Item 1.01. Entry into a Material Definitive Agreement
License Agreement Amendments
On December 31, 2020, Zolovax, Inc. ("Zolovax"), a wholly-owned subsidiary of
Heat Biologics, Inc. (the "Company") entered into an Exclusive License Agreement
(the "License Agreement") with the University of Miami ("UM") for the license
and development of a portfolio of patents leveraging its UMIP-510 platform to
target the COVID-19 virus and other infectious diseases. The License Agreement
grants Zolovax exclusive, worldwide rights to research, develop, make, use or
sell Licensed Products (as defined in the License Agreement) based upon
patent-related rights. The term of the license is the later of the length of the
last to expire patent or fifteen (15) years from the date of the first sale of a
Licensed Product unless terminated earlier. As consideration for the rights
granted in the License Agreement, Zolovax paid an upfront fee of $2,500, is
obligated to pay certain annual payments and to pay royalties equal to
a percentage (in the low-to-mid single digits) of net sales of Licensed
Products. These royalty rates are subject to reduction if additional license
rights from third parties are required to commercialize the Licensed Products.
In the event of a sublicense to a third party, Zolovax is obligated to pay
royalties to UM equal to a percentage of sublicense income. The License
Agreement provides for diligence milestones that include Investigational New
Drug ("IND") submission to the Food and Drug Administration ("FDA") or European
Medicines Agency ("EMA") within twenty four months of the effective date of the
License Agreement, dosing first patient in a Phase 1 clinical trial within nine
months of approval of an IND, and making commercially reasonable efforts towards
obtaining regulatory marketing approval for a Licensed Product form either the
FDA or EMA. The License Agreement also provides for commercial milestone
payments of up to an aggregate of $7,750,000 upon the achievement of $10,00,000,
$100,000,000 and $500,000,000 of cumulative net sales of License Products. The
License Agreement provides that Zolovax may terminate the License Agreement upon
ninety days' notice to UM, UM has the right to terminate the License Agreement
if Zolovax has engaged in certain bankruptcy events and each party has the right
to terminate the License Agreement if the other party commits a material breach
of the terms of the License Agreement, and such breach remains uncured for
thirty days.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Effective January 4, 2021, William Ostrander, was promoted to Chief Financial
Officer. Mr. Ostrander, age 53 joined the Company in September 2019 as the
Company's Vice President of Finance and Secretary in September 2019. Mr.
Ostrander has over 22 years of experience in financial management at public and
private companies. From November 2014 until joining the Company, Mr. Ostrander
served as Executive Director of Finance at Liquidia Technologies, a
publicly-traded biopharmaceutical company. Prior to that, he served as Senior
Director of Finance and Accounting at KBI Biopharma, a biopharmaceutical
contract services company. He also served as Manager of Finance at LexisNexis
Risk Solutions, a data analytics solutions company. Prior to that, he served as
Controller of Seisint Inc., a private information products company that was
acquired by LexisNexis. He also served as Senior Manager, Finance and held other
accounting and finance positions for Boca Research, a data communications
hardware manufacturer. Mr. Ostrander holds a B.S. in Finance from Central
Michigan University.
In connection with Mr. Ostrander's new role as the Company's Chief Financial
Officer, effective January 4, 2021, the Company entered into an amendment (the
"Ostrander Amendment") to the Offer Letter, dated September 23, 2019, as amended
on January 1, 2020. Pursuant to the Ostrander Amendment, Mr. Ostrander's base
salary has been increased to $275,000 (the "Base Salary") and his bonus target
has been increased to 30% of his Base Salary. In addition to a cash bonus equal
to his target bonus paid at year end, on January 4, 2021, based upon the
recommendations and guidance of the independent third party compensation
consultant retained by the Compensation Committee, Mr. Ostrander was awarded a
ten-year option to purchase 51,487 share of common stock ( the closing price of
the Company's common stock on the Nasdaq Capital Market on the date of the
grant), at an exercise price of $5.67, of which one third vests immediately, one
third vests on the one year anniversary of the date of grant and one third vests
on the two year anniversary of the date of grant.
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On January 4, 2021, we entered into a new employment agreement with Jeffrey Wolf
(the "Wolf Agreement") to continue to serve as our Chief Executive Office and
President, which agreement replaces the employment agreement that we had entered
into with Mr. Wolf on December 18, 2009, as amended on November 22, 2011, and
further amended on each of January 20, 2014, January 11, 2016, January 1, 2017
and January 2, 2020.Purusnat to the terms of the Wolf Agreement, Mr. Wolf will
receive an annual base salary of $540,000 per year. He also may receive, at the
sole discretion of the board, an additional cash performance-based bonuses equal
to up to 50% of his then outstanding base salary at the end of each year and a
discretionary equity award, with the actual amount of his bonus to be increased
in the sole discretion of the Board of Directors. In addition, he is to receive
(i) an incentive cash bonus in an amount equal to 2% of the Transaction
Consideration (as defined in the agreement) paid in connection with the
consummation of a Change in Control (as defined in the agreement), provided that
such Change in Control results in the stockholders of the Company receiving (or
being entitled to receive, whether upon the consummation of the Change in
Control or at a future date) transaction consideration worth at least 125% of
the average closing trading price of the Company's common stock during the 20
trading-day period immediately preceding the consummation of the Change in
Control and (ii) an equity bonus in the form of additional stock options or
restricted stock units or shares of restricted stock equal to 2% of the total
fully-diluted equity of the Company if the market capitalization of the Company
is equal to or exceeds a valuation of $500 million or more for fifteen (15)
business days or longer. In addition, subject to certain condition, Mr. Wolf may
also be entitled to receive equity in newly formed subsidiaries of the Company.
If the Wolf Agreement is terminated for death or disability (as defined in the
Wolf Agreement), he (or his estate in the event of death) will receive any
unpaid base salary through the date of death or disability, any unpaid target
bonus earned through date of termination and he shall be entitled to exercise
any vested awards for the shorter of 24 months after termination and the
remaining term of the award. If Mr. Wolf's employment is terminated by us other
than for Cause (as defined in the agreement) or by him for Good Reason (as
defined in the Wolf Agreement), he will receive a payment of an amount equal to
one (1) times his annual base salary plus his annual target bonus amount for the
year of termination assuming payment in full of the annual target bonus,
accelerated vesting of all unvested equity awards, extension of the time period
in which to exercise awards equal to the lesser of 24 months after termination
or the remaining term of the award and payment of COBRA premiums for the earlier
or twelve months, the date he becomes eligible for other group benefits or his
rights to COBRA expire. In addition, in the event the Company terminates Mr.
Wolf's employment upon or at any time in connection with a Change of Control
Transaction (as defined in the Wolf Agreement), Mr. Wolf is entitled to a lump
sum cash payment equal to 24 months of his current base pay, a cash payment
equal to a pro-rated amount of his target annual target bonus for the year
preceding termination, payment in full for COBRA for 12 months following
termination and immediate vesting of the unvested portion of any outstanding
equity awards and a period to exercise the awards equal to the lesser of 12
months after termination or the remaining term of the award. If within one year
after the occurrence of a Change in Control, the Executive terminates his
employment for Good Reason or the Company terminates his employment for any
reason other than death, disability of cause Mr. Wolf is entitled to a lump sum
cash payment equal to 24 months of his current base pay, a cash payment equal to
his full target annual target bonus, payment in full for COBRA for 12 months
following termination and immediate vesting of the unvested portion of any
outstanding equity awards and a period to exercise the awards equal to the
lesser of 24 months after termination or the remaining term of the award. Under
the Wolf Agreement, Mr. Wolf has also agreed to non-competition provisions.
In addition to a cash bonus paid at year end, on January 4, 2021, based upon the
recommendations and guidance of the independent third party compensation
consultant retained by the Compensation Committee, Mr. Wolf was awarded a ten
year option to purchase 147,980 shares of common stock, at an exercise price of
$5.67 (the closing price of the Company's common stock on the Nasdaq Capital
Market on the date of the grant) all of which vests on the two year anniversary
of the date of grant and 228,100 shares of restricted stock, of which half vests
immediately and the remaining half vests on the one year anniversary of the date
of grant.
On January 4, 2021, based upon the recommendations and guidance of the
independent third party compensation consultant retained by the Compensation
Committee, the Board also awarded the following equity compensation to the
non-executive members of the Board and its Committees: John K.A. Prendergast,
Ph.D., the lead independent director, was awarded 138,272 shares of restricted
common stock (including a one-time equity refresher of 105,820 shares of
restricted common stock); John Monahan, Ph.D., was awarded an option to purchase
65,217 shares of common stock (including a one-time equity refresher of an
option to purchase 45,766 shares of common stock), and Edward B. Smith, III was
awarded an option to purchase 65,217 shares of common stock (including a
one-time equity refresher of an option to purchase 45,766 shares of common
stock). Each option is exercisable for a period of ten years from the date of
grant, vests immediately and has an exercise price of $5.67 per share (the
closing price of the Company's common stock on the Nasdaq Capital Market on the
date of the grant). The annual cash compensation for directors for 2021 is to
remain the same as it was for the prior year as disclosed in the Company's 2020
proxy statement other than the annual cash retainer that was increased by $5,000
per non-executive director year to $40,000 per non-executive director per year.
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On December 31, 2020, the Company entered into a Separation Agreement with Jeff
T. Hutchins, Ph.D., the Company's former Chief Scientific and Operating Officer
(the "Hutchins Separation Agreement") which provides for a payment to Dr.
Hutchins of $110,000. The separation agreement contains non-disparagement
obligations, non-solicitation and a standard release of claims on the part of
Dr. Hutchins.
The foregoing summaries of each of the License Agreement, the Ostrander
Amendment, the Wolf Agreement, the form of Restricted Stock Agreement and the
Hutchins Separation Agreement, does not purport to be complete and each is
qualified in its entirety by reference to the License Agreement, the Ostrander
Amendment, the Wolf Agreement and the Hutchins Separation Agreement, a copy of
each of which is filed as Exhibit 10.1, 10.2, 10.3, 10.4 and 10.5 to this
Current Report on Form 8-K.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
The following exhibits are filed with this Current Report on Form 8-K.
Exhibit
Number Exhibit Description
10.1+ Exclusive License Agreement between the University of Miami and
Zolovax, Inc. dated as of December 31, 2020.
10.2 Amendment to Offer Letter between Heat Biologics, Inc. and William
Ostrander, dated as of January 4, 2021.
10.3 Employment Agreement between Heat Biologics, Inc. and Jeffrey Wolf,
dated as of January 4, 2021.
10.4 Form of Restricted Stock Agreement
10.5 Separation Agreement dated December 31, 2020 between Heat Biologics,
Inc. And Jeff Hutchins.
+ Certain portions of this exhibit (indicated by "[***]") have been omitted
pursuant to confidential treatment.
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