21.   Subsequent Events

 

In April of 2021, the Company management decided to discontinue the operations of its Brazilian subsidiary iBio Brazil. This is not expected to have a material impact on the Company’s consolidated operations and in management’s opinion exit costs are not expected to be material. As such, the net liabilities and operations of iBio Brazil were not classified as discontinued operations.

 

On May 4, 2021, the Company and FhUSA entered into the Settlement Agreement to settle the Lawsuit. The Settlement Agreement, among other things, resolves the Company’s claims to ownership of certain plant-based technology developed by FhUSA from 2003 through 2014, and sets forth the terms of a license of intellectual property.  The Lawsuit was commenced against FhUSA by the Company in March 2015 in the Court of Chancery of the State of Delaware and is described in more detail in the Company’s Quarterly Report on Form 10-Q for the quarter ended  December 31, 2020.  The Settlement Agreement is not an admission of liability or fault of the parties.

 

The terms of the Settlement Agreement provide for cash payments to the Company of $28,000,000 as follows: (i) $16,000,000 to be paid no later than May 14, 2021 (which is expected to be paid 100% to cover legal fees and expenses); (ii) two payments of $5,100,000 payable by March 31, 2022 and 2023 and (iii) as additional consideration for a license agreement, two payments of $900,000 due on March 1, 2022 and 2023. The license provides for a nonexclusive, nontransferable, worldwide, fully paid-up license to all intellectual property rights in and to certain plant-based technology developed by FhUSA from 2003 through 2014 that were the subject of the Lawsuit. After payment of the fees and expenses of its attorneys and others retained by the Company, including the litigation funding company, the Company’s estimated aggregate net cash recovery as a result of the Settlement Agreement will be approximately $12,000,000. 

 

The Settlement Agreement provides that within three business days of confirmation of receipt in full of the initial $16,000,000 payment, the Company and FhUSA will submit a stipulated order dismissing all claims with prejudice asserted in the Lawsuit.  The Settlement Agreement also contains a mutual release by the Company and FhUSA of all claims and counterclaims through the date of the Settlement Agreement.

 

On May 6, 2021, the Company announced that IBIO-201, the Company’s vaccine candidate combining antigens derived from the spike protein (“S protein”) fused with iBio’s patented LicKM™ booster molecule, recently completed IND-enabling toxicology studies. The studies identified no adverse effects at low or high doses. The Company also reported on development of IBIO-202, a subunit vaccine candidate that targets the nucleocapsid protein (“N protein”) of SARS-CoV-2. Using its plant-based FastPharming® System, the Company reported that it has successfully expressed N protein antigens and has initiated both intramuscular and intranasal preclinical studies to identify favorable antigen-adjuvant combinations.

 

On April 30, 2021, the Company entered into a new employment agreement, dated as of April 30, 2021, with Thomas F. Isett, the Company’s Chief Executive Officer (the “New Employment Agreement”) in order to further enhance corporate governance and better align its compensation arrangements with current best practices. The New Employment Agreement, which was approved by the Company’s Compensation Committee, replaces in its entirety the Amended and Restated Executive Employment Agreement, dated as of April 21, 2020, by and between Mr. Isett and the Company (the “Prior Agreement”) and removed certain legacy contractual obligations, including an uncapped transaction bonus of 4.5% to be paid in connection with a Change of Control (as defined in the Prior Agreement), which were not viewed by the Company’s Compensation Committee as best governance practices or as being aligned with the Company’s goals.

 

Pursuant to the terms of the New Employment Agreement, Mr. Isett will serve as the Company’s Chief Executive Officer for a term of two years, subject to extensions for one-year periods. Mr. Isett will receive an annual base salary of $650,000 and he is still eligible to receive a target bonus of 60% of his base salary based upon the Compensation Committee’s assessment of his performance and the performance of the Company during the prior fiscal year.  In addition, pursuant to the terms of the New Employment Agreement, the Company issued Mr. Isett an award of nonqualified stock options to purchase 3,000,000 shares of the Company’s common stock (the “Option Shares”), pursuant to the Company’s 2020 Omnibus Equity Incentive Plan (the “Plan”). The New Employment Agreement also provides that the Compensation Committee will establish certain performance criteria and thereafter Mr. Isett will receive a grant of 5,000,000 performance restricted stock units (“RSUs”), which will also vest subject to achievement of pre-defined performance criteria to be established by the Compensation Committee.  Mr. Isett will also be entitled to continue to receive certain benefits that he is currently entitled to under the Prior Agreement. Under the terms of the New Employment Agreement, Mr. Isett is also entitled to certain payments if his employment is terminated by the Company without Cause (as defined in the New Employment Agreement).  In addition, Mr. Isett is also entitled certain payments if his employment is terminated by the Company without Cause within twelve (12) months after a “Change in Control,” as defined in the Plan.