access; and |
● | Until or unless you notify Synovus Financial Corp. (Main) as described above, you consent to receive exclusively through electronic means all notices, disclosures, authorizations, acknowledgements, and other documents that are required to be provided or made available to you by Synovus Financial Corp. (Main) during the course of your relationship with Synovus Financial Corp. (Main). |
Exhibit 10.12
Adopted by the Board on July 18, 2017
2017 LONGEVERON LLC
INCENTIVE PLAN
Article I – General Provisions
1.1 Establishment and Purpose
There is hereby established the 2017 Longeveron LLC Incentive Plan (the “Plan”). The purpose of the Plan is to attract, retain and reward persons providing services to or for the direct, or indirect, benefit of the Company, a Company Subsidiary and/or an Affiliate, and to motivate such persons to contribute to the growth and profits of the Company in the future. The Plan seeks to accomplish these goals and objectives through the issuance of interests in the Company.
1.2 Definitions
Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Operating Agreement. For the purposes of the Plan and unless otherwise specified in an Award Agreement, the following terms shall have the meanings ascribed thereto:
“Affiliate” shall have the meaning assigned thereto in the Operating Agreement.
“Award” shall mean the grant or issuance of Incentive Units, Common Units, Restricted Units and/or Unit Appreciation Rights awarded pursuant to Article II of this Plan, or an Option awarded pursuant to Article III of this Plan.
“Award Agreement” means the agreement between the Company and a Participant evidencing an award of Incentive Units, Common Units, Restricted Units and/or Unit Appreciation Rights, as applicable, by the Board as described in Section 2.2 hereof.
“Bankruptcy” shall mean (i) the entry of a decree or order for relief by a court having jurisdiction in respect of a Person in an involuntary proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of a Person or for any substantial part of such Person’s property or the entry of an order for the winding up or liquidation of its affairs, which decree or order remains unstayed and in effect for a period of ninety (90) consecutive days; (ii) the commencement by a Person of a voluntary proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of a Person or for any substantial part of its property, or any general assignment by a Person for the benefit of creditors; (iii) the attachment by a creditor of a Person’s interest in the Company, which attachment is not discharged or vacated within ninety (90) days from the date it becomes effective; or (iv) the occurrence of any event constituting a “Bankruptcy” within meaning assigned to such term in the Operating Agreement.
“Board of Managers” or “Board” shall mean the Board of Managers of the Company.
“Capital Account(s)” shall have the meaning assigned thereto in the Operating Agreement.
2017 Longeveron LLC Incentive Plan
“Cause” shall have the meaning assigned thereto in the Operating Agreement; provided, however, in the event a Participant has entered into an employment agreement with the Company or a Company Subsidiary that defines Cause, “Cause” shall also include the occurrence of any event constituting “Cause” as defined in such Participant’s employment agreement.
“Change in Form” shall mean a transaction or series of transactions under which the Company be conducted in a form different from that of a Delaware limited liability company taxed as a partnership, for example a conversion in the a C-corporation.
“Code” means the Internal Revenue Code of 1986, as amended, and any successor code or law.
“Common Units” shall have the meaning assigned thereto in the Operating Agreement; provided, however, Common Units available for issuance under the Plan shall be in the form of Series C Common Units.
“Company” means Longeveron LLC, a Delaware limited liability company, including any successors thereto.
“Company Subsidiary” shall have the meaning assigned thereto in the Operating Agreement.
“Disability” shall have the meaning assigned thereto in the Operating Agreement.
“Effective Date” means the date the Plan becomes effective as provided under Article IX hereto.
“Fair Market Value” means, unless otherwise determined by the Board of Managers, the value of an Incentive Unit and/or Common Units (including any Common Unit underlying an Option), as applicable, in the Company determined as of the most recent preceding Valuation Date by such methods or procedures as shall be established from time to time in good faith by the Board of Managers; provided, however, in the event a Participant’s Service is terminated for Cause, or the Board of Managers has determined that the Participant has violated any nonsolicitation, noncompetition or nondisclosure provision contained in any agreement, including but not limited to an Award Agreement, entered into by and between a Participant and the Company, a Company Subsidiary and/or an Affiliate, the Fair Market Value of the Participant’s Incentive Units and/or Common Units (to the extent not otherwise Forfeited), as applicable, shall be the lesser of the amount of the Participant’s Capital Account balance attributable to such Incentive Units and/or Common Units, as applicable, or such value as determined in accordance with the foregoing procedures.
“Forfeit,” “Forfeiture,” “Forfeited” means the loss by a Participant of any and all right, title and interest in and to the Option, Incentive Units, Common Units, Restricted Units and/or Unit Appreciation Rights, as applicable, or any portion thereof, including, but not limited to, any Units issuable thereunder and all profits or capital of the Company attributable to such Incentive Unit or Common Unit; the elimination of the Participant’s Capital Account relating thereto; the loss of any and all rights to any payment by the Company for such Option, Incentive Units, Common Units, Restricted Units and/or Unit Appreciation Rights, as applicable; and the termination of all other rights of the Participant related to such Option, Incentive Unit, Common Units, Restricted Units and/or Unit Appreciation Rights, as applicable, arising under this Plan, an Award Agreement, the Operating Agreement or otherwise.
2
2017 Longeveron LLC Incentive Plan
“Incentive Unit”, “Restricted Incentive Units” and “Unrestricted Incentive Units” shall have the meaning assigned thereto in the Operating Agreement.
“Initial Public Offering” or “IPO” means following the Change in Form, the closing of an initial public offering of the stock or other equity securities of the Company firmly underwritten by a nationally recognized underwriter.
“Member” shall have the meaning assigned thereto in the Operating Agreement.
“Operating Agreement” means that certain Limited Liability Company Agreement between the Company and the members named therein dated as of November 20, 2014, as may thereafter be amended or restated from time to time.
“Option” means a right, whether issued in the form of an option, warrant or other similar equity-based instrument, to purchase one or more Units, subject to the terms of the Plan and the related Option Award Agreement.
“Option Award Agreement” means the agreement between the Company and a Participant or other document or instrument evidencing an Award of an Option by the Board of Managers as described in Section 3.2 hereof.
“Participant” means any person who has satisfied the eligibility requirements set forth in Section 1.6 and who has entered into an Award Agreement under the Plan, which Award Agreement remains outstanding under the Plan.
“Person” shall have the meaning assigned thereto in the Operating Agreement.
“Plan” shall have the meaning provided in Section 1.1 hereof.
“Restricted Unit” shall mean a right granted pursuant to Article II of the Plan to receive Series C Common Units at a future date in accordance with the terms of the Award Agreement and this Plan. Notwithstanding any provision of an Award Agreement to the contrary, Restricted Units may, in the Company’s sole discretion, be settled in cash in lieu of an issuance of Class C Common Units.
“Sale Transaction” means: (i) the sale, transfer or other disposition of all or substantially all of the assets of the Company to any Person; or (ii) the acquisition of the Company by a Person or “group” of Persons (as that term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended), by means of any transaction or series of related transactions (including, without limitation, any merger, consolidation, or reorganization), if, following such transaction or transactions, the Persons that were securityholders immediately prior to such transaction or transactions beneficially own, directly or indirectly, less than fifty percent (50%) of both the then outstanding securities of the purchaser, transferee or successor and do not otherwise retain the power to direct or cause the direction, directly or indirectly, through one or more intermediaries, of the management and policies of the purchaser, transferee or successor. Notwithstanding the foregoing, a Sale Transaction shall not include any or all transactions necessary to effectuate a Change in Form.
3
2017 Longeveron LLC Incentive Plan
“Section 409A” shall mean Section 409A of the Code, and the regulations and other binding guidance promulgated thereunder.
“Service” shall mean the provision of services to the Company, a Company Subsidiary and/or an Affiliate by an individual in the capacity of an employee, partner, manager or a consultant.
“Unit” shall have the meaning assigned thereto in the Operating Agreement. Units available for issuance under the Plan shall be in the form of Incentive Units or Series C Common Units.
“Unit Appreciation Right” shall mean a right granted pursuant to Article II of the Plan to receive a payment of Series C Common Units based on the increase in the value of the number of Series C Common Units specified in the Award Agreement. Notwithstanding any provision of an Award Agreement to the contrary, Unit Appreciation Rights may, in the Company’s sole discretion, be settled in cash in lieu of the issuance of Series C Common Units.
“Unvested” means the portion of an Award which has not become Vested in accordance with the terms of the Plan or a Participant’s Award Agreement.
“Valuation Date” means the last day of each calendar year and such other dates, if any, as may be established from time to time by the Board.
“Vest,” “Vesting,” “Vested” means the lapse, in accordance with the terms of the Plan or a Participant’s Award Agreement of the Forfeiture restrictions applicable to all or a portion of an Award.
“Vesting Start Date” means the “Grant Date” (as defined in an Award Agreement) unless such other date is specifically designated as the Vesting Start Date under the terms of an Award Agreement.
4
2017 Longeveron LLC Incentive Plan
1.3 Administration
The Plan shall be administered by the Board of Managers or a designee thereof (hereinafter collectively the “Board”). Subject to the terms of the Plan and without limiting the Board’s authority, the Board shall, among other things, determine eligibility for participation in the Plan, grant or issue Awards under the Plan, establish the terms and conditions of any such Award (including, without limitation, the form of the Award and the number and/or type of Units underlying the Award), the ownership rights in the Company represented by the Incentive Units and/or Common Units covered by the Award, and the Forfeiture provisions and other conditions applicable to each Award), approve the form of, adjust, modify or amend any Award Agreement as necessary, construe the Plan and any Award Agreement issued under the Plan, or, subject to the provisions of the Plan, accelerate at any time the Vesting of any Award. To the extent the Board has delegated any administrative authority hereunder, such delegation of authority shall be and remain revocable by the Board.
The Board shall have full authority and discretion to decide all matters relating to the administration and interpretation of the Plan and any Award Agreement, including but not limited to the resolution of any conflict or ambiguity contained in the terms of the Plan, which determinations shall be final, conclusive, and binding on the Company, the Participant and any and all interested parties. In the event of a conflict between the terms of the Plan and an Award Agreement, the Plan shall govern except to the extent that the Plan gives the Board the express authority to vary the terms of the Plan by means of an Award Agreement, in which case, the Award Agreement shall govern with respect to such terms. In the event of a conflict between the Operating Agreement and the Plan and/or the Award Agreement, the Board shall have full authority and discretion to resolve the conflict, which determination shall be final, conclusive, and binding on the Company, the Participant and any and all interested parties.
1.4 Types of Awards Under the Plan
Awards under the Plan may be in the form of Options, Incentive Units, Common Units, Restricted Units or Unit Appreciation Rights. The maximum number of (i) Incentive Units available for grant or issuance pursuant to Awards under the Plan, (ii) Series C Common Units available for grant or issuance pursuant to Options under the Plan, and (iii) Series C Common Units available for grant or issuance pursuant to Awards (other than Options) under the Plan, shall, in the aggregate, not exceed 200,000. Incentive Units issued from time to time, if any, will be issued for no consideration or de minimis consideration as such interests are intended to constitute “profits interests” within the meaning of Revenue Procedure 93-27 and 2001-43. Incentive Units or Common Units issued or reserved for issuance under an Award that is Forfeited, cancelled, expires or terminate for any reason shall again become available for issuance under the Plan.
The Company may require holders of Common Units and Incentive Units to transfer such Units to one or more entities organized for the purpose of holding such Units (each, an “Employee Vehicle”) in exchange for interests in such Employee Vehicle, and the Company may issue Common Units and Incentive Units directly to an Employee Vehicle in respect of individuals who perform Services. Interest in the Employee Vehicle will generally entitle each holder of such interests to the distributions and allocations that correspond to the distributions and allocations of the Common Units and Incentive Units that are held by the Employee Vehicle and that were issued to or in respect of the holder of such interest in the Employee Vehicle.
5
2017 Longeveron LLC Incentive Plan
1.5 Dilution
The issuance of Incentive Units and/or Common Units (including those issued under an Award) under the Plan shall cause the Membership Interests (and, where appropriate, a proportionate amount of the Capital Account) of the Company’s pre-existing Members to decrease as provided under the Operating Agreement. The Forfeiture or cancellation of Incentive Units and/or Common Units (including those issued under an Award) under the Plan shall cause the Membership Interests (and, where appropriate, a proportionate amount of the Capital Account) of the Company’s Members to increase as provided under the Operating Agreement.
1.6 Eligibility and Participation
Employees, partners, managers, independent contractors, and consultants of, or to, the Company, a Company Subsidiary and/or an Affiliate who are determined by the Board to be responsible for the continued growth, development and future financial success of the Company and/or its subsidiary entities shall be eligible to participate in the Plan.
Article II – Unit Awards
2.1 Award of Incentive Units
The Board may, in its discretion, from time to time, grant or issue Incentive Units, Common Units, Restricted Units or Unit Appreciation Rights to persons eligible to participate in the Plan. All such Awards shall be subject to the provisions of this Plan and the Award Agreement pursuant to which such Awards are granted or issued, and to the provisions of the Operating Agreement.
2.2 Award Agreement
Each Award of Incentive Units, Common Units, Restricted Units or Unit Appreciation Rights shall be evidenced by an Award Agreement. The Award Agreement shall specify, among other things, the purchase price, if any, of the Units acquired thereunder, the terms and conditions of the Award, the number and type of Units issued or to be issued thereunder, the Vesting and Forfeiture provisions applicable thereto, and such other provisions applicable thereto; provided, however, that the rights of a Participant as a Member shall only arise as provided in Section 6.4 hereof.
2.3 Termination of Service
Unless otherwise determined by the Board or provided in an Award Agreement, any Incentive Units, Common Units, Restricted Units or Unit Appreciation Rights which have not Vested in accordance with the terms of the applicable Award Agreement shall be Forfeited by a Participant if the Participant’s Service terminates for any reason, including but not limited to death, Disability, voluntary termination or involuntary termination with or without Cause.
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2.5 Fundamental Transaction
Notwithstanding any provision of this Plan or Award Agreement to the contrary, upon the occurrence of a Sale Transaction, Change in Form, IPO, or in connection with the death, Disability or termination of the Participant’s Service, the Board may, in its sole discretion, accelerate the Vesting of all or a portion of any outstanding Award. Any such action taken by the Board pursuant to the authority granted under this Section is not required to be uniform among all Participants and may apply to such Participants, or classes or categories of Participants as the Board, in its sole discretion, deems appropriate. To the extent that the Board exercises its authority granted under this Section to accelerate the Vesting of an Award, the risk of Forfeiture applicable to the affected Award shall immediately lapse and such Award shall become fully Vested.
Article III – Option Awards
3.1 Award of Options
The Board may, in its discretion, from time to time, make an Award of Options to persons eligible to participate in the Plan. All such Options shall be subject to the provisions of this Plan and the Option Award Agreement pursuant to which such Options are granted, and to the provisions of the Operating Agreement. Each Option and all rights and obligations thereunder shall expire on such date as the Board may determine, but not later than ten (10) years from the date such Option is awarded, and shall be subject to earlier termination as provided elsewhere in the Plan and the applicable Option Award Agreement.
3.2 Option Award Agreement
Each Award of an Option shall be evidenced by an Option Award Agreement. The Option Award Agreement shall specify, among other things, the terms and conditions of the Award and the exercise of such Option, the exercise price of the Option, the number of Units to which the Option relates, the Vesting and Forfeiture provisions applicable thereto, and such other provisions applicable to such Option; provided, however, that the rights of a Participant as a Member shall only arise as provided in Section 6.4 hereof.
3.3 Option Exercise Price
The exercise price of each Option shall be determined by the Board and shall not be less than the Fair Market Value of a Unit at the date of grant. Unless otherwise provided in the Option Award Agreement or as otherwise determined by the Board, the exercise price of an Option shall be paid in full in cash at the time of exercise.
3.4 Exercise of Options
Options shall be exercisable in accordance with the provisions of the Participant’s Option Award Agreement. Each Option shall, by its terms, be exercisable during the Participant’s lifetime only by the Participant or by the Participant’s guardian or legal representative. Notwithstanding, in the event of a Participant’s death, such Participant’s Options may be exercised (to the extent exercisable under the Option Award Agreement) by the Participant’s personal representative or persons entitled thereto under the Participant’s will or the laws of descent and distribution.
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2017 Longeveron LLC Incentive Plan
3.5 Termination of Service
Unless otherwise provided in an Option Award Agreement, any portion of an Option which has not Vested in accordance with the terms of the applicable Option Award Agreement shall be Forfeited by a Participant if the Participant’s Service is terminated for any reason, including but not limited to death, Disability, voluntary termination or involuntary termination with or without Cause. Unless otherwise provided in the Participant’s Option Award Agreement, in the event a Participant’s Service is terminated for Cause, the Participant’s interest in the unexercised portion of an outstanding Option shall be immediately Forfeited regardless of whether such Option has otherwise Vested in accordance with the provisions of the applicable Option Award Agreement.
3.6 Fundamental Transaction
Notwithstanding any provision of this Plan or an Option Award Agreement to the contrary, upon the occurrence of a Sale Transaction, Change in Form, IPO, or in connection with the death, Disability or termination of the Participant’s Service, the Board may, in its sole discretion, accelerate the Vesting of all or portion of the Options awarded under an Option Award Agreement. Any such action taken by the Board pursuant to the authority granted under this Section is not required to be uniform among all Participants and may apply to such Participants, or classes or categories of Participants as the Board, in its sole discretion, deems appropriate. To the extent that the Board exercises its authority granted under this Section to accelerate the Vesting of Options, the risk of Forfeiture applicable to the affected Options shall immediately lapse and such Units shall become fully Vested.
Article IV – Right of First Refusal/Right to Repurchase
4.1 Transfer Restrictions/Right of First Refusal
The right to sell, transfer, assign, pledge, hypothecate, gift or otherwise dispose of any Incentive Units acquired under an Award Agreement shall be determined by and be subject to the terms of the Plan and the Operating Agreement. To the extent that the transfer of any Units acquired under an Award Agreement is otherwise permitted, such transfer shall be subject to the transfer restrictions contained in the Operating Agreement, including, without limitation, the rights of first refusal and transfer restrictions set forth in Article XI thereof.
4.2 Company’s Right to Purchase Incentive Units From the Participant
If a Participant’s Service is terminated for any reason, the Company shall have the right for a period of twelve (12) months, or such shorter period as is required by applicable law, beginning as of the date of the Participant’s termination of Service, to purchase from the Participant (or any transferee of a Participant) any and all, or any portion thereof, of the Units issued to the Participant under this Plan, to the extent vested (regardless of who then owns the Units) at a price equal to the Fair Market Value of such Units.
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The Fair Market Value of the Units to be purchased pursuant to this Article III shall be fixed as of the date the Participant (or any transferee of a Participant) is notified by the Company of its intent to purchase the Units and shall not increase or decrease thereafter. The closing for the purchase of a Participant’s Units shall occur within one hundred twenty (120) days of the date the Participant (or any transferee of a Participant) is notified by the Company of its intent to purchase the Participant’s Units. Up to one hundred percent (100%) of the aggregate purchase price for the Units to be repurchased pursuant to this Article III may, at the discretion of the Company, be paid by deferred payment. Any such deferred payment to be made pursuant to this Article III shall be evidenced by a promissory note executed, dated and delivered as of the date of closing. Such note shall be due and payable in four (4) equal annual installments of principal, together with accrued interest, beginning on the first anniversary of the closing date, and continuing on each succeeding anniversary until fully paid. Any promissory note delivered under this Article III shall bear interest accruing from the date of the closing at the lowest rate permitted to be charged for indebtedness of this nature under Section 483 and Section 1274 of the Internal Revenue Code (whichever Section shall be applicable) and as announced from time to time by the Internal Revenue Service so as to avoid an “imputation” of interest (as that term is used in Section 483 of the Internal Revenue Code) and the presence of “original issue discount” (as that term is used in Section 1274 and the related provisions of the Internal Revenue Code). Such note shall provide that the obligor shall have the right, at any time and from time to time, to make prepayments of the principal thereon either in whole, or in part, together with all interest accrued to the date of each prepayment, without prepayment penalty or premium of any kind.
Article V – Tax Matters/Section 409A
5.1 Withholding
The Company shall have the right to require the Participant to remit to the Company, or withhold from any wages payable to a Participant, an amount sufficient to satisfy federal, state and local tax withholding requirements, if any, arising from or in connection with the Participant’s receipt and/or ownership of Units Unit Appreciation Rights or Restricted Units granted or acquired under the Plan. The Company shall have a right to withhold from any payment of Units and/or cash payment to a Participant or other person under the Plan an amount sufficient to cover any required tax withholding requirements, including the Participant’s social security and Medicare taxes and federal, state, local income tax or such other applicable taxes (“Taxes”) with respect to an Award. The Company shall have the right to require the payment of any Taxes before issuing any Units pursuant to the Award. The Board may, if it deems appropriate in the case of a Participant, withhold such Taxes through a reduction of the number or percentage of Units delivered to such individual, or allow the Participant to elect to cover all or any part of the required withholdings through a reduction of the number or percentage of Units delivered to such individual or a subsequent return to the Company of Units held by the Participant. To the extent appropriate, any such Taxes may be withheld by, or remitted to, a Company Subsidiary or an Affiliate.
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2017 Longeveron LLC Incentive Plan
5.2 Section 409A
Notwithstanding any provision of the Plan or an Award Agreement to the contrary, if any Award or benefit provided under this Plan is subject to the provisions of Section 409A of the Code, the provisions of the Plan and any applicable Award Agreement shall be administered, interpreted and construed in a manner necessary in order to comply with Section 409A or an exception thereto (or disregarded to the extent such provision cannot be so administered, interpreted or construed), and the following provisions shall apply, as applicable:
(a) The grant of Options or Unit Appreciation Rights shall be granted under terms and conditions consistent with Treas. Reg. § 1.409A-1(b)(5) such that any such Award does not constitute a deferral of compensation under Section 409A. Accordingly, any such Award may be granted to eligible employees, partners, managers and consultants of the Company, a Company Subsidiary and/or an Affiliate in which the Company has a controlling interest. In determining whether the Company has a controlling interest, the rules of Treas. Reg. § 1.414(c)-2(b)(2)(i) shall apply; provided that the language “at least 50 percent” shall be used instead of “at least 80 percent” in each place it appears; provided, further, where legitimate business reasons exist (within the meaning of Treas. Reg. § 1.409A-1(b)(5)(iii)(E)(1)), the language “at least 20 percent” shall be used instead of “at least 80 percent” in each place it appears. The rules of Treas. Reg. §§ 1.414(c)-3 and 1.414(c)-4 shall apply for purposes of determining ownership interests in an organization.
(b) For purposes of Section 409A, and to the extent applicable to any Award or benefit under the Plan, it is intended that distribution events qualify as permissible distribution events for purposes of Section 409A and shall be interpreted and construed accordingly. Whether a Participant has separated from service or employment will be determined by the Board based on all of the facts and circumstances and, to the extent applicable to any Award or benefit, in accordance with the guidance issued under Section 409A. For this purpose, separation from service shall mean the Participant’s death, retirement or other termination of service with the Company and all of its controlled group members within the meaning of Section 409A of the Code; provided, that, a Participant will be presumed to have experienced a separation from service when the level of bona fide services performed permanently decreases to a level less than twenty percent (20%) of the average level of bona fide services performed during the immediately preceding thirty-six (36) month period or such other applicable period as provided by Section 409A.
(c) If a Participant is a “specified employee” for purposes of Section 409A and a payment subject to Section 409A (and not excepted therefrom) to the Participant is due upon separation from service, such payment shall be delayed for a period of six (6) months after the date the Participant separates from service (or, if earlier, the death of the Participant). Any payment that would otherwise have been due or owing during such six-month period will be paid immediately following the end of the six-month period unless another compliant date is specified in the applicable agreement. The provisions of this Section 4.2(c) shall apply at such time as the Company’s Units (or other applicable securities) are publicly traded on an established securities market or otherwise, consistent with the elections and provisions authorized and/or established under Section 409A.
(d) In no event shall the Company (or its employees, partners, officers, or directors or Affiliates) or any member of the Board have any liability to any Participant (or any other Person) due to the failure of an Award to satisfy the requirements of Section 409A.
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Article VI – Other Provisions
6.1 Adjustment in Interests/Successor
In the event that the Board shall determine that any dividend or other distribution, recapitalization, Unit split, reverse Unit split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Units or other securities of the Company, or other similar corporate transaction or event, including any transaction(s) in connection with a Change in Form, affects the Awards such that an adjustment is determined by the Board to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, then the Board shall, in such manner as it may deem equitable, adjust any or all of: (i) the number and type of Units (or other securities or property) which thereafter may be made the subject of Awards, (ii) the number and type of Units (or other securities or property) subject to outstanding Awards, and (iii) the grant, purchase, or exercise price with respect to any Award or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award. Adjustments under this Section shall be made by the Board, whose determination as to what adjustments shall be made, and the extent thereof, shall be final and conclusive. Fractional interests may, at the discretion of the Board, be issued under the Plan on account of any such adjustment. Upon any such adjustment, the rights and obligations under the Plan and any applicable Award Agreement, including but not limited to Vesting and Forfeiture provisions, shall continue with respect to such interests or securities in the same manner as applied to the original interests of the Company issued under the Plan.
The Company shall use commercially reasonable efforts to require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to expressly assume and agree to perform the obligations of this Plan in the same manner and to the same extent the Company would be required to perform if no such succession had taken place.
6.2 No Employment or Service Rights
Nothing contained in the Plan or an Award Agreement shall confer upon any Participant any right with respect to continued Service nor shall the Plan interfere in any way with the right of the Company, a Company Subsidiary and/or Affiliate to at any time reassign the Participant to a different job, change the compensation of the Participant or terminate the Participant’s Service for any reason.
6.3 Nontransferability
Notwithstanding any other provision of this Plan or an Award Agreement to the contrary, the Awards issued under the Plan and the Participant’s rights and obligations arising therefrom may not be assigned, pledged or otherwise transferred (hereinafter collectively “Transfer”) without the written consent of the Company and then only in accordance with the terms of the Operating Agreement. In the event the Company consents to any such Transfer of Units, no such Transfer shall be deemed effective until the transferee delivers to the Company a signed joinder agreement(s) (in the form prescribed by the Company) agreeing to be bound by the provisions of the Plan, the applicable Award Agreement, and the Operating Agreement and otherwise complies with the terms of the Operating Agreement.
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6.4 Member
A Participant shall obtain the rights and obligations as a Member with respect to the Units acquired under an Award Agreement and the Plan only upon satisfaction of all the following: (i) the execution by the Company and the Participant of the applicable Award Agreement and the Participant’s satisfaction of the terms of the Award Agreement; (ii) the satisfaction of any tax withholding obligation as described in Article IV of the Plan; and (iii) the delivery by the Participant to the Company of a signed joinder agreement (in the form prescribed by the Company) agreeing to be bound by the provisions of the Operating Agreement. Upon satisfying the foregoing conditions, the Participant shall have the rights and obligations of a Member with respect to such Units, subject to the terms of the Plan, the applicable Award Agreement and the Operating Agreement.
6.5 Foreign Jurisdictions
Subject to the provisions of this Article VI, the Board shall have the authority to adopt or amend the provisions of the Plan or an Award Agreement with foreign nationals or United States citizens employed abroad, as it may deem necessary or desirable to comply with the tax or other laws of foreign countries in order to promote achievement of the purposes of the Plan.
6.6 Other Compensation Plan
Nothing contained in this Plan shall prevent the Company, a Company Subsidiary and/or Affiliate from adopting other or additional compensation arrangements for employees, consultants, independent contractors or other persons of the Company, a Company Subsidiary and/or Affiliate.
6.7 Compliance With Governmental Regulations
It is intended that Units issued under the Plan shall be exempt from the registration requirements of federal and state securities laws. The Company shall use commercially reasonable efforts to affect any registrations or exemption filings and to comply with such laws, regulations and rulings forthwith upon advice by its counsel that any such registration, filing or compliance is necessary.
6.8 Exculpation and Indemnification
The Company shall indemnify and hold harmless the members of the Board and any Person or member of any committee to which the Board has delegated any administrative authority under the Plan from and against any and all liabilities, costs and expenses incurred by such persons as a result of any act, or omission to act, in connection with the performance of such person’s duties, responsibilities and obligations under the Plan, other than such liabilities, costs and expenses as may result from the gross negligence, willful misconduct, and/or criminal acts of such persons.
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6.9 Change in Form
In preparation for the Company engaging in a transaction or series of transactions in which the Company contemplates a Change in Form and/or an IPO, notwithstanding any other provisions to the contrary herein and without the consent of any Participant, the Board, in its sole discretion, shall have the authority to take any and all action the Board considers or deems necessary or appropriate to modify or amend the Plan and any Award and/or Award Agreement in connection with such Change in Form and/or IPO regardless of whether such modification or amendment of the Plan and/or Award Agreement shall adversely affect the rights of a Participant under the Plan and/or Award Agreement or otherwise.
6.9 Voting Agreement; Proxy
By participating in the Plan, a Participant agrees to vote Units issued pursuant to the Plan, with respect to any matter in which the Participant shall have the right to vote, in accordance with the recommendation of the Board. Without in any way limiting the generality of the foregoing voting agreement, in the event of an Approved Sale (as defined below), each Participant agrees (i) to vote all Units then owned by the Participant at any regular or special meeting of members (or consent pursuant to a written consent in lieu of such meeting) in favor of such Approved Sale, and to raise no objections against the Approved Sale or the process pursuant to which the Approved Sale was arranged, (ii) to waive any and all dissenters’, appraisal or similar rights with respect to such Approved Sale, and (iii) if the Approved Sale is structured as a sale of equity securities by the members of the Company, to sell the Units then owned by the Participant on the terms and conditions of such Approved Sale. “Approved Sale” means a Change of Control, Sale Transaction or Change in Form which has been approved by the Board and the holders of a majority of the Company’s outstanding Voting Units (as defined in the Operating Agreement). The Participant will take all actions requested by the Company in connection with the consummation of an Approved Sale, including, without limitation, entering into an agreement reflecting the terms of the Approved Sale, surrendering certificates, giving customary and reasonable representations and warranties, and executing and delivering customary certificates or other documents.
As security for the Participant’s obligations hereunder this Section, each Participant grants to the Chairman of the Board, with full power of substitution and resubstitution, an irrevocable proxy to vote all Units owned or hereafter acquired by the Participant, at all meetings of the members of the Company held or taken after the date of this Agreement, or to execute any written consent in lieu thereof. This proxy shall be deemed to be coupled with an interest, shall be irrevocable, and shall remain valid and continue in effect until terminated by the Company. Each Participant hereby irrevocably appoints the Chairman of the Board as the Participant’s attorney-in-fact with authority to sign any documents with respect to any such vote or any actions by written consent of the members taken after the date of this Agreement.
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Article VII – Amendment and Termination
The Board may modify, amend or terminate the Plan at any time; provided, however, that no modification, amendment or termination of this Plan shall materially adversely affect the Vested rights of a Participant under an Award previously made to such Participant without the consent of such Participant.
Notwithstanding the foregoing or any provision of the Plan or an Award Agreement to the contrary, the Board may at any time (without the consent of the Participant) modify, amend or terminate any or all of the provisions of this Plan or an Award Agreement to the extent necessary to conform the provisions of the Plan with Section 409A of the Code regardless of whether such modification, amendment, or termination of the Plan or an Award Agreement shall adversely affect the rights of a Participant under the Plan.
Article VIII – Governing Law
This Plan shall be construed in accordance with and governed exclusively by the laws of the State of Delaware, without giving effect to any conflicts or choice of law provisions that would cause the application of the domestic substantive laws of any other jurisdiction.
Article IX – Venue
Jurisdiction and venue in any proceeding relating to the Plan or any Award granted or issued hereunder is specifically limited to any court geographically located in Miami, FL.
Article X – Effective Date
IN WITNESS WHEREOF, the undersigned has caused this Plan to be duly adopted, executed and effective as of this 18th day of July, 2017 (the “Effective Date”).
LONGEVERON LLC | ||
By: | /s/ Joshua M. Hare | |
Joshua M. Hare, M.D., | ||
Chairman of the Board |
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2017 Longeveron LLC Incentive Plan
Exhibit 21.1
Longeveron LLC
List of Subsidiaries
(as of January 19, 2021)
None.
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Registration Statement on Form S-1 of our report dated September 16, 2020 relating to the financial statements of Longeveron LLC appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading “Experts” in such Prospectus.
/s/ MSL, P.A
Ft. Lauderdale, Florida
January 16, 2021
Exhibit 99.1
Consent of Person Named as About to Become Director
January 16 2021
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as amended, I hereby consent to my being named in the Registration Statement on Form S-1 of Longeveron LLC, and all amendments thereto (the “Registration Statement”) and any related prospectus filed pursuant to Rule 424 promulgated under the Securities Act of 1933, as a person anticipated to become a director of Longeveron Inc. upon the incorporation of Longeveron Inc. and to the filing of this consent as an exhibit to the Registration Statement.
Sincerely,
/s/ Douglas Losordo, M.D. | |
Name: Douglas Losordo, M.D. |
Exhibit 99.2
Consent of Person Named as About to Become Director
January 16 2021
Pursuant to Rule 438 promulgated under the Securities Act of 1933, as amended, I hereby consent to my being named in the Registration Statement on Form S-1 of Longeveron LLC, and all amendments thereto (the “Registration Statement”) and any related prospectus filed pursuant to Rule 424 promulgated under the Securities Act of 1933, as a person anticipated to become a director of Longeveron Inc. upon the incorporation of Longeveron Inc. and to the filing of this consent as an exhibit to the Registration Statement.
Sincerely,
/s/ Erin Borger | |
Name: Erin Borger |