Document:

freq-ex1016_1057.htm

Exhibit 10.16

 

			
	

	
 
	
19 Presidential Way, Suite 203

Woburn, MA 01801

 

 

December 19, 2019

 

Wendy S. Arnold

64 East Street

Ipswich, MA 01938

 

Re:  Employment Terms

 

Dear Wendy:

 

On behalf of us at Frequency Therapeutics, Inc. (the “Company”), I am pleased to offer you full-time employment, subject to the terms and conditions below. We expect that your employment with the Company will commence no later than February 3, 2020 in the Company’s Woburn, MA offices.  You will be employed as Chief People Officer, reporting to David Lucchino, Chief Executive Officer.

 

Your responsibilities will include but not be limited to:  

	
 
	
•
	
Reinforce and build upon a “check your ego at the door” culture. (This means supporting our team/teammates, even when one might not get the bulk of the credit one feels they might otherwise deserve.) This approach is fundamental to our culture as team Frequency’s number one mission is to help patients regain hearing while building value for shareholders. 

	
 
	
•
	
Develop the overall strategic HR plan and prioritize and implement key HR initiatives.   Participate in the development of the organization's plans and programs as a strategic partner, bringing a business perspective as well as the perspective of people and organization.   Evaluate and advise on the impact of strategic and growth initiatives on attracting, motivating, developing and retaining our talent.

	
 
	
•
	
Act as a trusted advisor and coach to leaders, managers, and employees. 

	
 
	
•
	
Develop and execute the recruitment strategy and workforce plan to enable our rapid growth.   

	
 
	
•
	
Coach hiring managers to identify and recruit strong and diverse talent.  Design and implement effective and nimble recruiting procedures and practices.

	
 
	
•
	
Work with the Leadership Team to design the structure and roles to achieve strategic and growth goals.  Advise leaders on optimal staffing and team structure.   

	
 
	
•
	
Champion, promote, and embed an innovative and inclusive company culture.   Implement programs and practices to sustain the culture as the company grows.

	
 
	
•
	
Evaluate Frequency’s current people-related practices and identifies opportunities for improvement.  Partners with the CEO, CFO, and General Counsel to develop progressive and competitive compensation and benefits programs to provide motivation, incentives and rewards for strong performance.   Contribute to the development of presentations to the Compensation Committee of the Board of Directors.  Coordinate with Frequency’s external compensation consultant to support analyses for the Compensation Committee. 

 

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•
	
Manage and facilitate Frequency’s goal setting and performance assessment process.

	
 
	
•
	
Supports continuous leader, manager, and employee development by implementing learning programs to ensure skill development needed to build a high-performing company. Ensure strong people management practices, including feedback and assessment.   Work with managers to create career paths that grow and retain talent.

	
 
	
•
	
Partner with Legal to develop appropriate policies and programs for effective and compliant management of the people resources of the organization, including employee relations, affirmative action, sexual harassment, employee complaints, external education and career development.  Stay abreast of and ensures compliance with new laws and regulations.

	
 
	
•
	
Oversee the development and management of HR operations, systems, and processes that will scale as Frequency rapidly grows.  Manage the human resource information database (HRIS) and production of necessary reports while ensuring the confidentiality of HR data.

	
 
	
•
	
Structure, develop and oversee the HR resources to provide maximum benefit to the organization as it grows.

	
 
	
•
	
Identify, hire, and oversee external resources effectively when outside expertise is necessary.

1.Your compensation will be $25,666.67 per month subject to tax and other withholdings as required by law.  In addition, you will be eligible for an annual performance-based bonus with a target amount equal to 35% of your annualized base salary, based on your individual performance and the Company’s performance during the applicable fiscal year, in accordance with certain milestones to be determined by the board of directors of the Company (the “Board”). The Company also agrees to pay the equivalent of your 2019 annual bonus at your previous employer, which is an amount equal to $52,272. Your salary may be adjusted from time to time in accordance with normal business practice and at the sole discretion of the Company. The actual amount of any such annual bonus payable to you will be determined by the Board in its discretion. You must be an active employee of the Company on the date any bonus is paid in order to be eligible for payment of an annual bonus.  

 

2.You will be eligible for Frequency Health, Dental, Vision and Disability insurance, in addition to participation in the Company’s 401(k) the first of the month following your first day of employment. 

 

3.You will be eligible for a maximum 15 Paid Time Off days (PTO) per calendar year to be taken at such times as may be approved by the Company. These PTO days are accrued monthly at a rate of 10 hours per month.

 

4.You will be required to execute an Employee Proprietary Information and Inventions Assignment Agreement in the form attached as Exhibit B, as a condition of employment. 

 

5.You represent that you are not bound by any employment contract, restrictive covenant or other restriction preventing you from entering into employment with or carrying out your responsibilities for the Company, or which is in any way inconsistent with the terms of this letter. 

 

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6.In connection with entering into this letter agreement, following the commencement of your employment with the Company, the Company will recommend to the Board of Directors or its designee that it grant you an option to purchase 130,000 shares of the Company’s common stock (the “Stock Option”) at a per-share exercise price equal to the fair market value of a share of the Company’s common stock on the date of grant (as determined under the Plan (as defined below)), provided that you are employed by the Company on the date of grant  Subject to your continued employment with the Company through the applicable vesting date, 25% of the shares underlying the Stock Option will vest on the first anniversary of the date you commence employment with the Company and 1/48th of the total number of shares initially underlying the Stock Option will vest on each monthly anniversary thereafter.  The Stock Option will otherwise be subject to the terms and conditions of the Company’s 2019 Incentive Award Plan (the “Plan”) and a stock option agreement to be entered into between you and the Company. 

 

7.You agree to provide to the Company, within three days of your hire date, documentation of your eligibility to work in the United States, as required by the Immigration Reform and Control Act of 1986. You may need to obtain a work visa in order to be eligible to work in the United States.  If that is the case, your employment with the Company will be conditioned upon your obtaining a work visa in a timely manner as determined by the Company.

 

8.This offer set forth in this letter is contingent upon the Company completing a background check on you to its satisfaction in accordance with applicable laws. The Company engages a third-party provider to perform background checks and such provider will be reaching out to you under separate cover to provide the background check disclosure and required authorization forms for your review and execution.  

 

9.The Company shall have the right to terminate your employment without “Cause” (as defined on Exhibit A hereto).  Termination “Without Cause” means the Company’s termination of your employment for any reason other than for Cause, death or as a result of you becoming permanently disabled (within the meaning of Section 22(e) of the Internal Revenue Code of 1986, as amended (the “Code”)).  If the Company terminates your employment with the Company Without Cause or you terminate your employment with the Company with Good Reason (as defined on Exhibit A hereto), you shall be entitled to payment of your unpaid base salary earned for the period up to the date of such termination, amounts accrued or payable under any benefit plans and programs of the Company applicable to you up to the date of such termination, subject to and in accordance with the terms of such plans and programs, and amounts payable on account of any unreimbursed business expenses incurred in accordance with Company policy up to the date of such termination.  In addition, in the event you deliver to the Company a general release of claims against the Company and its affiliates in a form reasonably acceptable to the Company that becomes effective and irrevocable within sixty (60) days following such termination of employment (“Release Condition”) and subject to your compliance with the terms of any confidentiality, non-competition, non-solicitation or other similar restrictive covenants with the Company to which you are subject, the Company will (i) continue to pay your then current base salary, less all applicable withholding taxes and authorized deductions, for a period of twelve (12) months following the date of termination (“Severance Period”), (ii) an amount equal to 100% of your annual bonus opportunity, less all applicable taxes and withholdings, in one lump sum within 

 

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14 days of the satisfaction of the Release Condition, and (iii) should you timely elect and be eligible to continue receiving group medical and dental coverage pursuant to COBRA, and so long as the Company can provide such benefit without violating the non-discrimination requirements of the law, the Company will pay the portion of the premium for such coverage that is paid by the Company for active and similarly situated employees who receive the same type of coverage, such payment to be made for coverage from the termination date through the earliest of (x) the end of the Severance Period, (y) the date you are no longer eligible for COBRA coverage or (z) the date you become eligible for healthcare coverage from a subsequent employer (and you agree to promptly notify the Company of such eligibility).  The remaining balance of any premium cost shall timely be paid by you.  

 

10.Notwithstanding Section 9 hereof, if the Company terminates your employment with the Company Without Cause or you terminate your employment with the Company with Good Reason during the twelve (12) month period commencing on a Change in Control (as defined on Exhibit A hereto), then, subject to your compliance with the Release Condition and with the terms of any confidentiality, non-competition, non-solicitation or other similar restrictive covenants with the Company to which you are subject, in lieu of (and not in addition to) the amounts in Section 9 hereof, (i) the Company will pay you (x) the same benefits as set forth in Section 9 hereof, except that the Severance Period will be twelve (12) months and (y) an amount equal to 100% of your target annual bonus for the year in which the termination occurs, less all applicable taxes and withholdings, in one lump sum within 14 days of the execution of the Release Agreement, and (ii) the vesting and, to the extent applicable, exercisability of each equity award, including all unvested stock options, held by you as of the date the termination occurs will accelerate in respect of one hundred percent (100%) of the shares subject thereto.

 

11.Nothing in this letter or any other prior agreement between you and the Company (collectively, the “Subject Documents”) prevents you from reporting possible violations of law or regulation to any governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or any other whistleblower protection provisions of state or federal law or regulation (including the right to receive an award for information provided to any such government agencies).  Furthermore, in accordance with 18 U.S.C. § 1833, notwithstanding anything to the contrary in any Subject Document: (a) you shall not be in breach of any Subject Document, and shall not be held criminally or civilly liable under any federal or state trade secret law (i) for the disclosure of a trade secret that is made in confidence to a federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; and (b) if you file a lawsuit for retaliation by the Company for reporting a suspected violation of law, you may disclose the trade secret to your attorney, and may use the trade secret information in the court proceeding, if you file any document containing the trade secret under seal, and do not disclose the trade secret, except pursuant to court order.

 

12.This letter shall be interpreted to avoid any additional tax under Section 409A of the Code (“Section 409A”).  If any payment or benefit cannot be provided or made at the time 

 

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specified without incurring sanctions under Section 409A, then such benefit or payment shall be provided in full at the earliest time thereafter, when such sanctions will not be imposed.

 

Notwithstanding anything in this letter to the contrary, any compensation or benefit payable under this letter upon your termination of employment shall be payable only upon your “separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided below, any such compensation or benefits shall not be paid, or, in the case of installments, shall not commence payment, until the sixtieth (60th) day following your Separation from Service (the “First Payment Date”).  Any installment payments that would have been made to you during the sixty (60) day period immediately following your Separation from Service but for the preceding sentence shall be paid to you on the First Payment Date and the remaining payments shall be made as provided in this letter.  The right to receive any installment payments under this letter, including without limitation any continuation salary payments that are payable on Company payroll dates, shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment as permitted under Section 409A.  Except as otherwise permitted under Section 409A, no payment hereunder shall be accelerated or deferred unless such acceleration or deferral would not result in additional tax or interest pursuant to Section 409A.

 

Notwithstanding any other provision of this letter to the contrary, and solely if and to the extent necessary for compliance with Section 409A and not otherwise eligible for exclusion from the requirements of Section 409A, if as of the date of your Separation from Service from the Company, you are deemed to be a “specified employee” (within the meaning of Section 409A), no payment or other distribution required to be made to you hereunder (including any payment of cash, any transfer of property and any provision of taxable benefits) as a result of your Separation from Service shall be made until the date that is the earlier of (1) the expiration of the six-month period measured from the date of your Separation from Service or (2) the date of your death.  Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to the foregoing shall be paid to you in a lump sum, and all remaining payments and benefits due under this letter shall be paid or provided in accordance with the normal payment dates specified for them herein.

 

13.Notwithstanding any other provisions of this letter, in the event that any payment or benefit made by the Company or otherwise to you or for your benefit, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (all such payments and benefits, including the payments and benefits under Section 9 and Section 10 hereof, being hereinafter referred to as the “Total Payments”), would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Total Payments shall be reduced (in the order provided in this Section below) to the minimum extent necessary to avoid the imposition of the Excise Tax on the Total Payments, but only if (a) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income and employment taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments), is greater than or equal to (b) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income and employment taxes on such Total Payments and the amount of the Excise Tax to which you would be subject in 

 

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respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).  The Total Payments shall be reduced in the following order:  (i) reduction on a pro-rata basis of any cash severance payments that are exempt from Section 409A, (ii) reduction on a pro-rata basis any non-cash severance payments or benefits that are exempt from Section 409A, (iii) reduction on a pro-rata basis of any other payments or benefits that are exempt from Section 409A, and (iv) reduction of any payments or benefits otherwise payable on a pro-rata basis or such other manner that complies with Section 409A; provided, in case of clauses (ii), (iii) and (iv), that reduction of any payments attributable to the acceleration of vesting of Company equity awards shall be first applied to Company equity awards that would otherwise vest last in time.  All determinations regarding the application of this Section shall be made by an accounting firm or consulting group with experience in performing calculations regarding the applicability of Section 280G of the Code and the Excise Tax selected by the Company (the “Independent Advisors”).  For purposes of these determinations, no portion of the Total Payments shall be taken into account which, in the opinion of the Independent Advisors, (x) does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) or (y) constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation.  The costs of obtaining such determination and all related fees and expenses (including related fees and expenses incurred in any later audit) shall be borne by the Company.  In the event it is later determined that a greater reduction in the Total Payments should have been made to implement the objective and intent of this Section, the excess amount shall be returned immediately by you to the Company.

 

14.This letter shall be interpreted and construed in accordance with the laws of the Commonwealth of Massachusetts without regard to any conflicts of laws principles that would result in the application of the laws of another state.  While other terms and conditions of your employment may change in the future, the at-will nature of your employment may not be changed, except in a subsequent letter or written agreement, signed by you and the Chief Executive Officer of the Company.  This letter may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same agreement.  Signatures delivered by facsimile or PDF shall be deemed effective for all purposes.  This letter contains the entire agreement between you and the Company with respect to the matters covered herein.  This letter supersedes all prior and contemporaneous agreements and understanding, oral or written, between you and the Company with respect to the matters herein.  This letter may not be amended, nor may any of your rights or obligations as set forth herein be altered, except by a written instrument executed by you, on the one hand, and a duly-authorized officer of the Company acting with the written authorization of the Board, on the other hand.

 

 

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15.If you agree with the employment provisions of this letter, please sign this letter in the space provided below and return it to David L. Lucchino, President and CEO. Please return this signed offer letter by December 27, 2019 by 5PM (EST) or the offer will become null and void.

 

				
	
 
	
 
	
Sincerely,

	
 
	
 
	
 
	
 

	
 
	
 
	
FREQUENCY THERAPEUTICS, INC.

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
By:
	
/s/ David L. Lucchino

	
 
	
 
	
Name:
	
David L. Lucchino

	
 
	
 
	
Title:
	
President and CEO

	
 
	
 
	
 
	
 

	
Accepted and agreed by:
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
/s/ Wendy S. Arnold
	
 
	
 
	
 

	
Wendy S. Arnold
	
 
	
 
	
 

 

 

 

 

 

 

 

 

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19 Presidential Way, Suite 203

Woburn, MA 01801

 

 

Exhibit A

 

When used in the letter to which this Exhibit A is attached, the following terms shall have the meanings set forth below.

 

(1) “Cause” means any of:

(a) your conviction of, or plea of guilty or nolo contendere to, any crime involving dishonesty or moral turpitude or any felony; or (b) a good faith finding by the Company that you have (i) engaged in willful misconduct or gross negligence that is materially harmful to the business or reputation of the Company, (ii) breached or threatened to breach the terms of any restrictive covenants or confidentiality agreement or any similar agreement with the Company, and/or (iii) materially failed to perform your assigned duties, provided, however, in the case of (iii) that the Company provided you with written notice of such failure and a period of 30 days to cure, but you failed to cure such failure.

(2) “Good Reason” means the occurrence, without your prior written consent, of any of the following events:

(a) a material reduction in your authority, duties, or responsibilities (other than in connection with a corporate transaction where you continue to hold substantially the same position with respect to the Company’s business, substantially as such business exists prior to the date of consummation of such corporate transaction, but do not hold such position with respect to the successor or surviving entity in the transaction); (b) the relocation by at least 50 miles of the principal place at which you provide services to the Company; or (c) a material reduction in your base salary (other than a reduction of less than 10% that is implemented in connection with a contemporaneous reduction in base salaries proportionately affecting other similarly situated employees of the Company). 

To be treated as a resignation for Good Reason, (x) you must provide written notice to the Company of your intention to terminate your employment for Good Reason, describing the grounds for such action, no later than 90 days after the occurrence of such circumstances, (y) you must provide the Company with at least 30 days in which to cure the circumstances, and (z) if the Company is not successful in curing the circumstances, you must end your employment within 30 days following the cure period in (y).

(3) “Change in Control” means a Change in Control as defined in the Company’s 2019 Incentive Award Plan, as in effect on the date hereof.

 

 

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Exhibit B

 

Employee Proprietary Information and Inventions Assignment Agreement

 

 

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US-DOCS\110928677.1Exhibit
4.6

 

DESCRIPTION
OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT

TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

 

The
following is a description of our common stock and preferred stock as set forth in our certificate of incorporation and bylaws,
each of which are incorporated by reference as an exhibit to the Annual Report on Form 10-K to which this Exhibit 4.6 is a part.
This summary does not purport to be complete and is qualified in its entirety by the full text of our aforementioned certificate
of incorporation and bylaws and by applicable law.

 

Our
authorized capital stock consists of 500,000,000 shares of common stock, par value $0.0001 per share and 10,000,000 shares of
Preferred Stock, par value $0.0001 per share.

 

The
additional shares of our authorized stock available for issuance might be issued at times and under circumstances so as to have
a dilutive effect on earnings per share and on the equity ownership of the holders of our common stock. The ability of our board
of directors to issue additional shares of stock could enhance the board’s ability to negotiate on behalf of the stockholders
in a takeover situation but could also be used by the board to make a change-in-control more difficult, thereby denying stockholders
the potential to sell their shares at a premium and entrenching current management. The following description is a summary of
the material provisions of our capital stock. You should refer to our amended and restated certificate of incorporation and by-laws,
both of which are on file with the SEC as exhibits to previous SEC filings, for additional information. The summary below is qualified
by provisions of applicable law.

 

Common
Stock

 

Voting.
The holders of our common stock are entitled to one vote for each share held of record on all matters on which the holders are
entitled to vote (or consent to).

 

Dividends.
The holders of our common stock are entitled to receive, ratably, dividends only if, when and as declared by our board of
directors out of funds legally available therefor and after provision is made for each class of capital stock having preference
over the common stock (including the common stock).

 

Liquidation
Rights. In the event of our liquidation, dissolution or winding-up, the holders of our common stock are entitled to share,
ratably, in all assets remaining available for distribution after payment of all liabilities and after provision is made for each
class of capital stock having preference over the common stock (including the common stock).

 

Conversion
Rights. The holders of our common stock have no conversion rights.

 

Preemptive
and Similar Rights. The holders of our common stock have no preemptive or similar rights.

 

Redemption/Put
Rights. There are no redemption or sinking fund provisions applicable to the common stock. All of the outstanding shares of
our common stock are fully-paid and nonassessable.

 

Transfer
Agent and Registrar. The transfer agent and registrar for our common stock is VStock Transfer, LLC.

 

Preferred
Stock

 

We
are authorized to issue up to 10,000,000 shares of preferred stock, par value $0.0001 per share, (of which 1,600,000 shares have
been designated as Series A Preferred Stock) with such designations, rights, and preferences as may be determined from time to
time by our board of directors. Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting, or other rights that could adversely affect the voting power or other rights
of the holders of our common stock. The issuance of preferred stock could have the effect of restricting dividends on our common
stock, diluting the voting power of our common stock, impairing the liquidation rights of our common stock, or delaying or preventing
a change in control of our company, all without further action by our stockholders.

 

    	 

    	 

    

 

Our
board of directors has the authority, within the limitations and restrictions prescribed by law and without stockholder approval,
to provide by resolution for the issuance of shares of preferred stock, and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preference and the number
of shares constituting any series of the designation of such series, by delivering an appropriate certificate of amendment to
our amended and restated certificate of incorporation to the Delaware Secretary of State pursuant to the Delaware General Corporation
Law (the “DGCL”). The issuance of preferred stock could have the effect of decreasing the market price of the common
stock, impeding or delaying a possible takeover and adversely affecting the voting and other rights of the holders of our common
stock.

 

If
we offer a specific series of preferred stock under this prospectus, we will describe the terms of the preferred stock in the
prospectus supplement for such offering and will file a copy of the certificate establishing the terms of the preferred stock
with the SEC. To the extent required, this description will include:

 

	●	the
    title and stated value;
	●	the
    number of shares offered, the liquidation preference per share and the purchase price;
	●	the
    dividend rate(s), period(s) and/or payment date(s), or method(s) of calculation for such dividends;
	●	whether
    dividends will be cumulative or non-cumulative and, if cumulative, the date from which dividends will accumulate;
	●	the
    procedures for any auction and remarketing, if any;
	●	the
    provisions for a sinking fund, if any;
	●	the
    provisions for redemption, if applicable;
	●	any
    listing of the preferred stock on any securities exchange or market;
	●	whether
    the preferred stock will be convertible into our common stock, and, if applicable, the conversion price (or how it will be
    calculated) and conversion period;
	●	whether
    the preferred stock will be exchangeable into debt securities, and, if applicable, the exchange price (or how it will be calculated)
    and exchange period;
	●	voting
    rights, if any, of the preferred stock;
	●	a
    discussion of any material and/or special U.S. federal income tax considerations applicable to the preferred stock;
	●	the
    relative ranking and preferences of the preferred stock as to dividend rights and rights upon liquidation, dissolution or
    winding up of the affairs of Matinas; and
	●	any
    material limitations on issuance of any class or series of preferred stock ranking senior to or on a parity with the series
    of preferred stock as to dividend rights and rights upon liquidation, dissolution or winding up of Matinas.

 

Transfer
Agent and Registrar for Preferred Stock. The transfer agent and registrar for any series or class of preferred stock will
be set forth in each applicable prospectus supplement.

 

Series
A Preferred Stock

 

Our
board of directors created out of the authorized and unissued shares of our preferred stock, a series of preferred stock comprised
of 1,600,000 shares of Series A Preferred Stock. All shares of Series A Preferred Stock have been automatically converted pursuant
to the terms of the certificate of designation. 

 

Series
B Preferred Stock

 

Our
board of directors created out of the authorized and unissued shares of our preferred stock, a series of preferred stock comprised
of 15,000 shares of Series B Preferred Stock. Each share of Series B Preferred have a stated value of $1,000 per share.

 

Rank.
The Series B Preferred rank

 

	●	junior
    to our Series A Preferred Stock and any class or series of our capital stock hereafter created specifically ranking by its
    terms senior to the Series B Preferred;
	●	senior
    to all of our common stock;

 

    	 

    	 

    

 

	●	senior
    to any class or series of our capital stock hereafter created specifically ranking by its terms junior to the Series B Preferred;
    and
	●	on
    a parity with any class or series of our capital stock hereafter created specifically ranking by its terms on a parity with
    the Series B Preferred.

 

in
each case, as to distributions of assets upon our liquidation, dissolution or winding up whether voluntarily or involuntarily.

 

Dividends.
Holders of the Series B Preferred are entitled to receive dividends payable as follows: (i) a number of shares of common stock
equal to 10% of the shares of common stock underlying the Series B Preferred then held by such holder on the 12 month anniversary
of the COD Effective Date, (ii) a number of shares of common stock equal to 15% of the shares of common stock underlying the Series
B Preferred then held by such holder on the 24-month anniversary of the COD Effective Date and (iii) a number of shares of common
stock equal to 20% of the shares of common stock underlying the Series B Preferred then held by such holder on the 36-month anniversary
of the COD Effective Date. In the event a purchaser in this offering no longer holds Series B Preferred as of the 12-month anniversary,
the 24-month anniversary or the 36 month anniversary, such purchaser will not be entitled to receive any dividends on such anniversary
date.

 

Optional
Conversion. Each share of Series B Preferred is convertible into shares of our common stock at any time at the option of the
holder at a conversion price $0.50 per share (subject to adjustment for reverse splits, stock combinations and similar changes
as provided in the certificate of designation). Holders of Series B Preferred are prohibited from converting Series B Preferred
into shares of our common stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially
own more than 4.99% (or upon the election by a holder prior to the issuance of any shares of Series B Preferred, 9.99%) of the
total number of shares of our common stock then issued and outstanding. Dividends will not accrue and will not be paid following
optional conversion.

 

Automatic
Conversion. Each share of our Series B Preferred shall automatically convert into 2,000 shares of our common stock at a conversion
price of $0.50 per share upon the earlier of (i) the first FDA approval of one of our product candidates, (ii) the 36-month anniversary
of the COD Effective Date or (iii) the consent to conversion by holders of at least 50.1% of the outstanding shares of Series
B Preferred. In the event the Series B Preferred automatically converts into common stock prior to the 36 month anniversary of
the COD Effective Date, the holder on the date of such conversion shall also be entitled to receive those dividends which would
have been payable after the conversion date, as if the shares of Series B Preferred had remained unconverted and outstanding through
the 36 month anniversary of the COD Effective Date. Such dividend amount shall be payable as set forth above in shares of common
stock upon such automatic conversion.

 

Liquidation
Preference. In the event of a liquidation, dissolution or winding-up of our company, whether voluntary or involuntary, the
proceeds and/or assets of our company remaining after giving effect to such transaction, and the payment of all of our debts and
liabilities will be distributed first to the holders of our Series A Preferred Stock and thereafter to the holders of Series B
Preferred and then to stockholders of common stock (including the holders of our Series A Preferred Stock and Series B Preferred
on an “as converted” basis) on a pro rata basis.

 

Voting
Rights. Except as provided in the Certificate of Designation of the Series B Preferred or as otherwise required by law, the
holders of Series B Preferred will have no voting rights. However, we may not, without the consent of holders of a majority of
the outstanding shares of Series B Preferred, alter or change adversely the powers, preferences or rights given to the Series
B Preferred, increase the number of authorized shares of Series B Preferred, or enter into any agreement with respect to the foregoing.

 

Redemption.
We will be not obligated to redeem or repurchase any shares of Series B Preferred. Shares of Series B Preferred will not otherwise
be entitled to any redemption rights or mandatory sinking fund or analogous fund provisions.

 

Transfer
Agent, Registrar and Dividend Disbursing Agent. The transfer agent, registrar and dividend disbursing agent for our Series
B preferred stock is VStock Transfer, LLC.

 

    	 

    	 

    

 

Anti-takeover
Effects of Delaware Law and of our Amended and Restated Certificate of Incorporation

 

The
following paragraphs summarize certain provisions of the DGCL and our amended and restated certificate of incorporation that may
have the effect of discouraging an acquisition of Matinas. The summary does not purport to be complete and is subject to and qualified
in its entirety by reference to the DGCL and our amended and restated certificate of incorporation and by-laws, copies of which
are on file with the SEC. Please refer to “Additional Information” below for directions on obtaining these documents.

 

Section
203 of the Delaware General Corporation Law

 

We
are subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any
business combination with any interested stockholder for a period of three years after the date that such stockholder became an
interested stockholder, with the following exceptions:

 

	●	before
    such date, the board of directors of the corporation approved either the business combination or the transaction that resulted
    in the stockholder becoming an interested stockholder;
	●	upon
    completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder
    owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes
    of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those
    shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants
    do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or
    exchange offer; or
	●	on
    or after such date, the business combination is approved by the board of directors and authorized at an annual or special
    meeting of the stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
    stock that is not owned by the interested stockholder.

 

In
general, Section 203 defines business combination to include the following:

 

	●	any
    merger or consolidation involving the corporation and the interested stockholder;
	●	any
    sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;
	●	subject
    to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation
    to the interested stockholder;
	●	any
    transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class
    or series of the corporation beneficially owned by the interested stockholder; or
	●	the
    receipt by the interested stockholder of the benefit of any loss, advances, guarantees, pledges or other financial benefits
    by or through the corporation.

 

In
general, Section 203 defines an “interested stockholder” as an entity or person who, together with the person’s
affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder
status did own, 15% or more of the outstanding voting stock of the corporation.

 

Certificate
of Incorporation and Bylaws

 

Our
certificate of incorporation and bylaws contain provisions that could have the effect of discouraging potential acquisition proposals
or tender offers or delaying or preventing a change of control of our company. These provisions are as follows: 

 

	●	they
    provide that special meetings of stockholders may be called only by the board of directors, President or our Chairman of the
    board of directors, or at the request in writing by stockholders of record owning at least fifty (50%) percent of the issued
    and outstanding voting shares of common stock;
	●	they
    do not include a provision for cumulative voting in the election of directors. Under cumulative voting, a minority stockholder
    holding a sufficient number of shares may be able to ensure the election of one or more directors. The absence of cumulative
    voting may have the effect of limiting the ability of minority stockholders to effect changes in our board of directors; and
	●	they
    allow us to issue “blank check” preferred stock, the terms of which may be established and shares of which may
    be issued without stockholder approval.

 

Potential
Effects of Authorized but Unissued Stock

 

We
have shares of common stock and preferred stock available for future issuance without stockholder approval. We may utilize these
additional shares for a variety of corporate purposes, including future public offerings to raise additional capital, to facilitate
corporate acquisitions or payment as a dividend on the capital stock.

 

The
existence of unissued and unreserved common stock and preferred stock may enable our board of directors to issue shares to persons
friendly to current management or to issue preferred stock with terms that could render more difficult or discourage a third-party
attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, thereby protecting the continuity
of our management. In addition, the board of directors has the discretion to determine designations, rights, preferences, privileges
and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences
of each series of preferred stock, all to the fullest extent permissible under the DGCL and subject to any limitations set forth
in our amended and restated certificate of incorporation. The purpose of authorizing the board of directors to issue preferred
stock and to determine the rights and preferences applicable to such preferred stock is to eliminate delays associated with a
stockholder vote on specific issuances. The issuance of preferred stock, while providing desirable flexibility in connection with
possible financings, acquisitions and other corporate purposes, could have the effect of making it more difficult for a third-party
to acquire, or could discourage a third-party from acquiring, a majority of our outstanding voting stock.

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