Mirkine Pharma, Inc. Disclosures
MIR is preparing to undertake a private placement offering in the United States. Exemplar Capital, LLC, a Wall Street firm that is licensed as a broker-dealer with the SEC and is a member of FINRA and SIPC, will be the Managing broker-dealer for the offering. The uses of funding are for further animal studies and initiation of the FDA process for regulatory approval in the United States, called an Investigation New Drug application. The private placement will be governed by Regulation D, Section 506(c) of the Securities Act of 1933.
To learn more about the services of Exemplar Capital, the cost of services, the nature of its relationships with clients, and potential conflicts of interest, see its Customer Relationship Summary (SEC Form CRS). Exemplar Capital is registered in 52 U.S. states and territories. To find out more about the legal structure of Exemplar Capital, its officers, its registrations, and its regulatory history, please see FINRA Broker-Check.
If you are an accredited investor, and you would like to receive the forthcoming Private Placement Memorandum (PPM) for this potential offering, you may request one by contacting:
Andrew Szabo CFA
Managing Director
Natural and Life Sciences Group
Investment Banking OSJ
Exemplar Capital, LLC
211 East 43rd Street, Seventh Floor
New York, NY 10017
RISK DISCLOSURES AND CONFLICT OF INTEREST DISCLOSURES
This discussion by MIR contains “forward-looking statements” as understood under federal securities law. There can be no assurance that the assumptions supporting these statements are valid, nor that the predictions implied by such statements will prove accurate. Therefore, investors should not place undue reliance upon these statements, except as limited to understanding the present outlook of Management.
Risks Relating to an Investment in the Company
General Best Reasonable Efforts Offering
This Offering is being conducted on a “best efforts” basis by Exemplar only. No guarantee can be given that all or any of the securities will be sold, or that sufficient proceeds will be available to conduct successful operations. Receipt of a relatively small amount of capital may reduce the ability of the Company to exploit its technology and products.
No Guarantee of Profitability or Dividends
There can be no assurance that the Company will ever produce any marketable products or that cash flows from sales of the Company’s products will be sufficient to create net profits for the Company. Poor sales of the products would likely significantly affect the total returns to Investors. In addition, there is no guarantee that dividends will be paid to Common Stockholders on a regular basis, if at all. The Company may choose not to pay dividends if it believes it is in the best interest of the Company not to do so.
No Guaranteed Return of Investor’s Capital
Investment in the Company is speculative and involves a high degree of risk. There can be no guarantee that an Investor will realize a substantial return on the investment, or any return at all, or will not lose the entire investment. For this reason, each prospective Investor should read this PPM and the Offering Agreements carefully and should consult with his, her, or its own legal counsel, accountant, or business adviser(s) prior to making any investment decision.
Borrowing by the Company
The Company may choose from time to time to borrow funds from third party lenders. Although the purpose of borrowings is to support the exploitation of its technology and products, as well as potentially increase the overall Investor return, its use is inherently risky and can instead increase the risk of loss.
The interest rates at which the Company is able to borrow will affect the Company’s operating results. While the use of borrowed funds may increase returns on its investments, if the Company earns a lower return on its investments using the borrowed funds, the leverage will decrease overall Company returns. The effect of leverage may therefore result in a greater decrease in the value of the Company than if the Company was not so leveraged.
The use of leverage has the potential to magnify the gains or the loss on the Company’s investments and to make the Company’s returns more volatile.
The Company may be unable to meet its obligations to a lender under a credit facility. If this occurs, the Company may be liable for increased payments and penalties to the lender. The lender may also foreclose on any Company assets in which it holds a security interest. As such, the Company’s inability to perform under a credit facility could have significant negative effects on the Company, its assets, and ultimately the Investors.
The Company could be in a position where it must borrow funds in order to cover its operating expenses, overhead, or committed investments. In any of these events, it is uncertain whether debt financing will be available to the Company on desirable terms, or at all. If the Company is unable to secure debt financing in these circumstances, the Company could end up in default of its obligations to third parties and incur significant penalties and other negative consequences. If the Company is able to secure debt financing in these circumstances, the Company could be highly leveraged and would be subject to all the risks associated with borrowing.
Risks of Credit Facility Being Unavailable, Called or Terminated
While the Company believes that it will have sufficient working capital to maintain the Company’s business for some time, there may be some developments in the business that would require the Company to secure a third-party credit facility. The Company has not yet obtained a credit facility, and its ability to do so is not certain. Even if the Company is able to obtain a credit facility, that credit facility could later be called or terminated for a variety of possible reasons. The credit facility lender may get bought out, may cease business altogether, or may claim an event of default under the terms of the credit facility. In such an event, the Company may need to either replace a substantial amount of money or the lender may collect all incoming cash and not allow for any distributions to stockholders until the default is cured or the credit facility is paid off.
U. S. Securities Laws
The offer and sale of the Series A Preferred Stock will not be registered under the Securities Act or the laws of any applicable state pursuant to an exemption from the registration requirements of the Securities Act, and the securities laws of certain states. Each Investor must furnish certain information to the Company and represent, among other customary private placement representations, that it is acquiring its Series A Preferred Stock for investment purposes and not with a view towards resale or distribution. The acquisition of Series A Preferred Stock by each Investor must also be lawful under applicable state securities laws.
The Series A Preferred Stock has not been, and will not be, registered under the Securities Act. Accordingly, the United States securities laws impose certain restrictions upon the ability of a stockholder to transfer such Series A Preferred Stock. Series A Preferred Stock may not be offered, sold, transferred, or delivered, directly or indirectly, unless (i) such Series A Preferred Stock is registered under the Securities Act and any applicable state securities laws, or (ii) an exemption from registration under the Securities Act and any applicable state securities laws is available. Moreover, the Series A Preferred Stock may not be transferred or resold for one year after issuance. Further, there will be no liquid, public market for the Series A Preferred Stock, and none is expected to develop.
Compliance with Anti-Money Laundering Requirements
The Company may be subject to certain provisions of the USA PATRIOT Act of 2001 (“the Patriot Act”), including, but not limited to, Title III thereof, the International Money Laundering and Abatement and Anti-Terrorist Financing Act of 2001 (“Title III”), certain regulatory and legal requirements imposed or enforced by the Office of Foreign Assets Control (“OFAC”) and other similar laws of the United States. In response to increased regulatory concerns with respect to the sources of the Company’s capital used in investments and other activities, the Company may request that Investors provide additional documentation verifying, among other things, such Investor’s identity and source of funds to be used to purchase Series A Preferred Stock. The Company may decline to accept a subscription from an Investor if this information is not provided or on the basis of the information that is provided. Requests for documentation and additional information may be made at any time during which a stockholder holds Series A Preferred Stock. The Company may be required to report this information, or report the failure to comply with such requests for information, to appropriate governmental authorities, in certain circumstances without informing a stockholder that such information has been reported. The Company will take such steps as it determines are necessary to comply with applicable law, regulations, orders, directives, or special measures, including, but not limited to, those imposed or enforced by OFAC, the Patriot Act and Title III.
Risk of Competition from Company and Affiliates
The officers and directors of the Company and their affiliates may compete with the business of the Company or may be stockholders of other companies (some of which may directly compete with the business of the Company) and have other business interests of significance.
Risk of Additional Investors
While this Offering is for up to a maximum amount of $10 million, this amount may be increased in the sole discretion of the Company. Additional Series A Preferred Stock may be sold from time to time to the existing stockholders or new Investors. As additional Series A Preferred Stock is issued, the increase in Series A Preferred Stock may reduce the amounts the Company has available to pay dividends on Common Stock, as dividends will need to be distributed amongst more stockholders. In addition, subsequent sales may be at a price per share higher or lower than the price at which the Company issues Series A Preferred Stock in this Offering.
The Company is authorized to issue up to _____ shares of blank check preferred stock. While there is no guarantee that all of such shares will be issued, the Board may authorize the issuance of additional classes of preferred stock, including securities that are convertible into or exchangeable for, or that represent the right to receive, Common Stock or preferred stock. The issuance of additional shares of Common Stock or preferred stock or convertible or exchangeable securities or rights could be substantially dilutive to holders of Common Stock and Series A Preferred Stock. The value of our Common Stock and Series A Preferred Stock could decline as a result of sales of shares of Common Stock or preferred stock made after this Offering or the perception that such sales could occur.
Our Common Stock is Equity and is Subordinate to our Future Indebtedness and Preferred Stock
Shares of our Common Stock are equity interests and do not constitute indebtedness. As such, shares of our Common Stock will rank junior to all indebtedness and other non-equity claims on us with respect to assets available to satisfy such claims. Additionally, holders of our Common Stock may be subject to the prior dividend and liquidation rights of any holders of preferred stock that the Company may issue, including the holders of the Series A Preferred Stock.
We will Retain Broad Discretion in Using the Net Proceeds from this Offering, and May Not Use the Proceeds Effectively
We intend to use the net proceeds from this Offering for general corporate purposes to support our plans to grow our business and operations. General corporate purposes may include working capital, capital expenditures and research and development. Our management will retain broad discretion with respect to the allocation of the net proceeds of this Offering. The net proceeds may be applied in ways with which you and the other Investors in the offering may not agree, and to the extent not used, may result in an excess of capital. Moreover, our management may use the proceeds for corporate purposes that may not increase our market value or make us more profitable.
Risks Specifically Related to the Company’s Healthcare Business
Potential Obstacles to Regulatory Approval
A serious risk facing MIR, as with other early-stage pharmaceutical companies seeking regulatory approval for branded drugs, is delays or failures in obtaining required regulatory approval from the Federal Food and Drug Administration (FDA) of the United States. This risk interrelates to other risks, such as the risk of inadequate funding to advance that process. The FDA process involves four distinct hurdles: 1. Making an Investigational New Drug application and having it approved. 2. Phase I clinical trials (safety and dosage). 3. Phase II clinical trials (efficacy for a stated outcome). 4. Phase III clinical trials (efficacy for the stated outcome, but with a much larger patient population than Phase II). The Company is considering options to seek a strategic takeout after success in steps 1, 2, or 3, but failure at any of these steps could lead to a total or near-total loss for investors. [AJS1]
Failures and Defects with Respect to Our Products
We are a new company with new technology and no products. While the technology has undergone some testing by an affiliated company, there can be no guarantee that the technology and products, to the extent they are developed, will work as we believe they are capable of working. The Company’s Patented Compound, for example, has only undergone limited animal testing, and has not undergone any human trials. Accordingly, there can be no guarantee that the products developed from the Patented Compound will have any beneficial health effect whatsoever on cancer or any other health condition.
While the Company intends to obtain insurance to cover failures and defects in its products, no such insurance is in place, and even if the Company obtains such insurance, the insurance may not provide all of the coverage that the Company requires to avoid significant claims against it.
Failure to Manage Supply Chain Risks
If we fail to manage our supply chain risks our operations may be disrupted. Our products will require and rely on ingredients that we will source from third-party suppliers. The continued development of our products depends on our ability to implement and manage supply chain logistics to secure the necessary ingredients. We do not have significant experience in managing supply chain risks. We will depend on a limited number of suppliers for our product ingredients, and it is possible that we may not be able to obtain a sufficient supply of ingredients in a timely manner, or at all. Events that could disrupt our supply chain include, but are not limited to:
- The imposition of trade laws or regulations;
- The imposition of duties, tariffs and other charges on imports and exports;
- Disruption in the supply of certain ingredients from out international suppliers;
- Foreign currency fluctuations;
- Theft;
- Restrictions on the transfer of funds;
- Pandemics such as covid-19;
- War, civil strife and other military and political disruptions.
The occurrence of any of the foregoing could materially increase the cost and reduce or delay the supply of our products and could materially delay our progress towards introducing new or improved versions of products, all of which could adversely affect our business, financial condition, operating results, and prospects.
Inability to Protect our Intellectual Property
If we are unable to protect our intellectual property, or if third parties are successful in claiming that we are misappropriating the intellectual property of others, we may incur significant expense and our business may be materially and adversely affected.
Our intellectual property includes, or may include, patents, inventions (whether or not patentable), patent applications, registered domain names, registered and unregistered trademarks, trademark applications, copyrights, and trade secrets. We believe that our intellectual property is essential to our business and affords us a competitive advantage in the markets in which we operate. If we do not adequately protect our intellectual property, our brand and reputation may be harmed, our customers could devalue our products and offerings, and our ability to compete effectively may be impaired.
To protect our intellectual property, we rely on a combination of copyright, trademark, patent, and trade secret laws, contractual provisions, end-user policies, and disclosure restrictions. Upon discovery of potential infringement of our intellectual property, management and the Board intends to promptly take action to protect the Company’s rights as appropriate. We also intend to enter into confidentiality agreements and invention assignment agreements with our employees and consultants and seek to control access to, and distribution of, our proprietary information in a commercially prudent manner. The efforts we have taken to protect our intellectual property may not be sufficient or effective. For example, effective intellectual property protection may not be available in every country in which we currently or in the future will operate. In addition, it may be possible for other parties to copy or reverse-engineer our products and offerings in the event our intellectual property isn’t protectible or even if the Company has a valid patent. Further, we may be unable to prevent competitors from acquiring domain names or trademarks that are similar to, infringe upon, or diminish the value of our domain names, trademarks, service marks, and other proprietary rights. Moreover, our trade secrets may be compromised by third parties or our employees, which would cause us to lose the competitive advantage derived from the trade secret. Further, we may be unable to detect infringement of our intellectual property rights, and even if we detect such violations and decide to enforce our intellectual property rights, we may not be successful, and may incur significant expenses, in such efforts. Further, such enforcement efforts may result in a ruling that our intellectual property rights are unenforceable. Any failure to protect or any loss of our intellectual property may have an adverse effect on our ability to compete and may adversely affect our business, financial condition, or operating results.
Any intellectual property claim against us, regardless of merit, could be time consuming and expensive to settle or litigate, could divert our management’s attention and other resources, and could diminish goodwill associated with our brand, and result in significant damage payments by the Company in the event that the Company is unsuccessful in defending against any patent infringement claims. These claims may also subject us to significant liability for damages and may result in us having to stop using technology, content, branding, or business methods found to be in violation of another party’s rights. Further, certain adverse outcomes of such proceedings could adversely affect our ability to compete effectively in existing or future businesses.
We may be required or may opt to seek a license for the right to use intellectual property held by others, which may not be available on commercially reasonable terms, or at all. Even if a license is available, we may be required to pay significant royalties, which may increase our operating expenses. We may also be required to develop alternative non-infringing technology, content, branding, or business methods, which could require significant effort and expense and make us less competitive. If we cannot license or develop alternative technology, content, branding, or business methods for any allegedly infringing aspect of our business, we may be unable to compete effectively or we may be prevented from operating our business in certain jurisdictions. Any of these results could harm our operating results.
In particular, the Company has not done a patent search with respect to its patent applications and invented intellectual property. Accordingly, the Company and its management do not know if there are inventions that already exist and that may create a barrier to the Company obtaining patent protection for its technologies. If it cannot obtain such protection, the value of its technologies and its Common Stock and Series A Preferred Stock could be materially and adversely affected.
Interest Rate Risk
The Company’s operating results will likely depend to a large extent on its ability to generate a net profit, which is essentially the difference between its costs and whatever revenue it can generate from exploiting its technology and products. Changes in the general level of interest rates can affect the Company’s ability to generate a net profit by affecting the cost of borrowings, and the financial health of potential development partners and other parties who may be interested in the Company’s technology and products.
Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond the control of the Company.
Other General Risks of an Investment in the Company
The Company is Newly Formed
The Company is a newly formed entity with no operating history on which prospective Investors may base an evaluation of likely performance. To the extent that the CEO of the Company, Ms. Beljanski, has been responsible for the investment results of previous investments, those results are, in any event, past results and are not necessarily indicative of future results of the Company’s business. There can be no assurance that the Company will perform as well as the past investments of Ms. Beljanski or that the Company will achieve its investment goals.
Reliance on Management
The officers and directors of the Company will make all Company decisions, including all decisions with respect to the conduct of the Company’s business. The Company will be relying solely on the expertise and judgment of such officers and directors. There is no requirement that the Company create or utilize an advisory board or committee of advisers to assist the Company management in making decisions with respect to the Company. The officers and directors may resign at any time without liability to the Company. There can be no guaranty or assurance that suitable replacement officers or directors will be identified and elected in the event of the resignation or removal of any officer or director.
The Company’s founder and CEO is Ms. Beljanski. He is considered an integral part of the Company’s business strategy and the loss of Ms. Beljanski could adversely affect the Company’s performance. The Certificate of Incorporation does not provide any protection for Investors in the event Ms. Beljanski is no longer providing services to the Company. In such event, the Company will continue operating and managing the Company’s business without her services.
Failure to Retain our Key Employees or Recruit New Employees
We rely on key personnel, including personnel who have technical expertise in their subject matter area and/or a network of relationships with individuals and institutions in the markets we intend to serve. In addition, if we expand, we will need to hire local personnel within those new markets. If we were to have less success in recruiting and retaining these employees than our competitors, our growth and results of operations could be adversely affected. Moreover, equity awards can be an important component of a company’s compensation program, especially for executive officers and other members of senior management. The Company has not yet determined to what extent, if any, it will establish equity incentive plans. If the Company does not establish sufficient equity incentives, there could be an adverse effect on our recruiting and retention efforts, which could impact our growth and results of operations.
Valuation Risk of Illiquid Investment
There will initially be no market for the Series A Preferred Stock and it will be difficult to value the Company at any given time, particularly if the Company has little or no revenue. In the absence of substantially similar developmental-stage companies, the Company will be required to resort to non-comparable pricing methodologies, including, for example, models based on assumptions regarding expected trends, historical trends following market conditions believed to be comparable to the then current market conditions and other factors believed at the time to be likely to influence the potential value of the Company. Such methodologies may not prove to be accurate and the Company’s inability to accurately value the Company will make it difficult for the Company to accurately assess the value of the Series A Preferred Stock and any given time.
Business disruptions and interruptions due to natural disasters and other external events beyond our control
Our operations can be subject to natural disasters and other external events beyond our control, such as earthquakes, fires, severe weather, public health issues, power failures, telecommunication loss, major accidents, terrorist attacks, acts of war, and other natural and man-made events. Such events of disaster, whether natural or attributable to human beings, could cause severe destruction, disruption or interruption to our operations or property. If we were to suffer a disruption or interruption and were not able to resume normal operations within a period consistent with industry standards, our business could suffer serious harm. In addition, depending on the nature and duration of the disruption or interruption, we might be vulnerable to fraud, additional expense or other losses, or to a loss of business and/or clients. Additionally, natural disasters and external events could affect the business and operations of our clients, which could impair their ability to pay for our products, or otherwise adversely affect their business dealings with us, any of which could have a material adverse effect on our business, financial condition and results of operations.
Failure to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, and as a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business. If we identify material weaknesses in our internal control over financial reporting or are otherwise required to restate our financial statements, we could be required to implement expensive and time-consuming remedial measures and could lose stockholder confidence in the accuracy and completeness of our financial reports. This could have an adverse effect on our business, financial condition and results of operations, including the valuation of the Company, and could potentially subject us to litigation.
Risk of Litigation
The Company’s activities may include activities that will subject it to the risks of becoming involved in litigation by third parties, including product liability claims arising from the sale and use of our products. The expense of defending claims against the Company by third parties and paying any amounts pursuant to settlements or judgments would be borne by the Company and would reduce Company’s net assets. The Company and certain of its affiliates will be indemnified by the Company in connection with such litigation, subject to certain conditions.
Recourse to the Company’s Assets
The Company’s assets, including its IP and inventory, may be required to be available to satisfy all liabilities and other obligations of the Company in certain circumstances. Although the Company may seek to structure certain of its business activities through entities having limited liability, there can be no assurance that such efforts will always be successful or respected. If the Company or one or more of its affiliated entities becomes subject to a liability, parties seeking to have the liability satisfied may have recourse to the Company’s assets generally and not be limited to any particular asset of the Company, such as the asset representing the investment giving rise to the liability.
Risks of Uninsured Losses
The Company intends to insure its assets against hazard, to the extent commercially practical, although no such insurance is currently in place. However, some events may be uninsurable or insurance coverage for such events may not be economically practicable. Losses from earthquakes, floods, or other weather phenomena, for example, that could occur may be uninsured and cause losses to the Company. In addition, insurance may lapse without proper notice to the Company and assets may become temporarily uninsured and sustain damage during this period.
Competition for Company Assets
The business and arena in which the Company is engaged is highly competitive, and the Company is competing with numerous established entities, some of which have more financial resources and experience in the healthcare business than the Company. The Company expects to encounter significant competition from other market participants including other healthcare companies, pharmaceutical companies, supplement companies, private equity funds, other private parties, governmental entities, and other individuals or entities with objectives similar in whole or in part to those of the Company. Any general increase in the availability of capital for such purposes may increase competition for the Company and could reduce the profits generated by the Company’s business.
Absence of Registration Under Applicable Securities Laws
This Offering is being made under certain federal and state securities laws exemptions. As such, the Series A Preferred Stock has not been registered under the Securities Act, or applicable state securities laws. Therefore, no regulatory authority has reviewed the terms of this Offering, including the nature and amounts of the compensation, the disclosure of risks and tax consequences, and the fairness of the terms of this Offering. Further, Investors do not have all of the protection afforded in registered or qualified offerings, and they must judge the adequacy of disclosure and the fairness of the terms of this Offering without the benefit of prior review by any regulatory authority.
Furthermore, the Company may fail to comply with the requirements of the exemptions from registration on which it is relying. If so, the Investors could rescind their purchase of Series A Preferred Stock. If enough Investors successfully sought rescission, the Company would face severe financial demands, which would adversely affect the Company.
Risks Specific to Stockholders
Series A Preferred Stock is not Liquid/Restrictions on Withdrawal of Stockholder Capital
Stockholders will not be allowed to issue a request for a redemption of their Series A Preferred Stock. As a result, a stockholder may be required to maintain his, her, or its investment indefinitely.
Restrictions on Transfer of Series A Preferred Stock
Stockholders will not be free to sell or transfer Series A Preferred Stock for one year after issuance and except to the extent any such sale or transfer is in compliance with the Securities Act and state securities laws. There is no market for the Series A Preferred Stock, public or private, and there is no likelihood or guarantee that one will develop. Stockholders must be prepared to hold their Series A Preferred Stock as a long-term investment.
Rights of Series A Preferred Stockholders are Restricted
No Series A Preferred Stockholder can exercise control over the Company’s affairs, which is entirely in the hands of the Common Stockholders. The Series A Preferred Stock does not entitle the holders thereof to vote on any matters required or permitted to be voted on by the stockholders.
The Company, however, will be amenable to input from Series A Preferred Stockholders and may at its option schedule meetings with the Series A Preferred Stockholders to update them on developments with the Company’s business and receive questions and commentary from such stockholders.
Loss on Dissolution
In the event of a dissolution of the Company, the proceeds realized from the liquidation of assets, if any, will be distributed to the stockholders, but only after the satisfaction of claims of creditors, which include the liquidation and Company expenses. Accordingly, the ability of a stockholder to recover all or any portion of its investment in the Company under such circumstances will depend on the amount of funds so realized and claims to be satisfied therefrom. There is no guarantee of a return of any of a stockholder’s investment.
Series A Preferred Stock is Unsecured and Subordinate to Company Liabilities
The Series A Preferred Stock is unsecured and subordinate to the prior payment in full of all liabilities and expenses of the Company. As a result, upon the liquidation of the Company assets will be available for distribution to the stockholders only if, after payment of all liabilities and expenses, including any amounts owed to any lenders and any amount of Company expenses due but not yet paid, and amounts due to any holders of preferred stock, the Company has any remaining amount of assets available for distribution to the stockholders. The Company may not have sufficient remaining assets upon liquidation to pay the investment amounts of the stockholders or make any distribution of net profits to the stockholders.
Limited Fiduciary Duties
Conflicts may arise between the interests of the Company and those of the stockholders. The Certificate of Incorporation does not create or impose any fiduciary duty on the officers and directors. Furthermore, each of the stockholders waive any and all fiduciary duties that, absent such waiver, may be implied by applicable law, and in doing so, acknowledge and agree that the duties and obligations of the officers and directors to the stockholders are only as expressly set forth in the Certificate of Incorporation. The provisions of the Certificate of Incorporation, to the extent that they restrict the duties and liabilities of the Company otherwise existing at law or in equity, are agreed by the stockholders to replace such other duties and liabilities of the Company.
CONFLICTS OF INTEREST
The Company is subject to various conflicts of interest arising out of its relationship with its Chief Executive Officer. None of the agreements and arrangements between the Company and the Chief Executive Officer, including those relating to compensation, resulted from arm’s length negotiations. In addition, no assurances can be made that other conflicts of interest will not arise in the future. These conflicts of interest include, but are not limited to, the following:
Competition by the Company with Other Affiliated Companies
The officers and directors may, subject to performing any of their obligations set forth in any agreements with the Company, engage in any other activities, ventures, or businesses, regardless of whether those activities, ventures, or businesses are similar to or competitive with the business of the Company. None of the officers or directors nor any of their affiliates shall be obligated to account to the Company or to any stockholder for any profits or income earned or derived from such other activities, ventures, or businesses. None of the officers or directors or any of their affiliates shall be obligated to inform the Company or the stockholders of any investment or business opportunity of any type or description.
Diversity of Stockholders
The Investors may include taxable and tax-exempt persons and entities and may include persons or entities organized in various jurisdictions, including outside of the United States. As a result, conflicts of interest may arise in connection with decisions made by the Company that may be more beneficial for holders of one security as opposed to a holder of different securities.
Lack of Separate Representation
The documents relating to the Company, including the Subscription Documents to be completed by each investor, are detailed and often technical in nature. Legal counsel retained by the Company to advise it on the formation of the Company and the conduct of the Offering (the “Law Firm”) represent the interests of the Company only and will not represent the interests of any Investor. Accordingly, each investor is urged to consult with its own legal counsel before investing in the Company. The Law Firm does not investigate or verify the accuracy and completeness of information set forth in this PPM concerning the Company, the officers and directors of the Company or any of their respective affiliates, personnel and prior performance. In advising as to matters of law (including matters of law described in this PPM), the Law Firm has relied, and will rely, upon representations of fact made by the Company and other persons in this PPM and other documents. Such advice may be materially inaccurate or incomplete if any such representations are themselves inaccurate or incomplete, and the Law Firm generally will not undertake independent investigation with regard to such representations.
Indemnification
Pursuant to the Certificate of Incorporation, the Company will to the fullest extent permitted by the Delaware Act, as the same now exists or may hereafter be amended, substituted, or replaced (but, in the case of any such amendment, substitution, or replacement, only to the extent that such amendment, substitution, or replacement permits the Company to provide broader indemnification rights than the Delaware Act permitted the Company to provide prior to such amendment, substitution, or replacement), the Company shall indemnify, hold harmless, defend, pay, and reimburse the Company from and against any and all losses, claims, damages, judgments, fines, or liabilities, including reasonable legal fees or other expenses incurred in investigating or defending against such losses, claims, damages, judgments, fines, or liabilities, and any amounts expended in settlement of any claims (collectively, “Losses”) to which the Company may become subject by reason of:
(i) Any act or omission or alleged act or omission performed or omitted to be performed on behalf of the Company in connection with the business of the Company; or
(ii) The fact that an officer or director is or was acting in connection with the business of the Company as a manager, officer, employee, or agent of the Company or that the Company is or was serving at the request of the Company as a manager, director, officer, employee, or agent of any other Person provided, that (x) the Company acted in good faith and in a mannerbelieved by the Company to be in, or not opposed to, the best interests of the Company, and, with respect to any criminal proceeding, had no reasonable cause to believe its conduct was unlawful, and (y) the Company’s conduct did not constitute fraud, gross negligence, willful misconduct, or a material breach by the Company of the Operating Agreement or any of the Company’s other agreements with the Company, in each case as determined by a final, non-appealable order of a court of competent jurisdiction.
To the extent these indemnification provisions protect the Company at the cost of the stockholders, a conflict of interest may exist.