TECX 8-K
Tectonic Therapeutic, Inc. (TECX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Explanatory Note
On June 20, 2024, the Delaware corporation formerly known as “AVROBIO, Inc.” completed its previously announced merger transaction in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of January 30, 2024 (the “Merger Agreement”) by and among AVROBIO, Inc. (“AVROBIO”), Tectonic Therapeutic, Inc. (“Tectonic”), and Alpine Merger Subsidiary, Inc., a direct wholly owned subsidiary of AVROBIO (“Merger Sub”), pursuant to which Merger Sub merged with and into Tectonic, with Tectonic surviving as a direct wholly owned subsidiary of AVROBIO and the surviving corporation of the merger (the “Merger”). Additionally, as a result of the Merger, (i) Tectonic changed its name from “Tectonic Therapeutic, Inc.” to “Tectonic Operating Company, Inc.”, and (ii) AVROBIO changed its name from “AVROBIO, Inc.” to “Tectonic Therapeutic, Inc.” (the “Company”). See Item 2.01 for additional information regarding completion of the Merger.
| Item 1.01. | Entry into a Material Definitive Agreement. |
Contingent Value Rights Agreement
In connection with the Merger, AVROBIO entered into a Contingent Value Rights Agreement (the “CVR Agreement”) with Computershare Inc. and its affiliate, Computershare Trust Company N.A. (collectively, the “Rights Agent”), pursuant to which the AVROBIO common stockholders of record as of immediately prior to the consummation of the Merger received one contingent value right (each, a “CVR”) for each outstanding share of AVROBIO’s common stock held by such stockholder on such date.
Each CVR represents the contractual right to receive payments from the Company upon the actual receipt by the Company or its subsidiaries of certain contingent proceeds derived from any marketable consideration that is paid to the Company as a result of the direct or indirect sale, license, assignment, transfer, conveyance, grant of any option or other disposition of certain of AVROBIO’s assets, rights and interests to the extent existing prior to the closing of the Merger relating to (a) AVROBIO’s plato® manufacturing platform, (b) AVR-RD-01 (Fabry disease), AVR-RD-02 (Gaucher disease), and/or AVR-RD-03 (Pompe disease) research and development programs of AVROBIO (none of which are currently active), and (c) certain intellectual property of AVROBIO, net of certain tax, transaction costs and certain other expenses or liabilities.
The contingent payments under the CVR Agreement, if they become payable, will become payable to the Rights Agent for subsequent distribution to the holders of the CVRs. There can be no assurance that holders of CVRs will receive any payments with respect thereto.
The right to the contingent payments contemplated by the CVR Agreement is a contractual right only and are not transferable, except in the limited circumstances specified in the CVR Agreement. The CVRs are not evidenced by a certificate or any other instrument and will not be registered with the Securities and Exchange Commission (the “SEC”). The CVRs do not have any voting or dividend rights and do not represent any equity or ownership interest in the Company or any of its affiliates. No interest will accrue on any amounts payable in respect of the CVRs.
The foregoing description of the CVR Agreement contained herein does not purport to be complete and is qualified in its entirety by reference to the full text of the CVR Agreement, which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
Indemnification Agreements
In connection with the Merger, the Company entered into indemnification agreements with each of its new directors and executive officers. Each indemnification agreement provides for indemnification and advancements by the Company of certain expenses and costs relating to claims, suits or proceedings arising from each individual’s service to the Company as an officer or director, as applicable, to the maximum extent permitted by applicable law.
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The foregoing description of the indemnification agreements is qualified in its entirety by the full text of the form of indemnification agreement, which is attached hereto as Exhibit 10.2 and incorporated herein by reference.
| Item 2.01. | Completion of Acquisition or Disposition of Assets. |
As previously disclosed, on January 30, 2024, AVROBIO, Merger Sub and Tectonic entered into the Merger Agreement, pursuant to which Merger Sub merged with and into Tectonic, with Tectonic surviving as a direct wholly owned subsidiary of AVROBIO and the surviving corporation of the Merger. On June 20, 2024, AVROBIO, Merger Sub and Tectonic consummated the transactions contemplated by the Merger Agreement. Effective at 4:00 p.m. Eastern Time on June 20, 2024, AVROBIO effected a 1-for-12 reverse stock split of its common stock (the “Reverse Stock Split”). Effective at 4:02 p.m. Eastern Time on June 20, 2024, the Company completed the Merger, and effective at 4:03 p.m. Eastern Time on June 20, 2024, the Company changed its name to “Tectonic Therapeutic, Inc.” (the “Name Change”). Following the completion of the Merger, the business conducted by the Company became primarily the business conducted by Tectonic, which is a biotechnology company focused on the discovery and development of therapeutic proteins and antibodies that modulate the activity of G-protein coupled receptors. Unless noted otherwise, all references to share and per share amounts in this Current Report on Form 8-K reflect the Reverse Stock Split.
Under the terms of the Merger, immediately prior to the effective time of the Merger, each share of Tectonic’s preferred stock was converted into one share of Tectonic’s common stock. At the effective time of the Merger, the Company issued an aggregate of approximately 5,322,169 shares of its common stock to Tectonic stockholders, based on an exchange ratio of 0.53441999 (after giving effect to the Reverse Stock Split) shares of the Company’s common stock for each share of Tectonic common stock outstanding immediately prior to the Merger, including those shares of common stock issued upon conversion of the Tectonic preferred stock and simple agreements for future equity and those shares of Tectonic common stock issued in the Tectonic pre-closing financing transaction which closed on June 20, 2024, immediately prior to the closing of the Merger (the “Tectonic pre-closing financing”), but excluding shares to be canceled pursuant to the Merger Agreement and excluding any dissenting shares, resulting in approximately 14,734,323 shares of the Company’s common stock being issued and outstanding and approximately 15,371,780 shares of the Company’s common stock outstanding on a diluted basis immediately following the effective time of the Merger. Immediately following the Merger, AVROBIO securityholders as of immediately prior to the Merger owned approximately 24.8% of the outstanding shares of the Company on a diluted basis and Tectonic securityholders, including those who purchased shares in the Tectonic pre-closing financing, owned approximately 75.2% of the outstanding shares of the Company on a diluted basis.
The issuance of the shares of AVROBIO’s common stock issued to the former stockholders of Tectonic, other than the shares issued in the Tectonic pre-closing financing, was registered with the SEC on the Company’s Registration Statement on Form S-4 (File No. 333-277048), as amended.
The shares of AVROBIO’s common stock listed on the Nasdaq Global Select Market, previously trading through the close of business on Thursday, June 20, 2024 under the ticker symbol “AVRO,” are expected to commence trading on the Nasdaq Global Market on a post-Reverse Stock Split adjusted basis under the ticker symbol “TECX” on Friday, June 21, 2024. The Company’s common stock is represented by a new CUSIP number, 878972 108.
The foregoing description of the Merger and the Merger Agreement contained herein does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and incorporated herein by reference.
FORM 10 INFORMATION
Cautionary Note Regarding Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and 21E of the Exchange Act of 1934, as amended (the “Exchange Act”), including statements regarding the anticipated benefits of the Merger and the financial condition, results of operations, and prospects of the Company. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current expectations and beliefs of the management of the Company, as
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well as assumptions made by, and information currently available to, the management of the Company. Forward-looking statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions, and include words such as “may,” “will,” “should,” “would,” “expect,” “anticipate,” “plan,” “likely,” “believe,” “estimate,” “project,” “intend,” and other similar expressions or the negative or plural of these words, or other similar expressions that are predictions or indicate future events or prospects, although not all forward-looking statements contain these words. Statements that are not historical facts are forward-looking statements. Forward-looking statements in this communication include, but are not limited to, the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Current Report on Form 8-K. Forward-looking statements are based on current beliefs and assumptions that are subject to risks and uncertainties and are not guarantees of future performance. Forward-looking statements include, but are not limited to, any statements regarding the strategies, prospects, plans, expectations or objectives of management the Company for future operations, the progress, scope or timing of the development of the Company’s product candidates, the expectations surrounding the potential safety, efficacy, and regulatory and clinical progress of the Company’s product candidates, including GPCR targeted biologics and TX45, and anticipated milestones and timing therefor, the benefits that may be derived from any future products or the commercial or market opportunity with respect to any future products of the Company, the ability of the Company to protect its intellectual property rights, the anticipated operations, financial position, ability to raise capital to fund operations, revenues, costs or expenses of the Company, statements regarding future economic conditions or performance, statements of belief and any statement of assumptions underlying any of the foregoing. Forward-looking statements may also include any statements regarding the Merger, including the location and management of the Company, the percentage ownership of the Company, the contingent payments contemplated by the CVRs, the Company’s expected cash and the sufficiency of the Company’s cash, cash equivalents and short-term investments to fund operations into 2026, and any statement of assumptions underlying any of the foregoing.
The foregoing review of important factors that could cause actual events to differ from expectations should not be construed as exhaustive and should be read in conjunction with statements that are included herein and elsewhere, including the risk factors included in the “Risk Factors” section of this Current Report on Form 8-K and other documents to be filed by the Company from time to time with the SEC discussions of potential risks, uncertainties, and other important factors in the Company’s subsequent filings with the SEC, and risk factors associated with companies, such as the Company, that operate in the biopharma industry. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Company’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Nothing in this communication should be regarded as a representation by any person that the forward-looking statements set forth herein will be achieved or that the contemplated results of any such forward-looking statements will be achieved. Forward-looking statements in this communication speak only as of the day they are made and are qualified in their entirety by reference to the cautionary statements herein. Except as required by applicable law, the Company undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
Business, Facilities and Legal Proceedings
The information set forth in the section of the Proxy Statement/Prospectus filed with the SEC on May 3, 2024 (the “Proxy Statement/Prospectus”) entitled “Tectonic’s Business” beginning on page 358 is incorporated herein by reference.
Risk Factors
The information set forth in the section of the Proxy Statement/Prospectus entitled “Risk Factors” beginning on page 36 is incorporated herein by reference.
Financial Information
The information set forth in Item 9.01 of this Current Report on Form 8-K concerning the financial information of Tectonic and AVROBIO is incorporated herein by reference. The unaudited pro forma condensed combined financial information of Tectonic and AVROBIO as of and for year ended December 31, 2023 and for the three months ended March 31, 2024 is set forth in Exhibit 99.4 hereto and is incorporated herein by reference.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations of AVROBIO and Tectonic, respectively, for the years ended December 31, 2023 and 2022 is set forth in the section of the Proxy Statement/Prospectus entitled “AVROBIO’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Tectonic Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on pages 397 and 410, respectively, and is incorporated herein by reference.
Management’s Discussion and Analysis of Financial Condition and Results of Operations for AVROBIO for the quarter ended March 31, 2024 is included in AVROBIO’s quarterly report on Form 10-Q for the quarter ended March 31, 2024 that was filed with the SEC on May 9, 2024, and is incorporated herein by reference.
Management’s Discussion and Analysis of Financial Condition and Results of Operations for Tectonic for the quarter ended March 31, 2024 is set forth in Exhibit 99.2 to this Current Report on Form 8-K, and is incorporated herein by reference.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial ownership of the Company’s common stock as of June 20, 2024 and reflects the 1-for-12 reverse stock split of the Company’s common stock effected June 20, 2024 (the “Reverse Stock Split”).
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Under those rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power with respect to the securities as well as any shares of common stock that the individual or entity has the right to acquire within 60 days of June 20, 2024 the exercise of stock options or other rights. These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Except as noted by footnote, and subject to community property laws where applicable, the Company believes, based on the information provided to them, that the persons and entities named in the table below have sole voting and investment power with respect to all common stock shown as beneficially owned by them.
The table lists applicable percentage ownership based on 14,734,323 shares of common stock outstanding as of June 20, 2024. The number of shares beneficially owned includes shares of common stock that each person has the right to acquire within 60 days, including upon the exercise of stock options and the vesting of restricted stock units.
These stock options and restricted stock units shall be deemed to be outstanding for the purpose of computing the percentage of outstanding shares of the Company’s common stock expected to be owned by such person but shall not be deemed to be outstanding for the purpose of computing the percentage of outstanding shares of the combined organization’s common stock expected to be owned by any other person.
| Beneficial Ownership Prior to the Merger |
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Name of Beneficial Owner |
Number | Percent | ||||||
5% or Greater Stockholders: |
||||||||
Entities affiliated with Timothy A. Springer, Ph.D.(1) |
4,243,121 | 28.80 | % | |||||
Entities affiliated with FMR LLC(2) |
1,077,538 | 7.31 | % | |||||
Polaris Partners IX, L.P.(3) |
1,073,062 | 7.28 | % | |||||
Entities affiliated with Vida Ventures(4) |
1,028,674 | 6.98 | % | |||||
Entities affiliated with EcoR1(5) |
849,143 | 5.76 | % | |||||
Directors and Named Executive Officers: |
||||||||
Timothy A. Springer, Ph.D.(1) |
4,243,121 | 28.80 | % | |||||
Terrance McGuire(6) |
1,157,976 | 7.86 | % | |||||
Stefan Vitorovic(4) |
1,028,674 | 6.98 | % | |||||
Alise Reicin, M.D.(7) |
293,520 | 1.99 | % | |||||
Christian Cortis, Ph.D.(8) |
158,704 | 1.07 | % | |||||
Marcella K. Ruddy, M.D.(9) |
60,125 | * | ||||||
Praveen Tipirneni, M.D.(10) |
15,203 | * | ||||||
Daniel Lochner |
— | — | ||||||
Phillip B. Donenberg(11) |
9,535 | * | ||||||
All executive officers and directors as a group (11 persons)(12) |
7,104,435 | 48.21 | % | |||||
| * | Represents beneficial ownership of less than 1%. |
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| (1) | Consists of (i) 3,621,161 shares of common stock held by Dr. Springer and (ii) 621,960 shares of common stock held by TAS Partners, LLC (“TAS”). Dr. Springer is the sole managing member of TAS. Dr. Springer exercises sole voting and dispositive power over the shares held by him directly and the shares held by TAS. Dr. Springer disclaims beneficial ownership of the shares held by TAS. The principal business address of each of Dr. Springer and TAS is 36 Woodman Road, Newton, MA, 02467. |
| (2) | Consists of (i) 215,508 shares of common stock held by Fidelity Select Portfolios: Biotechnology Portfolio, (ii) 72,841 shares of common stock held by Fidelity Advisor Series VII: Fidelity Advisor Biotechnology Fund, (iii) 63,553 shares of common stock held by Fidelity Mt. Vernon Street Trust: Fidelity Series Growth Company Fund, (iv) 230,656 shares of common stock held by Fidelity Mt. Vernon Street Trust: Fidelity Growth Company Fund, (v) 400,394 shares of common stock held by Fidelity Growth Company Commingled Pool, and (vi) 94,586 shares of common stock held by Fidelity Mt. Vernon Street Trust: Fidelity Growth Company K6 Fund. These funds and accounts are managed by direct or indirect subsidiaries of FMR LLC. Abigail P. Johnson is a Director, the Chairman and the Chief Executive Officer of FMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. The address of these funds and accounts is 245 Summer Street, Boston, MA 02210. |
| (3) | Consists of 1,073,062 shares of common stock held by Polaris Partners IX, L.P. (“PP IX”). Polaris Partners GP IX, L.L.C. (“PP GP IX”) is the general partner of PP IX and may be deemed to have sole voting and dispositive power with respect to the shares held by PP IX. David Barrett, Brian Chee, Amir Nashat and Amy Schulman (collectively, the “PP GP IX Managing Members”) are the managing members of PP GP IX, and Terrance McGuire, a member of the board of directors, holds an interest in PP GP IX. Each of the PP GP IX Managing Members and Terrance McGuire, in their respective capacities with respect to PP GP IX, may be deemed to have shared voting and dispositive power with respect to the shares held by PP IX. The principal business address for all entities and individuals affiliated with Polaris Partners is c/o Polaris Partners, One Marina Park Drive, 8th Floor, Boston, Massachusetts 02210. |
| (4) | Consists of (i) 1,000,900 shares of common stock held by Vida Ventures II, LLC (“Vida II Main Fund”) and (ii) 27,774 shares of common stock held by Vida Ventures II-A, LLC (“Vida II Parallel Fund,” and together with the Vida II Main Fund, “Vida II”). VV Manager II, LLC (“VV Manager II”) is the manager of Vida II. Arie Belldegrun, Fred Cohen, and Leonard Potter are the members of the management committee of VV Manager II (the “Management Committee”) and Arie Belldegrun, Fred Cohen, Stefan Vitorovic, Arjun Goyal, Helen Kim, Rajul Jain, and Joshua Kazam are the members of the investment committee of VV Manager II (the “Investment Committee”). Stefan Vitorovic serves as a director on the board of directors. Each of the Management Committee, the Investment Committee and the respective members thereof may be deemed to share voting and dispositive power over the shares held by Vida II. VV Manager II, the Management Committee, the Investment Committee and each member of each of the Management Committee and Investment Committee disclaim beneficial ownership over the securities held of record by Vida II. The address of all entities affiliated with Vida is 40 Broad Street, Suite 201, Boston, Massachusetts 02109. |
| (5) | Consists of (i) 55,535 shares of common stock held by EcoR1 Capital Fund, L.P. (“Capital Fund”), (ii) 783,214 shares of common stock held by EcoR1 Capital Fund Qualified, L.P. (“Qualified Fund”) and (iii) 10,394 shares of common stock held by EcoR1 Venture Opportunity Fund, L.P. (“Opportunity Fund”). EcoR1 Capital LLC (“EcoR1”) is the general partner of Capital Fund and Qualified Fund, and the investment advisor to Opportunity Fund. Biotech Opportunity GP, LLC is the general partner of Opportunity Fund. Oleg Nodelman is the control person of EcoR1 and Biotech Opportunity GP, LLC and may be deemed to share dispositive voting power over the shares held by Qualified Fund, Capital Fund and Opportunity Fund. Mr. Nodelman, EcoR1 and Biotech Opportunity GP, LLC each disclaim beneficial ownership of all shares except to the extent of their pecuniary interest. The address of the above person and entities is 357 Tehama Street #3, San Francisco, CA 94103. |
| (6) | Consists of (i) 20,262 shares of common stock held by Polaris Founders Capital Fund I, L.P. (“PF I”), (ii) consists of 64,652 shares of common stock held by Polaris Founders Capital Fund II, L.P. (“PF II”) and (iii) 1,073,062 shares of common stock held by PP IX. Polaris Founders Capital Management Co. I, L.L.C. (“PFC I GP”) is the general partner of PF I and may be deemed to have sole voting and dispositive power with respect to the shares held by PF I. Polaris Founders Capital Management Co. II, L.L.C. (“PFC II GP”) is the general partner of PF II and may be deemed to have sole voting and dispositive power with respect to the shares held by PFC II. Terrance McGuire, a member of the board of directors, and Jonathan Flint (together, the “PFC GP Managing Members”) are the managing members of PFC I GP and PFC II GP. Each of the PFC GP Managing Members, in their respective capacities with respect to PFC I GP and PFC II GP, may be deemed to have shared voting and dispositive power with respect to the shares held by PF I and PF II. PP GP IX is the general partner of PP IX and may be deemed to have sole voting and dispositive power with respect to the shares held by PP IX. The PP GP IX Managing Members are the managing members of PP GP IX, and Terrance McGuire, a member of the board of directors, holds an interest in PP GP IX. Each of the PP GP IX Managing Members and Terrance McGuire, in their respective capacities with respect to PP GP IX, may be deemed to have shared voting and dispositive power with respect to the shares held by PP IX. The principal business address for all entities and individuals affiliated with Polaris Partners is c/o Polaris Partners, One Marina Park Drive, 8th Floor, Boston, Massachusetts 02210. |
| (7) | Consists of (i) 166,580 shares of common stock held by Dr. Reicin, 11,372 of which are subject to repurchase as of June 20, 2024, (ii) 124,530 shares of common stock held by the 2020 Reicin-Boiarsky Family Trust (the “2020 Reicin Trust”) and (iii) 2,410 shares of common stock issuable upon exercise of options granted to Dr. Reicin that are exercisable within 60 days of June 20, 2024. Robert Boiarsky is a co-trustee of the 2020 Reicin Trust and the spouse of Dr. Reicin. Dr. Reicin may be deemed to have shared voting and dispositive power over the securities held by the 2020 Reicin Trust. |
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| (8) | Consists of (i) 126,368 shares of common stock held by Dr. Cortis and (ii) 32,336 shares of common stock issuable upon exercise of options granted to Dr. Cortis that are exercisable within 60 days of June 20, 2024. |
| (9) | Consists of (i) 32,065 shares of common stock held by Dr. Ruddy and (ii) 28,060 shares of common stock issuable upon exercise of options granted to Dr. Ruddy that are exercisable within 60 days of June 20, 2024. |
| (10) | Consists of (i) 3,037 shares of common stock held by Dr. Tipirneni and (ii) 12,166 shares of common stock issuable upon exercise of options granted to Dr. Tipirneni that are exercisable within 60 days of June 20, 2024. |
| (11) | Consists of (i) 166 shares of common stock held by Mr. Donenberg and (ii) 9,369 shares of common stock issuable upon exercise of options granted to Mr. Donenberg that are exercisable within 60 days of June 20, 2024. |
| (12) | Consists of (i) 6,893,205 shares of common stock and (ii) 211,230 shares of common stock issuable upon exercise of options that are exercisable within 60 days of June 20, 2024. |
Information about Directors and Executive Officers; Director Compensation and Director Independence; Executive Compensation
The information set forth in Item 5.02 of this Current Report on Form 8-K is incorporated herein by reference.
The information set forth in the section of the Proxy Statement/Prospectus entitled “Management Following the Merger” beginning on page 427 is incorporated herein by reference.
Certain Relationships and Related Party Transactions
The information set forth in the section of the Proxy Statement/Prospectus entitled “Certain Relationships and Related Party Transactions of the Combined Company” beginning on page 434 is incorporated herein by reference.
Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters
Shares of AVROBIO’s common stock were historically listed on the Nasdaq Global Select Market under the symbol “AVRO.” Shares of the Company’s common stock are expected to commence trading on the Nasdaq Global Market on a post-Reverse Stock Split adjusted basis on June 21, 2024 under the symbol “TECX.”
As of the closing and following the completion of the Merger and after giving effect to the Reverse Stock Split, the Company had approximately 14,734,323 shares of common stock issued and outstanding held of record by approximately 16 holders. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose shares of Company common stock are held of record by banks, brokers and other financial institutions.
The information set forth in the section of the Proxy Statement/Prospectus entitled “Market Price and Dividend Information—Dividends” on page 35 is incorporated herein by reference.
Description of Registrant’s Securities
The information set forth in the section of the Proxy Statement/Prospectus entitled “Description of AVROBIO Capital Stock” beginning on page 453 and in the section entitled “Comparison of Rights of Holders of AVROBIO Capital Stock and Tectonic Capital Stock” beginning on page 457 is incorporated herein by reference.
Indemnification of Directors and Officers
The information set forth in Item 1.01 of this Current Report on Form 8-K under the heading “Indemnification Agreements” is incorporated herein by reference.
A description of the Company’s indemnification obligations in respect of its directors and officers is included in the Proxy Statement/Prospectus in the section entitled “The Merger Agreement—Indemnification and Insurance for Directors and Officers” beginning on page 254 and is incorporated herein by reference.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
The information set forth in Item 4.01 of this Current Report on Form 8-K is incorporated herein by reference.
Financial Statements and Supplementary Data
The information set forth in Item 9.01 of this Current Report on Form 8-K is incorporated herein by reference.
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WHERE YOU CAN FIND MORE INFORMATION
The Company is subject to the informational requirements of the Exchange Act and in accordance therewith, files annual, quarterly and current reports, proxy statements and other information with the SEC electronically, and the SEC maintains a website that contains the Company’s filings as well as reports, proxy and information statements, and other information issuers file electronically with the SEC at www.sec.gov.
The Company also makes available free of charge on or through its website at www.tectonictx.com, its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after the Company electronically files such material with or otherwise furnishes it to the SEC. The website addresses for the SEC and the Company are inactive textual references and except as specifically incorporated by reference into this Current Report on Form 8-K, information on those websites is not part of this Current Report on Form 8-K.
If you would like to request documents from the Company, please send a request in writing or by telephone to the following address:
Tectonic Therapeutic, Inc.
490 Arsenal Way, Suite 210
Watertown, MA 02472
Attn: Daniel Lochner
(339) 666-3320
Email: [email protected]
| Item 2.02. | Results of Operations and Financial Condition. |
To the extent required by Item 2.02 of Form 8-K, the information incorporated in Items 2.01 and 9.01 of this Current Report on Form 8-K is incorporated by reference herein.
| Item 3.02. | Unregistered Sales of Equity Securities. |
Tectonic previously entered into a Subscription Agreement (the “Subscription Agreement”) on January 30, 2024 with certain institutional investors (the “Purchasers”). Pursuant to the Subscription Agreement, Tectonic agreed to sell and issue shares of Tectonic common stock in the Tectonic pre-closing financing, as previously disclosed in AVROBIO’s Current Report on Form 8-K filed with the SEC on January 30, 2024. The closing of the Tectonic pre-closing financing was completed on June 20, 2024. At the closing of the Tectonic pre-closing financing, Tectonic sold and issued to the Purchasers 7,790,889 shares of Tectonic common stock at a purchase price of $12.39908 per share, for an aggregate purchase price of approximately $96.6 million. In addition, in connection with the closing of the Merger, Tectonic’s outstanding Simple Agreements for Future Equity (“SAFEs”) converted into 2,752,216 shares of Tectonic common stock at a conversion price of $12.39908 per share. The aggregate purchase price between the Tectonic pre-closing financing and the SAFEs was approximately $130.7 million and the shares of Tectonic common stock issued to investors in both transactions were exchanged at the closing of the Merger at the exchange ratio for an aggregate of 5,634,445 shares of the Company’s common stock.
The preceding summary does not purport to be complete and is qualified in its entirety by reference to the Subscription Agreement for the Tectonic pre-closing financing, a copy of which is attached hereto as Exhibit 10.3, and which is incorporated herein by reference.
The Subscription Agreement has been included to provide investors and stockholders with information regarding its terms. It is not intended to provide any other factual information about Tectonic or the parties thereto. The Subscription Agreement contains representations and warranties that the parties thereto made to, and solely for the benefit of, each other. The assertions embodied in such representations and warranties are qualified by information contained in the confidential disclosure schedules that each may have delivered to the other party in connection with signing the Subscription Agreement. Accordingly, investors and stockholders should not rely on such representations and warranties as characterizations of the actual state of facts or circumstances, since they were only made as of the
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date of the Subscription Agreement and are modified in important part by the underlying disclosure schedules. Moreover, information concerning the subject matter of such representations and warranties may change after the date of the Subscription Agreement, which subsequent information may or may not be fully reflected in Tectonic’s or the Company’s public disclosures.
The securities described above have not been registered under the Securities Act, or any state securities laws. Tectonic relied on an exemption from the registration requirements of the Securities Act under Section 506 thereof. Each of the Purchasers represented that it was acquiring the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. Appropriate legends were affixed to the securities.
| Item 3.03. | Material Modification to Rights of Security Holders. |
To the extent required by Item 3.03 of Form 8-K, the information contained in Item 2.01 of this Current Report on Form 8-K is incorporated by reference herein.
As previously disclosed, at a special meeting of AVROBIO’s stockholders held on June 11, 2024 (the “Special Meeting”), AVROBIO’s stockholders approved an amendment to AVROBIO’s Fourth Amended and Restated Certification of Incorporation (the “Certificate of Incorporation”) to effect the Reverse Stock Split. On June 20, 2024, AVROBIO amended its Certificate of Incorporation to effect the Reverse Stock Split, effective as of 4:00 p.m. Eastern Time on June 20, 2024.
As a result of the Reverse Stock Split, every 12 shares of AVROBIO’s common stock held by a stockholder immediately prior to the Reverse Stock Split, were combined and reclassified into one share of AVROBIO’s common stock. No fractional shares were issued in connection with the Reverse Stock Split. Any fractional shares resulting from the Reverse Stock Split were rounded down to the nearest whole number, and each AVROBIO stockholder who would otherwise be entitled to a fraction of a share of common stock upon the Reverse Stock Split (after aggregating all fractions of a share to which such stockholder would otherwise be entitled) is entitled to receive a cash payment in lieu thereof at a price equal to the fraction to which the stockholder would otherwise be entitled multiplied by the closing price of AVROBIO’s common stock on June 20, 2024. No fractional shares of Company common stock were issuable to stockholders pursuant to the Merger, and no certificates or scrip for any such fractional shares were issued, with no cash being paid for any fractional share eliminated by such rounding.
In addition, on June 20, 2024, AVROBIO amended its Certificate of Incorporation to provide for the exculpation of officers of AVROBIO, effective as of 4:01 p.m. Eastern Time on June 20, 2024.
On June 20, 2024, AVROBIO also amended its Certificate of Incorporation to effect the Name Change, effective as of 4:03 p.m. Eastern Time on June 20, 2024.
The foregoing descriptions of the certificates of amendment to the amended and restated certificate of incorporation of AVROBIO are not complete and are subject in their entirety by reference to the certificates of amendment, copies of which are attached hereto as Exhibit 3.1, Exhibit 3.2 and Exhibit 3.3, respectively, and are incorporated herein by reference.
| Item 4.01 | Changes in Registrant’s Certifying Accountant. |
(a) Dismissal of Independent Registered Public Accounting Firm
Ernst & Young LLP (“EY”) served as AVROBIO’s independent registered public accounting firm prior to completion of the Merger. On June 20, 2024, following the completion of the Merger, EY was dismissed as the Company’s independent registered public accounting firm. The decision to dismiss EY was approved by the Company’s board of directors.
The reports of EY on AVROBIO’s consolidated financial statements for the fiscal years ended December 31, 2023 and 2022 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, or other similar opinion as defined in Item 304(a)(1)(ii) of Regulation S-K (17 CFR § 229.304(a)(1)(ii)) except for an explanatory paragraph regarding existence of substantial doubt about AVROBIO’s ability to continue as a going concern in the report for the year ended December 31, 2022.
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During AVROBIO’s two most recent fiscal years and the subsequent period from January 1, 2024 to June 20, 2024, there were (i) no disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions thereto) with EY on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of EY, would have caused it to make reference to the subject matter of the disagreement in connection with its report for such years and (ii) no reportable events (as described in Item 304(a)(1)(v) of Regulation S-K). The Company provided EY with a copy of the disclosures made in this Item 4.01 and requested EY to furnish us with a letter addressed to the SEC stating whether it agrees with the statements made by us and, if not, stating the respects in which it does not agree. A copy of EY’s letter to the SEC dated June 20, 2024 regarding these statements is filed as Exhibit 16.1 to this Current Report on Form 8-K.
(b) Appointment of New Independent Registered Public Accounting Firm
Deloitte & Touche LLP (“Deloitte”) served as the independent registered public accounting firm of Tectonic prior to the completion of the Merger. On June 20, 2024, following the completion of the Merger, the Company’s board of directors approved the appointment of Deloitte as the Company’s independent registered public accounting firm.
During Tectonic’s two most recent fiscal years and the subsequent period from January 1, 2024 to June 20, 2024, Tectonic did not consult with Deloitte regarding any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.
| Item 5.01. | Changes in Control of Registrant. |
The information set forth in Item 2.01 of this Current Report on Form 8-K regarding the Merger and the information set forth in Item 5.02 of this Current Report on Form 8-K regarding the board of directors and executive officers of the Company following the Merger are incorporated by reference into this Item 5.01.
| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
Resignation of Directors
In accordance with the Merger Agreement, immediately prior to the Merger, Gail Farfel, Ph.D., Christopher Paige, Ph.D., Philip J. Vickers, Ph.D., Ian Clark, Annalisa Jenkins, M.B.B.S., F.R.C.P. and Bruce Booth, D.Phil. resigned from the AVROBIO’s board of directors and committees of the AVROBIO board of directors on which they respectively served, which resignations were not the result of any disagreements with the Company relating to its operations, policies or practices.
Appointment of Directors
Effective upon the closing of the Merger on June 20, 2024, the size of the board of directors was fixed at six members and the board of directors of the Company was reconstituted as follows: (i) Phillip B. Donenberg (designated by AVROBIO), and (ii) Alise Reicin, M.D., Terrance McGuire, Timothy A. Springer, Ph.D., Praveen Tipirneni, M.D. and Stefan Vitorovic, M.S., M.B.A. (designated by Tectonic). The classification of the board of directors was confirmed as follows: Dr. Reicin and Dr. Tipirneni were appointed as Class I directors (terms expire at the Company’s 2025 annual meeting), Dr. Springer and Mr. Vitorovic were appointed as Class II directors (terms expire at the Company’s 2026 annual meeting), and Mr. McGuire and Mr. Donenberg were appointed as Class III directors (terms expire at the Company’s 2027 annual meeting). Under the Nasdaq Listing Rules, a majority of the members of the board of directors must qualify as “independent,” as affirmatively determined by the board of directors. Under the Nasdaq Listing Rules, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Company’s board of directors has determined that each of Phillip B. Donenberg, Terrance McGuire, Timothy A. Springer, Ph.D., Praveen Tipirneni, M.D. and Stefan Vitorovic qualify as “independent directors” as defined by the Nasdaq Listing Rules.
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Immediately after the closing of the Merger on June 20, 2024, the board of directors of the Company reconstituted its various standing committees as follows:
Audit Committee
Mr. Donenberg, Mr. McGuire and Mr. Vitorovic were appointed to the Audit Committee of the board of directors. Mr. Donenberg was appointed chair of the Audit Committee and designated as the “audit committee financial expert.”
Compensation Committee
Dr. Tipirneni and Mr. Vitorovic were appointed to the Compensation Committee of the board of directors. Dr. Tipirneni was appointed chair of the Compensation Committee.
Nominating and Corporate Governance Committee
Dr. Springer and Mr. McGuire were appointed to the Nominating and Corporate Governance Committee of the board of directors. Dr. Springer was appointed chair of the Nominating and Corporate Governance Committee.
Each of the newly appointed directors’ biographical information is set forth below.
Alise Reicin, M.D., age 63, has served as a member of the board of directors since completion of the Merger. Dr. Reicin previously served as Tectonic’s President and Chief Executive Officer since August 2020. Prior to joining Tectonic, Dr. Reicin served as President, Global Clinical Development at Celgene Corporation, public pharmaceutical company, from November 2018 to December 2019 and was a member of the Executive Committee. Prior to Celgene, she served as Head of Global Clinical Development at EMD Serono Inc., a privately held pharmaceutical company, from May 2015 to October 2018. Prior to EMD Serono, Dr. Reicin served as Vice President, Program and Pipeline Leadership, Oncology at Merck & Co., Inc., a public pharmaceutical company. Prior to Merck, she was a faculty member at Columbia Medical School and a physician and researcher at Columbia Presbyterian Hospital. While at Merck, Dr. Reicin led the team that brought Keytruda from Phase 1 through its initial approvals and over the course of her career she has played a leadership role in the development and approval of over 10 novel medicines across a broad range of therapeutic areas. Dr. Reicin serves on the board of directors of Homology Medicines, Inc., a public biopharmaceutical company and Sana Biotechnology, Inc., a public cell and gene therapy company. Dr. Reicin earned a B.A. in Biochemistry from Barnard College of Columbia University. She earned a M.D. in Medicine from Harvard University. The Company believes that Dr. Reicin is qualified to serve on its board of directors due to her clinical expertise and leadership roles in the biotechnology and biopharmaceuticals industry.
Phillip B. Donenberg, age 63, has served as a member of the board of directors since completion of the Merger. Mr. Donenberg previously served as a member of the AVROBIO board of directors since June 2018. Mr. Donenberg served as senior vice president and chief financial officer of Jaguar Gene Therapy, LLC, a privately held early-stage gene therapy company from February 2020 to March 2023. From July 2018 to November 2018, Mr. Donenberg served as the chief financial officer and senior vice president of Assertio Therapeutics, Inc., a pharmaceutical company. Previously, Mr. Donenberg served at AveXis, Inc. (now a Novartis company), a gene therapy company, as senior vice president and chief financial officer from October 2017 to June 2018 and as vice president, corporate controller from September 2016 to October 2017. He was the chief financial officer of RestorGenex Corporation from May 2014 to January 2016, when RestorGenex merged with Diffusion Pharmaceuticals LLC, a pharmaceutical company, and served as the merged company’s consultant chief financial officer until September 2016, and the chief financial officer of 7wire Ventures LLC, an early-stage healthcare venture fund, from September 2013 to May 2014. Prior to that time, Mr. Donenberg served as the chief financial officer of BioSante Pharmaceuticals, Inc. from July 1998 to June 2013, when BioSante merged with ANIP Pharmaceuticals, Inc. Mr. Donenberg currently serves on the board of directors and as audit committee chair of Taysha Gene Therapies, Inc., a gene therapy company, and also has experience serving on the boards of directors of privately held companies. Mr. Donenberg holds a B.S. in accountancy from the University of Illinois Champaign-Urbana College of Business and is a Certified Public Accountant. The Company believes that Mr. Donenberg is qualified to serve on its board of directors because of his financial expertise and his experience as an executive of companies in the life sciences industry.
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Terrance McGuire, age 68, has served as a member of the board of directors since completion of the Merger. Mr. McGuire previously served as a member of the Tectonic board of directors since Tectonic commenced operations as an independent company in February 2020. Mr. McGuire was a co-founder and is currently a general partner of Polaris Partners. He serves on the board of directors of several private companies and currently serves on the board of directors of Cyclerion Therapeutics Inc., Alector Inc., Seer Inc. and Invivyd Inc. Mr. McGuire has also served on the board of Pulmatrix Inc. Mr. McGuire is the former chairman of the National Venture Capital Association, which represents ninety percent of the venture capitalists in the U.S., chairman of the board of the Thayer School of Engineering at Dartmouth College, and a member of the boards of The David H. Koch Institute for Integrative Cancer Research at the Massachusetts Institute of Technology and The Arthur Rock Center for Entrepreneurship at Harvard Business School. Mr. McGuire earned a B.S. in physics and economics from Hobart College, an M.S. in engineering from The Thayer School at Dartmouth College, and an M.B.A. from Harvard Business School. The Company believes that Mr. McGuire is qualified to serve on its board of directors because of his extensive experiences as a venture capitalist focused on the biotechnology industry, as well as many years of experience as a director of biotechnology companies guiding them in the execution of their corporate strategy and objectives.
Timothy A. Springer, Ph.D., age 75, has served as a member of the board of directors since completion of the Merger. Dr. Springer co-founded Tectonic in June 2019 and previously served as a scientific advisor to Tectonic and as a member of the Tectonic board of directors since June 2019. Dr. Springer served as Chief Executive Officer of Tectonic from June 2019 until August 2019 and as President of Tectonic from June 2019 until August 2020. Since 1989, Dr. Springer has served as the Latham Family Professor at Harvard Medical School. He has also served as Senior Investigator in the Program in Cellular and Molecular Medicine at Boston Children’s Hospital since 2012, and as a Professor of Biological Chemistry and Molecular Pharmacology at Harvard Medical School and Professor of Medicine at Boston Children’s Hospital since 2011. He was also the founder of Morphic Technology, Inc. and has served as a scientific advisor and as a member of its board of directors since June 2015. He has also served Selecta Biosciences Inc. as a scientific advisor since December 2008 and as a member of its Board since June 2016. Dr. Springer is a member of the National Academy of Sciences and his honors include the Crafoord Prize, the American Association of Immunologists Meritorious Career Award, the Stratton Medal from the American Society of Hematology, and the Basic Research Prize from the American Heart Association, the Canada International Gairdner Award, and the Lasker Basic Medical Research Award. Dr. Springer received a B.A. in Biochemistry from the University of California, Berkeley, and a Ph.D. in Biochemistry and Molecular Biology from Harvard University. The Company believes that Dr. Springer is qualified to serve on its board of directors because of his extensive knowledge of the integrin field and his investment, business and board experience with biopharmaceutical companies.
Praveen Tipirneni, M.D., age 55, has served as a member of the board of directors since completion of the Merger. Dr. Tipirneni previously served as a member of the Tectonic board of directors since February 2020. Dr. Tipirneni currently serves as Chief Executive Officer and as a member of the board of directors of Morphic Holding, Inc., a position he has held since July 2015. Dr. Tipirneni received a B.A. in Mechanical Engineering from Massachusetts Institute of Technology, an M.D. from McGill University and an M.B.A. from the Wharton School of Business of the University of Pennsylvania. The Company believes Dr. Tipirneni is qualified to serve on its board of directors because of his experience with biotechnology companies, including working with and serving in various executive positions in life sciences companies.
Stefan Vitorovic, M.S., M.B.A., age 39, has served as a member of the board of directors since completion of the Merger. Mr. Vitorovic previously served as a member of the Tectonic board of directors since August 2021. Mr. Vitorovic is the co-founder and Managing Director of Vida Ventures, a role he has served in since January 2017. Prior to founding Vida Ventures, Mr. Vitorovic was an investment professional at Third Rock Ventures, an early-stage life sciences venture capital firm, from July 2014 to January 2017. At Third Rock, he was part of the founding team of Decibel Therapeutics, Inc. (acquired by Regeneron Pharmaceuticals, Inc.), a hearing-focused drug discovery and development platform company. Before Third Rock, he was an investor at TPG Capital from August 2012 to June 2014, where he focused on majority, control stakes in healthcare companies. Mr. Vitorovic worked on a variety of equity and debt financings, including Aptalis Pharmaceutical Technologies (now Adare Pharma Solutions) and Biomet, Inc. (now Zimmer Biomet Holdings, Inc. (NYSE: ZBH)). Prior to TPG, Mr. Vitorovic was an investment banker at Credit Suisse’s healthcare banking group from 2004 to 2008. Mr. Vitorovic currently serves on the board of
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directors of Vigil Neuroscience, Inc. (NASDAQ: VIGL), Volastra Therapeutics, Inc., and Souffle Therapeutics, Inc. He was previously a board observer of Oyster Point Pharma, Inc. (formerly NASDAQ: OYST), Dyne Therapeutics (NASDAQ: DYN) and Sutro Biopharma, Inc. (NASDAQ: STRO), and a board member of Kyverna Therapeutics, Inc. (NASDAQ: KYTX) and Praxis Precision Medicines, Inc. (NASDAQ: PRAX) from 2018 to 2022. He received a B.S. with Honors in Biological Sciences and an M.S. in Biology from Stanford University, where he conducted biomedical research in the lab of Dr. Helen Blau at Stanford Medical School. Mr. Vitorovic received his M.B.A. from Harvard Business School. The Company believes Mr. Vitorovic is qualified to serve on its board of directors because of his deep expertise in life sciences research and investing, as well as his extensive experience in new company formation and operations.
Departure of Executive Officers
Immediately prior to the Merger, Erik Ostrowski, Steven Avruch, Azadeh Golipour, Ph.D. and Essra Ridha, M.D., MRCP, FFPM resigned from all of their offices with AVROBIO and all of its subsidiaries, if applicable, including, with respect to Mr. Ostrowski, as AVROBIO’s President, Interim Chief Executive Officer and Chief Financial Officer (principal executive officer, principal financial officer and principal accounting officer).
Appointment of Executive Officers
On June 20, 2024, the Company’s board of directors appointed Alise Reicin, M.D. as the Chief Executive Officer and principal executive officer, Daniel Lochner as the Chief Financial Officer and principal financial officer and principal accounting officer, Christian Cortis, Ph.D. as the Chief Operating Officer, Peter McNamara, Ph.D. as the Chief Scientific Officer, Marcella K. Ruddy, M.D. as the Chief Medical Officer, and Marc Schwabish, Ph.D. as the Chief Business Officer.
There are no family relationships among any of the newly appointed executive officers. None of the newly appointed executive officers has a direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Each of the newly appointed executive officers’ biographical information is set forth below.
Alise Reicin, M.D. Dr. Reicin’s biographical information is disclosed in the section above under the heading “Appointment of Directors.”
Daniel Lochner, age 42, has served as the Company’s Chief Financial Officer since completion of the Merger. Mr. Lochner was previously appointed Tectonic’s Chief Financial Officer in June 2024. Prior to joining Tectonic, Mr. Lochner served as Chief Financial Officer and Chief Business Officer for the Eye Care Division of Viatris Inc., a global healthcare company, from January 2023 to April 2024. Prior to Viatris, Mr. Lochner was the Chief Financial Officer and Chief Business Officer of Oyster Point Pharma, Inc., a biotechnology company that was acquired by Viatris in January 2023, from July 2019 to January 2023 where he led a successful initial public offering, other equity and debt financings, the transition to a commercial-stage company and the acquisition to Viatris. Previously, Mr. Lochner was a Managing Director within the Investment Management Division of Goldman Sachs & Co., where he served as a lead equity portfolio manager and healthcare investor for various fund strategies. Mr. Lochner joined the Investment Management Division of Goldman Sachs & Co. in 2005 as an equity investor, a position he maintained during his tenure at the firm. Mr. Lochner received a B.A. in Economics from the University of Richmond and an Executive M.B.A. from Columbia University.
Christian Cortis, Ph.D., age 56, has served as the Company’s Chief Operating Officer since completion of the Merger. Dr. Cortis was previously appointed Tectonic’s Chief Operating Officer in August 2020, and since then, also served in the capacity of Chief Financial Officer until closing of the Merger. He was named as Tectonic’s Chief Financial Officer in March 2024. Prior to that, Dr. Cortis served as Tectonic’s Interim CEO from August 2019 to August 2020. Prior to joining Tectonic, Dr. Cortis held positions of increasing responsibility at Agenus, Inc. from 2015 to 2019, where he most recently served as the Chief Strategy Officer and Head of Finance. Dr. Cortis’ experience also includes earlier roles as Head of Business Development for Synta Pharmaceuticals, Inc., and as Principal with Advanced Technology Ventures where he oversaw and participated in investment transactions into private companies in the biotech and healthcare sector. In addition, Dr. Cortis was a member of the board of directors of OpenEye Scientific Software from November 2015 to August 2022 until its acquisition by Cadence Design Systems, Inc. in 2022. Dr. Cortis earned a B.Sc. in Mathematics and Physics from McGill University and a M.Sc. in Applied Physics from Columbia University. Dr. Cortis earned his Ph.D in Applied Mathematics and Theoretical Chemistry from Columbia University.
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Peter McNamara, Ph.D., age 53, has served as the Company’s Chief Scientific Officer since completion of the Merger. Dr. McNamara previously served as Tectonic’s Chief Scientific Officer since June 2022. Prior to that, Dr. McNamara served as Senior Vice President, Head of Research at Tectonic from June 2021 to June 2022. Prior to joining Tectonic, he held various positions at the Genomics Institute of the Novartis Research Foundation (“NIBR, San Diego”), a privately held pharmaceutical company, from 2005 to April 2021, most recently as Executive Director of Biotherapeutics and Biotechnology from June 2018 to April 2021 where he served on the executive committee and strategy council responsible for managing a portfolio of approximately 50 preclinical and early-stage clinical drug discovery programs across different modalities in a broad range of therapeutic areas. Over the course of his career, Dr. McNamara has played a critical role in the obtainment of over 10 INDs, two of which are now approved. Prior to Novartis, Dr. McNamara served as Director of Pharmacology at Phenomix Corporation, a privately-held biotechnology company. Prior to Phenomix, he was a faculty member of the Institute for Translational Medicine and Therapeutics at the University of Pennsylvania. Dr. McNamara earned both a Ph.D. and B.S. in Biochemistry from the National University of Ireland, at Galway.
Marcella K. Ruddy, M.D., age 62, has served as the Company’s Chief Medical Officer since completion of the Merger. Dr. Ruddy previously served as Tectonic’s Chief Medical Officer since July 2021. She has over 20 years of experience in drug development across all stages of clinical drug development. She currently serves as a member of the board of directors of Polarean Imaging plc and Upstream Bio, Inc. and has since August 2022 and January 2023, respectively. Prior to joining Tectonic’s team, Dr. Ruddy was the Head of Clinical Development for the Immunology/Inflammation Therapeutic Area at Regeneron Pharmaceuticals. In that role she led the clinical development of Dupixent® through over nine Phase 3 trial initiations and multiple regulatory approvals globally. Dr. Ruddy spent 10 years in early development at Merck and took many compounds from preclinical development through proof of concept in the clinic. Prior to entry into drug development, Dr. Ruddy was a member of the Pulmonary Unit at Massachusetts General Hospital/Harvard Medical School where she founded and directed the Adult Cystic Fibrosis Program. Dr. Ruddy earned an A.B. from Princeton University and a M.D. and M.S. from Washington University, St. Louis. She completed her internal medicine and pulmonary fellowship training at Harvard Medical School affiliated hospitals.
Marc Schwabish, Ph.D., age 44, has served as the Company’s Chief Operating Officer since completion of the Merger. Dr. Schwabish previously served as Tectonic’s Chief Business Officer since March 2021. Prior to joining Tectonic, Dr. Schwabish served as SVP Business Development and US Operations at Fusion Pharmaceuticals Inc. from February 2018 to December 2020 where his transactions, amongst others, included the company’s Series B financing, IPO, and an expansive partnership with AstraZeneca plc. Prior to working at Fusion Pharmaceuticals, Dr. Schwabish was Heard of U.S. Pharma Business Development at Bayer, Inc. He also held roles in Business Development and Alliance Management at Eisai Inc., Strategy Consulting at Leerink Swann and Healthcare Investment Banking at RBS. Dr. Schwabish earned a B.S. in Biological Sciences from Cornell University. He earned a Ph.D. in Biochemistry and Molecular Pharmacology from Harvard University.
Executive Employment Arrangement
Alise Reicin, M.D.
In connection with and effective as of the closing of the Merger, on June 20, 2024, the Company entered into an amended and restated executive employment agreement with Dr. Reicin. The material terms of the amendment are as follows: (i) Dr. Reicin shall remain President and Chief Executive Officer and shall continue to serve as an executive director to the board of directors of the combined company; (ii) an annual base salary of $620,000; (iii) eligibility for an annual, performance-based cash bonus with a target bonus percentage of 55% of Dr. Reicin’s base salary; (iv) issuance of an option award to purchase shares of common stock of the Company, such that when combined with Dr. Reicin’s existing holdings or rights to acquire securities in the Company, Dr. Reicin will hold and/or have the right to acquire shares representing at least 4.34% of the Company’s outstanding common stock; and (v) eligibility to participate in the Company’s executive severance plan and other employee benefit, welfare and other plans, as may be maintained by the Company from time to time.
The above description of the employment related agreement for Dr. Reicin does not purport to be complete and is subject to and qualified in its entirety by reference to the copy of the amended and restated employment agreement for Dr. Reicin included as Exhibit 10.4 to this Current Report on Form 8-K, which is incorporated herein by reference.
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2019 Equity Incentive Plan
The Company assumed, effective as of the closing of the Merger, the 2019 Equity Incentive Plan of Tectonic (the “2019 Plan”), which is filed as Exhibit 10.5 to this Current Report on Form 8-K and incorporated herein by reference, as well as the outstanding awards granted thereunder, the award agreements evidencing the grants of such awards.
2024 Equity Incentive Plan
At the Special Meeting, AVROBIO’s stockholders considered and approved the 2024 Equity Incentive Plan (the “2024 Plan”), which became effective at the closing of the Merger and following the Reverse Stock Split. As of the effective time of the Merger, there were 1,237,099 shares of the Company’s common stock available for grant under the 2024 Plan which number does not reflect any options previously granted under the 2019 Plan or granted to certain officers and directors immediately following the closing of the Merger (including as described in Section 5.02 of this Current Report on Form 8-K). In addition, the number of shares initially reserved and available for issuance under the 2024 Plan will automatically increase each January 1, beginning on January 1, 2025, by 5% of the outstanding number of shares on the immediately preceding December 31, or such lesser amount as determined by the Company’s board of directors.
A more complete summary of the terms of the 2024 Plan is set forth in the Proxy Statement/Prospectus under the section titled “Proposal No. 4: The Incentive Plan Proposal” and is incorporated by reference herein. That summary and the foregoing description of the 2024 Plan do not purport to be complete and are qualified in their entirety by reference to the text of the 2024 Plan, forms of option grant notice and option agreement, copies of which are attached to this Current Report on Form 8-K as Exhibits 10.6 and 10.7 hereto and are incorporated herein by reference.
2024 Employee Stock Purchase Plan
At the Special Meeting, AVROBIO’s stockholders considered and approved the 2024 Employee Stock Purchase Plan (the “2024 ESPP”), which became effective at the closing of the Merger and following the Reverse Stock Split. As of the effective time of the Merger, there were 147,343 shares of the Company’s common stock reserved for issuance under the 2024 ESPP. In addition, the number of shares initially reserved and available for issuance under the 2024 ESPP will automatically increase each January 1, beginning on January 1, 2025, by the lesser of a number of shares equal to 442,029, 1% of the outstanding number of shares on the immediately preceding December 31, or such lesser amount as determined by the plan administrator.
A more complete summary of the terms of the 2024 ESPP is set forth in the Proxy Statement/Prospectus under the section titled “Proposal No. 5: The ESPP Proposal” and is incorporated by reference herein. That summary and the foregoing description of the 2024 ESPP do not purport to be complete and are qualified in their entirety by reference to the text of the 2024 ESPP, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.8 hereto and are incorporated herein by reference.
Closing Option Grants
In connection with the closing of the Merger, the Compensation Committee of the Company approved option grants to certain of the Company’s employees, including Alise Reicin, M.D. (the Company’s new Chief Executive Officer and principal executive officer), Daniel Lochner (the Company’s new Chief Financial Officer and principal financial officer and principal accounting officer) and Marcella K. Ruddy, M.D. (the Company’s new Chief Medical Officer). As a result, on June 20, 2024, Dr. Reicin received an option grant to purchase 289,600 shares of the Company’s common stock, Mr. Lochner received an option grant to purchase 118,000 shares of the Company’s common stock and Dr. Ruddy received an option grant to purchase 81,700 shares of the Company’s common stock, each with an exercise price per share equal to the closing price per share of the Company’s common stock as reported on the Nasdaq Global Market on such date (as adjusted for the Reverse Stock Split). The shares subject to these option grants will vest 25% on the first anniversary of the grant date, and thereafter the remaining 75% of the shares will vest in equal monthly installments over the following three years, in each case subject to the recipient’s continuous service through the applicable vesting dates, such that the options are vested in full on the four-year anniversary of the grant date. Mr. Lochner also received an option grant to purchase 15,000 shares of the Company’s common stock with an
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exercise price per share equal to the closing price per share of the Company’s common stock as reported on the Nasdaq Global Market on such date (as adjusted for the Reverse Stock Split). The shares subject to the option grant will vest 50% on June 1, 2026 if the Company raises $100,000,000 by June 1, 2026 and has a minimum of a two year cash runway as of June 1, 2026 (i.e. until June 1, 2028), and 50% on June 1, 2028 if the Company has a minimum of a two year cash runway as of June 1, 2028 (i.e. until June 1, 2030), in each case, as determined by the board of directors (or the Compensation Committee) in its sole discretion.
In addition, in connection with the closing of the Merger, the board of directors approved certain option grants to the Company’s directors, other than Dr. Reicin. As a result, on June 20, 2024, each of Phillip B. Donenberg, Terrance McGuire, Timothy A. Springer, Ph.D., Praveen Tipirneni, M.D. and Stefan Vitorovic received an option grant to purchase 11,760 shares of the Company’s common stock, in each case, with an exercise price per share equal to the closing price per share of the Company’s common stock as reported on The Nasdaq Capital Market on such date (as adjusted for the Reverse Stock Split). The shares subject to these option grants will vest 1/3 on the first anniversary of the grant date, and thereafter the remaining 2/3 of the shares will vest in equal monthly installments over the following two years, in each case subject to the recipient’s continuous service through the applicable vesting dates, such that the options are vested in full on the three-year anniversary of the grant date.
| Item 5.03. | Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
To the extent required by this Item, the information included in Item 2.01 and Item 3.03 of this Current Report on Form 8-K is incorporated herein by reference.
Commencing on June 21, 2024, the Company expects the trading symbol for its common stock, which is currently listed the Nasdaq Global Select Market and will hereafter be listed on the Nasdaq Global Market, to change from “AVRO” to “TECX.” The change in trading symbol is related solely to the Name Change.
| Item 5.06. | Change in Shell Company Status. |
As a result of the Merger, we ceased to be a shell company (as defined in Rule 12b-2 of the Exchange Act) as of the closing of the Merger. A description of the Merger and the terms of the Merger Agreement are included in the Proxy Statement/Prospectus in the section entitled “Proposal No. 1-The Nasdaq Stock Issuance Proposal” beginning on page 307 of the Proxy Statement/Prospectus. Further reference is made to the information contained in Item 2.01 of this Current Report on Form 8-K.
| Item 8.01. | Other Events. |
On June 20, 2024, the Company issued a press release announcing, among other things, the closing of the Merger. A copy of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference, except that the information contained on the websites referenced in the press releases is not incorporated herein by reference.
| Item 9.01. | Financial Statements and Exhibits. |
(a) Financial Statements of Businesses Acquired
The audited consolidated financial statements of Tectonic as of and for the years ended December 31, 2023 and 2022 and the related notes thereto are included in the Proxy Statement/Prospectus, and are incorporated herein by reference.
The audited consolidated financial statements of AVROBIO as of and for the years ended December 31, 2023 and 2022 and the related notes are included in AVROBIO’s annual report on Form 10-K for the year ended December 31, 2023 that was filed with the SEC on March 14, 2024, and are incorporated herein by reference.
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The unaudited condensed interim financial statements of Tectonic as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 are filed herewith as Exhibit 99.3 to this Current Report on Form 8-K and are incorporated herein by reference.
The unaudited condensed interim condensed consolidated financial statements of AVROBIO as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 are included in AVROBIO’s quarterly report on Form 10-Q for the quarter ended March 31, 2024 that was filed with the SEC on May 9, 2024.
(b) Pro Forma Financial Information
The unaudited pro forma financial information for the year ended December 31, 2023 and the three months ended March 31, 2024 are filed herewith as Exhibit 99.4 to this Current Report on Form 8-K and are incorporated herein by reference.
(d) Exhibits.
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| * | Filed herewith |
| ** | Previously filed. |
| # | Indicates a management contract or any compensatory plan, contract or arrangement. |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TECTONIC THERAPEUTIC, INC. | ||||||
| Date: June 20, 2024 | By: | /s/ Alise Reicin, M.D. | ||||
| Alise Reicin, M.D. | ||||||
| Chief Executive Officer | ||||||
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Exhibit 3.1
CERTIFICATE OF AMENDMENT
TO THE
FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
AVROBIO, INC.
AVROBIO, Inc. (the “Corporation”), a corporation organized and existing under the laws of the State of Delaware, does hereby certify as follows:
1. That the Fourth Amended and Restated Certificate of Incorporation of the Corporation that was filed with the Secretary of State of Delaware on June 25, 2018 (the “Amended and Restated Certificate”) is hereby amended to add the following paragraph after the first paragraph of Article IV thereof to provide the following:
Upon this Certificate of Amendment becoming effective (the “Effective Time”) pursuant to the DGCL, each twelve (12) shares of the Common Stock issued and outstanding and held of record by each stockholder of the Corporation or issued and held by the Corporation in treasury immediately prior to the Effective Time shall automatically without further action on the part of the Corporation or any holder of such Common Stock, be combined into one (1) validly issued, fully paid and nonassessable share of Common Stock, subject to the treatment of fractional share interests as described below (the “Reverse Stock Split”). No fractional shares shall be issued as a result of the Reverse Stock Split. Instead, if upon aggregating all of the shares of Common Stock held by a record holder immediately following the Reverse Stock Split such holder would otherwise be entitled to a fractional share of Common Stock as a result of the Reverse Stock Split, the Corporation shall pay in cash (without interest) to each such holder an amount equal to the product of such resulting fractional interest in one share of Common Stock multiplied by the closing trading price on The Nasdaq Stock Market LLC of a share of Common Stock on the last trading day immediately prior to the date on which the Effective Time occurs (with such price proportionately adjusted to give effect to the Reverse Stock Split). Each holder of record of a certificate or certificates representing one or more shares of Common Stock pre-Reverse Stock Split shall be entitled to receive as soon as practicable following the Effective Time, upon surrender of such certificate or certificates, a certificate or certificates representing the whole number of shares of Common Stock post-Reverse Stock Split to which such holder shall be entitled pursuant to the Reverse Stock Split as well as cash in lieu of any fractional shares of Common Stock to which such holder may be entitled. Each certificate that immediately prior to the Effective Time represented shares of Common Stock (“Old Certificates”), shall thereafter represent that number of shares of Common Stock into which the shares of Common Stock represented by the Old Certificate shall have been combined (as well as the right to receive cash in lieu of fractional shares of Common Stock after the Effective Time of the Reverse Stock Split upon the surrender thereof).
2. That the foregoing amendment was duly adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware.
3. That the foregoing amendment shall become effective at 4:00 p.m. eastern on June 20, 2024.
IN WITNESS WHEREOF, this Certificate of Amendment to the Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this Corporation on this 20th day of June, 2024.
| AVROBIO, INC. | ||
| By: | /s/ Erik Ostrowski | |
| Erik Ostrowski | ||
| President, Interim Chief Executive Officer, Chief Financial Officer and Treasurer | ||
Exhibit 3.2
CERTIFICATE OF AMENDMENT
TO THE
FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
AVROBIO, INC.
AVROBIO, Inc. (the “Corporation”), a corporation organized and existing under the laws of the State of Delaware, does hereby certify as follows:
1. That the Fourth Amended and Restated Certificate of Incorporation of the Corporation that was filed with the Secretary of State of Delaware on June 25, 2018 (the “Amended and Restated Certificate”) is hereby amended to add a new Article X thereto to read in its entirety as follows:
ARTICLE X
An Officer of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of his or her fiduciary duty as an Officer, except for liability (a) for any breach of the Officer’s duty of loyalty to the Corporation or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) for any transaction from which the Officer derived an improper personal benefit or (d) in any action by or in the right of the Corporation. If the DGCL is amended after the effective date of this Certificate to authorize corporate action further eliminating or limiting the personal liability of Officers, then the liability of an Officer of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. For purposes of this Article X, “Officer” shall have the meaning set forth in Section 102(b)(7) of the DGCL.
Any amendment, repeal or modification of this Article X by either of (i) the stockholders of the Corporation or (ii) an amendment to the DGCL, or the adoption of any provision of this Certificate inconsistent with this Article X, shall not adversely affect any right or protection existing at the time of such amendment, repeal, modification or adoption with respect to any acts or omissions occurring before such amendment, repeal, modification or adoption of a person serving as an Officer at the time of such amendment, repeal, modification or adoption. Notwithstanding anything herein to the contrary, the affirmative vote of not less than two thirds (2/3) of the outstanding shares of capital stock entitled to vote thereon, and the affirmative vote of not less than two thirds (2/3) of the outstanding shares of each class entitled to vote thereon as a class, shall be required to amend or repeal any provision of this Article X.
2. That the foregoing amendment was duly adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware.
3. That the foregoing amendment shall become effective at 4:01 p.m. eastern on June 20, 2024.
IN WITNESS WHEREOF, this Certificate of Amendment to the Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this Corporation on this 20th day of June, 2024.
| AVROBIO, INC. | ||
| By: | /s/ Erik Ostrowski | |
| Erik Ostrowski | ||
| President, Interim Chief Executive Officer, Chief Financial Officer and Treasurer | ||
Exhibit 3.3
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
AVROBIO, INC.
Pursuant to Section 242
of the General Corporation Law of the State of Delaware
AVROBIO, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), certifies that:
1. Article I of the Fourth Amended and Restated Certificate of Incorporation of the Corporation, as currently in effect, is hereby amended and restated in its entirety to read as follows:
“The name of the Corporation is Tectonic Therapeutic, Inc.”
2. The foregoing amendment has been duly adopted in accordance with Section 242 of the Delaware General Corporation Law by the board of directors of the Corporation.
3. The foregoing amendment shall become effective at 4:03 p.m. eastern on June 20, 2024.
IN WITNESS WHEREOF, this Certificate of Amendment has been signed by an authorized officer of the Corporation on June 20, 2024.
| AVROBIO, INC. | ||
| By: | /s/ Erik Ostrowski | |
| Erik Ostrowski | ||
| President, Interim Chief Executive Officer, Chief Financial Officer and Treasurer | ||
Exhibit 10.1
CONTINGENT VALUE RIGHTS AGREEMENT
THIS CONTINGENT VALUE RIGHTS AGREEMENT (this “Agreement”), dated as of June 20, 2024, is entered into by and among AVROBIO, Inc., a Delaware corporation (the “Company”) and Computershare Inc., a Delaware corporation, (“Computershare”) and its affiliate Computershare Trust Company, N.A., a federally chartered trust company, jointly as rights agent (collectively, the “Rights Agent”).
RECITALS
WHEREAS, the Company, Alpine Merger Subsidiary, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), and Tectonic Therapeutic, Inc., a Delaware corporation (“Tyrol”), have entered into an Agreement and Plan of Merger and Reorganization, dated as of January 29, 2024 (the “Merger Agreement”), pursuant to which Merger Sub will merge with and into Tyrol, with Tyrol surviving the Merger as a wholly-owned subsidiary of the Company;
WHEREAS, pursuant to the Merger Agreement, and in accordance with the terms and conditions thereof, the Company has agreed to provide to the Holders (as defined herein) contingent value rights as hereinafter described; and
WHEREAS, the parties have done all things reasonably necessary to make the contingent value rights, when issued pursuant to the Merger Agreement and hereunder, the valid obligations of the Company and to make this Agreement a valid and binding agreement of the Company, in accordance with its terms.
NOW, THEREFORE, in consideration of the premises and the consummation of the transactions referred to above, it is mutually covenanted and agreed, for the proportionate benefit of all Holders, as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. Capitalized terms used but not otherwise defined herein have the meanings ascribed thereto in the Merger Agreement. The following terms have the meanings ascribed to them as follows:
“Acting Holders” means, at the time of determination, the Holders of more than 30% of the outstanding CVRs, as reflected on the CVR Register.
“Assignee” has the meaning set forth in Section 7.5.
“Calendar Quarter” means the successive periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 or December 31, for so long as this Agreement is in effect; provided, however that (a) the first Calendar Quarter shall commence on the date of this Agreement and shall end on the first such occurrence of a March 31, June 30, September 30 or December 31 thereafter, and (b) the last Calendar Quarter shall commence on the first day after the full Calendar Quarter immediately preceding the effective date of the termination or expiration of this Agreement and shall end on the effective date of the termination or expiration of this Agreement.
“Commercially Reasonable Efforts” means with respect to the disposition of the Company Pre-Closing Assets, carrying out those obligations and tasks in good faith following receipt of a bona fide indication of interest or proposal from a third party (verbal (provided that any such verbal offer must be subsequently delivered in writing, which the Company shall request) or written) (“Inbound Interest”) delivered or otherwise made known to an executive officer or business development officer of the Company, taking into account all commercial and other relevant factors that the Company, exercising good faith, would normally take into account with respect to a disposition of assets; provided that Commercially Reasonable Efforts shall not require the Company to initiate any bona fide sale process or other proactive efforts to identify potential counterparties with respect to any Company Pre-Closing Assets.
“Common Stock” means the common stock, $0.0001 par value, of the Company.
“Company Pre-Closing Assets” means those assets of the Company, to the extent existing as of immediately prior to the Closing, relating to (a) the Company’s plato manufacturing platform, (b) the Company’s AVR-RD-01 (Fabry), AVR-RD-02 (Gaucher), and/or AVR-RD-03 (Pompe) research and development programs, and (c) the Company’s Intellectual Property set forth in Section 4.12(a) of the Aspen Disclosure Schedule.
“CVR” means a contingent contractual right of Holders to receive CVR Payments pursuant to the Merger Agreement and this Agreement.
“CVR Payment” means a cash payment equal to eighty percent (80%) of the Net Proceeds received by the Company in a given Calendar Quarter during the CVR Term, with the remaining twenty percent (20%) being retained by the Company.
“CVR Payment Amount” means with respect to each CVR Payment and each Holder, an amount equal to such CVR Payment divided by the total number of CVRs and then multiplied by the total number of CVRs held by such Holder as reflected on the CVR Register.
“CVR Payment Period” means a period equal to a Calendar Quarter ending at any time after the effective date of a Disposition Agreement.
“CVR Payment Statement” means, for a given CVR Payment Period during the CVR Term, a written statement of the Company, signed on behalf of the Company, setting forth in reasonable detail the calculation of the applicable CVR Payment for such CVR Payment Period.
“CVR Register” has the meaning set forth in Section 2.3(b).
“CVR Term” means the period beginning on the Closing and ending upon the tenth (10th) anniversary of this Agreement.
“Disposition” or “Dispose” means the direct or indirect sale, license, assignment, transfer, conveyance, grant of any option or other disposition of any Company Pre-Closing Asset by the Company or its Affiliates (including any such sale or disposition of equity securities in any Subsidiary established by the Company or its Affiliates to hold any right, title or interest in or to any Company Pre-Closing Asset), in each case, during the Disposition Period.
“Disposition Agreement” means a definitive written agreement providing for a transaction or series of transactions between the Company or its Affiliates and any Person who is not an Affiliate of the Company regarding a Disposition of the Company Pre-Closing Assets.
“Disposition Period” means the period beginning on the execution date of the Merger Agreement and ending on the date that is eighteen (18) months after the Closing Date.
“DTC” means The Depository Trust Company.
“Funds” has the meaning set forth in Section 7.13.
“Gross Proceeds” means, without duplication, the sum of all cash consideration and the value of any marketable consideration actually received by the Company or any of its Affiliates during the CVR Term with respect to a Disposition, solely as such consideration relates to a Company Pre-Closing Asset. The value of any marketable securities (whether debt or equity) or other non-cash property constituting Gross Proceeds shall be determined as follows: (i) if a value was ascribed to any such securities or property in connection with such Disposition, such value so ascribed or (ii) if no value was ascribed, then (A) the value of securities for which there is an established public market shall be equal to the volume weighted average of their closing market prices for the thirty (30) trading days ending the day prior to the date of payment to, or receipt by the Company or its relevant Affiliate, and (B) the value of securities that have no established public market and the value of consideration that consists of other non-cash property, shall be the fair market value thereof as of the date of payment to, or receipt by, the Company or its relevant Affiliate.
“Holder” means, at the relevant time, a Person in whose name CVRs are registered in the CVR Register.
“Loss” has the meaning set forth in Section 3.2(g).
“Net Proceeds” means, for any CVR Payment Period, Gross Proceeds minus Permitted Deductions, all as calculated, to the extent in accordance with GAAP, in a manner consistent with the Company’s accounting practices in the most recently filed annual audited financial statements with the SEC, except as otherwise set forth herein. For clarity, to the extent Permitted Deductions exceed Gross Proceeds for any CVR Payment Period, any excess Permitted Deductions shall be applied against Gross Proceeds in subsequent CVR Payment Periods.
“Notice” has the meaning set forth in Section 7.1.
“Officer’s Certificate” means a certificate signed by the chief executive officer and the chief financial officer of the Company, in their respective official capacities.
“Party” means the Company or the Rights Agent.
“Permitted Deductions” means the sum of (without duplication):
(a) any applicable Tax (including any applicable value added, transfer, stamp or sales taxes) imposed on Gross Proceeds and payable by Tyrol, the Company or any of their respective Affiliates (regardless of whether the due date for such Taxes arises during or after the Disposition Period) and, without duplication, any income or other similar Taxes payable by Tyrol, the Company or any of their respective Affiliates that would not have been incurred by Tyrol, the Company or any of their respective Affiliates but for the Gross Proceeds; provided that, for purposes of calculating income Taxes incurred by Tyrol, the Company or any of their respective Affiliates in respect of the Gross Proceeds, any such income Taxes shall be computed (i) assuming that the only items of gross income of Tyrol, the Company and their subsidiaries are the applicable items of Gross Proceeds (for the avoidance of doubt, assuming that such items of Gross Proceeds are taxable in the hands of Tyrol, the Company or their subsidiaries, as applicable, no later than the taxable year that includes the corresponding CVR Payment Amount), (ii) assuming that the only items of expenses, losses, credits or other deductions of Tyrol, the Company and their subsidiaries are those items of expense, loss, credit and deduction (including net operating loss carryforwards or other Tax attributes) of the Company or its Affiliates existing as of immediately prior to the Closing for U.S. federal income tax purposes and applicable state and local income tax purposes that are actually usable by Tyrol, the Company or their subsidiaries, as applicable, in the tax year of receipt of the applicable items of Gross Proceeds, to the extent such net operating loss carryforwards and other items are permitted by Law to be, and are, taken as a deduction in such taxable year (for the sake of clarity, (1) taking into account any limits on the usability of such attributes, including under Section 382 of the Code as determined by the Company’s tax advisers, including, but not limited to, as a result of the transactions contemplated by the Merger Agreement and (2) excluding any net operating losses or other Tax attributes generated by Tyrol, the Company or any of their respective Affiliates after the Closing, including by reason of any acquisition after the Closing), and (iii) all such items of Gross Proceeds are taxed in the hands of Tyrol, the Company or their subsidiaries, as applicable, at the highest applicable marginal income or other similar U.S. federal, state, local and non-U.S. tax rate;
(b) any reasonable and documented out-of-pocket costs and expenses incurred by the Company or any of its Affiliates in respect to its performance of this Agreement following the Closing, including any costs related to the prosecution, maintenance or enforcement by the Company or any of its Subsidiaries of intellectual property rights (but excluding any costs related to a breach of this Agreement, including costs incurred in litigation in respect of the same);
(c) any reasonable and documented out-of-pocket expenses incurred or accrued by the Company or any of its Affiliates in connection with the negotiation, entry into and closing of any Disposition of any Company Pre-Closing Asset, including any brokerage fee, finder’s fee, opinion fee, success fee, transaction fee, service fee or other fee, commission or expense owed to any broker, finder, investment bank, auditor, accountant, counsel, advisor or other third party in relation thereto;
(d) (i) any Losses actually incurred, and actually paid or actually payable, or reasonably expected to be incurred and subsequently actually paid by the Company or any of its Subsidiaries arising out of any third-party claims, demands, actions, or other proceedings related to or in connection with any Disposition or any Company Pre-Closing Assets and, without duplication, (ii) an amount that would reasonably be payable under any obligations of the Company or any of its Subsidiaries in respect of contingent or indemnification obligations provided for in any Disposition Agreement; provided that any amounts deducted pursuant to this clause (d) shall be held back by the Company in a separate account for the benefit of the Holders and to the extent such amounts have not been paid in respect of such third-party proceedings or such contingent or indemnification obligations (as applicable) upon the final resolution of such third-party proceedings or the lapse in survival of such contingent or indemnification obligations (provided that in the case of contingent or indemnification obligations that continue indefinitely pursuant to their terms, such lapse of survival shall be deemed to have occurred three (3) years after the commencement of such obligations) (as applicable), in each case prior to the end of the CVR Term, then such amounts shall be paid over to the Rights Agent within fifteen (15) Business Days of such final resolution or such lapse (as applicable) for further distribution to the Holders; and
(e) any proceeds in consideration for a Disposition pursuant to a Disposition Agreement included in the final determination of Aspen Net Cash in accordance with the Merger Agreement.
“Permitted Transfer” means a transfer of CVRs (a) upon death of a Holder by will or intestacy; (b) pursuant to a court order; (c) by operation of Law (including by consolidation or merger) or without consideration in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; (d) in the case of CVRs held in book-entry or other similar nominee form, from a nominee to a beneficial owner and, if applicable, through an intermediary, to the extent allowable by DTC; or (e) as provided in Section 2.6.
“Rights Agent” means the Rights Agent named in the first paragraph of this Agreement, until a successor Rights Agent will have become the Rights Agent pursuant to the applicable provisions of this Agreement, and thereafter “Rights Agent” will mean such successor Rights Agent.
ARTICLE 2
CONTINGENT VALUE RIGHTS
Section 2.1 Holders of CVRs; Appointment of Rights Agent.
(a) The CVRs represent the rights of Holders to receive CVR Payments pursuant to this Agreement. The initial Holders will be the holders of issued and outstanding shares of Common Stock as of immediately prior to the Effective Time (the “Specified Time”) (including, for the avoidance of doubt, those shares of Common Stock issued upon settlement of Aspen Restricted Stock Units pursuant to Section 6.7 of the Merger Agreement) (the “Eligible Holders” and such shares, the “Eligible Shares”). One CVR will be issued with respect to each Eligible Share.
(b) The Company hereby appoints the Rights Agent to act as Rights Agent for the Company in accordance with the express terms and conditions set forth in this Agreement (and no implied terms and conditions), and the Rights Agent hereby accepts such appointment.
Section 2.2 Non-transferable. The CVRs may not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than through a Permitted Transfer. The CVRs will not be listed on any quotation system or traded on any securities exchange. Any purported transfer of a CVR other than in a Permitted Transfer shall be null and void ab initio.
Section 2.3 No Certificate; Registration; Registration of Transfer; Change of Address.
(a) The CVRs will be issued in book-entry form only and will not be evidenced by a certificate or other instrument.
(b) The Rights Agent shall create and maintain a register (the “CVR Register”) for the purpose of registering CVRs and Permitted Transfers. The CVR Register will be created, and CVRs will be distributed, pursuant to written instructions to the Rights Agent from the Company. The CVR Register will initially show one position for Cede & Co. representing Eligible Shares held by DTC on behalf of the street holders of the Eligible Shares held by such Eligible Holders as of the Specified Time. The Rights Agent will have no responsibility whatsoever directly or indirectly to the street name holders with respect to transfers of CVRs. With respect to any payments or issuances to be made under Section 2.4 below, the Rights Agent will accomplish the payment to any former street name holders of Eligible Shares by sending one lump-sum payment or issuance to DTC. The Rights Agent will have no responsibilities whatsoever with regard to the distribution of payments or Eligible Shares by DTC to such street name holders.
(c) Subject to the restrictions on transferability set forth in Section 2.2, every request made to transfer a CVR must be in writing and accompanied by a written instrument of transfer and any other requested documentation in form reasonably satisfactory to the Rights Agent pursuant to its guidelines or procedures, including a guaranty of signature by an “eligible guarantor institution” that is a member or participant in the Securities Transfer Agents Medallion Program, duly executed and properly completed by the Holder thereof, the Holder’s attorney duly authorized in writing, the Holder’s personal representative or the Holder’s survivor, and setting forth in reasonable detail the circumstances relating to the transfer. Upon receipt of such written notice, the Rights Agent shall, subject to its reasonable determination that the transfer instrument is in proper form and the transfer otherwise complies with the other terms and conditions of this Agreement (including the provisions of Section 2.2), register the transfer of the CVRs in the CVR Register. The Company and Rights Agent may require evidence of payment of a sum sufficient to cover any stamp, documentary, registration, or other Tax or governmental charge that is imposed in connection with any such registration of transfer (or evidence that such Taxes and charges are not applicable). The Rights Agent shall have no duty or obligation to take any action under any section of this Agreement that requires the payment by a Holder of a CVR of applicable taxes or charges unless and until the Rights Agent is satisfied that all such taxes or charges have been paid. All duly transferred CVRs registered in the CVR Register will be the valid obligations of the Company and will entitle the transferee to the same benefits and rights under this Agreement as those held immediately prior to the transfer by the transferor. No transfer of a CVR will be valid until registered in the CVR Register, and any transfer not duly registered in the CVR Register will be void and invalid. All costs and expenses related to any transfer or assignment of the CVRs (including the cost of any transfer tax) will be the responsibility of the transferor.
(d) A Holder may make a written request to the Rights Agent to change such Holder’s address of record in the CVR Register. The written request must be duly executed by the Holder. Upon receipt of such written notice, the Rights Agent shall, subject to its reasonable determination that the transfer instrument is in proper form, promptly record the change of address in the CVR Register. The Acting Holders may, without duplication, make a written request to the Rights Agent for a list containing the names, addresses and number of CVRs of the Holders that are registered in the CVR Register. Upon receipt of such written request from the Acting Holders, the Rights Agent shall promptly deliver a copy of such list to the Acting Holders.
(e) The Company will provide written instructions to the Rights Agent for the distribution of CVRs to Eligible Holders as of the Specified Time. Subject to the terms and conditions of this Agreement and the Company’s prompt confirmation of the Effective Time, the Rights Agent shall effect the distribution of the CVRs, less any applicable tax withholding, to each Eligible Holder as of the Specified Time by the mailing of a statement of holding reflecting such CVRs.
Section 2.4 Payment Procedures.
(a) No later than forty-five (45) days following the end of each Calendar Quarter during the CVR Term, commencing with the first CVR Payment Period in which the Company or its Affiliates receives Gross Proceeds, the Company shall deliver to the Rights Agent a CVR Payment Statement for the such CVR Payment Period. Subject to the last sentence of this Section 2.4(a), concurrent with the delivery of each CVR Payment Statement, on the terms and conditions of this Agreement, the Company shall pay the Rights Agent in U.S. dollars an amount equal to the CVR Payment for the applicable CVR Payment Period. Such CVR Payment will be transferred by wire transfer of immediately available funds to an account designated in writing by the Rights Agent not less than twenty (20) Business Days prior to the date of the applicable payment. Upon receipt of the wire transfer referred to in the foregoing sentence, the Rights Agent shall promptly (and in any event, within ten (10) Business Days) pay, by check mailed, first-class postage prepaid, to the address each Holder set forth in the CVR Register at such time or by other method of deliver as specified by the applicable Holder in writing to the Rights Agent, an amount equal to such Holder’s CVR Payment Amount. The Rights Agent shall as soon as practicable after receipt of a CVR Payment Statement under this Section 2.4(a), send each Holder at its registered address a copy of such statement. For the avoidance of doubt the Company shall have no further liability in respect of the relevant CVR Payment upon delivery of such CVR Payment in accordance with this Section 2.4(a) and the satisfaction of each of the Company’s obligations set forth in this Section 2.4(a). Notwithstanding anything to the contrary herein, no CVR Payment shall become due and payable to any Holder until such time as the then-outstanding and undistributed Net Proceeds exceeds $350,000 in the aggregate.
(b) If instructed by the Company, the Rights Agent shall solicit from each Holder, and each Holder covenants and agrees to provide to the Rights Agent, an IRS Form W-9 or appropriate IRS Form W-8, as applicable, at such time or times, including immediately prior to the first CVR Payment, as is necessary to permit any payment under this Agreement to be made without U.S. federal backup withholding. That notwithstanding, the Company, Tyrol and any of their respective Affiliates (each a “Withholding Agent”) shall be entitled to deduct and withhold and hereby authorizes the Rights Agent to deduct and withhold, any Tax or similar governmental charge or levy, that is required to be deducted or withheld under applicable Law from any amounts payable pursuant to this Agreement. To the extent the amounts are so withheld by a Withholding Agent and paid over to the appropriate Governmental Authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of whom such deduction and withholding was made. The Company will use commercially reasonable efforts to provide withholding and reporting instructions in writing (email being sufficient) to the Rights Agent from time to time as relevant, and upon request of the Rights Agent. The Rights Agent shall have no responsibilities with respect to Tax withholding, reporting or payment except as set forth herein or as specifically instructed by the Company.
(c) Any portion of a CVR Payment that remains undistributed to the Holders six (6) months after the applicable Calendar Quarter end (including by means of uncashed checks or invalid addresses on the CVR Register) will be delivered by the Rights Agent to the Company or a person nominated in writing by the Company (with written notice thereof from the Company to the Rights Agent), and any Holder will thereafter look only to the Company for payment of such CVR Payment (which shall be without interest).
(d) If any CVR Payment (or portion thereof) remains unclaimed by a Holder two (2) years after the applicable Calendar Quarter end (or immediately prior to such earlier date on which such CVR Payment would otherwise escheat to or become the property of any Governmental Authority), such CVR Payment (or portion thereof) will, to the extent permitted by applicable Law, become the property of the Company and will be transferred to the Company or a person nominated in writing by the Company (with written notice thereof from the Company to the Rights Agent), free and clear of all claims or interest of any
Person previously entitled thereto, and no consideration or compensation shall be payable therefor. Neither the Company nor the Rights Agent will be liable to any Person in respect of a CVR Payment delivered to a public official pursuant to any applicable abandoned property, escheat or similar legal requirement under applicable Law. In addition to and not in limitation of any other indemnity obligation herein, the Company agrees to indemnify and hold harmless the Rights Agent with respect to any liability, penalty, cost or expense the Rights Agent may incur or be subject to in connection with transferring such property to the Company, a public office or a person nominated in writing by the Company.
Section 2.5 No Voting, Dividends or Interest; No Equity or Ownership Interest.
(a) If and when issued, the CVRs will not have any voting or dividend rights, and interest will not accrue on any amounts payable in respect of CVRs to any Holder.
(b) If and when issued, the CVRs will not represent any equity or ownership interest in the Company or in any constituent company to the Merger. It is hereby acknowledged and agreed that a CVR shall not constitute a security of the Company.
(c) Nothing contained in this Agreement shall be construed as conferring upon any Holder, by virtue of the CVRs, any rights or obligations of any kind or nature whatsoever as a stockholder or member of the Company or any of its subsidiaries either at Law or in equity. The rights of any Holder and the obligations of the Company and its Affiliates and their respective officers, directors and controlling Persons are contract rights limited to those expressly set forth in this Agreement.
(d) It is hereby acknowledged and agreed that the CVRs and the possibility of any payment hereunder with respect thereto are highly speculative and subject to numerous factors outside of the Company’s control, and there is no assurance that Holders will receive any payments under this Agreement or in connection with the CVRs. Each Holder acknowledges that it is highly possible that no Disposition will occur prior to the expiration of the Disposition Period and that there will not be any Gross Proceeds that may be the subject of a CVR Payment Amount. It is further acknowledged and agreed that neither the Company nor its Affiliates owe, by virtue of their obligations under this Agreement, a fiduciary duty or any implied duties to the Holders and the parties hereto intend solely the express provisions of this Agreement to govern their contractual relationship with respect to the CVRs. It is acknowledged and agreed that this Section 2.5(d) is an essential and material term of this Agreement.
Section 2.6 Ability to Abandon CVR. A Holder may at any time, at such Holder’s option, abandon all of such Holder’s remaining rights represented by CVRs by transferring such CVR to the Company or a Person nominated in writing by the Company (with written notice thereof from the Company to the Rights Agent) without consideration in compensation therefor, and such rights will be cancelled, with the Rights Agent being promptly notified in writing by the Company of such transfer and cancellation. Nothing in this Agreement is intended to prohibit the Company or its Affiliates from offering to acquire or acquiring CVRs, in private transactions or otherwise, for consideration in its sole discretion.
Section 2.7 Intended Tax Treatment. Except to the extent otherwise required by applicable Law, for U.S. federal income tax (and applicable state and local income tax purposes), the parties agree to treat the issuance of the CVRs as not constituting a current distribution and all CVR Payments for all Tax purposes as distributions of money governed by Section 301 of the Code, which will constitute a dividend to the extent payable out of the Company and its Affiliates’ “earnings and profits” (pursuant to Section 316 of the Code) in the taxable year when the CVR Payment is made (the “Intended Tax Treatment”).
ARTICLE 3
THE RIGHTS AGENT
Section 3.1 Certain Duties and Responsibilities.
(a) The Rights Agent will not have any liability for any actions taken , suffered or omitted to be taken in connection with this Agreement, except to the extent such liability arises as a result of the willful misconduct, bad faith, fraud or gross negligence of the Rights Agent (in each case as determined by a final non-appealable judgment of court of competent jurisdiction). Notwithstanding anything in this Agreement to the contrary, any liability of the Rights Agent under this Agreement will be limited to the amount of annual fees paid by the Company to the Rights Agent in connection with this Agreement (but not including reimbursable expenses and other charges) during the twelve (12) months immediately preceding the event for which recovery from the Rights Agent is being sought. Anything to the contrary notwithstanding, in no event will the Rights Agent be liable for special, punitive, indirect, incidental or consequential loss or damages of any kind whatsoever (including, without limitation, lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damages, and regardless of the form of action.
(b) The Rights Agent shall not have any duty or responsibility in the case of the receipt of any written demand from any Holder with respect to any action or default by any person or entity, including, without limiting the generality of the foregoing, any duty or responsibility to initiate or attempt to initiate any Legal Proceedings at Law or otherwise or to make any demand upon the Company or Tyrol. The Rights Agent may (but shall not be required to) enforce all rights of action under this Agreement and any related claim, action, suit, audit, investigation or proceeding instituted by the Rights Agent may be brought in its name as the Rights Agent and any recovery in connection therewith will be for the proportionate benefit of all the Holders, as their respective rights or interests may appear on the CVR Register.
Section 3.2 Certain Rights of Rights Agent.
(a) The Rights Agent undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations will be read into this Agreement against the Rights Agent.
(b) The Rights Agent may rely and will be protected and held harmless by the Company in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document reasonably believed by it to be genuine and to have been signed or presented by or on behalf of the Company or, with respect to Section 2.3(d), the Acting Holders.
(c) Whenever the Rights Agent deems it desirable that a matter be proved or established prior to taking, suffering or omitting to take any action hereunder, the Rights Agent may rely upon an Officer’s Certificate, which certificate shall be full authorization and protection to the Rights Agent, and the Rights Agent shall, in the absence of bad faith, willful misconduct, fraud or gross negligence (in each case as determined by a final non-appealable judgment of court of competent jurisdiction) on its part, not incur any liability and shall be held harmless by the Company for or in respect of any action taken, suffered or omitted to be taken by it under the provisions of this Agreement in reliance upon such Officer’s Certificate.
(d) The Rights Agent may engage and consult with counsel of its selection, and the advice or opinion of such counsel will, in the absence of bad faith, willful misconduct, fraud or gross negligence (in each case as determined by a final non-appealable judgment of court of competent jurisdiction) on the part of the Rights Agent, be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by the Rights Agent in the absence of bad faith in reliance thereon.
(e) Any permissive rights of the Rights Agent hereunder will not be construed as a duty.
(f) The Rights Agent will not be required to give any note or surety in respect of the execution of its powers or otherwise under this Agreement.
(g) The Company agrees to indemnify the Rights Agent for, and to hold the Rights Agent harmless from and against, any loss, liability, damage, judgment, fine, penalty, cost, claim, demand, suit or expense (each, a “Loss”) suffered or incurred by the Rights Agent and arising out of or in connection with the Rights Agent’s exercise and performance of its obligations under this Agreement, including the reasonable and documented costs and expenses of defending the Rights Agent against any claims, charges,
demands, actions or suits arising out of or in connection in connection with the execution, acceptance, administration, exercise and performance of its duties under this Agreement, including the costs and expenses of defending against any claim of liability arising therefrom, directly or indirectly, or enforcing its rights hereunder, except to the extent such Loss has been determined by a final non-appealable decision of a court of competent jurisdiction to have resulted from the Rights Agent’s gross negligence, fraud, bad faith or willful misconduct; provided that this Section 3.2(g) shall not apply with respect to income, receipt, franchise or similar Taxes levied against the Rights Agent by a Governmental Authority.
(h) The Company agrees (i) to pay the reasonable, out-of-pocket and documented fees and expenses of the Rights Agent in connection with the Rights Agent’s performance of its obligations hereunder as mutually agreed upon in writing by the Rights Agent and the Company on or prior to the date of this Agreement, and (ii) to reimburse the Rights Agent for all reasonable and documented out-of-pocket expenses and other disbursements incurred in the preparation, delivery, negotiation, amendment, administration and execution of this Agreement and the exercise and performance of its duties hereunder, including all stamp and transfer Taxes (and excluding for the avoidance of doubt, any income, receipt, franchise or similar Taxes levied against the Rights Agent by a Governmental Authority) and governmental charges, incurred by the Rights Agent in the performance of its obligations under this Agreement.
(i) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it believes that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.
(j) The Rights Agent shall have no responsibility to the Company, any holders of CVRs, any holders of shares of Common Stock or any other Person for interest or earnings on any moneys held by the Rights Agent pursuant to this Agreement.
(k) The Rights Agent shall not be subject to, nor be required to comply with, or determine if any Person has complied with, the Merger Agreement or any other agreement between or among any the Company, Tyrol or Holders, even though reference thereto may be made in this Agreement, or to comply with any notice, instruction, direction, request or other communication, paper or document other than as expressly set forth in this Agreement.
(l) Subject to applicable Law, (i) the Rights Agent and any shareholder, affiliate, director, officer or employee of the Rights Agent may buy, sell or deal in any securities of the Company or Tyrol or become peculiarly interested in any transaction in which such parties may be interested, or contract with or lend money to such parties or otherwise act as fully and freely as though it were not the Rights Agent under this Agreement, and (ii) nothing herein will preclude the Rights Agent from acting in any other capacity for the Company or for any other Person.
(m) In the event the Rights Agent reasonably believes any ambiguity or uncertainty exists hereunder or in any notice, instruction, direction, request or other communication, paper or document received by the Rights Agent hereunder, the Rights Agent shall, as soon as practicable, provide notice to the Company, and the Rights Agent, may, in its sole discretion, refrain from taking any action, and shall be fully protected and shall not be liable in any way to the Company or any Holder or any other Person for refraining from taking such action, unless the Rights Agent receives written instructions from the Company or such Holder or other Person which eliminate such ambiguity or uncertainty to the reasonable satisfaction of the Rights Agent;
(n) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorney or agents and the Rights Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorney or agents or for any loss to the Company or Tyrol resulting from any such act, default, neglect or misconduct, absent gross negligence, fraud, bad faith or willful misconduct (each as determined by a final non-appealable judgment of a court of competent jurisdiction) in the selection and continued employment thereof.
(o) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement (except its countersignature thereof) or be required to verify the same, and all such statements and recitals are and shall be deemed to have been made by the Company only.
(p) The Rights Agent shall act hereunder solely as agent for the Company and shall not assume any obligations or relationship of agency or trust with any of the owners or holders of the CVRs. The Rights Agent shall not have any duty or responsibility in the case of the receipt of any written demand from any Holders with respect to any action or default by the Company, including, without limiting the generality of the foregoing, any duty or responsibility to initiate or attempt to initiate any Legal Proceedings at Law or otherwise or to make any demand upon the Company.
(q) The Rights Agent may rely on and be fully authorized and protected in acting or failing to act upon (a) any guaranty of signature by an “eligible guarantor institution” that is a member or participant in the Securities Transfer Agents Medallion Program or other comparable “signature guarantee program” or insurance program in addition to, or in substitution for, the foregoing; or (b) any Law, act, regulation or any interpretation of the same even though such Law, act, or regulation may thereafter have been altered, changed, amended or repealed.
(r) The Rights Agent shall not be liable or responsible for any failure of the Company to comply with any of its obligations relating to any registration statement filed with the SEC or this Agreement, including without limitation obligations under applicable regulation or Law.
(s) The obligations of the Company and the rights of the Rights Agent under this Section 3.2, Section 3.1 and Section 2.4 shall survive the expiration of the CVRs and the termination of this Agreement and the resignation, replacement or removal of the Rights Agent.
(t) The Rights Agent will not be deemed to have knowledge of any event of which it was supposed to receive notice hereunder but has not received written notice of such event, and the Rights Agent will not incur any liability for failing to take action in connection therewith, in each case, unless and until it has received such notice in writing.
(u) The Rights Agent will have no liability and shall be held harmless by the Company in respect of the validity of this Agreement and the execution and delivery hereof (except the due execution and delivery hereof by the Rights Agent and the enforceability of this Agreement against the Rights Agent assuming the due execution and delivery hereof by the Company), nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement.
Section 3.3 Resignation and Removal; Appointment of Successor.
(a) The Rights Agent may resign at any time by written notice to the Company. Any such resignation notice shall specify the date on which such resignation will take effect (which shall be at least thirty (30) days following the date that such resignation notice is delivered), and such resignation will be effective on the earlier of (x) the date so specified and (y) the appointment of a successor Rights Agent.
(b) The Company will have the right to remove the Rights Agent at any time by written notice to the Rights Agent, specifying the date on which such removal will take effect. Such notice will be given at least thirty (30) days prior to the date so specified (or, if earlier, the appointment of the successor Rights Agent).
(c) If the Rights Agent resigns, is removed or becomes incapable of acting, the Company will promptly appoint a qualified successor Rights Agent. Notwithstanding the foregoing, if the Company fails to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent, then any Holder may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. The successor Rights Agent so appointed will, upon its acceptance of such appointment in accordance with this Section 3.3(c) and Section 3.4, become the Rights Agent for all purposes hereunder.
(d) The Company will give notice to the Holders of each resignation or removal of the Rights Agent and each appointment of a successor Rights Agent in accordance with Section 7.2. Each notice will include the name and address of the successor Rights Agent. If the Company fails to send such notice within ten (10) Business Days after acceptance of appointment by a successor Rights Agent, the successor Rights Agent will cause the notice to be mailed at the expense of the Company.
(e) Notwithstanding anything to the contrary in this Section 3.3, unless consented to in writing by the Acting Holders, the Company will not appoint as a successor Rights Agent any Person that is not a stock transfer agent of national reputation or the corporate trust department of a commercial bank.
(f) The Rights Agent will reasonably cooperate with the Company and any successor Rights Agent in connection with the transition of the duties and responsibilities of the Rights Agent to the successor Rights Agent, including the transfer of all relevant data, including the CVR Register, to the successor Rights Agent, but such predecessor Rights Agent shall not be required to make any additional expenditure or assume any additional liability in connection with the foregoing.
Section 3.4 Acceptance of Appointment by Successor. Every successor Rights Agent appointed hereunder will, at or prior to such appointment, execute, acknowledge and deliver to the Company and to the resigning or removed Rights Agent an instrument accepting such appointment and a counterpart of this Agreement, and such successor Rights Agent, without any further act, deed or conveyance, will become vested with all the rights, powers, trusts and duties of the Rights Agent; provided that upon the request of the Company or the successor Rights Agent, such resigning or removed Rights Agent will execute and deliver an instrument transferring to such successor Rights Agent all the rights, powers and trusts of such resigning or removed Rights Agent, except such rights which survive its resignation or removal under the terms hereunder.
ARTICLE 4
COVENANTS
Section 4.1 List of Holders. The Company will furnish or cause to be furnished to the Rights Agent, in such form as the Company receives from the Company’s transfer agent (or other agent performing similar services for the Company), the names and addresses of the Holders within fifteen (15) Business Days following the Closing Date.
Section 4.2 Efforts.
| (a) | During the Disposition Period, the Company shall, and shall cause its Subsidiaries to, use Commercially Reasonable Efforts to effect Dispositions with respect to the Company Pre-Closing Assets to a third party that has delivered Inbound Interest delivered or otherwise made known to an executive officer or business development officer of the Company with respect to a Company Pre-Closing Asset after the Closing to the Company, its Subsidiaries or their Representatives in evaluating or potentially engaging in a Disposition. |
| (b) | Subject to Section 4.2(a) and the other contractual obligations of the Company expressly set forth in this Agreement, (i) the Holders acknowledge that the Company has a fiduciary obligation to operate its business in the best interests of its stockholders, and any potential obligation to pay CVR Payments will not create any express or implied obligation to operate its business in any particular manner in order to maximize such CVR Payments, (ii) except as expressly set forth in this Agreement, the Holders are not relying on any representation of the Company or any other Person with regard to any Disposition or other action involving the Company Pre-Closing Assets following the Closing, and neither the Company nor any other Person has provided, or can provide, any assurance to the Holders that any CVR Payments will in fact be earned and paid, and (iii) none of the Company or any of its Subsidiaries, officers or directors shall have any obligation or liability whatsoever to any Person relating to or in connection with any action, or failure to act, with respect to any Disposition. |
Section 4.3 Additional Covenants. During the Disposition Period:
| (a) | Without limiting any other provisions of this Section 4.3, neither the Company nor any of its Affiliates shall take any action in bad faith with respect to, or with the primary purpose of avoiding, the payment of the CVR Payment Amount, including by making any dividend, distribution or other transfer of Net Proceeds in a manner materially adverse to the Company’s obligations in respect of Net Proceeds pursuant to this Agreement |
| (b) | The Company shall, and shall cause its subsidiaries to, use commercially reasonable efforts to continue to preserve and maintain the Company Pre-Closing Assets, including all Intellectual Property relating thereto but, and shall use commercially reasonable efforts to comply with such maintenance obligations as required by any license or related term set forth in any Disposition Agreement. Notwithstanding the foregoing, with respect to such efforts to preserve and maintain Intellectual Property relating to the Company Pre-Closing Assets, (A) the Company shall not be required to incur aggregate out-of-pocket costs and expenses in excess of $200,000 (the “IP Expense Fund”) and (B) the Company shall prioritize the application of the IP Expense Fund in accordance with the provisions of Schedule 1 hereto. |
| (c) | The Company shall not grant any lien, security interest, pledge or similar interest in any Company Pre-Closing Assets or any Net Proceeds other than (A) pursuant to the terms of a Disposition Agreement or (B) any such interest generally granted with respect to all assets of the Company and not specific to any of the Company Pre-Closing Assets, and which do not prohibit the ability of the Company to complete a Disposition and, in connection therewith, to deliver title to the Company Pre-Closing Assets to the purchaser thereof, free and clear of such interest. |
| (d) | The Company shall promptly inform the director(s) on the Company board of directors who then hold CVRs if and after Inbound Interest is delivered or otherwise made known to an executive officer or business development officer of the Company, and shall keep such director(s) reasonably and promptly informed regarding material developments in the negotiation of Disposition Agreements. |
Section 4.4 Books and Records. Until the end of the CVR Term, the Company shall, and shall cause its Affiliates to, keep true, complete and accurate records in sufficient detail to enable the Rights Agent to confirm the applicable CVR Payment Amount payable hereunder in accordance with the terms specified in this Agreement.
Section 4.5 Audits. Until the expiration of this Agreement and for a period of one (1) year thereafter, the Company shall keep complete and accurate records in sufficient detail to support the accuracy of the payments due hereunder. The Acting Holders shall have the right to cause an independent accounting firm reasonably acceptable to the Company to audit such records for the sole purpose of confirming payments for a period covering not more than the date commencing with the first CVR Payment Period in which the Company or its Affiliates receives Gross Proceeds and ending on the last day of the CVR Term. The Company may require such accounting firm to execute a reasonable confidentiality agreement with the Company prior to commencing the audit. The accounting firm shall disclose to Rights Agent or the Acting Holders, as applicable, only whether the reports are correct or not and the specific details concerning any discrepancies. No other information shall be shared. Such audits may be conducted during normal business hours upon reasonable prior written notice to the Company, but no more than frequently than once per year. No accounting period of the Company shall be subject to audit more than one time by the Acting Holders,
as applicable, unless after an accounting period has been audited by the Acting Holders, as applicable, the Company restates its financial results for such accounting period, in which event the Acting Holders, as applicable, may conduct a second audit of such accounting period in accordance with this Section 4.5. Adjustments (including remittances of underpayments or overpayments disclosed by such audit) shall be made by the Company to reflect the results of such audit, which adjustments shall be paid promptly following receipt of an invoice therefor. Whenever such an adjustment is made, the Company shall promptly prepare a certificate setting forth such adjustment, and a brief, reasonably detailed statement of the facts, computation and methodology accounting for such adjustment to the extent not already reflected in the audit report and promptly file with the Rights Agent a copy of such report and promptly deliver to the Rights Agent a revised CVR Payment Statement for the relevant CVR Payment Period. The Rights Agent shall be fully protected in relying on any such report and on any adjustment or statement therein contained and shall have no duty or liability with respect to, and shall not be deemed to have knowledge of any such adjustment or any such event unless and until it shall have received such report. The Acting Holders, as applicable, shall bear the full cost and expense of such audit unless such audit discloses an underpayment by the Company of twenty percent (20%) or more of the CVR Payment Amount due under this Agreement, in which case the Company shall bear the full cost and expense of such audit. The Rights Agent shall be entitled to rely on any audit report delivered by the independent accounting firm pursuant to this Section 4.5.
Section 4.7 No Conflict. The Company will not enter into any agreement with any Person that is, or otherwise take any actions or inactions, in conflict with this Agreement in any material respect or materially and adversely affect the performance of its obligations under this Agreement.
ARTICLE 5
AMENDMENTS
Section 5.1 Amendments Without Consent of Holders.
(a) The Company, at any time and from time to time, may (without the consent of any Person, other than the Rights Agent, with such consent not to be unreasonably withheld, conditioned or delayed) enter into one or more amendments to this Agreement for any of the following purposes:
(i) to evidence the appointment of another Person as a successor Rights Agent and the assumption by any successor Rights Agent of the covenants and obligations of the Rights Agent herein in accordance with the provisions hereof;
(ii) subject to Section 6.1, to evidence the succession of another person to the Company and the assumption of any such successor of the covenants of the Company outlined herein in a transaction contemplated by Section 6.1;
(iii) to add to the covenants of the Company such further covenants, restrictions, conditions or provisions as the Company and the Rights Agent will consider to be for the protection and benefit of the Holders; provided that in each case, such provisions do not adversely affect the interests of the Holders;
(iv) to cure any ambiguity, to correct or supplement any provision in this Agreement that may be defective or inconsistent with any other provision in this Agreement, or to make any other provisions with respect to matters or questions arising under this Agreement; provided that, in each case, such provisions do not adversely affect the interests of the Holders;
(v) as may be necessary or appropriate to ensure that the CVRs are not subject to registration under the Securities Act or the Exchange Act and the rules and regulations promulgated thereunder, or any applicable state securities or “blue sky” laws;
(vi) as may be necessary or appropriate to ensure that the Company is not required to produce a prospectus or an admission document in order to comply with applicable Law;
(vii) to cancel the CVRs (i) in the event that any Holder has abandoned its rights in accordance with Section 2.6, (ii) in order to give effect to the provisions of Section 2.7 or (iii) following a transfer of such CVRs to the Company or its Affiliates in accordance with Section 2.2 or Section 2.3;
(viii) as may be necessary or appropriate to ensure that the Company complies with applicable Law; or
(ix) to effect any other amendment to this Agreement for the purpose of adding, eliminating or changing any provisions of this Agreement, provided that, in each case, such additions, eliminations or changes do not adversely affect the interests of the Holders.
(b) Promptly after the execution by the Company of any amendment pursuant to this Section 5.1, the Company will (or will cause the Rights Agent to) notify the Holders in general terms of the substance of such amendment in accordance with Section 7.2.
Section 5.2 Amendments with Consent of Holders.
(a) In addition to any amendments to this Agreement that may be made by the Company without the consent of any Holder pursuant to Section 5.1, with the consent of the Acting Holders (whether evidenced in a writing or taken at a meeting of the Holders), the Company and the Rights Agent may enter into one or more amendments to this Agreement for the purpose of adding, eliminating or amending any provisions of this Agreement, even if such addition, elimination or amendment is adverse to the interests of the Holders.
(b) Promptly after the execution by the Company and the Rights Agent of any amendment pursuant to the provisions of this Section 5.2, the Company will (or will cause the Rights Agent to) notify the Holders in general terms of the substance of such amendment in accordance with Section 7.2.
Section 5.3 Effect of Amendments.
Upon the execution of any amendment under this Article 5, this Agreement will be modified in accordance therewith, such amendment will form a part of this Agreement for all purposes and every Holder will be bound thereby. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 5, the Rights Agent shall execute such supplement or amendment. Notwithstanding anything in this Agreement to the contrary, the Rights Agent shall not be required to execute any supplement or amendment to this Agreement that it has determined would adversely affect its own rights, duties, obligations or immunities under this Agreement. No supplement or amendment to this Agreement shall be effective unless duly executed by the Rights Agent.
ARTICLE 6
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 6.1 The Company May Not Consolidate, Etc. During the CVR Term, the Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless:
(a) the Person formed by such consolidation or into which the Company is merged or the Person that acquires by conveyance or transfer, or that leases, the properties and assets of the Company substantially as an entirety (the “Surviving Person”) shall expressly assume payment of amounts on all CVRs (when and as due hereunder) and the performance of every duty and covenant of this Agreement on the part of the Company to be performed or observed; and
(b) The Company has delivered to the Rights Agent an Officer’s Certificate, stating that such consolidation, merger, conveyance, transfer or lease complies with this Article 6 and that all conditions precedent herein provided for relating to such transaction have been complied with.
Section 6.2 Successor Substituted. Upon any consolidation of or merger by the Company with or into any other Person, or any conveyance, transfer or lease of the properties and assets substantially as an entirety to any Person in accordance with Section 6.3, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, and shall assume all of the obligations of the Company under this Agreement with the same effect as if the Surviving Person had been named as the Company herein.
ARTICLE 7
MISCELLANEOUS
Section 7.1 Notices to Rights Agent and to the Company. All notices, requests and other communications (each, a “Notice”) to any party hereunder shall be in writing and shall be deemed to have been duly delivered and received hereunder (a) when sent, fees prepaid, via a reputable international overnight courier service in the case of delivery in person, by FedEx or other internationally recognized overnight courier service or (b) (except in the case of the Rights Agent) when sent, if sent by email (with a written or electronic confirmation of delivery) prior to 6:00 p.m. (New York City time), otherwise on the next succeeding Business Day, in each case to the intended recipient as set forth below:
if to the Rights Agent, to:
Computershare Trust Company, N.A.,
Computershare Inc.
150 Royall Street
Canton, MA 02021
Attention: Client Services
Facsimile: (781) 575-4210
if to the Company, to:
Tectonic Therapeutic, Inc.
400 Arsenal Way, Suite 210
Watertown, MA 02472
Attention: Alise Reicin, Chief Executive Officer
Email: [email protected]
with a copy, which shall not constitute notice, to:
Cooley LLP
500 Boylston Street
Boston, MA 02116
Attention: Miguel Vega; Marc Recht; Michael Rohr
E-mail: [email protected]; [email protected]; [email protected]
or to such other address as such party may hereafter specify for the purpose by notice to the other parties hereto.
Section 7.2 Notice to Holders. All Notices required to be given to the Holders will be given (unless otherwise herein expressly provided) in writing and mailed, first-class postage prepaid, to each Holder at such Holder’s address as set forth in the CVR Register, not later than the latest date, and not earlier than the earliest date, prescribed for the sending of such Notice, if any, and will be deemed given on the date of mailing. In any case where notice to the Holders is given by mail, neither the failure to mail such Notice, nor any defect in any Notice so mailed, to any particular Holder will affect the sufficiency of such Notice with respect to other Holders.
Section 7.3 Entire Agreement. As between the Company and the Rights Agent, this Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement, notwithstanding the reference to any other agreement herein, and supersedes all prior agreements and understandings, both written and oral, among or between any of the parties with respect to the subject matter of this Agreement. If and to the extent that any provision of this Agreement is inconsistent or conflicts with the Merger Agreement, this Agreement will govern and be controlling.
Section 7.4 Merger or Consolidation or Change of Name of Rights Agent. Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the stock transfer or other shareholder services business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 3.3. The purchase of all or substantially all of the Rights Agent’s assets employed in the performance of transfer agent activities shall be deemed a merger or consolidation for purposes of this Section 7.4.
Section 7.5 Successors and Assigns. This Agreement will be binding upon, and will be enforceable by and inure solely to the benefit of, the Holders, the Company and the Rights Agent and their respective successors and assigns. Except for assignments pursuant to Section 7.4, the Rights Agent may not assign this Agreement without the Company’s prior written consent. Subject to Section 5.1(a)(ii) and Article 6 hereof, the Company may assign, in its sole discretion and without the consent of any other party, any or all of its rights, interests and obligations hereunder to one or more of its Affiliates or to any Person with whom the Company is merged or consolidated, or any entity resulting from any merger or consolidation to which the Company shall be a party (each, an “Assignee”); provided, that in connection with any assignment to an Assignee, the Company shall agree to remain liable for the performance by the Company of its obligations hereunder (to the extent the Company exists following such assignment). The Company or an Assignee may not otherwise assign this Agreement without the prior consent of the Acting Holders (such consent not to be unreasonably withheld, conditioned or delayed). Any attempted assignment of this Agreement in violation of this Section 7.5 will be void ab initio and of no effect.
Section 7.6 Benefits of Agreement; Action by Acting Holders. Nothing in this Agreement, express or implied, will give to any Person (other than the Company, the Rights Agent, the Holders and their respective permitted successors and assigns hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the Company, the Rights Agent, the Holders and their permitted successors and assigns. The Holders will have no rights hereunder except as are expressly set forth herein. The Holders shall be intended third-party beneficiaries of the provisions of this Agreement; provided that, except for the rights of the Rights Agent set forth herein, the Acting Holders will have the sole right, on behalf of all Holders, by virtue of or under any provision of this Agreement, to institute any action or Legal Proceeding at Law or in equity with respect to this Agreement or otherwise to enforce the Holders’ rights hereunder, and no individual Holder or other group of Holders will be entitled to exercise such rights.
Section 7.7 Governing Law. This Agreement and the CVRs will be governed by, and construed in accordance with, the laws of the State of Delaware without regard to the conflicts of law rules of such state.
Section 7.8 Jurisdiction. In any action or proceeding between any of the parties hereto arising out of or relating to this Agreement or any of the transactions contemplated hereby, each of the parties hereto: (a) irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the Court of Chancery of the State of Delaware or, to the extent such court does not have subject matter jurisdiction, the Superior Court of the State of Delaware or the United States District Court for the District of Delaware, and appellate courts thereof; (b) agrees that all claims in respect of such action or proceeding shall be heard and determined exclusively in accordance with clause (a) of this Section 7.8; (c) waives any objection to laying venue in any such action or proceeding in such courts; (d) waives any objection that such courts are an inconvenient forum or do not have jurisdiction over any Party; and (e) agrees that service of process upon such Party in any such action or proceeding shall be effective if notice is given in accordance with Section 7.1 or Section 7.2 of this Agreement; provided that, nothing in this Section 7.8 shall affect the right of any Party to serve legal process in any other manner permitted by applicable Law.
Section 7.9 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (II) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATION OF THIS WAIVER, (III) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (IV) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.9.
Section 7.10 Severability Clause. In the event that any provision of this Agreement, or the application of any such provision to any Person or set of circumstances, is for any reason determined to be invalid, unlawful, void or unenforceable to any extent, the remainder of this Agreement, and the application of such provision to Persons or circumstances other than those as to which it is determined to be invalid, unlawful, void or unenforceable, will not be impaired or otherwise affected and will continue to be valid and enforceable to the fullest extent permitted by applicable Law. Upon such a determination, the parties hereto will 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 fullest extent possible; provided, however, that if an excluded provision shall affect the rights, immunities, liabilities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign immediately upon written Notice to the Company.
Section 7.11 Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which will be deemed an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement or any counterpart may be executed and delivered by electronic communications by portable document format (.pdf), each of which shall be deemed an original. This Agreement will become effective when each party hereto will have received a counterpart hereof signed by the other party hereto. Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement will have no effect and no party will have any right or obligation hereunder (whether by virtue of any oral or written agreement or any other communication).
Section 7.12 Termination. This Agreement will automatically terminate and be of no further force or effect and, except as provided in Section 3.2, the parties hereto will have no further liability hereunder, and the CVRs will expire without any consideration or compensation therefor, upon the expiration of the CVR Term. The termination of this Agreement will not affect or limit the right of Holders to receive the CVR Payments under Section 2.4 to the extent earned prior to the termination of this Agreement, and the provisions applicable thereto will survive the expiration or termination of this Agreement until such CVR Payments have been made, if applicable. Upon termination or expiry of this Agreement pursuant to this Section 7.12, all CVRs issued hereunder shall be automatically cancelled and forfeited by the Holders without any consideration or payment therefor. Notwithstanding the foregoing, no such termination shall affect any rights or obligations accrued prior to the effective date of such termination.
Section 7.13 Funds. All funds received by Computershare under this Agreement that are to be distributed or applied by Computershare in the performance of services hereunder (the “Funds”) shall be held by Computershare, as agent for the Company, and deposited in one or more bank accounts to be maintained by Computershare in its name as agent for the Company. Until paid pursuant to the terms of this Agreement, Computershare may hold or invest the Funds through such accounts in: (a) funds backed by obligations of, or guaranteed by, the United States of America; (b) debt or commercial paper obligations rated A-1 or P-1 or better by S&P Global Inc. (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”), respectively; (c) Government and Treasury backed AAA-rated Fixed NAV money market funds that comply with Rule 2a-7 of the Investment Company Act of 1940, as amended; or (d) short term certificates of deposit, bank repurchase agreements, and bank accounts with commercial banks with Tier 1 capital exceeding $1 billion, or with an investment grade rating by S&P (LT Local Issuer Credit Rating), Moody’s (Long Term Rating) and Fitch Ratings, Inc. (LT Issuer Default Rating) (each as reported by Bloomberg Finance L.P.). The Rights Agent shall have no responsibility or liability for any diminution of the Funds that may result from any deposit or investment made by Computershare in accordance with this paragraph, including any losses resulting from a default by any bank, financial institution or other third party. Computershare may from time to time receive interest, dividends or other earnings in connection with such deposits or investments. The Rights Agent shall not be obligated to pay such interest, dividends or earnings to the Company, any holder or any other party.
Section 7.14 Further Assurance by Company. The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required or requested by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.
Section 7.15 Force Majeure. Notwithstanding anything to the contrary contained herein, the Rights Agent will not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, epidemic, pandemic, terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest.
Section 7.16 Construction.
(a) For purposes of this Agreement, whenever the context requires: singular terms will include the plural, and vice versa; the masculine gender will include the feminine and neuter genders; the feminine gender will include the masculine and neuter genders; and the neuter gender will include the masculine and feminine genders.
(b) As used in this Agreement, the words “include” and “including,” and variations thereof, will not be deemed to be terms of limitation, but rather will be deemed to be followed by the words “without limitation.”
(c) The headings contained in this Agreement are for convenience of reference only, will not be deemed to be a part of this Agreement and will not be referred to in connection with the construction or interpretation of this Agreement.
(d) Unless stated otherwise, “Article” and “Section” followed by a number or letter mean and refer to the specified Article or Section of this Agreement. The term “Agreement” and any reference in this Agreement to this Agreement or any other agreement or document includes, and is a reference to, this Agreement or such other agreement or document as it may have been, or may from time to time be, amended, restated, replaced, supplemented or novated and includes all schedules to it.
(e) A period of time is to be computed as beginning on the day following the event that began the period and ending at 4:30 p.m. on the last day of the period, if the last day of the period is a Business Day, or at 4:30 p.m. on the next Business Day if the last day of the period is not a Business Day.
(f) Any reference in this Agreement to a date or time shall be deemed to be such date or time in New York City, United States, unless otherwise specified. The parties hereto and the Company have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and the Company and no presumption or burden of proof shall arise favoring or disfavoring any Person by virtue of the authorship of any provision of this Agreement.
(g) All references herein to “$” are to United States Dollars.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed as of the day and year first above written.
| AVROBIO, INC. | ||
| By: | /s/ Erik Ostrowski | |
| Name: | Erik Ostrowski | |
| Title: | President, Interim Chief Executive Officer, Chief Financial Officer and Treasurer | |
| COMPUTERSHARE INC. and COMPUTERSHARE TRUST COMPANY, N.A., as Rights Agent On behalf of both entities | ||
| By: | /s/ Erik Schwendenman | |
| Name: | Erik Schwendenman | |
| Title: | VP Business Development | |
Exhibit 10.2
TECTONIC THERAPEUTIC, INC.
FORM OF INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this “Agreement”) dated as of ___________, 2024, is made by and between TECTONIC THERAPEUTIC, INC., a Delaware corporation (the “Company”), and _________________ (“Indemnitee”).
RECITALS
A. The Company desires to attract and retain the services of highly qualified individuals as directors, officers, employees and agents.
B. The Company’s Bylaws (the “Bylaws”) require that the Company indemnify its directors and officers, and empowers the Company to indemnify its employees and other agents, as authorized by the Delaware General Corporation Law, as amended (the “DGCL”), under which the Company is organized and such Bylaws expressly provide that the indemnification provided therein is not exclusive and contemplates that the Company may enter into separate agreements with its directors, officers and other persons to set forth specific indemnification provisions.
C. Indemnitee does not regard the protection currently provided by applicable law, the Bylaws, the Company’s other governing documents, and available insurance as adequate under the present circumstances, and the Company has determined that Indemnitee and other directors, officers, employees and agents of the Company may not be willing to serve or continue to serve in such capacities without additional protection.
D. The Company desires and has requested Indemnitee to serve or continue to serve as a director, officer, employee or agent of the Company, as the case may be, and has proffered this Agreement to Indemnitee as an additional inducement to serve in such capacity.
E. Indemnitee is willing to serve, or to continue to serve, as a director, officer, employee or agent of the Company, as the case may be, if Indemnitee is furnished the indemnity provided for herein by the Company.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions.
(a) Agent. For purposes of this Agreement, the term “Agent” of the Company means any person who: (i) is or was a director, officer, employee, agent, or other fiduciary of the Company or a subsidiary of the Company; or (ii) is or was serving at the request or for the convenience of, or representing the interests of, the Company or a subsidiary of the Company, as a director, officer, employee, agent, or other fiduciary of a foreign or domestic corporation, partnership, joint venture, trust or other enterprise.
1.
(b) Change in Control. For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by the Company’s then outstanding Voting Securities; (ii) individuals who on the date of this Agreement are members of the Company’s board of directors (the “Board of Directors” and altogether, the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board of Directors (provided, however, that if the appointment or election (or nomination for election) of any new board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall be considered as a member of the Incumbent Board); or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of transactions) all or substantially all of the Company’s assets.
(c) Expenses. For purposes of this Agreement, the term “Expenses” shall be broadly construed and shall include, without limitation, all direct and indirect costs of any type or nature whatsoever, including, without limitation, all attorneys’, witness, or other professional fees and related disbursements, and other out-of-pocket costs of whatever nature, actually and reasonably incurred by Indemnitee in connection with the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under this Agreement, the DGCL or otherwise. The term “Expenses” shall also include reasonable compensation for time spent by Indemnitee for which he or she is not compensated by the Company or any subsidiary or third party: (i) for any period during which Indemnitee is not an Agent, in the employment of, or providing services for compensation to, the Company or any subsidiary; and (ii) if the rate of compensation and estimated time involved is approved by the directors of the Company who are not parties to any action with respect to which Expenses are incurred, for Indemnitee while an Agent of, employed by, or providing services for compensation to, the Company or any subsidiary.
2.
(d) Independent Counsel. For purposes of this Agreement, the term “Independent Counsel” means a law firm, or a partner (or, if applicable, member) of such a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company will pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, Liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.
(e) Liabilities. For purposes of this Agreement, the term “Liabilities” shall be broadly construed and shall include, without limitation, judgments, damages, deficiencies, liabilities, losses, penalties, excise taxes, fines, assessments and amounts paid in settlement, including any interest and any federal, state, local or foreign taxes imposed as a result of the actual or deemed receipt of any payment under this Agreement.
(f) Proceedings. For purposes of this Agreement, the term “proceeding” shall be broadly construed and shall include, without limitation, any threatened, pending, or completed action, suit, claim, counterclaim, cross claim, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing, or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, and whether formal or informal in any case, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness, or otherwise by reason of: (i) the fact that Indemnitee is or was a director or officer of the Company; (ii) the fact that any action taken by Indemnitee (or a failure to take action by Indemnitee) or of any action (or failure to act) on Indemnitee’s part while acting as an Agent; or (iii) the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise, and in any such case described above, whether or not serving in any such capacity at the time any liability or Expense is incurred for which indemnification, reimbursement, or advancement of Expenses may be provided under this Agreement. If the Indemnitee believes in good faith that a given situation may lead to or culminate in the institution of a proceeding, this shall be considered a proceeding under this paragraph.
(g) Subsidiary. For purposes of this Agreement, the term “subsidiary” means any corporation, limited liability company, or other entity, of which more than 50% of the outstanding voting securities or equity interests are owned, directly or indirectly, by the Company and one or more of its subsidiaries, and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as an Agent.
(h) Voting Securities. For purposes of this Agreement, “Voting Securities” shall mean any securities of the Company that vote generally in the election of directors.
3.
2. Agreement to Serve. Indemnitee will serve, or continue to serve, as the case may be, as an Agent, faithfully and to the best of his or her ability, at the will of such entity designated by the Company and at the request of the Company (or under separate agreement, if such agreement exists), in the capacity Indemnitee currently serves such entity, so long as Indemnitee is duly appointed or elected and qualified in accordance with the applicable provisions of the governance documents of such entity, or until such time as Indemnitee tenders his or her resignation in writing; provided, however, that nothing contained in this Agreement is intended as an employment agreement between Indemnitee and the Company or any of its subsidiaries or to create any right to continued employment of Indemnitee with the Company or any of its subsidiaries in any capacity.
The Company acknowledges that it has entered into this Agreement and assumes the obligations imposed on it hereby, in addition to and separate from its obligations to Indemnitee under the Bylaws, to induce Indemnitee to serve, or continue to serve, as an Agent, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an Agent.
3. Indemnification.
(a) Indemnification in Third Party Proceedings. Subject to Section 10 below, the Company shall indemnify Indemnitee to the fullest extent permitted by the DGCL, as the same may be amended from time to time (but, to the fullest extent of the law, only to the extent that such amendment permits Indemnitee to broader indemnification rights than the DGCL permitted prior to adoption of such amendment), if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding, other than a proceeding by or in the right of the Company to procure a judgment in its favor, for any and all Expenses and Liabilities (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses and Liabilities) incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such proceeding, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal proceeding had no reasonable cause to believe that Indemnitee’s conduct was unlawful. The parties hereto intend that this Agreement shall provide to the fullest extent permitted by law for indemnification in excess of that expressly permitted by statute, including, without limitation, any indemnification provided by the Amended and Restated Certificate of Incorporation of the Company, which may be amended from time to time (the “Certificate of Incorporation”), the Bylaws, vote of its stockholders or disinterested directors, or applicable law.
(b) Indemnification in Derivative Actions and Direct Actions by the Company. Subject to Section 10 below, the Company shall indemnify Indemnitee to the fullest extent permitted by the DGCL, as the same may be amended from time to time (but, fullest extent permitted by applicable law, only to the extent that such amendment permits Indemnitee to broader indemnification rights than the DGCL permitted prior to adoption of such amendment), if Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding by or in the right of the Company to procure a judgment in its favor, against any and all Expenses actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement, or appeal of such proceedings, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 3(b) in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court competent jurisdiction to be liable to the Company, unless and only to the extent that the Chancery Court of the State of Delaware (the “Delaware Court”) or any court in which the proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.
4.
(c) Indemnification of Related Parties. If (i) Indemnitee is or was affiliated with one or more private equity or venture capital funds and/or certain of its affiliates that has invested in the Company (an “Appointing Stockholder”), (ii) the Appointing Stockholder is, or is threatened to be made, a party to or a participant in any proceeding, and (iii) the Appointing Stockholder’s involvement in the proceeding is related to Indemnitee’s service to the Company as a director of the Company or any direct or indirect subsidiaries of the Company, then, to the extent resulting from any claim based on Indemnitee’s service to the Company as an Agent, the Appointing Stockholder will be entitled to indemnification hereunder for reasonable expenses to the same extent as Indemnitee.
(d) Fund Indemnitors. The Company hereby acknowledges that the Indemnitee may have certain rights to indemnification, advancement of Expenses or insurance, provided by a private equity or venture capital fund and/or certain of its affiliates (collectively, the “Fund Indemnitors”). In the event that the Indemnitee is, or is threatened to be made, a party to or a participant in any proceeding to the extent resulting from any claim based on the Indemnitee’s service as an Agent, then the Company shall (i) be an indemnitor of first resort (i.e., its obligations to Indemnitee are primary and any obligation of the Fund Indemnitors to advance Expenses or to provide indemnification for the same Expenses or liabilities incurred by Indemnitee are secondary), (ii) be required to advance reasonable Expenses incurred by Indemnitee, and (iii) be liable for the full amount of all Expenses, judgments, penalties, fines, and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement and any provision of the Bylaws or the Certificate of Incorporation (or any other agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Fund Indemnitors. The Company irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. No advancement or payment by the Fund Indemnitors on behalf of Indemnitee with respect to any claim for which Indemnitee has sought advancement on or indemnification from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution or be subrogated to the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. The Fund Indemnitors are express third-party beneficiaries of the terms of this Section.
4. Indemnification of Expenses of Successful Party. Notwithstanding any other provision of this Agreement, in circumstances where indemnification is not available under Section 3(a) or 3(b), as the case may be, to the fullest extent permitted by law and to the extent that Indemnitee is a party to (or a participant in) any proceeding and has been successful on the merits or otherwise in defense of any proceeding or in defense of any claim, issue or matter therein, in whole or part, including the dismissal of any action without prejudice, the Company shall indemnify Indemnitee against all Expenses and Liabilities in connection with the investigation, defense or appeal of such proceeding. If Indemnitee is not wholly successful in such proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such proceeding, the Company shall indemnify Indemnitee against all Expenses and Liabilities incurred by Indemnitee or on Indemnitee’s behalf in connection with or related to each successfully resolved claim, issue or matter to the fullest extent permitted by law.
5.
5. Partial Indemnification; Witness Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses and Liabilities incurred by Indemnitee in the investigation, defense, settlement or appeal of a proceeding, but is precluded by applicable law or the specific terms of this Agreement to indemnification for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of Indemnitee’s acting as an Agent, a witness or otherwise asked to participate in any proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.
6. Advancement of Expenses. To the extent not prohibited by law, the Company shall advance the Expenses incurred by Indemnitee in connection with any proceeding, and such advancement shall be made within twenty (20) days after the receipt by the Company of a statement or statements requesting such advances (which shall include invoices received by Indemnitee in connection with such Expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditures made that would cause Indemnitee to waive any privilege accorded by applicable law shall not be included with the invoice) and upon request of the Company, an undertaking to repay the advancement of Expenses if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. Advances shall be unsecured, interest free and without regard to Indemnitee’s ability to repay the Expenses. Advances shall include any and all Expenses incurred by Indemnitee pursuing an action to enforce Indemnitee’s right to indemnification under this Agreement or otherwise and this right of advancement, including expenses incurred preparing and forwarding statements to the Company to support the advances claimed. Indemnitee acknowledges that the execution and delivery of this Agreement shall constitute an undertaking providing that Indemnitee shall, to the fullest extent required by law, repay the advance (without interest) if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. The right to advances under this Section shall continue until final disposition of any proceeding, including any appeal therein. This Section 6 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 10(b).
7. Notice and Other Indemnification Procedures.
(a) Notification of Proceeding. Indemnitee will notify the Company in writing promptly upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The written notification to the Company shall include a description of the nature of the proceeding and the facts underlying the proceeding. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement.
6.
(b) Request for Indemnification Payments. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification under the terms of this Agreement, and shall request payment thereof by the Company.
(c) Determination of Right to Indemnification Payments. Upon written request by Indemnitee for indemnification pursuant to the Section 7(b) hereof, a determination with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following four methods, which shall be at the election of the Board of Directors: (i) by a majority vote of the disinterested directors, even though less than a quorum; (ii) by a committee of disinterested directors designated by a majority vote of the disinterested directors, even though less than a quorum; (iii) if there are no disinterested directors or if the disinterested directors so direct, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to the Indemnitee; or (iv) if so directed by the Board of Directors, by the stockholders of the Company; provided, however, that if there has been a Change in Control, then such determination shall be made by Independent Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). For purposes hereof, disinterested directors are those members of the Board of Directors who are not parties to the action, suit or proceeding in respect of which indemnification is sought by Indemnitee. Indemnification payments requested by Indemnitee under Section 3 hereof shall be made by the Company no later than sixty (60) days after receipt of the written request by Indemnitee. Claims for advancement of Expenses shall be made under the provisions of Section 6 herein.
(d) Application for Enforcement. In the event the Company fails to make timely payments as set forth in Sections 6 or 7(b) herein, Indemnitee shall have the right to apply to any court of competent jurisdiction for the purpose of enforcing Indemnitee’s right to indemnification or advancement of Expenses pursuant to this Agreement. In such enforcement hearing or proceeding, the burden of proof shall be on the Company to prove that indemnification or advancement of Expenses to Indemnitee is not required under this Agreement or permitted by applicable law. Any determination by the Company (including its Board of Directors, a committee thereof, Independent Counsel) or the stockholders of the Company, that Indemnitee is not entitled to indemnification hereunder, shall not be a defense by the Company to the action nor create any presumption that Indemnitee is not entitled to indemnification or advancement of Expenses hereunder.
(e) Indemnification of Certain Expenses. The Company shall indemnify Indemnitee against all Expenses incurred in connection with any hearing or proceeding under this Section 7 unless the Company prevails in such hearing or proceeding on the merits in all material respects.
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8. Assumption of Defense. In the event the Company shall be requested by Indemnitee to pay the Expenses of any proceeding, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, or to participate to the extent permissible in such proceeding, with counsel reasonably acceptable to Indemnitee. Upon assumption of the defense by the Company and the retention of such counsel by the Company, the Company shall not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that Indemnitee shall have the right to employ separate counsel in such proceeding at Indemnitee’s sole cost and expense. Notwithstanding the foregoing, if Indemnitee’s counsel delivers a written notice to the Company stating that such counsel has reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or the Company shall not, in fact, have employed counsel or otherwise actively pursued the defense of such proceeding within a reasonable time, then in any such event the fees and Expenses of Indemnitee’s counsel to defend such proceeding shall be subject to the indemnification and advancement of Expenses provisions of this Agreement.
9. Insurance. To the extent that the Company maintains an insurance policy or policies providing liability insurance for Agents (“D&O Insurance”), Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such Agent under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms hereof, the Company has D&O Insurance in effect or otherwise potentially available, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.
10. Exceptions.
(a) Certain Matters. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee on account of any proceeding with respect to: (i) remuneration paid to Indemnitee if it is determined by final judgment or other final adjudication that such remuneration was in violation of law (and, in this respect, both the Company and Indemnitee have been advised that the Securities and Exchange Commission (the “SEC”) believes that indemnification for liabilities arising under the federal securities laws is against public policy and is, therefore, unenforceable and that claims for indemnification should be submitted to appropriate courts for adjudication, as indicated in Section 10(d) below); (ii) a final judgment rendered against Indemnitee for an accounting, disgorgement or repayment of profits made from the purchase or sale by Indemnitee of securities of the Company against Indemnitee or in connection with a settlement by or on behalf of Indemnitee to the extent it is acknowledged by Indemnitee and the Company that such amount paid in settlement resulted from Indemnitee’s conduct from which Indemnitee received monetary personal profit, pursuant to the provisions of Section 16(b) of the Exchange Act or other provisions of any federal, state or local statute or rules and regulations thereunder; (iii) a final judgment or other final adjudication that Indemnitee’s conduct was in bad faith, knowingly fraudulent or deliberately dishonest or constituted willful misconduct (but only to the extent of such specific determination); or (iv) on account of conduct that is established by
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a final judgment as constituting a breach of Indemnitee’s duty of loyalty to the Company or resulting in any personal profit or advantage to which Indemnitee is not legally entitled. For purposes of the foregoing sentence, a final judgment or other adjudication may be reached in either the underlying proceeding or action in connection with which indemnification is sought or a separate proceeding or action to establish rights and Liabilities under this Agreement.
(b) Claims Initiated by Indemnitee. Any provision herein to the contrary notwithstanding, the Company shall not be obligated to indemnify or advance Expenses to Indemnitee with respect to proceedings or claims initiated or brought by Indemnitee against the Company or its Agents and not by way of defense, except (i) with respect to proceedings brought to establish or enforce a right to indemnification or advancement under this Agreement or under any other agreement, provision in the Bylaws or the Certificate of Incorporation or applicable law, or (ii) with respect to any other proceeding initiated by Indemnitee that is either approved by the Board of Directors or Indemnitee’s participation is required by applicable law. However, indemnification or advancement of Expenses may be provided by the Company in specific cases if the Board of Directors determines it to be appropriate.
(c) Unauthorized Settlements. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee under this Agreement for any amounts paid in settlement of a proceeding effected without the Company’s written consent. Neither the Company nor Indemnitee shall unreasonably withhold consent to any proposed settlement; provided, however, that the Company may in any event decline to consent to (or to otherwise admit or agree to any liability for indemnification hereunder in respect of) any proposed settlement if the Company is also a party in such proceeding and determines in good faith that such settlement is not in the best interests of the Company and its stockholders.
(d) Securities Act Liabilities. Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee or otherwise act in violation of any undertaking appearing in and required by the rules and regulations promulgated under the Securities Act of 1933, as amended (the “Securities Act”), or in any registration statement filed with the SEC under the Securities Act. Indemnitee acknowledges that paragraph (h) of Item 512 of Regulation S-K currently generally requires the Company to undertake in connection with any registration statement filed under the Securities Act to submit the issue of the enforceability of Indemnitee’s rights under this Agreement in connection with any liability under the Securities Act on public policy grounds to a court of appropriate jurisdiction and to be governed by any final adjudication of such issue. Indemnitee specifically agrees that any such undertaking shall supersede the provisions of this Agreement and to be bound by any such undertaking.
(e) Prior Payments Any provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify or advance Expenses to Indemnitee under this Agreement for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, expect with respect to any excess beyond the amount paid under any insurance policy or indemnity policy.
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11. Nonexclusivity and Survival of Rights. The provisions for indemnification and advancement of Expenses set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may at any time be entitled under any provision of applicable law, the Certificate of Incorporation, the Bylaws or other agreements, both as to action in Indemnitee’s official capacity and Indemnitee’s action as an Agent, in any court in which a proceeding is brought, and Indemnitee’s rights hereunder shall continue after Indemnitee has ceased acting as an Agent and shall inure to the benefit of the heirs, executors, administrators and assigns of Indemnitee. The obligations and duties of the Company to Indemnitee under this Agreement shall be binding on the Company and its successors and assigns until terminated in accordance with its terms. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her corporate status prior to such amendment, alteration or repeal. To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Certificate of Incorporation, the Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, by Indemnitee shall not prevent the concurrent assertion or employment of any other right or remedy by Indemnitee.
12. Term. This Agreement shall continue until and terminate upon the later of: (a) five (5) years after the date that Indemnitee shall have ceased to serve as an Agent; or (b) one (1) year after the final termination of any proceeding, including any appeal then pending, in respect to which Indemnitee was granted rights of indemnification or advancement of Expenses hereunder.
No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against an Indemnitee or an Indemnitee’s estate, spouse, heirs, executors or personal or legal representatives after the expiration of five (5) years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such five-year period; provided, however, that if any shorter period of limitations is otherwise applicable to such cause of action, such shorter period shall govern.
13. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who, at the request and expense of the Company, shall execute all papers required and shall do everything that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.
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14. Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification and advancement of Expenses to Indemnitee to the fullest extent now or hereafter permitted by law.
15. Severability. If any provision of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of the Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 14 hereof.
16. Amendment and Waiver. No supplement, modification, amendment, or cancellation of this Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.
17. Notice. Except as otherwise provided herein, any notice or demand which, by the provisions hereof, is required or which may be given to or served upon the parties hereto shall be in writing and, if by electronic transmission, shall be deemed to have been validly served, given or delivered when sent, if by overnight delivery, courier or personal delivery, shall be deemed to have been validly served, given or delivered upon actual delivery and, if mailed, shall be deemed to have been validly served, given or delivered three (3) business days after deposit in the United States mail, as registered or certified mail, with proper postage prepaid and addressed to the party or parties to be notified at the addresses set forth on the signature page of this Agreement (or such other address(es) as a party may designate for itself by like notice). If to the Company, notices and demands shall be delivered to the attention of the Chief Executive Officer of the Company.
18. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware.
19. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same Agreement. Only one such counterpart need be produced to evidence the existence of this Agreement.
20. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction hereof.
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21. Entire Agreement. Subject to Section 11 hereof, this Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings and negotiations, written and oral, between the parties with respect to the subject matter of this Agreement; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation, the Bylaws, the DGCL and any other applicable law, and shall not be deemed a substitute therefor, and does not diminish or abrogate any rights of Indemnitee thereunder.
22. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such proceeding; and/or (ii) the relative fault of the Company and Indemnitee in connection with such event(s) and/or transaction(s).
23. Consent to Jurisdiction. The Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) agree to appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, an agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.
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IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the date first above written.
| TECTONIC THERAPEUTIC, INC. | ||||
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| Name: |
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| Title: |
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| INDEMNITEE | ||||
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Signature of Indemnitee | ||||
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Print or Type Name of Indemnitee | ||||
Exhibit 10.3
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this “Agreement”), is made as of January 29, 2024 (the “Effective Date”), by and between Tectonic Therapeutic, Inc., a Delaware corporation (the “Company”) and each of the investors listed on Exhibit A attached to this Agreement (each a “Purchaser” and together the “Purchasers”).
RECITALS
WHEREAS, the Company and the Purchasers are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act (as defined herein) and/or Rule 506 of Regulation D promulgated thereunder;
WHEREAS, the Company desires to sell to the Purchasers, and the Purchasers desire to purchase from the Company shares of Common Stock, par value $0.0001 (the “Common Stock”) at a purchase price equal to $12.39908 per share, each in accordance with the terms and provisions of this Agreement, or an aggregate purchase price of $96,599,856.12 (the “Offering Amount”).
NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties and covenants herein contained, the parties hereto hereby agree as follows:
1. Purchase and Sale of Common Stock.
1.1 Upon the terms and subject to the conditions herein contained, the Company agrees to sell to each Purchaser, and each Purchaser agrees, severally and not jointly, to purchase from the Company, at a closing (the “Closing,” and the date of the Closing, the “Closing Date”) to occur immediately prior to the Effective Time (as such term is defined in that certain Agreement and Plan of Merger and Reorganization by and among the Company, Alpine Merger Subsidiary, Inc. and AVROBIO, Inc. (“Aspen”), dated as of the date hereof (the “Merger Agreement”)), that number of shares of Common Stock as indicated opposite such Purchaser’s name on the Schedule of Purchasers on Exhibit A hereto under the heading “ Purchased Shares” (collectively, the “Shares”) for the Total Purchase Price indicated opposite such Purchaser’s name on the Schedule of Purchasers on Exhibit A hereto (the “Applicable Purchase Price”).
1.2 Upon not less than three (3) business days’ written notice from (or on behalf of) the Company to each Purchaser (the “Closing Notice”) that the Company reasonably expects all conditions to the closing of the Merger to be satisfied, each Purchaser shall deliver the Applicable Purchase Price to the Company at least two (2) business day prior to the Closing Date as specified in the Closing Notice, to be held in escrow until the Closing, by wire transfer of United States dollars in immediately available funds to the account specified by the Company in the Closing Notice. On the Closing Date, the Company shall issue the Shares to each Purchaser and subsequently cause the number of Shares to be purchased by such Purchaser at the Closing as set forth in Exhibit A attached to this Agreement to be registered in book-entry form, free and clear of any liens or other restrictions (other than those arising under applicable securities laws) in the name of such Purchaser (or its nominee in accordance with such Purchaser’s delivery instructions) on the Company’s share register, which book-entry records shall contain substantially the legends set forth in Section 3.5. Notwithstanding the foregoing and as may be agreed to between the Company and one or more Purchasers, the preceding two sentences shall be replaced with the following: Upon not less than three (3) business days’ written notice from (or on behalf of) the Company to each Purchaser (the “Closing Notice”)
that the Company reasonably expects all conditions to the closing of the Merger to be satisfied, on the Closing Date, (i) each Purchaser shall deliver to the Company, as promptly as possible following receipt of satisfactory evidence, in the form mutually agreed by the Company and each Purchaser, of the issuance of the Shares as set forth in and subject to the following clause (ii), its Applicable Purchase Price by wire transfer of United States dollars in immediately available funds to the account specified by the Company in the Closing Notice (which account shall not be an escrow account) and (ii) promptly after Closing and upon receipt of such Applicable Purchase Price, the Company shall issue the Shares to each Purchaser and subsequently the number of Shares to be purchased by such Purchaser at the Closing as set forth in Exhibit A attached to this Agreement shall be registered in book-entry form, free and clear of any liens or other restrictions (other than those arising under applicable securities laws) in the name of such Purchaser (or its nominee in accordance with such Purchaser’s delivery instructions) on the Company’s share register, which book-entry records shall contain substantially the legends set forth in Section 3.5, and the Company shall provide each Purchaser with evidence of the issuance of such Shares from the Company’s transfer agent in form reasonably acceptable to such Purchaser. Following the Closing, upon request of a Purchaser, the Company shall provide, or cause the transfer agent for the Shares to provide, a copy of the book-entry statement evidencing the Shares purchased by the Purchaser. For purposes of this Agreement, “business day” shall mean a day, other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close. Prior to or at the Closing, each Purchaser shall deliver to the Company a duly completed and executed IRS Form W-9 or appropriate Form W-8. Upon request by a Purchaser, the Company will provide a completed Form W-9 concurrent with, or prior to, the delivery of the Closing Notice. In the event the Closing Date does not occur within one (1) business day after the expected Closing Date specified in the Closing Notice, the Company shall promptly (but not later than one (1) business day thereafter) return the Applicable Purchase Price to each Purchaser by wire transfer of United States dollars in immediately available funds to the account specified by each Purchaser, and any book-entries for the Shares shall be deemed cancelled; provided that, unless this Agreement has been terminated pursuant to Section 6.16 hereof, such return of funds shall not terminate this Agreement or relieve each Purchaser of its obligation to purchase the Shares at the Closing.
1.3 At or prior to the Closing Date, the Registration Statement (as defined in the Merger Agreement) will register the issuance of shares of Aspen Common Stock (as defined in the Merger Agreement) issued in exchange for the Shares upon the closing of the Merger (as defined in the Merger Agreement) and the Aspen Common Stock issued in respect of the Shares will be freely tradable by each Purchaser upon issuance, subject to any restrictions under applicable securities laws. Notwithstanding anything to the contrary included in this Agreement and the Merger Agreement, to the extent that the Staff of the U.S. Securities and Exchange Commission (the “SEC”) does not permit the Shares to be registered on Form S-4, or for any other reason the Shares are not then included on the Registration Statement, then the Company shall as promptly as practicable, cause Aspen to register the Shares as provided in and further described in Section 6.2 hereof and Exhibit C hereto.
1.4 Defined Terms Used in this Agreement. In addition to the terms defined above, the following terms used in this Agreement shall be construed to have the meanings set forth or referenced below.
(a) “Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including, without limitation, any general partner, managing member, officer, director or trustee of such Person, or any venture capital fund or other investment fund now or hereafter existing that is controlled by one or more general partners, managing members or investment advisers of, or shares the same management company or investment adviser with, such Person.
(b) “Board” means the Board of Directors of the Company.
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(c) “Code” means the Internal Revenue Code of 1986, as amended.
(d) “Company Intellectual Property” means all patents, patent applications, registered and unregistered trademarks, trademark applications, registered and unregistered service marks, service mark applications, tradenames, copyrights, trade secrets, domain names, information and proprietary rights and processes, similar or other intellectual property rights, subject matter of any of the foregoing, tangible embodiments of any of the foregoing, licenses in, to and under any of the foregoing, and in any and all such cases as are necessary to the Company in the conduct of the Company’s business as now conducted and as presently proposed to be conducted.
(e) “Investors’ Rights Agreement” means the Investors’ Rights Agreement among the Company and certain other stockholders of the Company dated as of March 31, 2021.
(f) “Knowledge” including the phrase “to the Company’s knowledge” shall mean the Knowledge Parties’ actual knowledge after reasonable investigation and assuming such knowledge as the individual would have as a result of the reasonable performance of the individual’s duties in the ordinary course. Additionally, for purposes of Section 2.8, the Company shall be deemed to have “knowledge” of a patent right only if the Company has actual knowledge of the patent right.
(g) “Knowledge Parties” means the Officers.
(h) “Material Adverse Effect” means any effect, change, event, circumstance, or development that, considered together with all other effects, changes, events, circumstances, or developments that have occurred prior to the date of determination of the occurrence of a Material Adverse Effect, has or would reasonably be expected to have a material adverse effect on the business, financial condition, assets, liabilities or results of operations of the Company or its subsidiaries, taken as a whole; provided, however, that effects, changes, events, circumstances, or developments arising or resulting from the following shall not be taken into account in determining whether there has been a Material Adverse Effect: (a) the announcement of the Merger Agreement or the pendency of the transactions contemplated hereunder, (b) the taking of any action, or the failure to take any action, by the Company that is required to comply with the terms of this Agreement or the Merger Agreement, (c) any natural disaster, calamity or epidemics, pandemics (including COVID-19 and any precautionary or emergency measures, recommendations, protocols or orders taken or issued by any person in response to COVID-19) or other force majeure events, or any act or threat of terrorism or war, any armed hostilities or terrorist activities (including any escalation or general worsening of any of the foregoing) anywhere in the world or any governmental or other response or reaction to any of the foregoing, (d) any change in GAAP (as defined below) or applicable law or the interpretation thereof, (e) any change in the cash position of the Company and its subsidiaries which results from operations in the ordinary course of business, or (f) general economic or political conditions or conditions generally affecting the industries in which the Company and its subsidiaries operate; except in each case with respect to clauses (c), (d) and (f), to the extent disproportionately affecting the Company and its subsidiaries, taken as a whole, relative to other similarly situated companies in the industries in which the Company and its subsidiaries operate.
(i) “New Purchaser” means each of the Purchasers who are party to this Agreement and who, together with their Affiliates, are not existing stockholders in the Company as of immediately prior to the date hereof.
(j) “Officer” means the Chief Executive Officer, President, Chief Operating Officer, and any other person who has a policy making function and reports directly to the Board of Directors or the Chief Executive Officer.
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(k) “Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
(l) “Purchaser” means each of the Purchasers who are party to this Agreement.
(m) “Restated Certificate” means the Company’s existing amended and restated certificate of incorporation, as amended prior to Closing to increase the number of authorized shares of the Company’s Common Stock to effect the Company Convertible Notes Conversion and the Company Preferred Stock Conversion (each as defined in the Merger Agreement).
(n) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(o) “Voting Agreement” means the Voting Agreement among the Company and certain other stockholders of the Company dated as of March 31, 2021.
2. Representations and Warranties of the Company. The Company hereby represents and warrants to each Purchaser that, except as set forth on the Disclosure Schedule attached as Exhibit B to this Agreement, which exceptions shall be deemed to be part of the representations and warranties made hereunder, the following representations are true and complete as of the date hereof, except as otherwise indicated. The Disclosure Schedule shall be arranged in sections corresponding to the numbered and lettered sections contained in this Section 2, and the disclosures in any section of the Disclosure Schedule shall qualify other sections in this Section 2 only to the extent it is readily apparent from a reading of the disclosure that such disclosure is applicable to such other sections.
For purposes of these representations and warranties (other than those in Sections 2.2, 2.3, 2.4, 2.5, and 2.6), the term the “Company” shall include any subsidiaries of the Company, unless otherwise noted herein.
2.1 Organization, Good Standing, Corporate Power and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted and as presently proposed to be conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect.
2.2 Capitalization.
(a) As of the date hereof, the authorized capital of the Company consists of:
(i) 11,947,558 shares of Common Stock, 2,634,714 shares of which are issued and outstanding as of the date hereof. All of the outstanding shares of Common Stock have been duly authorized, are fully paid and nonassessable and were issued in compliance with all applicable federal and state securities laws. The Company holds no Common Stock in its treasury.
(ii) 6,825,483 shares of the Company’s preferred stock, par value $0.0001 per share (the “Preferred Stock”), of which (A) 4,118,120 shares have been designated Series A-1 Preferred Stock, all of which are issued and outstanding as of the date hereof, (B) 1,649,188 shares have been designated Series A-2 Preferred Stock, all of which are issued and outstanding as of the date hereof, (C) 696,516 shares have been designated Series A-3 Preferred Stock, all of which are issued and outstanding as of the date hereof, and (D) 361,659 shares have been designated Series A-4 Preferred Stock, all of which are issued and outstanding as of the date hereof. The rights, privileges and preferences of the Preferred Stock are as stated in the Restated Certificate and as provided by the Delaware General Corporation Law. The Company holds no Preferred Stock in its treasury.
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(b) The Company has reserved 1,991,264 shares of Common Stock for issuance to officers, directors, employees and consultants of the Company pursuant to the Company’s 2019 Equity Incentive Plan duly adopted by the Board and approved by the Company stockholders (the “Stock Plan”). Of such reserved shares of Common Stock, 113,598 shares have been issued pursuant to restricted stock purchase agreements and/or the exercise of stock options, 1,830,965 options to purchase shares have been granted and are currently outstanding, and 46,701 shares of Common Stock remain available for issuance to officers, directors, employees and consultants pursuant to the Stock Plan. The Company has furnished to the Purchasers complete and accurate copies of the Stock Plan and forms of agreements used thereunder.
(c) Section 2.2(c) of the Disclosure Schedule sets forth the capitalization of the Company as of the date hereof including the number of shares of the following: (i) issued and outstanding Common Stock, including, with respect to restricted Common Stock, vesting schedule and repurchase price; (ii) outstanding stock options, including vesting schedule and exercise price; (iii) shares of Common Stock reserved for future award grants under the Stock Plan; (iv) each series of Preferred Stock; and (v) warrants or stock purchase rights, if any. Except for (i) the conversion privileges of the Shares to be issued under this Agreement, (ii) the rights provided in Section 4 of the Investors’ Rights Agreement, (iii) the Simple Agreements for Future Equity, each of which will be converted pursuant to the terms of the Merger Agreement into Common Stock at the same price per share at which the Common Stock is sold pursuant to this Agreement, which conversion shall take place immediately following the Company Preferred Stock Conversion and immediately prior to the Concurrent Investment (as defined in the Merger Agreement) and at the Specified Time (as defined in the Merger Agreement) and (iv) the securities and rights described in Sections 2.2(a)(ii) and 2.2(b) of this Agreement and Section 2.2(c) of the Disclosure Schedule, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, to purchase or acquire from the Company any shares of Common Stock or Preferred Stock, or any securities convertible into or exchangeable for shares of Common Stock or Preferred Stock. All outstanding shares of Common Stock and all shares of Common Stock underlying outstanding options are subject to (1) a right of first refusal in favor of the Company upon any proposed transfer (other than transfers for estate planning purposes); and (2) a lock-up or market standoff agreement of not less than one hundred eighty (180) days following the Company’s initial public offering pursuant to a registration statement filed with the SEC under the Securities Act.
(d) Except as set forth in Section 2.2(c) of the Disclosure Schedule, none of the Company’s stock purchase agreements or stock option documents contains a provision for acceleration of vesting (or lapse of a repurchase right) or other changes in the vesting provisions or other terms of such agreement or understanding upon the occurrence of any event or combination of events, including, without limitation, in the case where the Stock Plan is not assumed in an acquisition. The Company has never adjusted or amended the exercise price of any stock options previously awarded, whether through amendment, cancellation, replacement grant, repricing, or any other means. Except as set forth in the Restated Certificate, the Company has no obligation (contingent or otherwise) to purchase or redeem any of its capital stock.
(e) The Company has obtained valid waivers of any rights by other parties to purchase any of the Shares covered by this Agreement.
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2.3 Subsidiaries. The Company does not currently own or control, directly or indirectly, any interest in any other corporation, partnership, trust, joint venture, limited liability company, association, or other business entity. The Company is not a participant in any joint venture, partnership or similar arrangement.
2.4 Authorization. All corporate action required to be taken by the Board and stockholders in order to authorize the Company to enter into this Agreement and to issue the Shares at the Closing has been taken or will be taken prior to the Closing. The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement by the Company have been duly authorized by all necessary corporate action on the part of the Company. All action on the part of the officers of the Company necessary for the execution and delivery of this Agreement, the performance of all obligations of the Company under this Agreement to be performed as of the Closing, and the issuance and delivery of the Shares has been taken or will be taken prior to the Closing. This Agreement, when executed and delivered by the Company, shall constitute a valid and legally binding obligation of the Company, enforceable against the Company in accordance with their respective terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally, or (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
2.5 Valid Issuance of Shares.
(a) The Shares, when issued, sold and delivered in accordance with the terms and for the consideration set forth in this Agreement, will be validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under this Agreement, applicable state and federal securities laws and liens or encumbrances created by or imposed by a Purchaser. Assuming the accuracy of the representations of the Purchasers in Section 3 of this Agreement and subject to the filings described in Section 2.6, the Shares will be issued in compliance with all applicable federal and state securities laws, and the issuance of the Shares will be exempt from registration under the Securities Act.
(b) No “bad actor” disqualifying event described in Rule 506(d)(1)(i-viii) of the Securities Act (a “Disqualification Event”) is applicable to the Company or, to the Company’s knowledge, any Company Covered Person, except for a Disqualification Event as to which Rule 506(d)(2)(ii-iv) or (d)(3) of the Securities Act is applicable. “Company Covered Person” means, with respect to the Company as an “issuer” for purposes of Rule 506 of the Securities Act, any Person listed in the first paragraph of Rule 506(d)(1) of the Securities Act.
2.6 Governmental Consents and Filings. Assuming the accuracy of the representations made by the Purchasers in Section 3 of this Agreement, no consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority is required on the part of the Company in connection with the consummation of the transactions contemplated by this Agreement, except for (i) the filing of an amendment to the Restated Certificate to increase the authorized number of shares of Common Stock of the Company as may be necessary in order to sell and issue the Shares pursuant to this Agreement, which shall be filed prior to the Closing Date (the “Amendment to Restated Certificate”), and (ii) filings pursuant to applicable securities laws, which have been made or will be made in a timely manner.
2.7 Litigation. There is no claim, action, suit, proceeding, arbitration, complaint, charge or investigation pending or, to the Company’s knowledge, currently threatened (a) against the Company or any officer or director of the Company arising out of their employment or board relationship with the Company; (b) that questions the validity of this Agreement or the right of the Company to enter into this Agreement, or to consummate the transactions contemplated by this Agreement; or (c) that would
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reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. Neither the Company nor, to the Company’s knowledge, any of its officers or directors is a party or is named as subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality (in the case of officers or directors, such as would affect the Company). There is no action, suit, proceeding or investigation by the Company pending or which the Company intends to initiate. The foregoing includes, without limitation, actions, suits, proceedings or investigations pending or threatened in writing involving the prior employment of any of the Company’s employees, their services provided in connection with the Company’s business, any information or techniques allegedly proprietary to any of their former employers or their obligations under any agreements with prior employers.
2.8 Intellectual Property.
(a) The Company owns or possesses or believes it can acquire on commercially reasonable terms sufficient legal rights to all Company Intellectual Property without any known conflict with, or infringement of, the rights of others, including prior employees or consultants. The Company has not received any communications alleging that the Company has violated, or by conducting its business, would violate any of the patents, trademarks, service marks, tradenames, copyrights, trade secrets, mask works or other proprietary rights or processes of any other Person.
(b) To the Company’s knowledge, no product or service marketed or sold (or proposed to be marketed or sold) by the Company violates or will violate any license or infringes or will infringe any intellectual property rights of any other party.
(c) Other than with respect to commercially available software products under standard end-user object code license agreements, there are no outstanding options, licenses, agreements, claims, encumbrances or shared ownership interests of any kind relating to the Company Intellectual Property, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights and processes of any other Person.
(d) The Company has obtained and possesses valid licenses to use all of the software programs present on the computers and other software-enabled electronic devices that it owns or leases or that it has otherwise provided to its employees for their use in connection with the Company’s business.
(e) Each employee and consultant has assigned to the Company all intellectual property rights he or she owns that are related to the Company’s business as now conducted and as presently proposed to be conducted and all intellectual property rights that he, she or it solely or jointly conceived, reduced to practice, developed or made during the period of his, her or its employment or consulting relationship with the Company that (i) relate, at the time of conception, reduction to practice, development, or making of such intellectual property right, to the Company’s business as then conducted or as then proposed to be conducted, (ii) were developed on any amount of the Company’s time or with the use of any of the Company’s equipment, supplies, facilities or information or (iii) resulted from the performance of services for the Company. It will not be necessary to use any inventions of any of its employees or consultants (or Persons it currently intends to hire) made prior to their employment by the Company, including prior employees or consultants.
(f) Section 2.8(f) of the Disclosure Schedule lists all patents, patent applications, registered trademarks, material unregistered trademarks, trademark applications, service marks, service mark applications, tradenames, registered copyrights, and licenses to and under any of the foregoing, in each case owned by the Company.
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(g) The Company has not embedded, used or distributed any open source, copyleft or community source code (including but not limited to any libraries or code, software, technologies or other materials that are licensed or distributed under any General Public License, Lesser General Public License or similar license arrangement or other distribution model described by the Open Source Initiative at www.opensource.org, collectively “Open Source Software”) in connection with any of its products or services that are generally available or in development in any manner that would materially restrict the ability of the Company to protect its proprietary interests in any such product or service or in any manner that requires, or purports to require (i) any Company Intellectual Property (other than the Open Source Software itself) be disclosed or distributed in source code form or be licensed for the purpose of making derivative works; (ii) any restriction on the consideration to be charged for the distribution of any Company Intellectual Property; (iii) the creation of any obligation for the Company with respect to Company Intellectual Property owned by the Company, or the grant to any third party of any rights or immunities under Company Intellectual Property owned by the Company; or (iv) any other limitation, restriction or condition on the right of the Company with respect to its use or distribution of any Company Intellectual Property.
(h) No government funding, facilities of a university, college, other educational institution or research center, or funding from third parties was used in the development of any Company Intellectual Property. No Person who was involved in, or who contributed to, the creation or development of any Company Intellectual Property, has performed services for the government, university, college, or other educational institution or research center in a manner that would affect Company’s rights in the Company Intellectual Property.
2.9 Compliance with Other Instruments. The Company is not in violation or default (a) of any provisions of its Restated Certificate or Bylaws, (b) of any instrument, judgment, order, writ or decree, (c) under any note, indenture or mortgage, (d) under any lease, agreement, contract or purchase order to which it is a party or by which it is bound that is required to be listed on the Disclosure Schedule, or (e) to its knowledge, of any provision of federal or state statute, rule or regulation applicable to the Company, the violation of which would have a Material Adverse Effect. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated herein will not result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either (x) a default under any such provision, instrument, judgment, order, writ, decree, contract or agreement; or (y) an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or the suspension, revocation, forfeiture, or nonrenewal of any material permit or license applicable to the Company.
2.10 Agreements; Actions.
(a) Except for this Agreement, there are no agreements, understandings, instruments, contracts or proposed transactions to which the Company is a party or by which it is bound that involve (i) obligations (contingent or otherwise) of, or payments to, the Company in excess of $250,000, (ii) the license of any patent, copyright, trademark, trade secret or other proprietary right to or from the Company (other than commercially available, off the shelf software licensed to the Company or non-exclusive licenses entered into by the Company in the ordinary course of business), (iii) the grant of rights to manufacture, produce, assemble, license, market, or sell its products to any other Person that limit the Company’s exclusive right to develop, manufacture, assemble, distribute, market or sell its products, or (iv) indemnification by the Company with respect to infringements of proprietary rights.
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(b) The Company has not (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) incurred any indebtedness for money borrowed or incurred any other liabilities individually in excess of $100,000 or in excess of $250,000 in the aggregate, (iii) made any loans or advances to any Person, other than ordinary advances for business expenses, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than in the ordinary course of business. For the purposes of (a) and (b) of this Section 2.10, all indebtedness, liabilities, agreements, understandings, instruments, contracts and proposed transactions involving the same Person (including Persons the Company has reason to believe are affiliated with each other) shall be aggregated for the purpose of meeting the individual minimum dollar amounts of such section.
(c) The Company is not a guarantor or indemnitor of any indebtedness of any other Person.
2.11 Certain Transactions.
(a) Other than (i) standard employee benefits generally made available to all employees, standard employee offer letters or employment agreements and Confidential Information Agreements (as defined below), (ii) standard director and officer indemnification agreements approved by the Board, (iii) the purchase of shares of the Company’s capital stock and the issuance of options to purchase shares of Common Stock, in each instance, approved in the written minutes of the Board (previously made available to the Purchasers or their respective counsel), and (iv) this Agreement, there are no agreements, understandings or proposed transactions between the Company and any of its Officers, directors or consultants, or any Affiliate thereof.
(b) The Company is not indebted, directly or indirectly, to any of its directors, officers or employees or to their respective spouses or children or to any Affiliate of any of the foregoing, other than in connection with expenses or advances of expenses incurred in the ordinary course of business or employee relocation expenses and for other customary employee benefits made generally available to all employees. None of the Company’s directors, officers or employees, or any members of their immediate families, or any Affiliate of the foregoing are, directly or indirectly, indebted to the Company or, to the Company’s knowledge, have any (i) material commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship with any of the Company’s customers, suppliers, service providers, joint venture partners, licensees and competitors, (ii) direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company except that directors, officers, employees or stockholders of the Company may own stock in (but not exceeding two percent (2%) of the outstanding capital stock of) publicly traded companies that may compete with the Company; or (iii) financial interest in any material contract with the Company.
2.12 Rights of Registration and Voting Rights. Except as provided in the Investors’ Rights Agreement or in Section 6.2 below, the Company is not under any obligation to register under the Securities Act any of its currently outstanding securities or any securities issuable upon exercise or conversion of its currently outstanding securities. To the Company’s knowledge, except as contemplated in the Voting Agreement, no stockholder of the Company has entered into any agreements with respect to the voting of capital shares of the Company.
2.13 Property. The property and assets that the Company owns are free and clear of all mortgages, deeds of trust, liens, loans and encumbrances, except for statutory liens for the payment of current taxes that are not yet delinquent and encumbrances and liens that arise in the ordinary course of business and do not materially impair the Company’s ownership or use of such property or assets. With respect to the property and assets it leases, the Company is in compliance with such leases in all material respects and holds a valid leasehold interest free of any liens, claims or encumbrances other than those of the lessors of such property or assets. The Company does not own any real property.
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2.14 Financial Statements. The Company has made available to each Purchaser its audited financial statements as of December 31, 2022 and for the fiscal years ended December 31, 2022 and 2021, its unaudited financial statements (including balance sheet, income statement and statement of cash flows) as of September 30, 2023 (the “Balance Sheet Date”) and for the nine-month period ended on the Balance Sheet Date (collectively, the “Financial Statements”). The Financial Statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods indicated, except that the unaudited Financial Statements may not contain all footnotes required by GAAP. The Financial Statements fairly present in all material respects the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein, subject in the case of the unaudited Financial Statements to normal year-end audit adjustments. Except as set forth in the Financial Statements, the Company has no material liabilities or obligations, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to the Balance Sheet Date; (ii) obligations under contracts and commitments incurred in the ordinary course of business; and (iii) liabilities and obligations of a type or nature not required under GAAP to be reflected in the Financial Statements, which, in all such cases, individually and in the aggregate would not have a Material Adverse Effect. The Company maintains and will continue to maintain a standard system of accounting established and administered in accordance with GAAP.
2.15 Changes. Since the Balance Sheet Date through the date hereof, there has not been:
(a) any change in the assets, liabilities, financial condition or operating results of the Company from that reflected in the Financial Statements, except changes in the ordinary course of business that have not caused, in the aggregate, a Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by insurance, that would have a Material Adverse Effect;
(c) any waiver or compromise by the Company of a valuable right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and the satisfaction or discharge of which would not have a Material Adverse Effect;
(e) any material change to a material contract or agreement by which the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder;
(g) any resignation or termination of employment of any Officer of the Company;
(h) any mortgage, pledge, transfer of a security interest in, or lien, created by the Company, with respect to any of its material properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and do not materially impair the Company’s ownership or use of such property or assets;
(i) any loans or guarantees made by the Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;
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(j) any declaration, setting aside or payment or other distribution in respect of any of the Company’s capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by the Company;
(k) any sale, assignment or transfer of any Company Intellectual Property that could reasonably be expected to result in a Material Adverse Effect;
(l) receipt of notice that there has been a loss of, or material order cancellation by, any major customer of the Company;
(m) to the Company’s knowledge, any other event or condition of any character, other than events affecting the economy or the Company’s industry generally, that could reasonably be expected to result in a Material Adverse Effect; or
(n) any arrangement or commitment by the Company to do any of the things described in this Section 2.15.
2.16 Employee Matters.
(a) To the Company’s knowledge, none of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with such employee’s ability to promote the interest of the Company or that would conflict with the Company’s business. Neither the execution or delivery of this Agreement, nor the carrying on of the Company’s business by the employees of the Company, nor the conduct of the Company’s business as now conducted and as presently proposed to be conducted, will, to the Company’s knowledge, conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument under which any such employee is now obligated.
(b) The Company is not delinquent in payments to any of its employees, consultants, or independent contractors for any wages, salaries, commissions, bonuses, or other direct compensation for any service performed for it to the date hereof or amounts required to be reimbursed to such employees, consultants or independent contractors. The Company has complied in all material respects with all applicable state and federal equal employment opportunity laws and with other laws related to employment, including those related to wages, hours, worker classification and collective bargaining. The Company has withheld and paid to the appropriate governmental entity or is holding for payment not yet due to such governmental entity all amounts required to be withheld from employees of the Company and is not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing.
(c) To the Company’s knowledge, no Officer intends to terminate employment with the Company or is otherwise likely to become unavailable to continue as an Officer. The Company does not have a present intention to terminate the employment of any of the foregoing. The employment of each employee of the Company is terminable at the will of the Company. Except as set forth in Section 2.16(c)(i) of the Disclosure Schedule or as required by law, upon termination of the employment of any such employees, no severance or other payments will become due. Except as set forth in Section 2.16(c)(ii) of the Disclosure Schedule, the Company has no policy, practice, plan or program of paying severance pay or any form of severance compensation in connection with the termination of employment services.
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(d) The Company has not made any representations regarding equity incentives to any officer, employee, director or consultant that are inconsistent with the share amounts and terms set forth in the minutes of meetings of (or actions taken by unanimous written consent by) the Board.
(e) Each former officer whose employment was terminated by the Company has entered into an agreement with the Company providing for the full release of any claims against the Company or any related party arising out of such employment.
(f) Section 2.16(f) of the Disclosure Schedule sets forth each employee benefit plan maintained, established or sponsored by the Company, or which the Company participates in or contributes to, which is subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Company has made all required contributions and has no liability to any such employee benefit plan, other than liability for health plan continuation coverage described in Part 6 of Title I(B) of ERISA, and has complied in all material respects with all applicable laws for any such employee benefit plan.
(g) The Company is not bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union, and no labor union has requested or, to the knowledge of the Company, has sought to represent any of the employees, representatives or agents of the Company. There is no strike or other labor dispute involving the Company pending, or to the Company’s knowledge, threatened, which could have a Material Adverse Effect, nor is the Company aware of any labor organization activity involving its employees.
(h) To the Company’s knowledge, none of the officers or directors of the Company has been (i) subject to voluntary or involuntary petition under the federal bankruptcy laws or any state insolvency law or the appointment of a receiver, fiscal agent or similar officer by a court for his or her business or property; (ii) convicted in a criminal proceeding or named as a subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (iii) subject to any order, judgment or decree (not subsequently reversed, suspended, or vacated) of any court of competent jurisdiction permanently or temporarily enjoining him or her from engaging, or otherwise imposing limits or conditions on his or her engagement in any securities, investment advisory, banking, insurance, or other type of business or acting as an officer or director of a public company; or (iv) found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated any federal or state securities, commodities, or unfair trade practices law, which such judgment or finding has not been subsequently reversed, suspended, or vacated.
2.17 Tax Returns and Payments. There are no federal, state, county, local or foreign taxes due and payable by the Company that have not been timely paid. There are no accrued and unpaid federal, state, county, local or foreign taxes of the Company that are due, whether or not assessed or disputed. There have been no examinations or audits of any tax returns or reports by any applicable federal, state, local or foreign governmental agency. The Company has duly and timely filed all federal, state, county, local and foreign tax returns required to have been filed by it and there are in effect no waivers of applicable statutes of limitations with respect to taxes for any year.
2.18 Insurance. The Company has in full force and effect insurance policies concerning such casualties as would be reasonable and customary for companies like the Company, with extended coverage, which, to the Company’s knowledge, is sufficient in amount (subject to reasonable deductions) to allow it to replace any of its properties that might be damaged or destroyed.
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2.19 Employee Agreements. Each current and former employee, consultant and officer of the Company has executed an agreement with the Company regarding confidentiality and proprietary information substantially in the form or forms made available to the Purchasers or their respective counsel (the “Confidential Information Agreements”). No current or former officer has excluded works or inventions from his or her assignment of inventions pursuant to such officer’s Confidential Information Agreement. Each current and former officer has executed a non-competition and non-solicitation agreement substantially in the form or forms delivered to the Purchasers or their respective counsel. The Company is not aware that any of its officers is in violation of any agreement described in this Section 2.19.
2.20 Permits. The Company has all franchises, permits, licenses and any similar authority necessary for the conduct of its business, the lack of which could reasonably be expected to have a Material Adverse Effect. The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority.
2.21 Corporate Documents. The Restated Certificate and Bylaws of the Company as of the date of this Agreement are in the form made available to the Purchasers or their respective counsel. The copy of the minute books of the Company made available to the Purchasers contains minutes of all meetings of directors and stockholders and all actions by written consent without a meeting by the directors and stockholders since the date of incorporation and accurately reflects in all material respects all actions by the directors (and any committee of directors) and stockholders.
2.22 Environmental and Safety Laws. Except as could not reasonably be expected to have a Material Adverse Effect to the best of its knowledge (a) the Company is and has been in compliance with all Environmental Laws; (b) there has been no release or to the Company’s knowledge threatened release of any pollutant, contaminant or toxic or hazardous material, substance or waste or petroleum or any fraction thereof (each a “Hazardous Substance”), on, upon, into or from any site currently or heretofore owned, leased or otherwise used by the Company; (c) there have been no Hazardous Substances generated by the Company that have been disposed of or come to rest at any site that has been included in any published U.S. federal, state or local “superfund” site list or any other similar list of hazardous or toxic waste sites published by any governmental authority in the United States; and (d) there are no underground storage tanks located on, no polychlorinated biphenyls (“PCBs”) or PCB-containing equipment used or stored on, and no hazardous waste as defined by the Resource Conservation and Recovery Act, as amended, stored on, any site owned or operated by the Company, except for the storage of hazardous waste in compliance with Environmental Laws. The Company has made available to the Purchasers true and complete copies of all material environmental records, reports, notifications, certificates of need, permits, pending permit applications, correspondence, engineering studies and environmental studies or assessments.
For purposes of this Section 2.22, “Environmental Laws” means any law, regulation, or other applicable requirement relating to (a) releases or threatened release of Hazardous Substance; (b) pollution or protection of employee health or safety, public health or the environment; or (c) the manufacture, handling, transport, use, treatment, storage, or disposal of Hazardous Substances.
2.23 Foreign Corrupt Practices Act. Neither the Company nor any of its directors, officers, employees or agents have, directly or indirectly, made, offered, promised or authorized any payment or gift of any money or anything of value to or for the benefit of any “foreign official” (as such term is defined in the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”)), foreign political party or official thereof or candidate for foreign political office for the purpose of (i) influencing any official act or decision of such official, party or candidate, (ii) inducing such official, party or candidate to use his, her or its influence to affect any act or decision of a foreign governmental authority, or (iii) securing any improper advantage, in the case of (i), (ii) and (iii) above in order to assist the Company or any of its affiliates in obtaining or retaining business for or with, or directing business to, any person. Neither the Company nor
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any of its directors, officers, employees or agents have made or authorized any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of funds or received or retained any funds in violation of any law, rule or regulation. The Company further represents that it has maintained, and has caused each of its subsidiaries and affiliates to maintain, systems of internal controls (including, but not limited to, accounting systems, purchasing systems and billing systems) and written policies to ensure compliance with the FCPA or any other applicable anti-bribery or anti-corruption law, and to ensure that all books and records of the Company accurately and fairly reflect, in reasonable detail, all transactions and dispositions of funds and assets. Neither the Company nor, to the Company’s knowledge, any of its officers, directors or employees are the subject of any allegation, voluntary disclosure, investigation, prosecution or other enforcement action related to the FCPA or any other anti-corruption law.
2.24 Data Privacy. In connection with its collection, storage, transfer, use and/or disclosure of any information from any identifiable individuals including, without limitation, all information that constitutes “personal information,” “personal data” or “personally identifiable information” as defined in applicable laws (collectively “Personal Information”) by or on behalf of the Company, the Company is and has been, in compliance with all applicable laws in all relevant jurisdictions, the Company’s privacy policies, and the requirements of any contract to which the Company is a party and with all industry standards to which the Company is bound or to which the Company has represented itself to comply (collectively, “Privacy Requirements”). The Company maintains and has maintained reasonable physical, technical, and administrative security measures and policies designed to protect all Personal Information collected, stored, transferred, used, maintained or controlled by or on behalf of the Company from and against unlawful or unauthorized access, destruction, loss, use, modification and/or disclosure. The Company is and has been, in compliance in all material respects with all laws relating to data loss, theft and breach of security notification obligations. The Company has not transferred or sold the Personal Information to any third party and there are no outstanding agreements or arrangements that the Company is bound by, with any third party, for the sale, transfer, access, license, encumbrance or creation of any right over the Personal Information. There has been no occurrence of unlawful, accidental or unauthorized destruction, loss, use, modification or disclosure of or access to Personal Information owned, stored, used, maintained or controlled by or on behalf of the Company such that Privacy Requirements or any unauthorized access to or disclosure of the Company’s confidential information or trade secrets that reasonably would be expected to result in a Material Adverse Effect.
2.25 Preclinical Development and Clinical Trials. The studies, tests, preclinical development and clinical trials, if any, conducted by or on behalf of the Company are being conducted in all material respects in accordance with experimental protocols, procedures and controls pursuant to accepted professional and scientific standards for products or product candidates comparable to those being developed by the Company and all applicable laws and regulations, including the Federal Food, Drug, and Cosmetic Act and 21 C.F.R. parts 50, 54, 56, 58, 312, and 812. The descriptions of, protocols for, and data and other results of, the studies, tests, development and trials conducted by or on behalf of the Company that have been furnished or made available to the Purchasers are accurate and complete. The Company is not aware of any studies, tests, development or trials the results of which reasonably call into question the results of the studies, tests, development and trials conducted by or on behalf of the Company, and the Company has not received any notices or correspondence from the U.S. Food and Drug Administration or any other governmental entity or any institutional review board or comparable authority requiring the termination, suspension or material modification of any studies, tests, preclinical development or clinical trials conducted by or on behalf of the Company.
2.26 Investment Company; Shell Company. The Company is not an investment company within the meaning of the Investment Company Act of 1940, as amended. The Company is not as of the date hereof, and has never been, an issuer identified in Rule 144(i)(1) promulgated under the Securities Act.
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2.27 Disclosure. The Company has made available to the Purchasers or their respective counsel all the information reasonably available to the Company that the Purchasers have requested for deciding whether to acquire the Shares. No representation or warranty of the Company contained in this Agreement, as qualified by the Disclosure Schedule, and no certificate furnished or to be furnished to Purchasers at the Closing contains any untrue statement of a material fact or, to the Company’s knowledge, omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. It is understood that this representation is qualified by the fact that the Company has not delivered to the Purchasers, and has not been requested to deliver, a private placement or similar memorandum or any written disclosure of the types of information customarily furnished to purchasers of securities.
2.28 Private Placement. Neither the Company nor any Person acting on its behalf, has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security under any circumstances that would require registration under the Securities Act of the Shares being sold pursuant to this Agreement, including any form of general solicitation or general advertising.
2.29 No Integrated Offering. None of the Company, its subsidiaries nor, to the Company’s knowledge, any of its Affiliates or any Person acting on its behalf has, directly or indirectly, at any time within the past six months, made any offers or sales of any Company security or solicited any offers to buy any security under circumstances that would (i) eliminate the availability of the exemption from registration under the Securities Act in connection with the offer and sale by the Company of the Shares as contemplated hereby or (ii) cause the offering of the Shares pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of any applicable law, regulation or stockholder approval provisions.
2.30 Information Provided. The information to be supplied by or on behalf of the Company for inclusion or incorporation by reference in the Registration Statement, or supplied by or on behalf of the Company for inclusion in any filing pursuant to Rule 165 and Rule 425 under the 1933 Act or Rule 14a-12 under the 1934 Act (each a “Regulation M-A Filing”), shall not, at the time the Registration Statement or any such Regulation M-A Filing is filed with the SEC, at any time it is amended or supplemented or at the time the Registration Statement is declared effective by the SEC, as applicable, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The information to be supplied by or on behalf of the Company for inclusion in the Registration Statement to be sent to the stockholders of Aspen in connection with the meeting of Aspen’s stockholders (the “Public Company Meeting”), shall not, on the date the proxy statement/prospectus included in the Registration Statement is first mailed to stockholders of Aspen, at the time of the Public Company Meeting or at the Effective Time, contain any statement that, at such time and in light of the circumstances under which it shall be made, is false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements made in the Registration Statement not false or misleading; or omit to state any material fact necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Public Company Meeting that has become false or misleading.
2.31 Brokers. Other than the Placement Agents (as defined below), there is no broker, investment banker, financial advisor, finder or other person which has been retained by or is authorized to act on behalf of the Company that is entitled to any fee or commission in connection with the execution of this Agreement and the consummation of the transactions contemplated hereby.
2.32 Authorization of Merger Agreement. The Company has all necessary corporate power and authority to enter into and to perform its obligations under this Agreement and the Merger Agreement. The Board has (i) determined that the transactions contemplated under the Merger Agreement are fair to, advisable and in the best interests of the Company and its stockholders, (ii) approved and declared advisable
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the Merger Agreement and (iii) determined to recommend, upon the terms and subject to the conditions set forth in the Merger Agreement, that the stockholders of the Company vote to adopt the Merger Agreement and thereby approve the transactions contemplated thereunder. The Merger Agreement has been duly executed and delivered by the Company and assuming the due authorization, execution and delivery by the other parties thereto, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to the Enforceability Exceptions (as defined in the Merger Agreement).
2.33 Additional Representations and Warranties. The Company’s representations and warranties set forth in the Merger Agreement in Sections 3.7(b), 3.7(d), 3.8, 3.9, 3.14(a), 3.16(c) and 3.24 are hereby incorporated by reference and made by the Company, as qualified by the disclosures in the Company Disclosure Schedule (as defined in the Merger Agreement). As of the Effective Date, to the Company’s knowledge, the representations and warranties of Aspen in the Merger Agreement are true and correct, as qualified therein and by the disclosure schedules to the Merger Agreement.
2.34 No Additional Agreements. The Company does not have any agreement with any Purchaser with respect to the transactions contemplated by this Agreement other than as specified in this Agreement.
3. Representations and Warranties of the Purchasers. Each Purchaser hereby represents and warrants to the Company, severally and not jointly, that:
3.1 Authorization. The Purchaser has full power and authority to enter into this Agreement. This Agreement, when executed and delivered by the Purchaser, will constitute valid and legally binding obligations of the Purchaser, enforceable against such Purchaser in accordance with their terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and any other laws of general application affecting enforcement of creditors’ rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.
3.2 Purchase Entirely for Own Account. This Agreement is made with the Purchaser in reliance upon the Purchaser’s representation to the Company, which by the Purchaser’s execution of this Agreement, the Purchaser hereby confirms, that the Shares to be acquired by the Purchaser will be acquired for investment for the Purchaser’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of applicable securities laws. By executing this Agreement, the Purchaser further represents that the Purchaser does not presently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third Person, with respect to any of the Shares. The Purchaser has not been formed for the specific purpose of acquiring the Shares.
3.3 Disclosure of Information. The Purchaser has had an opportunity to discuss the Company’s business, management, financial affairs and the terms and conditions of the offering of the Shares with the Company’s management and has had an opportunity to review the Company’s facilities. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of the Purchasers to rely thereon.
3.4 Restricted Securities. The Purchaser understands that, until the Shares have been registered on an effective registration statement or have been transferred pursuant to an exemption from registration under the Securities Act, the Shares will be characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such Shares may be resold (i) pursuant to an effective registration statement or (ii) pursuant to an exemption from registration under the Securities Act.
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3.5 Legends. The Purchaser understands that the Shares and any securities issued in respect of or exchange for the Shares, may be notated with one or all of the following legends:
(a) “THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.”
(b) Any legend set forth in, or required by, the Restated Certificate or Bylaws.
(c) Any legend required by the securities laws of any state to the extent such laws are applicable to the Shares represented by the certificate, instrument, or book entry so legended.
3.6 Accredited Investor. The Purchaser is an accredited investor as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(4), (a)(5), (a)(6), (a)(7), (a)(8), (a)(9), (a)(12) or (a)(13) under the Securities Act.
3.7 Foreign Investors. If the Purchaser is not a United States person (as defined by Section 7701(a)(30) of the Code), the Purchaser hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Shares or any use of this Agreement, including (i) the legal requirements within its jurisdiction for the purchase of the Shares, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained, and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Shares. The Purchaser’s subscription and payment for and continued beneficial ownership of the Shares will not violate any applicable securities or other laws of the Purchaser’s jurisdiction.
3.8 CFIUS Foreign Person Status. Purchaser is not a “foreign person” within the meaning of the Defense Production Act of 1950, as amended, including all implementing regulations thereof.
3.9 No General Solicitation. Neither the Purchaser, nor any of its officers, directors, employees, agents, stockholders or partners has either directly or indirectly, including, through a broker or finder (a) engaged in any general solicitation, or (b) published any advertisement in connection with the offer and sale of the Shares. The Purchaser is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television, radio or the internet or presented at any seminar or any other general solicitation or general advertisement. The purchase of the Shares by the Purchaser has not been solicited by or through anyone other than the Company or, on the Company’s behalf, Leerink Partners LLC and Cowen and Company, LLC (each, a “Placement Agent” and together, the “Placement Agents”), who have been engaged as placement agents for the offering of the Shares.
3.10 Experience of the Purchaser. The Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the investment in the Shares, and has so evaluated the merits and the risks of such investment. The Purchaser is able to bear the economic risk of an investment in the Shares and is able to sustain a loss of all of its investment in the Shares without economic hardship, if such a loss should occur.
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3.11 Exculpation Among Purchasers. The Purchaser acknowledges that it is not relying upon any Person, other than the Company and its officers and directors, in making its investment or decision to invest in the Company.
3.12 Residence. If the Purchaser is an individual, then the Purchaser resides in the state or province identified in the address of the Purchaser set forth on Exhibit A; if the Purchaser is a partnership, corporation, limited liability company or other entity, then the office or offices of the Purchaser in which its principal place of business is identified in the address or addresses of the Purchaser set forth on Exhibit A.
3.13 “Bad Actor” Matters. If Purchaser is a Company Covered Person, Purchaser hereby represents that no Disqualification Event is applicable to Purchaser or, to Purchaser’s knowledge, any of its Rule 506(d) Related Parties (as defined below), except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. Purchaser hereby agrees that it shall notify the Company promptly in writing in the event a Disqualification Event becomes applicable to Purchaser or, to Purchaser’s knowledge, any of its Rule 506(d) Related Parties, except, if applicable, for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. For purposes of this Section 3.13, “Rule 506(d) Related Party” shall mean a person or entity that is a beneficial owner of Purchaser’s securities for purposes of Rule 506(d) of the Securities Act.
3.14 Tax Advisors. The Purchaser has had the opportunity to review with the Purchaser’s own tax advisors the federal, state and local tax consequences of its purchase of the Shares set forth opposite such Purchaser’s name on the Schedule of Purchasers, where applicable, and the transactions contemplated by this Agreement. The Purchaser is relying solely on the Purchaser’s own determination as to tax consequences or the advice of such tax advisors and not on any statements or representations of the Company or any of its agents and understands that the Purchaser (and not the Company) shall be responsible for the Purchaser’s own tax liability that may arise as a result of the transactions contemplated by this Agreement.
4. Conditions to the Purchasers’ Obligations at Closing. The obligations of each Purchaser to purchase Shares at Closing are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived by such Purchaser solely as to itself:
4.1 Representations and Warranties. The representations and warranties of the Company contained in Section 2 shall be true and correct in all respects as of the date made, except as set forth on the Disclosure Schedule and except for those representation and warranties which address matters only as of a particular date (which representations were so true and correct as of such particular date). As of the Closing Date, (a) the representations and warranties of the Company contained in Sections 2.1, 2.4 and 2.5 shall be true and correct in all respects as of the date made, except, in each case, (i) as set forth on the Disclosure Schedule and (ii) for those representation and warranties which address matters only as of a particular date (which representations were so true and correct as of such particular date), (b) the representations and warranties of the Company contained in Section 2.2 shall be true and correct in all respects as of the date made, except, (i) as set forth on the Disclosure Schedule, (ii) for such inaccuracies which are de minimis, individually or in the aggregate, and (iii) for those representation and warranties which address matters only as of a particular date (which representations were so true and correct as of such particular date); and (c) the representations and warranties of the Company contained in Section 2 (other than Sections 2.1, 2.2, 2.4 and 2.5) shall be true and correct in all respects as of the date made except, in each case, (i) as set forth on the Disclosure Schedule, (ii) where the failure to be so true and correct would not reasonably be expected to have a Material Adverse Effect (without giving effect to any references therein to any Material Adverse Effect or other materiality qualifications) and (iii) for those representation and warranties which address matters only as of a particular date (which representations were so true and correct as of such particular date).
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4.2 Performance. The Company shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by the Company on or before the Closing.
4.3 Compliance Certificate. The Chief Executive Officer of the Company shall deliver to the Purchasers at the Closing a certificate certifying that the conditions specified in Sections 4.1, 4.2, 4.10 and 4.11 have been fulfilled.
4.4 Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be obtained and effective as of the Closing.
4.5 Amendment to Restated Certificate. The Company shall have filed the Amendment to Restated Certificate with the Secretary of State of Delaware on or prior to the Closing, which shall continue to be in full force and effect as of the Closing.
4.6 Secretary’s Certificate. The Secretary of the Company shall have delivered to the Purchasers at the Closing a certificate certifying (i) the Certificate of Incorporation and Bylaws of the Company in effect at the Closing, (ii) resolutions of the Board approving this Agreement and the transactions contemplated under this Agreement, (iii) resolutions of the Board approving the Merger Agreement and the transactions contemplated thereby, and (iv) resolutions of the stockholders of the Company approving the Amendment to Restated Certificate.
4.7 Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to each Purchaser, and each Purchaser (or its respective counsel) shall have received all such counterpart original and certified or other copies of such documents as reasonably requested. Such documents may include good standing certificates.
4.8 The Merger.
(a) Each of the conditions precedent to the obligation of the Company to effect the Merger shall have been satisfied or waived and the Merger remains anticipated to be consummated substantially simultaneously with the Closing if the Closing were to occur.
(b) Subject to Section 4.8(c), the Company shall not amend or waive (or approve an amendment or a waiver requested by Aspen of or fail to contest an action regarding a breach of) any term of the Merger Agreement that would be reasonably expected to materially and adversely affect the Purchasers between the date hereof and the Closing without the consent of the Purchasers having the right to purchase at the Closing, a majority of the Shares to be purchased hereunder (the “Purchaser Majority”); provided, that any change to the definitions of “Company Valuation” or “Company Equity Value” in the Merger Agreement, or a waiver by the Company of the conditions set forth in Sections 9.4 or 9.5 of the Merger Agreement are deemed to materially and adversely affect the Purchasers and require the Requisite Purchaser Consent (as defined below).
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(c) Prior to seeking such consent from the Purchasers, the Company will provide written notice to the Purchasers that such consent is being sought (the “Initial Waiver Notice”). Such Initial Waiver Notice shall identify the nature of the change sought (e.g., whether it is requesting an amendment or a waiver to the Merger Agreement and the party seeking the request), but shall not disclose any material non-public information pertaining to the Company, Aspen or their respective operations. After the Initial Waiver Notice is received, each Purchaser shall have five business days to elect to receive a full request for Purchaser Consent (the “Final Waiver Notice”), such Final Waiver Notice containing the substance of the waiver or amendment being requested and any other relevant information. If a Purchaser elects to receive the Final Waiver Notice, the Final Waiver Notice shall be sent to such consenting Purchaser (an “Informed Purchaser”) and the approval of (i) the Informed Purchasers who have agreed, in the aggregate, to purchase a majority of the Shares that all Informed Purchasers have agreed, in the aggregate, to purchase will be required to approve the requested amendment or waiver and (ii) the Requisite Purchaser Consent with respect to the matters set forth in the proviso to the last sentence of Section 4.8(b). If no Purchaser has elected to receive the Final Waiver Notice after five business days following delivery of the Initial Waiver Notice, then no consent shall be required under this Section 4.8(c).
4.9 Registration Statement. The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceeding for that purpose shall have been initiated or threatened in writing by the SEC or its staff.
4.10 No Material Adverse Effect. Since the date of execution of this Agreement, no event or series of events shall have occurred that has had or would reasonably be expected to have a Material Adverse Effect.
4.11 No Injunction. No statute, rule, regulation, order, executive order, decree, judgment, writ, order, ruling or injunction shall have been enacted, entered, promulgated, issued or endorsed by any court of competent jurisdiction or any governmental authority that enjoins, prevents or prohibits the consummation of any of the transactions contemplated by this Agreement or the Merger Agreement.
4.12 Nasdaq. The approval of the listing of the additional shares of Aspen Common Stock on The Nasdaq Stock Market shall have been obtained and the shares of Aspen Common Stock to be issued upon conversion of the Shares pursuant to the Merger Agreement shall have been approved for listing (subject to official notice of issuance) on The Nasdaq Stock Market.
4.13 Offering. The Company shall receive at Closing the Offering Amount.
5. Conditions of the Company’s Obligations at Closing. The obligations of the Company to sell Shares to the Purchasers at the Closing are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise waived:5.1 Representations and Warranties. The representations and warranties of each Purchaser contained in Section 3 shall be true and correct in all respects as of the Closing except for those representation and warranties which address matters only as of a particular date (which representations were so true and correct as of such particular date).
5.2 Performance. The Purchasers shall have performed and complied with all covenants, agreements, obligations and conditions contained in this Agreement that are required to be performed or complied with by them on or before the Closing.
5.3 Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Shares pursuant to this Agreement shall be obtained and effective as of the Closing.
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5.4 The Merger. Each of the conditions precedent to the obligation of the Company to effect the Merger shall have been satisfied or waived and the Merger remains anticipated to be consummated substantially simultaneously with the Closing if the Closing were to occur.
6. Miscellaneous.
6.1 Legend Removal. The restrictive legends described in Section 3.5(a) and Section 3.5(b) shall promptly be removed from any shares of Aspen Common Stock included in the Registration Statement in connection with the closing of the Merger and at such point such Aspen Common Stock will be in book-entry form, free and clear of any liens or other restrictions whatsoever and without restrictive legends. If the Shares are not then included on the Registration Statement, then, upon request of a Purchaser, the Company shall remove the restrictive legends described in Section 3.5(a) and Section 3.5(b) (i) following the time that Rule 144 or any other applicable exemption from the registration requirements of the Securities Act, or (ii) following the time that an effective registration statement covering the resale of such Shares is declared effective. Without limiting the foregoing, within two (2) Business Days’ of the request of the Purchaser, the Company shall promptly cause the legends to be removed from any book-entry statements for such Shares in accordance with the terms of this Agreement and deliver, or cause to be delivered, to any Purchaser new book-entry statements representing the Shares that are free from all restrictive and other legends or, at the request of such Purchaser, via DWAC transfer to such Purchaser’s account. The Company shall bear all costs of such legend removal, including costs of counsel to the Company for any opinions required in connection with such legend removal.
6.2 Registration. To the extent that the staff of the SEC does not permit the Shares to be registered on Form S-4, or for any other reason the Shares are not then included on the Registration Statement, on any day during the period commencing on the Closing Date and ending the earliest of (a) the date as of which the Purchaser may sell its Shares under Rule 144 of the Securities Act (“Rule 144”) without restriction; (b) the third anniversary of the Closing Date; or (c) the date on which the Purchaser shall have sold all of its Shares pursuant to a registration statement, the Company shall cause Aspen to register the resale of the Shares on Form S-3 (or in the event Form S-3 is not available for the registration of the resale of the Shares, the Company shall cause Aspen to (i) register the resale of the Shares on another appropriate form and (ii) undertake to register the Shares on Form S-3 promptly after such form is available), pursuant to the terms set forth in Exhibit C hereto (the “Resale Registration Statement”). In addition, the Company hereby agrees that it shall cause Aspen not to consent to any waiver of the restrictions and obligations under any Lock-Up Agreement (as defined in the Merger Agreement) pursuant to Section (j) of such Lock-Up Agreement prior to the effectiveness of the initial Resale Registration Statement.
6.3 Disclosure of Transactions. The Company shall ensure that Aspen will, by 9:00 a.m. (Eastern Time) on the first business day immediately following the Effective Date (or if this Agreement is executed between midnight and 9:00 a.m., New York City time, on any business day, no later than 9:01 a.m. on the date the Agreement is executed), file with the SEC a Current Report on Form 8-K (the “Disclosure Document”) disclosing: (a) all material terms of the transactions contemplated by this Agreement, (b) all material terms of the Merger Agreement, and (c) all material non-public information pertaining to the Company and Aspen and their respective operations, to the extent that such information has been provided or made available to any Purchaser by the Company, Aspen or any of their respective officers, directors, employees or agents, prior to the filing of the Disclosure Document. Upon the issuance of the Disclosure Document, no Purchaser shall be in possession of any material, non-public information pertaining to the Company or Aspen (“MNPI”) received from the Company, Aspen or any of their respective officers, directors, employees or agents that is not disclosed in the Disclosure Document unless specifically agreed in writing by such Purchaser. Upon the issuance of the Disclosure Document, the Company acknowledges and agrees that the Purchasers shall have no obligations under this Agreement or any confidentiality agreements with the Company to refrain from trading in securities of Aspen, except for any lock-up
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agreement or support agreement entered into by any Purchaser or an affiliate thereof who was a stockholder of the Company prior to the Effective Date and any obligations under applicable securities laws. Furthermore, for the period between the issuance of the Disclosure Document and the completion of the Closing, the Company shall use its reasonable best efforts not to provide any MNPI to any Purchaser, unless otherwise specifically agreed in writing by such Purchaser, except in the case of MNPI provided to an observer of the Board or member of the Board who is affiliated with any Purchaser or in the case of the Closing Notice referred to in Section 1.2 hereof. The Company shall not, and shall cause its officers, directors, employees and agents and Aspen (and its officers, directors, employees and agents) not to, publicly disclose the name of any Purchaser or any affiliate or investment adviser of any Purchaser, or include the name of any Purchaser or any affiliate or investment adviser of any Purchaser without the prior written consent (e-mail being sufficient) of such Purchaser (i) in any press release or marketing materials, or (ii) in any filing with the SEC or any regulatory agency or trading market, except (A) as required by the federal securities laws, rules or regulations, or (B) to the extent such disclosure is required by other laws, rules or regulations, at the request of the staff of the SEC or regulatory agency or under regulations of any national securities exchange on which Aspen’s securities are listed for trading, and in the case of any disclosure made pursuant to clause (ii), the Company will provide the Purchaser with prior written notice (e-mail being sufficient) of, and an opportunity to, review the applicable portion of such filing.
6.4 Survival of Warranties. Unless otherwise set forth in this Agreement, the representations and warranties of the Company and the Purchasers contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and each Closing and shall in no way be affected by any investigation or knowledge of the subject matter thereof made by or on behalf of the Purchasers or the Company.
6.5 Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
6.6 Governing Law. This Agreement shall be governed by the internal law of the State of Delaware, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Delaware.
6.7 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, the Uniform Electronic Transactions Act or other applicable law) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
6.8 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
6.9 Notices.
(a) General. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt, or (i) personal delivery to the party to be notified, (ii) when sent, if sent by electronic mail during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, provided no rejection or undeliverable notice has been received, (iii) five days after having been
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sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their address as set forth on the signature page or Exhibit A, or to such e-mail address or address as subsequently modified by written notice given in accordance with this Section 6.9. If notice is given to the Company a copy (which copy shall not constitute notice) shall also be sent to Cooley LLP, 500 Boylston St., Boston, MA 02116, Attention: Marc Recht or via email to [email protected].
(b) Consent to Electronic Notice. Each Purchaser consents to the delivery of any stockholder notice pursuant to the Delaware General Corporation Law (the “DGCL”), as amended or superseded from time to time, by electronic transmission pursuant to Section 232 of the DGCL (or any successor thereto) at the e-mail address set forth below such Purchaser’s name on the signature page or Exhibit A, as updated from time to time by notice to the Company. To the extent that any notice given by means of electronic transmission is returned or undeliverable for any reason, the foregoing consent shall be deemed to have been revoked until a new or corrected e-mail address has been provided, and such attempted electronic notice shall be ineffective and deemed to not have been given. Each Purchaser agrees to promptly notify the Company of any change in its e-mail address, and that failure to do so shall not affect the foregoing.
6.10 No Finder’s Fees. The Company agrees to indemnify and hold harmless each Purchaser from any liability for any commission or compensation in the nature of a finder’s or broker’s fee arising out of this transaction (and the costs and expenses of defending against such liability or asserted liability) by reason of an agreement or any other action (or failure to act) by the Company or any of its officers, employees or representatives. All fees owed to the Placement Agents are owed by reason of an agreement of the Company and shall be paid by the Company.
6.11 Amendments and Waivers. Neither this Agreement, nor any provision hereof, may be waived, amended, changed or modified orally or by course of dealing, except by an instrument in writing executed by (a) the Company, (b) the Purchaser Majority and (c) the New Purchasers having the right to purchase at the Closing, a majority of the Shares to be purchased hereunder by such New Purchasers (clauses (b) and (c) together, the “Requisite Purchaser Consent”); provided that no such amendment shall impose or increase any liability or obligation on a Purchaser without the consent of such Purchaser.
6.12 Severability. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.
6.13 Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
6.14 Entire Agreement. This Agreement (including the Exhibits hereto) constitutes the full and entire understanding and agreement between the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties are expressly canceled.
23.
6.15 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON THE QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
6.16 Termination. This Agreement shall terminate and be void and of no further force and effect, and all rights and obligations of the parties hereunder shall terminate without any further liability on the part of any party in respect thereof, upon the earliest to occur of (i) such date and time as the Merger Agreement is terminated in accordance with its terms, (ii) upon the mutual written agreement of the Company and the Requisite Purchaser Consent or (iii) October 31, 2024 (the “Outside Date”). In the event of the termination of this Agreement as provided in the foregoing provisions of this Section 6.16, this Agreement shall be of no further force or effect; provided, however, that (a) this Section 6.16 and the other provisions of Section 6 of this Agreement shall survive the termination of this Agreement and shall remain in full force and effect, and (b) the termination of this Agreement shall not relieve any party to this Agreement of any liability for common law fraud or for any Willful Breach of any representation, warranty, covenant, obligation or other provision contained in this Agreement. “Willful Breach” means a deliberate act or deliberate failure to act, taken with the actual knowledge that such act or failure to act would result in or constitute a material breach of this Agreement.
6.17 Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of Delaware and to the jurisdiction of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of Delaware or the United States District Court for the District of Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.
WAIVER OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
24.
6.18 Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under this Agreement are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under this Agreement. Nothing contained herein, and no action taken by any Purchaser pursuant hereto, shall be deemed to constitute the Purchasers as, and the Company acknowledges that the Purchasers do not so constitute, a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group, and the Company will not assert any such claim with respect to such obligations or the transactions contemplated by this Agreement, and the Company acknowledges that the Purchasers are not acting in concert or as a group with respect to such obligations or the transactions contemplated by this Agreement. The Company acknowledges and each Purchaser confirms that it has independently participated in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose. The Company has elected to provide all Purchasers with the same terms for the convenience of the Company and not because it was required or requested to do so by any Purchaser.
6.19 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
6.20 Waiver of Conflicts. Each party to this Agreement acknowledges that Cooley LLP, counsel for the Company, has in the past performed and may continue to perform legal services for certain of the Purchasers in matters unrelated to the transactions described in this Agreement, including the representation of such Purchasers in venture capital financings and other matters. Accordingly, except as otherwise agreed between the Company and a Purchaser, each party to this Agreement hereby (a) acknowledges that they have had an opportunity to ask for information relevant to this disclosure; and (b) the Company gives its informed consent to Cooley LLP’s representation of certain of the Purchasers in such unrelated matters and the Purchasers give their consent to Cooley LLP’s representation of the Company in connection with this Agreement and the transactions contemplated hereby.
[Signature Pages Follow]
25.
IN WITNESS WHEREOF, the parties have executed this Subscription Agreement as of the date first written above.
| TECTONIC THERAPEUTICS, INC. | ||
| By: | /s/ Alise Reicin | |
| Name: Alise Reicin | ||
| Title: Chief Executive Officer | ||
| Address for Notice: Tectonic Therapeutic, Inc. 490 Arsenal Way, Suite 210 Watertown, MA 02472 |
| Email: [email protected] |
With a copy to (which shall not constitute notice):
Cooley LLP
500 Boylston St.
Boston, MA 02116
Attention: Marc Recht
Email: [email protected]
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR THE PURCHASER FOLLOWS]
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| Fidelity Select Portfolios: Biotechnology Portfolio | ||
| By: | /s/ Chris Maher | |
| Name: | Chris Maher | |
| Title: | Authorized Signatory | |
| Email address: |
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| Address: |
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Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| Fidelity Advisor Series VII: Fidelity Advisor Biotechnology Fund | ||
| By: | /s/ Chris Maher | |
| Name: | Chris Maher | |
| Title: | Authorized Signatory | |
| Email address: |
| |
| Address: |
| |
|
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Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| Fidelity Mt. Vernon Street Trust: Fidelity Series Growth Company Fund | ||
| By: | /s/ Chris Maher | |
| Name: | Chris Maher | |
| Title: | Authorized Signatory | |
| Email address: |
| |
| Address: |
| |
|
| ||
Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| Fidelity Mt. Vernon Street Trust: Fidelity Growth Company Fund | ||
| By: | /s/ Chris Maher | |
| Name: | Chris Maher | |
| Title: | Authorized Signatory | |
| Email address: |
| |
| Address: |
| |
|
| ||
Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| Fidelity Growth Company Commingled Pool
By: Fidelity Management Trust Company, as Trustee | ||
| By: | /s/ Chris Maher | |
| Name: | Chris Maher | |
| Title: | Authorized Signatory | |
| Email address: |
| |
| Address: |
| |
|
| ||
Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| Fidelity Mt. Vernon Street Trust: Fidelity Growth Company K6 Fund | ||
| By: | /s/ Chris Maher | |
| Name: | Chris Maher | |
| Title: | Authorized Signatory | |
| Email address: |
| |
| Address: |
| |
|
| ||
Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| TAS PARTNERS, LLC | ||
| By: | /s/ Timothy Springer | |
| Name: | Timothy Springer | |
| Title: | Manager | |
| Email address: | *** | |
| Address: | 36 Woodman Rd. | |
| Newton, MA 02467 | ||
Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| 5AM OPPORTUNITIES II, L.P.
By: 5AM Opportunities II (GP), LLC Its: General Partner | ||
| By: | /s/ Kush M. Parmar | |
| Name: | Kush M. Parmar | |
| Title: | Managing Member | |
| Email address: | *** | |
| Address: | 501 Second Street, Suite 350 | |
| San Francisco, CA 94107 | ||
Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| ECOR1 CAPITAL FUND, L.P.
By: EcoR1 Capital, LLC, its General Partner | ||
| By: | /s/ Oleg Nodelman | |
| Name: | Oleg Nodelman | |
| Title: | Manager | |
| Email address: | *** | |
| Address: | 357 Tehama Street, Suite 3 | |
| San Francisco, CA 94103 | ||
| ECOR1 CAPITAL FUND QUALIFIED, L.P.
By: EcoR1 Capital, LLC, its General Partner | ||
| By: | /s/ Oleg Nodelman | |
| Name: | Oleg Nodelman | |
| Title: | Manager | |
| Email address: | *** | |
| Address: | 357 Tehama Street, Suite 3 | |
| San Francisco, CA 94103 | ||
Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| FARALLON CAPITAL PARTNERS, L.P. | ||
| By: | /s/ Philip Dreyfuss | |
| Name: | Philip Dreyfuss | |
| Title: | Authorized Signatory | |
| Email address: | *** | |
| Address: | One Maritime Plaza, Ste. 2100 | |
| San Francisco, CA 94111 | ||
Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| FARALLON CAPITAL INSTITUTIONAL PARTNERS, L.P. | ||
| By: | /s/ Philip Dreyfuss | |
| Name: | Philip Dreyfuss | |
| Title: | Authorized Signatory | |
| Email address: | *** | |
| Address: | One Maritime Plaza, Ste. 2100 | |
| San Francisco, CA 94111 | ||
Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| FOUR CROSSINGS INSTITUTIONAL PARTNERS V, L.P. | ||
| By: | /s/ Philip Dreyfuss | |
| Name: | Philip Dreyfuss | |
| Title: | Authorized Signatory | |
| Email address: | *** | |
| Address: | One Maritime Plaza, Ste. 2100 | |
| San Francisco, CA 94111 | ||
Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| FARALLON CAPITAL INSTITUTIONAL PARTNERS II, L.P. | ||
| By: | /s/ Philip Dreyfuss | |
| Name: | Philip Dreyfuss | |
| Title: | Authorized Signatory | |
| Email address: | *** | |
| Address: | One Maritime Plaza, Ste. 2100 | |
| San Francisco, CA 94111 | ||
Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| FARALLON CAPITAL OFFSHORE INVESTORS II, L.P. | ||
| By: | /s/ Philip Dreyfuss | |
| Name: | Philip Dreyfuss | |
| Title: | Authorized Signatory | |
| Email address: | *** | |
| Address: | One Maritime Plaza, Ste. 2100 | |
| San Francisco, CA 94111 | ||
Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| FARALLON CAPITAL F5 MASTER I, L.P. | ||
| By: | /s/ Philip Dreyfuss | |
| Name: | Philip Dreyfuss | |
| Title: | Authorized Signatory | |
| Email address: | *** | |
| Address: | One Maritime Plaza, Ste. 2100 | |
| San Francisco, CA 94111 | ||
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| FARALLON CAPITAL (AM) INVESTORS, L.P. | ||
| By: | /s/ Philip Dreyfuss | |
| Name: | Philip Dreyfuss | |
| Title: | Authorized Signatory | |
| Email address: | *** | |
| Address: | One Maritime Plaza, Ste. 2100 | |
| San Francisco, CA 94111 | ||
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| FARALLON CAPITAL INSTITUTIONAL PARTNERS III, L.P. | ||
| By: | /s/ Philip Dreyfuss | |
| Name: | Philip Dreyfuss | |
| Title: | Authorized Signatory | |
| Email address: | *** | |
| Address: | One Maritime Plaza, Ste. 2100 | |
| San Francisco, CA 94111 | ||
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| THE STUART PARTNERS, LLC | ||
| By: | /s/ Anastasios Parafestas | |
| Name: | Anastasios Parafestas | |
| Title: | Manager of its Managing Member | |
| Email address: | *** | |
| Address: | One Joy Street | |
| Boston, MA 02108 | ||
Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| POLARIS PARTNERS IX, L.P.
By: Polaris Partners GP IX, L.P. | ||
| By: | /s/ Lauren Crockett | |
| Name: | Lauren Crockett | |
| Title: | General Counsel | |
| Email address: | *** | |
| Address: | One Marina Park Drive, 8th Floor | |
| Boston, MA 02210 | ||
| POLARIS FOUNDERS CAPITAL FUND II, L.P.
By: Polaris Founders Capital Management Co. II, L.L.C., its general partner | ||
| By: | /s/ Harold Friedman | |
| Name: | Harold Friedman | |
| Title: | Vice President | |
| Email address: | *** | |
| Address: | One Marina Park Drive, 8th Floor | |
| Boston, MA 02210 | ||
Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| VIDA VENTURES II, LLC
By: VV Manager II LLC Its: Managing Member | ||
| By: | /s/ Stefan Vitorovic | |
| Name: | Stefan Vitorovic | |
| Title: | Co-Founder and Managing Director | |
| Email address: | *** | |
| Address: | 40 Broad St., Suite 201 | |
| Boston, MA 02109 | ||
| VIDA VENTURES II-A, LLC
By: VV Manager II LLC Its: Managing Member | ||
| By: | /s/ Stefan Vitorovic | |
| Name: | Stefan Vitorovic | |
| Title: | Co-Founder and Managing Director | |
| Email address: | *** | |
| Address: | 40 Broad St., Suite 201 | |
| Boston, MA 02109 | ||
Signature Page to Subscription Agreement
The parties have executed this Subscription Agreement as of the date first written above.
| PURCHASER: | ||
| GC&H INVESTMENTS, L.P. | ||
| By: | /s/ Melissa Roque | |
| Name: | Elzbieta Gibbons or Melissa Roque | |
| Title: | Authorized Signatory | |
| Email address: | *** | |
| Address: | 3 Embarcadero Center, 20th Floor | |
| San Francisco, CA 94111 | ||
| GC&H INVESTMENTS A5, L.P. | ||
| By: | /s/ Melissa Roque | |
| Name: | Elzbieta Gibbons or Melissa Roque | |
| Title: | Authorized Signatory | |
| Email address: | *** | |
| Address: | 3 Embarcadero Center, 20th Floor | |
| San Francisco, CA 94111 | ||
Signature Page to Subscription Agreement
EXHIBITS
Exhibit A – SCHEDULE OF PURCHASERS
Exhibit B – DISCLOSURE SCHEDULE
Exhibit C – REGISTRATION
EXHIBIT A
SCHEDULE OF PURCHASERS
| Purchaser |
Address |
Total Purchase Price | Purchased Shares |
|||||||
| Fidelity Select Portfolios: Biotechnology Portfolio |
*** Mag & Co. |
$ | 5,000,003.41 | 403,256 | ||||||
| Fidelity Advisor Series VII: Fidelity Advisor Biotechnology Fund |
*** |
$ | 1,689,994.61 | 136,300 | ||||||
| Fidelity Mt. Vernon Street Trust: Fidelity Series Growth Company Fund |
*** |
$ | 1,474,486.20 | 118,919 | ||||||
| Fidelity Mt. Vernon Street Trust: Fidelity Growth Company Fund |
*** |
$ | 5,351,455.33 | 431,601 | ||||||
| Fidelity Growth Company Commingled Pool |
*** |
$ | 9,289,551.93 | 749,213 | ||||||
| Fidelity Mt. Vernon Street Trust: Fidelity Growth Company K6 Fund |
*** |
$ | 2,194,500.78 | 176,989 | ||||||
| TAS Partners, LLC |
*** |
$ | 21,557,362.87 | 1,738,626 | ||||||
| 5AM Opportunities II, L.P. |
*** |
$ | 14,999,997.82 | 1,209,767 | ||||||
| EcoR1 Capital Fund, L.P. |
*** |
$ | 751,297.46 | 60,593 | ||||||
A-1
| Purchaser |
Address |
Total Purchase Price | Purchased Shares |
|||||||
| EcoR1 Capital Fund Qualified, L.P. |
*** |
$ | 12,546,108.30 | 1,011,858 | ||||||
| Farallon Capital Partners, L.P. |
*** |
$ | 2,063,988.06 | 166,463 | ||||||
| Farallon Capital Institutional Partners, L.P. |
*** |
$ | 1,552,997.17 | 125,251 | ||||||
| Four Crossings Institutional Partners V, L.P. |
*** |
$ | 344,992.01 | 27,824 | ||||||
| Farallon Capital Institutional Partners II, L.P. |
*** |
$ | 552,998.97 | 44,600 | ||||||
| Farallon Capital Offshore Investors II, L.P. |
*** |
$ | 3,888,996.25 | 313,652 | ||||||
| Farallon Capital F5 Master I, L.P. |
*** |
$ | 1,126,989.58 | 90,893 | ||||||
| Farallon Capital (AM) Investors, L.P. |
*** |
$ | 266,989.39 | 21,533 | ||||||
| Farallon Capital Institutional Partners III, L.P. |
*** |
$ | 201,993.42 | 16,291 | ||||||
| The Stuart Partners, LLC |
*** |
$ | 4,999,991.01 | 403,255 | ||||||
| Polaris Partners IX, L.P. |
*** |
$ | 3,072,603.62 | 247,809 | ||||||
| Polaris Founders Capital Fund II, L.P. |
*** |
$ | 1,499,991.11 | 120,976 | ||||||
| Vida Ventures II, LLC |
*** |
$ | 1,530,133.27 | 123,407 | ||||||
| Vida Ventures II-A, LLC |
*** |
$ | 42,454.45 | 3,424 | ||||||
| GC&H Investments, L.P. |
*** |
$ | 249,990.26 | 20,162 | ||||||
| GC&H Investments A5, L.P. |
*** |
$ | 349,988.84 | 28,227 | ||||||
|
|
|
|
|
|||||||
| TOTAL |
$ | 96,599,856.12 | 7,790,889 | |||||||
|
|
|
|
|
|||||||
A-2
EXHIBIT B
DISCLOSURE SCHEDULE
B-1
EXHIBIT C
SUMMARY OF TERMS OF REGISTRATION RIGHTS
| Registrable Securities: | All shares of Aspen Common Stock received in exchange for Shares purchased pursuant to this Agreement (the “Exchange Shares”) and any other shares of Common Stock issued as a dividend or other distribution with respect to, in exchange for or in replacement of the Exchange Shares, whether by merger, charter amendment or otherwise will be deemed “Registrable Securities”; provided, however that any such Registrable Securities shall cease to be Registrable Securities (and the Company shall not be required to maintain the effectiveness of any, or file another, Registration Statement hereunder with respect thereto) upon the first to occur of (A) a registration statement with respect to the sale of such Registrable Securities being declared effective by the SEC under the 1933 Act, and such Registrable Securities having been disposed of by the holder thereof in accordance with such effective registration statement, (B) such Registrable Securities having been sold in accordance with Rule 144 (or another exemption from the registration requirements of the 1933 Act) and (C) such Registrable Securities becoming eligible for resale without volume or manner-of-sale restrictions by a non-affiliate and without current public information requirements pursuant to Rule 144. | |
| Registration | No later than the 30th calendar day following the Closing Date, the Company1 shall prepare and file with the SEC a registration statement covering the resale of all the Registrable Securities. The registration statement shall be on Form S-3 if such form is available for use by the Company, provided that if at such time the registration statement is on Form S-1, the Company shall use its best efforts to maintain the effectiveness of such registration statement until such time as a registration statement on Form S-3 covering the Registrable Securities has been declared effective by the SEC. The Company shall use commercially reasonable efforts to have the registration statement declared effective as soon as reasonably practicable after the filing thereof, but in any case not more than sixty (60) days following the filing thereof (or ninety (90) days in the event of a “full review” by the SEC); provided, however, that if the Company is notified by the SEC that the registration statement will not be reviewed or is no longer subject to further review and comment, such date shall be fifth (5th) trading day following the date on which the Company is so notified (if such date precedes the dates otherwise required above).
Not less than five (5) Business Days prior to the filing of the registration statement, the Company will furnish to each selling stockholder a copy of the registration statement as proposed to be filed, which documents will be subject to the review of the selling | |
| 1 | References to “the Company” mean Tectonic Therapeutic, Inc. prior to the Closing and the combined company after the Closing, as the context requires. |
| stockholders. The Company will notify the selling stockholders (which notice will be accompanied by an instruction to suspend the use of the registration statement) as promptly as reasonably possible (i) of the issuance by the SEC or other governmental authority of any stop order suspending the effectiveness of the registration statement, (ii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, and (iii) of the occurrence of any event or passage of time that makes the financial statements included in a registration statement ineligible for inclusion therein or any statement made in the registration statement untrue in any material respect or that requires any revisions to the registration statement so that, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company will use its commercially reasonable efforts to ensure that the use of the registration statement may be resumed as promptly as is practicable. | ||
| Expenses: | The Company will pay the registration expenses, including filing and printing fees, Company’s counsel fees and accounting fees and expenses, but excluding discounts, commissions and fees of underwriters, brokers, dealer managers or other similar securities industry professionals and legal fees incurred by holders of Registrable Securities. | |
| Indemnification: | The Company shall indemnify, defend and hold harmless the selling stockholders and each of their respective officers, directors, agents, partners, members, managers, investment advisers and employees of each of them, each Person who controls any such selling stockholder (within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) and the officers, directors, partners, members, managers, stockholders, agents, investment advisers and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees), expenses and disbursements, as incurred, that arise out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in the registration statement, or arising out of or relating to any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (ii) any violation or alleged violation by the Company or its agents of the Securities Act, the Exchange Act or any state securities law or any rule or regulation thereunder, in connection with the performance of its obligations or any action or inaction required of the Company in connection with any registration, except to the extent, but only to the extent, that such untrue statements, alleged untrue statements, | |
| omissions or alleged omissions (i) are based solely upon information regarding such selling stockholder furnished in writing to the Company by such selling stockholder expressly for use therein or (ii) are a result of a selling stockholder’s failure to send or give a copy of the prospectus or supplement (as then amended or supplemented), if required (and not exempted) to the Persons asserting an untrue statement or omission or alleged untrue statement or omission at or prior to the written confirmation of the sale of Registrable Securities. |
Exhibit 10.4
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of June 20, 2024, by and between Tectonic Therapeutic, Inc. (the “Company”), and Alise Reicin (“Executive”) (collectively referred to as the “Parties” or individually referred to as a “Party”).
RECITALS
WHEREAS, Company and Executive are parties to that certain Executive Employment Agreement, dated August 10, 2020 (the “Prior Agreement”), delineating the terms and conditions of Executive’s employment with Company;
WHEREAS, Company and Executive desire to amend and restate the Prior Agreement to set forth the terms and conditions of the Executive’s continued employment with the Company effective and conditional upon the completion of the Company’s anticipated merger with AVROBIO, Inc. (the “Merger”) (the “Effective Date”);
WHEREAS, in consideration of Executive’s continued employment with the Company and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, Executive and the Company agree as follows:
AGREEMENT
1. Duties and Scope of Employment.
(a) Positions and Duties. Executive will continue to serve as President and Chief Executive Officer of the Company. Executive shall work primarily from her home in New Jersey, with business-related travel to the Company’s Watertown, Massachusetts location from time to time in accordance with Executive’s duties hereunder. In addition, Executive shall make such business trips to such places as may be necessary or advisable for the efficient operations of the Company. Executive will continue to render such business and professional services in the performance of Executive’s duties, consistent with Executive’s position within the Company, as shall reasonably be assigned to Executive by the Company’s Board of Directors (the “Board”). Executive’s at-will employment will continue for an indefinite term until terminated pursuant to the terms of this Agreement, and this period during which the Executive is employed by the Company is referred to herein as the “Employment Term.”
(b) Board Membership. During the Employment Term, Executive will continue to serve as an executive director of the Board. The Company agrees to propose the election and reelection of Executive as an executive director of the Board to the stockholders of the Company at each appropriate annual meeting of stockholders during the Employment Term.
(c) Obligations. During the Employment Term, Executive will continue to perform Executive’s duties faithfully and to the best of Executive’s ability and will continue to devote Executive’s full business efforts and time to the Company. For the duration of the Employment Term, Executive agrees not to actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of the Board. Except with the prior written consent of the Board, Executive will not, while employed by the Company, undertake or engage in any other employment, occupation or business enterprise that would interfere with Executive’s responsibilities and the performance of Executive’s duties hereunder except for (i)
reasonable time devoted to volunteer services for or on behalf of such religious, educational, non-profit and/or other charitable organization as Executive may wish to serve, (ii) service as a director on the board of directors of Sana Biotechnology, Inc. (which the Board previously approved such service by the Executive), (iii) service on the board of directors of a publicly traded biotechnology company that is engaged in the research and development of T-cell redirecting immunotherapies (which the Board previously approved such service by the Executive), and (iv) such other consulting or advisory activities as Executive may disclose to the Chair of the Board of Directors from time to time, provided that individually and in the aggregate, the forgoing activities do not materially interfere with the performance of Executive’s duties and responsibilities hereunder, as determined by the Board in good faith, and do not create any conflict of interest with the Company or its business.
2. At-Will Employment. Subject to Sections 7, 8, and 9 below, the parties agree that Executive’s employment with the Company will continue to be “at-will” employment and may be terminated at any time with or without cause or notice, for any reason or no reason. Executive understands and agrees that neither Executive’s job performance nor promotions, commendations, bonuses or the like from the Company give rise to or in any way serve as the basis for modification, amendment, or extension, by implication or otherwise, of Executive’s employment with the Company.
3. Compensation.
(a) Base Salary. Commencing on the Effective Date, the Company will pay Executive as compensation for Executive’s services a base salary at a rate of $620,000 per year, paid in bi-weekly installments, as reviewed annually by and modified from time to time at the discretion of the Board (the “Base Salary”). The Base Salary will be paid in regular installments in accordance with the Company’s normal payroll practices (subject to required withholding). Any increase or decrease in Base Salary (together with the then existing Base Salary) shall serve as the “Base Salary” for future employment under this Agreement. The first and last payment will be adjusted, if necessary, to reflect a commencement or termination date other than the first or last working day of a pay period, except as provided in Section 8 below.
(b) Annual Bonus. Executive will continue to be eligible to earn an annual discretionary bonus. Commencing on the Effective Date, Executive will be eligible to earn an annual discretionary bonus with a target amount equal to 55% of the Base Salary (the “Target Bonus”). The Executive’s actual annual bonus (the “Annual Bonus”) may be greater or less than the Target Bonus. The Annual Bonus will be based on achievement of one or more Company and/or individual performance goals established by the Compensation Committee or the Board in its discretion (provided that the Compensation Committee or the Board will seek Executive’s input with respect to such goals and will communicate them in writing to Executive in a timely manner), and actual payout of the Annual Bonus will be determined by the Board in its discretion based on achievement of the applicable performance goals for the relevant year. Except as otherwise provided in this Agreement, to qualify for the Annual Bonus in respect of any calendar year, the Executive must remain continuously employed with the Company through February 15th of the following calendar year. Any Annual Bonus payment will be paid no later than March 15th of the calendar year following the year as to which it relates. The Annual Bonus is not earned until paid and no pro-rated amount will be paid if Executive’s employment terminates for any reason prior to the payment date, except as provided in Section 8(a) below.
(c) Equity. In connection with the Merger and promptly following the closing of the Merger, the Board agrees to issue to the Executive an option award to purchase shares of Common Stock of the Company, such that when combined with Executive’s prior securities holdings or rights to acquire securities in the Company, Executive will hold or have the right to acquire shares representing at least 4.34% of the Company’s post-Merger outstanding shares of common stock. Thereafter, Executive will be eligible to receive awards of stock options or
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restricted stock or other equity awards pursuant to any plans or arrangements the Company may have in effect from time to time, and the Board (or the Compensation Committee) shall consider in good faith and determine in its discretion whether Executive shall be granted any such equity awards and the terms of any such award in accordance with the terms of any applicable plan or arrangement that may be in effect from time to time.
4. Employee Benefits. During the Employment Term, Executive will continue to be eligible to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other senior executives of the Company, including, without limitation, the Company’s group medical, dental, vision, disability, and 401K plans. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.
5. Vacation. Executive will continue to be eligible to accrue a maximum of four (4) weeks paid vacation per year, in accordance with the Company’s vacation policy, which shall be taken subject to the demands of the Company’s business and Executive’s obligations as an employee of the Company with a substantial degree of responsibility.
6. Reimbursement of Expenses. During the Employment Term, the Executive will be entitled to reimbursement for all reasonable and normal direct and out-of-pocket business expenses incurred by the Executive in connection with the performance of her duties hereunder, including without limitation, business travel expenses, reasonable home office expenses, and expenses relating to a cellular data plan for a mobile phone and hotspot, providing both domestic and international coverage, upon the Executive’s presentation of valid receipts, expense statements or other supporting documentation for such expenses as the Company may reasonably require. The Company shall reimburse the Executive for her reasonable legal fees and expenses paid or incurred by the Executive in connection with the negotiation and preparation of this Agreement in an amount not to exceed $10,000.
7. Termination on Death or Disability.
(a) Effectiveness. Executive’s employment will terminate automatically upon Executive’s Death or, upon fourteen (14) days prior written notice from the Company, in the event of Disability. For purposes of this Agreement, “Disability” means that Executive, at the time notice is given, has been unable to substantially perform Executive’s duties under this Agreement for not less than one-hundred and twenty (120) workdays within a twelve (12) consecutive month period as a result of Executive’s incapacity due to a physical or mental condition and, if reasonable accommodation is required by law, after any reasonable accommodation.
(b) Effect of Termination. Upon any termination for death or Disability, Executive shall be entitled to: (i) Executive’s Base Salary through the effective date of termination; (ii) the right to continue health care benefits under Title X of the Consolidated Budget Reconciliation Act of 1985, as amended (“COBRA”), at Executive’s cost, to the extent required and available by law; (iii) reimbursement of expenses for which Executive is entitled to be reimbursed pursuant to Section 6 above, but for which Executive has not yet been reimbursed; and (iv) no other severance or benefits of any kind, unless required by law or pursuant to any other written Company plans or policies, as then in effect.
8. Involuntary Termination without Cause; Resignation for Good Reason.
(a) Executive’s entitlement to any and all severance benefits in the event of a termination without “Cause,” a resignation for “Good Reason,” or in the event of a “Change in Control” shall be governed by the Tectonic Therapeutic, Inc. Severance Plan, which will be adopted by the Board and in effect as of the Effective Date (the “Severance Plan”) in accordance with its terms, including all eligibility and release requirements.
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(b) For purposes of this Agreement, “Cause” shall mean the occurrence of any of the following events: (i) Executive’s dishonest statements or acts with respect to the Company or any Affiliate of the Company, or any current or prospective customers, suppliers, vendors or other third parties with which such entity does business, which statements or acts cause or, in the reasonable judgment of the Board, are likely to cause material financial or reputational harm to the Company or an Affiliate; (ii) Executive’s commission of (A) a felony or (B) any misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or in each case the equivalent in any relevant jurisdiction; (iii) Executive’s willful or grossly negligent failure to substantially perform her duties and obligations in connection with Executive’s employment (for reasons other than death or Disability) which failure, if curable, is not cured within thirty (30) days after receipt of written notice from the Company setting forth such failure; (iv) Executive’s gross negligence, willful misconduct or insubordination with respect to the Company or any Affiliate of the Company; or (v) Executive’s material violation of any provision of any agreement(s) between Executive and the Company or any Affiliate of the Company relating to noncompetition, nonsolicitation, nondisclosure and/or assignment of inventions including, but not limited to, the Confidential Information Agreement (as such term is defined in Section 10 below).
(c) For purposes of this Agreement, “Affiliate,” “Good Reason” and “Change in Control” shall have the same definitions as those contained in the Severance Plan.
9. Involuntary Termination for Cause; Resignation Without Good Reason.
(a) Effectiveness. Notwithstanding any other provision of this Agreement, the Company may terminate Executive’s employment at any time for Cause or Executive may resign from Executive’s employment with the Company at any time without Good Reason. Termination for Cause, or Executive’s resignation without Good Reason, shall be effective on the date either Party gives notice to the other Party of such termination in accordance with this Agreement unless otherwise agreed by the Parties.
(b) Effect of Termination. In the case of the Company’s termination of Executive’s employment for Cause, or Executive’s resignation without Good Reason, Executive shall be entitled to receive: (i) Base Salary through the effective date of the termination or resignation, as applicable; (ii) reimbursement of all expenses for which Executive is entitled to be reimbursed pursuant to Section 6 above, but for which Executive has not yet been reimbursed; (iii) the right to continue health care benefits under COBRA, at Executive’s cost, to the extent required and available by law; and (iv) no other severance or benefits of any kind, unless required by law or pursuant to any other written Company plans or policies, as then in effect. In the event of such a termination, Executive’s rights to retain vested equity awards shall be governed by the applicable award agreements.
10. Company Matters.
(a) Proprietary Information and Inventions. In connection with Executive’s employment with the Company, Executive has and will continue to receive and have access to Company confidential information and trade secrets. Accordingly, Executive agrees that Executive is bound by the Employee Confidential Information and Inventions Assignment Agreement, dated as of the Effective Date (the “Confidential Information Agreement”), which contains restrictive covenants and prohibits unauthorized use or disclosure of the Company’s confidential information and trade secrets, among other obligations. A copy of Executive’s executed Confidential Information Agreement is attached hereto as Exhibit A.
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(b) Resignation on Termination. On termination of Executive’s employment, regardless of the reason for such termination, Executive shall immediately (and with contemporaneous effect) resign any directorships, offices or other positions that Executive may hold in the Company or any affiliate, unless otherwise agreed in writing by the Parties.
(c) Notification of New Employer. In the event that Executive leaves the employ of the Company, Executive agrees to notify her new employer about Executive’s rights and obligations under this Agreement and the Confidential Information Agreement.
11. Arbitration. To ensure the timely and economical resolution of disputes that may arise in connection with Executive’s employment with the Company, Executive and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance, negotiation, execution, or interpretation of this Agreement, Confidential Information Agreement, or Executive’s employment, or the termination of Executive’s employment, including but not limited to all statutory claims (including, but not limited to, the Massachusetts Antidiscrimination Act, Mass. Gen. Laws ch.151B and the Massachusetts Wage Act, Mass. Gen. Laws ch. 149), will be resolved pursuant to the Federal Arbitration Act, 9 U.S.C. §1-16, and to the fullest extent permitted by law, by final, binding and confidential arbitration by a single arbitrator conducted in Boston, Massachusetts by Judicial Arbitration and Mediation Services Inc. (“JAMS”) under the then applicable JAMS rules (at the following web address: https://www.jamsadr.com/rules-employment-arbitration/); provided, however, this arbitration provision shall not apply to sexual harassment claims to the extent prohibited by applicable law. A hard copy of the rules will be provided to you upon request. A hard copy of the rules will be provided to Executive upon request. By agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding. In addition, all claims, disputes, or causes of action under this section, whether by Executive or the Company, must be brought in an individual capacity, and shall not be brought as a plaintiff (or claimant) or class member in any purported class or representative proceeding, nor joined or consolidated with the claims of any other person or entity. The Arbitrator may not consolidate the claims of more than one person or entity, and may not preside over any form of representative or class proceeding. To the extent that the preceding sentences regarding class claims or proceedings are found to violate applicable law or are otherwise found unenforceable, any claim(s) alleged or brought on behalf of a class shall proceed in a court of law rather than by arbitration. The Company acknowledges that Executive will have the right to be represented by legal counsel at any arbitration proceeding. Questions of whether a claim is subject to arbitration under this Agreement shall be decided by the arbitrator. Likewise, procedural questions which grow out of the dispute and bear on the final disposition are also matters for the arbitrator. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award; and (c) be authorized to award any or all remedies that Executive or the Company would be entitled to seek in a court of law. The prevailing party in any arbitration hereunder will be entitled to recover from the losing party all costs incurred by it in enforcing the performance of, or protecting its rights under, any part of this Agreement, including reasonable costs of investigation and attorneys’ fees. Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Any awards or orders in such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent jurisdiction.
12. Assignment. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of Executive upon Executive’s death and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form of
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compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution or, in the case of employee benefits or severance, to a beneficiary designated in writing. Any other attempted assignment, transfer, conveyance or other disposition of Executive’s right to compensation or other benefits will be null and void.
13. Notices. All notices, requests, demands and other communications called for under this Agreement shall be in writing and shall be delivered personally by hand or by courier, mailed by United States first-class mail, postage prepaid, at the address indicated for such Party on the signature page to this Agreement, or at such other address as such Party may designate by ten (10) days’ advance written notice to the other Parties hereto. All such notices and other communications shall be deemed given upon personal delivery, three (3) days after the date of mailing. A copy of any notice to Executive (which shall not constitute notice) shall also be provided to her counsel: Mintz, Levin, Cohn, Ferrs, Glovsky & Popeo, P.C., 919 Third Avenue, New York, New York, 10022, Attention: David R. Lagasse.
14. Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.
15. Integration. This Agreement, together with the Company’s 2019 Equity Incentive Plan, Award Agreement, and the Confidential Information Agreement represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral. No waiver, alteration, or modification of any of the provisions of this Agreement will be binding unless in writing and signed by duly authorized representatives of the parties hereto.
16. Tax Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.
17. Waiver. No Party shall be deemed to have waived any right, power or privilege under this Agreement or any provisions hereof unless such waiver shall have been duly executed in writing and acknowledged by the Party to be charged with such waiver. The failure of any Party at any time to insist on performance of any of the provisions of this Agreement shall in no way be construed to be a waiver of such provisions, nor in any way to affect the validity of this Agreement or any part hereof. No waiver of any breach of this Agreement shall be held to be a waiver of any other subsequent breach.
18. Governing Law. This Agreement will be governed by the laws of the Commonwealth of Massachusetts (with the exception of its conflict of laws provisions).
19. Acknowledgment. Executive acknowledges that Executive has had the opportunity to discuss this matter with and obtain advice from Executive’s legal counsel, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.
20. Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, and all such counterparts shall constitute but one instrument.
21. Effect of Headings. The section and subsection headings contained herein are for convenience only and shall not affect the construction hereof.
22. Construction of Agreement. This Agreement has been negotiated by the respective Parties, and the language shall not be construed for or against either Party.
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23. Parachute Payments. If any payment or benefit Executive would receive from the Company or otherwise in connection with a Change of Control (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment (a “Payment”) shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for Executive. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”). Notwithstanding the foregoing, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A of the Code that would not otherwise be subject to taxes pursuant to Section 409A of the Code, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A of the Code after consultation with Executive, as follows: (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for Executive as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A of the Code shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A of the Code.
(a) Unless Executive and the Company agree to use the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the change of control transaction triggering the Payment, the Company shall engage an independent nationally recognized accounting firm to perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the change of control transaction, the Company shall appoint another independent nationally recognized accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. The Company shall use commercially reasonable efforts to cause the accounting firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to Executive and the Company no later than 30 days prior to the date on which Executive’s right to a 280G Payment becomes reasonably likely to occur (if requested at that time by Executive or the Company) or such other time as requested by Executive or the Company.
(b) If Executive receives a Payment for which the Reduced Amount was determined pursuant to clause (x) of the first paragraph of this Section and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, Executive shall promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) of the first paragraph of this Section) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) in the first paragraph of this Section, Executive shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.
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24. Section 409A.
(a) Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to Executive, if any, pursuant to this Agreement, when considered together with any other severance payments or separation benefits that are considered deferred compensation under Section 409A (together, the “Deferred Compensation Separation Benefits”) will be paid or otherwise provided until Executive has a “separation from service” within the meaning of Section 409A. The Executive’s right to receive any installment payments hereunder shall, for purposes of Section 409A, be treated as a right to receive a series of separate and distinct payments. If the timing of Executive’s execution of a Release pursuant to Section 9(b) could impact the calendar year in which any payment under this Agreement that is subject to Section 409A will be made, such payment will be made in the later calendar year.
(b) Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s termination (other than due to death), then the Deferred Compensation Separation Benefits that are payable within the first six (6) months following Executive’s separation from service, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive’s separation from service. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executive’s separation from service, but prior to the six (6) month anniversary of the separation from service, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.
(c) Any amount paid under this Agreement that satisfies the requirements of the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred Compensation Separation Benefits for purposes of clause (a) above.
(d) Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit will not constitute Deferred Compensation Separation Benefits for purposes of clause (a) above. For purposes of this Agreement, “Section 409A Limit” will mean the lesser of two (2) times: (i) Executive’s annualized compensation based upon the annual rate of pay paid to Executive during the Executive’s taxable year preceding Executive’s taxable year of Executive’s termination of employment as determined under Treasury Regulation Section 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive’s employment is terminated.
(e) The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.
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25. D&O Insurance; Indemnification.
(a) The Company shall continue to cause Executive to be covered by directors and officers’ liability insurance to the same extent that such coverage is then maintained for officers or directors of the Company in active service, and any “tail” policy providing directors and officers liability coverage that covers a period of service in which Executive is or was in active service shall cover Executive’s employment with the Company for a similar period.
(b) The Company will continue to indemnify Executive and hold Executive harmless to the fullest extent permitted by applicable law, in accordance with the Bylaws and the Certificate of Incorporation of the Company and pursuant to the terms of an indemnification agreement in substantially the same form as entered into with other officers or directors of the Company and has been provided to the Executive in connect herewith.
[Remainder of page is intentionally blank; signature page follows]
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IN WITNESS WHEREOF, each of the Parties has executed this Agreement as of the day and year first above written.
| “COMPANY” | ||
| TECTONIC THERAPEUTIC, INC. | ||
| By: | /s/ Terrance McGuire | |
| Address: *** | ||
| Attn: Terrance McGuire | ||
| Email: *** | ||
| “EXECUTIVE” | ||
| ALISE REICIN | ||
| /s/ Alise Reicin | ||
| Alise Reicin | ||
| Address: *** | ||
| Email: *** | ||
EXHIBIT A
Employee Confidential Information and Inventions Assignment Agreement
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Exhibit 10.6
TECTONIC THERAPEUTIC, INC.
2024 EQUITY INCENTIVE PLAN
ADOPTED BY THE BOARD OF DIRECTORS: JUNE 20, 2024
APPROVED BY THE STOCKHOLDERS: JUNE 11, 2024
1. GENERAL.
(a) Plan Purpose. The Company, by means of the Plan, seeks to secure and retain the services of Employees, Directors and Consultants, to provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate and to provide a means by which such persons may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Awards.
(b) Available Awards. The Plan provides for the grant of the following Awards: (i) Incentive Stock Options; (ii) Nonstatutory Stock Options; (iii) SARs; (iv) Restricted Stock Awards; (v) RSU Awards; (vi) Performance Awards; and (vii) Other Awards.
(c) Adoption Date; Effective Date. The Plan will come into existence on the Adoption Date, but no Award may be granted prior to the Effective Date.
2. SHARES SUBJECT TO THE PLAN.
(a) Share Reserve. Subject to adjustment in accordance with Section 2(c) and any adjustments as necessary to implement any Capitalization Adjustments, the aggregate number of shares of Common Stock that may be issued pursuant to Awards will not exceed a number of shares of Common Stock equal to twelve and one half percent (12.5%) of the total number of shares of the Company’s Capital Stock outstanding on a fully diluted basis determined as of immediately after the Effective Time (the “Initial Share Reserve”). In addition, subject to any adjustments as necessary to implement any Capitalization Adjustments, such aggregate number of shares of Common Stock will automatically increase on January 1 of each year for a period of ten years commencing on January 1, 2025 and ending on (and including) January 1, 2034, in an amount equal to five percent (5%) of the total number of shares of Common Stock outstanding on December 31 of the preceding year; provided, however, that the Board may act prior to January 1st of a given year to provide that the increase for such year will be a lesser number of shares of Common Stock.
(b) Aggregate Incentive Stock Option Limit. Notwithstanding anything to the contrary in Section 2(a) and subject to any adjustments as necessary to implement any Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options is three (3) multiplied by the Initial Share Reserve.
(c) Share Reserve Operation.
(i) Limit Applies to Common Stock Issued Pursuant to Awards. For clarity, the Share Reserve is a limit on the number of shares of Common Stock that may be issued pursuant to Awards and does not limit the granting of Awards, except that the Company will keep available at all times the number of shares of Common Stock reasonably required to satisfy its obligations to issue shares pursuant to such Awards. Shares may be issued in connection with a merger or acquisition as permitted by, as applicable, Nasdaq Listing Rule 5635(c), NYSE Listed Company Manual Section 303A.08, NYSE American Company Guide Section 711 or other applicable rule, and such issuance will not reduce the number of shares available for issuance under the Plan.
(ii) Actions that Do Not Constitute Issuance of Common Stock and Do Not Reduce Share Reserve. The following actions do not result in an issuance of shares under the Plan and accordingly do not reduce the number of shares subject to the Share Reserve and available for issuance under the Plan: (1) the expiration or termination of any portion of an Award without the shares covered by such portion of the Award having been issued; (2) the settlement of any portion of an Award in cash (i.e., the Participant receives cash rather than Common Stock); (3) the withholding of shares that would otherwise be issued by the Company to satisfy the exercise, strike or purchase price of an Award; or (4) the withholding of shares that would otherwise be issued by the Company to satisfy a tax withholding obligation in connection with an Award.
(iii) Reversion of Previously Issued Shares of Common Stock to Share Reserve. The following shares of Common Stock previously issued pursuant to an Award and accordingly initially deducted from the Share Reserve will be added back to the Share Reserve and again become available for issuance under the Plan: (1) any shares that are forfeited back to or repurchased by the Company because of a failure to meet a contingency or condition required for the vesting of such shares; (2) any shares that are reacquired by the Company to satisfy the exercise, strike or purchase price of an Award; and (3) any shares that are reacquired by the Company to satisfy a tax withholding obligation in connection with an Award.
3. ELIGIBILITY AND LIMITATIONS.
(a) Eligible Award Recipients. Subject to the terms of the Plan, Employees, Directors and Consultants are eligible to receive Awards.
(b) Specific Award Limitations.
(i) Limitations on Incentive Stock Option Recipients. Incentive Stock Options may be granted only to Employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and (f) of the Code).
(ii) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds $100,000 (or such other limit established in the Code) or otherwise does not comply with the rules governing Incentive Stock Options, the Options or portions thereof that exceed such limit (according to the order in which they were granted) or otherwise do not comply with such rules will be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).
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(iii) Limitations on Incentive Stock Options Granted to Ten Percent Stockholders. A Ten Percent Stockholder may not be granted an Incentive Stock Option unless (1) the exercise price of such Option is at least 110% of the Fair Market Value on the date of grant of such Option and (2) the Option is not exercisable after the expiration of five years from the date of grant of such Option.
(iv) Limitations on Nonstatutory Stock Options and SARs. Nonstatutory Stock Options and SARs may not be granted to Employees, Directors and Consultants unless the stock underlying such Awards is treated as “service recipient stock” under Section 409A or unless such Awards otherwise comply with the requirements of Section 409A.
(c) Aggregate Incentive Stock Option Limit. The aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options is the number of shares specified in Section 2(b).
(d) Non-Employee Director Compensation Limit. The aggregate value of all compensation granted or paid, as applicable, to any individual for service as a Non-Employee Director with respect to any calendar year, including Awards granted and cash fees paid by the Company to such Non-Employee Director, will not exceed (1) $750,000 in total value or (2) in the event such Non-Employee Director is first appointed or elected to the Board during such calendar year, $1,000,000 in total value, in each case, calculating the value of any equity awards based on the grant date fair value of such equity awards for financial reporting purposes. The limitations in this Section 3(d) shall apply commencing with the first calendar year that begins following the Effective Date.
4. OPTIONS AND STOCK APPRECIATION RIGHTS.
Each Option and SAR will have such terms and conditions as determined by the Board. Each Option will be designated in writing as an Incentive Stock Option or Nonstatutory Stock Option at the time of grant; provided, however, that if an Option is not so designated or if an Option designated as an Incentive Stock Option fails to qualify as an Incentive Stock Option, then such Option will be a Nonstatutory Stock Option, and the shares purchased upon exercise of each type of Option will be separately accounted for. Each SAR will be denominated in shares of Common Stock equivalents. The terms and conditions of separate Options and SARs need not be identical; provided, however, that each Option Agreement and SAR Agreement will conform (through incorporation of provisions hereof by reference in the Award Agreement or otherwise) to the substance of each of the following provisions:
(a) Term. Subject to Section 3(b) regarding Ten Percent Stockholders, no Option or SAR will be exercisable after the expiration of ten years from the date of grant of such Award or such shorter period specified in the Award Agreement.
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(b) Exercise or Strike Price. Subject to Section 3(b) regarding Ten Percent Stockholders, the exercise or strike price of each Option or SAR will not be less than 100% of the Fair Market Value on the date of grant of such Award. Notwithstanding the foregoing, an Option or SAR may be granted with an exercise or strike price lower than 100% of the Fair Market Value on the date of grant of such Award if such Award is granted pursuant to an assumption of or substitution for another option or stock appreciation right pursuant to a Corporate Transaction and in a manner consistent with the provisions of Sections 409A and, if applicable, 424(a) of the Code.
(c) Exercise Procedure and Payment of Exercise Price for Options. In order to exercise an Option, the Participant must provide notice of exercise to the Plan Administrator in accordance with the procedures specified in the Option Agreement or otherwise provided by the Company. The Board has the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to utilize a particular method of payment. The exercise price of an Option may be paid, to the extent permitted by Applicable Law and as determined by the Board, by one or more of the following methods of payment to the extent set forth in the Option Agreement:
(i) by cash or check, bank draft or money order payable to the Company;
(ii) pursuant to a “cashless exercise” program developed under Regulation T as promulgated by the U.S. Federal Reserve Board that, prior to the issuance of the Common Stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the exercise price to the Company from the sales proceeds;
(iii) by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock that are already owned by the Participant free and clear of any liens, claims, encumbrances or security interests, with a Fair Market Value on the date of exercise that does not exceed the exercise price, provided that (1) at the time of exercise the Common Stock is publicly traded, (2) any remaining balance of the exercise price not satisfied by such delivery is paid by the Participant in cash or other permitted form of payment, (3) such delivery would not violate any Applicable Law or agreement restricting the redemption of the Common Stock, (4) any certificated shares are endorsed or accompanied by an executed assignment separate from certificate, and (5) such shares have been held by the Participant for any minimum period necessary to avoid adverse accounting treatment as a result of such delivery;
(iv) if the Option is a Nonstatutory Stock Option, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value on the date of exercise that does not exceed the exercise price, provided that (1) such shares used to pay the exercise price will not be exercisable thereafter and (2) any remaining balance of the exercise price not satisfied by such net exercise is paid by the Participant in cash or other permitted form of payment; or
(v) in any other form of consideration that may be acceptable to the Board and permissible under Applicable Law.
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(d) Exercise Procedure and Payment of Appreciation Distribution for SARs. In order to exercise any SAR, the Participant must provide notice of exercise to the Plan Administrator in accordance with the SAR Agreement. The appreciation distribution payable to a Participant upon the exercise of a SAR will not be greater than an amount equal to the excess of (i) the aggregate Fair Market Value on the date of exercise of a number of shares of Common Stock equal to the number of Common Stock equivalents that are vested and being exercised under such SAR, over (ii) the strike price of such SAR. Such appreciation distribution may be paid to the Participant in the form of Common Stock or cash (or any combination of Common Stock and cash) or in any other form of payment, as determined by the Board and specified in the SAR Agreement.
(e) Transferability. Options and SARs may not be transferred to third party financial institutions for value. The Board may impose such additional limitations on the transferability of an Option or SAR as it determines. In the absence of any such determination by the Board, the following restrictions on the transferability of Options and SARs will apply, provided that except as explicitly provided herein, neither an Option nor a SAR may be transferred for consideration and provided, further, that if an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer:
(i) Restrictions on Transfer. An Option or SAR will not be transferable, except by will or by the laws of descent and distribution, and will be exercisable during the lifetime of the Participant only by the Participant; provided, however, that the Board may permit transfer of an Option or SAR in a manner that is not prohibited by applicable tax and securities laws upon the Participant’s request, including to a trust if the Participant is considered to be the sole beneficial owner of such trust (as determined under Section 671 of the Code and applicable U.S. state law) while such Option or SAR is held in such trust, provided that the Participant and the trustee enter into a transfer and other agreements required by the Company.
(ii) Domestic Relations Orders. Notwithstanding the foregoing, subject to the execution of transfer documentation in a format acceptable to the Company and subject to the approval of the Board or a duly authorized Officer, an Option or SAR may be transferred pursuant to a domestic relations order.
(f) Vesting. The Board may impose such restrictions on or conditions to the vesting and/or exercisability of an Option or SAR as determined by the Board. Except as otherwise provided in the applicable Award Agreement or other written agreement between a Participant and the Company, vesting of Options and SARs will cease upon termination of the Participant’s Continuous Service.
(g) Termination of Continuous Service for Cause. Except as explicitly otherwise provided in the Award Agreement or other written agreement between a Participant and the Company, if a Participant’s Continuous Service is terminated for Cause, the Participant’s Options and SARs will terminate and be forfeited immediately upon such termination of Continuous Service, and the Participant will be prohibited from exercising any portion (including any vested portion) of such Awards on and after the date of such termination of Continuous Service and the Participant will have no further right, title or interest in such forfeited Award, the shares of Common Stock subject to the forfeited Award, or any consideration in respect of the forfeited Award.
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(h) Post-Termination Exercise Period Following Termination of Continuous Service for Reasons Other than Cause. Subject to Section 4(i), if a Participant’s Continuous Service terminates for any reason other than for Cause, the Participant may exercise his or her Option or SAR to the extent vested, but only within the following period of time or, if applicable, such other period of time provided in the Award Agreement or other written agreement between a Participant and the Company; provided, however, that in no event may such Award be exercised after the expiration of its maximum term (as set forth in Section 4(a)):
(i) three months following the date of such termination if such termination is a termination without Cause (other than any termination due to the Participant’s Disability or death);
(ii) 12 months following the date of such termination if such termination is due to the Participant’s Disability;
(iii) 18 months following the date of such termination if such termination is due to the Participant’s death; or
(iv) 18 months following the date of the Participant’s death if such death occurs following the date of such termination but during the period such Award is otherwise exercisable (as provided in (i) or (ii) above).
Following the date of such termination, to the extent the Participant does not exercise such Award within the applicable Post-Termination Exercise Period (or, if earlier, prior to the expiration of the maximum term of such Award), such unexercised portion of the Award will terminate, and the Participant will have no further right, title or interest in the terminated Award, the shares of Common Stock subject to the terminated Award, or any consideration in respect of the terminated Award.
(i) Restrictions on Exercise; Extension of Exercisability. A Participant may not exercise an Option or SAR at any time that the issuance of shares of Common Stock upon such exercise would violate Applicable Law. Except as otherwise provided in the Award Agreement or other written agreement between a Participant and the Company, if a Participant’s Continuous Service terminates for any reason other than for Cause and, at any time during the last thirty days of the applicable Post-Termination Exercise Period: (i) the exercise of the Participant’s Option or SAR would be prohibited solely because the issuance of shares of Common Stock upon such exercise would violate Applicable Law, or (ii) the immediate sale of any shares of Common Stock issued upon such exercise would violate the Company’s Trading Policy, then the applicable Post-Termination Exercise Period will be extended to the last day of the calendar month that commences following the date the Award would otherwise expire, with an additional extension of the exercise period to the last day of the next calendar month to apply if any of the foregoing restrictions apply at any time during such extended exercise period, generally without limitation as to the maximum permitted number of extensions; provided, however, that in no event may such Award be exercised after the expiration of its maximum term (as set forth in Section 4(a)).
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(j) Non-Exempt Employees. No Option or SAR, whether or not vested, granted to an Employee who is a non-exempt employee for purposes of the U.S. Fair Labor Standards Act of 1938, as amended, will be first exercisable for any shares of Common Stock until at least six months following the date of grant of such Award. Notwithstanding the foregoing, in accordance with the provisions of the U.S. Worker Economic Opportunity Act, any vested portion of such Award may be exercised earlier than six months following the date of grant of such Award in the event of (i) such Participant’s death or Disability, (ii) a Corporate Transaction in which such Award is not assumed, continued or substituted, (iii) a Change in Control, or (iv) such Participant’s retirement (as such term may be defined in the Award Agreement or another applicable agreement or, in the absence of any such definition, in accordance with the Company’s then current employment policies and guidelines). This Section 4(j) is intended to operate so that any income derived by a non-exempt employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay.
(k) Whole Shares. Options and SARs may be exercised only with respect to whole shares of Common Stock or their equivalents.
5. AWARDS OTHER THAN OPTIONS AND STOCK APPRECIATION RIGHTS.
(a) Restricted Stock Awards and RSU Awards. Each Restricted Stock Award and RSU Award will have such terms and conditions as determined by the Board; provided, however, that each Restricted Stock Award Agreement and RSU Award Agreement will conform (through incorporation of the provisions hereof by reference in the Award Agreement or otherwise) to the substance of each of the following provisions:
(i) Form of Award.
(1) Restricted Stock Awards: To the extent consistent with the Company’s Bylaws, at the Board’s election, shares of Common Stock subject to a Restricted Stock Award may be (A) held in book entry form subject to the Company’s instructions until such shares become vested or any other restrictions lapse, or (B) evidenced by a certificate, which certificate will be held in such form and manner as determined by the Board. Unless otherwise determined by the Board, a Participant will have voting and other rights as a stockholder of the Company with respect to any shares subject to a Restricted Stock Award.
(2) RSU Awards: An RSU Award represents a Participant’s right to be issued on a future date the number of shares of Common Stock that is equal to the number of restricted stock units subject to the RSU Award. As a holder of an RSU Award, a Participant is an unsecured creditor of the Company with respect to the Company’s unfunded obligation, if any, to issue shares of Common Stock in settlement of such Award and nothing contained in the Plan or any RSU Award Agreement, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between a Participant and the Company or an Affiliate or any other person. A Participant will not have voting or any other rights as a stockholder of the Company with respect to any RSU Award (unless and until shares are actually issued in settlement of a vested RSU Award).
(ii) Consideration.
(1) Restricted Stock Awards: A Restricted Stock Award may be granted in consideration for (A) cash or check, bank draft or money order payable to the Company, (B) services to the Company or an Affiliate, or (C) any other form of consideration as the Board may determine and permissible under Applicable Law.
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(2) RSU Awards: Unless otherwise determined by the Board at the time of grant, an RSU Award will be granted in consideration for the Participant’s services to the Company or an Affiliate, such that the Participant will not be required to make any payment to the Company (other than such services) with respect to the grant or vesting of the RSU Award, or the issuance of any shares of Common Stock pursuant to the RSU Award. If, at the time of grant, the Board determines that any consideration must be paid by the Participant (in a form other than the Participant’s services to the Company or an Affiliate) upon the issuance of any shares of Common Stock in settlement of the RSU Award, such consideration may be paid in any form of consideration as the Board may determine and permissible under Applicable Law.
(iii) Vesting. The Board may impose such restrictions on or conditions to the vesting of a Restricted Stock Award or RSU Award as determined by the Board. Except as otherwise provided in the Award Agreement or other written agreement between a Participant and the Company, vesting of Restricted Stock Awards and RSU Awards will cease upon termination of the Participant’s Continuous Service.
(iv) Termination of Continuous Service. Except as otherwise provided in the Award Agreement or other written agreement between a Participant and the Company, if a Participant’s Continuous Service terminates for any reason, (1) the Company may receive through a forfeiture condition or a repurchase right any or all of the shares of Common Stock held by the Participant under his or her Restricted Stock Award that have not vested as of the date of such termination as set forth in the Restricted Stock Award Agreement and the Participant will have no further right, title or interest in the Restricted Stock Award, the shares of Common Stock subject to the Restricted Stock Award, or any consideration in respect of the Restricted Stock Award and (2) any portion of his or her RSU Award that has not vested will be forfeited upon such termination and the Participant will have no further right, title or interest in the RSU Award, the shares of Common Stock issuable pursuant to the RSU Award, or any consideration in respect of the RSU Award.
(v) Dividends and Dividend Equivalents. Dividends or dividend equivalents may be paid or credited, as applicable, with respect to any shares of Common Stock subject to a Restricted Stock Award or RSU Award, as determined by the Board and specified in the Award Agreement.
(vi) Settlement of RSU Awards. An RSU Award may be settled by the issuance of shares of Common Stock or cash (or any combination thereof) or in any other form of payment, as determined by the Board and specified in the RSU Award Agreement. At the time of grant, the Board may determine to impose such restrictions or conditions that delay such delivery to a date following the vesting of the RSU Award.
(b) Performance Awards. With respect to any Performance Award, the length of any Performance Period, the Performance Goals to be achieved during the Performance Period, the other terms and conditions of such Award, and the measure of whether and to what degree such Performance Goals have been attained will be determined by the Board.
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(c) Other Awards. Other forms of Awards valued in whole or in part by reference to, or otherwise based on, Common Stock, including the appreciation in value thereof, may be granted either alone or in addition to Awards provided for under Section 4 and the preceding provisions of this Section 5. Subject to the provisions of the Plan, the Board will have sole and complete discretion to determine the persons to whom and the time or times at which such Other Awards will be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Awards and all other terms and conditions of such Other Awards.
6. ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.
(a) Capitalization Adjustments. In the event of a Capitalization Adjustment, the Board shall appropriately and proportionately adjust: (i) the class(es) and maximum number of shares of Common Stock subject to the Plan and the maximum number of shares by which the Share Reserve may annually increase pursuant to Section 2(a); (ii) the class(es) and maximum number of shares that may be issued pursuant to the exercise of Incentive Stock Options pursuant to Section 2(b); and (iii) the class(es) and number of securities and exercise price, strike price or purchase price of Common Stock subject to outstanding Awards. The Board shall make such adjustments, and its determination shall be final, binding and conclusive. Notwithstanding the foregoing, no fractional shares or rights for fractional shares of Common Stock shall be created in order to implement any Capitalization Adjustment. The Board shall determine an appropriate equivalent benefit, if any, for any fractional shares or rights to fractional shares that might be created by the adjustments referred to in the preceding provisions of this Section.
(b) Dissolution or Liquidation. Except as otherwise provided in the Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Awards (other than Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) will terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Award is providing Continuous Service, provided, however, that the Board may determine to cause some or all Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.
(c) Corporate Transaction. The following provisions will apply to Awards in the event of a Corporate Transaction, except as set forth in Section 11, unless otherwise provided in the instrument evidencing the Award or any other written agreement between the Company and the Participant or unless otherwise expressly provided by the Board at the time of grant of an Award.
(i) Awards May Be Assumed. In the event of a Corporate Transaction, any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue any or all Awards outstanding under the Plan or may substitute similar awards for Awards outstanding under the Plan (including but not limited to, awards to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction), and any reacquisition or repurchase rights held by the Company in respect of
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Common Stock issued pursuant to Awards may be assigned by the Company to the successor of the Company (or the successor’s parent company, if any), in connection with such Corporate Transaction. A surviving corporation or acquiring corporation (or its parent) may choose to assume or continue only a portion of an Award or substitute a similar award for only a portion of an Award, or may choose to assume, continue or substitute the Awards held by some, but not all Participants. The terms of any assumption, continuation or substitution will be set by the Board.
(ii) Awards Held by Current Participants. In the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Awards or substitute similar awards for such outstanding Awards, then with respect to Awards that have not been assumed, continued or substituted and that are held by Participants whose Continuous Service has not terminated prior to the effective time of the Corporate Transaction (referred to as the “Current Participants”), the vesting of such Awards (and, with respect to Options and Stock Appreciation Rights, the time when such Awards may be exercised) will be accelerated in full to a date prior to the effective time of such Corporate Transaction (contingent upon the effectiveness of the Corporate Transaction) as the Board determines (or, if the Board does not determine such a date, to the date that is five days prior to the effective time of the Corporate Transaction), and such Awards will terminate if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction, and any reacquisition or repurchase rights held by the Company with respect to such Awards will lapse (contingent upon the effectiveness of the Corporate Transaction). With respect to the vesting of Performance Awards that will accelerate upon the occurrence of a Corporate Transaction pursuant to this subsection (ii) and that have multiple vesting levels depending on the level of performance, unless otherwise provided in the Award Agreement, the vesting of such Performance Awards will accelerate at 100% of the target level upon the occurrence of the Corporate Transaction in which the Awards are not assumed, continued or substituted in accordance with Section 6(c)(i). With respect to the vesting of Awards that will accelerate upon the occurrence of a Corporate Transaction pursuant to this subsection (ii) and are settled in the form of a cash payment, such cash payment will be made no later than 30 days following the occurrence of the Corporate Transaction or such later date as required to comply with Section 409A of the Code.
(iii) Awards Held by Persons other than Current Participants. In the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue such outstanding Awards or substitute similar awards for such outstanding Awards, then with respect to Awards that have not been assumed, continued or substituted and that are held by persons other than Current Participants, such Awards will terminate if not exercised (if applicable) prior to the occurrence of the Corporate Transaction; provided, however, that any reacquisition or repurchase rights held by the Company with respect to such Awards will not terminate and may continue to be exercised notwithstanding the Corporate Transaction.
(iv) Payment for Awards in Lieu of Exercise. Notwithstanding the foregoing, in the event an Award will terminate if not exercised prior to the effective time of a Corporate Transaction, the Board may provide, in its sole discretion, that the holder of such Award may not exercise such Award but will receive a payment, in such form as may be determined by the Board, equal in value, at the effective time, to the excess, if any, of (1) the value of the property the Participant would have received upon the exercise of the Award (including, at the discretion of the Board, any unvested portion of such Award), over (2) any exercise price payable by such holder in connection with such exercise.
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(d) Appointment of Stockholder Representative. As a condition to the receipt of an Award under this Plan, a Participant will be deemed to have agreed that the Award will be subject to the terms of any agreement governing a Corporate Transaction involving the Company, including, without limitation, a provision for the appointment of a stockholder representative that is authorized to act on the Participant’s behalf with respect to any escrow, indemnities and any contingent consideration.
(e) No Restriction on Right to Undertake Transactions. The grant of any Award under the Plan and the issuance of shares pursuant to any Award does not affect or restrict in any way the right or power of the Company, the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any Change in Control, any Corporate Transaction, any merger or consolidation of the Company, any issue of stock or of options, rights or options to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
7. ADMINISTRATION.
(a) Administration by Board. The Board will administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in subsection (c) below.
(b) Powers of Board. The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:
(i) To determine from time to time (1) which of the persons eligible under the Plan will be granted Awards; (2) when and how each Award will be granted; (3) what type or combination of types of Award will be granted; (4) the provisions of each Award granted (which need not be identical), including the time or times when a person will be permitted to receive an issuance of Common Stock or other payment pursuant to an Award; (5) the number of shares of Common Stock or cash equivalent with respect to which an Award will be granted to each such person; (6) the Fair Market Value applicable to an Award; and (7) the terms of any Performance Award that is not valued in whole or in part by reference to, or otherwise based on, the Common Stock, including the amount of cash payment or other property that may be earned and the timing of payment.
(ii) To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Award Agreement, in a manner and to the extent it deems necessary or expedient to make the Plan or Award fully effective.
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(iii) To settle all controversies regarding the Plan and Awards granted under it.
(iv) To accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest, notwithstanding the provisions in the Award Agreement stating the time at which it may first be exercised or the time during which it will vest.
(v) To prohibit the exercise of any Option, SAR or other exercisable Award during a period of up to 30 days prior to the consummation of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of Common Stock or the share price of the Common Stock including any Corporate Transaction, for reasons of administrative convenience.
(vi) To suspend or terminate the Plan at any time. Suspension or termination of the Plan will not Materially Impair rights and obligations under any Award granted while the Plan is in effect except with the written consent of the affected Participant.
(vii) To amend the Plan in any respect the Board deems necessary or advisable; provided, however, that stockholder approval will be required for any amendment to the extent required by Applicable Law. Except as provided above, rights under any Award granted before amendment of the Plan will not be Materially Impaired by any amendment of the Plan unless (1) the Company requests the consent of the affected Participant, and (2) such Participant consents in writing.
(viii) To submit any amendment to the Plan for stockholder approval.
(ix) To approve forms of Award Agreements for use under the Plan and to amend the terms of any one or more Awards, including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion; provided however, that, a Participant’s rights under any Award will not be Materially Impaired by any such amendment unless (1) the Company requests the consent of the affected Participant, and (2) such Participant consents in writing.
(x) Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan or Awards.
(xi) To adopt such procedures and sub-plans as are necessary or appropriate to permit and facilitate participation in the Plan by, or take advantage of specific tax treatment for Awards granted to, Employees, Directors or Consultants who are non-U.S. nationals or employed outside the United States (provided that Board approval will not be necessary for immaterial modifications to the Plan or any Award Agreement to ensure or facilitate compliance with the laws of the relevant non-U.S. jurisdiction).
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(xii) To effect, at any time and from time to time, subject to the consent of any Participant whose Award is Materially Impaired by such action, (1) the reduction of the exercise price (or strike price) of any outstanding Option or SAR; (2) the cancellation of any outstanding Option or SAR and the grant in substitution therefor of (A) a new Option, SAR, Restricted Stock Award, RSU Award or Other Award, under the Plan or another equity plan of the Company, covering the same or a different number of shares of Common Stock, (B) cash and/or (C) other valuable consideration (as determined by the Board); or (3) any other action that is treated as a repricing under generally accepted accounting principles.
(c) Delegation to Committee.
(i) General. The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration of the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to another Committee or a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. Each Committee may retain the authority to concurrently administer the Plan with the Committee or subcommittee to which it has delegated its authority hereunder and may, at any time, revest in such Committee some or all of the powers previously delegated. The Board may retain the authority to concurrently administer the Plan with any Committee and may, at any time, revest in the Board some or all of the powers previously delegated.
(ii) Rule 16b-3 Compliance. To the extent an Award is intended to qualify for the exemption from Section 16(b) of the Exchange Act that is available under Rule 16b-3 of the Exchange Act, the Award will be granted by the Board or a Committee that consists solely of two or more Non-Employee Directors, as determined under Rule 16b-3(b)(3) of the Exchange Act and thereafter any action establishing or modifying the terms of the Award will be approved by the Board or a Committee meeting such requirements to the extent necessary for such exemption to remain available.
(d) Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board or any Committee in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.
(e) Delegation to Other Person or Body. The Board or any Committee may delegate to one or more persons or bodies the authority to do one or more of the following to the extent permitted by Applicable Law: (i) designate recipients, other than Officers, of Awards, provided that no person or body may be delegated authority to grant an Award to themself; (ii) determine the number of shares subject to such Awards; and (iii) determine the terms of such Awards; provided, however, that the Board or Committee action regarding such delegation will fix the terms of such delegation in accordance with Applicable Law, including without limitation Sections 152 and 157 of the Delaware General Corporation Law. Unless provided otherwise in the Board or Committee action regarding such delegation, each Award granted pursuant to this section will be granted on the applicable form of Award Agreement most recently approved for use by the Board or the Committee, with any modifications necessary to incorporate or reflect the terms of such Award. Notwithstanding anything to the contrary herein, neither the Board nor any Committee may delegate to any person or body (who is not a Director or that is not comprised solely of Directors, respectively) the authority to determine the Fair Market Value.
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8. TAX WITHHOLDING
(a) Withholding Authorization. As a condition to acceptance of any Award under the Plan, a Participant authorizes withholding from payroll and any other amounts payable to such Participant, and otherwise agrees to make adequate arrangements to satisfy the Tax-Related Items withholding obligations, if any, of the Company and/or an Affiliate that arise in connection with the grant, vesting, exercise or settlement of such Award, as applicable. Accordingly, a Participant may not be able to exercise an Award even though the Award is vested, and the Company shall have no obligation to issue shares of Common Stock subject to an Award, unless and until such obligations are satisfied.
(b) Satisfaction of Withholding Obligation. To the extent permitted by the terms of an Award Agreement, the Company may, in its sole discretion, satisfy any Tax-Related Items withholding obligation relating to an Award by any of the following means or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Award; (iii) withholding cash from an Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant; (v) by allowing a Participant to effectuate a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the U.S. Federal Reserve Board; or (vi) by such other method as may be set forth in the Award Agreement.
(c) No Obligation to Notify or Minimize Taxes; No Liability to Claims. Except as required by Applicable Law the Company has no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Award. Furthermore, the Company has no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of an Award or a possible period in which the Award may not be exercised. The Company has no duty or obligation to minimize the tax consequences of an Award to the holder of such Award and will not be liable to any holder of an Award for any adverse tax consequences to such holder in connection with an Award. As a condition to accepting an Award under the Plan, each Participant (i) agrees to not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates related to tax liabilities arising from such Award or other Company compensation and (ii) acknowledges that such Participant was advised to consult with his or her own personal tax, financial and other legal advisors regarding the tax consequences of the Award and has either done so or knowingly and voluntarily declined to do so. Additionally, each Participant acknowledges any Option or SAR granted under the Plan is exempt from Section 409A only if the exercise or strike price is at least equal to the “fair market value” of the Common Stock on the date of grant as determined by the U.S. Internal Revenue Service and there is no other impermissible deferral of compensation associated with the Award. Additionally, as a condition to accepting an Option or SAR granted under the Plan, each Participant agrees to not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates in the event that the U.S. Internal Revenue Service asserts that such exercise price or strike price is less than the “fair market value” of the Common Stock on the date of grant as subsequently determined by the U.S. Internal Revenue Service.
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(d) Withholding Indemnification. The Company and/or its Affiliate may withhold or account for Tax-Related Items by considering statutory or other withholding rates, including minimum or maximum rates applicable in a Participant’s jurisdiction. In the event of overwithholding, the Participant pay receive a refund of any over-withheld amount in cash (with no entitlement to the equivalent in Common Stock) or, if not refunded, the Participant may seek a refund from the local tax authorities. In the event of under-withholding, the Participant may be required to pay any additional Tax-Related Items directly to the applicable tax authority or to the Company and/or its Affiliate. As a condition to accepting an Award under the Plan, in the event that the amount of the Company’s and/or its Affiliate’s withholding obligation in connection with such Award was greater than the amount actually withheld by the Company and/or its Affiliates, each Participant agrees to indemnify and hold the Company and/or its Affiliates harmless from any failure by the Company and/or its Affiliates to withhold the proper amount. Further, if the obligation for Tax-Related Items is satisfied by withholding in shares of Common Stock, for tax purposes, the Participant will be deemed to have been issued the full number of shares subject to the Award, notwithstanding that a number of the shares is held back solely for the purpose of paying the Tax-Related Items.
9. MISCELLANEOUS.
(a) Source of Shares. The stock issuable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market or otherwise.
(b) Use of Proceeds from Sales of Common Stock. Proceeds from the sale of shares of Common Stock pursuant to Awards will constitute general funds of the Company.
(c) Corporate Action Constituting Grant of Awards. Corporate action constituting a grant by the Company of an Award to any Participant will be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Award is communicated to, or actually received or accepted by, the Participant. In the event that the corporate records (e.g., Board consents, resolutions or minutes) documenting the corporate action approving the grant contain terms (e.g., exercise price, vesting schedule or number of shares) that are inconsistent with those in the Award Agreement or related grant documents as a result of a clerical error in the Award Agreement or related grant documents, the corporate records will control and the Participant will have no legally binding right to the incorrect term in the Award Agreement or related grant documents.
(d) Stockholder Rights. No Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Award unless and until (i) such Participant has satisfied all requirements for exercise of the Award pursuant to its terms, if applicable, and (ii) the issuance of the Common Stock subject to such Award is reflected in the records of the Company.
(e) No Employment or Other Service Rights. Nothing in the Plan, any Award Agreement or any other instrument executed thereunder or in connection with any Award granted pursuant thereto will confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or affect the right of the
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Company or an Affiliate to terminate at will (unless otherwise required under Applicable Law) and without regard to any future vesting opportunity that a Participant may have with respect to any Award (i) the employment of an Employee with or without notice and with or without Cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the U.S. state or non-U.S. jurisdiction in which the Company or the Affiliate is incorporated, as the case may be. Further, nothing in the Plan, any Award Agreement or any other instrument executed thereunder or in connection with any Award will constitute any promise or commitment by the Company or an Affiliate regarding the fact or nature of future positions, future work assignments, future compensation or any other term or condition of employment or service or confer any right or benefit under the Award or the Plan unless such right or benefit has specifically accrued under the terms of the Award Agreement and/or Plan.
(f) Change in Time Commitment. In the event a Participant’s regular level of time commitment in the performance of his or her services for the Company and any Affiliates is reduced (for example, and without limitation, if the Participant is an Employee of the Company and the Employee has a change in status from a full-time Employee to a part-time Employee or takes an extended leave of absence) after the date of grant of any Award to the Participant, the Board may determine, to the extent permitted by Applicable Law, to (i) make a corresponding reduction in the number of shares or cash amount subject to any portion of such Award that is scheduled to vest or become payable after the date of such change in time commitment, and (ii) in lieu of or in combination with such a reduction, extend the vesting or payment schedule applicable to such Award. In the event of any such reduction, the Participant will have no right with respect to any portion of the Award that is so reduced or extended.
(g) Execution of Additional Documents. As a condition to accepting an Award under the Plan, the Participant agrees to execute any additional documents or instruments necessary or desirable, as determined in the Plan Administrator’s sole discretion, to carry out the purposes or intent of the Award, or facilitate compliance with securities and/or other regulatory requirements, in each case at the Plan Administrator’s request.
(h) Electronic Delivery and Participation. Any reference herein or in an Award Agreement to a “written” agreement or document will include any agreement or document delivered electronically, filed publicly at www.sec.gov (or any successor website thereto) or posted on the Company’s intranet (or other shared electronic medium controlled by the Company to which the Participant has access). By accepting any Award the Participant consents to receive documents by electronic delivery and to participate in the Plan through any on-line electronic system established and maintained by the Plan Administrator or another third party selected by the Plan Administrator. The form of delivery of any Common Stock (e.g., a stock certificate or electronic entry evidencing such shares) shall be determined by the Company.
(i) Clawback/Recovery. All Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other Applicable Law and any clawback policy that the Company
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otherwise adopts, to the extent applicable and permissible under Applicable Law. In addition, the Board may impose such other clawback, recovery or recoupment provisions in an Award Agreement as the Board determines necessary or appropriate, including but not limited to a reacquisition right in respect of previously acquired shares of Common Stock or other cash or property upon the occurrence of Cause. No recovery of compensation under such a clawback policy will be an event giving rise to a Participant’s right to voluntarily terminate employment upon a “resignation for good reason,” or for a “constructive termination” or any similar term under any plan of or agreement with the Company.
(j) Securities Law Compliance. A Participant will not be issued any shares in respect of an Award unless either (i) the shares are registered under the Securities Act; or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. Each Award also must comply with other Applicable Law governing the Award, and a Participant will not receive such shares if the Company determines that such receipt would not be in material compliance with Applicable Law.
(k) Transfer or Assignment of Awards; Issued Shares. Except as expressly provided in the Plan or the form of Award Agreement, Awards granted under the Plan may not be transferred or assigned by the Participant. After the vested shares subject to an Award have been issued, or in the case of a Restricted Stock Award and similar awards, after the issued shares have vested, the holder of such shares is free to assign, hypothecate, donate, encumber or otherwise dispose of any interest in such shares provided that any such actions are in compliance with the provisions herein, the terms of the Trading Policy and Applicable Law.
(l) Effect on Other Employee Benefit Plans. The value of any Award granted under the Plan, as determined upon grant, vesting or settlement, shall not be included as compensation, earnings, salaries, or other similar terms used when calculating any Participant’s benefits under any employee benefit plan sponsored by the Company or any Affiliate, except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiliate’s employee benefit plans.
(m) Deferrals. To the extent permitted by Applicable Law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may also establish programs and procedures for deferral elections to be made by Participants. Deferrals will be made in accordance with the requirements of Section 409A.
(n) Section 409A. Unless otherwise expressly provided for in an Award Agreement, the Plan and Award Agreements will be interpreted to the greatest extent possible in a manner that makes the Plan and the Awards granted hereunder exempt from Section 409A, and, to the extent not so exempt, in compliance with the requirements of Section 409A. If the Board determines that any Award granted hereunder is not exempt from and is therefore subject to Section 409A, the Award Agreement evidencing such Award will incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code, and to the extent an Award Agreement is silent on terms necessary for compliance, such terms are hereby incorporated by reference into the Award Agreement. Notwithstanding anything to the contrary in this Plan (and unless the Award Agreement specifically provides otherwise), if the shares of Common Stock are
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publicly traded, and if a Participant holding an Award that constitutes “deferred compensation” under Section 409A is a “specified employee” for purposes of Section 409A, no distribution or payment of any amount that is due because of a “separation from service” (as defined in Section 409A without regard to alternative definitions thereunder) will be issued or paid before the date that is six months and one day following the date of such Participant’s “separation from service” or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A, and any amounts so deferred will be paid in a lump sum on the day after such six month period elapses, with the balance paid thereafter on the original schedule.
(o) CHOICE OF LAW. This Plan and any controversy arising out of or relating to this Plan shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without regard to conflict of law principles that would result in any application of any law other than the law of the State of Delaware.
10. COVENANTS OF THE COMPANY.
The Company will seek to obtain from each regulatory commission or agency, as may be deemed to be necessary, having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell shares of Common Stock upon exercise or vesting of the Awards; provided, however, that this undertaking will not require the Company to register under the Securities Act the Plan, any Award or any Common Stock issued or issuable pursuant to any such Award. If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary or advisable for the lawful issuance and sale of Common Stock under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon exercise or vesting of such Awards unless and until such authority is obtained. A Participant is not eligible for the grant of an Award or the subsequent issuance of Common Stock pursuant to the Award if such grant or issuance would be in violation of any Applicable Law.
11. ADDITIONAL RULES FOR AWARDS SUBJECT TO SECTION 409A.
(a) Application. Unless the provisions of this Section of the Plan are expressly superseded by the provisions in the form of Award Agreement, the provisions of this Section shall apply and shall supersede anything to the contrary set forth in the Award Agreement for a Non-Exempt Award.
(b) Non-Exempt Awards Subject to Non-Exempt Severance Arrangements. To the extent a Non-Exempt Award is subject to Section 409A due to application of a Non-Exempt Severance Arrangement, the following provisions of this subsection (b) apply.
(i) If the Non-Exempt Award vests in the ordinary course during the Participant’s Continuous Service in accordance with the vesting schedule set forth in the Award Agreement, and does not accelerate vesting under the terms of a Non-Exempt Severance Arrangement, in no event will the shares be issued in respect of such Non-Exempt Award any later than the later of: (i) December 31st of the calendar year that includes the applicable vesting date, or (ii) the 60th day that follows the applicable vesting date.
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(ii) If vesting of the Non-Exempt Award accelerates under the terms of a Non-Exempt Severance Arrangement in connection with the Participant’s Separation from Service, and such vesting acceleration provisions were in effect as of the date of grant of the Non-Exempt Award and, therefore, are part of the terms of such Non-Exempt Award as of the date of grant, then the shares will be earlier issued in settlement of such Non-Exempt Award upon the Participant’s Separation from Service in accordance with the terms of the Non-Exempt Severance Arrangement, but in no event later than the 60th day that follows the date of the Participant’s Separation from Service. However, if at the time the shares would otherwise be issued the Participant is subject to the distribution limitations contained in Section 409A applicable to “specified employees,” as defined in Section 409A(a)(2)(B)(i) of the Code, such shares shall not be issued before the date that is six months following the date of such Participant’s Separation from Service, or, if earlier, the date of the Participant’s death that occurs within such six-month period.
(iii) If vesting of a Non-Exempt Award accelerates under the terms of a Non-Exempt Severance Arrangement in connection with a Participant’s Separation from Service, and such vesting acceleration provisions were not in effect as of the date of grant of the Non-Exempt Award and, therefore, are not a part of the terms of such Non-Exempt Award on the date of grant, then such acceleration of vesting of the Non-Exempt Award shall not accelerate the issuance date of the shares, but the shares shall instead be issued on the same schedule as set forth in the Grant Notice as if they had vested in the ordinary course during the Participant’s Continuous Service, notwithstanding the vesting acceleration of the Non-Exempt Award. Such issuance schedule is intended to satisfy the requirements of payment on a specified date or pursuant to a fixed schedule, as provided under U.S. Treasury Regulations Section 1.409A-3(a)(4).
(c) Treatment of Non-Exempt Awards Upon a Corporate Transaction for Employees and Consultants. The provisions of this subsection (c) shall apply and shall supersede anything to the contrary set forth in the Plan with respect to the permitted treatment of any Non-Exempt Award in connection with a Corporate Transaction if the Participant was either an Employee or Consultant upon the applicable date of grant of the Non-Exempt Award.
(i) Vested Non-Exempt Awards. The following provisions shall apply to any Vested Non-Exempt Award in connection with a Corporate Transaction:
(1) If the Corporate Transaction is also a Section 409A Change in Control then the Acquiring Entity may not assume, continue or substitute the Vested Non-Exempt Award. Upon the Section 409A Change in Control the settlement of the Vested Non-Exempt Award will automatically be accelerated and the shares will be immediately issued in respect of the Vested Non-Exempt Award. Alternatively, the Company may instead provide that the Participant will receive a cash settlement equal to the Fair Market Value of the shares that would otherwise be issued to the Participant upon the Section 409A Change in Control.
(2) If the Corporate Transaction is not also a Section 409A Change in Control, then the Acquiring Entity must either assume, continue or substitute each Vested Non-Exempt Award. The shares to be issued in respect of the Vested Non-Exempt Award shall be issued to the Participant by the Acquiring Entity on the same schedule that the shares would have been issued to the Participant if the Corporate Transaction had not occurred. In the Acquiring
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Entity’s discretion, in lieu of an issuance of shares, the Acquiring Entity may instead substitute a cash payment on each applicable issuance date, equal to the Fair Market Value of the shares that would otherwise be issued to the Participant on such issuance dates, with the determination of the Fair Market Value of the shares made on the date of the Corporate Transaction.
(ii) Unvested Non-Exempt Awards. The following provisions shall apply to any Unvested Non-Exempt Award unless otherwise determined by the Board pursuant to subsection (e) of this Section.
(1) In the event of a Corporate Transaction, the Acquiring Entity shall assume, continue or substitute any Unvested Non-Exempt Award. Unless otherwise determined by the Board, any Unvested Non-Exempt Award will remain subject to the same vesting and forfeiture restrictions that were applicable to the Award prior to the Corporate Transaction. The shares to be issued in respect of any Unvested Non-Exempt Award shall be issued to the Participant by the Acquiring Entity on the same schedule that the shares would have been issued to the Participant if the Corporate Transaction had not occurred. In the Acquiring Entity’s discretion, in lieu of an issuance of shares, the Acquiring Entity may instead substitute a cash payment on each applicable issuance date, equal to the Fair Market Value of the shares that would otherwise be issued to the Participant on such issuance dates, with the determination of Fair Market Value of the shares made on the date of the Corporate Transaction.
(2) If the Acquiring Entity will not assume, substitute or continue any Unvested Non-Exempt Award in connection with a Corporate Transaction, then such Award shall automatically terminate and be forfeited upon the Corporate Transaction with no consideration payable to any Participant in respect of such forfeited Unvested Non-Exempt Award. Notwithstanding the foregoing, to the extent permitted and in compliance with the requirements of Section 409A, the Board may in its discretion determine to elect to accelerate the vesting and settlement of the Unvested Non-Exempt Award upon the Corporate Transaction, or instead substitute a cash payment equal to the Fair Market Value of such shares that would otherwise be issued to the Participant, as further provided in subsection (e)(ii) below. In the absence of such discretionary election by the Board, any Unvested Non-Exempt Award shall be forfeited without payment of any consideration to the affected Participants if the Acquiring Entity will not assume, substitute or continue the Unvested Non-Exempt Awards in connection with the Corporate Transaction.
(3) The foregoing treatment shall apply with respect to all Unvested Non-Exempt Awards upon any Corporate Transaction, and regardless of whether or not such Corporate Transaction is also a Section 409A Change in Control.
(d) Treatment of Non-Exempt Awards Upon a Corporate Transaction for Non-Employee Directors. The following provisions of this subsection (d) shall apply and shall supersede anything to the contrary that may be set forth in the Plan with respect to the permitted treatment of a Non-Exempt Director Award in connection with a Corporate Transaction.
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(i) If the Corporate Transaction is also a Section 409A Change in Control then the Acquiring Entity may not assume, continue or substitute the Non-Exempt Director Award. Upon the Section 409A Change in Control the vesting and settlement of any Non-Exempt Director Award will automatically be accelerated and the shares will be immediately issued to the Participant in respect of the Non-Exempt Director Award. Alternatively, the Company may provide that the Participant will instead receive a cash settlement equal to the Fair Market Value of the shares that would otherwise be issued to the Participant upon the Section 409A Change in Control pursuant to the preceding provision.
(ii) If the Corporate Transaction is not also a Section 409A Change in Control, then the Acquiring Entity must either assume, continue or substitute the Non-Exempt Director Award. Unless otherwise determined by the Board, the Non-Exempt Director Award will remain subject to the same vesting and forfeiture restrictions that were applicable to the Award prior to the Corporate Transaction. The shares to be issued in respect of the Non-Exempt Director Award shall be issued to the Participant by the Acquiring Entity on the same schedule that the shares would have been issued to the Participant if the Corporate Transaction had not occurred. In the Acquiring Entity’s discretion, in lieu of an issuance of shares, the Acquiring Entity may instead substitute a cash payment on each applicable issuance date, equal to the Fair Market Value of the shares that would otherwise be issued to the Participant on such issuance dates, with the determination of Fair Market Value made on the date of the Corporate Transaction.
(e) If the RSU Award is a Non-Exempt Award, then the provisions in this Section 11(e) shall apply and supersede anything to the contrary that may be set forth in the Plan or the Award Agreement with respect to the permitted treatment of such Non-Exempt Award:
(i) Any exercise by the Board of discretion to accelerate the vesting of a Non-Exempt Award shall not result in any acceleration of the scheduled issuance dates for the shares in respect of the Non-Exempt Award unless earlier issuance of the shares upon the applicable vesting dates would be in compliance with the requirements of Section 409A.
(ii) The Company explicitly reserves the right to earlier settle any Non-Exempt Award to the extent permitted and in compliance with the requirements of Section 409A, including pursuant to any of the exemptions available in U.S. Treasury Regulations Section 1.409A-3(j)(4)(ix).
(iii) To the extent the terms of any Non-Exempt Award provide that it will be settled upon a Change in Control or Corporate Transaction, to the extent it is required for compliance with the requirements of Section 409A, the Change in Control or Corporate Transaction event triggering settlement must also constitute a Section 409A Change in Control. To the extent the terms of a Non-Exempt Award provide that it will be settled upon a termination of employment or termination of Continuous Service, to the extent it is required for compliance with the requirements of Section 409A, the termination event triggering settlement must also constitute a Separation From Service. However, if at the time the shares would otherwise be issued to a Participant in connection with a “separation from service” such Participant is subject to the distribution limitations contained in Section 409A applicable to “specified employees,” as defined in Section 409A(a)(2)(B)(i) of the Code, such shares shall not be issued before the date that is six months following the date of the Participant’s Separation From Service, or, if earlier, the date of the Participant’s death that occurs within such six month period.
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(iv) The provisions in this subsection (e) for delivery of the shares in respect of the settlement of an RSU Award that is a Non-Exempt Award are intended to comply with the requirements of Section 409A so that the delivery of the shares to the Participant in respect of such Non-Exempt Award will not trigger the additional tax imposed under Section 409A, and any ambiguities herein will be so interpreted.
12. SEVERABILITY.
If all or any part of the Plan or any Award Agreement is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of the Plan or such Award Agreement not declared to be unlawful or invalid. Any Section of the Plan or any Award Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
13. TERMINATION OF THE PLAN.
The Board may suspend or terminate the Plan at any time. No Incentive Stock Options may be granted after the tenth anniversary of the earlier of: (i) the Adoption Date, or (ii) the date the Plan is approved by the Company’s stockholders. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
14. DEFINITIONS.
As used in the Plan, the following definitions apply to the capitalized terms indicated below:
(a) “Acquiring Entity” means the surviving or acquiring corporation (or its parent company) in connection with a Corporate Transaction.
(b) “Adoption Date” means the date the Plan is first approved by the Board or Compensation Committee, as applicable.
(c) “Affiliate” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 promulgated under the Securities Act. The Board may determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.
(d) “Applicable Law” means the Code and any applicable U.S. and non-U.S. securities, exchange control, tax, federal, state, material local or municipal or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, listing rule, regulation, judicial decision, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body (including under the authority of any applicable self-regulating organization such as the Nasdaq Stock Market, New York Stock Exchange, or the Financial Industry Regulatory Authority).
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(e) “Award” means any right to receive Common Stock, cash or other property granted under the Plan (including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, an RSU Award, a SAR, a Performance Award or any Other Award).
(f) “Award Agreement” means a written or electronic agreement between the Company and a Participant evidencing the terms and conditions of an Award. The Award Agreement generally consists of the Grant Notice and the agreement containing the written summary of the general terms and conditions applicable to the Award and which is provided, including through electronic means, to a Participant along with the Grant Notice.
(g) “Board” means the Board of Directors of the Company (or its designee). Any decision or determination made by the Board shall be a decision or determination that is made in the sole discretion of the Board (or its designee), and such decision or determination shall be final and binding on all Participants.
(h) “Capital Stock” means each and every class of common stock of the Company, regardless of the number of votes per share.
(i) “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Award after the Adoption Date without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, reverse stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or any similar equity restructuring transaction, as that term is used in Statement of Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.
(j) “Cause” has the meaning ascribed to such term in any written agreement between a Participant and the Company or any Affiliate of the Company defining such term and, in the absence of such agreement, such term means, with respect to a Participant, the occurrence of any of the following events: (i) the Participant’s dishonest statements or acts with respect to the Company or any Affiliate of the Company, or any current or prospective customers, suppliers, vendors or other third parties with which such entity does business; (ii) the Participant’s commission of (A) a felony or (B) any misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or in each case the equivalent in any relevant jurisdiction; (iii) the Participant’s failure to perform the Participant’s assigned duties and responsibilities to the reasonable satisfaction of the Company or any Affiliate of the Company which failure continues, in the reasonable judgment of the Company, after written notice given to the Participant by the Company or any Affiliate of the Company; (iv) the Participant’s gross negligence, willful misconduct or insubordination with respect to the Company or any Affiliate of the Company; or (v) the Participant’s material violation of any provision of any agreement(s) between the Participant and the Company or any Affiliate of the Company relating to noncompetition, nonsolicitation, nondisclosure and/or assignment of inventions. The determination that a termination of the Participant’s Continuous Service is either for Cause or without Cause will be made by the Board with respect to Participants who are executive officers of the Company and by the Company’s Chief Executive Officer with respect to
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Participants who are not executive officers of the Company. Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for the purposes of outstanding Awards held by such Participant will have no effect upon any determination of the rights or obligations of the Company or any Affiliate of the Company or such Participant for any other purpose.
(k) “Change in Control” or “Change of Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:
(i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities, or (C) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;
(ii) there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than 50% of the combined outstanding voting power of the Acquiring Entity in such merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding voting power of the parent of the Acquiring Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction;
(iii) there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than 50% of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; or
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(iv) individuals who, on the Adoption Date, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board.
Notwithstanding the foregoing or any other provision of this Plan, (A) the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, (B) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply, and (C) with respect to any nonqualified deferred compensation that becomes payable on account of the Change in Control, the transaction or event described in clause (i), (ii), (iii), or (iv) also constitutes a Section 409A Change in Control if required in order for the payment not to violate Section 409A of the Code.
(l) “Code” means the U.S. Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.
(m) “Committee” means the Compensation Committee and any other committee of one or more Directors to whom authority has been delegated by the Board or Compensation Committee in accordance with the Plan.
(n) “Common Stock” means the common stock of the Company.
(o) “Company” means Tectonic Therapeutic, Inc., a Delaware corporation, and any successor corporation thereto.
(p) “Compensation Committee” means the Compensation Committee of the Board.
(q) “Consultant” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services. However, service solely as a Director, or payment of a fee for such service, will not cause a Director to be considered a “Consultant” for purposes of the Plan. Notwithstanding the foregoing, a person is treated as a Consultant under this Plan only if a Form S-8 Registration Statement under the Securities Act is available to register either the offer or the sale of the Company’s securities to such person.
(r) “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Director or Consultant or a change in the Entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, will not terminate a Participant’s Continuous Service; provided, however, that if the Entity for which a Participant is rendering services ceases to qualify as an Affiliate, as determined by the Board, such Participant’s Continuous Service will be considered to
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have terminated on the date such Entity ceases to qualify as an Affiliate. For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or to a Director will not constitute an interruption of Continuous Service. To the extent permitted by Applicable Law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service will be considered interrupted in the case of (i) any leave of absence approved by the Company or an Affiliate, including sick leave, military leave or any other personal leave, or (ii) transfers between the Company, an Affiliate, or their successors. Notwithstanding the foregoing, a leave of absence will be treated as Continuous Service for purposes of vesting in an Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by Applicable Law. In addition, to the extent required for exemption from or compliance with Section 409A, the determination of whether there has been a termination of Continuous Service will be made, and such term will be construed, in a manner that is consistent with the definition of “separation from service” as defined under U.S. Treasury Regulation Section 1.409A-1(h) (without regard to any alternative definition thereunder).
(s) “Corporate Transaction” means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:
(i) a sale or other disposition of all or substantially all, as determined by the Board, of the consolidated assets of the Company and its Subsidiaries;
(ii) a sale or other disposition of at least 50% of the outstanding securities of the Company;
(iii) a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or
(iv) a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.
Notwithstanding the foregoing or any other provision of this Plan, (A) the term Corporate Transaction shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, (B) the definition of Corporate Transaction (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Awards subject to such agreement; provided, however, that if no definition of Corporate Transaction or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply, and (C) with respect to any nonqualified deferred compensation that becomes payable on account of the Corporate Transaction, the transaction or event described in clause (i), (ii), (iii), or (iv) also constitutes a Section 409A Change in Control if required in order for the payment not to violate Section 409A of the Code.
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(t) “determine” or “determined” means as determined by the Board or the Committee (or its designee) in its sole discretion.
(u) “Director” means a member of the Board.
(v) “Disability” means, with respect to a Participant, such Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, as provided in Section 22(e)(3) of the Code, and will be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.
(w) “Effective Date” means the effective date of this Plan, which is the date of the closing of the transactions contemplated by the Merger Agreement, provided that this Plan is approved by the Company’s stockholders prior to such date.
(x) “Effective Time” has the meaning set forth in the Merger Agreement.
(y) “Employee” means any person employed by the Company or an Affiliate. However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.
(z) “Employer” means the Company or the Affiliate that employs the Participant.
(aa) “Entity” means a corporation, partnership, limited liability company or other entity.
(bb) “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(cc) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” will not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to a registered public offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities.
(dd) “Fair Market Value” means, as of any date, unless otherwise determined by the Board, the value of the Common Stock (as determined on a per share or aggregate basis, as applicable) determined as follows:
(i) If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value will be the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in a source the Board deems reliable.
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(ii) If there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value will be the closing selling price on the last preceding date for which such quotation exists.
(iii) In the absence of such markets for the Common Stock, or if otherwise determined by the Board, the Fair Market Value will be determined by the Board in good faith and in a manner that complies with Sections 409A and 422 of the Code.
(ee) “Governmental Body” means any: (i) nation, state, commonwealth, canton, province, territory, county, municipality, district or other jurisdiction of any nature; (ii) U.S. or non-U.S. federal, state, local, municipal, or other government; (iii) governmental or regulatory body, or quasi-governmental body of any nature (including any governmental division, department, administrative agency or bureau, commission, authority, instrumentality, official, ministry, fund, foundation, center, organization, unit, body or Entity and any court or other tribunal, and for the avoidance of doubt, any tax authority) or other body exercising similar powers or authority; or (iv) self-regulatory organization (including the Nasdaq Stock Market, New York Stock Exchange, and the Financial Industry Regulatory Authority).
(ff) “Grant Notice” means the notice provided to a Participant that he or she has been granted an Award under the Plan and which includes the name of the Participant, the type of Award, the date of grant of the Award, number of shares of Common Stock subject to the Award or potential cash payment right, (if any), the vesting schedule for the Award (if any) and other key terms applicable to the Award.
(gg) “Incentive Stock Option” means an option granted pursuant to Section 4 of the Plan that is intended to be, and qualifies as, an “incentive stock option” within the meaning of Section 422 of the Code.
(hh) “Materially Impair” means any amendment to the terms of the Award that materially adversely affects the Participant’s rights under the Award. A Participant’s rights under an Award will not be deemed to have been Materially Impaired by any such amendment if the Board, in its sole discretion, determines that the amendment, taken as a whole, does not materially impair the Participant’s rights. For example, the following types of amendments to the terms of an Award do not Materially Impair the Participant’s rights under the Award: (i) imposition of reasonable restrictions on the minimum number of shares subject to an Option or SAR that may be exercised; (ii) to maintain the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code; (iii) to change the terms of an Incentive Stock Option in a manner that disqualifies, impairs or otherwise affects the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code; (iv) to clarify the manner of exemption from, or to bring the Award into compliance with or qualify it for an exemption from, Section 409A; or (v) to comply with other Applicable Laws.
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(ii) “Merger Agreement” means that certain Agreement and Plan of Merger and Reorganization, dated as of January 30, 2024, among AVROBIO, Inc. a Delaware corporation (“Aspen”), Alpine Merger Subsidiary, Inc., a Delaware corporation and wholly owned subsidiary of Aspen, and the Tectonic Therapeutic, Inc, a Delaware corporation.
(jj) “Non-Employee Director” means a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.
(kk) “Non-Exempt Award” means any Award that is subject to, and not exempt from, Section 409A, including as the result of (i) a deferral of the issuance of the shares subject to the Award which is elected by the Participant or imposed by the Company, or (ii) the terms of any Non-Exempt Severance Arrangement.
(ll) “Non-Exempt Director Award” means a Non-Exempt Award granted to a Participant who was a Director but not an Employee on the applicable grant date.
(mm) “Non-Exempt Severance Arrangement” means a severance arrangement or other agreement between the Participant and the Company that provides for acceleration of vesting of an Award and issuance of the shares in respect of such Award upon the Participant’s termination of employment or separation from service (as such term is defined in Section 409A(a)(2)(A)(i) of the Code (and without regard to any alternative definition thereunder)) (“Separation from Service”) and such severance benefit does not satisfy the requirements for an exemption from application of Section 409A provided under U.S. Treasury Regulations Section 1.409A-1(b)(4), 1.409A-1(b)(9) or otherwise.
(nn) “Nonstatutory Stock Option” means any option granted pursuant to Section 4 of the Plan that does not qualify as an Incentive Stock Option.
(oo) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act.
(pp) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan.
(qq) “Option Agreement” means a written or electronic agreement between the Company and the Optionholder evidencing the terms and conditions of the Option grant. The Option Agreement includes the Grant Notice for the Option and the agreement containing the written summary of the general terms and conditions applicable to the Option and which is provided, including through electronic means, to a Participant along with the Grant Notice. Each Option Agreement will be subject to the terms and conditions of the Plan.
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(rr) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
(ss) “Other Award” means an award valued in whole or in part by reference to, or otherwise based on, Common Stock, including the appreciation in value thereof (e.g., options or stock rights with an exercise price or strike price less than 100% of the Fair Market Value at the time of grant) that is not an Incentive Stock Option, Nonstatutory Stock Option, SAR, Restricted Stock Award, RSU Award or Performance Award.
(tt) “Other Award Agreement” means a written or electronic agreement between the Company and a holder of an Other Award evidencing the terms and conditions of an Other Award grant. Each Other Award Agreement will be subject to the terms and conditions of the Plan.
(uu) “Own,” “Owned,” “Owner,” or “Ownership” means that a person or Entity will be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.
(vv) “Participant” means an Employee, Director or Consultant to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award.
(ww) “Performance Award” means an Award that may vest or may be exercised or a cash award that may vest or become earned and paid contingent upon the attainment during a Performance Period of certain Performance Goals and which is granted under the terms and conditions of Section 5(b) pursuant to such terms as are approved by the Board. In addition, to the extent permitted by Applicable Law and set forth in the applicable Award Agreement, the Board may determine that cash or other property may be used in payment of Performance Awards. Performance Awards that are settled in cash or other property are not required to be valued in whole or in part by reference to, or otherwise based on, the Common Stock.
(xx) “Performance Criteria” means one or more criteria that the Board will select for purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria that will be used to establish such Performance Goals may be based on any one of, or combination of, the following as determined by the Board: earnings (including earnings per share and net earnings); earnings before interest, taxes and depreciation; earnings before interest, taxes, depreciation and amortization; total stockholder return; relative stockholder return; return on equity or average stockholder’s equity; return on assets, investment, or capital employed; stock price; margin (including gross margin); income (before or after taxes); operating income; operating income after taxes; pre-tax profit; operating cash flow; sales, annual recurring revenue or revenue targets; increases in revenue or product revenue; expenses and cost reduction goals; improvement in or attainment of working capital levels; economic value added (or an equivalent metric); market share; cash flow; cash flow per share; share price performance; debt reduction; customer satisfaction; stockholders’ equity; capital expenditures; debt levels; operating profit or net operating profit; workforce diversity; growth of net income or operating income; billings; financing; regulatory milestones; stockholder liquidity; corporate governance and compliance; intellectual property; personnel matters; progress of internal research; progress of partnered
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programs; partner satisfaction; budget management; partner or collaborator achievements; internal controls, including those related to the U.S. Sarbanes-Oxley Act of 2002; investor relations, analysts and communication; implementation or completion of projects or processes; employee retention; number of users, including unique users; strategic partnerships or transactions (including in-licensing and out-licensing of intellectual property); establishing relationships with respect to the marketing, distribution and sale of the Company’s products; supply chain achievements; co-development, co-marketing, profit sharing, joint venture or other similar arrangements; individual performance goals; corporate development and planning goals; and other measures of performance selected by the Board or Committee whether or not listed herein.
(yy) “Performance Goals” means, for a Performance Period, one or more goals established by the Board for the Performance Period based upon the Performance Criteria. Performance Goals may be based on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise by the Board (i) in the Award Agreement at the time the Award is granted or (ii) in such other document setting forth the Performance Goals at the time the Performance Goals are established, the Board will appropriately make adjustments in the method of calculating the attainment of Performance Goals for a Performance Period as follows: (1) to exclude restructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects of items that are “unusual” in nature or occur “infrequently” as determined under generally accepted accounting principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; (8) to exclude the effect of any change in the outstanding shares of Common Stock by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends; (9) to exclude the effects of stock based compensation and the award of bonuses under the Company’s bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles; and (11) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles. In addition, the Board may establish or provide for other adjustment items in the Award Agreement at the time the Award is granted or in such other document setting forth the Performance Goals at the time the Performance Goals are established. In addition, the Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to define the manner of calculating the Performance Criteria it selects to use for such Performance Period. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Award Agreement or the written terms of a Performance Award.
(zz) “Performance Period” means the period of time selected by the Board over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to vesting or exercise of an Award. Performance Periods may be of varying and overlapping duration, at the sole discretion of the Board.
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(aaa) “Plan” means this Tectonic Therapeutic, Inc. 2024 Equity Incentive Plan, as amended from time to time.
(bbb) “Plan Administrator” means the person, persons, and/or third-party administrator designated by the Company to administer the day-to-day operations of the Plan and the Company’s other equity incentive programs.
(ccc) “Post-Termination Exercise Period” means the period following termination of a Participant’s Continuous Service within which an Option or SAR is exercisable, as specified in Section 4(h).
(ddd) “Restricted Stock Award” means an Award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 5(a).
(eee) “Restricted Stock Award Agreement” means a written or electronic agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award grant. The Restricted Stock Award Agreement includes the Grant Notice for the Restricted Stock Award and the agreement containing the written summary of the general terms and conditions applicable to the Restricted Stock Award and which is provided, including by electronic means, to a Participant along with the Grant Notice. Each Restricted Stock Award Agreement will be subject to the terms and conditions of the Plan.
(fff) “RSU Award” or “RSU” means an Award of restricted stock units representing the right to receive an issuance of shares of Common Stock which is granted pursuant to the terms and conditions of Section 5(a).
(ggg) “RSU Award Agreement” means a written or electronic agreement between the Company and a holder of an RSU Award evidencing the terms and conditions of an RSU Award grant. The RSU Award Agreement includes the Grant Notice for the RSU Award and the agreement containing the written summary of the general terms and conditions applicable to the RSU Award and which is provided, including by electronic means, to a Participant along with the Grant Notice. Each RSU Award Agreement will be subject to the terms and conditions of the Plan.
(hhh) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
(iii) “Rule 405” means Rule 405 promulgated under the Securities Act.
(jjj) “SAR Agreement” means a written or electronic agreement between the Company and a holder of a SAR evidencing the terms and conditions of a SAR grant. The SAR Agreement includes the Grant Notice for the SAR and the agreement containing the written summary of the general terms and conditions applicable to the SAR and which is provided, including by electronic means, to a Participant along with the Grant Notice. Each SAR Agreement will be subject to the terms and conditions of the Plan.
(kkk) “Section 409A” means Section 409A of the Code and the regulations and other guidance thereunder.
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(lll) “Section 409A Change in Control” means a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the Company’s assets, as provided in Section 409A(a)(2)(A)(v) of the Code and U.S. Treasury Regulations Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder).
(mmm) “Securities Act” means the U.S. Securities Act of 1933, as amended.
(nnn) “Share Reserve” means the number of shares available for issuance under the Plan as set forth in Section 2(a).
(ooo) “Stock Appreciation Right” or “SAR” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 4.
(ppp) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation will have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%.
(qqq) “Tax-Related Items” means any income tax, social insurance, payroll tax, fringe benefit tax, payment on account or other tax-related items arising out of or in relation to a Participant’s participation in the Plan and legally applicable or deemed applicable to the Participant.
(rrr) “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Affiliate.
(sss) “Trading Policy” means the Company’s policy permitting certain individuals to sell Company shares only during certain “window” periods and/or otherwise restricts the ability of certain individuals to transfer or encumber Company shares, as in effect from time to time.
(ttt) “Unvested Non-Exempt Award” means the portion of any Non-Exempt Award that had not vested in accordance with its terms upon or prior to the date of any Corporate Transaction.
(uuu) “Vested Non-Exempt Award” means the portion of any Non-Exempt Award that had vested in accordance with its terms upon or prior to the date of a Corporate Transaction.
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Exhibit 10.7
TECTONIC THERAPEUTIC, INC.
STOCK OPTION GRANT NOTICE
(2024 EQUITY INCENTIVE PLAN)
Tectonic Therapeutic, Inc. (the “Company”) has granted to you (the “Optionholder”) an option to purchase the number of shares of Common Stock set forth below (the “Option”) under the Tectonic Therapeutic, Inc. 2024 Equity Incentive Plan (the “Plan”). The Option is subject to all of the terms and conditions set forth in this Stock Option Grant Notice (the “Grant Notice”), the Option Agreement (the “Option Agreement”), the Notice of Exercise and the Plan, all of which are attached hereto and incorporated herein in their entirety. Capitalized terms not explicitly defined in this Grant Notice but defined in the Option Agreement or the Plan will have the meanings set forth in the Option Agreement or the Plan, as applicable. If the Company uses an electronic capitalization table system (such as Carta or Shareworks) and the fields below are blank or the information is otherwise provided in a different format electronically, the blank fields and other information (such as exercise schedule and type of grant) will be deemed to come from the electronic capitalization system and is considered part of this Grant Notice.
| Optionholder: |
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| Date of Grant: |
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| Vesting Commencement Date: |
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| Number of Shares of Common Stock Subject to Option: |
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| Exercise Price (Per Share)1: |
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| Total Exercise Price: |
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| Expiration Date: |
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| Exercise Schedule: |
[Same as Vesting Schedule] [Early Exercise Permitted] | |
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| Type of Grant2: |
[Incentive Stock Option] [Nonstatutory Stock Option] | |
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Vesting Schedule: [ ]
| 1 | The exercise price may be paid by one or a combination of the methods permitted in the Option Agreement. |
| 2 | If this is an Incentive Stock Option, it (plus other outstanding Incentive Stock Options) cannot be first exercisable for more than $100,000 in value (measured by exercise price) in any calendar year. Any excess over $100,000 is a Nonstatutory Stock Option. |
Optionholder Acknowledgements: By Optionholder’s signature below or by electronic acceptance or authentication in a form authorized by the Company, Optionholder understands and agrees that the Option is governed by this Grant Notice, the Option Agreement, the Notice of Exercise and the Plan, all of which are made a part of this document.
By accepting this Option, Optionholder consents to receive this Grant Notice, the Option Agreement, the Plan, and any other Plan-related documents by electronic delivery and to participate in the Plan through an online or electronic system established and maintained by the Company or another third party designated by the Company. Optionholder represents that he or she has read and is familiar with the provisions of this Grant Notice, the Option Agreement, the Notice of Exercise and the Plan. Optionholder acknowledges and agrees that this Grant Notice and the Option Agreement may not be modified, amended or revised except in writing signed by Optionholder and a duly authorized officer of the Company.
Optionholder further acknowledges that in the event of any conflict between the provisions in this Grant Notice, the Option Agreement, the Notice of Exercise and the provisions of the Plan, the provisions of the Plan will control. Optionholder further acknowledges that the Grant Notice, the Option Agreement, the Notice of Exercise and the Plan set forth the entire understanding between Optionholder and the Company regarding the Option and supersede all prior oral and written agreements, promises and/or representations regarding the Option, with the exception of (i) other equity awards previously granted to Optionholder and Common Stock previously issued to Optionholder; (ii) any applicable compensation recovery or clawback policy that is adopted by the Company or is required by Applicable Law; and (iii) any written employment agreement, offer letter, severance agreement, written severance plan or policy, or other written agreement between the Company and Optionholder in each case that specifies the terms that should govern the Option.
Optionholder further acknowledges that this Grant Notice has been prepared on behalf of the Company by Cooley LLP, counsel to the Company and that Cooley LLP does not represent, and is not acting on behalf of, Optionholder in any capacity. Optionholder has been provided with an opportunity to consult with Optionholder’s own counsel with respect to this Grant Notice.
This Grant Notice may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act or other applicable law) or other transmission method and any counterpart so delivered will be deemed to have been duly and validly delivered and be valid and effective for all purposes.
| Tectonic Therapeutic, Inc. | Optionholder: | |||||||
| By: | By: | |||||||
| (Signature) | (Signature) | |||||||
| Title: | Email: | |||||||
| Date: | Date: | |||||||
Attachments: Option Agreement, 2024 Equity Incentive Plan and Notice of Exercise
ATTACHMENT I
OPTION AGREEMENT
TECTONIC THERAPEUTIC, INC.
2024 Equity Incentive Plan
OPTION AGREEMENT
(INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)
Pursuant to your Stock Option Grant Notice (“Grant Notice”) and (the “Option Agreement”), Tectonic Therapeutic, Inc. (the “Company”) has granted you an option under the Tectonic Therapeutic, Inc. 2024 Equity Incentive Plan (the “Plan”) to purchase the number of shares of Common Stock at the exercise price indicated in your Grant Notice (the “Option”). The option is granted to you effective as of the date of grant set forth in the Grant Notice (the “Date of Grant”). If there is any conflict between the provisions in this Option Agreement, the Grant Notice, the Notice of Exercise and the terms of the Plan, the terms of the Plan will control. Capitalized terms not explicitly defined in this Option Agreement but defined in the Grant Notice or the Plan will have the meanings set forth in the Grant Notice or Plan, as applicable.
The details of your Option, in addition to those set forth in the Grant Notice and the Plan, are as follows:
1. Vesting. Your Option will vest as provided in your Grant Notice. Vesting will cease upon the termination of your Continuous Service.
2. Number of Shares and Exercise Price. The number of shares of Common Stock subject to your Option and your exercise price per share in your Grant Notice will be adjusted for Capitalization Adjustments.
3. Exercise Restriction for Non-Exempt Employees. If you are an Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended (that is, a “Non-Exempt Employee”), and except as otherwise provided in the Plan, you may not exercise your Option until you have completed at least six months of Continuous Service measured from the Date of Grant, even if you have already been an employee for more than six months. Consistent with the provisions of the Worker Economic Opportunity Act, you may exercise your Option as to any vested portion prior to such six month anniversary in the case of (i) your death or disability, (ii) a Corporate Transaction in which your Option is not assumed, continued or substituted, (iii) a Change in Control or (iv) your termination of Continuous Service on your “retirement” (as defined in the Company’s benefit plans).
4. Exercise prior to Vesting (“Early Exercise”). If permitted in your Grant Notice (i.e., the “Exercise Schedule” indicates “Early Exercise Permitted”) and subject to the provisions of your Option, you may elect at any time that is both (i) during the period of your Continuous Service and (ii) during the term of your Option, to exercise all or part of your Option, including the unvested portion of your Option; provided, however, that:
(a) a partial exercise of your Option will be deemed to cover first vested shares of Common Stock and then the earliest vesting installment of unvested shares of Common Stock;
(b) any shares of Common Stock so purchased from installments that have not vested as of the date of exercise will be subject to the purchase option in favor of the Company as described in the Company’s form of Early Exercise Stock Purchase Agreement;
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(c) you will enter into the Company’s form of Early Exercise Stock Purchase Agreement with a vesting schedule that will result in the same vesting as if no early exercise had occurred; and
(d) if your Option is an Incentive Stock Option, then, to the extent that the aggregate Fair Market Value (determined at the Date of Grant) of the shares of Common Stock with respect to which your Option plus all other Incentive Stock Options you hold are exercisable for the first time by you during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, your Option(s) or portions thereof that exceed such limit (according to the order in which they were granted) will be treated as Nonstatutory Stock Options.
5. Method of Payment. You must pay the full amount of the exercise price for the shares you wish to exercise. The permitted methods of payment are as follows:
(a) by cash, check, bank draft, electronic funds transfer or money order payable to the Company;
(b) subject to Company and/or Board consent at the time of exercise and provided that at the time of exercise the Common Stock is publicly traded, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds. This manner of payment is also known as a “broker-assisted exercise”, “same day sale”, or “sell to cover”;
(c) subject to Company and/or Board consent at the time of exercise and provided that at the time of exercise the Common Stock is publicly traded, by delivery to the Company (either by actual delivery or attestation) of already-owned shares of Common Stock that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your Option, will include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company. You may not exercise your Option by delivery to the Company of Common Stock if doing so would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock;
(d) subject to Company and/or Board consent at the time of exercise, and provided that the Option is a Nonstatutory Stock Option, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise of the Option by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price plus, to the extent permitted by the Company and/or Board at the time of exercise, the aggregate withholding obligations in respect of the Option exercise; provided, further that you must pay any remaining balance of the aggregate exercise price not satisfied by the “net exercise” in cash or other permitted form of payment. Shares of Common Stock will no longer be subject to the Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are used to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to you as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations;
(e) subject to the consent of the Company and/or Board at the time of exercise, according to a deferred payment or similar arrangement with you; provided, however, that interest will compound at least annually and will be charged at the minimum rate of interest necessary to avoid (A) the imputation of interest income to the Company and compensation income to the Optionholder under any applicable provisions of the Code, and (B) the classification of the Option as a liability for financial accounting purposes; or
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(f) in any other form of legal consideration that may be acceptable to theBoard.
6. Whole Shares. You may exercise your Option only for whole shares of Common Stock.
7. Securities Law Compliance. In no event may you exercise your Option unless the shares of Common Stock issuable upon exercise are then registered under the Securities Act or, if not registered, the Company has determined that your exercise and the issuance of the shares would be exempt from the registration requirements of the Securities Act. The exercise of your Option also must comply with all other applicable laws and regulations governing your Option, and you may not exercise your Option if the Company determines that such exercise would not be in material compliance with such laws and regulations (including any restrictions on exercise required for compliance with Treas. Reg. 1.401(k)-1(d)(3), if applicable).
8. Term. You may not exercise your Option before the Date of Grant or after the expiration of the Option’s term. Except as set forth in your Grant Notice, the term of your Option expires, subject to the provisions of Section 4(i) of the Plan, upon the earliest of the following:
(a) immediately upon the termination of your Continuous Service for Cause;
(b) three months after the termination of your Continuous Service for any reason other than Cause, your Disability or your death (except as otherwise provided in Section 8(d) below); provided, however, that if during any part of such three month period your Option is not exercisable solely because of the condition set forth in the section above relating to “Securities Law Compliance,” your Option will not expire until the earlier of the Expiration Date or until it has been exercisable for an aggregate period of three months after the termination of your Continuous Service; provided further, that if (i) you are a Non-Exempt Employee, (ii) your Continuous Service terminates within six months after the Date of Grant, and (iii) you have vested in a portion of your Option at the time of your termination of Continuous Service, your Option will not expire until the earlier of (x) the later of (A) the date that is seven months after the Date of Grant, and (B) the date that is three months after the termination of your Continuous Service, and (y) the Expiration Date;
(c) 12 months after the termination of your Continuous Service due to your Disability (except as otherwise provided in Section 8(d)) below;
(d) 18 months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates for any reason other than Cause;
(e) the Expiration Date indicated in your Grant Notice; or
(f) the day before the 10th anniversary of the Date of Grant.
If your Option is an Incentive Stock Option, note that to obtain the federal income tax advantages associated with an Incentive Stock Option, the Code requires that at all times beginning on the Date of Grant and ending on the day three months before the date of your Option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability. The Company has provided for extended exercisability of your Option under certain circumstances for your benefit but cannot guarantee that your Option will necessarily be treated as an Incentive Stock Option if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your Option more than three months after the date your employment with the Company or an Affiliate terminates.
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9. Exercise.
(a) You may exercise the vested portion of your Option (and the unvested portion of your Option if your Grant Notice so permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours. If required by the Company, your exercise may be made contingent on your execution of any additional documents specified by the Company as more fully set forth in Section 14 below.
(b) By exercising your Option you agree that, as a condition to any exercise of your Option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of your Option, (ii) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (iii) the disposition of shares of Common Stock acquired upon such exercise.
(c) If your Option is an Incentive Stock Option, by exercising your Option you agree that you will notify the Company in writing within 15 days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your Option that occurs within two years after the Date of Grant or within one year after such shares of Common Stock are transferred upon exercise of your Option.
(d) By exercising your Option you agree that you will not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale with respect to any shares of Common Stock or other securities of the Company held by you, for a period of 180 days following the effective date of a registration statement of the Company filed under the Securities Act or such longer period as the underwriters or the Company will request to facilitate compliance with applicable FINRA rules (the “Lock-Up Period”); provided, however, that nothing contained in this section will prevent the exercise of a repurchase option, if any, in favor of the Company during the Lock-Up Period. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriters that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your shares of Common Stock until the end of such period. You also agree that any transferee of any shares of Common Stock (or other securities) of the Company held by you will be bound by this Section 9(d). The underwriters of the Company’s stock are intended third party beneficiaries of this Section 9(d) and will have the right, power and authority to enforce the provisions hereof as though they were a party hereto. You further agree that the obligations contained in this Section 9(d) will also, if so determined by the Board, apply in the Company’s initial listing of its Common Stock on a national securities exchange by means of a registration statement on Form S-1 under the Securities Act (or any successor registration form under the Securities Act subsequently adopted by the Securities and Exchange Commission) filed by the Company with the Securities and Exchange Commission that registers shares of existing capital stock of the Company for resale (a “Direct Listing”), provided that all holders of at least 5% of the Company’s outstanding Common Stock (after giving effect to the conversion into Common Stock of any outstanding preferred stock of the Company) are subject to substantially similar obligations with respect to such Direct Listing.
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10. Transferability. Except as otherwise provided in this Section 10, your Option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you.
(a) Certain Trusts. Upon receiving written permission from the Board or its duly authorized designee, you may transfer your Option to a trust if you are considered to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law) while the Option is held in the trust. You and the trustee must enter into transfer and other agreements required by the Company.
(b) Domestic Relations Orders. Upon receiving written permission from the Board or its duly authorized designee, and provided that you and the designated transferee enter into transfer and other agreements required by the Company, you may transfer your Option pursuant to the terms of a domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulation 1.421-1(b)(2) that contains the information required by the Company to effectuate the transfer. You are encouraged to discuss the proposed terms of any division of this Option with the Company prior to finalizing the domestic relations order or marital settlement agreement to help ensure the required information is contained within the domestic relations order or marital settlement agreement. If this Option is an Incentive Stock Option, this Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.
(c) Beneficiary Designation. Upon receiving written permission from the Board or its duly authorized designee, you may, by delivering written notice to the Company, in a form approved by the Company and any broker designated by the Company to handle option exercises, designate a third party who, on your death, will thereafter be entitled to exercise this Option and receive the Common Stock or other consideration resulting from such exercise. In the absence of such a designation, your executor or administrator of your estate will be entitled to exercise this Option and receive, on behalf of your estate, the Common Stock or other consideration resulting from such exercise.
11. Option not a Service Contract. Your Option is not an employment or service contract, and nothing in your Option will be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment. In addition, nothing in your Option will obligate the Company or an Affiliate, their respective stockholders, boards of directors, officers or employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.
12. Withholding Obligations.
(a) At the time you exercise your Option, in whole or in part, and at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “same day sale” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your Option.
(b) If this Option is a Nonstatutory Stock Option, then upon your request and subject to approval by the Company, and compliance with any applicable legal conditions or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your Option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required
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to be withheld by law (or such lower amount as may be necessary to avoid classification of your Option as a liability for financial accounting purposes). If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your Option, share withholding pursuant to the preceding sentence will not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your Option. Notwithstanding the filing of such election, shares of Common Stock will be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your Option that are otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure will be your sole responsibility.
(c) You may not exercise your Option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your Option when desired even though your Option is vested, and the Company will have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein, if applicable, unless such obligations are satisfied.
13. Tax Consequences. You hereby agree that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes your tax liabilities. You will not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates related to tax liabilities arising from your Option or your other compensation. In particular, you acknowledge that this Option is exempt from Section 409A of the Code only if the exercise price per share specified in the Grant Notice is at least equal to the “fair market value” per share of the Common Stock on the Date of Grant and there is no other impermissible deferral of compensation associated with the Option. Because the Common Stock is not traded on an established securities market, the Fair Market Value is determined by the Board, perhaps in consultation with an independent valuation firm retained by the Company. You acknowledge that there is no guarantee that the Internal Revenue Service will agree with the valuation as determined by the Board, and you will not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates in the event that the Internal Revenue Service asserts that the valuation determined by the Board is less than the “fair market value” as subsequently determined by the Internal Revenue Service.
14. Imposition of Other Requirements. You agree to execute further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of this Option. You further agree to execute, to the extent requested by the Company, at any time and from time to time, any agreements entered into with holders of capital stock of the Company, including without limitation a right of first refusal and co-sale agreement, stockholders agreement and/or a voting agreement.
15. Notices. Any notices provided for in your Option or the Plan will be given in writing (including electronically) and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company. The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this Option by electronic means or to request your consent to participate in the Plan by electronic means. By accepting this Option, you consent to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
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16. Governing Plan Document. Your Option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. If there is any conflict between the provisions of your Option and those of the Plan, the provisions of the Plan will control.
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ATTACHMENT II
2024 EQUITY INCENTIVE PLAN
ATTACHMENT III
NOTICE OF EXERCISE
TECTONIC THERAPEUTIC, INC.
NOTICE OF EXERCISE
This constitutes notice to Tectonic Therapeutic, Inc. (the “Company”) that I elect to purchase the below number of shares of Common Stock of the Company (the “Shares”) by exercising my Option for the price set forth below. Capitalized terms not explicitly defined in this Notice of Exercise but defined in the Grant Notice, the Option Agreement or the Plan will have the meanings set forth in the Grant Notice, the Option Agreement or the Plan, as applicable. Use of certain payment methods is subject to Company and/or Board consent and certain additional requirements set forth in the Option Agreement and the Plan. If the Company uses an electronic capitalization table system (such as Carta or Shareworks) and the fields below are blank, the blank fields will be deemed to come from the electronic capitalization system and is considered part of this Notice of Exercise.
| Option Information | ||
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Incentive ☐ Nonstatutory ☐ | |
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| Date of Grant: |
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| Number of Shares of Common Stock as to which Option is exercised: |
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| Certificates to be issued in name of:3 |
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| Exercise Information | ||
| Date of Exercise: |
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| Total exercise price: |
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| Cash:4 |
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| Regulation T Program (cashless exercise):5 |
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| Value of _________ Shares delivered with this notice:6 |
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| Value of _________ Shares pursuant to net exercise:7 |
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By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the Plan, (ii) to satisfy the tax withholding obligations, if any, relating to the exercise of this Option as set forth in the Option Agreement, (iii) if this exercise relates to an incentive stock option, to notify you in writing within 15 days after the date of any disposition of any of the Shares issued upon exercise of this Option that occurs within two years after the Date of Grant or within one year after such Shares are issued upon exercise of this Option, and (iv) to execute, if and when requested by the Company, at any time or from time to time, any agreements entered into with holders of capital stock of the Company, including without limitation a right of first refusal and co-sale agreement, stockholders
| 3 | If left blank, will be issued in the name of the option holder. |
| 4 | Cash may be in the form of cash, check, bank draft, electronic funds transfer or money order payment. |
| 5 | Subject to Company and/or Board consent and must meet the public trading and other requirements set forth in the Option Agreement. |
| 6 | Subject to Company and/or Board consent and must meet the public trading and other requirements set forth in the Option Agreement. Shares must be valued in accordance with the terms of the option being exercised, and must be owned free and clear of any liens, claims, encumbrances or security interests. Certificates must be endorsed or accompanied by an executed assignment separate from certificate. |
| 7 | Subject to Company and/or Board consent and must be a Nonstatutory Option. |
agreement and/or a voting agreement. I further agree that this Notice of Exercise may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act or other applicable law) or other transmission method and will be deemed to have been duly and validly delivered and be valid and effective for all purposes.
I hereby make the following certifications and representations with respect to the number of Shares listed above, which are being acquired by me for my own account upon exercise of the Option as set forth above:
I acknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and are deemed to constitute “restricted securities” under Rule 701 and Rule 144 promulgated under the Securities Act. I warrant and represent to the Company that I have no present intention of distributing or selling said Shares, except as permitted under the Securities Act and any applicable state securities laws.
I further acknowledge and agree that, except for such information as required to be delivered to me by the Company pursuant to the Option or the Plan (if any), I will have no right to receive any information from the Company by virtue of the grant of the Option or the purchase of shares of Common Stock through exercise of the Option, ownership of such shares of Common Stock, or as a result of my being a holder of record of stock of the Company. Without limiting the foregoing, to the fullest extent permitted by Applicable Law, I hereby waive all inspection rights under Section 220 of the Delaware General Corporation Law and all such similar information and/or inspection rights that may be provided under the law of any jurisdiction, or any federal, state or foreign regulation, that are, or may become, applicable to the Company or the Company’s capital stock (the “Inspection Rights”). I hereby covenant and agree never to directly or indirectly commence, voluntarily aid in any way, prosecute, assign, transfer, or cause to be commenced any claim, action, cause of action, or other proceeding to pursue or exercise the Inspection Rights.
I further acknowledge that I will not be able to resell the Shares for at least 90 days after the stock of the Company becomes publicly traded (i.e., subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply to affiliates of the Company under Rule 144.
I further acknowledge that all certificates representing any of the Shares subject to the provisions of the Option will have endorsed thereon appropriate legends reflecting the foregoing limitations, as well as any legends reflecting restrictions pursuant to the Company’s Certificate of Incorporation, Bylaws and/or applicable securities laws.
I further agree that, if required by the Company (or a representative of the underwriters) in connection with the first underwritten registration of the offering of any securities of the Company under the Securities Act, I will not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale with respect to any shares of Common Stock or other securities of the Company for a period of 180 days following the effective date of a registration statement of the Company filed under the Securities Act (or such longer period as the underwriters or the Company will request to facilitate compliance with applicable FINRA rules) (the “Lock-Up Period”). I further agree to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriters that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such period. I further agree that the obligations contained in this paragraph will also, if so determined by the Board, apply in the Company’s initial listing of its Common Stock on a national securities exchange
by means of a registration statement on Form S-1 under the Securities Act (or any successor registration form under the Securities Act subsequently adopted by the Securities and Exchange Commission) filed by the Company with the Securities and Exchange Commission that registers shares of existing capital stock of the Company for resale (a “Direct Listing”), provided that all holders of at least 5% of the Company’s outstanding Common Stock (after giving effect to the conversion into Common Stock of any outstanding preferred stock of the Company) are subject to substantially similar obligations with respect to such Direct Listing.
| Very truly yours, | ||
| (Signature) | ||
| Name (Please Print) | ||
| Address of Record: | ||
| Email: | ||
Exhibit 10.8
TECTONIC THERAPEUTIC, INC.
2024 EMPLOYEE STOCK PURCHASE PLAN
ADOPTED BY THE BOARD OF DIRECTORS: JUNE 20, 2024
APPROVED BY THE STOCKHOLDERS: JUNE 11, 2024
1. GENERAL; PURPOSE.
(a) The Plan provides a means by which Eligible Employees of the Company and certain Designated Companies may be given an opportunity to purchase shares of Common Stock. The Plan permits the Company to grant a series of Purchase Rights to Eligible Employees under an Employee Stock Purchase Plan. In addition, the Plan permits the Company to grant a series of Purchase Rights to Eligible Employees that do not meet the requirements of an Employee Stock Purchase Plan.
(b) The Plan includes two components: a 423 Component and a Non-423 Component. The Company intends (but makes no undertaking or representation to maintain) the 423 Component to qualify as an Employee Stock Purchase Plan. The provisions of the 423 Component, accordingly, will be construed in a manner that is consistent with the requirements of Section 423 of the Code. In addition, this Plan authorizes grants of Purchase Rights under the Non-423 Component that do not meet the requirements of an Employee Stock Purchase Plan. Except as otherwise provided in the Plan or determined by the Board, the Non-423 Component will operate and be administered in the same manner as the 423 Component. In addition, the Company may make separate Offerings which vary in terms (provided that such terms are not inconsistent with the provisions of the Plan or the requirements of an Employee Stock Purchase Plan to the extent the Offering is made under the 423 Component), and the Company will designate which Designated Company is participating in each separate Offering.
(c) The Company, by means of the Plan, seeks to retain the services of Eligible Employees, to secure and retain the services of new Employees and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Related Corporations.
2. ADMINISTRATION.
(a) The Board will administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 2(c).
(b) The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:
(i) To determine how and when Purchase Rights will be granted and the provisions of each Offering (which need not be identical).
(ii) To designate from time to time (A) which Related Corporations will be eligible to participate in the Plan as Designated 423 Companies, (B) which Related Corporations or Affiliates will be eligible to participate in the Plan as Designated Non-423 Companies, (C) which Affiliates or Related Corporations may be excluded from participation in the Plan, and (D) which Designated Companies will participate in each separate Offering (to the extent that the Company makes separate Offerings).
(iii) To construe and interpret the Plan and Purchase Rights, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it deems necessary or expedient to make the Plan fully effective.
(iv) To settle all controversies regarding the Plan and Purchase Rights granted under the Plan.
(v) To suspend or terminate the Plan at any time as provided in Section 12.
(vi) To amend the Plan at any time as provided in Section 12.
(vii) Generally, to exercise such powers and to perform such acts as it deems necessary or expedient to promote the best interests of the Company, its Related Corporations and Affiliates, and to carry out the intent that the Plan be treated as an Employee Stock Purchase Plan with respect to the 423 Component.
(viii) To adopt such rules, procedures and sub-plans as are necessary or appropriate to permit or facilitate participation in the Plan by Employees who are non-U.S. nationals or employed or located outside the United States. Without limiting the generality of, and consistent with, the foregoing, the Board specifically is authorized to adopt rules, procedures, and sub-plans regarding, without limitation, eligibility to participate in the Plan, the definition of eligible “earnings,” handling and making of Contributions, establishment of bank or trust accounts to hold Contributions, payment of interest, conversion of local currency, obligations to pay payroll tax, determination of beneficiary designation requirements, withholding procedures and handling of share issuances, any of which may vary according to applicable requirements, and which, if applicable to a Designated Non-423 Company, do not have to comply with the requirements of Section 423 of the Code.
(c) The Board may delegate some or all of the administration of the Plan to a Committee or Committees. If administration is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan and any applicable Offering Document to the Board will thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. Further, to the extent not prohibited by Applicable Law, the Board or Committee may, from time to time, delegate some or all of its authority under the Plan to one or more officers of the Company or other persons or groups of persons as it deems necessary, appropriate or advisable under conditions or limitations that it may set at or after the time of the delegation. The Board may retain the authority to concurrently administer the Plan with the Committee (or its delegate) and may, at any time, revest in the Board some or all of the powers previously delegated. Whether or not the Board has delegated administration of the Plan to a Committee (or a delegate of the Committee), the Board will have the final power to determine all questions of policy and expediency that may arise in the administration of the Plan.
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(d) All determinations, interpretations and constructions made by the Board will not be subject to review by any person and will be final, binding and conclusive on all persons.
3. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 11(a) relating to Capitalization Adjustments, the maximum number of shares of Common Stock that may be issued under the Plan will not exceed a number of shares of Common Stock equal to one percent (1%) of the total number of shares of Common Stock issued and outstanding determined as of immediately after the Effective Time (the “Initial Share Reserve”), plus the number of shares of Common Stock that are automatically added on January 1st of each year for a period of up to ten years, commencing on January 1, 2025 and ending on (and including) January 1, 2034, in an amount equal to the lesser of (x) one percent (1%) of the total number of shares of Common Stock outstanding on December 31st of the preceding calendar year, and (y) a number of shares equal to three times the Initial Share Reserve. Notwithstanding the foregoing, the Board may act prior to the first day of any calendar year to provide that there will be no January 1st increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year will be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence. For the avoidance of doubt, up to the maximum number of shares of Common Stock reserved under this Section 3(a) may be used to satisfy purchases of Common Stock under the 423 Component and any remaining portion of such maximum number of shares may be used to satisfy purchases of Common Stock under the Non-423 Component.
(b) If any Purchase Right granted under the Plan terminates without having been exercised in full, the shares of Common Stock not purchased under such Purchase Right will again become available for issuance under the Plan.
(c) The stock purchasable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market.
4. GRANT OF PURCHASE RIGHTS; OFFERING.
(a) The Board may from time to time grant or provide for the grant of Purchase Rights to Eligible Employees under an Offering (consisting of one or more Purchase Periods) on an Offering Date or Offering Dates selected by the Board. Each Offering will be in such form and will contain such terms and conditions as the Board will deem appropriate, and with respect to the 423 Component, will comply with the requirement of Section 423(b)(5) of the Code that all Employees granted Purchase Rights will have the same rights and privileges. The terms and conditions of an Offering shall be incorporated by reference into the Plan and treated as part of the Plan. The provisions of separate Offerings need not be identical, but each Offering will include (through incorporation of the provisions of this Plan by reference in the document comprising the Offering or otherwise) the period during which the Offering will be effective, which period will not exceed 27 months beginning with the Offering Date, and the substance of the provisions contained in Sections 5 through 8, inclusive.
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(b) If a Participant has more than one Purchase Right outstanding under the Plan, unless such Participant otherwise indicates in forms delivered to the Company or a third party designated by the Company (each, a “Company Designee”): (i) each form will apply to all of the Participant’s Purchase Rights under the Plan, and (ii) a Purchase Right with a lower exercise price (or an earlier-granted Purchase Right, if different Purchase Rights have identical exercise prices) will be exercised to the fullest possible extent before a Purchase Right with a higher exercise price (or a later-granted Purchase Right if different Purchase Rights have identical exercise prices) will be exercised.
(c) The Board will have the discretion to structure an Offering so that if the Fair Market Value of a share of Common Stock on the first Trading Day of a new Purchase Period within that Offering is less than or equal to the Fair Market Value of a share of Common Stock on the Offering Date for that Offering, then (i) that Offering will terminate immediately as of that first Trading Day, and (ii) the Participants in such terminated Offering will be automatically enrolled in a new Offering beginning on the first Trading Day of such new Purchase Period.
5. ELIGIBILITY.
(a) Purchase Rights may be granted only to Employees of the Company or, as the Board may designate in accordance with Section 2(b), to Employees of a Related Corporation or an Affiliate. Except as provided in Section 5(b) or as required by Applicable Law, an Employee will not be eligible to be granted Purchase Rights unless, on the Offering Date, the Employee has been in the employ of the Company, the Related Corporation or the Affiliate, as the case may be, for such continuous period preceding such Offering Date as the Board may (unless prohibited by Applicable Law) require, but in no event will the required period of continuous employment be equal to or greater than two years. In addition, the Board may provide (unless prohibited by Applicable Law) that no Employee will be eligible to be granted Purchase Rights under the Plan unless, on the Offering Date, such Employee’s customary employment with the Company, the Related Corporation or the Affiliate is more than 20 hours per week and more than five months per calendar year or such other criteria as the Board may determine consistent with Section 423 of the Code with respect to the 423 Component. The Board may also exclude (unless prohibited by Applicable Law) from participation in the Plan or any Offering Employees who are “highly compensated employees” (within the meaning of Section 423(b)(4)(D) of the Code) of the Company, a Related Corporation or an Affiliate, or a subset of such highly compensated employees.
(b) The Board may provide that each person who, during the course of an Offering, first becomes an Eligible Employee will, on a date or dates specified in the Offering which coincides with the day on which such person becomes an Eligible Employee or which occurs thereafter, receive a Purchase Right under that Offering, which Purchase Right will thereafter be deemed to be a part of that Offering. Such Purchase Right will have the same characteristics as any Purchase Rights originally granted under that Offering, as described herein, except that:
(i) the date on which such Purchase Right is granted will be the “Offering Date” of such Purchase Right for all purposes, including determination of the exercise price of such Purchase Right;
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(ii) the period of the Offering with respect to such Purchase Right will begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board may provide that if such person first becomes an Eligible Employee within a specified period of time before the end of the Offering, the individual will not receive any Purchase Right under that Offering.
(c) No Employee will be eligible for the grant of any Purchase Rights under the 423 Component if, immediately after any such Purchase Rights are granted, such Employee owns stock possessing five percent or more of the total combined voting power or value of all classes of stock of the Company or of any Related Corporation. For purposes of this Section 5(c), the rules of Section 424(d) of the Code will apply in determining the stock ownership of any Employee, and stock which such Employee may purchase under all outstanding Purchase Rights and options will be treated as stock owned by such Employee.
(d) As specified by Section 423(b)(8) of the Code, an Eligible Employee may be granted Purchase Rights under the 423 Component only if such Purchase Rights, together with any other rights granted under all Employee Stock Purchase Plans of the Company and any Related Corporations, do not permit such Eligible Employee’s rights to purchase stock of the Company or any Related Corporation to accrue at a rate which, when aggregated, exceeds U.S. $25,000 of Fair Market Value of such stock (determined at the time such rights are granted, and which, with respect to the Plan, will be determined as of their respective Offering Dates) for each calendar year in which such rights are outstanding at any time.
(e) Officers of the Company and any Designated Company, if they are otherwise Eligible Employees, will be eligible to participate in Offerings under the Plan. Notwithstanding the foregoing, the Board may (unless prohibited by Applicable Law) provide in an Offering that Employees who are highly compensated Employees within the meaning of Section 423(b)(4)(D) of the Code will not be eligible to participate.
(f) Notwithstanding anything in this Section 5 to the contrary, in the case of an Offering under the Non-423 Component, an Eligible Employee (or group of Eligible Employees) may be excluded from participation in the Plan or an Offering if the Board has determined, in its sole discretion, that participation of such Eligible Employee(s) is not advisable or practical for any reason.
6. PURCHASE RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each Eligible Employee, pursuant to an Offering made under the Plan, will be granted a Purchase Right to purchase up to that number of shares of Common Stock purchasable either with a percentage of earnings (as such concept is defined in the Offering Document) or with a maximum dollar amount, but in either case as so specified by the Board in the Offering Document, during the period that begins on the Offering Date (or such later date as the Board determines for a particular Offering) and ends on the date stated in the Offering, which date will be no later than the end of the Offering.
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(b) The Board will establish one or more Purchase Dates during an Offering on which Purchase Rights granted for that Offering will be exercised and shares of Common Stock will be purchased in accordance with such Offering.
(c) In connection with each Offering made under the Plan, the Board may specify (i) a maximum number of shares of Common Stock that may be purchased by any Participant on any Purchase Date during such Offering, (ii) a maximum aggregate number of shares of Common Stock that may be purchased by all Participants pursuant to such Offering and/or (iii) a maximum aggregate number of shares of Common Stock that may be purchased by all Participants on any Purchase Date under the Offering. If the aggregate purchase of shares of Common Stock issuable upon exercise of Purchase Rights granted under the Offering would exceed any such maximum aggregate number, then, in the absence of any Board action otherwise, a pro rata (based on each Participant’s accumulated Contributions) allocation of the shares of Common Stock (rounded down to the nearest whole share) available will be made in as nearly a uniform manner as will be practicable and equitable.
(d) The purchase price of shares of Common Stock acquired pursuant to Purchase Rights will be specified by the Board prior to commencement of an Offering and will not be less than the lesser of:
(i) an amount equal to 85% of the Fair Market Value of the shares of Common Stock on the Offering Date; or
(ii) an amount equal to 85% of the Fair Market Value of the shares of Common Stock on the applicable Purchase Date.
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An Eligible Employee may elect to participate in an Offering and authorize payroll deductions as the means of making Contributions by completing and delivering to the Company or a Company Designee, within the time specified in the Offering, an enrollment form provided by the Company or a Company Designee. The enrollment form will specify the amount of Contributions not to exceed the maximum amount specified by the Board. Each Participant’s Contributions will be credited to a bookkeeping account for such Participant under the Plan and will be deposited with the general funds of the Company except where Applicable Law requires that Contributions be held separately or deposited with a third party. If permitted in the Offering, a Participant may begin such Contributions with the first practicable payroll occurring on or after the Offering Date (or, in the case of a payroll date that occurs after the end of the prior Offering but before the Offering Date of the next new Offering, Contributions from such payroll will be included in the new Offering). If permitted in the Offering, a Participant may thereafter reduce (including to zero) or increase such Participant’s Contributions. If payroll deductions are impermissible or problematic under Applicable Law or if specifically provided in the Offering and to the extent permitted by Section 423 of the Code with respect to the 423 Component, in addition to or instead of making Contributions by payroll deductions, a Participant may make Contributions through payment by cash, check or wire transfer prior to a Purchase Date.
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(b) During an Offering, a Participant may cease making Contributions and withdraw from the Offering by delivering to the Company or a Company Designee a withdrawal form provided by the Company or a Company Designee. The Company may impose a deadline before a Purchase Date for withdrawing. Upon such withdrawal, such Participant’s Purchase Right in that Offering will immediately terminate and the Company will distribute as soon as practicable to such Participant all of such Participant’s accumulated but unused Contributions and such Participant’s Purchase Right in that Offering shall thereupon terminate. A Participant’s withdrawal from that Offering will have no effect upon such Participant’s eligibility to participate in any other Offerings under the Plan, but such Participant will be required to deliver a new enrollment form to participate in subsequent Offerings.
(c) Purchase Rights granted pursuant to any Offering under the Plan will terminate immediately if the Participant either (i) is no longer an Employee for any reason or for no reason or (ii) is otherwise no longer eligible to participate. The Company will distribute as soon as practicable to such individual all of such individual’s accumulated but unused Contributions.
(d) Unless otherwise determined by the Board, a Participant whose employment transfers or whose employment terminates with an immediate rehire (with no break in service) by or between the Company and a Designated Company or between Designated Companies will not be treated as having terminated employment for purposes of participating in the Plan or an Offering; however, if a Participant transfers from an Offering under the 423 Component to an Offering under the Non-423 Component, the exercise of the Participant’s Purchase Right will be qualified under the 423 Component only to the extent such exercise complies with Section 423 of the Code. If a Participant transfers from an Offering under the Non-423 Component to an Offering under the 423 Component, the exercise of the Purchase Right will remain non-qualified under the Non-423 Component for the remainder of the Offering. The Board may establish different and additional rules governing transfers between separate Offerings within the 423 Component and between Offerings under the 423 Component and Offerings under the Non-423 Component.
(e) During a Participant’s lifetime, Purchase Rights will be exercisable only by such Participant. Purchase Rights are not transferable by a Participant, except by will, by the laws of descent and distribution, or, if permitted by the Company and valid under Applicable Law, by a beneficiary designation as described in Section 10.
(f) Unless otherwise specified in the Offering or required by Applicable Law, the Company will have no obligation to pay interest on Contributions.
8. EXERCISE OF PURCHASE RIGHTS.
(a) On each Purchase Date, each Participant’s accumulated Contributions will be applied to the purchase of shares of Common Stock, up to the maximum number of shares of Common Stock permitted by the Plan and the applicable Offering, at the purchase price specified in the Offering. No fractional shares will be issued unless specifically provided for in the Offering.
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(b) Unless otherwise provided in the Offering, if any amount of accumulated Contributions remains in a Participant’s account after the purchase of shares of Common Stock and such remaining amount is less than the amount required to purchase one share of Common Stock on the final Purchase Date of an Offering, then such remaining amount will be held in such Participant’s account for the purchase of shares of Common Stock under the next Offering under the Plan, unless such Participant withdraws from or is not eligible to participate in such next Offering, in which case such amount will be distributed to such Participant after the final Purchase Date without interest (unless the payment of interest is otherwise required by Applicable Law). If the amount of Contributions remaining in a Participant’s account after the purchase of shares of Common Stock is at least equal to the amount required to purchase one (1) whole share of Common Stock on the final Purchase Date of an Offering, then such remaining amount will be distributed in full to such Participant after the final Purchase Date of such Offering without interest (unless otherwise required by Applicable Law).
(c) No Purchase Rights may be exercised to any extent unless the shares of Common Stock to be issued upon such exercise under the Plan are covered by an effective registration statement pursuant to the Securities Act and the Plan is in material compliance with all applicable U.S. and non-U.S. federal, state and other securities, exchange control and other laws applicable to the Plan. If on a Purchase Date the shares of Common Stock are not so registered or the Plan is not in such compliance, no Purchase Rights will be exercised on such Purchase Date, and, subject to Section 423 of the Code with respect to the 423 Component, the Purchase Date will be delayed until the shares of Common Stock are subject to such an effective registration statement and the Plan is in material compliance, except that the Purchase Date will in no event be more than 27 months from the Offering Date. If, on the Purchase Date, as delayed to the maximum extent permissible, the shares of Common Stock are not registered and the Plan is not in material compliance with all Applicable Laws, as determined by the Company in its sole discretion, no Purchase Rights will be exercised and all accumulated but unused Contributions will be distributed to the Participants without interest (unless the payment of interest is otherwise required by Applicable Law).
9. COVENANTS OF THE COMPANY.
The Company will seek to obtain from each U.S. and non-U.S. federal, state or other regulatory commission, agency or other Governmental Body having jurisdiction over the Plan such authority as may be required to grant Purchase Rights and issue and sell shares of Common Stock thereunder unless the Company determines, in its sole discretion, that doing so is not practical or would cause the Company to incur costs that are unreasonable. If, after commercially reasonable efforts, the Company is unable to obtain the authority that counsel for the Company deems necessary for the grant of Purchase Rights or the lawful issuance and sale of Common Stock under the Plan, and at a commercially reasonable cost, the Company will be relieved from any liability for failure to grant Purchase Rights and/or to issue and sell Common Stock upon exercise of such Purchase Rights.
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10. DESIGNATION OF BENEFICIARY.
(a) The Company may, but is not obligated to, permit a Participant to submit a form designating a beneficiary who will receive any shares of Common Stock and/or Contributions from the Participant’s account under the Plan if the Participant dies before such shares and/or Contributions are delivered to the Participant. The Company may, but is not obligated to, permit the Participant to change such designation of beneficiary. Any such designation and/or change must be on a form approved by the Company.
(b) If a Participant dies, and in the absence of a valid beneficiary designation, the Company will deliver any shares of Common Stock and/or Contributions to the executor or administrator of the estate of the Participant. If no executor or administrator has been appointed (to the knowledge of the Company), the Company, in its sole discretion, may deliver such shares of Common Stock and/or Contributions, without interest (unless the payment of interest is otherwise required by Applicable Law), to the Participant’s spouse, dependents or relatives, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
11. ADJUSTMENTS UPON CHANGES IN COMMON STOCK; CORPORATE TRANSACTIONS.
(a) In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities by which the share reserve is to increase automatically each year pursuant to Section 3(a), (iii) the class(es) and number of securities subject to, and the purchase price applicable to outstanding Offerings and Purchase Rights, and (iv) the class(es) and number of securities that are the subject of the purchase limits under each ongoing Offering. The Board will make these adjustments, and its determination will be final, binding and conclusive.
(b) In the event of a Corporate Transaction, then: (i) any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue outstanding Purchase Rights or may substitute similar rights (including a right to acquire the same consideration paid to the stockholders in the Corporate Transaction) for outstanding Purchase Rights, or (ii) if any surviving or acquiring corporation (or its parent company) does not assume or continue such Purchase Rights or does not substitute similar rights for such Purchase Rights, then the Participants’ accumulated Contributions will be used to purchase shares of Common Stock (rounded down to the nearest whole share) within ten business days (or such other period specified by the Board) prior to the Corporate Transaction under the outstanding Purchase Rights, and the Purchase Rights will terminate immediately after such purchase.
12. AMENDMENT, TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may amend the Plan at any time in any respect the Board deems necessary or advisable. However, except as provided in Section 11(a) relating to Capitalization Adjustments, stockholder approval will be required for any amendment of the Plan for which stockholder approval is required by Applicable Law.
(b) The Board may suspend or terminate the Plan at any time. No Purchase Rights may be granted under the Plan while the Plan is suspended or after it is terminated.
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(c) Any benefits, privileges, entitlements and obligations under any outstanding Purchase Rights granted before an amendment, suspension or termination of the Plan will not be materially impaired by any such amendment, suspension or termination except (i) with the consent of the person to whom such Purchase Rights were granted, (ii) as necessary to facilitate compliance with any laws, listing requirements, or governmental regulations (including, without limitation, the provisions of Section 423 of the Code and the regulations and other interpretive guidance issued thereunder relating to Employee Stock Purchase Plans) including without limitation any such regulations or other guidance that may be issued or amended after the date the Plan is adopted by the Board, or (iii) as necessary to obtain or maintain favorable tax, listing, or regulatory treatment. To be clear, the Board may amend outstanding Purchase Rights without a Participant’s consent if such amendment is necessary to ensure that the Purchase Right and/or the Plan complies with the requirements of Section 423 of the Code with respect to the 423 Component or with respect to other Applicable Laws. Notwithstanding anything in the Plan or any Offering Document to the contrary, the Board will be entitled to: (i) establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars; (ii) permit Contributions in excess of the amount designated by a Participant in order to adjust for mistakes in the Company’s processing of properly completed Contribution elections; (iii) establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts withheld from the Participant’s Contributions; (iv) amend any outstanding Purchase Rights or clarify any ambiguities regarding the terms of any Offering to enable the Purchase Rights to qualify under and/or comply with Section 423 of the Code with respect to the 423 Component; and (v) establish other limitations or procedures as the Board determines in its sole discretion advisable that are consistent with the Plan. The actions of the Board pursuant to this paragraph will not be considered to alter or impair any Purchase Rights granted under an Offering as they are part of the initial terms of each Offering and the Purchase Rights granted under each Offering.
13. TAX QUALIFICATION; TAX WITHHOLDING.
(a) Although the Company may endeavor to (i) qualify a Purchase Right for special tax treatment under the laws of the United States or jurisdictions outside of the United States or (ii) avoid adverse tax treatment, the Company makes no representation to that effect and expressly disavows any covenant to maintain special or to avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan. The Company will be unconstrained in its corporate activities without regard to the potential negative tax impact on Participants.
(b) Each Participant will make arrangements, satisfactory to the Company and any applicable Related Corporation or Affiliate, to enable the Company, the Related Corporation or the Affiliate to fulfill any withholding obligation for Tax-Related Items. Without limitation to the foregoing, in the Company’s sole discretion and subject to Applicable Law, such withholding obligation may be satisfied in whole or in part by (i) withholding from the Participant’s salary or any other cash payment due to the Participant from the Company, a Related Corporation or an Affiliate; (ii) withholding from the proceeds of the sale of shares of Common Stock acquired under the Plan, either through a voluntary sale or a mandatory sale arranged by the Company; or (iii) any other method deemed acceptable by the Board. The Company shall not be required to issue any shares of Common Stock under the Plan until such obligations are satisfied.
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(c) The 423 Component is exempt from the application of Section 409A of the Code, and any ambiguities herein shall be interpreted to so be exempt from Section 409A of the Code. The Non-423 Component is intended to be exempt from the application of Section 409A of the Code under the short-term deferral exception and any ambiguities shall be construed and interpreted in accordance with such intent. In furtherance of the foregoing and notwithstanding any provision in the Plan to the contrary, if the Committee determines that an option granted under the Plan may be subject to Section 409A of the Code or that any provision in the Plan would cause an option under the Plan to be subject to Section 409A, the Committee may amend the terms of the Plan and/or of an outstanding option granted under the Plan, or take such other action the Committee determines is necessary or appropriate, in each case, without the Participant’s consent, to exempt any outstanding option or future option that may be granted under the Plan from or to allow any such options to comply with Section 409A of the Code, but only to the extent any such amendments or action by the Committee would not violate Section 409A of the Code. Notwithstanding the foregoing, the Company shall have no liability to a Participant or any other party if the option under the Plan that is intended to be exempt from or compliant with Section 409A of the Code is not so exempt or compliant or for any action taken by the Committee with respect thereto.
14. EFFECTIVE DATE OF PLAN.
The Plan will become effective immediately prior to and contingent upon the Effective Date. No Purchase Rights will be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval must be within 12 months before or after the date the Plan is adopted (or if required under Section 12(a) above, materially amended) by the Board.
15. MISCELLANEOUS PROVISIONS.
(a) Proceeds from the sale of shares of Common Stock pursuant to Purchase Rights will constitute general funds of the Company.
(b) A Participant will not be deemed to be the holder of, or to have any of the rights of a holder with respect to, shares of Common Stock subject to Purchase Rights unless and until the Participant’s shares of Common Stock acquired upon exercise of Purchase Rights are recorded in the books of the Company (or its transfer agent).
(c) The Plan and Offering do not constitute an employment contract. Nothing in the Plan or in the Offering will in any way alter the at will nature of a Participant’s employment or amend a Participant’s employment or service contract, as applicable, or be deemed to create in any way whatsoever any obligation on the part of any Participant to continue in the employ or service of the Company, a Related Corporation or an Affiliate, or on the part of the Company, a Related Corporation or an Affiliate to continue the employment or service of a Participant.
(d) The provisions of the Plan will be governed by the laws of the State of Delaware without resort to that state’s conflict of laws rules.
(e) If any particular provision of the Plan is found to be invalid or otherwise unenforceable, such provision will not affect the other provisions of the Plan, but the Plan will be construed in all respects as if such invalid provision were omitted.
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(f) If any provision of the Plan does not comply with Applicable Law, such provision shall be construed in such a manner as to comply with Applicable Law.
16. DEFINITIONS.
As used in the Plan, the following definitions will apply to the capitalized terms indicated below:
(a) “423 Component” means the part of the Plan, which excludes the Non-423 Component, pursuant to which Purchase Rights that satisfy the requirements for an Employee Stock Purchase Plan may be granted to Eligible Employees.
(b) “Affiliate” means any entity, other than a Related Corporation, whether now or subsequently established, which is at the time of determination, a “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 promulgated under the Securities Act. The Board may determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.
(c) “Applicable Law” means the Code and any applicable U.S. and non-U.S. securities, exchange control, tax, federal, state, material local or municipal or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, listing rule, regulation, judicial decision, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body (or under the authority of the New York Stock Exchange, NASDAQ Stock Market or the Financial Industry Regulatory Authority).
(d) “Board” means the Board of Directors of the Company.
(e) “Capitalization Adjustment” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Purchase Right after the date the Plan is adopted by the Board without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other similar equity restructuring transaction, as that term is used in Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto). Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.
(f) “Code” means the U.S. Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.
(g) “Committee” means a committee of one or more members of the Board to whom authority has been delegated by the Board in accordance with Section 2(c).
(h) “Common Stock” means the common stock of the Company.
(i) “Company” means Tectonic Therapeutic, Inc., a Delaware corporation.
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(j) “Contributions” means the payroll deductions, contributions made by Participants in case payroll deductions are impermissible or problematic under Applicable Law and other additional payments specifically provided for in the Offering that a Participant contributes to fund the exercise of a Purchase Right. A Participant may make additional payments into the Participant’s account if specifically provided for in the Offering, and then only if the Participant has not already had the maximum permitted amount withheld during the Offering through payroll deductions or other contributions and, with respect to the 423 Component, to the extent permitted by Section 423.
(k) “Corporate Transaction” means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:
(i) a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its subsidiaries;
(ii) a sale or other disposition of more than 50% of the outstanding securities of the Company;
(iii) a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or
(iv) a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.
(l) “Designated 423 Company” means any Related Corporation selected by the Board as participating in the 423 Component.
(m) “Designated Company” means any Designated Non-423 Company or Designated 423 Company, provided, however, that at any given time, a Related Corporation participating in the 423 Component shall not be a Related Corporation participating in the Non-423 Component.
(n) “Designated Non-423 Company” means any Related Corporation or Affiliate selected by the Board as participating in the Non-423 Component.
(o) “Director” means a member of the Board.
(p) “Effective Date” means the effective date of this Plan, which is the date of the closing of the transactions contemplated by the Merger Agreement.
(q) “Effective Time” has the meaning set forth in the Merger Agreement.
(r) “Eligible Employee” means an Employee who meets the requirements set forth in the document(s) governing the Offering for eligibility to participate in the Offering, provided that such Employee also meets the requirements for eligibility to participate set forth in the Plan.
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(s) “Employee” means any person, including an Officer or Director, who is “employed” for purposes of Section 423(b)(4) of the Code by the Company or a Related Corporation or solely with respect to the Non-423 Component, an Affiliate. However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.
(t) “Employee Stock Purchase Plan” means a plan that grants Purchase Rights intended to be options issued under an “employee stock purchase plan,” as that term is defined in Section 423(b) of the Code.
(u) “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.
(v) “Fair Market Value” means, as of any date, the value of the Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock will be, unless otherwise determined by the Board, the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in such source as the Board deems reliable. Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value will be the closing sales price on the last preceding date for which such quotation exists.
(ii) In the absence of such markets for the Common Stock, the Fair Market Value will be determined by the Board in good faith in compliance with Applicable Laws and regulations and, to the extent applicable as determined in the sole discretion of the Board, in a manner that complies with Sections 409A of the Code.
(w) “Governmental Body” means any: (i) nation, state, commonwealth, canton, province, territory, county, municipality, district or other jurisdiction of any nature; (ii) U.S. or non-U.S. federal, state, local, municipal or other government; (iii) governmental or regulatory body, or quasi-governmental body of any nature (including any governmental division, department, administrative agency or bureau, commission, authority, instrumentality, official, ministry, fund, foundation, center, organization, unit, body or entity and any court or other tribunal, and for the avoidance of doubt, any tax authority) or other body exercising similar powers or authority; or (iv) self-regulatory organization (including the New York Stock Exchange, the NASDAQ Stock Market and the Financial Industry Regulatory Authority).
(x) “Merger Agreement” means that certain Agreement and Plan of Merger and Reorganization, dated as of January 30, 2024, among AVROBIO, Inc. a Delaware corporation (“Aspen”), Alpine Merger Subsidiary, Inc., a Delaware corporation and wholly owned subsidiary of Aspen, and the Tectonic Therapeutic, Inc, a Delaware corporation.
(y) “Non-423 Component” means the part of the Plan, which excludes the 423 Component, pursuant to which Purchase Rights that are not intended to satisfy the requirements for an Employee Stock Purchase Plan may be granted to Eligible Employees.
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(z) “Offering” means the grant to Eligible Employees of Purchase Rights, with the exercise of those Purchase Rights automatically occurring at the end of one or more Purchase Periods. The terms and conditions of an Offering will generally be set forth in the “Offering Document” approved by the Board for that Offering.
(aa) “Offering Date” means a date selected by the Board for an Offering to commence.
(bb) “Officer” means a person who is an officer of the Company or a Related Corporation within the meaning of Section 16 of the Exchange Act.
(cc) “Participant” means an Eligible Employee who holds an outstanding Purchase Right.
(dd) “Plan” means this Tectonic Therapeutic, Inc. 2024 Employee Stock Purchase Plan, as amended from time to time, including both the 423 Component and the Non-423 Component.
(ee) “Purchase Date” means one or more dates during an Offering selected by the Board on which Purchase Rights will be exercised and on which purchases of shares of Common Stock will be carried out in accordance with such Offering.
(ff) “Purchase Period” means a period of time specified within an Offering, generally beginning on the Offering Date or on the first Trading Day following a Purchase Date, and ending on a Purchase Date. An Offering may consist of one or more Purchase Periods.
(gg) “Purchase Right” means an option to purchase shares of Common Stock granted pursuant to the Plan.
(hh) “Related Corporation” means any “parent corporation” or “subsidiary corporation” of the Company whether now or subsequently established, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.
(ii) “Securities Act” means the U.S. Securities Act of 1933, as amended.
(jj) “Tax-Related Items” means any income tax, social insurance, payroll tax, fringe benefit tax, payment on account or other tax-related items arising out of or in relation to a Participant’s participation in the Plan, including, but not limited to, the exercise of a Purchase Right and the receipt of shares of Common Stock or the sale or other disposition of shares of Common Stock acquired under the Plan.
(kk) “Trading Day” means any day on which the exchange(s) or market(s) on which shares of Common Stock are listed, including but not limited to the New York Stock Exchange, Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or any successors thereto, is open for trading.
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Exhibit 16.1
June 20, 2024
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Commissioners:
We have read Item 4.01 of Form 8-K dated June 20, 2024, of Tectonic Therapeutic, Inc. and are in agreement with the statements contained in the first and second sentences of the first paragraph and the second and third paragraphs under (a) Dismissal of Independent Registered Public Accounting Firm. We have no basis to agree or disagree with other statements of the registrant contained therein.
/s/ Ernst & Young LLP
Exhibit 99.1
Tectonic Therapeutic Announces Closing of Merger with AVROBIO as well as Concurrent Private Placement of $130.7 Million
— Tectonic will be focused on advancing a pipeline of novel G-protein-coupled receptor (“GPCR”) targeted biologic therapies, including the lead program, TX45, a Fc-relaxin fusion
— TX45 is currently being evaluated in Phase 1a/1b clinical trials as a potential treatment for Group 2 Pulmonary Hypertension with Heart Failure with Preserved Ejection Fraction (“HFpEF”), a serious condition estimated to affect over 600,000 people in the U.S. alone, currently with no approved therapies
— Tectonic’s second program is evaluating Hereditary Hemorrhagic Telangiectasia (“HHT”), the second-most common genetic bleeding disorder, representing a potential first-in-indication opportunity
— Post-transaction cash, cash equivalents and investments of approximately $181 million, before payment of final transaction-related expenses, is expected to fund current operational plans into mid-2027, including through key Phase 1b and Phase 2 readouts for TX45 expected in 2025 and 2026 respectively, and progression of the HHT program into clinical development
— Shares to trade on Nasdaq under the ticker symbol “TECX” commencing on June 21, 2024
WATERTOWN, Mass., June 20, 2024 (GLOBEL NEWSWIRE) — Tectonic Therapeutic, Inc. (“Tectonic”) (NASDAQ: TECX), a clinical stage biotechnology company focused on the discovery and development of therapeutic proteins and antibodies that modulate the activity of GPCRs, today announced the completion of its previously announced merger with AVROBIO, Inc. (“AVROBIO”). The combined company will operate under the name Tectonic Therapeutic, Inc., and its shares are expected to begin trading on the Nasdaq Global Market on June 21, 2024 under the ticker symbol “TECX”.
Concurrent with the merger, Tectonic completed a $130.7 million private placement with a syndicate of new and existing investors, including a major mutual fund, TAS Partners, 5AM Ventures, EcoR1 Capital, Polaris Partners, certain funds and accounts advised by Farallon Capital Management, Vida Ventures, the PagsGroup, and other undisclosed investors. Following these transactions, Tectonic’s cash, cash equivalents and investments of approximately $181 million at close, before payment of final transaction-related expenses, is expected to fund current operational plans into mid-2027.
“It’s an exciting time to be transitioning into a publicly-traded company. We expect to initiate a randomized Phase 2 clinical trial for our lead program, TX45, in Group 2 Pulmonary Hypertension in the setting of Left Heart Disease with Preserved Ejection Fraction in the second half of this year. Results from the ongoing Phase 1a clinical trial in this patient population are expected in mid-2024, to be followed by Phase 1b results expected in 2025 and results from the Phase 2 clinical trial expected in 2026. We also expect to select a potential development candidate for our second program targeting a treatment for HHT, later this year, with the start of corresponding clinical studies anticipated to commence in the fourth quarter of 2025 or the first quarter of 2026,” said Alise Reicin, M.D., President and Chief Executive Officer of Tectonic.
“We believe we are strongly positioned to enter the public markets at this time, with a solid financial foundation, investor syndicate and leadership team, and with several potential catalysts over the next two years, setting the stage for meaningful value creation. This transaction represents a major milestone in the evolution of Tectonic and in our efforts to bring innovative medicines to patients,” added Dr. Reicin.
Tectonic’s lead program, TX000045 (“TX45”), is an Fc-relaxin fusion molecule that activates the RXFP1 receptor, the GPCR target of the hormone relaxin. Tectonic believes TX45’s pharmacological profile, the direct result of applying Tectonic’s protein engineering capabilities, has the potential to overcome the limitations that have impeded previous attempts to develop relaxin as a therapeutic protein.
Tectonic’s second program addresses HHT, the second-most common genetic bleeding disorder. It has been estimated that there are approximately 70,000 HHT patients in the United States. The target population for development is the 10-20% of HHT patients who are considered to have severe disease because of frequent bleeding, anemia, and in some cases, who require blood transfusions.
Transaction Details
In connection with the closing of the merger, AVROBIO enacted a 1 for 12 reverse stock split of its common stock and issued a non-transferable contingent value right (a “CVR”) to AVROBIO shareholders of record immediately prior to the closing, which does not include the former holders of shares of Tectonic or the private placement investors. Holders of a CVR will be entitled to receive certain cash payments from proceeds received by Tectonic, if any, related to the dispositions of AVROBIO’s pre-transaction legacy assets. Following the reverse stock split and based on the final exchange ratio of approximately 0.5344 shares of AVROBIO common stock for each share of Tectonic common stock, at the closing of the merger, there are approximately 15,371,780 shares of the combined company’s common stock outstanding on a diluted basis, with prior AVROBIO stockholders owning approximately 24.8% on a diluted basis and prior Tectonic stockholders (including investors in the private placement) holding approximately 75.2% of the combined company’s outstanding common stock on a diluted basis.
Leerink Partners served as exclusive financial advisor to Tectonic and Cooley LLP served as legal counsel to Tectonic. Leerink Partners and TD Cowen acted as joint placement agents for Tectonic’s private placement. Piper Sandler acted as capital markets advisor to Tectonic. TD Cowen served as lead financial advisor to AVROBIO, Houlihan Lokey served as co-financial advisor to AVROBIO, and Goodwin Procter LLP served as legal counsel to AVROBIO.
About Tectonic
Tectonic Therapeutic is a biotechnology company focused on the discovery and development of therapeutic proteins and antibodies that modulate the activity of G-protein coupled receptors (“GPCRs”). Leveraging its proprietary technology platform called GEODe™ (“GPCRs Engineered for Optimal Discovery”), Tectonic is focused on developing biologic medicines that overcome the existing challenges of GPCR-targeted drug discovery and harness the human body to modify the course of disease. Tectonic focuses on areas of significant unmet medical need, often where therapeutic options are poor or nonexistent, as these are areas where new medicines have the potential to improve patient quality of life. Tectonic is headquartered in Watertown, Massachusetts. For more information, please visit www.tectonictx.com and follow @TectonicTx on X (formerly Twitter) and LinkedIn.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements in this press release other than statements of historical facts are “forward-looking statements. These statements may be identified by words such as “aims,” “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,” “plans,” “possible,” “potential,” “seeks,” “will” and variations of these words or similar expressions that are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Forward-looking statements in this press release include, but are not limited to, statements regarding: the design, objectives, initiation, timing, progress and results of current and future preclinical
studies and clinical trials of Tectonic’s product candidates, including the ongoing Phase 1a/b clinical trial for its lead program, TX45, in Group 2 Pulmonary Hypertension and initiation of Phase 2 clinical trial; candidate selection for Tectonic’s second program in HHT; market opportunity and Tectonic’s anticipated cash runway. These forward-looking statements are based on Tectonic’s expectations and assumptions as of the date of this press release. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Tectonic’s control. Actual results and the timing of events could differ materially from those contained in any forward-looking statement as a result of various factors, including, without limitation: (i) the ability of AVROBIO and Tectonic to integrate their businesses successfully and to achieve anticipated synergies; (ii) the possibility that other anticipated benefits of the merger will not be realized, including without limitation, anticipated revenues, expenses, earnings and other financial results, and growth and expansion of Tectonic’s operations, and the anticipated tax treatment of the merger; (iii) potential litigation relating to the transaction that could be instituted against Tectonic or its directors; (iv) the ability of Tectonic to retain, attract and hire key personnel; (v) potential adverse reactions or changes to relationships with customers, employees, suppliers or other parties resulting from the completion of the transaction; (vi) potential business uncertainty, including changes to existing business relationships that could affect Tectonic’s financial performance; (vii) Tectonic’s need for additional funding, which may not be available; (viii) failure to identify additional product candidates and develop or commercialize marketable products; (ix) the early stage of Tectonic’s development efforts; (x) potential unforeseen events during clinical trials could cause delays or other adverse consequences; (xi) risks relating to the regulatory approval process; (xii) interim, topline and preliminary data may change as more patient data become available, and are subject to audit and verification procedures that could result in material changes in the final data; (xiii) success in preclinical testing and earlier clinical trials does not ensure that later clinical trials will generate the same results or otherwise provide adequate data to demonstrate the efficacy and safety of a product candidate; (xiv) Tectonic’s product candidates may cause serious adverse side effects; (xv) inability to maintain its collaborations, or the failure of these collaborations; (xvi) Tectonic’s reliance on third parties, including for the manufacture of materials for its research programs, preclinical and clinical studies; (xvii) failure to obtain U.S. or international marketing approval; (xviii) changes in expected or existing competition; (xix) the impact of macroeconomic conditions, including the conflict in Ukraine and the conflict in the Middle East, heightened inflation and uncertain credit and financial markets, on Tectonic’s business, clinical trials and financial position; (xx) changes in the regulatory environment; (xxi) the uncertainties and timing of the regulatory approval process; and (xxii) unexpected litigation or other disputes. Other factors that may cause Tectonic’s actual results to differ from those expressed or implied in the forward-looking statements in this press release are identified under the heading “Risk Factors” in the final prospectus on Form 424(b)(3) filed by AVROBIO with the SEC on May 3, 2024, and in other filings that Tectonic makes and will make with the SEC in the future. Tectonic expressly disclaims any obligation to update any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise, except as otherwise required by law. For more information, please visit www.tectonictx.com and follow @TectonicTx on X (formerly Twitter) and LinkedIn.
Contacts:
Investors:
Dan Ferry
LifeSci Advisors
(617) 430-7576
Media:
Karen Sharma
CG Life
(617) 571-2733
Exhibit 99.2
TECTONIC MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion and analysis of Tectonic’s financial condition and results of operations together with Tectonic’s unaudited consolidated financial statements and the related notes included as Exhibit 99.3 to this Current Report on Form 8-K. This discussion and analysis should also be read together with Tectonic’s pro forma financial information as of and for the three months ended March 31, 2024 included as Exhibit 99.4 to this Current Report on Form 8-K. In addition to historical information, the following discussion contains forward-looking statements. Tectonic’s actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” in this Current Report on Form 8-K.
Overview
Tectonic Therapeutic, Inc. (the “Company” or “Tectonic”) is a biotechnology company focused on the discovery and development of therapeutic proteins and antibodies that modulate the activity of GPCRs. The discovery of biologics that can modulate GPCRs has historically been quite challenging. Tectonic has developed a proprietary technology platform called GEODe™, with the aim of addressing these challenges to enable the discovery and development of GPCR-targeted biologic medicines that can modify the course of disease. Tectonic focuses on areas of significant unmet medical need, often where therapeutic options are poor or nonexistent, as these are areas where new medicines have the potential to improve patient quality of life.
GPCRs are receptor molecules found on the surface of cells that act as sensors for various extracellular stimuli to enable communication between cells and their environment. These molecules regulate diverse aspects of human biology including blood pressure, glucose metabolism, transmission between neurons and immune surveillance. There are over 800 human genes encoding GPCRs, underscoring the extent to which nature has relied on this molecular system for physiological control. The breadth of effects controlled by GPCRs is best illustrated by the fact that greater than 30% of all approved drugs address targets in this class. The vast majority of these drugs, however, are small molecules, and their targets have been largely confined to a few GPCR subfamilies, many of which have a natural ligand that is also a small molecule. Tectonic believes there are many situations where biologics could present advantages over small molecules for this class of targets. For instance, when targeting a single member of a highly related family of GPCRs, the selectivity profile achievable with an antibody may be preferable to that of a small molecule to optimize therapeutic efficacy and safety for the patient. Conversely, when multi-modal action is needed to achieve a desired physiological effect, proteins engineered for bispecific function allow for dual target engagement, unlike small molecules that are generally optimized for action on a single target. Tectonic is focused on developing biologics to address GPCRs with the goal of capturing such opportunities.
It has been historically difficult, however, to discover therapeutic proteins and antibodies that bind to and modulate the activity of GPCRs because of the low endogenous level of expression of many GPCRs, complex biochemistry and their inherent instability when removed from their natural environment, the cell membrane. With the goal of unlocking the potential for biologic therapeutics to broaden the clinical utility of GPCRs, Tectonic uses its proprietary GEODe™ technology platform in an attempt to overcome the known challenges of GPCR-targeted drug discovery.
Tectonic’s lead asset, TX45, is an Fc-relaxin fusion molecule that activates the RXFP1 receptor, the GPCR target of the hormone, relaxin. Relaxin is an endogenous protein, expressed at low levels in both men and women. In normal human physiology, relaxin is upregulated during pregnancy where it exerts vasodilative effects, reduces systemic and pulmonary vascular resistance and increases cardiac output to accommodate the increased demand for oxygen and nutrients from the developing fetus. Relaxin also exerts anti-fibrotic effects on pelvic ligaments to facilitate delivery of the baby. It has long been hypothesized that these unique dual aspects of relaxin biology may offer therapeutic potential in the treatment of cardiovascular disease. Unfortunately, the development of a viable therapeutic has been challenging, primarily because of relaxin’s very short half-life. Tectonic believes TX45’s pharmacological profile, the direct result of applying Tectonic’s protein engineering capabilities, has the potential to overcome the limitations that have impeded previous attempts to develop relaxin as a therapeutic protein. To interrogate the therapeutic potential of relaxin, Tectonic has identified: Group 2 Pulmonary Hypertension (“PH”) in the setting of Heart Failure with Preserved Ejection Fraction (“HFpEF”), referred to as Group 2 PH /HFpEF hereafter, as the initial disease setting. Tectonic hypothesizes that in this setting, treatment with relaxin could improve hemodynamics through effects on vasodilation and potential remodeling in both the pulmonary vessels and the heart which could translate into a clinically meaningful improvement in exercise capacity in these patients. Clinical trials are planned to confirm this hypothesis. Despite this belief, Tectonic’s business carries substantial risks, including Tectonic’s limited experience in therapeutic discovery and development, and the risk that the platform may never result in the regulatory approval of a product candidate.
Since Tectonic’s inception in 2019, Tectonic’s operations have focused on organizing and staffing the company, business planning, raising capital, establishing Tectonic’s intellectual property portfolio and conducting preclinical studies and clinical trials. Tectonic does not have any product candidates approved for sale and has not generated any revenue from product sales. Tectonic has funded its operations primarily with proceeds from sales of Series A-1, A-2, A-3, and A-4 convertible preferred stock (collectively, the “Preferred Stock”), proceeds received from the Merger (as defined below), proceeds from the issuance of common stock, proceeds from issuance of convertible promissory notes, which were all converted to convertible preferred stock in March 2021 and proceeds from issuance of Simple Agreements for Future Equity (“SAFEs”) in October and December 2023. From inception through March 31, 2024, Tectonic has received $114.7 million in capital contributions from sales of Preferred Stock, issuance of convertible promissory notes, and proceeds from issuance of SAFEs. As of March 31, 2024, Tectonic had $18.7 million in cash and cash equivalents. Upon the consummation of the transactions contemplated by that certain Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) dated January 30, 2024 by and among AVROBIO, Inc. (“AVROBIO”), Alpine Merger Subsidiary, Inc. and Tectonic (the “Merger”) on June 20, 2024, Tectonic received $77.3 million in cash proceeds from AVROBIO, and $96.6 million in proceeds related to the sale of shares to investors pursuant to that certain subscription agreement dated January 30, 2024 among certain investors and Tectonic (the “Subscription Agreement”).
Since inception, Tectonic has incurred significant operating losses. Tectonic’s net losses were $15.2 million and $14.4 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, Tectonic had an accumulated deficit of $105.8 million. Tectonic expects to continue to incur significant expenses and operating losses for the foreseeable future. Tectonic anticipates that its expenses will increase significantly in connection with its ongoing activities, as Tectonic:
| • | continues Tectonic’s ongoing and planned research and development of Tectonic’s lead product candidate TX45 and Tectonic’s other product candidates; |
| • | initiates preclinical studies and clinical trials for any additional product candidates that Tectonic may pursue in the future; |
| • | seeks to discover and develop additional product candidates and further expand Tectonic’s clinical product pipeline; |
| • | seeks regulatory approvals for any product candidates that successfully complete clinical trials; |
| • | continues to scale up external manufacturing capacity with the aim of securing sufficient quantities to meet Tectonic’s capacity requirements for clinical trials and eventual potential commercialization; |
| • | establishes sales, marketing and distribution infrastructure to commercialize any product candidate for which Tectonic may obtain regulatory approval; |
| • | develops, maintains, expands and protects Tectonic’s intellectual property portfolio; |
| • | acquires or in-licenses other product candidates and technologies; |
| • | hires additional clinical, quality control and manufacturing personnel; |
| • | adds discovery, clinical, operational, financial and management information systems and personnel, including personnel to support Tectonic’s product development and planned future commercialization efforts; and |
| • | incurs additional legal, accounting, investor relations and other expenses associated with operating as a public company following the completion of the Merger. |
Tectonic will not generate revenue from product sales unless and until Tectonic successfully completes clinical development and obtains regulatory approval for one or more of Tectonic’s product candidates. If Tectonic obtains regulatory approval for any of Tectonic’s product candidates and does not enter into a commercialization partnership, Tectonic expects to incur significant expenses related to developing Tectonic’s internal commercialization capability to support product sales, marketing and distribution. Further, following the completion of the Merger, the combined company will continue to incur additional costs associated with operating as a public company.
As a result, Tectonic will need substantial additional funding to support Tectonic’s continuing operations and pursue Tectonic’s growth strategy. Until such time as Tectonic can generate significant revenue from product sales, if ever, Tectonic expects to finance its operations through a combination of public or private equity offerings, debt financings or other capital sources, which may include collaborations with other companies, marketing, distribution or licensing arrangements with third parties, or other strategic transactions. Tectonic may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If Tectonic fails to raise capital or enter into such agreements as and when needed, Tectonic may have to significantly delay, reduce or eliminate its product discovery and development programs or commercialization efforts.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, Tectonic is unable to accurately predict the timing or amount of increased expenses or when or if Tectonic will be able to achieve or maintain profitability. Even if Tectonic is able to generate product sales, Tectonic may not become profitable. If Tectonic fails to become profitable or is unable to sustain profitability on a continuing basis, then Tectonic may be unable to continue its operations at planned levels and be forced to reduce or terminate Tectonic’s operations.
Recent Developments
Merger with AVROBIO
On January 30, 2024, Tectonic entered into the Merger Agreement with AVROBIO and Merger Sub. Pursuant to the Merger Agreement and the satisfaction of the conditions described in the Merger Agreement, on June 20, 2024, Merger Sub merged with and into Tectonic, with Tectonic surviving as a wholly owned subsidiary of AVROBIO. The Merger Agreement and the transactions contemplated therein were approved by the members of the AVROBIO board of directors and the Tectonic board of directors (the “Board”).
Subject to the terms and conditions of the Merger Agreement, at the effective time, (a) each outstanding share of Tectonic common stock (including shares of Tectonic common stock issued upon conversion of Tectonic preferred stock and the shares issued pursuant to the Subscription Agreement and conversion of the SAFEs) was converted into the right to receive a number of shares of AVROBIO common stock equal to the exchange ratio; and (b) each then outstanding Tectonic stock option that is outstanding and unexercised immediately prior to the effective time was assumed by AVROBIO, subject to the exchange ratio.
Immediately after the Merger, AVROBIO securityholders as of immediately prior to the Merger owned approximately 24.8% of the outstanding shares of capital stock of the combined company on a diluted basis. Immediately after the Merger, former Tectonic securityholders owned approximately 38.5% of the outstanding shares of capital stock of the combined company on a diluted basis. Investors participating in the Subscription Agreement and the SAFEs owned approximately 27.1% and 9.6% of the outstanding shares of capital stock of the combined company, respectively, on a diluted basis.
Tectonic stockholders received approximately 10,956,614 shares of AVROBIO common stock in connection with the Merger, including 6,901 shares of AVROBIO common stock subject to vesting terms, based on the number of shares of Tectonic common stock outstanding immediately prior to the Merger, including Tectonic restricted stock, the number of shares of Tectonic common stock issued to investors participating in the Subscription Agreement and SAFEs, and Tectonic convertible preferred stock outstanding immediately prior to the Merger, which was converted into shares of Tectonic common stock on a one-for-one basis immediately prior to the closing of the Merger.
Tectonic Subscription Agreement
Concurrently with the closing of the Merger, on June 20, 2024, certain investors of Tectonic completed the purchase of shares of Tectonic common stock pursuant to the Subscription Agreement at a price of approximately $12.40 per share for an aggregate purchase price of approximately $96.6 million. The shares of Tectonic common stock that were issued pursuant to the Subscription Agreement were converted into 4,163,606 shares of AVROBIO common stock upon the closing of the Merger based on the exchange ratio, pursuant to the Merger Agreement.
Macroeconomic Considerations
Uncertainty in the global economy presents significant risks to Tectonic’s business. Tectonic is subject to continuing risks and uncertainties in connection with the current macroeconomic environment, including rising interest rates, recent bank failures and geopolitical factors, such as tensions involving China and the United States, the war between Russia and Ukraine and the conflict in the Middle East and the responses thereto. While Tectonic is closely monitoring the impact of the current macroeconomic conditions on all aspects of its business, including the impacts on Tectonic’s participants in its clinical trials, employees, suppliers, vendors and collaboration partners, the ultimate extent of the impact on Tectonic’s business remains highly uncertain and will depend on future developments and factors that continue to evolve. Most of these developments and factors are outside Tectonic’s control and could exist for an extended period of time. Tectonic will continue to evaluate the nature and extent of the potential impacts to Tectonic’s business, results of operations, liquidity and capital resources.
Revenue
Tectonic has not generated any revenue since its inception and does not expect to generate any revenue from the sale of products in the foreseeable future, if at all. If Tectonic’s development efforts for its product candidates are successful and result in regulatory approval, or in collaboration or license agreements with third parties, Tectonic may generate revenue in the future from product sales or payments from collaboration or license agreements that Tectonic may enter into with third parties, or any combination thereof. Tectonic cannot predict if, when or to what extent Tectonic will generate revenue from the commercialization and sale of Tectonic’s product candidates. Tectonic may never succeed in obtaining regulatory approval for any of its product candidates.
Operating Expenses
Research and Development
Research and development expenses consist of costs incurred for Tectonic’s research activities, including Tectonic’s discovery efforts and the development of its programs and platform. These expenses include:
| • | employee-related expenses, including salaries, related benefits and share-based compensation expense, for employees engaged in research and development functions; |
| • | expenses incurred in connection with research and the preclinical and clinical development of Tectonic’s programs and Tectonic’s product candidates, including under agreements with third parties; |
| • | laboratory supplies, consumables and other research materials; |
| • | facilities, depreciation and other expenses related to research and development activities, which include direct or allocated expenses for rent and maintenance of facilities, and utilities; |
| • | costs related to compliance with regulatory requirements; and |
| • | payments made under third-party licensing agreements. |
Tectonic expenses all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on Tectonic’s evaluation of the progress to completion of specific tasks using information and data provided to Tectonic by Tectonic’s vendors and third-party service providers. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense when the goods have been delivered or the services have been performed, or when it is no longer expected that the goods will be delivered or the services rendered. Upfront payments under license agreements are expensed upon receipt of the license, and annual maintenance fees under license agreements are expensed in the period in which they are incurred. Milestone payments under license or collaboration agreements are accrued, with a corresponding expense being recognized, in the period in which the milestone is determined to be probable of achievement and the related amount is reasonably estimable.
Tectonic’s direct research and development expenses relate to the development of Tectonic’s lead product candidate, TX45, as well as the nonclinical safety pharmacology and toxicology testing of Tectonic’s product candidates. Tectonic’s external services expenses consist of the external costs and fees paid to consultants and other research laboratories in connection with Tectonic’s preclinical development and clinical development activities.
Costs that are deployed across multiple of Tectonic’s programs, including the HHT program and programs aimed at the discovery and development of potential therapies for fibrotic disease, and its platform technology and are not directly attributable to any single program are not allocated to any single program and, as such, are not separately classified. These costs include multi-program employee costs, cross-program payments made under third-party licensing agreements, costs of laboratory supplies and facilities expenses, including rent, depreciation and other indirect costs, The costs of Tectonic’s discovery efforts and projects are included in unallocated employee-related expenses, laboratory supplies and other expenses.
General and Administrative
General and administrative expenses consist primarily of salaries and personnel-related costs, including share-based compensation, for Tectonic’s personnel in executive, legal, finance and accounting, human resources and other administrative functions. General and administrative expenses also include legal fees relating to patents and corporate matters, professional fees paid for accounting, auditing, consulting and tax service, insurance costs, travel expenses, office and information technology costs and facilities, depreciation and other expenses related to general and administrative activities, which include direct or allocated expenses for rent and maintenance of facilities and utilities.
Tectonic anticipates that its general and administrative expenses will increase in the future as the combined company is expected to incur significantly increased accounting, audit, legal, regulatory, compliance, director and officer insurance, and investor and public relations expenses associated with operating as a public company. Tectonic also expects to incur additional intellectual property-related expenses as Tectonic files patent applications to protect innovations arising from Tectonic’s research and development activities.
Other Income (Expense), Net
Loss on Issuance of SAFEs and Change in Fair Value of SAFE Liabilities
In October and December 2023, Tectonic issued SAFEs for proceeds of $34.1 million. The SAFEs were recorded as liabilities in the consolidated balance sheet at their fair value on the issuance dates. Until redemption, the SAFEs were measured at a fair value on a recurring basis, with subsequent changes in fair value recorded in other income and expenses on the consolidated statement of operations and comprehensive loss. Tectonic recorded a loss of $2.1 million resulting from the remeasurement of the SAFEs to fair value from December 31, 2023 to March 31, 2024.
Immediately prior to the closing of the Merger, the principal balance of the SAFEs was automatically redeemed into 2,752,216 shares of Tectonic common stock at the conversion price of $12.40 per share. At the closing of the Merger, shares of Tectonic common stock issued pursuant to the redemption of the SAFEs were converted into 1,470,839 shares of AVROBIO common stock based on the exchange ratio, pursuant to the Merger Agreement.
Interest Income
Interest income primarily consists of interest earned on Tectonic’s invested cash balances, which consist of deposit accounts and a sweep account.
Interest Expense
Interest expense primarily consists of interest expense on finance lease liabilities.
Other Income (Expense), net
Other income (expense), net primarily consists of the difference between transactional currency and functional currency.
Income Taxes
Since Tectonic’s inception, it has not recorded any income tax benefits for the net losses it has incurred or for the research and development tax credits earned in each year by Tectonic’s operations in the United States, as Tectonic believes, based upon the weight of available evidence, that it is more likely than not that all of Tectonic’s net operating loss carryforwards and tax credit carryforwards will not be realized.
Components of Tectonic’s Results of Operations
Comparison of the Three Months Ended March 31, 2024 and 2023
The following table summarizes Tectonic’s results of operations for the three months ended March 31, 2024 and 2023:
| Three Months Ended March 31, |
||||||||||||||||
| 2024 | 2023 | Change | % | |||||||||||||
| (in thousands) | ||||||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
$ | 10,818 | $ | 12,985 | $ | (2,167 | ) | (17 | )% | |||||||
| General and administrative |
2,150 | 1,546 | 604 | 39 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total operating expenses |
12,968 | 14,531 | (1,563 | ) | (11 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Loss from operations |
(12,968 | ) | (14,531 | ) | 1,563 | (11 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Other income (expense), net: |
||||||||||||||||
| Change in fair value of the SAFE liabilities |
(2,075 | ) | — | (2,075 | ) | 100 | ||||||||||
| Interest income |
256 | 128 | 128 | 100 | ||||||||||||
| Interest expense |
(31 | ) | (42 | ) | 11 | (26 | ) | |||||||||
| Other expense |
(403 | ) | — | (403 | ) | — | % | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other (expense) income, net |
(2,253 | ) | 86 | (2,339 | ) | (2,720 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net loss |
$ | (15,221 | ) | $ | (14,445 | ) | $ | (776 | ) | 5 | ||||||
|
|
|
|
|
|
|
|
|
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Operating Expenses
Research and Development Expenses
Direct research and development expenses by program:
| Three Months Ended March 31, |
||||||||||||||||
| 2024 | 2023 | Change | % | |||||||||||||
| (in thousands) | ||||||||||||||||
| Direct research and development expenses by program: |
||||||||||||||||
| TX45 |
$ | 5,710 | $ | 8,655 | (2,945 | ) | (34 | )% | ||||||||
| Platform development, early-stage research and unallocated expenses: |
||||||||||||||||
| Personnel related (including share-based compensation) |
3,203 | 2,853 | 350 | 12 | ||||||||||||
| External services |
784 | 273 | 511 | 187 | ||||||||||||
| Facility, supplies and other |
1,121 | 1,204 | (83 | ) | (7 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total research and development expenses |
$ | 10,818 | $ | 12,985 | $ | (2,167 | ) | (17 | )% | |||||||
|
|
|
|
|
|
|
|
|
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Research and development expenses were $10.8 million for the three months ended March 31, 2024, as compared to $13.0 million for the three months ended March 31, 2023. The decrease of $2.2 million was primarily due to a decrease of $2.9 million in direct research and development expenses which were specifically attributed to Tectonic’s lead product candidate, TX45. This decrease resulted from a reduction of $5.2 million in direct research and development expenses which were specifically attributed to the end of a development and manufacturing services contract term with a major customer, partially offset by an increase of $2.3 million in clinical trial CRO costs. The increase of $0.4 million in personnel related costs was primarily due to severance and related costs incurred as a result of a reduction in force that occurred during the three months ended March 31, 2024. The increase of $0.5 million in external services was primarily due to an increase in consulting and professional services to support the ongoing development activities. The decrease of less than $0.1 million in facility, supplies and other expenses was primarily due to decreased travel costs and laboratory service and equipment purchases.
General and Administrative Expenses
| Three Months Ended March 31, |
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| 2024 | 2023 | Change | % | |||||||||||||
| (in thousands) | ||||||||||||||||
| Personnel related (including share-based compensation) |
$ | 1,246 | $ | 1,015 | $ | 231 | 23 | % | ||||||||
| Professional and consultant fees |
582 | 375 | 207 | 55 | ||||||||||||
| Facility related and other |
322 | 156 | 166 | 106 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total general and administrative expenses |
$ | 2,150 | $ | 1,546 | $ | 604 | 39 | % | ||||||||
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|
|
|
|
|
|
|
|
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General and administrative expenses were $2.2 million for the three months ended March 31, 2024 as compared to $1.5 million for the three months ended March 31, 2023. The increase of $0.6 million resulted from an increase of $0.2 million in personnel related costs and was primarily due to severance and costs incurred as a result of a reduction in force that occurred during the three months ended March 31, 2024. The increase of $0.2 million in professional and consultant fees was related to an increase in consulting and professional services fees to support Merger related activities during the three months ended March 31, 2024. The increase of $0.2 million in facility related costs and other expenses was due to increased office and insurance costs.
Other Income (Expense), Net
Change in Fair Value of SAFE Liabilities
The SAFE liabilities loss of $2.1 million resulted from the remeasurement of the SAFE liabilities to fair value from December 31, 2023 to March 31, 2024.
Interest Income
Interest income increased by $0.1 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to an increase in interest rates in 2023.
Interest Expense
Interest expense was consistent for the three months ended March 31, 2024 and 2023.
Other Expense
Other expense increased by $0.4 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to the reversal of an Australian research and development tax credit claim during the three months ended March 31, 2024.
Liquidity and Capital Resources
Sources of Liquidity
Since Tectonic’s inception, Tectonic has incurred significant operating losses. Tectonic expects to incur significant expenses and operating losses for the foreseeable future as Tectonic advances the preclinical and clinical development of Tectonic’s research programs and product candidates. Tectonic expects that its research and development and general and administrative costs will increase in connection with conducting additional preclinical studies and clinical trials for Tectonic’s current and future research programs and product candidates, contracting with CMOs to support preclinical studies and clinical trials, expanding Tectonic’s intellectual property portfolio, and providing general and administrative support for Tectonic’s operations. As a result, Tectonic will need additional capital to fund its operations, which Tectonic may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources.
Tectonic does not currently have any approved products and has never generated any revenue from product sales. To date, Tectonic has funded its operations primarily through proceeds from sales of preferred stock and common stock, proceeds from issuance of convertible promissory notes, proceeds from issuance of SAFEs and proceeds received from the merger. From inception through March 31, 2024, Tectonic has received $114.7 million in capital contributions from sales of preferred stock and convertible promissory notes and proceeds from issuance of SAFEs. As of March 31, 2024, Tectonic had $18.7 million in cash and cash equivalents and an accumulated deficit of $105.8 million.
Cash Flows
The following table shows a summary of Tectonic’s cash flows for the three months ended March 31, 2024 and 2023:
| Three Months Ended March 31, |
||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Net cash used in operating activities |
$ | (9,273 | ) | $ | (10,815 | ) | ||
| Net cash used in investing activities |
(4 | ) | (136 | ) | ||||
| Net cash used in financing activities |
(668 | ) | (143 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents |
(76 | ) | — | |||||
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|
|
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| Net decrease in cash, cash equivalents and restricted cash |
$ | (10,021 | ) | $ | (11,094 | ) | ||
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|
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Operating Activities
During the three months ended March 31, 2024, operating activities used $9.3 million of cash, primarily resulting from a net loss of $15.2 million, offset by changes in Tectonic’s operating assets and liabilities of $2.9 million and non-cash charges of $3.1 million. Non-cash charges primarily consisted of $2.1 million change in fair value of the SAFE liabilities, $0.4 million in depreciation and amortization expense, $0.3 million in stock-based compensation expense, and $0.3 million in non-cash lease expense. Net cash provided by changes in Tectonic’s operating assets and liabilities consisted primarily of a $1.5 million increase in accounts payable, a $1.4 million increase in accrued expenses and other current liabilities, and a $0.3 million decrease in prepaid expenses and other current assets, partially offset by a $0.3 million decrease in operating lease liabilities. The increase in accrued expenses and other current liabilities and accounts payable was primarily due to the timing of vendor and research partner payments and invoicing. The decrease in prepaid and other current assets was due to a reassessment of the tax benefit amount related to Australia. The decrease in operating lease liabilities was primarily due to the lease payments made during the three months ended March 31, 2024.
During the three months ended March 31, 2023, operating activities used $10.8 million of cash, primarily resulting from a net loss of $14.4 million, offset by non-cash charges of $1.0 million and changes in Tectonic’s operating assets and liabilities of $2.7 million. Non-cash charges primarily consisted of $0.4 million in depreciation and amortization expense, $0.3 million in stock-based compensation expense, and $0.3 million in non-cash lease expense. Net cash provided by changes in Tectonic’s operating assets and liabilities consisted primarily of a $2.3 million increase in accrued expenses and other current liabilities and a $1.0 million increase in accounts payable, partially offset by a $0.3 million increase in prepaid expenses and other current assets and a $0.3 million decrease in operating lease liabilities. The increase in accrued expenses and other current liabilities and increase in accounts payable were primarily due to the timing of vendor and research partner payments and invoicing. The increase in prepaid expenses and other current assets is due to prepayments of material costs and insurance and license fees. The decrease in operating lease liabilities was primarily due to the lease payments made during the three months ended March 31, 2023.
Investing Activities
During the three months ended March 31, 2024 and 2023, net cash used in investing activities was less than $0.1 million and $0.1 million, respectively. The change in net cash used in investing activities during the three months ended March 31, 2024 and 2023 was due to Tectonic’s purchases of property, equipment, and improvements.
Financing Activities
During the three months ended March 31, 2024 and 2023, net cash used in financing activities was $0.7 million and $0.1 million, respectively. Net cash used in financing activities during the three months ended March 31, 2024 was primarily due to Tectonic’s payments of deferred offering costs of $0.6 million and $0.1 million of repayment of finance lease obligations. Net cash used in financing activities during the three months ended March 31, 2023 was primarily due to $0.1 million of repayment of finance lease obligations.
Funding Requirements
Tectonic expects its expenses to increase in connection with its ongoing activities, particularly as Tectonic continues the research and development of, continue or initiate clinical trials of, and seek marketing approval for, Tectonic’s product candidates including its lead product candidate TX45. In addition, if Tectonic obtains marketing approval for TX45 or any of its other product candidates, Tectonic expects to incur significant commercialization expenses related to program sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators. Furthermore, following the completion of the Merger, Tectonic expects to incur additional costs associated with operating as a public company. Accordingly, Tectonic will need to obtain substantial additional funding in connection with its continuing operations. If Tectonic is unable to raise capital when needed or on attractive terms, Tectonic would be forced to delay, reduce or eliminate Tectonic’s research and development programs or future commercialization efforts.
Tectonic expects its existing cash and cash equivalents, together with the net proceeds from the Merger and the sale of securities pursuant to the Subscription Agreement, will enable Tectonic to fund its operating expenses and capital expenditure requirements for at least the next twelve months. Tectonic’s future capital requirements will depend on many factors, including:
| • | the scope, progress, results and costs of product discovery, preclinical studies and clinical trials; |
| • | the scope, prioritization and number of Tectonic’s research and development programs; |
| • | the costs, timing and outcome of regulatory review of Tectonic’s product candidate; |
| • | Tectonic’s ability to establish and maintain collaborations on favorable terms, if at all; |
| • | the achievement of milestones or occurrence of other developments that trigger payments under the license agreements and any other collaboration agreements Tectonic enters into; |
| • | the extent to which Tectonic is obligated to reimburse, or entitled to reimbursement of, clinical trial costs under collaboration agreements, if any; |
| • | the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing Tectonic’s intellectual property rights and defending intellectual property-related claims; |
| • | the extent to which Tectonic acquires or in-license other product candidates and technologies; |
| • | the costs of securing manufacturing arrangements for commercial production; and |
| • | the costs of establishing or contracting for sales and marketing capabilities if Tectonic obtains regulatory approvals to market Tectonic’s product candidates. |
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and Tectonic may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, Tectonic’s product candidates, if approved, may not achieve commercial success. Tectonic’s commercial revenues, if any, will be derived from sales of product candidates that Tectonic does not expect to be commercially available for many years, if at all. Accordingly, Tectonic will need to continue to rely on additional financing to achieve its business objectives. Adequate additional financing may not be available to Tectonic on acceptable terms, or at all.
Until such time, if ever, as Tectonic can generate substantial product revenues, Tectonic expects to finance its cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. Debt financing, if available, may involve agreements that include covenants limiting or restricting Tectonic’s ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
If Tectonic raises funds through additional collaborations, strategic alliances or licensing arrangements with third parties, Tectonic may have to relinquish valuable rights to Tectonic’s technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to Tectonic. If Tectonic is unable to raise additional funds through equity or debt financings when needed, Tectonic may be required to delay, limit, reduce or terminate Tectonic’s product development or future commercialization efforts or grant rights to develop and market product candidates that Tectonic would otherwise prefer to develop and market itself.
Following the closing of the Merger, Tectonic expects to incur additional costs associated with operating as a public company. In addition, Tectonic anticipates that Tectonic will need substantial additional funding in connection with Tectonic’s continuing operations. Tectonic projections of operating capital requirements are based on Tectonic’s current operating plan, which includes several assumptions that may prove to be incorrect and Tectonic may use all of its available capital resources sooner than it expects.
Tectonic currently has no ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect Tectonic’s liquidity over the next five years, other than Tectonic’s lease obligations.
Going Concern
Tectonic evaluated certain adverse conditions and events that raise substantial doubt about Tectonic’s ability to continue as a going concern within twelve months after the date that the accompanying financial statements were issued or available to be issued. Since Tectonic’s inception, Tectonic has funded its operations primarily with proceeds from the sale of common stock, preferred stock, issuance of convertible promissory notes, issuance of SAFEs and proceeds received at the closing of the Merger. Tectonic has also incurred significant recurring losses, including net losses of $15.2 million and $14.4 million for the three months ended March 31, 2024 and 2023, respectively. In addition, Tectonic used $9.3 million and $10.8 million in operations for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, Tectonic has an accumulated deficit of $105.8 million. In June 2024, the Company completed the Merger and received $77.3 million of cash from AVROBIO and $96.6 million from the issuance of common stock pursuant to the Subscription Agreements. Management believes that its current cash on hand along with the cash received from the closing of the Merger are sufficient to fund the Company’s planned operations for at least one year from the date of issuance of these unaudited condensed consolidated financial statements.
Contractual Obligations & Commitments
Leases
The following is Tectonic’s contractual obligations and commitments as of March 31, 2024:
| Less than 1 Year | 1 to 3 Years | 3 to 5 Years | More than 5 Years |
Total | ||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Finance Leases |
$ | 434 | $ | 915 | $ | 44 | $ | — | $ | 1,393 | ||||||||||
| Operating Leases |
1,154 | 1,712 | — | — | 2,866 | |||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total |
$ | 1,588 | $ | 2,627 | $ | 44 | $ | — | $ | 4,259 | ||||||||||
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The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts. The table does not include obligations under agreements that Tectonic can cancel without a significant penalty.
Harvard Agreement
In July 2020, Tectonic entered into an option agreement with the President and Fellows of Harvard College (“Harvard”) and obtained an option to negotiate a license under Harvard’s interest in certain patent rights (the “Patent Rights”) in exchange for an option fee in the low five digits. In October 2021, Tectonic exercised the option and in February 2022 it entered into a license agreement with Harvard (the “Harvard License Agreement”) to conduct research and development activities using certain materials, technology and patent rights owned by Harvard, with the intent to develop, obtain regulatory approval for, and commercialize products. The Harvard License Agreement expires upon the later of: (i) the expiry of the last valid claim within the licensed patent rights, expected to be not earlier than May 2041; and (ii) the earlier of (a) ten years after the first commercial sale of the first know-how enabled product or (b) twelve years after the first commercial sale of the first licensed product.
As partial consideration for the Harvard License Agreement, Tectonic agreed to pay Harvard a one-time license fee of $170,000, with such fee to be paid in equal installments over three years. In July 2022, Tectonic paid Harvard $56,666 and in July 2023 Tectonic paid Harvard $56,667. The final installment of $56,667 under the Harvard License Agreement is due in July 2024. As partial consideration for the Harvard License Agreement, Tectonic entered into a subscription agreement with Harvard in July 2022, pursuant to which Harvard was granted 227,486 shares of common stock of the Company with a fair market value in the mid six digits.
Tectonic is required to pay an annual maintenance fee ranging from the low five digits to the low six digits until the first commercial sale of a royalty-bearing product, following which the annual maintenance fee will increase to a low six digits for the remainder of the term of the Harvard License Agreement. Tectonic is required to pay a one-time milestone payment of $100,000 for each discovered product granted FDA marketing authorization as well as for the first licensed product or know-how enabled product to reach certain clinical developmental milestones, up to $8.5 million and for the first licensed product or know-how enabled product to reach certain commercial milestones, up to $2.0 million. Tectonic is also obligated to pay tiered royalties as a percentage in the low single digits on net sales of licensed products, as a percentage in the low single digits on the net sales of know-how enabled products and a single royalty as a percentage in the low single digits on the net sales of discovered products, subject to a reduction for third-party licenses, as well as a percentage between 10-20% of non-royalty income Tectonic receives in connection with a sublicense, strategic partnership or know-how enabled license. With respect to any net sales of licensed products and know-how enabled products sold in certain countries outside of the United States and Europe, Tectonic and Harvard will negotiate a royalty percentage on a country-by-country basis.
For a more detailed description of this agreement, see note 6 to the interim condensed consolidated Tectonic financial statements included as Exhibit 99.3 of this Current Report on Form 8-K.
Alloy Therapeutics License Agreement
On November 29, 2021, Tectonic executed a license agreement with Alloy Therapeutics, LLC (“ATX”), whereby Tectonic will use ATX technology for the purpose of preclinical development, clinical development and commercialization of potential product candidates, for an initial period of three years, with the option to extend the term for an additional two years. Tectonic will pay ATX a non-refundable and non-creditable annual fee of $0.1 million on each anniversary of the agreement. On November 7, 2022, ATX and Tectonic amended the agreement and extended the period of payment for the first fee due in May 2023. Additionally, Tectonic will be responsible for annual partnering fees if Tectonic decides to pursue clinical development of a product candidate using the ATX technology. The partnering fees may be creditable against future milestone development fees paid by Tectonic. Tectonic will also be responsible to pay ATX development milestone payments for the movement of certain product candidates thought clinical trials, which range from the low six digits to the low seven digits upon completion of each milestone and amount to $4.8 million in total milestone payments under the license agreement. Provided Tectonic is able to commercialize a product using ATX technology, Tectonic will be responsible to pay ATX commercial payments in the low seven digits per year during the first six years of commercial sales, amounting to an amount in the high eight digits in total commercial payments under the license agreement.
During the three months ended March 31, 2024 and 2023, Tectonic paid $0.1 million and $0 to ATX, respectively.
Adimab Agreement
On May 1, 2023, Tectonic entered into a discovery agreement with Adimab, LLC (“Adimab”), an antibody discovery company, whereby Tectonic and Adimab are collaborating on human antibody discovery in accordance with an agreed upon research program. Tectonic paid an upfront technology access fee totaling $20,000 upon execution of the agreement during the year ended December 31, 2023.
Tectonic also will be responsible for payment of: (1) quarterly funding equal to 100% of the actual full-time employee (“FTE”) expended by Adimab in the performance of its obligations in accordance with the agreed upon research program at an annual rate of $0.4 million per FTE (subject to annual consumer price index increases) per the agreement, (2) delivery fees equal to $0.1 million upon both Adimab’s initial delivery of sequences or physical materials and completion pursuant to the research program (initial and completion fees payable once per target for a total of up to $0.4 million), (3) the option, with a non-creditable, non-refundable option exercise fee of $0.5 million, to obtain the licenses and assignments for information discovered during the research program (4) development milestone payments for the movement of certain product candidates thought clinical trials, which range in the low seven digits and (5) royalty payments based on the annual net sales that Tectonic generates from products that utilize Adimab technology. Tectonic has the right to terminate the agreement if certain criteria are met. During the three months ended March 31, 2024 and 2023, Tectonic paid $0.1 million and $0 to Adimab, respectively.
Critical Accounting Estimates
Tectonic’s management’s discussion and analysis of its financial condition and results of operations is based on Tectonic’s interim condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these interim condensed consolidated financial statements requires Tectonic to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the interim condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Tectonic bases its estimates on historical experience, known trends and events, and various other assumptions that Tectonic believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities recorded expenses that are not readily apparent from other sources. Tectonic evaluates its estimates and assumptions on an ongoing basis. Actual results may differ from these estimates.
While Tectonic’s significant accounting policies are described in greater detail in Note 2 to Tectonic’s audited annual consolidated financial statements, Tectonic believes that the following accounting policies are those most critical to the judgements and estimates used in the preparation of Tectonic’s interim condensed consolidated financial statements.
Prepaid and Accrued Research and Development Expenses
As part of the process of preparing its interim condensed consolidated financial statements, Tectonic is required to estimate its prepaid and accrued research and development expenses. This process involves estimating the level of service performed and the associated cost incurred for the services when Tectonic has not yet been invoiced or otherwise notified of actual costs. The majority of Tectonics’ service providers invoice Tectonic in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. Tectonic makes estimates of its prepaid and accrued research and development expenses as of each balance sheet date in the interim condensed consolidated financial statements based on facts and circumstances known to Tectonic at that time, which includes corroboration of these estimates with the service providers. Estimated research and development expenses include those related to fees paid to vendors in connection with clinical, discovery and preclinical development activities and any research organizations in connection with clinical and preclinical studies and testing. Although Tectonic does not expect its estimates to be materially different from amounts actually incurred, Tectonic’s understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in changes in estimates reported in the current period. To date, there have not been any material adjustments to Tectonic’s prior estimates of prepaid and accrued research and development expenses.
Valuation of SAFE Liabilities
Tectonic accounts for the SAFEs as liabilities at fair value and adjusts the liabilities to fair value at each period end date until a triggering event occurs that results in the settlement of the liabilities. Triggering events include an equity financing, public listing transaction, change of control and dissolution. Changes in the liabilities’ fair values are recognized in the Company’s statement of operations and comprehensive loss in change in fair value of SAFE liabilities. The fair value of the SAFEs has been estimated using probability-weighted scenario analyses and discount rates derived by application of the build-up method to reflect the cost of equity.
The valuations of the SAFE liabilities as of March 31, 2024 and December 31, 2023 were determined based on a probability-weighted scenario analysis that assumed the probabilities of the occurrence of an equity financing, public listing transaction and dissolution to be 10.0%, 87.5% and 2.5% respectively. The estimated time to redemption used in the March 31, 2024 valuation was two months for an equity financing and dissolution and one month for a public listing transaction. The estimated time to redemption used in the December 31, 2023 valuation was five months for an equity financing and dissolution and four months for a public listing transaction. The valuations used a discount rate of 30.2% to approximate the cost of equity, which was derived from application of a build-up method that incorporated the risk-free rate at the valuation date, and adjustments to reflect market risk, a small stock premium, and a selected company-specific risk premium.
Share-Based Compensation
Tectonic measures stock options granted to employees and non-employees based on their fair value on the date of the grant using the Black-Scholes-Merton (“BSM”) option pricing model. Compensation expense for those awards is recognized over the requisite service period, which is generally the vesting period of the respective award for employees. Compensation expense for awards to non-employee with service-based vesting conditions is recognized in the same manner as if Tectonic had paid cash in exchange for the goods or services, which is generally the over the vesting period of the award. Tectonic uses the straight-line method to recognize the expense of awards with service-based vesting conditions. Tectonic accounts for forfeitures of stock options as they occur.
The BSM requires the use of assumptions to determine the fair value of the stock options. The determination of fair value of the Tectonic common stock is described below. Other assumptions used in the BSM, the volatility of Tectonic’s common stock, the expected term of Tectonic’s common stock, the risk-free interest rate for a period that approximates the expected term of Tectonic’s common stock and Tectonic’s expected dividend yield, are determined by Tectonic management.
Determination of Fair Value of Common Stock
As there has been no public market for Tectonic’s common stock to date, the estimated fair value of Tectonic’s common stock has been determined by the Board as of the date of grant of each stock options, with input from management, considering Tectonic’s most recently available third-party valuations of Tectonic common stock and the Board’s assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held- Company Equity Securities Issued as Compensation and were prepared using the option pricing model (“OPM”). OPM uses option theory to value the various classes of Tectonic’s securities in light of their respective claims to the enterprise value. Total shareholders’ deficit value is allocated to the various share classes based upon their respective claims on a series of call options with strike prices at various value levels depending upon the rights and preferences of each class. A BSM is typically employed in this analysis, with an option term assumption that is consistent with Tectonic’s expected time to a liquidity event and a volatility assumption based on the estimated stock price volatility of a peer group of comparable public companies over a similar term. In addition to considering the results of these third-party valuations, the Board considered various objective and subjective factors to determine the fair value of Tectonic’s common stock as of each grant date, including:
| • | the prices of Tectonic’s common stock at the time of each grant of stock options; |
| • | the progress of Tectonics’ research and development programs, including the status of preclinical studies and clinical trials for Tectonic’s product candidates; |
| • | Tectonic’s stage of development and business strategy; |
| • | external market conditions affecting the biotechnology industry and trends within the biotechnology industry; |
| • | Tectonic’s financial position, including cash on hand, and Tectonic’s historical and forecasted performance and operating results; |
| • | the lack of an active public market for Tectonic’s common stock and Tectonic’s Series A convertible preferred stock; |
| • | the likelihood of achieving a liquidity event, such as an initial public offering, or IPO, merger or sale of Tectonic in light of prevailing market conditions; and |
| • | the analysis of IPOs and market performance of similar companies in the biotechnology industry. |
The assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application of management’s judgment. As a result, if Tectonic had used significantly different assumptions or estimates, the fair value of Tectonic’s common stock and Tectonic’s share- based compensation expense could have been materially different. After the Merger is completed and there is a public trading market for Tectonic’s common stock, it will no longer be necessary for the Board to estimate the fair value of Tectonics’ common stock in connection with Tectonics’ accounting for granted stock options or other such awards Tectonic may grant, as the fair value of Tectonic’s common stock and stock options will be determined based on the quoted market price of Tectonic’s common stock.
Recent Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact Tectonic’s financial position, results of operations or cash flows is disclosed in Note 2 to Tectonic’s interim condensed consolidated financial statements included as Exhibit 99.3 of this Current Report on Form 8-K.
Qualitative and Quantitative Disclosures about Market Risk
Interest Rate Risk
Tectonic’s primary exposure to market risk is to market risk related to interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. As of March 31, 2024, Tectonic had cash and cash equivalents of $18.7 million, which consisted of cash and money market funds. As of March 31, 2024, Tectonic had a finance lease liability and an operating lease liability of $1.2 million and $2.7 million, respectively. In October 2023 and December 2023, Tectonic issued SAFEs to certain of Tectonic’s investors. Tectonic received proceeds of $10.1 million from the October issuance and $24.0 million from the December issuance. Interest income and expenses are sensitive to changes in the general level of interest rates. However, due to the nature of these investments, an immediate 10% change in market interest rates would not have a material effect on the fair market value of Tectonic’s investment portfolio.
Inflation Risk
Tectonic’s results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, Tectonic believes the effects of inflation, if any, on Tectonic’s results of operations and financial condition have been immaterial. Tectonic cannot assure you its business will not be affected in the future by inflation.
Exhibit 99.3
| Page | ||||
| Unaudited Interim Condensed Consolidated Financial Statements for the Three Months ended March 31, 2024 and 2023 |
||||
| Unaudited Condensed Consolidated Balance Sheets |
F-2 | |||
| Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Loss |
F-3 | |||
| Unaudited Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit |
F-4 | |||
| Unaudited Condensed Consolidated Statements of Cash Flows |
F-5 | |||
| Notes to Unaudited Condensed Consolidated Financial Statements |
F-6 | |||
F-1
TECTONIC THERAPEUTIC, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
| March 31, 2024 |
December 31, 2023 |
|||||||
| (unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 18,748 | $ | 28,769 | ||||
| Prepaid expenses and other current assets |
1,810 | 2,115 | ||||||
|
|
|
|
|
|||||
| Total current assets |
20,558 | 30,884 | ||||||
| Property, equipment and improvements, net |
2,864 | 3,122 | ||||||
| Finance right-of-use assets, net |
1,323 | 1,437 | ||||||
| Operating right-of-use assets |
2,375 | 2,669 | ||||||
| Deferred offering costs |
3,444 | 669 | ||||||
| Restricted cash |
587 | 587 | ||||||
| Other assets |
4 | 31 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 31,155 | $ | 39,399 | ||||
|
|
|
|
|
|||||
| Liabilities, Convertible Preferred Stock and Stockholders’ Deficit |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 2,563 | $ | 409 | ||||
| Accrued expenses and other current liabilities |
11,048 | 8,141 | ||||||
| SAFE liabilities |
32,590 | 30,515 | ||||||
| Operating lease liability - current portion |
1,388 | 1,348 | ||||||
| Finance lease liability - current portion |
475 | 475 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
48,064 | 40,888 | ||||||
| Operating lease liability - net of current portion |
1,280 | 1,644 | ||||||
| Finance lease liability - net of current portion |
758 | 876 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
50,102 | 43,408 | ||||||
|
|
|
|
|
|||||
| Commitments and contingencies (Note 6) |
||||||||
| Convertible preferred stock (Series A-1, A-2, A-3 and A-4), $0.0001 par value; 6,825,483 shares authorized as of March 31, 2024 and December 31, 2023; 6,825,483 shares issued and outstanding as of March 31, 2024 and December 31, 2023; aggregate liquidation preference of $87,459 as of March 31, 2024 and December 31, 2023 |
80,627 | 80,627 | ||||||
| Stockholders’ Deficit |
||||||||
| Common stock, $0.0001 par value; 11,947,558 shares authorized as of March 31, 2024 and December 31, 2023; 2,637,120 and 2,634,246 shares issued and outstanding as of March 31, 2024 and December 31, 2023 |
— | — | ||||||
| Additional paid-in capital |
6,304 | 5,979 | ||||||
| Accumulated other comprehensive loss |
(53 | ) | (11 | ) | ||||
| Accumulated deficit |
(105,825 | ) | (90,604 | ) | ||||
|
|
|
|
|
|||||
| Total stockholders’ deficit |
(99,574 | ) | (84,636 | ) | ||||
|
|
|
|
|
|||||
| Total liabilities, convertible preferred stock and stockholders’ deficit |
$ | 31,155 | $ | 39,399 | ||||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-2
TECTONIC THERAPEUTIC, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Operating expenses: |
||||||||
| Research and development |
$ | 10,818 | $ | 12,985 | ||||
| General and administrative |
2,150 | 1,546 | ||||||
|
|
|
|
|
|||||
| Total operating expenses |
12,968 | 14,531 | ||||||
|
|
|
|
|
|||||
| Loss from operations |
(12,968 | ) | (14,531 | ) | ||||
| Other income (expense), net: |
||||||||
| Change in fair value of SAFE liabilities |
(2,075 | ) | — | |||||
| Interest income |
256 | 128 | ||||||
| Interest expense |
(31 | ) | (42 | ) | ||||
| Other expense |
(403 | ) | — | |||||
|
|
|
|
|
|||||
| Total other (expense) income, net |
(2,253 | ) | 86 | |||||
|
|
|
|
|
|||||
| Net loss |
(15,221 | ) | (14,445 | ) | ||||
|
|
|
|
|
|||||
| Net loss per share attributable to common stockholders, basic and diluted |
$ | (5.83 | ) | $ | (6.50 | ) | ||
|
|
|
|
|
|||||
| Weighted-average common shares outstanding, basic and diluted |
2,608,740 | 2,222,800 | ||||||
|
|
|
|
|
|||||
| Other comprehensive loss: |
||||||||
| Foreign currency translation adjustment |
(50 | ) | — | |||||
|
|
|
|
|
|||||
| Comprehensive loss |
$ | (15,271 | ) | $ | (14,445 | ) | ||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-3
TECTONIC THERAPEUTIC, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
(In thousands, except share amounts)
| Convertible Preferred Stock | Common Stock | Total Stockholders’ Deficit |
||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-in Capital |
Accumulated Other Comprehensive Loss |
Accumulated Deficit |
||||||||||||||||||||||||||
| Balances as of December 31, 2023 |
6,825,483 | $ | 80,627 | 2,634,246 | $ | — | $ | 5,979 | $ | (11 | ) | $ | (90,604 | ) | $ | (84,636 | ) | |||||||||||||||
| Exercise of stock options |
— | — | 2,874 | — | 4 | — | — | 4 | ||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | — | 321 | — | — | 321 | ||||||||||||||||||||||||
| Foreign currency translation adjustment |
— | — | — | — | — | (42 | ) | — | (42 | ) | ||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | (15,221 | ) | (15,221 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balances as of March 31, 2024 |
6,825,483 | $ | 80,627 | 2,637,120 | $ | — | $ | 6,304 | $ | (53 | ) | $ | (105,825 | ) | $ | (99,574 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Convertible Preferred Stock | Common Stock | Total Stockholders’ Deficit |
||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Additional Paid-in Capital |
Accumulated Other Comprehensive Loss |
Accumulated Deficit |
||||||||||||||||||||||||||
| Balances as of December 31, 2022 |
6,825,483 | $ | 80,627 | 2,525,771 | $ | — | $ | 2,127 | $ | — | $ | (47,781 | ) | $ | (45,654 | ) | ||||||||||||||||
| Exercise of stock options |
— | — | 1,285 | — | 1 | — | — | 1 | ||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | — | 275 | — | — | 275 | ||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | (14,445 | ) | (14,445 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Balances as of March 31, 2023 |
6,825,483 | $ | 80,627 | 2,527,056 | $ | — | $ | 2,403 | $ | — | $ | (62,226 | ) | $ | (59,823 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-4
TECTONIC THERAPEUTIC, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (15,221 | ) | $ | (14,445 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization expense |
377 | 364 | ||||||
| Stock-based compensation expense |
321 | 275 | ||||||
| Non-cash lease expense |
294 | 274 | ||||||
| Change in fair value of SAFE liabilities |
2,075 | — | ||||||
| Change in operating assets and liabilities: |
||||||||
| Prepaid expenses and other current assets |
289 | (335 | ) | |||||
| Other non-current assets |
24 | (20 | ) | |||||
| Accounts payable |
1,510 | 1,039 | ||||||
| Accrued expenses and other current liabilities |
1,382 | 2,326 | ||||||
| Operating lease liabilities |
(324 | ) | (293 | ) | ||||
|
|
|
|
|
|||||
| Net cash used in operating activities |
(9,273 | ) | (10,815 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from investing activities: |
||||||||
| Purchase of property, equipment and improvements |
(4 | ) | (136 | ) | ||||
|
|
|
|
|
|||||
| Net cash used in investing activities |
(4 | ) | (136 | ) | ||||
|
|
|
|
|
|||||
| Cash flows from financing activities: |
||||||||
| Payment for deferred offering costs |
(554 | ) | — | |||||
| Proceeds from exercise of common stock options |
4 | 1 | ||||||
| Repayment of finance lease obligations |
(118 | ) | (144 | ) | ||||
|
|
|
|
|
|||||
| Net cash used in financing activities |
(668 | ) | (143 | ) | ||||
|
|
|
|
|
|||||
| Effect of exchange rate changes on cash and cash equivalents |
(76 | ) | — | |||||
| Net decrease in cash and cash equivalents and restricted cash |
(10,021 | ) | (11,094 | ) | ||||
| Cash and cash equivalents and restricted cash as of beginning of period |
29,356 | 36,553 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents and restricted cash as of end of period |
$ | 19,335 | $ | 25,459 | ||||
|
|
|
|
|
|||||
| Components of cash, cash equivalents and restricted cash: |
||||||||
| Cash and cash equivalents |
$ | 18,748 | $ | 24,872 | ||||
| Restricted cash |
587 | 587 | ||||||
|
|
|
|
|
|||||
| Total cash, cash equivalents and restricted cash |
$ | 19,335 | $ | 25,459 | ||||
|
|
|
|
|
|||||
| Supplemental disclosure of non-cash financing activities: |
||||||||
| Deferred offering costs included in accrued expenses and other current liabilities |
$ | 1,576 | $ | — | ||||
| Supplemental disclosure of cash flow information: |
||||||||
| Cash paid for interest |
$ | 31 | $ | 42 | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-5
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 1. | DESCRIPTION OF BUSINESS |
Business
Tectonic Therapeutic, Inc. (“Company”) is a biotechnology company focused on the discovery and development of therapeutic proteins and antibodies that modulate the activity of G-protein coupled receptors (“GPCRs”). Leveraging its proprietary technology platform called GEODe™ (“GPCRs Engineered for Optimal Discovery”), the Company is focused on developing biologic medicines that overcome the existing challenges of GPCR-targeted drug discovery and harness the human body to modify the course of disease. The Company focuses on areas of significant unmet medical need, often where therapeutic options are poor or nonexistent, as these are areas where new medicines have the potential to improve patient quality of life. The Company was incorporated on June 5, 2019 under the laws of the State of Delaware and has its principal headquarters in Watertown, Massachusetts.
Risks and Uncertainties
The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing. Product candidates currently under development will require significant additional research and development efforts, including extensive pre-clinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure, and extensive compliance reporting capabilities.
The Company’s proprietary GEODe™ platform is currently in development. There can be no assurance that current and future research and development activities will be successfully completed, that adequate protection for owned intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.
Liquidity and Going Concern
As of March 31, 2024, the Company had an accumulated deficit of $105.8 million and has incurred losses and negative cash flows from operations since inception, including a net loss of $15.2 million for the three months ended March 31, 2024. To date, the Company has financed its operations primarily through the issuance of common stock, convertible preferred stock, convertible promissory notes and Simple Agreements for Future Equity (“SAFEs”). The Company has devoted substantially all of its financial resources and efforts to business planning, conducting research and development, recruiting management and technical staff, and raising capital. Management expects that the Company’s operating losses and negative cash flows will continue for the foreseeable future as it continues to develop its product candidates.
As the Company continues to develop its proprietary platform and potential product candidates, it will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. It may never achieve profitability, and unless and until it does, it will continue to need to raise additional capital to fund its operations. On June 20, 2024, the Company completed a merger with AVROBIO, Inc. (“AVROBIO”) pursuant to which the Company received $77.3 million of cash from AVROBIO and completed the sale of $96.6 million of common stock (see Note 14). Management believes that its current cash on hand along with the cash received from the closing of the merger agreement are sufficient to fund the Company’s planned operations for at least one year from the date of issuance of these unaudited condensed consolidated financial statements.
F-6
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). Any reference in these notes to applicable guidance is meant to refer to GAAP, as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of its financial position and its results of operations, changes in convertible preferred stock and stockholders’ deficit and cash flows. The information as of December 31, 2023 included in the unaudited interim condensed consolidated balance sheets was derived from audited annual consolidated financial statements but does not contain all of the footnote disclosures from the audited annual consolidated financial statements.
These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements as of and for the years ended December 31, 2023 and 2022.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of expenses during the reporting periods. Significant items subject to such estimates and assumptions include the contract research accruals, stock-based compensation expense, the fair value of the Company’s common stock, the income tax valuation allowance, and the fair value determination of the SAFEs. Management’s estimates are based on historical experience and various other assumptions that it believes are reasonable under the circumstances. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
F-7
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB, or other standard setting bodies and are adopted by the Company as of the specified effective dates. Unless otherwise discussed, the impact of recently issued standards that are not yet effective are not anticipated to have a material impact on the Company’s condensed consolidated financial statements upon adoption.
Recently Adopted Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in an Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (i) those not carried at fair value with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (ii) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective for the Company beginning after December 15, 2023. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted this guidance on January 1, 2024 with no material impact on the condensed consolidated financial statements and disclosures.
Recently Issued Accounting Pronouncements Not Yet Adopted
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) (“ASU 2023-07”), which enhances the segment disclosure requirements for public entities on an annual and interim basis. Under ASU 2023-07, public entities will be required to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss. Additionally, current annual disclosures about a reportable segment’s profit or loss and assets will be required on an interim basis. Entities will also be required to disclose information about the CODM’s title and position at the Company along with an explanation of how the CODM uses the reported measures of segment profit or loss in their assessment of segment performance and deciding whether how to allocate resources. Finally, ASU 2023-07 requires all segment disclosures for public entities that have only a single reportable segment. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-07 on its condensed consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) (“ASU 2023-09”), which enhances the income tax disclosure requirements for public entities on an annual basis. Under ASU 2023-09, public entities will be required to disclose in their rate reconciliation, on an annual basis, both percentages and amounts in their reporting currency for certain categories in a tabular format, with accompanying qualitative disclosures. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, and early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-09 on its condensed consolidated financial statements.
F-8
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 3. | FAIR VALUE MEASUREMENTS |
The following tables present information about financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):
| March 31, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: |
||||||||||||||||
| Cash equivalents: |
||||||||||||||||
| Money market funds |
$ | 17,213 | $ | — | $ | — | $ | 17,213 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 17,213 | $ | — | $ | — | $ | 17,213 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Liabilities: |
||||||||||||||||
| SAFE liabilities |
$ | — | $ | — | $ | 32,590 | $ | 32,590 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | — | $ | — | $ | 32,590 | $ | 32,590 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| December 31, 2023 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: |
||||||||||||||||
| Cash equivalents: |
||||||||||||||||
| Money market funds |
$ | 27,278 | $ | — | $ | — | $ | 27,278 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 27,278 | $ | — | $ | — | $ | 27,278 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Liabilities: |
||||||||||||||||
| SAFE liabilities |
$ | — | $ | — | $ | 30,515 | $ | 30,515 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | — | $ | — | $ | 30,515 | $ | 30,515 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
As of March 31, 2024 and December 31, 2023, the Company’s cash equivalents, which were invested in money market funds, were valued based on Level 1 inputs.
SAFE Liabilities
From October through December 2023, the Company entered into multiple SAFE agreements with certain existing investors and received $34.1 million (see Note 13). The SAFE liabilities are included within the Level 3 fair value hierarchy. The SAFE liabilities were valued using a probability weighted scenario analysis and discount rates derived by application of the build-up method to reflect the cost of equity. The valuation model requires a variety of inputs, including the probability of occurrence of events that would trigger conversion or redemption of the SAFEs, the expected timing of such events, and a discount rate.
F-9
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The valuations of the SAFE liabilities as of March 31, 2024 and December 31, 2023, were determined based on a probability-weighted scenario analysis that assumed the probabilities of the occurrence of an equity financing, public listing transaction and dissolution to be 10.0%, 87.5% and 2.5% respectively. The estimated time to redemption used in the March 31, 2024 valuation was two months for an equity financing and dissolution and one month for a public listing transaction. The estimated time to redemption used in the December 31, 2023 valuation was five months for an equity financing and dissolution and four months for a public listing transaction. The valuations used a discount rate of 30.2% to approximate the cost of equity, which was derived from application of a build-up method that incorporated the risk-free rate at the valuation date, and adjustments to reflect market risk, a small stock premium, and a selected company-specific risk premium. The valuation of the SAFE liabilities at the October issuance date was determined using the same methodology; however, the discount rate was 30.9% due to the higher risk-free rate at the valuation date. In October 2023, the probabilities of the occurrence of an equity financing, public listing transaction and dissolution used were 87.5%, 10.0%, and 2.5%, respectively. The estimated time to redemption used was 1.5 months for an equity financing and 5.5 months for a public listing transaction and dissolution.
The following table presents activity for the SAFE liabilities that were measured at fair value using significant unobservable Level 3 inputs during the three months ended March 31, 2024 and the year ended December 31, 2023 (in thousands):
| SAFE Liabilities | ||||
| Balance as of January 1, 2023 |
$ | — | ||
| Initial fair value recognition |
31,515 | |||
| Loss on issuance |
255 | |||
| Fair value adjustments |
(1,255 | ) | ||
|
|
|
|||
| Balance as of December 31, 2023 |
30,515 | |||
| Fair value adjustments |
2,075 | |||
|
|
|
|||
| Balance as of March 31, 2024 |
$ | 32,590 | ||
|
|
|
|||
F-10
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 4. | PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET |
Property, equipment and improvements, net is comprised of the following (in thousands):
| March 31, 2024 |
December 31, 2023 |
|||||||
| Laboratory equipment |
$ | 4,548 | $ | 4,510 | ||||
| Furniture and office equipment |
244 | 244 | ||||||
| Computer equipment |
165 | 161 | ||||||
| Construction in progress |
— | 38 | ||||||
| Leasehold improvements |
25 | 25 | ||||||
|
|
|
|
|
|||||
| 4,982 | 4,978 | |||||||
| Less: accumulated depreciation |
(2,118 | ) | (1,856 | ) | ||||
|
|
|
|
|
|||||
| Property and equipment, net |
$ | 2,864 | $ | 3,122 | ||||
|
|
|
|
|
|||||
Depreciation expense was $0.3 million and $0.2 million during the three months ended March 31, 2024 and 2023 and was recorded as follows (in thousands):
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| General and administrative |
$ | 4 | $ | 4 | ||||
| Research and development |
258 | 226 | ||||||
|
|
|
|
|
|||||
| $ | 262 | $ | 230 | |||||
|
|
|
|
|
|||||
These amounts are exclusive of amortization related to finance lease assets of $0.1 million during the three months ended March 31, 2024 and 2023.
| 5. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
Accrued expenses and other current liabilities is comprised of the following (in thousands):
| March 31, 2024 |
December 31, 2023 |
|||||||
| Employee compensation related costs |
$ | 3,769 | $ | 2,840 | ||||
| Accrued office and laboratory costs |
141 | 211 | ||||||
| Accrued contract research organization fees |
3,207 | 2,298 | ||||||
| Accrued contract development and manufacturing organization fees |
604 | 660 | ||||||
| Accrued professional fees |
2,935 | 1,798 | ||||||
| Other current liabilities |
392 | 334 | ||||||
|
|
|
|
|
|||||
| $ | 11,048 | $ | 8,141 | |||||
|
|
|
|
|
|||||
F-11
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 6. | COMMITMENTS AND CONTINGENCIES |
Leases
The Company’s commitments under its operating and finance leases are described in Note 7.
Harvard Agreement
In July 2020, the Company entered into an agreement with the President and Fellows of Harvard College (“Harvard”), for an option fee in the low five digits, whereby Harvard granted the Company an exclusive option to negotiate a worldwide, exclusive, royalty-bearing license under Harvard’s interest in the patent rights covering certain technology that was developed by Harvard. In October 2021, the Company exercised the option and on February 10, 2022, entered into a license agreement (“License Agreement”) with Harvard to conduct research and development activities using certain materials, technology and patent rights owned by Harvard, with the intent to develop, obtain regulatory approval for, and commercialize products. The License Agreement will remain in effect until the expiration of the last valid claim within the patent rights covering a product developed under the License Agreement or the termination of the License Agreement. Management concluded that the acquisition of patents and materials received under the License Agreement represents an asset acquisition of an in-progress research and development asset without future alternative use; therefore, any consideration paid was expensed.
As consideration for the License Agreement, the Company agreed to pay Harvard a non-refundable license fee, consisting of a cash payment due in three equal annual installments, in total amounting to $170,000 and 227,486 shares of common stock. The installments became due on July 2, 2022 (“First Payment Due Date”) and the first and second anniversaries of the First Payment Due Date. The first payment of $56,666 was paid in July 2022. The common stock issued to Harvard had a fair value of $0.4 million. Both the cash payment and the issuance of shares were expensed to research and development during the year ended December 31, 2022. The second payment of $56,666 was made in July 2023. The remaining installment amount of $56,668 is due in July 2024.
The Company also will be responsible for payment of (1) annual maintenance fees ranging from the low five digits to the low six digits during the term of the License Agreement (through the first commercial sale of a royalty-bearing product); (2) royalty payments as a percentage in the low single digits of the annual net sales that the Company generates from products that utilize the license technology (“Licensed Products”) and royalty payments as a percentage in the low single digits of the annual net sales that the Company generates from know-how enabled product licenses (“Know-How Enabled Products”) and (3) a percentage between 10-20% of all non-royalty income received by the Company under sublicenses, strategic partnerships and know-how enabled product licenses that utilize the license technology. Subsequent to the first commercial sale of a royalty-bearing product, annual maintenance fees will increase to a low six digits for the remainder of the term of the License Agreement. The royalty term from sales of Licensed Products will terminate on a country-by-country and product-by-product basis on the earlier of (i) the expiration of the patent rights covering the product, expected to be no earlier than May 2041, and (ii) the termination of the License Agreement. The royalty term from sales of Know-How Enabled Products will terminate on the earlier of (i) ten years after the first commercial sale of the first Know-How Enabled Product and (ii) twelve years after the first commercial sale of the first Licensed Product. There was less than $0.1 million due to Harvard as of March 31, 2024. During the three months ended March 31, 2024 and 2023, the Company paid $0.1 million to Harvard.
F-12
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Alloy Therapeutics License Agreement
On November 29, 2021, the Company executed a license agreement with Alloy Therapeutics, LLC (“ATX”), whereby the Company will use ATX technology for the purpose of preclinical development, clinical development and commercialization of potential product candidates, for an initial period of three years, with an option to extend the term for an additional two years. The Company will pay ATX a non-refundable and non-creditable annual fee of $0.1 million on each anniversary of the agreement. On November 7, 2022, the Company and ATX amended the agreement and extended the period of payment for the first fee due in May 2023. Additionally, the Company will be responsible for annual partnering fees if the Company decides to pursue clinical development of a product candidate using the ATX technology. The partnering fees may be creditable against future milestone development fees paid by the Company. The Company will also be responsible to pay ATX development milestone payments for the movement of certain product candidates through clinical trials, which range from the low six digits to the low seven digits upon completion of each milestone and amount to $4.8 million in total milestone payments under the license agreement. Provided the Company is able to commercialize a product using ATX technology, the Company will be responsible to pay ATX commercial payments in the low seven digits per year during the first six years of commercial sales, amounting to an amount in the high eight digits in total commercial payments under the license agreement.
During the three months ended March 31, 2024 and 2023, the Company paid $0.1 million and $0 to ATX, respectively.
Adimab Agreement
On May 1, 2023, the Company entered into a discovery agreement with Adimab, LLC (“Adimab”), an antibody discovery company, whereby the Company and Adimab are collaborating on human antibody discovery in accordance with an agreed upon research program. The Company paid an upfront technology access fee totaling $20,000 upon execution of the agreement.
The Company also will be responsible for payment of (1) quarterly funding equal to 100% of the actual full-time employee (“FTE”) expended by Adimab in the performance of its obligations in accordance with the agreed upon research program at an annual rate of $0.4 million per FTE (subject to annual consumer price index increases) per the agreement, (2) delivery fees equal to $0.1 million upon both Adimab’s initial delivery of sequences or physical materials and completion pursuant to the research program (initial and completion fees payable once per target for a total of up to $0.4 million), (3) a non-creditable, non-refundable fee of $0.5 million upon the exercise of an option to obtain the licenses and assignments for information discovered during the research program, (4) development milestone payments for the movement of certain product candidates thought clinical trials, which range in the low seven digits, and (5) royalty payments based on the annual net sales that the Company generates from products that utilize Adimab technology. The Company has the right to terminate the agreement if certain criteria are met. As of March 31, 2024, the Company recorded $0.1 million of costs associated with the FTEs in accrued expenses and other current liabilities and $0.1 million of discovery delivery fees in accounts payable.
Indemnification Agreements
In accordance with the Company’s amended and restated certificate of incorporation (“ARCOI”) and certain indemnification agreements, the Company indemnifies certain officers and directors for specified events or occurrences, subject to certain limits, in which the officer or director is or was serving at the Company’s request in such capacity.
F-13
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company enters into certain types of contracts that contingently requires it to indemnify various parties against claims from third parties. These contracts primarily relate to (i) the Company’s bylaws, under which it must indemnify directors and executive officers, and may indemnify other officers and employees, for liabilities arising out of their relationship with the Company, (ii) contracts under which it must indemnify directors and certain officers and consultants for liabilities arising out of their relationship, and (iii) procurement, service or license agreements under which the Company may be required to indemnify vendors, service providers or licensees for certain claims, including claims that may be brought against them arising from the Company’s acts or omissions with respect to the its products, technology, intellectual property or services.
From time to time, the Company may receive indemnification claims under these contracts in the normal course of business. In the event that one or more of these matters were to result in a claim against the Company, an adverse outcome, including a judgment or settlement, may cause a material adverse effect on future business, operating results or financial condition. It is not possible to estimate the maximum amount potentially payable under these contracts since there is no history of prior indemnification claims and the unique facts and circumstances involved in each particular claim will be determinative.
As of March 31, 2024 and December 31, 2023, the Company did not have any liabilities or other commitments related to indemnification claims.
| 7. | LEASES |
The Company has entered into operating leases for office and laboratory facilities and financing leases for laboratory equipment used in research and development activities. The remaining lease terms for its leases range from two years to four years. These leases often include options to extend the term of the lease. When it is reasonably certain that the option will be exercised, the impact of the renewal term is included in the lease term for purposes of determining total future lease payments and measuring the ROU asset and lease liability. The Company is not reasonably certain to exercise any available renewal options, which are therefore excluded from the measurement of leases. The Company applies the short-term lease policy election for its real estate and equipment leases, which allows it to exclude from recognition leases with an original term of twelve months or less.
In November 2020, the Company executed a facilities lease agreement to occupy 18,768 square feet of office and laboratory space, that was subsequently amended on April 21, 2022. The lease requires the Company to pay fixed base rent, which is included in the measurement of the lease, as well as its proportionate share of the facilities operating expenses which are treated as variable lease costs based on the Company’s election to combine lease and associated non-lease components and are excluded from the measurement of the lease. The lease expires on January 31, 2026, and contains a five-year renewal option exercisable by the Company which is not included in the measurement of the lease.
In April 2021, the Company entered into an agreement to sublease a portion of its facility lease to a related party (see Note 13) in exchange for $28,333 per month. The sublease agreement was an operating lease with a term of 18 months and was set to expire on September 30, 2022. In July 2022, the Company granted the sublessee permission to terminate the agreement on July 31, 2022. An immaterial adjustment to straight-line rental income and accrued rent receivable was recorded as part of the early termination. The proceeds from the sublease agreement are recorded as an offset to facilities costs in the periods in which they are earned.
F-14
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth information about lease costs for the three months ended March 31, 2024 and 2023 (in thousands):
| Three Months Ended March 31, |
||||||||
| Finance lease cost | 2024 | 2023 | ||||||
| Amortization of ROU assets |
$ | 114 | $ | 134 | ||||
| Interest on lease liabilities |
31 | 42 | ||||||
| Operating lease cost |
351 | 351 | ||||||
| Short-term lease cost |
176 | 150 | ||||||
| Variable lease cost |
249 | 206 | ||||||
|
|
|
|
|
|||||
| Total lease costs |
$ | 921 | $ | 883 | ||||
|
|
|
|
|
|||||
The following table sets forth information about the Company’s leases for the three months ended March 31, 2024 and 2023 (in thousands):
| Three Months Ended March 31, |
||||||||
| Cash paid for amounts included in the measurement of lease liabilities | 2024 | 2023 | ||||||
| Finance leases - financing cash flows |
$ | 118 | $ | 144 | ||||
| Finance leases - operating cash flows |
31 | 42 | ||||||
| Operating leases - operating cash flows |
381 | 370 | ||||||
| Weighted-average remaining lease terms (in years) |
||||||||
| Finance leases |
2.99 | 3.97 | ||||||
| Operating leases |
1.84 | 2.84 | ||||||
| Weighted-average discount rate |
||||||||
| Finance leases |
9.65 | % | 9.54 | % | ||||
| Operating leases |
8.25 | % | 8.25 | % | ||||
F-15
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the maturity of the Company’s finance and operating lease liabilities for the three months ended March 31, 2024 (in thousands):
| Year ended December 31, |
Finance Leases | Operating Leases | ||||||
| 2024 (remaining) |
$ | 434 | $ | 1,154 | ||||
| 2025 |
552 | 1,580 | ||||||
| 2026 |
363 | 132 | ||||||
| 2027 |
44 | — | ||||||
| 2028 |
— | — | ||||||
| Thereafter |
— | — | ||||||
|
|
|
|
|
|||||
| Total lease payments |
1,393 | 2,866 | ||||||
| Less: interest |
(160 | ) | (198 | ) | ||||
|
|
|
|
|
|||||
| Total lease liabilities |
$ | 1,233 | $ | 2,668 | ||||
|
|
|
|
|
|||||
| 8. | CONVERTIBLE PREFERRED STOCK |
The Company issued Series A-1 convertible preferred stock (the “Series A-1 Preferred Stock”), Series A-2 convertible preferred stock (the “Series A-2 Preferred Stock”), Series A-3 convertible preferred stock (the “Series A-3 Preferred Stock”), and Series A-4 convertible preferred stock (the “Series A-4 Preferred Stock” and collectively with the Series A-1 Preferred Stock, the Series A-2 Preferred Stock, and the Series A-3 Preferred Stock, the “Preferred Stock”).
The Preferred Stock as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands, expect share and per share amounts):
| March 31, 2024 and December 31, 2023 | ||||||||||||||||||||||||
| Par Value | Preferred Stock Authorized |
Preferred Stock Issued and Outstanding |
Carrying Value |
Liquidation Preference |
Common Stock Issuable Upon Conversion |
|||||||||||||||||||
| Series A-1 Preferred Stock |
$ | 0.0001 | 4,118,120 | 4,118,120 | $ | 45,016 | $ | 54,308 | 4,118,120 | |||||||||||||||
| Series A-2 Preferred Stock |
$ | 0.0001 | 1,649,188 | 1,649,188 | 21,654 | 21,749 | 1,649,188 | |||||||||||||||||
| Series A-3 Preferred Stock |
$ | 0.0001 | 696,516 | 696,516 | 9,187 | 7,348 | 696,516 | |||||||||||||||||
| Series A-4 Preferred Stock |
$ | 0.0001 | 361,659 | 361,659 | 4,770 | 4,054 | 361,659 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| 6,825,483 | 6,825,483 | $ | 80,627 | $ | 87,459 | 6,825,483 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Upon the issuance of each series of the Preferred Stock, the Company assessed the embedded conversion and liquidation features of the issued Preferred Stock and determined that such features did not require the Company to separately account for these features.
The Preferred Stock have the following rights and privileges:
F-16
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dividends
The holders of the Preferred Stock are entitled to receive noncumulative dividends if and when declared by the Board at a rate of 8% per annum. The Company may not declare, pay or set aside any dividends on shares of any other series of capital stock of the Company, other than dividends on common stock payable in common stock, unless the holders of the Preferred Stock first receive, or simultaneously receive, a dividend on each outstanding share of the Preferred Stock. No dividends were declared or paid during through the period ended March 31, 2024.
Liquidation
In the event of any involuntary liquidation, dissolution or winding up of the Company or Deemed Liquidation Event, holders of the Preferred Stock shall be paid out of the assets of the Company available for distribution an amount per share equal to the greater of (i) the applicable original issue price, plus any dividends declared but unpaid, or (ii) such amount per share as would have been payable had all shares of the Preferred Stock been converted into shares of common stock.
If the assets available for distribution to its stockholders are insufficient to pay the holders of shares of the Preferred Stock the full amount which they shall be entitled, the holders of shares of Preferred Stock shall share ratably in any distribution in proportion to the respective amounts which would otherwise be payable if all amounts payable were paid in full.
Voting
On any matter presented to the stockholders of the Company for their actions or consideration at any meeting of the Company, each holder of outstanding shares of Series A-1, Series A-3 and Series A-4 (the “Voting Preferred Stock”) shall be entitled to the number of votes equal to the number of whole shares of common stock into which the shares of the Voting Preferred Stock are convertible. Holders of outstanding shares of Series A-2 Preferred Stock are not entitled to voting rights.
Redemption
The Preferred Stock is conditionally redeemable upon the occurrence of a Deemed Liquidation Event. A Deemed Liquidation Event is defined as (a) a merger or consolidation (an “event”) in which the Company is a constituent party (or a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant to the event), except those in which the shares Company’s stock outstanding immediately before the event continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following the event, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such event, the parent corporation of the surviving or resulting corporation and (b) the sale or disposition of the Company or one or more subsidiaries of the Company.
Mandatory Conversion
All outstanding shares of the Preferred Stock shall automatically convert into shares of common stock, at the conversion price upon either (a) the closing of the sale of shares of common stock to the public at a price of at least $39.56280 per share (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the common stock), in a firm-commitment underwritten initial public offering, resulting in at least $75.0 million of gross proceeds and in connection with such offering the common stock is listed for trading on the Nasdaq Stock Market’s National Market, the New York Stock Exchange or another exchange or marketplace approved by the Board of Directors, including the approval of a majority of the preferred directors or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the voting preferred stock (the “Requisite Holders”).
F-17
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As discussed in Note 14, all of the Company’s outstanding preferred stock converted into common stock immediately prior to the closing of the Merger.
Optional Conversion
Each share of the Preferred Stock shall be convertible at any time and from time to time and without the payment of additional consideration by the holder into such number of fully paid and non-assessable shares of common stock as determined by dividing the original issue price by the conversion price. Each share of Series A-2 Preferred Stock shall be convertible into one share of Series A-1 Preferred Stock.
The conversion price for the Series A-1 Preferred Stock and the Series A-2 Preferred Stock initially is equal to $13.18760, and the initial conversion price for the Series A-3 Preferred Stock and the Series A-4 Preferred Stock is $10.55008 and $11.20946, respectively. The conversion price is subject to adjustment for any stock-splits, stock dividends, combinations or other similar recapitalizations and other adjustments as set forth in the Company’s ARCOI.
| 9. | COMMON STOCK |
As of March 31, 2024, the Company’s ARCOI authorized the Company to issue up to 11,947,558 shares of $0.0001 par value common stock, of which, 2,637,120 shares were issued and outstanding.
Voting, dividend and liquidation rights of the holders of common stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock. Holders of common stock are entitled to one vote for each share of common stock; however, the holders of the common stock shall not be entitled to vote on any amendment to the ARCOI that relates solely to the terms of one or more outstanding series of preferred stock.
The Company has included in issued and outstanding common stock shares of restricted common stock granted by the Company. As of March 31, 2024, there were 2,637,120 common shares issued and outstanding, of which 2,615,555 relate to shares of unrestricted common stock.
| 10. | STOCK-BASED COMPENSATION |
In June 2019, the Company adopted the 2019 Equity Incentive Plan (the “2019 Plan”), which provides employees, consultants and advisors and non-employee members of the Board of Directors and its affiliates with the opportunity to receive grants of stock options, stock awards and equity awards. Since inception, the Company has only issued stock options. Under the 2019 Plan, the Company may grant equity awards that could require the issuance of up to 1,991,264 shares of the Company’s common stock.
For incentive stock options and non-statutory stock options, the option exercise price may not be less than 100% of the estimated fair value on the date of grant. Options granted typically vest over a four-year period but may be granted with different vesting terms. The options expire ten years from the grant date.
F-18
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A summary of the activity in the 2019 Plan for the three months ended March 31, 2024 is as follows (in thousands except share and per share amounts):
| Number of Shares |
Weighted- Average Exercise Price |
Weighted-Average Remaining Contractual Term (Years) |
Aggregate Intrinsic Value |
|||||||||||||
| Balance as of January 1, 2024 |
1,875,932 | $ | 1.66 | 8.2 | $ | 2,276 | ||||||||||
| Granted |
— | — | ||||||||||||||
| Exercised |
(2,874 | ) | 1.54 | $ | 4 | |||||||||||
| Forfeited and expired |
(19,558 | ) | 1.36 | |||||||||||||
|
|
|
|||||||||||||||
| Balance as of March 31, 2024 |
1,853,500 | $ | 1.66 | 7.9 | $ | 2,242 | ||||||||||
|
|
|
|||||||||||||||
| Options vested and exercisable as of March 31, 2024 |
1,068,487 | $ | 1.34 | 7.3 | $ | 1,634 | ||||||||||
| Options vested and expected to vest as of March 31, 2024 |
1,853,500 | $ | 1.66 | 7.9 | $ | 2,242 | ||||||||||
There were no options granted during the three months ended March 31, 2024. The weighted-average grant-date fair value of options granted during the three months ended March 31, 2023 was $1.34 per share. The total intrinsic value of options exercised during the three months ended March 31, 2024 and 2023 was $3,828 and $411, respectively. Forfeitures of options are recorded as incurred.
Cash received from option exercises for the three months ended March 31, 2024 and 2023 was $4,420 and $0, respectively.
The fair values of the options granted in the three months ended March 31, 2023 were estimated based on the BSM option pricing model, using the following assumptions:
| Three Months Ended | ||
| March 31, 2023 | ||
| Fair value per share of underlying common stock |
$1.34 | |
| Expected term (in years) |
5.93 | |
| Expected volatility |
111.05% -111.21% | |
| Risk-free interest rate |
3.65% | |
| Expected dividend yield |
0% |
Restricted Common Stock
Since 2019, the Company has granted restricted common stock to founders, employees and consultants. The purchase price of the restricted common stock is the estimated fair value on the grant date and the restricted stock is subject to various vesting schedules. Unvested restricted common stock are subject to repurchase rights held by the Company at the original issuance price in the event the restricted common stockholders’ service to the Company is terminated either voluntarily or involuntarily. As of March 31, 2024, there were 21,565 shares of unvested restricted common stock, with a repurchase liability of less than $0.1 million, that is classified in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheet.
F-19
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes restricted stock activity:
| Number of Shares |
||||
| Unvested restricted common stock as of January 1, 2024 |
35,494 | |||
| Granted |
— | |||
| Vested |
(13,929 | ) | ||
| Forfeited |
— | |||
|
|
|
|||
| Unvested restricted common stock as of March 31, 2024 |
21,565 | |||
|
|
|
|||
The weighted-average grant date fair value of unvested restricted common stock and restricted common stock vested and forfeited for the three months ended March 31, 2024 and 2023 was immaterial.
Stock-Based Compensation Expense
The Company recorded stock-based compensation expense regarding its employees and nonemployees as follows (in thousands):
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| General and administrative |
$ | 193 | $ | 174 | ||||
| Research and development |
128 | 101 | ||||||
|
|
|
|
|
|||||
| $ | 321 | $ | 275 | |||||
|
|
|
|
|
|||||
The Company records compensation expense on a straight-line basis over the vesting period. As of March 31, 2024, total compensation cost not yet recognized related to unvested stock options was $2.0 million, which is expected to be recognized over a weighted-average period of 2.4 years.
| 11. | INCOME TAXES |
During the three months ended March 31, 2024 and 2023, the Company recorded no income tax provision or benefit.
The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets, which primarily consist of net operating loss carryforwards. The Company has considered its history of cumulative net losses, estimated future taxable income and prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its deferred tax assets. As a result, as of March 31, 2024, the Company has maintained a full valuation allowance against its net deferred tax assets.
F-20
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 12. | NET LOSS PER SHARE |
Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share amounts):
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Numerator: |
||||||||
| Net loss attributable to common stockholders |
$ | (15,221 | ) | $ | (14,445 | ) | ||
|
|
|
|
|
|||||
| Denominator: |
||||||||
| Weighted-average common shares outstanding, basic and diluted |
2,608,740 | 2,222,800 | ||||||
|
|
|
|
|
|||||
| Net loss per share attributable to common stockholders, basic and diluted |
$ | (5.83 | ) | $ | (6.50 | ) | ||
|
|
|
|
|
|||||
The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. For the three months ended March 31, 2024 and 2023, the Company excluded the following potential common shares from the computation of diluted net loss per share attributable to common stockholders for the period because including them would have had an anti-dilutive effect:
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Convertible preferred stock (as converted to common stock) |
6,825,483 | 6,825,483 | ||||||
| Stock options to purchase common stock |
1,853,500 | 1,597,259 | ||||||
| Unvested restricted common stock |
21,565 | 294,733 | ||||||
| SAFEs (as converted to common stock) |
2,752,216 | — | ||||||
|
|
|
|
|
|||||
| 11,452,764 | 8,717,475 | |||||||
|
|
|
|
|
|||||
| 13. | RELATED PARTY TRANSACTIONS |
Scientific Advisory Board Member
One of the Company’s co-founders is a member of the Company’s Scientific Advisory Board (“SAB”) and meets the criteria of a related party. For each of the three months ended March 31, 2024 and 2023, the Company paid the SAB member fees in the amount of less than $0.1 million for advisory services provided. There were no amounts due to or from this related party as of March 31, 2024 and December 31, 2023.
License Agreement
Harvard College (“Harvard”) meets the criteria of a related party resulting from the Company’s co-founders’ employment as professors in the Harvard Department of Molecular Pharmacology. Additionally, both co-founders were members of the Board during the three months ended March 31, 2024 and one co-founder is a major shareholder in the Company. Core intellectual property utilized by the Company is licensed from Harvard in exchange for license fees, future milestones and royalties, and equity in the Company in the form of common stock.
F-21
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2024 and 2023, the Company paid Harvard $0.1 and $0.1 million in cash considerations, respectively (see Note 6). Accounts payable to Harvard amounted to less than $0.1 million and $0.1 million as of March 31, 2024 and December 31, 2023, respectively.
SAFE Agreements
From October through December 2023, the Company entered into multiple SAFE agreements with certain existing investors and received $34.1 million representing the purchase amount. All investors are considered related parties of the Company.
The SAFE agreements have no maturity date, bear no interest, and will be redeemed by the Company upon the occurrence of a triggering event, including an equity financing, public listing transaction, change of control or dissolution. Equity financing is defined as a sale of the Company’s preferred stock at a fixed valuation. In the event of an equity financing, the SAFEs will automatically be redeemed through delivery of a variable number of shares of Company preferred stock equal to the SAFE purchase amount divided by the preferred stock per share issuance price in the equity financing. In the case of the SAFE agreements issued in October 2023, a 10% discount will be applied to the per share issuance price in the equity financing in determining the number of shares of Company preferred stock issued to the investors upon redemption.
Public listing transaction is defined as a direct listing, initial public offering (“IPO”) of the Company’s common stock, a reverse merger or a SPAC transaction. In any of these instances, the SAFEs will automatically be redeemed through delivery of a variable number of shares of the Company’s common stock determined by dividing the SAFE purchase amount by the offering or conversion price in the respective transaction. In the event of a change in control transaction, the SAFE investors will be entitled to receive a portion of the transaction proceeds equal to the greater of the SAFE purchase amount, payable in cash or other consideration, or the amount payable on the number of shares of the Company’s common stock equal to the SAFE purchase amount divided by the change in control conversion price, as defined in the agreement. In a dissolution event, the investor will automatically be entitled to receive a portion of the dissolution purchase amount equal to the SAFE proceeds.
The SAFEs are not in the legal form of an outstanding share or debt and therefore were evaluated under ASC 480, Distinguishing Liabilities from Equity (“ASC 480”). Because the SAFEs allow for redemption based upon certain triggering events that are outside the Company’s control, the SAFEs were classified as liabilities pursuant to ASC 480 and initially measured at their fair value upon issuance. In addition, until redemption, the SAFEs are measured at fair value on a recurring basis with subsequent changes in fair value recoded in the Company’s statement of operations and comprehensive loss.
The SAFEs issued in October 2023 were recognized at their fair value of $10.4 million on the issuance date. The issuance date fair value exceeded the proceeds received by approximately $0.3 million and this difference was recognized as loss at issuance in the consolidated statement of operations and comprehensive loss. The SAFEs issued in December 2023 were recognized at their fair value of approximately $21.4 million on the issuance date. The proceeds received exceeded the issuance date fair value by approximately $2.6 million and this difference was recognized as a capital contribution from the related party investors in additional paid-in capital in the consolidated statement of stockholders’ deficit. The subsequent measurement to the total SAFE liabilities fair value of $32.6 million is recorded in the condensed consolidated statement of operations and comprehensive loss.
F-22
TECTONIC THERAPEUTIC, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 14. | SUBSEQUENT EVENTS |
Management has evaluated subsequent events through June 20, 2024, which is the date the unaudited condensed consolidated financial statements were available to be issued, to ensure that these consolidated financial statements include appropriate disclosure of events both recognized in the consolidated financial statements and events which occurred but were not recognized in the consolidated financial statements.
Merger with AVROBIO
As discussed in Note 1, on January 30, 2024, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with AVROBIO, pursuant to which the subsidiaries of AVROBIO merged with and into the Company on June 20, 2024, with the Company continuing as a wholly owned subsidiary of the surviving corporation of the merger (the “Merger”). The Merger is being accounted for as a reverse recapitalization in accordance with GAAP, with AVROBIO treated as the acquired company for financial reporting purposes, and the Company treated as the accounting acquirer.
Upon the closing of the Merger, each outstanding share of the Company’s common stock, including outstanding and unvested restricted stock, was converted into the right to receive a number of shares of AVROBIO’s common stock based on the Exchange Ratio, as defined in the Merger Agreement. Each outstanding and unexercised option to purchase shares of the Company’s common stock immediately prior to closing was assumed by AVROBIO and was converted into an option to purchase shares of AVROBIO common stock, with necessary adjustments to the number of shares and exercise price to reflect the Exchange Ratio. All of the Company’s restricted common stock outstanding and unvested immediately prior to the closing that was assumed by AVROBIO in the Merger remains unvested to the same extent and is subject to the same repurchase option, risk of forfeiture or other condition under any applicable restricted stock purchase agreement.
The Company’s stockholders received approximately 10,956,614 shares of AVROBIO common stock in connection with the Merger, including 6,901 shares of AVROBIO common stock subject to vesting terms, based on the number of shares of the Company’s common stock outstanding immediately prior to the Merger, including restricted stock, the number of shares of common stock issued to investors participating in the Subscription Agreements (as defined below) and SAFEs, and the Company’s convertible preferred stock outstanding immediately prior to the Merger, which was converted into shares of the Company’s common stock on a one-for-one basis immediately prior to the closing of the Merger.
Subscription Agreement
Concurrently with the closing of the Merger, certain investors of the Company completed the purchase of 7,790,889 shares of the Company’s common stock pursuant to that certain subscription agreement dated January 30, 2024 (the “Subscription Agreement”) at a purchase price of approximately $12.40 per share for an aggregate purchase price of approximately $96.6 million. Shares of the Company’s common stock issued pursuant to the Subscription Agreements were converted into 4,163,606 shares of AVROBIO common stock at the closing of the Merger based on the exchange ratio, pursuant to the Merger Agreement.
F-23
Exhibit 99.4
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On June 20, 2024, AVROBIO, Inc. (“AVROBIO”), Tectonic Therapeutic, Inc. (“Tectonic”), and AVROBIO Merger Subsidiary, Inc., a direct, wholly owned subsidiary of AVROBIO (“Merger Sub”) consummated the previously announced merger transaction pursuant to that certain agreement and plan of merger and reorganization (the “Merger Agreement”), dated January 30, 2024. Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Tectonic, with Tectonic surviving as a wholly owned subsidiary of AVROBIO (such transaction, the “merger”). Upon completion of the merger, the business of Tectonic will continue as the business of the surviving corporation, referred to herein as the “combined company.” After the completion of the merger, AVROBIO changed its corporate name to Tectonic Therapeutic, Inc.
At the closing of the merger (the “effective time” or the “Closing”) and related transactions, the shares of Tectonic common stock outstanding immediately prior to the effective time, including outstanding and unvested Tectonic Restricted Stock (defined in Note 1 of the accompanying notes), were converted into 10,956,614 shares of AVROBIO common stock in the aggregate, based on an exchange ratio determined in accordance with the terms of the Merger Agreement (the “Exchange Ratio”). The shares of AVROBIO common stock received by former Tectonic stockholders include 6,901 shares that are subject to vesting conditions, based on the unvested Tectonic Restricted Stock at Closing multiplied by the Exchange Ratio. The number of shares of Tectonic common stock outstanding immediately prior to the effective time included Tectonic common stock issued upon conversion of each share of Tectonic convertible preferred stock, and shares of Tectonic common stock issued in connection with the Subscription Agreements and Company SAFEs as defined in Note 1 of the accompanying notes (together with the merger, the “Transactions”). The Exchange Ratio is approximately 0.53 shares of AVROBIO common stock for each share of Tectonic common stock, after giving effect to the 1-for-12 reverse stock split of AVROBIO common stock that was effected on June 20, 2024.
The unaudited pro forma condensed combined balance sheet combines the historical balance sheets of AVROBIO and Tectonic as of March 31, 2024, and depicts the accounting of the Transactions under U.S. generally accepted accounting principles (“pro forma balance sheet transaction accounting adjustments”). The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2024, and the year ended December 31, 2023 combine the historical results of AVROBIO and Tectonic for these periods and depict the pro forma balance sheet transaction accounting adjustments assuming that those adjustments were made as of January 1, 2023 (“pro forma statement of operations transaction accounting adjustments”). Collectively, pro forma balance sheet transaction accounting adjustments and pro forma statement of operations transaction accounting adjustments are referred to as “transaction accounting adjustments” or “pro forma adjustments.”
These unaudited pro forma condensed combined financial information and related notes have been derived from and should be read in conjunction with:
| • | The historical unaudited condensed consolidated financial statements of Tectonic as of and for the three months ended March 31, 2024, and the related notes included as Exhibit 99.3 of this Current Report on Form 8-K; |
| • | the historical unaudited condensed consolidated financial statements of AVROBIO as of and for the three months ended March 31, 2024, the related notes, and its Management’s Discussion and Analysis of Financial Condition and Results of Operations included in its Quarterly Report on Form 10-Q filed with the SEC on May 9, 2024; |
| • | the historical audited consolidated financial statements of Tectonic as of and for the years ended December 31, 2023 and 2022, and the related notes included in the Proxy Statement/Prospectus filed with the SEC on May 3, 2024; |
| • | the historical audited consolidated financial statements of AVROBIO as of and for the years ended December 31, 2023 and 2022, the related notes, and its Management’s Discussion and Analysis of Financial Condition and Results of Operations included in its Annual Report on Form 10-K filed with the SEC on March 14, 2024; and |
| • | Management’s Discussion and Analysis of Financial Condition and Results of Operations of Tectonic included as Exhibit 99.2 of this Current Report on Form 8-K. |
The unaudited pro forma condensed combined financial information is based on the assumptions and pro forma adjustments that are described in the accompanying notes. The pro forma adjustments are preliminary, subject to further revision as additional information becomes available and additional analyses are performed, and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. Differences between these preliminary estimates and the final accounting, expected to be completed after the Closing, may occur and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information does not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the integration of the two companies. The unaudited pro forma condensed combined financial information is not necessarily indicative of the financial position or results of operations in the future periods or the result that actually would have been realized had AVROBIO and Tectonic been a combined organization during the specified periods. The actual results reported in periods following the merger may differ significantly from those reflected in the unaudited condensed combined pro forma financial information presented herein for a number of reasons, including, but not limited to, differences in the assumptions used to prepare this unaudited pro forma condensed combined financial information.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2024
(In thousands, except share and per share amounts)
| Historical | ||||||||||||||||||||
| (A) AVROBIO Inc. |
(B) Tectonic Therapeutic Inc. |
Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||||||
| Assets |
||||||||||||||||||||
| Current assets: |
||||||||||||||||||||
| Cash and cash equivalents |
$ | 90,481 | $ | 18,748 | $ | 94,600 | 6 | (e) | $ | 203,421 | ||||||||||
| 644 | 6 | (a) | ||||||||||||||||||
| 41 | 6 | (b) | ||||||||||||||||||
| (1,776 | ) | 6 | (h) | |||||||||||||||||
| 683 | 6 | (k) | ||||||||||||||||||
| Restricted cash |
283 | — | (283 | ) | 6 | (k) | — | |||||||||||||
| Prepaid expenses and other current assets |
1,074 | 1,810 | (448 | ) | 6 | (i) | 2,436 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total current assets |
91,838 | 20,558 | 93,461 | 205,857 | ||||||||||||||||
| Operating right-of-use assets |
110 | 2,375 | (110 | ) | 6 | (j) | 2,375 | |||||||||||||
| Finance right-of-use assets, net |
— | 1,323 | — | 1,323 | ||||||||||||||||
| Property, equipment and improvements, net |
— | 2,864 | — | 2,864 | ||||||||||||||||
| Deferred offering costs |
— | 3,444 | (3,444 | ) | 6 | (g) | — | |||||||||||||
| Restricted cash, net of current portion |
400 | 587 | (400 | ) | 6 | (k) | 587 | |||||||||||||
| Other assets |
— | 4 | — | 4 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total assets |
$ | 92,348 | $ | 31,155 | $ | 89,507 | $ | 213,010 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit) |
||||||||||||||||||||
| Current liabilities: |
||||||||||||||||||||
| Accounts payable |
$ | 243 | $ | 2,563 | $ | — | $ | 2,806 | ||||||||||||
| Accrued expenses and other current liabilities |
3,042 | 11,048 | 5,236 | 6 | (g) | 27,063 | ||||||||||||||
| 3,950 | 6 | (c) | ||||||||||||||||||
| 3,380 | 6 | (h) | ||||||||||||||||||
| 407 | 6 | (l) | ||||||||||||||||||
| SAFE liabilities |
— | 32,590 | 1,535 | 6 | (f) | — | ||||||||||||||
| (34,125 | ) | 6 | (f) | |||||||||||||||||
| Operating lease liability - current portion |
224 | 1,388 | (224 | ) | 6 | (j) | 1,388 | |||||||||||||
| Finance lease liability - current portion |
— | 475 | — | 475 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total current liabilities |
3,509 | 48,064 | (19,841 | ) | 31,732 | |||||||||||||||
| Operating lease liability - net of current portion |
— | 1,280 | — | 1,280 | ||||||||||||||||
| Finance lease liability - net of current portion |
— | 758 | — | 758 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total liabilities |
3,509 | 50,102 | (19,841 | ) | 33,770 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Tectonic convertible preferred stock (Series A-1, A-2, A-3 and A-4), $0.0001 par value |
— | 80,627 | (80,627 | ) | 6 | (d) | — | |||||||||||||
| Stockholders’ equity (deficit): |
||||||||||||||||||||
| AVROBIO common stock, $0.0001 par value |
4 | — | — | 6 | (b) | 1 | ||||||||||||||
| — | 6 | (l) | ||||||||||||||||||
| (4 | ) | 6 | (m) | |||||||||||||||||
| 1 | 6 | (m) | ||||||||||||||||||
| Tectonic common stock, $0.0001 par value |
— | — | 1 | 6 | (d) | — | ||||||||||||||
| 1 | 6 | (e) | ||||||||||||||||||
| — | 6 | (f) | ||||||||||||||||||
| — | 6 | (a) | ||||||||||||||||||
| (2 | ) | 6 | (m) | |||||||||||||||||
| Additional paid-in capital |
572,918 | 6,304 | 80,626 | 6 | (d) | 287,059 | ||||||||||||||
| 94,599 | 6 | (e) | ||||||||||||||||||
| 34,125 | 6 | (f) | ||||||||||||||||||
| 644 | 6 | (a) | ||||||||||||||||||
| (8,680 | ) | 6 | (g) | |||||||||||||||||
| 41 | 6 | (b) | ||||||||||||||||||
| (493,518 | ) | 6 | (m) | |||||||||||||||||
| Accumulated other comprehensive loss |
— | (53 | ) | — | (53 | ) | ||||||||||||||
| Accumulated deficit |
(484,083 | ) | (105,825 | ) | (1,535 | ) | 6 | (f) | (107,767 | ) | ||||||||||
| (3,950 | ) | 6 | (c) | |||||||||||||||||
| (5,156 | ) | 6 | (h) | |||||||||||||||||
| (448 | ) | 6 | (i) | |||||||||||||||||
| 114 | 6 | (j) | ||||||||||||||||||
| (407 | ) | 6 | (l) | |||||||||||||||||
| 493,523 | 6 | (m) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total stockholders’ equity (deficit) |
88,839 | (99,574 | ) | 189,975 | 179,240 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total liabilities, convertible preferred stock and stockholders’ equity (deficit) |
$ | 92,348 | $ | 31,155 | $ | 89,507 | $ | 213,010 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
See accompanying notes to the unaudited pro forma condensed combined financial information.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2024
(In thousands, except share and per share amounts)
| Historical | ||||||||||||||||||||||||
| (A) AVROBIO Inc. |
(B) Tectonic Therapeutic Inc. |
Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||||||||||
| Operating expenses: |
||||||||||||||||||||||||
| Research and development |
$ | 683 | $ | 10,818 | $ | — | $ | 11,501 | ||||||||||||||||
| General and administrative |
7,258 | 2,150 | — | 9,408 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total operating expenses |
7,941 | 12,968 | — | 20,909 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Loss from operations |
(7,941 | ) | (12,968 | ) | — | (20,909 | ) | |||||||||||||||||
| Other income (expense), net |
||||||||||||||||||||||||
| Interest income |
1,146 | 256 | — | 1,402 | ||||||||||||||||||||
| Interest expense |
— | (31 | ) | — | (31 | ) | ||||||||||||||||||
| Other expense |
(13 | ) | (403 | ) | — | (416 | ) | |||||||||||||||||
| Change in fair value of SAFE liabilities |
— | (2,075 | ) | 2,075 | 7 | (d) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total other income (expense), net |
1,133 | (2,253 | ) | 2,075 | 955 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net loss |
$ | (6,808 | ) | $ | (15,221 | ) | $ | 2,075 | $ | (19,954 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Basic and diluted, net income (loss) for the period attributable to equity holders |
$ | (6,808 | ) | $ | (15,221 | ) | $ | (19,954 | ) | |||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Weighted average number of common shares outstanding - basic and diluted |
44,790,825 | * | 2,608,740 | 14,711,544 | 7 | (f) | ||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| Net loss per common share - basic and diluted |
$ | (0.15 | )* | $ | (5.83 | ) | $ | (1.36 | ) | |||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
| * | After giving effect to the 1-for-12 reverse stock split of AVROBIO common stock that was effected on June 20, 2024, the basic and diluted net loss per common share was $1.82 and the basic and diluted weighted average number of common shares outstanding was 3,732,568 shares. |
See accompanying notes to the unaudited pro forma condensed combined financial information.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2023
(In thousands, except share and per share amounts)
| Historical | ||||||||||||||||||||||||||||
| (C) AVROBIO Inc. |
(D) Tectonic Therapeutic Inc. |
Transaction Accounting Adjustments |
Pro Forma Combined |
|||||||||||||||||||||||||
| Operating expenses: |
||||||||||||||||||||||||||||
| Research and development |
$ | 47,700 | $ | 36,966 | $ | 37 | 7 | (c) | $ | 86,041 | ||||||||||||||||||
| 1,338 | 7 | (a) | ||||||||||||||||||||||||||
| General and administrative |
23,967 | 7,682 | 5,156 | 7 | (b) | 39,828 | ||||||||||||||||||||||
| 411 | 7 | (c) | ||||||||||||||||||||||||||
| 2,612 | 7 | (a) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total operating expenses |
71,667 | 44,648 | 9,554 | 125,869 | ||||||||||||||||||||||||
| Gain on asset sale |
83,736 | — | — | 83,736 | ||||||||||||||||||||||||
| Loss on impairment |
(1,877 | ) | — | — | (1,877 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Income (loss) from operations |
10,192 | (44,648 | ) | (9,554 | ) | (44,010 | ) | |||||||||||||||||||||
| Other income (expense), net: |
||||||||||||||||||||||||||||
| Interest income |
2,420 | 581 | — | 3,001 | ||||||||||||||||||||||||
| Interest expense |
— | (152 | ) | — | (152 | ) | ||||||||||||||||||||||
| Other income (expense) |
(78 | ) | 396 | 114 | 7 | (e) | 432 | |||||||||||||||||||||
| Loss on issuance of SAFEs |
— | (255 | ) | — | (255 | ) | ||||||||||||||||||||||
| Change in fair value of SAFE liabilities |
— | 1,255 | (1,255 | ) | 7 | (d) | (1,535 | ) | ||||||||||||||||||||
| (1,535 | ) | 7 | (d) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Total other income (expense), net |
2,342 | 1,825 | (2,676 | ) | 1,491 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Income (loss) before income taxes |
12,534 | (42,823 | ) | (12,230 | ) | (42,519 | ) | |||||||||||||||||||||
| Provision for income taxes |
377 | — | — | 377 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Net income (loss) |
$ | 12,157 | $ | (42,823 | ) | $ (12,230) | $ | (42,896 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Basic and diluted, net income (loss) for the period attributable to equity holders |
$ | 12,157 | $ | (42,823 | ) | $ | (42,896 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Weighted average number of common shares outstanding - basic |
44,327,204 | * | 2,373,674 | 14,547,285 | 7 | (f) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Net income (loss) per common share - basic |
$ | 0.27 | * | $ | (18.04 | ) | $ | (2.95 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Weighted average number of common shares outstanding - diluted |
44,567,918 | * | 2,373,674 | 14,567,345 | 7 | (f) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Net income (loss) per common share - diluted |
$ | 0.27 | * | $ | (18.04 | ) | $ | (2.94 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||
| * | After giving effect to the 1-for-12 reverse stock split of AVROBIO common stock that was effected on June 20, 2024, the basic and diluted net income per common share was $3.29 and $3.27, respectively, and the basic and diluted weighted average number of common shares outstanding was 3,693,933 shares and 3,713,993 shares, respectively. |
See accompanying notes to the unaudited pro forma condensed combined financial information.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1. Description of the Merger
On June 20, 2024, AVROBIO, Tectonic and Merger Sub consummated the previously announced merger transaction pursuant to the terms of the Merger Agreement dated January 30, 2024, pursuant to which Merger Sub merged with and into Tectonic, with Tectonic surviving as a wholly owned subsidiary of AVROBIO. Subject to the terms and conditions of the Merger Agreement, at Closing:
| a) | each outstanding share of Tectonic common stock, including outstanding and unvested Tectonic Restricted Stock (defined below), after giving effect to the Transactions, converted into a number of shares of AVROBIO’s common stock, based on the Exchange Ratio, |
| b) | each outstanding and unexercised option to purchase shares of Tectonic common stock (“Tectonic options”) immediately prior to Closing was assumed by AVROBIO and converted into an option to purchase shares of AVROBIO common stock, with necessary adjustments to the number of shares and exercise price to reflect the Exchange Ratio; and |
| c) | All Tectonic restricted common stock outstanding and unvested immediately prior to Closing (“Tectonic Restricted Stock”) that was assumed by AVROBIO in the merger remains unvested to the same extent and is subject to the same repurchase option, risk of forfeiture or other condition under any applicable restricted stock purchase agreement. |
Under the terms of the Merger Agreement, the board of directors of AVROBIO accelerated the vesting of certain outstanding options to purchase AVROBIO common stock, after giving effect to the 1-for-12 reverse stock split that was effected on June 20, 2024, held by a current employee, director or consultant of AVROBIO as of the Closing, and accelerated the vesting and settled into shares of AVROBIO common stock each outstanding restricted stock unit (“RSU”) in respect of AVROBIO common stock that vests solely on the basis of time. The acceleration of vesting of AVROBIO’s options and RSUs occurs either upon a change of control as defined, pursuant to the terms of the original awards, or a modification of the awards as a result of the merger. The post-merger stock-based compensation expense, including the incremental fair value of the AVROBIO’s options and RSUs associated with the modification to accelerate vesting is immaterial at Closing and is not included as an adjustment to the unaudited pro forma condensed combined financial information.
Immediately following the merger, AVROBIO stockholders as of immediately prior to the merger will own approximately 24.8% of the outstanding capital stock of the combined company on a diluted basis, former Tectonic stockholders will own approximately 38.5% of the outstanding capital stock of the combined company on a diluted basis, and investors participating in the Subscription Agreements and Company SAFEs will own approximately 27.1% and 9.6% of the outstanding capital stock of the combined company, respectively, on a diluted basis. Tectonic stockholders received approximately 10,956,614 shares of AVROBIO common stock in connection with the merger, including 6,901 shares of AVROBIO common stock subject to vesting terms, based on the number of shares of Tectonic common stock outstanding immediately prior to the merger, including Tectonic Restricted Stock, the number of shares Tectonic common stock issued to investors participating in the Subscription Agreements and Company SAFEs, and Tectonic convertible preferred stock outstanding immediately prior to the merger, which was converted into shares of Tectonic common stock on a one-for-one basis immediately prior to the closing of the merger. The number of shares of AVROBIO common stock issued to Tectonic stockholders in connection with the merger was based on certain inputs, including (i) AVROBIO’s net cash at Closing of $77.3 million, (ii) the 1-for-12 reverse stock split of AVROBIO common stock effected on June 20, 2024, and (iii) aggregate proceeds from the Private Financing Transactions (as defined below) of $130.7 million. The following table summarizes the number of shares of common stock of the combined company outstanding following the consummation of the Transactions.
| Equity Capitalization Summary Upon Consummation of the Merger |
Number of Shares Owned |
% Ownership |
||||||
| Tectonic stockholders (1) |
5,322,169 | 36.1 | % | |||||
| AVROBIO stockholders |
3,777,709 | 25.6 | % | |||||
| Investors participating in the Company SAFEs |
1,470,839 | 10.0 | % | |||||
| Investors participating in the Subscription Agreements |
4,163,606 | 28.3 | % | |||||
|
|
|
|
|
|||||
| Total common stock of the combined company |
14,734,323 | 100 | % | |||||
|
|
|
|
|
|||||
| (1) | Shares of common stock of the combined company received by former Tectonic stockholders include 6,901 shares that are subject to vesting conditions, based on 12,914 shares of unvested Tectonic Restricted Stock at Closing multiplied by the Exchange Ratio of 0.53. |
The employment agreements for AVROBIO employees included entitlement to change in control payments for certain executives, and severance and retention bonus payments for certain non-executives, the aggregate of which was treated as pre-merger compensation expense of AVROBIO and reflected as an increase to accrued expenses of AVROBIO, which was assumed by the combined company at Closing. Prior to Closing, AVROBIO also discontinued its research and development activities and terminated and/or expired its leases. Additionally, AVROBIO’s directors & officers (D&O) insurance policy was fully utilized at Closing.
Private Financing Transactions
Subscription Agreements
Concurrently with the execution of the Merger Agreement, certain parties have entered into certain subscription agreements (the “Subscription Agreements”) with Tectonic to purchase, prior to the consummation of the merger, 7,790,889 shares of Tectonic common stock at a purchase price of approximately $12.40 per share for an aggregate purchase price of approximately $96.6 million (the “Private Placement”). The closing of the Private Placement was completed on June 20, 2024, and shares of Tectonic common stock issued pursuant to the Subscription Agreements were converted into 4,163,606 shares of AVROBIO common stock at Closing based on the Exchange Ratio, pursuant to the Merger Agreement.
Company SAFEs
From October to December 2023, Tectonic entered into various simple agreements for future equity (the “Company SAFEs”) with existing investors, who are also related parties of Tectonic and received $34.1 million representing the aggregate purchase amount. Tectonic accounts for the Company SAFEs as a liability pursuant to Accounting Standards Codification 480, Distinguishing Liabilities from Equity. The Company SAFEs were initially measured at their fair value upon issuance. In addition, until redemption, the Company SAFEs are measured at fair value on a recurring basis with subsequent changes in fair value recorded in the Tectonic’s statement of operations and comprehensive loss. Under the terms of the Company SAFEs, in the event of a public listing transaction such as an initial public offering or a reverse merger with a public company, the Company SAFEs will be redeemed through delivery of a variable number of shares of Tectonic common stock determined by dividing the Company SAFEs purchase amount by the offering or conversion price in the respective transaction. In connection with the merger, the principal balance of the Company SAFEs was automatically redeemed into 2,752,216 shares of Tectonic common stock at the conversion price of approximately $12.40 per share immediately prior to the Closing. At Closing, shares of Tectonic common stock issued pursuant to the redemption of the Company SAFEs were converted into 1,470,839 shares of AVROBIO common stock based on the Exchange Ratio, pursuant to the Merger Agreement.
The aggregate proceeds from the Private Financing Transactions (the Subscription Agreements and the Company SAFEs) was approximately $130.7 million.
Contingent Value Rights Agreement
In connection with the merger, AVROBIO and its designated rights agent entered into a Contingent Value Rights Agreement (the “CVR Agreement”). Pursuant to the CVR Agreement, each holder of AVROBIO common stock immediately prior to the effective time, is entitled to receive a contractual contingent value right (“CVR”) subject to and in accordance with the terms and conditions of the CVR Agreement, representing the contractual right to receive a pro rata portion of 80% of the net proceeds, if any, as a result of an AVROBIO disposition (including a license of AVROBIO’s pre-closing assets as defined in the CVR Agreement) after the Closing and prior to the 18-month anniversary of the Closing, received within a 10-year period following the Closing; provided that no contingent payment will be payable to any holder of the CVRs until such time as the then-outstanding and undistributed proceeds exceeds $0.4 million in the aggregate. The CVRs represent contingent consideration in the merger, however the unaudited pro forma condensed combined financial information does not include the fair value of contingent consideration related to the CVRs as the fair value of the CVRs was determined to be nominal at Closing.
2. Basis of Presentation
The unaudited pro forma condensed combined financial information is prepared in accordance with Article 11 of SEC Regulation S-X. The adjustments presented in the unaudited pro forma condensed combined financial information have been identified and presented to provide relevant information necessary for an understanding of the combined company upon consummation of the merger.
The unaudited pro forma condensed combined financial information is based on the assumptions and adjustments that are described in the accompanying notes. Accordingly, the pro forma adjustments are preliminary, subject to further revision as additional information becomes available and additional analyses are performed following the completion of the merger, and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information. Differences between these preliminary accounting conclusions and estimates and the final accounting conclusions and amounts may occur as a result of, among other reasons: (i) changes in initial assumptions in the determination of the accounting acquirer and related accounting, (ii) changes in the amount of cash used in AVROBIO’s operations, and (iii) other changes in AVROBIO’s assets and liabilities, which will be completed after the Closing, and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial information and the combined company’s future results of operations and financial position.
3. Accounting Policies
During the preparation of the accompanying unaudited pro forma combined financial information, Management was not aware of any material differences between Tectonic’s accounting policies and the accounting policies of AVROBIO. Following the consummation of the merger, Tectonic will conduct a more detailed review of AVROBIO’s accounting policies. As a result, Tectonic may identify differences between the accounting policies of the two companies that, when conformed, could have had a material impact on the accompanying unaudited pro forma combined financial information.
4. Accounting for the Merger
The unaudited pro forma condensed combined financial information gives effect to the merger, which is accounted for under U.S. generally accepted accounting principles (“GAAP”) as an in-substance reverse recapitalization of AVROBIO by Tectonic. Under this method of accounting, Tectonic is considered the accounting acquirer for financial reporting purposes. This determination is based on an evaluation of the following facts and circumstances immediately following the merger:
| • | Tectonic stockholders will own a substantial majority of the voting rights in the combined company; |
| • | Tectonic’s largest stockholder will retain the largest interest in the combined company; |
| • | Tectonic will designate a majority of the initial members of the board of directors of the combined company; |
| • | Tectonic’s executive management team will become the management of the combined company; and |
| • | The combined company will be renamed Tectonic Therapeutic, Inc. and will be headquartered in Massachusetts. |
As a result of Tectonic being treated as the accounting acquirer, Tectonic’s assets and liabilities are recorded at their pre-combination carrying amounts. AVROBIO’s assets and liabilities are measured and recognized at their fair values as of the effective time, which approximates the carrying value of the acquired cash and other non-operating assets, with no goodwill or other intangible assets recorded. The difference between the consideration transferred and the fair value of the net assets of AVROBIO following the determination of the actual consideration transferred for AVROBIO is reflected as an adjustment to additional paid-in capital. For periods prior to Closing, the historical financial statements of Tectonic become the historical financial statements of the combined company.
Preliminary Estimated Consideration Transferred (Purchase Price)
The estimated preliminary purchase price, which represents the consideration transferred to AVROBIO stockholders in the merger, is calculated based on the fair value of the common stock of the combined company that AVROBIO stockholders own as of the Closing of the Transactions because, with no active trading market for shares of Tectonic, the fair value of the AVROBIO common stock represents a more reliable measure of the fair value of consideration transferred in the merger. Accordingly, the accompanying unaudited pro forma combined financial information reflects an estimated preliminary purchase price of approximately $68.4 million. The following summarizes the preliminary estimate of the purchase price to be paid in the merger, after giving effect to the 1-for-12 reverse stock split of AVROBIO common stock that was effected on June 20, 2024 (in thousands, except share and per share amounts):
| Common shares of the combined company owned by AVROBIO stockholders (1) |
3,769,005 | |||
| Multiplied by the fair value per share of AVROBIO common stock (2) |
$ | 17.88 | ||
|
|
|
|||
| Total |
$ | 67,390 | ||
| Estimated fair value of assumed AVROBIO stock-based awards based on pre-merger service (3) |
1,052 | |||
|
|
|
|||
| Total estimated purchase price |
$ | 68,442 | ||
|
|
|
| (1) | The final purchase price was determined based on the number of shares of AVROBIO common stock that AVROBIO stockholders owned immediately prior to Closing. For purposes of this unaudited pro forma condensed combined financial information, the estimated number of shares, after giving effect to the 1-for-12 reverse stock split of AVROBIO common stock that was effected on June 20, 2024, represents 3,740,186 shares of AVROBIO common stock outstanding as of March 31, 2024, 3,787 shares of AVROBIO common stock issued subsequent to March 31, 2024 and 25,032 unvested RSUs outstanding as of the Closing which vested in full upon Closing in accordance with the terms of the original awards. |
| (2) | The final purchase price was based on the closing price of AVROBIO common stock on the Nasdaq Global Select Market on June 11, 2024, after giving effect to the 1-for-12 reverse stock split of AVROBIO common stock that was effected on June 20, 2024. |
| (3) | Reflects the estimated acquisition-date fair value of the assumed AVROBIO equity awards attributable to pre-merger service that were outstanding as of the effective time. This is included as an adjustment to the unaudited pro forma condensed combined balance sheet by crediting and debiting additional paid-in capital, resulting in no impact to the unaudited pro forma condensed combined financial information. |
5. Shares of AVROBIO Common Stock Issued to Tectonic Stockholders upon Closing of the Merger
At Closing, all outstanding shares of Tectonic common stock (including shares of Tectonic common stock issued upon conversion of Tectonic convertible preferred stock and shares of Tectonic common stock issued in connection with the Subscription Agreements and Company SAFEs) were exchanged for shares of AVROBIO common stock based on the Exchange Ratio of 0.53, determined in accordance with the terms of the Merger Agreement and after giving effect to the 1-for-12 reverse stock split of AVROBIO common stock that was effected on June 20, 2024. The number of shares of AVROBIO common stock that AVROBIO expects to issue to Tectonic’s stockholders is based on AVROBIO’s net cash at Closing of $77.3 million and is determined as follows:
| Shares of Tectonic common stock outstanding as of March 31, 2024 (1) |
2,637,120 | |||
| Tectonic stock option exercises subsequent to March 31, 2024 |
496,182 | |||
| Shares of Tectonic common stock issued upon conversion of Tectonic convertible preferred stock, see Note 6(d) |
6,825,483 | |||
| Shares of Tectonic common stock issued in connection with the Subscription Agreements, see Note 6(e) |
7,790,889 | |||
| Shares of Tectonic common stock issued upon redemption of the Company SAFEs, see Note 6(f) |
2,752,216 | |||
|
|
|
|||
| Total Tectonic common shares outstanding prior to the closing of the merger |
20,501,890 | |||
| Exchange Ratio |
0.53 | |||
|
|
|
|||
| Shares of AVROBIO common stock issued to Tectonic stockholders upon closing of the merger (2) |
10,956,614 | |||
|
|
|
| (1) | Shares of Tectonic common stock outstanding include 21,565 shares of unvested Tectonic Restricted Stock as of March 31, 2024. |
| (2) | Represents the total shares of AVROBIO common stock issued to Tectonic stockholders at Closing, including 6,901 shares of AVROBIO common stock subject to vesting conditions, based on 12,914 shares of unvested Tectonic Restricted Stock at Closing multiplied by the Exchange Ratio of 0.53. |
In addition, in connection with the merger, AVROBIO assumes all of the outstanding options to acquire Tectonic common stock and such stock options will become exercisable for shares of AVROBIO common stock following the merger.
6. Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2023
The pro forma notes and adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
Pro forma notes:
| 6(A) | Derived from the unaudited condensed consolidated balance sheet of AVROBIO as of March 31, 2024. |
| 6(B) | Derived from \the unaudited condensed consolidated balance sheet of Tectonic as of March 31, 2024. |
Pro forma Balance Sheet Transaction Accounting Adjustments:
| 6(a) | To reflect the exercise of 496,182 Tectonic stock options subsequent to March 31, 2024. |
| 6(b) | To reflect the exercise of 3,787 AVROBIO stock options subsequent to March 31, 2024, after giving effect to the 1-for-12 reverse stock split of AVROBIO common stock that was effected on June 20, 2024. |
| 6(c) | To reflect preliminary estimated incremental compensation expense of $3.9 million related to severance, retention bonuses and change in control payments resulting from pre-existing employment agreements or from approval from AVROBIO’s board of directors in connection with the merger that had not yet been paid or fully accrued for as of March 31, 2024. As such, the $3.9 million is recorded as an increase in accrued expenses and accumulated deficit in the unaudited pro forma condensed combined balance sheet as of March 31, 2024. |
| 6(d) | To reflect the automatic conversion, on a one-to-one basis, of all outstanding shares of Tectonic convertible preferred stock, with a carrying amount of $80.6 million, into 6,825,483 shares of Tectonic common stock immediately prior to the merger. Tectonic convertible preferred stock outstanding immediately prior to the Closing was comprised of the following: |
| Tectonic Convertible Preferred Stock |
||||
| Series A-1 |
4,118,120 | |||
| Series A-2 |
1,649,188 | |||
| Series A-3 |
696,516 | |||
| Series A-4 |
361,659 | |||
|
|
|
|||
| Total shares of Tectonic convertible preferred stock converted to shares of Tectonic common stock immediately prior to the merger |
6,825,483 | |||
|
|
|
|||
| 6(e) | To reflect the issuance of 7,790,889 shares of Tectonic common stock pursuant to the Subscription Agreements entered into concurrently with the execution of the Merger Agreement, for an aggregate purchase price of $96.6 million. The proceeds received in connection with the Subscription Agreements are recorded net of transaction costs deemed to be direct and incremental costs of the equity financing in the amount of approximately $2.0 million. The issuance of shares in connection with the Subscription Agreements are recorded as the issuance of Tectonic common stock at par value, with the remaining amount recorded to additional paid-in-capital. |
| 6(f) | To reflect, pursuant to the terms of the Company SAFEs, the automatic redemption of the principal balance of the Company SAFEs of $34.1 million, in the event of a public listing transaction, into 2,752,216 shares of Tectonic common stock at the conversion price of approximately $12.40 per share immediately prior to the closing of the merger, and the change in fair value of the SAFE liabilities of $1.5 million immediately prior to the redemption, which represents the difference between principal balance and the fair value of the Company SAFEs as of March 31, 2024, as an increase to accumulated deficit. The redemption is recorded as the issuance of Tectonic common stock at par value, with the remaining amount recorded to additional paid-in-capital. |
| 6(g) | To reflect preliminary estimated transaction costs of $8.7 million incurred by Tectonic in connection with the merger, such as advisory, legal and auditor fees, as an increase in accrued expenses of $5.2 million for transaction costs not yet reflected in the historical financial statements, the derecognition of the deferred offering costs of $3.4 million included in the historical financial statements, and a reduction to additional paid-in capital of $8.7 million in the unaudited pro forma condensed combined balance sheet. As the merger is accounted for as a reverse recapitalization equivalent to the issuance of equity for the net assets, primarily cash, of AVROBIO, these direct and incremental costs are treated as a reduction of the net proceeds received within additional paid-in capital. |
| 6(h) | To reflect preliminary estimated transaction costs of $5.2 million, not yet reflected in the historical financial statements, which were incurred by AVROBIO in connection with the merger, such as advisory, legal and auditor fees and including the estimated $1.8 million cost of a D&O tail policy. The adjustment is reflected in the unaudited pro forma condensed combined balance sheet as a decrease in cash of $1.8 million to reflect payments made subsequent to March 31, 2024, an increase in accrued expenses of $3.4 million and an increase in accumulated deficit of $5.2 million. |
| 6(i) | To derecognize $0.5 million of AVROBIO’s prepaid expenses consisting of $0.1 million of prepaid research and development expenses related to discontinued research and development activities and $0.4 million of prepaid insurance primarily related to the current AVROBIO’s D&O policy that was fully utilized at Closing. |
| 6(j) | To reflect the derecognition of AVROBIO’s operating leases that were terminated or expired prior to the closing of the merger. The operating lease right-of-use assets of $0.1 million and related operating lease liabilities of $0.2 million, were derecognized, resulting in a $0.1 million gain on termination of lease. |
| 6(k) | To reflect the release of $0.7 million of AVROBIO’s restricted cash, consisting of cash used to secure letters of credit in connection with AVROBIO’s lease agreements and corporate credit card program that was terminated prior to the closing of the merger, to cash and cash equivalents. |
| 6(l) | To reflect the acceleration of vesting and net settlement of AVROBIO’s RSUs at Closing as the release of 33,736 shares of AVROBIO common stock after giving effect to the 1-for-12 reverse stock split of AVROBIO common stock that was effected on June 20, 2024, at par value, an increase in accrued expenses of $0.4 million representing the number of shares withheld to satisfy tax withholding and remittance obligations for the vested AVROBIO’s RSUs based on the closing price of AVROBIO common stock on the Nasdaq Global Select Market on June 11, 2024, and a decrease in additional paid-in capital of $0.4 million. |
| 6(m) | To reflect the recapitalization of Tectonic, pursuant to the Merger Agreement, through the contribution of 20,501,890 shares of Tectonic common stock (see Note 5), and the issuance of 10,956,614 shares of AVROBIO common stock, reflecting the Exchange Ratio of 0.53 after giving effect to the 1-for-12 reverse stock split of AVROBIO common stock effected on June 20, 2024, and to reflect the derecognition of the accumulated deficit of AVROBIO which is reversed to additional paid-in capital. |
The derecognition of accumulated deficit of AVROBIO of $493.5 million is determined as follows (in thousands):
| Accumulated deficit of AVROBIO as of March 31, 2024 |
$ | 484,083 | ||
| Compensation expense related to severance, retention bonuses and change in control payments, see Note 6(c) |
3,950 | |||
| Transaction costs of AVROBIO, see Note 6(h) |
5,156 | |||
| Derecognition of prepaid research and development and prepaid insurance, see Note 6(i) |
448 | |||
| Gain on termination of operating leases, see Note 6(j) |
(114 | ) | ||
|
|
|
|||
| Total adjustment to derecognize the accumulated deficit of AVROBIO |
$ | 493,523 | ||
|
|
|
7. Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations
The pro forma notes and adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
Pro forma notes:
| 7(A) | Derived from the unaudited condensed consolidated statement of operations and comprehensive income (loss) of AVROBIO for the three months ended March 31, 2024. |
| 7(B) | Derived from the unaudited condensed consolidated statement of operations and comprehensive loss of Tectonic for the three months ended March 31, 2024. |
| 7(C) | Derived from the audited consolidated statement of operations and comprehensive loss of AVROBIO for the year ended December 31, 2023. |
| 7(D) | Derived from the audited consolidated statement of operations and comprehensive loss of Tectonic for the year ended December 31, 2023. |
Given Tectonic’s history of net losses and valuation allowance, management assumed an effective tax rate of 0%. Therefore, the pro forma adjustments to the unaudited pro forma condensed combined statement of operations resulted in no additional income tax adjustment to the unaudited pro forma condensed combined financial information.
Pro forma Statement of Operations Transaction Accounting Adjustments:
| 7(a) | To reflect preliminary estimated incremental compensation expense related to severance, retention bonuses and change in control payments recorded in research and development expenses of $1.3 million and general and administrative expenses of $2.6 million, resulting from pre-existing employment agreements or from approval from AVROBIO’s board of directors in connection with the merger that had not yet been paid or fully accrued for as of March 31, 2024 assuming that the adjustment described in Note 6(c) was made on January 1, 2023. |
| 7(b) | To reflect AVROBIO’s estimated advisory, legal, audit and other costs related to the merger, including the estimated cost of a D&O tail policy, that were not recorded in its historical financial statements as an increase to general and administrative expenses in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023 assuming that the adjustment described in Note 6(h) was made on January 1, 2023. |
| 7(c) | To reflect the derecognition of AVROBIO’s prepaid research and development expenses of $0.1 million related to discontinued research and development activities, and prepaid insurance of $0.4 million primarily related to AVROBIO’s D&O policy that was fully utilized at Closing, assuming the adjustment made in Note 6(i) was made on January 1, 2023. |
| 7(d) | To eliminate the change in fair value of SAFE liabilities that was included in the historical financial statements, assuming that the principal balance of the Company SAFEs was redeemed for shares of Tectonic common stock on January 1, 2023. |
The pro forma adjustment also reflects the change in fair value of SAFE liabilities of $1.5 million immediately prior to the redemption of the Company SAFEs, assuming that the adjustment described in Note 6(f) was made on January 1, 2023.
| 7(e) | To reflect the gain on termination of AVROBIO’s operating leases of $0.1 million, relating to AVROBIO’s operating leases that were terminated or expired prior to the closing of the merger assuming that the adjustment described in Note 6(j) was made on January 1, 2023. |
| 7(f) | The pro forma combined basic and diluted net income (loss) per share have been adjusted to reflect the pro forma net losses for the three months ended March 31, 2024, and the year ended December 31, 2023. In addition, the number of shares used in calculating the pro forma combined basic and diluted net loss per share has been adjusted to reflect the estimated total number of shares of common stock of the combined company that would be outstanding at the Closing of the merger, after giving effect to the 1-for-12 reverse stock split of AVROBIO common stock that was effected on June 20, 2024. For the three months ended March 31, 2024 and the year ended December 31, 2023, the pro forma weighted average shares outstanding, after giving effect to the aforementioned reverse stock split, has been calculated as follows: |
| March 31, 2024 | December 31, 2023 | |||||||||||
| Basic and Diluted | Basic | Diluted | ||||||||||
| Historical weighted-average number of Tectonic common shares outstanding |
2,608,740 | 2,373,674 | 2,373,674 | |||||||||
| Tectonic stock option exercises subsequent to March 31, 2024, assuming consummation of the merger as of January 1, 2023, see Note 6(a) |
496,182 | 496,182 | 496,182 | |||||||||
| Impact of Tectonic convertible preferred stock assuming conversion as of January 1, 2023, see Note 6(d) |
6,825,483 | 6,825,483 | 6,825,483 | |||||||||
| Impact of Tectonic private financing transactions assuming consummation of the merger as of January 1, 2023, see Note 6(e) and 6(f) |
10,543,105 | 10,543,105 | 10,543,105 | |||||||||
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| Total |
20,473,510 | 20,238,444 | 20,238,444 | |||||||||
| Application of exchange ratio to historical Tectonic weighted-average shares outstanding |
0.53 | 0.53 | 0.53 | |||||||||
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| Adjusted Tectonic weighted-average number of common shares outstanding |
10,941,453 | 10,815,829 | 10,815,829 | |||||||||
| Historical weighted-average number of AVROBIO common shares outstanding, after giving effect to the 1-for-12 reverse stock split of AVROBIO common stock |
3,732,568 | 3,693,933 | 3,713,993 | |||||||||
| Shares of AVROBIO common stock issued subsequent to March 31, 2024, assuming consummation of the merger as of January 1, 2023, see Note 6(b) |
3,787 | 3,787 | 3,787 | |||||||||
| Equity awards subject to outstanding AVROBIO RSUs that fully vest upon consummation of the merger (1) |
33,736 | 33,736 | 33,736 | |||||||||
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| Pro forma combined weighted average number of common shares outstanding |
14,711,544 | 14,547,285 | 14,567,345 | |||||||||
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| (1) | Represents the total AVROBIO RSUs outstanding as of the Closing, net of the number of shares withheld to satisfy tax withholding and remittance obligations and after giving effect to the 1-for-12 reverse stock split of AVROBIO common stock that was effected on June 20, 2024, including 25,032 RSUs that vested in full immediately prior to the Closing in accordance with the terms of the original awards and 8,704 RSUs that vested in full as a result of the merger. |