Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-39059
AVITA MEDICAL, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
85-1021707
(IRS Employer
Identification No.)
28159 Avenue Stanford
Suite 220
Valencia, CA 91355
(Address of principal executive offices and Zip Code)
Registrant’s telephone number, including area code: (661) 367-9170
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.0001 per share
Trading
Symbol
RCEL
Name of each exchange
on which registered
Nasdaq Capital Market
Securities registered pursuant to section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large
accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Emerging growth company
Accelerated filer
Smaller reporting company
☐
☒
☒
☐
☒
If an emerging growth company, indicate by check mark if the registrant has selected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to
Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-
Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued
financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant
recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and nonvoting common equity held by non-affiliates of the registrant was approximately $431,861,022 on June 30, 2023, using the closing price on that day of $17.01.
The number of shares of the registrant’s $0.0001 par value common stock outstanding as of February 7, 2024 was 25,706,662.
List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any
proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1980)
DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
TABLE OF CONTENTS
FORWARD LOOKING STATEMENTS
PART 1
Item 1.
Item 1A.
Item 1B.
Item 1C
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Party Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement and Schedules
Form 10-K Summary
SIGNATURES
i
Page
1
2
2
13
27
27
28
28
28
29
29
29
30
39
39
39
39
40
40
41
41
47
53
59
59
60
60
62
63
Table of Contents
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Annual Report”) and our other public filings contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements give expectations or forecasts of future events. Forward-looking statements can sometimes, but
not always, be identified by words such as “believe,” “expect,” “anticipate,” “contemplate,” “continue,” “estimate,” “goal,” “guidance,” “forecast,” “look forward,”
“outlook,” “predict,” “project,” “plan,” “should,” “target,” “intend,” “may,” “will,” “would,” “potential” and similar expressions to future periods. Forward-looking
statements are not based on historical facts but rather represent current expectations and assumptions. Factors that may influence or contribute to the inaccuracy of the
forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation: future revenues; solvency;
industry market conditions; increased competition; changes in our production capacity; failure to obtain, maintain and enforce our intellectual property rights; failure to
obtain and/or maintain regulatory approvals and comply with applicable regulations;; the conduct or outcome of pre-clinical or clinical (human) studies; operational and
management restructuring activities; our ability to find and maintain partnerships relating to collaborations, strategic arrangements and licensing arrangements; our
ability to expand our sales organization to address effectively existing and new markets that we intend to target; our ability to attract and retain qualified personnel,
including management; tax and interest rates; inflation, recession, financial market disruptions and other economic conditions; productivity, business process,
rationalization, investment, acquisition and acquisition integrations, consulting, operational, tax, financial and capital projects and initiatives; changes in the legal or
regulatory environment; the impact of a cybersecurity breach, terrorist attack, pandemic or epidemic, or natural disaster; and future working capital, costs, revenues,
business opportunities, cash flows, margins, earnings and growth.
Forward-looking statements relate to the future and are subject to many risks, assumptions and uncertainties, including those risks set forth in this Annual
Report in Part I, Item IA Risk Factors and elsewhere. Although we believe the expectations reflected in the forward-looking statements are reasonable, actual results,
developments and business decisions could differ materially from those contemplated by such forward-looking statements. The environment in which we operate is
highly competitive, highly regulated and rapidly changing and it is not possible for our management to predict all risks, as new risks emerge from time to time.
All subsequent written and oral forward-looking statements by or attributable to us or persons acting on our behalf are expressly qualified in their entirety by
these factors. We undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future developments or
otherwise, except as may be required by law.
As used herein, unless the context otherwise requires, references to "we,” “our,” “us,” “the Company,” and “AVITA Medical” refer to AVITA Medical, Inc.,
a Delaware corporation, and its subsidiaries (including AVITA Medical Pty Limited ("AVITA Australia").
Currency
In this Annual Report, all references to “dollars” or “$” are to the currency of the United States.
1
Table of Contents
Item 1. BUSINESS
OVERVIEW
PART I
AVITA Medical is a commercial-stage regenerative medicine company transforming the standard of care in wound care management and skin restoration
with innovative devices. At the forefront of our portfolio is our patented and proprietary RECELL® System (“RECELL System” or “RECELL”), approved by the United
States Food & Drug Administration (“FDA”) for the treatment of thermal burn wounds and full-thickness skin defects, and for repigmentation of stable depigmented
vitiligo lesions. RECELL harnesses the regenerative properties of a patient’s own skin to create an autologous skin cell suspension, Spray-On Skin™ Cells, delivering a
transformative solution at the point of care. This breakthrough technology serves as the catalyst for a new treatment paradigm enabling improved clinical outcomes.
CORPORATE HISTORY
AVITA Australia, the former parent company of AVITA Medical, was founded in December 1992. AVITA Australia began trading its American Depositary
Shares on the Nasdaq Capital Market (“Nasdaq”) under the symbol “RCEL” on October 1, 2019. Today, our common stock trades on the Nasdaq under the symbol
“RCEL” and our CHESS Depositary Interests (“CDIs”) are traded on the ASX under the symbol “AVH.”
STRATEGY
AVITA Medical is focused on becoming the leading provider of regenerative medicine addressing unmet medical needs in burn injuries, full-thickness skin
defects, and in skin repigmentation, such as vitiligo. We will continue to drive commercial revenue growth to generate positive cash flow and achieve operating profit.
To achieve these objectives, we intend to:
•Become the standard of care in the U.S. burns industry by increasing RECELL penetration and adoption in burn centers
•Expand into U.S. trauma centers to increase utilization of RECELL for the treatment of full-thickness skin defects
•Launch RECELL GO™ following FDA approval to increase market adoption and expand our customer base
•Expand our global presence within the European Union and Australia through the exclusive use of third-party distributors
•Continue to build upon commercial activities in Japan through our partnership with COSMOTEC Company, Ltd (“COSMOTEC”) with our current
Pharmaceuticals and Medical Devices Act (“PMDA”) approval for RECELL with an indication in burns
•Continue to pursue business development opportunities that are complementary to our core RECELL System indications and/or our targeted markets, such as
the agreement with Stedical Scientific, Inc. Refer to Footnote 20 for further details
•Establish commercial payor coverage for the RECELL System in the U.S. for the treatment of vitiligo lesions; initial phase of coverage expected during the
fourth quarter of 2025
PRODUCT PORTFOLIO
RECELL Platform
RECELL is a single use, stand-alone, battery operated, autologous cell harvesting device containing enzymatic and buffer solutions, sterile surgical
instruments, and actuators. RECELL is FDA approved for the treatment of thermal burn wounds and full-thickness skin defects, and for repigmentation of stable
depigmented vitiligo lesions. The platform technology of the RECELL System enables a thin split-thickness skin sample from the patient to be processed and prepared,
producing an autologous cellular suspension called Spray-On Skin Cells. These Spray-On Skin Cells are prepared at the point of care in as little as 30 minutes, providing
a new way to treat thermal burn wounds and full-thickness skin defects.
The regenerative skin cell suspension includes the patient's own skin cells, including keratinocytes, fibroblasts, and melanocytes, all of which play critical
roles in skin regeneration. The application of these cells stimulates healing and repigmentation throughout the wound bed. The patented and proprietary platform
technology underlying the Spray-On Skin Cell suspension originated in Australia, based on the seminal work of Professor Fiona Wood and fellow scientist Marie Stoner.
In September 2018, the FDA approved RECELL as a Class 3 device through a premarket approval (“PMA”) for the treatment of second and third-degree
2
Table of Contents
acute thermal burn injuries in patients 18 years and older. Following receipt of our original PMA, we commenced commercialization of the RECELL System in January
2019 in the United States.
In June 2021, the FDA approved expanded use of RECELL in combination of meshed autografting for acute full-thickness thermal wounds in both pediatric
and adult patients, and for full-thickness thermal burns greater than 50% total body surface area (“TBSA”). As a result of having achieved an expanded indication for
use in pediatric burns, the Biomedical Advanced Research and Development Authority (“BARDA”) funded U.S. Pediatric Burns trial has been closed to new enrollment.
In February 2022, the FDA approved a PMA supplement for the RECELL Autologous Cell Harvesting Device, an enhanced ease-of-use device aimed at
providing clinicians a more efficient user experience and streamlined workflow.
On June 7, 2023, the FDA approved a PMA supplement for full-thickness skin defects based on results from our pivotal trial for soft tissue repair and
reconstruction. Following this approval, we commenced a commercial launch on June 8, 2023.
On June 16 2023, the FDA approved a PMA application for the repigmentation of stable depigmented vitiligo lesions. Following FDA approval, the
Company established a three-step framework to secure reimbursement. The first step is a post-market study called, TONE. TONE will evaluate repigmentation using the
RECELL device and will also seek to measure the improvement in the quality-of life following treatment of stable vitiligo with RECELL. We expect to submit the study
for publication by the end of 2024.The second step is to capture the longitudinal healthcare costs for a vitiligo patient through a health economics, which is also expected
to be submitted for publication by the end of 2024. Following publication of both studies, it is expected that conversations with commercial payors will begin during the
second quarter of 2025. Subsequently, we anticipate commercial coverage will be rolled out on a regional basis, considering state and geographic factors. The initial
phase of coverage is likely to begin in the fourth quarter of 2025, with appropriately sized commercial support as coverage is established.
Additionally, on June 29, 2023, we submitted a PMA supplement to the FDA for RECELL GO™. RECELL GO maintains the FDA Breakthrough Device
designation from predecessor devices. On September 29, 2023, the Company received notice from the FDA that additional information regarding the PMA supplement
is required for the continuation of a substantive review for RECELL GO. This request, which is not unique to the Breakthrough Device Program, placed the application
file on hold while the Company addresses the FDA's questions. A category of questions posed by the FDA requires additional in-house testing, which is substantially
completed. Consequently, we expect to submit a response to the FDA no later than February 28, 2024. Upon the submission to the FDA, the application will reenter the
180-day cycle, with 90 days remaining in the review period. This timing would imply FDA approval on May 30, 2024, with a product launch on May 31, 2024.
TARGET MARKETS
Burns
Acute thermal burns are life-threatening and debilitating injuries that are among the most challenging and expensive to manage. These injuries require
complex surgical procedures, long and costly hospitalization, and have a high potential for clinical complications and requirement for rehabilitation and scar treatment.
In the U.S., approximately 40,000 people have burn injuries severe enough to require hospital admission annually, and it is estimated that 3,300 patients die each year.
The majority of patients treated on an inpatient basis in the U.S. are treated in specialized burn centers.
Severe burns (typically defined as second- and third-degree) are commonly treated with autologous split-thickness skin grafts (“STSGs”) to achieve definitive
closure of the burn wound. In a STSG, or autograft, donor skin is harvested from a healthy area of the patient’s skin. The donor skin is then typically perforated into a
mesh that can be expanded and transferred to cover the prepared burn injury. Treatment with STSG results in additional trauma for the patient due to creation of a new
donor site wound. Although the use of STSG has been a standard treatment for more than 50 years, autografting is associated with significant pain, itching, infection,
dyschromia, dyspigmentation, delayed healing, and hypertrophic scarring of the donor site.
The clinical benefits of earlier wound closure are well recognized and include increased survival, reduced hospital length of stay, decreased pain duration, and
reduced infection-related complications. However, in large burn injuries, the patient may have insufficient donor skin available to allow for immediate and complete
treatment of the entire burn injury area when using traditional grafting techniques. The lack of available healthy donor skin in patients with large burn injuries is often
the central problem impacting time to autografting and definitive closure of the wounds. In extensively burned patients, surgeons often must wait until the donor sites
have healed so they can re-harvest from the sites, resulting in delays in treatment and closure, requiring multiple procedures, and extending hospital stay. While waiting
for donor skin, the burn wounds may be temporarily covered by allogeneic skin (allograft, cadaver skin) or xenograft (typically pig skin). The overall cost of treatment
with STSG is expensive - for example it would cost
3
Table of Contents
approximately $579,000 and 59.4 days in hospital for a patient with a 40% TBSA mixed-depth burn injury to recover and return to normal day to day activities.
The pivotal studies leading to the RECELL System’s FDA PMA for the treatment of acute thermal burns demonstrated that the RECELL System treated
burns used 97.5% less donor skin when used alone in second-degree burns, and 32% less donor skin when used with autograft for third-degree burns, compared to
standard of care autografting. In these studies, a statistically significant reduction in donor skin required to treat burn patients with the RECELL System was realized
without any associated compromise to healing or safety outcomes. Donor site outcomes from the clinical trial for second-degree burns also revealed a statistically
significant reduction in patient-reported pain, increased patient satisfaction and improved scar outcomes.
Retrospective studies demonstrated that fewer autografting procedures are required for definitive closure of full-thickness burns when using the RECELL
System versus conventional autografts. In pediatric cases (N = 284), treatment with the RECELL System resulted in a 56% reduction in the mean number of autograft
procedures required compared to National Burn Repository (“NBR”) data. Additionally, in adult patients with greater than 50% TBSA (N=318), the RECELL System
resulted in a 60% reduction in the mean number of autograft procedures versus NBR data.
In addition to robust clinical data, RECELL has proven health economic benefits and a compelling cost-effectiveness model which shows that treatment
using the RECELL System for deep partial-thickness burns reduces total treatment costs by an average of 26%, or approximately $37,000, for patients with 10% TBSA
and approximately $150,000, for patients with 40% TBSA. For full-thickness burns, treatment using the RECELL System reduced total treatment cost by 3%, or
approximately $6,000 for patients with 10% TBSA and by 42% or approximately $243,000, for patients with 40% TBSA. These cost reductions are attributed to
decreasing the length of hospital stay, reducing the number of procedures required to close the burn wound, and minimizing the donor site size and associated wound
care. All of these cost savings estimates are net of the cost of the RECELL System.
A budget impact model was developed and has been used to calculate the annual budget impact of current standard of care for the treatment of burns versus
treatment using the RECELL System for a burn center with 200 patients. The model shows that treatment using the RECELL System reduces annual total treatment costs
from approximately $39.4 million to $32.6 million, saving 17% or approximately $6.8 million per year. In addition, real world evidence has been published by the
Doctors at IQVIA and funded by the Company and BARDA indicating that these economic savings are demonstrated in a wide range of burn sizes.
The market for the treatment of burns in the U.S. is highly concentrated, with approximately 140 burn centers and approximately 300 burn surgeons who treat
the majority of severe burn patients in the country (i.e., ~75%). Accordingly, our target market was predominantly burn centers, of which half are trauma centers. With
FDA approval for full-thickness skin defects, we are expanding into these trauma centers, with the goal of capturing approximately 30% of RECELL-eligible burn
injuries that are treated outside of dedicated burn centers.
Looking ahead, our goal is to establish RECELL as the standard of care for any burn injury that requires grafting for patients with 5% TBSA injury or greater.
In the U.S., we estimate that there are approximately 35,000 patients annually that could benefit from our technology. Each RECELL System can treat up to 10% TBSA,
and many patients require more than one device.
AVITA Medical has a policy of providing the RECELL System to a provider only after they have been certified, which includes extensive training in the use
of the product and in the aftercare of the patient. In general, we have found that most U.S. burn centers follow the industry-standard process of evaluating the RECELL
System and then taking it through their hospital’s Value Analysis Committee (“VAC”) prior to purchasing. In general, most surgeons follow a typical adoption curve,
starting from where they see the greatest economic and clinical value, which is the use of RECELL for treatment of larger burns. With time and continued use, surgeons
typically progress to adoption of RECELL for smaller, less severe burns and facial burns.
In the U.S., several existing reimbursement codes were in place prior to the commencement of commercial sales of the RECELL System. For inpatient
treatment of burn patients, U.S. hospitals are reimbursed under Diagnosis Related Group ("DRG") Codes based on diagnosis of a patient’s injuries. For physicians,
Current Procedural Terminology ("CPT") codes for use in RECELL System procedures are recommended by the American Burn Association and are the same for both
inpatient and outpatient use. In August 2020, we filed a Transitional Pass-through Payment Application (“TPT”) with The Centers for Medicare & Medicaid Services
(“CMS”) to support a separate, additional Medicare payment for use of the RECELL System in the Outpatient Setting. On November 3, 2021, the Company was
informed that CMS approved our TPT submission with the code effective as of January 1, 2022. The new “C” code provides additional payment which offsets the cost
of the device in hospital outpatient facilities and ambulatory surgical centers for Medicare beneficiaries over a 2-to-3-year period before converting to a permanent code.
Following the granting of the code, the Company is working with commercial carriers to ensure broader coverage. The new “C” code is not indication specific and lays
the foundation for growth in other indications outside of acute thermal burns (such as soft tissue repair).
4
Table of Contents
Full-Thickness Skin Defects
A wound is a breach in the integrity of the skin, with full-thickness wounds extending through the dermal layer to deeper tissues. Full-thickness skin defects
include traumatic avulsion (e.g. degloving), surgical excision (e.g. necrotizing soft tissue infection), or resection (e.g., skin cancer). The cause or origin of the wound
directly impacts healing potential, response to treatment options, and likely complications.
Traumatic Wounds. Traumatic wounds are subdivided by mechanism of injury into lacerations, abrasions, avulsions, crush, penetrating, or bites. Traumatic
wounds often arise in high-energy circumstances and result in extensive zones of injury with damage to multiple tissue types. Missing cutaneous tissue, macerated edges,
and contamination are common and can complicate wound healing. In the U.S., we estimate there are approximately 122,000 annual procedures that are eligible for
treatment with RECELL.
Surgical Wounds. Surgical wounds are precise incisions intentionally created to access underlying organs, relieve compartmental pressure, excise diseased
cutaneous tissue (infected or severely inflamed or necrotic), or to harvest tissue for autografting (flaps and grafts). In the U.S., we estimate there are approximately
12,500 annual procedures that are eligible for treatment with RECELL.
Surgical Excisions for Cancer. Surgical excisions for cancer are procedures used to remove and treat various skin cancers. In the U.S., we estimate there are
approximately 136,000 annual procedures that are eligible for treatment with RECELL.
Chronic Wounds. Chronic wounds are wounds that do not heal within an expected time frame. These types of wounds include diabetic foot ulcers, venous leg
ulcers, pressure ulcers, and non-pressure ulcers. In the U.S., we estimate there are approximately 128,000 annual procedures that are eligible for treatment with
RECELL.
Similar to the burns indication, full-thickness skin defects are associated with large areas of skin loss and as such, some of the top unmet needs identified by
surgeons are closely aligned:
•Reduced donor skin harvesting
•Reduced scarring
•Reduced pain
•Uniform pigmentation with surrounding skin
Given the interest to reduce donor skin harvesting, just as with the burns indication, we designed a clinical trial to demonstrate the use of less donor skin
without compromising healing outcomes relative to conventional autografting. The trial was essentially a repeat of the successful previous trial in full-thickness burns,
but with a population of patients with full-thickness, non-burn injuries. The study design included two co-primary endpoints based on pairwise comparisons where each
subject received both RECELL treatment and standard of care treatment: one endpoint had a hypothesis of superiority for donor skin sparing and the other co-primary
endpoint had a hypothesis of non-inferiority for healing. Both co-primary endpoints were met, demonstrating statistically significant donor sparing and non-inferior
healing outcomes with RECELL versus standard of care, meaning less skin from the patient is required to repair and close the wound without compromising the healing
outcomes relative to convention autografting. In addition to these results, RECELL has been successfully used outside the U.S. for many years and there exist several
case reports on the treatment of traumatic injuries that have been the subject of peer-reviewed scientific publications and presentations at medical conferences.
In the U.S., we estimate that there are approximately 400,000 full-thickness skin defect procedures annually that are eligible for treatment with RECELL. The
majority of our current burn accounts represent opportunities for use of RECELL in the treatment of full-thickness skin defects. In the second quarter of 2023, we
expanded our commercial organization from 30 to 70. Our team is targeting approximately 800 acute wound accounts, representing both burn and trauma accounts. In
the first half of 2024, we plan to further expand our commercial organization from 70 to 100.
The approval for the treatment of full-thickness skin defects represents a significant opportunity in which we are leveraging our existing resources while also
creating synergies with the burns market. Approximately 50% of the U.S. burn centers are classified as trauma centers. Those trauma centers currently utilizing RECELL
are now able to use RECELL to treat full-thickness skin defects as these centers have already approved RECELL through their respective VACs. Further, we are
expanding our burn market opportunity by virtue of our approval for full-thickness skin defects as we are extending our reach to include trauma centers.
5
Table of Contents
We anticipate RECELL being used in both the inpatient & outpatient settings across a wide range of wound sizes. From a reimbursement perspective, the
same DRG code that is currently being used to treat inpatient burns is now being applied for the treatment of full-thickness skin defects. Additionally, the outpatient TPT
“C” code we have been granted for RECELL can also be utilized for the treatment of full-thickness skin defects in the outpatient setting.
Vitiligo
Vitiligo is a disease that causes the loss of skin pigmentation, or color, in patches. The extent of color loss from vitiligo is unpredictable, can affect the skin on
any part of the body, and may also affect hair and the inside of the mouth. Vitiligo occurs when melanocytes, the pigment-producing skin cells, die or stop producing
melanin, the pigment that gives skin, hair, and eyes color. Vitiligo is believed to be an autoimmune disorder in which a patient’s immune system attacks and destroys the
melanocytes in the skin. It may also be caused by heredity factors or a triggering event, such as sunburn, stress, or exposure to industrial chemicals. Vitiligo affects
people of all skin types, but it may be more noticeable in people with darker skin. It is estimated that worldwide vitiligo prevalence is between 0.5 to 2% of the
population. The condition is not life-threatening or physically painful, but it can significantly alter physical appearance and have negative emotional and psychological
consequences, thus causing a cascade of medical conditions with associated costs.
Vitiligo cannot be cured at present, and treatments generally fall into one of two categories:
1.Treatments to arrest the spread of vitiligo, such as steroid creams and non-steroidal anti-inflammatory creams. There are also a number of therapies under
development designed to target the underlying autoimmune disease. One challenge in terms of achieving the desired patient outcome is that stopping the
spread of vitiligo may not restore pigmentation to the areas already damaged.
2.Treatments to restore pigmentation include skin grafting, laser phototherapy (with and without topicals), and Melanocyte-Keratinocyte Transplantation
Procedure (“MKTP”). MKTP requires expensive and substantial laboratory equipment and is currently only available in a handful of locations in the U.S.
RECELL does not treat underlying autoimmune disease. Rather, it works to restore pigmentation.
According to the FDA panel in 2021, there is a high level of depression, anxiety, and negative quality of life among vitiligo patients. Interest in vitiligo
treatment tends to increase in individuals who have lesions in more visible areas (such as the face, neck and hands) as well as the younger female population. In 2022,
over 400,000 patients pursued treatment for vitiligo in the U.S. We estimate that there are approximately 1.3 million people in the U.S. with stable vitiligo and a total
addressable market of approximately $5 billion. Vitiligo rates a 7.61 on the Dermatology Life Quality Index (“DLQI”), which is in the same range of other aesthetic
dermatological disease analogs which receive healthy positive reimbursement such as Rosacea (5.2), Psoriasis (9.3) and Atopic Dermatitis (12.79).
The market is expected to grow, especially over the next decade, with the advent of novel treatment options including oral and topical Janus Kinase (“JAK”)
inhibitors, such as Opzelura. Although these new products will both stabilize and re-pigment some patients, it is anticipated that many patients will need additional
modes of treatment for re-pigmentation. Products (immunosuppressants) working to stabilize vitiligo and RECELL (working to restore pigmentation) are
complementary. Further, large pharmaceutical companies with immunosuppressant assets in development will likely invest in disease awareness campaigns which will
further grow consumer awareness and the market.
Following FDA approval, we established a three-step framework to secure reimbursement. The first step is a post-market study called, TONE. The second
step is to initiate a health economics study to capture the longitudinal healthcare costs for a vitiligo patient. We expect to submit these two studies for publication by the
end of 2024. Following publication of these studies, we plan to start conversations with commercial payors during the second quarter of 2025. Consequently, we
anticipate commercial coverage will be rolled out on a regional basis, considering state and geographic factors. The initial phase of coverage is likely to begin in the
fourth quarter of 2025, with appropriately sized commercial support as coverage is established.
INTERNATIONAL STRATEGY
In international markets, the RECELL System has received various approvals and registrations to promote skin healing in a wide range of applications
including, burns, full-thickness skin defects, and vitiligo. These endorsements include
TGA registration in Australia, CE mark approval in Europe, and PMDA approval in Japan under the Pharmaceuticals and Medical Devices Act for burns. Our global
commercialization strategy is focused on Australia, the European Union, and Japan.
6
Table of Contents
In February 2019, we entered into a partnership with COSMOTEC, an M3 Group company, to market and distribute the RECELL System in Japan. Following
the approval of reimbursement pricing by the Japanese Ministry of Health, Labor, and Welfare, COSMOTEC began the commercial launch of RECELL in September
2022.
As part of our strategic growth plans, we plan to expand our global presence within the European Union and Australia through the exclusive use of third-
party distributors. In November 2023, we entered into our first European distribution partnership with PolyMedics Innovations GmbH. PolyMedics Innovations will lead
our expansion into Germany, Austria, and Switzerland.
We plan to actively identify new distribution partners in our focused markets over the next 6 to 12 months.
RESEARCH & DEVELOPMENT
Our research and development activities are focused on advancing our innovative products and building a comprehensive portfolio of solutions, as well as
developing clinical applications to advance the management of wound care. Additionally, we continue to conduct clinical studies to provide further efficacy and health
economic evidence.
We continue to commit resources to product development to ensure the RECELL system continues to evolve and that we maintain robust patent protection. In
June 2023, we submitted a PMA supplement to the FDA for RECELL GO™. RECELL GO is comprised of a reusable durable base unit and a single-use sterile
cartridge. The RECELL GO system aims to control the current manual process of cell disaggregation and filtration, as well as soak time, reducing variability across
medical providers compared to the current device. This revolutionary design will also reduce training requirements, allowing us to leverage our sales team more
effectively. In turn, we believe the reduction in training medical professionals will lead to increased adoption across our indications and the broader market.
Additionally, RECELL GO offers us an opportunity to expand our intellectual property portfolio. With each iteration of our RECELL System, we anticipate
preservation of the therapeutic power of Spray-on Skin Cells, deployed in devices that become appropriate for use in an increasing range of clinical settings. This is
particularly important as we aim to enter the dermatology space, where there is a shift toward an emphasis on the volume of patients treated in a day.
RECELL GO maintains the FDA Breakthrough Device designation from predecessor devices. On September 29, 2023, we received notice from the FDA that
additional information regarding the PMA supplement is required for the continuation of a substantive review for RECELL GO. This request, which is not unique to the
Breakthrough Device Program, placed the application file on hold while we address the FDA's questions. A category of questions posed by the FDA requires additional
in-house testing. The testing is already underway and we expect to submit a response to the FDA no later than February 28, 2024. Upon submitting a response to the
FDA, the application will reenter the 180-day cycle, with 90 days remaining in the review period. This timing would imply a product launch on May 31, 2024.
TONE will evaluate repigmentation using the RECELL device and will also seek to measure the improvement in the quality-of life following treatment of
stable vitiligo with RECELL. TONE, including publication, is expected to be complete by the end of 2024. The second step is to initiate a health economics study to
capture the longitudinal healthcare costs for a vitiligo patient, which is expected to be completed by the end of 2024. The purpose of these studies is to demonstrate how
treating vitiligo with RECELL can significantly reduce the lifetime healthcare cost of patients. As a result, commercial payors will stand to benefit economically by
providing coverage of RECELL for the repigmentation of stable depigmented vitiligo lesions. Following publication of these studies, we expect conversations with
commercial payors to begin during the second quarter of 2025. Commercial coverage will be rolled out on a tiered basis based on state and geographic factors. The
Company anticipates that the initial phase of reimbursement coverage will likely begin in the fourth quarter of 2025, with appropriately sized commercial support as
coverage is established.
SALES AND MARKETING
Our commercial organization is focused on clinical case support, staff training, and building awareness to further expand interest in the clinical and economic
benefits of RECELL. It is not uncommon in the treatment of wounds to have rotating staff and it is our commitment for all those working with RECELL to be
comfortable with the technology both during the procedure as well as during aftercare.
We sell RECELL in the U.S. through our direct commercial organization of 70 individuals, which consists of 10 managers, 40 regenerative tissue specialists,
and 20 clinical training specialists. Our commercial organization is composed of highly experienced medical sales representatives as well as former burn and trauma
nurses. This organization covers both thermal and non-thermal wound accounts. We plan to further expand our commercial organization to 108 in the first half of 2024.
7
Table of Contents
HUMAN CAPITAL
AVITA Medical’s investment in the U.S. commercial success of RECELL has led to the development of best-in-class teams supporting sales, clinical
education and training, reimbursement, medical affairs, as well as corporate management and infrastructure. As of December 31, 2023, we had 207 full-time and part-
time employees. As of December 31, 2023, 99% of our workforce was based in the United States, with a significant number of our management and professional
employees having prior experience with leading medical product, biotech, or pharmaceutical companies. None of our employees are covered by collective bargaining
agreements.
We embrace differences, diversity and varying perspectives amongst our employee base and are proud to be an equal opportunity employer. We do not
discriminate based on race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status,
sex, gender, gender identity, gender expression, age, military or veteran status, sexual orientation or any other protected characteristic established by federal, state, or
local laws. A diverse workforce as well as an inclusive culture and work environment are fundamentally important and strategic to us, beginning with our Board of
Directors and CEO and extending to all levels of the Company. As of December 31, 2023, the Directors of the Company were 28.5% female, our senior executive team
was 30% female and our total employee base was 50.2% female. In addition to promoting gender diversity, we encourage ethnically diverse talent when recruiting as
well as providing employee training and development focusing on workplace diversity and inclusion.
INTELLECTUAL PROPERTY
We seek to protect our intellectual property, core technologies, and other know-how through a combination of patents, trademarks, trade secrets,
confidentiality agreements, licenses, and IP assignments with our employees, consultants, business partners, suppliers, customers, and others. Additionally, we rely on
our research and development program, clinical trials, know-how and marketing programs to advance our products and product candidates, and to expand our intellectual
property rights.
As powerful complements to our IP rights, we also believe that the regulatory approval processes around the world will continue to provide additional and
significant barriers to entry against meaningful competition.
As of December 31, 2023, AVITA Medical’s patent portfolio comprised 22 patent grants and 31 pending patent applications worldwide, with patent coverage
either secured or in progress in the U.S., China, Japan, Australia, Brazil, Canada, France, Germany, Hong Kong, Italy, Spain, the United Kingdom, and at the European
Patent Office (“EPO”).
AVITA Medical’s patent portfolio covers the original RECELL product, all-in-one RECELL, RECELL GO, methods of using the RECELL System, methods
of evaluating the therapeutic potential of Regenerative Epidermal Suspension (“RES”), a cell-free and allogeneic RES supernate, and methods of preparing a cell
suspension with exogenous agents to promote wound healing. We expect that our research and development pipeline, strategic partnerships, and improvements to the
RECELL System and RES will result in additional and diverse patent applications in the next calendar year.
In 2019, AVITA Medical filed a Patent Term Extension (“PTE”) application with the U.S. Patent and Trademark for U.S. Patent No. 9,029,140, which covers
the RECELL System, as a result of patent term lost to the FDA regulatory process. The PTE application was approved, and the patent term of U.S. Patent No. 9,029,140,
has been extended to April 9, 2024. AVITA Medical’s other patents have expected expiration dates ranging from 2032 to 2033, while AVITA Medical’s pending patent
applications, if granted, would have expiration dates ranging from 2032 to 2042.
Additionally, AVITA Medical owns and defends a global trademark portfolio comprising 142 registered trademarks, common or state law trademarks, and
pending trademark applications, including “AVITA Medical,” the AVITA Medical logo, “RECELL,” “Spray-On Skin,” the RECELL System logo, “RES,” and others in
the U.S. and international markets. In addition to patent and trademark protection, the Company also relies on trade secrets, know-how, and other proprietary
information to develop and maintain our competitive position. We have robust confidentiality and invention disclosure procedures in place that incentivize our
employees to innovate and allow us to maintain our rights to AVITA Medical innovations.
FACILITIES
AVITA Medical leases approximately 17,500 square feet of administrative and office space in Valencia, California that is currently leased through October
31, 2026. The Company operates an FDA-registered production plant in Ventura, California, in a 27,480 square foot facility that is currently leased through September
30, 2027. The Ventura facility has one 3-year option to extend the lease, at our sole option, which allows for a total lease extension period through September 30, 2030.
The Company also has an administrative office lease in Irvine, California of approximately 10,700 square feet that is currently leased through the end of July
8
Table of Contents
2028. We also lease a limited amount of incubator space in Irvine, California for scientific research and product development activities.
MANUFACTURING, SUPPLY AND PRODUCTION
We produce the RECELL System in the Ventura facility under current Good Manufacturing Practices (“cGMP”) and per ISO 13485, which also meets the
regulatory requirements of other jurisdictions in which we sell the RECELL System. We maintain a state of regulatory compliance and inspection readiness at all times,
and any future material changes to our production processes for the RECELL System will be submitted for approval to the FDA and regulatory authorities in other
jurisdictions as required.
Within the Ventura facility we perform the final manufacturing, assembly, packaging, and warehousing of the RECELL System. Also included within the
Ventura facility is a secure controlled-temperature warehouse that complies with the vendor-managed inventory (“VMI”) requirements of the contract with BARDA.
The VMI contract with BARDA terminated on December 31, 2023.
AVITA Medical sources multiple components, sub-assemblies, and materials from third-party suppliers, who are required to meet our cGMP quality
specifications and associated regulatory requirements. To ensure continuity of supply, we maintain multiple sources of supply for key components, subassemblies and
materials, and the majority of critical raw materials and services have multiple qualified suppliers. While a small number of materials remain single sourced, we are
actively working to qualify and validate additional suppliers for these materials as we continue to evaluate methods of removing risk from the supply chain for the
RECELL System. We believe that our current manufacturing capacity at the Ventura facility is sufficient to meet the expected commercial demand for the RECELL
System for burns, as well as other indications under development, for the foreseeable future.
AVITA Medical serves the U.S. burn market by shipping the RECELL System directly from our Ventura facility to U.S. burn centers. From time-to-time we
may also store small quantities of the RECELL System at satellite distribution sites within the U.S. to better support access of the RECELL System to our U.S.
customers.
BARDA CONTRACT
We have a contract with BARDA, under the Assistant Secretary for Preparedness and Response, within the U.S. Department of Health and Human Services.
The contract provided funding for the development of the RECELL System. We entered into the contract on September 29, 2015, with the original contract period
ending on December 31, 2023. We have executed a contract modification with BARDA to extend the period of performance to September 28, 2025.
Under the original contract, BARDA has provided funding and technical support for the development of the RECELL System. BARDA funded the
completion of two randomized, controlled pivotal clinical trials, as well as Compassionate Use and Continued Access programs, and development of the health economic
model demonstrating the cost savings associated with the RECELL System. BARDA exercised a contract option to fund a randomized, controlled clinical trial for a
pediatric early intervention study which commenced enrollment in March 2020, and closed to enrollment in June 2021, subsequent to FDA-approval of an expanded
RECELL indication for use that includes treatment of pediatric patients. The BARDA contract also supported the Company’s clinical trial in soft-tissue reconstruction,
which led to the full-thickness skin defect indication. Also included in the BARDA contract was a provision for procurement of the RECELL System under a vendor-
managed inventory system to bolster emergency preparedness in the amount of $7.6 million and an additional $1.6 million to support the logistics of emergency
deployment of RECELL Systems for use in mass casualty or other emergency situations. We were contracted to manage this inventory of product until the earlier of the
federal government requesting shipment or at contract termination on December 31, 2023. As of December 31, 2023, we had received cumulative payments of $40.3
million under the original BARDA contract. Under the new contract, BARDA shall have access to AVITA Medical’s RECELL inventory in the event of a national
emergency. BARDA shall pay for the devices requisitioned under this inventory along with a nominal annual maintenance fee to ensure first right of access.
COMPETITION
We currently believe that there is no direct competition for the RECELL system. Additionally, our innovative technology is supported by robust intellectual
property rights and we believe that regulatory approval processes around the world will continue to provide additional and significant barriers to entry against
meaningful competition. Despite these meaningful competitive advantages, the medical device, biotechnology, and pharmaceutical industries are highly competitive and
subject to rapid advancements in technology, as well as changes in practice. In the future, we may face competition from various sources, including medical device,
pharmaceutical, and wound care companies, academic and medical institutions, governmental agencies, medical practitioners, and public and private research
institutions, among others. Consequently, any product that we successfully develop and/or commercialize will compete with both existing therapies and any new
therapies that may emerge in the future.
9
Table of Contents
In the burns and non-burn wound markets, our indirect competitor is primarily split-thickness autografts. While RECELL complements autografts for the
treatment of various wound injuries, split-thickness autografts represent the traditional surgical procedure and the current standard of care. However, based on our
clinical trials, we believe that the RECELL system offers sustainable competitive clinical and economic advantages over the traditional surgical procedure. Additionally,
in the burns market, Vericel Corporation markets Epicel® as a permanent skin replacement for deep-dermal or full-thickness burns; however, Epicel is a cultured
epidermal autograft grown ex vivo and exclusively used to treat burns comprised of greater than or equal to 30% of TBSA.
GOVERNMENT REGULATIONS
The production and marketing of the RECELL System and any additional product candidates developed in future ongoing research and development
activities are subject to regulation by numerous governmental authorities including the FDA in the U.S. and similar agencies in other countries throughout the world.
Pursuant to its authority under the Federal Food, Drug, and Cosmetic Act (the “FD&C Act”), the FDA has jurisdiction over medical devices in the U.S. The FDA
regulates the design, development, manufacturing, and distribution of medical devices to ensure that medical products distributed domestically are safe and effective for
their intended uses. The FD&C Act classifies medical devices into one of three categories based on the risks associated with the device and the level of control necessary
to provide reasonable assurance of safety and effectiveness. Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable
devices, or devices deemed not substantially equivalent to a previously 510(k) cleared device are categorized as Class III. These devices typically require submission and
approval of a PMA. The RECELL System is categorized as a Class III medical device, and in September 2018 the FDA granted our PMA for use in the treatment of
acute thermal burns in patients 18 years and older. In June 2021, the FDA approved a supplement to our PMA to expand the use of RECELL in pediatric patients with
full-thickness burns. In June 2023, the FDA approved a supplement to our PMA to expand the use of RECELL for full-thickness skin defects and an original PMA to
expand the use of RECELL for the repigmentation of stable depigmented vitiligo lesions.
To support PMA supplements in the U.S. or applications for approval in other regions, the completion of additional clinical and non-clinical studies and
supporting development activities will likely be required. Clinical trials can take many years to complete and require the expenditure of substantial resources. The length
of time varies substantially according to the type, complexity, novelty and intended use of the product candidate. We cannot make any assurances that once clinical trials
are completed by us or a collaborative partner, that we will be able to submit as scheduled a marketing approval request to the applicable governmental regulatory
authority, or that such request and application will be reviewed and cleared by such governmental authority in a timely manner, or at all. Although we intend to make use
of fast-track and abbreviated regulatory approval programs when possible and commercially appropriate, we cannot be certain that we will be able to obtain the
clearances and approvals necessary for clinical testing or for manufacturing and marketing our product candidates. Delays in obtaining regulatory approvals could
adversely affect the development and commercialization of our product candidates and could adversely impact our business, financial condition, and results of
operations. During the course of clinical trials and non-clinical studies, product candidates may exhibit unforeseen and unacceptable safety considerations. If any
unacceptable side effects were to occur, we may, or regulatory authorities may require us to, interrupt, limit, delay or abort the development of our potential products.
Any products manufactured or distributed by us pursuant to regulatory approvals are subject to continuing regulation by the FDA and similar agencies in
other countries, including maintaining records supporting manufacturing and distribution under cGMP regulations, periodic reporting, advertising, promotion,
compliance with any post-approval requirements imposed as a conditional of approval, recordkeeping and reporting requirements, including adverse events experiences.
After approval, material changes to the approved product, such as adding new indications or other labeling claims, or changes to the manufacturing process, are subject
to prior approval by FDA and other regulatory agencies. Medical device manufacturers and their subcontractors are required to register their establishments with the
FDA, certain state agencies and international agencies. Subcontractors are subject to periodic announced and unannounced inspections by the FDA and other agencies
for compliance with cGMP requirements. We have established processes in place for categorization of vendor criticality and the associated activities for qualification and
monitoring of vendors. These activities include but are not limited to, requiring certification of supplier in conformance to relevant cGMP regulations and other FDA
and international agency regulatory requirements, approved supplier lists, and regular Company conducted audits. In addition, all goods and services purchased from
suppliers by us must be purchased from only those suppliers on the approved supplier list. Furthermore, the Company itself will continue to comply with all relevant
FDA requirements and regulations and any applicable international agency regulatory requirements in its continued manufacturing and promotion of its FDA approved
commercial product.
10
Table of Contents
In addition to FDA approval in the U.S., the RECELL System has received various approvals and registrations in international markets. The RECELL
System is TGA-registered in Australia, received CE-mark approval in Europe, and received Japan’s Pharmaceuticals and Medical Devices Act (PMDA) approval for
burns in Japan.
HEALTHCARE LAWS AND REGULATIONS
AVITA Medical is a manufacturer of a medical device and therefore we are subject to regulations by the FDA and various federal and state healthcare laws
and regulations. These regulations govern our advertising and promotional practices, our interactions with healthcare providers (“HCPs”), and our reporting of any
payments made to HCPs. AVITA Medical is committed to the highest standards of business conduct in accordance with the AdvaMed Code of Ethics.
Interactions with Healthcare Providers
Providing any benefits or advantages to HCPs in order to induce or encourage the use or referral of AVITA products is strictly prohibited by both U.S. and
international laws and regulations. Restrictions under applicable Federal and State healthcare laws and regulations include but are not limited to the following:
•The Federal healthcare Anti-Kickback Statute (“AKS”). AKS prohibits any person from soliciting, offering, receiving, or providing any remuneration in
cash or in kind, whether directly or indirectly, to induce or reward the referral, purchase, lease, order, or recommendation of any item or service for which
payment may be made in whole or in part under a federal healthcare program such as Medicare and Medicaid.
•The Federal False Claims Act (“FCA”). FCA may be enforced by either the U.S. Department of Justice or private whistleblowers should they choose to
bring civil (qui tam) actions on behalf of the federal government. The FCA imposes civil penalties, as well as liability for treble damages and for attorneys’
fees and costs, on individuals or entities who knowingly present, or cause to be presented, claims for payment that are false or fraudulent to the federal
government. FCA also imposes similar penalties on those who make a false statement material to a fraudulent claim, or who improperly avoid, decrease, or
conceal an obligation to pay money to the federal government.
•State and foreign laws and regulations may apply to sales or marketing arrangements and claims involving healthcare devices or services reimbursed by non-
governmental third-party payors.
Additionally, certain state laws require medical device companies to comply with voluntary guidelines in our interactions with healthcare providers
promulgated by global trade associations and relevant compliance guidance issued by the U.S. Department of Health and Human Services, Office of Inspector General.
Such laws prohibit medical device manufacturers from offering or providing certain types of payments or gifts to health care providers; and/or require the disclosure of
gifts or payments to healthcare providers.
Interactions with Foreign Officials and Entities
The U.S. Foreign Corrupt Practices Act (“FCPA”) prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of
anything of value, directly or indirectly, to any foreign official, political party, or candidate for the purpose of influencing any act or decision of the foreign entity in
order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the U.S. to comply with
accounting provisions requiring the companies to maintain books and records that accurately and fairly reflect all transactions of the companies, including international
subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. We are also subject to similar regulations under
the Australian bribery laws and other anti-corruption laws that apply in countries where we do business.
Federal and State Reporting
Pursuant to the federal National Physician Payment Transparence Program (Open Payments) Act, AVITA Medical is required to report annually to the
Centers for Medicare and Medicaid Services within the U.S. Department of Health and Human Services. Additionally, in adhering to federal reporting requirements, all
relevant state marketing reporting regulations, any payments, and transfers of value to physicians and teaching hospitals, as well as other categories of disclosures must
be reported annually.
11
Table of Contents
Privacy
AVITA Medical must comply with the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) which imposes criminal and civil
liability for, among other conduct, making false statements relating to healthcare matters and executing a scheme to defraud any healthcare benefit program. It also
imposes criminal and civil liability and penalties on those who violate requirements such as mandatory contractual terms which are intended to safeguard the security,
transmission and use of individually identifiable health information.
Various state and foreign laws also govern the privacy and security of health information such as the European Union General Data Protection Regulation
(“GDPR”). GDPR governs the use of individual health data and other personal information and imposes strict obligations and restrictions on the ability to use, access,
process, and disseminate health data from clinical trials and adverse event reporting, among others.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
We are subject to extensive environmental, health and safety laws and regulations in a number of jurisdictions, primarily in California and the U.S.,
governing, among other things: the use, storage, registration, handling, emission and disposal of chemicals, waste materials and sewage; chemicals, air, water and
ground contamination; and air emissions and the cleanup of contaminated sites, including any contamination that could result from spills due to our failure to properly
dispose of production waste materials. Our operations at our Ventura manufacturing facility produce a small amount of waste materials that are considered minimally
hazardous, and we use a third-party waste disposal company to remove any waste generated during operations from the facility. Our activities require permits from
various governmental authorities including local municipal authorities. Local and state authorities may conduct periodic inspections in order to review and ensure our
compliance with the various regulations. We are not presently aware of any violations or deficiencies. These laws, regulations and permits could potentially require the
expenditure by us for compliance or remediation.
AVAILABLE INFORMATION
The Company files annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission (“SEC”)
under the Exchange Act. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the SEC. The public can obtain any documents that we file with the SEC at www.sec.gov. In addition, copies of announcements made by the
Company to ASX are available on the ASX website (www.asx.com.au) and also, under the heading “Investors: Press Releases” at the following link on our website
(https://ir.avitamedical.com/press-releases). We maintain a website at www.avitamedical.com. Since becoming a domestic U.S. issuer on July 1, 2020, our filings with
the SEC, including without limitation, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available free of charge on our website under the heading “Investors: Financials _SEC
Filings” at the following link on our website (https://ir.avitamedical.com/financials/sec-filings), as soon as reasonably practicable after we file or furnish them
electronically with the SEC. Information contained on our website is not part of or incorporated into this annual report.
12
Table of Contents
ORGANIZATIONAL STRUCTURE
Prior to the Corporate Restructuring initiated during fourth quarter, the Company had a total of six subsidiaries and their corporate details and business
activities are listed below:
Subsidiary Name
AVITA Medical Pty Limited
AVITA Medical Americas, LLC
AVITA Medical Europe Limited
Visiomed Group Pty Ltd
C3 Operations Pty Ltd
Infamed Pty Ltd
Place of
Incorporation
Australia
Delaware
United Kingdom
Australia
Australia
Australia
%
Held
100
100
100
100
100
100
Business Purpose
Operating Company
U.S. operations
EMEA operations
Asia Pacific Operations
Holding company
Inactive
By the end of the fourth quarter of 2023 the business activities of AVITA Medical Pty Limited, AVITA Medical Europe Limited, Visiomed Group Pty Ltd,
C3 Operations Pty Ltd and Infamed Pty Ltd were liquidated. AVITA Medical Americas LLC was transferred from C3 Operations Pty Ltd to be directly held by the
Company in preparation for each of AVITA Medical Pty Limited, AVITA Medical Europe Limited, Visiomed Group Pty Ltd, C3 Operations Pty Ltd and Infamed Pty
Ltd to be deregistered during the course of 2024.
After the Corporate Reorganization (expected to occur by the end of the third quarter in 2024), the Company’s entity structure will be as follows:
Subsidiary Name
Place of Incorporation
% Held
Business Purpose
AVITA Medical Americas, LLC
Delaware
100
U.S. operations
Item 1A. RISK FACTORS
Our business faces significant risks. You should carefully consider all of the information set forth in this annual report, including the following risk factors.
Our business, results of operations, and financial condition could be materially and adversely affected by any of these risks, and in such event, the trading price of our
common stock would likely decline, and you might lose all or part of your investment. This Annual Report also contains forward-looking statements that involve risks
and uncertainties, and our results could materially differ from those anticipated in these forward-looking statements. See “Forward-Looking Statements” included
elsewhere within this Annual Report for a discussion of certain risks, uncertainties and assumptions associated with these statements.
Risks Related to Our Business Operations
We have experienced significant losses, expect losses to continue for the foreseeable future and may never achieve or maintain profitability.
Although we have begun full scale marketing and sales of our RECELL® System in the United States and other jurisdictions, we have not yet achieved
profitability. We had a total net loss of $35.4 million and $26.7 million for the year ended December 31, 2023 and December 31, 2022, respectively. We have incurred a
cumulative deficit of $298.0 million through December 31, 2023. We anticipate that we may continue to incur losses at least until U.S. sales of the RECELL System are
adequate to fund operating expenses. We may not be able to successfully achieve or sustain profitability. Successful transition to profitable operations is dependent upon
achieving a level of revenues adequate to support our cost structure, including in new markets for which we are not presently approved.
Servicing our debt requires a significant amount of cash and we are subject to a number of restrictive covenants relating to our indebtedness, which may
restrict our business and financing activities.
Pursuant to the Credit Agreement that the Company entered with OrbiMed Advisors, LLC ("Credit Agreement") on October 18, 2023, we incurred $40.0
million of indebtedness secured by substantially all of our assets and have the ability to incur an additional $50.0 million of indebtedness. This level of debt could have
significant consequences on future operations, including increasing our vulnerability to adverse economic and industry conditions and limiting our flexibility in planning
for, or reacting to, changes in our business and the markets in which we compete.
13
Table of Contents
Our ability to make scheduled payments of interest depends on our future performance, which is subject to interest rate risk, economic, financial, competitive
and other factors beyond our control. We are exposed to risks related to a potential rising interest rate environment for the debt, which could cause our borrowing costs
to rise and impact our liquidity. Our business may not generate cash flow from operations in the future sufficient to service our debt in cash and make necessary capital
expenditures. In addition, if the Company’s net revenue does not equal or exceed a certain amount for upcoming fiscal periods as set forth in the Credit Agreement, then
the Company will be required to repay five percent of the outstanding principal amount of its indebtedness in equal quarterly installments, in addition to a repayment fee
and a prepayment fee.
If we are unable to generate sufficient cash flow to satisfy payment obligations under the Credit Agreement, we may be required to adopt one or more
alternatives, such as obtaining additional equity capital on terms that may be onerous or highly dilutive. We may not be able to engage in any of these activities or
engage in these activities on desirable terms, which could result in a default on our debt obligations.
The restrictions and covenants in the Credit Agreement may also prevent us from taking actions that we believe would be in the best interests of our business,
and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted. Our ability to
comply with these covenants in future periods will largely depend on the success of our products, and our ability to successfully implement our overall business strategy.
We may be unsuccessful in obtaining waivers or amendments to restrictions and covenants in the agreements. The breach of any of these covenants and restrictions
could result in a default under the Credit Agreement, which could result in an acceleration of the repayment of our indebtedness.
Provisions in our U.S. government contracts, may affect our intellectual property rights.
Certain of our activities have been funded, and may in the future be funded, by the U.S. government, including through previous contracts with BARDA.
When new technologies are developed with U.S. government funding, the government obtains certain rights in any resulting patents, including the right to a
nonexclusive license authorizing the government to use the invention and rights that may permit the government to disclose our confidential information to third parties
and to exercise “march-in” rights. The government can exercise its march-in rights if it determines that action is necessary because we fail to achieve practical
application of the U.S. government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to
give preference to U.S. industry. In addition, U.S. government-funded inventions must be reported to the government, U.S. government funding must be disclosed in any
resulting patent applications, and our rights in such inventions may be subject to certain requirements to manufacture products in the United States.
Development and commercialization of our products require successful completion of the regulatory approval process and may suffer delays or fail. We
may be unsuccessful in obtaining additional approvals for our RECELL System for full thickness skin defects and skin conditions such as vitiligo.
In the United States, as well as other jurisdictions, we have been and will be required to apply for and receive regulatory authorization before we can market
our products. For instance, our RECELL System has been approved by the FDA and regulatory authorities in Australia, the EU and Japan for use in certain treatments of
burns, acute wounds, scars and vitiligo. However, we will require additional clinical data or approvals from regulatory authorities within these countries to market the
product for the treatment of other indications, and from any other jurisdictions in which we seek to market the product. This process can be time-consuming and
complicated and may be unsuccessful or otherwise result in unanticipated delays or fail altogether. For example, on September 29, 2023, the Company received notice
from the FDA that additional information regarding the Company’s PMA supplement for its latest device, RECELL GO is required for the continuation of the FDA’s
review. This request, which is not unique to the Breakthrough Device Program, placed the application file on hold for approximately 4 to 6 months while the Company
addresses the FDA's questions.
To secure marketing authorization, an applicant generally is required to submit an application that includes the data supporting preclinical and clinical safety
and effectiveness as well as detailed information on the manufacturing and control of the product, proposed labeling and other additional information. Before marketing
authorization is granted, regulatory authorities may require the inspection of the manufacturing facility or facilities and quality systems (including those of third parties)
at which the product candidate is manufactured and tested, as well as potential audits of the non-clinical and clinical trial sites that generated the data cited in the
marketing authorization application.
We cannot predict whether any additional marketing authorizations will ultimately be granted or how long the applicable regulatory authority or agency will
take to do so. Regulatory agencies, including the FDA, have substantial discretion in the approval process. In addition, the approval process and the requirements
governing clinical trials vary from country to country. The policies of
14
Table of Contents
the FDA or other regulatory authorities may change, and additional government regulations may be enacted that could prevent, limit or delay the necessary approval of
any products we may develop and commercialize. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or
administrative action, either in the United States or elsewhere. If we are slow or unable to adapt to new or changed requirements, or if we are not able to maintain
regulatory compliance, we may lose any marketing approval that we may have obtained, and we may not achieve or sustain profitability.
Additionally, any future regulatory approvals that we receive may also contain requirements for costly post-marketing testing and surveillance to monitor the
safety and effectiveness of the product. Once a product is approved, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage,
advertising, promotion, import, export, and record keeping for the product will be subject to extensive and ongoing regulatory requirements. These requirements include
submission of safety and other post-marketing reports, registration, and continued compliance with good manufacturing practices for any clinical trials that we conduct
post-approval.
Finally, per FDA regulations, changes made to products, specifications, or test data evaluation methodology would generally require communication with the
FDA. There are several pathways for communicating with the FDA of such changes. As part of such review, the FDA may request additional information, at which time
the product may become temporarily unavailable.
Our success depends, in part, on our relationships with, and the efforts of, third-party distributors.
We rely on third-party distributors for a portion of our sales in countries outside of the U.S. Our distributors may not commit the necessary resources to
market and sell our products to the level of our expectations, and, regardless of the resources they commit, they may not be successful. If we are not able to maintain our
distribution network, if our distribution network is not successful in marketing and selling our products, or if we experience a significant reduction in, cancellation, or
change in the size and timing of orders from our distributors, our revenues could decline significantly and lead to an inability to meet operating cash flow requirements,
which would have a material adverse effect on our business, financial condition, and results of operations.
Obtaining and maintaining regulatory approval for a product candidate in one jurisdiction does not mean that we will be successful in obtaining
regulatory approval for that product candidate in other jurisdictions.
Obtaining and maintaining regulatory approval for a product in one jurisdiction does not guarantee that we will be able to obtain or maintain similar approval
in other jurisdictions, while a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others.
For example, even though the FDA has granted marketing approval for use of our RECELL System for the treatment full-thickness skin defects and vitiligo, comparable
regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries if not currently
approved. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the
United States, including additional preclinical studies or clinical trials as clinical trials conducted in one jurisdiction may not be accepted by regulatory authorities in
other jurisdictions. In many jurisdictions outside the United States, a medical device must be approved for reimbursement before it can be approved for sale in that
jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.
We are highly dependent on our regulatory approval in the United States and failure to maintain that approval would materially impact our business and
prospects.
Our business is highly dependent on the PMA we received in September 2018 from the FDA including subsequent secondary approvals of the PMA outside
of burns. This PMA allows us to sell our RECELL System in the United States, our current primary market. While we intend to take every action and precaution to
ensure that our PMA remains effective, it is possible that the FDA could take a position in the future that requires a modification, temporary suspension or revocation of
our PMA. Any such action by the FDA would have a material adverse effect on our business.
We may encounter substantial delays in any further clinical studies necessary to support any regulatory applications for additional commercial
applications of our technology.
We cannot guarantee that any preclinical testing or clinical trials will be conducted as planned or completed on schedule, if at all. As a result, we may not
achieve the expected clinical milestones necessary for approval by the FDA, or other regulators, for the use of our RECELL System for additional applications in the
United States or other countries.
15
Table of Contents
A failure in a clinical study or regulatory application can occur at any stage. Events that may prevent successful or timely
commencement, enrollment or completion of clinical development or a regulatory application include:
•delays in raising, or inability to raise, sufficient capital to fund the planned trials;
•delays in reaching a consensus with regulatory agencies on trial design;
•changes in trial design;
•inability to identify, recruit and train suitable clinical investigators;
•inability to add new clinical trial sites;
•delays in reaching agreement on acceptable terms for the performance of the trials with prospective clinical research organizations and clinical trial sites;
•delays in recruiting suitable clinical sites and patients (i.e., subjects) to participate in clinical trials;
•imposition of a clinical hold by regulatory agencies for any reason, including negative clinical results, safety concerns or as a result of an inspection of
manufacturing or clinical operations or trial sites;
•failure by any relevant parties to adhere to clinical trial requirements;
•failure to perform in accordance with the FDA’s Good Clinical Practice (“GCPs”), or applicable regulatory guidelines in other countries;
•delays in the testing, validation, manufacturing and delivery of the product candidates to the clinical sites;
•delays caused by clinical trial sites not completing a trial;
•failure to demonstrate adequate effectiveness;
•occurrence of serious adverse events in clinical trials that are associated with the product candidates that are viewed to outweigh its potential benefits;
•changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;
•adverse events, safety issues, product recalls, manufacturing or supply chain interruptions, or poor clinical outcomes where the RECELL System is being used
commercially; and
•disagreements with regulatory agencies in the interpretation of the data from our clinical trials.
Delays, including delays caused by the above factors, can be costly and could negatively affect our ability to complete clinical trials for our product
candidates. If we are not able to successfully complete clinical trials or are not able to do so in a timely and cost-effective manner, we will not be able to obtain
regulatory approval for the use of our RECELL System for additional applications, all of which could have a material adverse effect on our business, financial condition
and results of operations.
We may be unsuccessful in commercializing our RECELL System, or other future products, due to unfavorable pricing regulations or third-party
coverage and reimbursement policies.
We cannot guarantee that we will receive favorable pricing and reimbursement for use of our products. The rules and regulations that govern pricing and
reimbursement for medical products vary widely from country to country or from indication to indication, and within the United States, can also vary widely from one
health system or hospital to the next. In some foreign jurisdictions, including the EU, the government largely controls pricing of medical products. In other countries,
coverage negotiations must occur at the regional or hospital level. Pricing negotiations can take considerable time after the receipt of marketing approval for a medical
product.
As a result, even after obtaining regulatory approval for a product in a particular country, we may be subject to price regulations or limited reimbursement,
which may delay or limit our commercial launch of the product and negatively impact the revenue we are able to generate from the sale of the product in that country.
Adverse pricing limitations may hinder our ability to recoup our total investment in our RECELL System or other future products, even after obtaining regulatory
approval.
If we are unable to promptly obtain coverage and profitable payment rates from hospital budget, government-funded and private purchasers for the RECELL
System or any future products, this could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our
overall financial condition.
For example, we presently benefit from various reimbursement codes, including the following:
•for hospitals in inpatient services using Medicare Severity Diagnosis-Related Groups (“MS-DRGs”).
•Specific International Classification of Disease, 10th revision, Procedure Classification System (“ICD-10-PCS”) code series describing our “cell suspension
technique” for the use of the RECELL System.
•CPT codes to support physician reimbursement for professional healthcare services, ambulatory surgical center (“ASCs”) reimbursement for facility services
and hospital reimbursement for outpatient department services. Medicare reimburses
16
Table of Contents
ASCs for services using CPT codes and reimburses hospitals for outpatient services using Ambulatory Payment Classifications (“APCs”).
In addition, in 2022, we were approved for a TPT C code to support additional Medicare payment in the outpatient hospital and the ASC setting. There can be
no guarantee that the above reimbursement codes will not be withdrawn, reduced, consolidated or otherwise be altered in a manner which is not supportive of ongoing
commercial use of the RECELL System.
We may require additional financing in the future to continue the development and commercialization of our RECELL System or any future products,
which may cause dilution to our existing stockholders. If additional financing is not available, we may have to postpone, reduce or cease operations.
If we are unable to achieve profitability sufficient to permit us to fund our operations, repay the indebtedness under our Credit Agreement with OrbiMed and
other planned actions, we may be required to raise additional capital. There can be no assurance that such capital would be available on favorable terms, or at all. If we
raise additional capital through the issuance of equity, the percentage ownership held by existing stockholders may be reduced, and the market price of our common
stock or CDIs could fall due to an increased number of shares or CDIs available for sale in the market. If we are unable to secure additional capital as circumstances
require, we may not be able to fund our planned activities or continue our operations.
We face manufacturing risks that may adversely affect our ability to manufacture products and could reduce our gross margins and negatively affect our
business and operating results.
Our success depends, in part, on our ability to manufacture our current and future products in sufficient quantities and on a timely basis to meet demand,
while adhering to product quality standards, complying with regulatory quality system requirements and managing manufacturing costs. We have a manufacturing
facility located in Ventura, California where we produce, package and warehouse the RECELL System. We also rely on global third-party manufacturers for production
of some of the components used in the RECELL System. If our facility, or the facilities of our third-party contract manufacturers, suffer damage, or a force majeure
event, this could materially impact our ability to operate.
We are also subject to other risks relating to our manufacturing capabilities, including:
•quality and reliability of components, sub-assemblies and materials that we source from third-party suppliers, who are required to meet our quality
specifications, some of whom are our single-source suppliers for the products they supply;
•failure to secure raw materials, components and materials in a timely manner, in sufficient quantities or on commercially reasonable terms;
•inability to secure raw materials, components and materials of sufficient quality to meet the exacting needs of medical device manufacturing;
•inability to increase production capacity or volumes to meet demand; and
As demand for our products increases, we will have to invest additional resources to purchase raw materials and components, sub-assemblies and materials,
hire and train employees and enhance our manufacturing processes. If we fail to increase our production capacity efficiently to meet demand for our products, we may
not be able to fill customer orders on a timely basis, our sales may not increase in line with our expectations and our operating margins could fluctuate or decline. It may
not be possible for us to manufacture our products at a cost or in quantities sufficient to make these products commercially viable or to maintain current operating
margins, all of which could have a material adverse effect on our business, financial condition and results of operations. In addition, we are continually identifying
additional third-party suppliers who could serve if necessary as replacement manufacturers should the need arise.
Certain of our products are dependent on specialized sources of supply potentially subject to disruption which could have a material, adverse impact on
our business.
Due to the cost and regulatory requirements associated with qualifying multiple suppliers, in the prior year we single-sourced some of our material
components. To the extent that any of these single-sourced suppliers experience disruptions in deliveries due to production, quality, or other issues, we are potentially
subject to similar production delays or unfavorable cost increases. In the current year, we invested resources in obtaining additional suppliers for some of our key raw
materials, but these efforts only mitigate, and not eliminate, our supply chain risk.
17
Table of Contents
We rely on third parties to conduct, supervise and monitor our clinical trials. If these third parties do not successfully carry out their contractual duties or
meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our drug product candidates and our business could be substantially
harmed.
We rely on clinical research organizations (“CRO”), and clinical trial sites to ensure our clinical trials are conducted properly and on time. While we will have
agreements governing their activities, we will have limited influence over their actual performance. CROs manage and monitor the clinical trials, duties and functions,
and we will control only certain aspects of our CROs’ activities. Nevertheless, we will be responsible for ensuring that each of our clinical trials is conducted in
accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.
We and our CROs are required to comply with the FDA’s GCPs for conducting, recording and reporting the results of clinical trials to assure that the data and
reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. The FDA, and comparable foreign
regulatory authorities, enforces these GCPs through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CROs fail to comply
with applicable GCPs, the clinical data generated in our future clinical trials may be deemed unreliable and the FDA or other foreign regulatory authorities may require
us to perform additional clinical trials before approving any marketing applications.
If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical
data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other reasons, our clinical trials may be
extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, our product candidates. If any such event
were to occur, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our ability to generate
revenues could be delayed. If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to
do so on commercially reasonable terms. Further, switching or adding additional CROs involves additional costs and requires management time and focus. In addition,
there is a natural transition period when a new CRO commences work. As a result, delays occur, which could materially impact our ability to meet our desired clinical
development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the
future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.
Product recalls or inventory losses caused by unforeseen events may adversely affect our operating results and financial condition.
Our products are manufactured, stored and distributed using technically complex processes requiring specialized facilities, highly specific raw materials and
other production constraints. The complexity of these processes, as well as strict company and government standards for the manufacture, storage and distribution of our
product candidates, subjects us to risks. In addition, process deviations or unanticipated effects of approved process changes may result in production runs of our
RECELL System not complying with stability requirements or specifications. The occurrence or suspected occurrence of production and distribution difficulties can lead
to lost inventories and in some cases product recalls, with consequential reputational damage and the risk of product liability. The investigation and remediation of any
identified problems can cause production delays, substantial expense, lost sales and delays of new product launches. In the event our production efforts require a recall
or result in an inventory loss, our operating results and financial condition may be adversely affected.
A cyber security incident could be disruptive to our business, compromise confidential data, cause reputation harm, and subject us to litigation and
federal and state governmental inquiries.
We collect and store sensitive business and other information, including intellectual property and trade secrets, on our networks. Our business operations are
dependent upon the secure maintenance of this information. Despite the implementation of security measures, our internal computer and information technology systems
and those of our vendors and customers are vulnerable to attack and damage from computer viruses, malware, denial of service attacks, unauthorized access, or other
harm, including from threat actors seeking to cause disruption to our business. We face risks related to the protection of information that we maintain—or engage a
third-party to maintain on our behalf—including unauthorized access, acquisition, use, disclosure, or modification of such information. Cyberattacks are increasing in
their frequency, sophistication and intensity and have become increasingly difficult to detect. Cyberattacks could include the deployment of harmful malware,
ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of
information. Beyond external criminal activity, systems that access or control access to our services and databases may be compromised as a result of human error, fraud
or malice on the part of employees or third parties, or may result from accidental technological failure. A material cyberattack or security incident could cause
interruptions in our operations and could result in a material disruption of our business operations, damage to our reputation, financial condition, results of operations,
cash flows and prospects.
18
Table of Contents
We receive, collect, process, use and store a large amount of information from our customers and our own employees, including personal information,
protected health and other sensitive and confidential information. If threat actors are able to circumvent or breach our security systems, they could steal any information
located therein or cause serious and potentially long-lasting disruption to our operations. Security breaches or attempts thereof could also damage our reputation and
expose us to a risk of monetary loss and/or litigation, fines and sanctions. We also face risks associated with security breaches affecting third parties that conduct
business with us or our customers and others who interact with our data. While we maintain insurance that covers certain security incidents, we may not carry
appropriate insurance or maintain sufficient coverage to compensate for all potential liability.
We are subject to diverse laws and regulations relating to data privacy and security, such as HIPPA and similar U.S. state data protection regulations,
including the California Consumer Privacy Act (CCPA), and European data privacy laws, including the E.U.’s General Data Protection Regulation. Complying with
these numerous and complex regulations is expensive and difficult, and failure to comply with these regulations could result in regulatory scrutiny, fines, civil liability or
damage to our reputation. In addition, any security breach or attempt thereof could result in liability for stolen assets or information, additional costs associated with
repairing any system damage, incentives offered to clients or other business partners to maintain business relationships after a breach, and implementation of measures to
prevent future breaches, including organizational changes, deployment of additional personnel and protection technologies, employee training and engagement of third-
party experts and consultants. Additionally, the costs incurred to remediate any security incident could be substantial.
We cannot assure you that any of our third-party service providers with access to our, or our customers and/or employees’ personally identifiable and other
sensitive or confidential information will not experience security breaches or attempts thereof, which could have a corresponding effect on our business.
We rely on information technology systems for critical business functions and the operations of our business.
We rely upon complex, integrated information technology (“IT”) systems in our business functions including our quality systems to operate our business. If
any of our IT systems were to be disrupted or fail, our business could suffer irreparable harm, financial loss, and our operations would be adversely impacted.
The markets in which we operate are highly competitive and innovative. Our competitors may develop products that render our products less attractive or
obsolete and our business may deteriorate.
The markets for our products are highly competitive and our competitors may develop products that may more effectively compete with our products, thus
negatively impacting our sales, financial conditions and business prospects. Our competitors may have significantly more financial and other resources to invest in
product development. We must continue to develop and market new products, or we risk our products becoming obsolete, in which case, our revenues may decline, and
our business prospects may suffer.
Product development is an expensive, uncertain and lengthy process.
We have significant product development projects ongoing that, if successful, are intended to improve the ease and use of our device in our current burn
indication, as well as in full-thickness skin defects, vitiligo and future indications. The costs, timeline and ultimate success of these product development programs are
subject to risk and uncertainty. If we are not able to develop and obtain regulatory approval for these products in development in a timely fashion and within budget, our
business prospects and financial condition may suffer.
Compliance with environmental, health and safety requirements is costly and, if not achieved, could result in material financial fines and penalties,
expensive lawsuits, cessation of business operations, and a material adverse impact on the business.
Our manufacturing and other processes may involve the use of hazardous materials subject to federal, state, and local and foreign environmental
requirements. Under some environmental laws and regulations, we could be held responsible for costs at third-party sites that we have used for waste disposal, or for
contamination at our past or present facilities. Failure to comply with current environmental laws, or future laws, could result in significant fines, penalties and expenses
which could have an adverse impact on our financial condition.
We may be subject to civil and criminal penalties if the FDA determines that we have marketed or promoted our products for off-label usage.
We are prohibited from promoting our products for uses that are inconsistent with the uses that have been approved by the FDA - also known as “off-label”
uses. More specifically, we may not make claims, in our promotion materials, website or otherwise,
19
Table of Contents
about the use of any RECELL products which are outside of their approved labeling and indications. If the FDA determines that our marketing activities constitute off-
label promotion, the FDA could impose fines and penalties on the Company and our executives, withdraw or recall our approved product from the market, as well as
limit our product from off-label usage.
Risks Relating to our Industry and Intellectual Property
We face competition from the existing standard of care and any future potential changes in medical practice and technology and the possibility that our
competitors may develop products, treatments or procedures that are similar, more advanced, safer or more effective than ours.
The medical device, biotechnology and pharmaceutical industries, specifically relating to the areas where we currently or intend to market our RECELL
System, are intensely competitive and subject to significant changes due to technology and medical practice standards. We may face competition from any number of
different sources with respect to any products we develop and commercialize.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products, treatments or procedures that are safer,
more effective, have fewer or less severe side effects, are more convenient or are less expensive than our RECELL System or any future products we develop. Many of
our current or future competitors may have significantly greater financial resources and experience and expertise in research and development, manufacturing,
preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we may have. Mergers and acquisitions in the
pharmaceutical, medical device, and biotechnology industries or wound care markets may result in increased concentration of resources among a smaller number of our
competitors. Other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established
companies. These companies compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient
registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.
We could be subject to product liability lawsuits, which could result in costly and time-consuming litigation and significant liabilities.
The development of medical device products, such as our RECELL System, involves an inherent risk of product liability claims and associated financial
liability and adverse publicity. Any products we may develop could be found to be harmful or to contain harmful substances and expose us to substantial liability and
risk of litigation or may force us to discontinue production. We may be unable to obtain or maintain insurance on reasonable terms or otherwise protect ourselves against
potential product liability claims that could impede or prevent further business development of any products we may create and commercialize. Furthermore, a product
liability claim could damage our reputation, whether or not such claims are covered by insurance or have merit. A product liability claim against us or the withdrawal of
a product from the market could have a material adverse effect on our business or financial condition. Furthermore, product liability lawsuits, regardless of their success,
would likely be time consuming and expensive to resolve and would divert management’s time and attention, which could seriously harm our business.
If we are unable to effectively protect our intellectual property, we may not be able to operate our business and third parties may be able to use and profit
from our technology, both of which would impair our ability to be competitive.
Our success will be heavily dependent on our ability to obtain and maintain meaningful patent protection for our technologies and products throughout the
world. Patent law relating to the technology fields in which we will operate is still evolving. The amount of ongoing protection for our proprietary rights therefore is
uncertain. We will rely on patents to protect a significant part of our intellectual property and to enhance our competitive position. However, our presently pending or
future patent applications may be denied, and any patent previously issued to us or our subsidiaries may be challenged, invalidated, held unenforceable or circumvented.
In 2019, we filed a Patent Term Extension (“PTE”) application with the U.S. Patent and Trademark for U.S. Patent No. 9,029,140, which covers the RECELL System, as
a result of patent term lost to the FDA regulatory process. The PTE application was approved, and the patent term of U.S. Patent No. 9,029,140, has been extended to
April 9, 2024. Our other patents have expected expiration dates ranging from 2032 to 2033, while our pending patent applications, if granted, would have expiration
dates ranging from 2032 to 2042. Furthermore, the patent protections we have been granted may not be broad enough to prevent competitors from producing products
similar to ours.
In addition, the laws of various foreign countries in which we may compete may not protect our intellectual property to the same extent as do the laws of the
United States. If we fail to obtain adequate patent protection for our proprietary technology, our ability to be commercially competitive will be materially impaired.
20
Table of Contents
In the ordinary course of business and as appropriate, we intend to apply for additional patents covering both our technologies and products, as we deem
appropriate. Our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from practicing our technologies or developing
competing products and technologies. In addition, because patent law is evolving in the life science industry, the patent positions of companies like ours are uncertain.
As a result, the validity and enforceability of our patents cannot be predicted with certainty.
We may find it difficult to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on all of our technologies and products in every jurisdiction is expensive. Competitors could reverse engineer our
technologies in jurisdictions where we have not obtained patent protection to develop their own products. These products may compete with our products and may not
be covered by any patent claims or other intellectual property rights.
The laws of some countries do not protect intellectual property rights to the same extent as the laws of the United States and many companies have
encountered significant problems in protecting and defending such rights in foreign jurisdictions. This lack of protection, particularly in relation to biotechnology, could
make it difficult for us to stop the infringement of our patents. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert
the efforts and attention of key personnel from other aspects of our business.
We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be unable
to protect our rights to, or use of, our technology.
If we choose to go to court to stop someone else from using the intellectual property claimed in our patents or our licensed patents, that individual or company
has the right to ask the court to rule that these patents are invalid and/or should not be enforced against that third party. These lawsuits are expensive and would distract
our key personnel and consume time and other resources, even if we were successful in stopping the infringement of these patents. In addition, there is a risk that a court
will decide that these patents are invalid or unenforceable and that we do not have the right to stop the other party from using the inventions or, even if the validity or
enforceability of these patents is upheld, the court may refuse to stop the other party because the competitors’ activities do not infringe our rights.
If third parties make claims of intellectual property infringement against us, or otherwise seek to establish their intellectual property rights equal or
superior to ours, we may have to spend time and money in response and potentially discontinue certain of our operations.
While we currently do not believe it to be the case, third parties may claim that we are employing their proprietary technology without authorization or that
we are infringing on their patents. If such claims were made, we could incur substantial costs coupled with diversion of our management and key technical personnel in
defending against these claims. Furthermore, parties making claims against us may be able to obtain injunctive or other equitable relief which could effectively halt our
ability to further develop, commercialize and sell products. In the event of a successful claim of infringement, courts may order us to pay damages and obtain one or
more licenses from third parties. We may not be able to obtain these licenses at a reasonable cost, if at all. Defense of any lawsuit or failure to obtain any of these
licenses could prevent us from commercializing available products and have a material negative effect on our business.
Our current and future relationships with investigators, health care professionals, consultants, third-party payors, and customers will be subject to
applicable healthcare regulatory laws, which could expose us to penalties.
Our business operations and current and future relationships with investigators, healthcare professionals, consultants, third-party payors and customers may
expose us to broadly applicable fraud and abuse and other healthcare laws and regulations. These laws regulate the business or financial arrangements and relationships
through which we conduct our operations, including how we research, market, sell and distribute our products for which we obtain marketing approval. Such laws
include:
•the federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing
remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or
recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under a federal healthcare program such as
Medicare and Medicaid. A person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it to have
committed a violation; in addition, the government may assert that a claim including
21
Table of Contents
items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;
•the federal false claims laws including the civil False Claims Act, which can be enforced through civil whistleblower or qui tam actions, and civil monetary
penalties laws, which impose criminal and civil penalties against individuals or entities for knowingly presenting, or causing to be presented to the federal
government, claims for payment that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a
false or fraudulent claim, or knowingly making, or causing to be made, a false statement to avoid, decrease or conceal an obligation to pay money to the federal
government; in addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute
constitutes a false or fraudulent claim for purposes of the civil False Claims Act;
•HIPAA imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any
healthcare benefit program or making false or fraudulent statements relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity
does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation;
•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, also imposes obligations,
including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information on
health plans, health care clearing houses, and certain health care providers, known as covered entities, and their business associates, defined as independent
contractors or agents of covered entities that create, receive or obtain protected health information in connection with providing a service for or on behalf of a
covered entity as well as their covered subcontractors;
•a number of federal, state and foreign laws, regulations, guidance and standards that impose requirements regarding the protection of health data that are
applicable to or affect our operations;
•the federal transparency requirements, sometimes referred to as the “Sunshine Act,” under the Patient Protection and Affordable Care Act, which requires
certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health
Insurance Program (with certain exceptions) to report annually to the government information related to payments or other "transfers of value" made to
physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and requires applicable manufacturers and
group purchasing organizations to report annually to the government ownership and investment interests held by the physicians described above and their
immediate family members. Applicable manufacturers are also required to report such information regarding their relationships with physician assistants, nurse
practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse midwives during the previous year; and
•analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to our business practices, including but not
limited to, research, distribution, sales, and marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-
party payors, including private insurers, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and state
laws that require medical device companies to comply with the industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated
by the federal government; state laws that require medical device manufacturers to report information related to payments and other transfers of value to
physicians and other healthcare providers, marketing expenditures or drug pricing, as well as state and local laws that require the registration of sales
representatives; and state and foreign laws governing the privacy and security of health information in some circumstances, many of which differ from each other
in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Defending against any such actions can be costly, time-consuming and may require significant financial and personnel resources. Therefore, even if we are
successful in defending against any such actions that may be brought against us, our business may be impaired.
The continued successful commercialization of the RECELL system for FDA approved and pending indications, will depend in part on the extent to
which government authorities and health insurers establish adequate reimbursement levels and pricing policies.
Continued sales of the RECELL System depend in part on the availability of coverage and reimbursement from third-party payers such as government
insurance programs, including Medicare and Medicaid, private health insurers, health maintenance organizations and other health care related organizations, who are
increasingly challenging the price of medical products and services.
Both the federal and state governments in the United States continue to propose and pass new legislation, regulations, and policies affecting coverage and
reimbursement rates, which are designed to contain or reduce the cost of health care. Further federal and state proposals and healthcare reforms are likely, which could
limit the prices that can be charged for the RECELL System and may further limit our commercial opportunity. For example, on August 16, 2022, President Biden
signed the Inflation Reduction Act
22
Table of Contents
of 2022, or the IRA, into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in Affordable Care Act
marketplaces through plan year 2025. The IRA also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the
beneficiary maximum out-of-pocket cost through a newly established manufacturer discount program. It is possible that the Affordable Care Act will be subject to
judicial or Congressional challenges in the future. Accordingly, we continue to evaluate the effect that the Affordable Care Act has on our business.
There also may be future changes unrelated to the IRA that result in reductions in potential coverage and reimbursement levels for our product and we cannot
predict the scope of any future changes or the impact that those changes would have on our operations. Cost control initiatives may decrease coverage and payment
levels and, in turn, the price that we will be able to charge and/or the volume of our sales. We are unable to predict all changes to the coverage or reimbursement
methodologies that will be applied by private or government payers. Any denial of private or government payer coverage, such as the Affordable Care Act, the IRA, as
well as other federal, state, and foreign healthcare reform measures that have been and may be adopted in the future, or inadequate reimbursement could harm our
business and reduce our revenue. Additionally, if rebate obligations associated with them are substantially greater than we expect, our future net revenue and
profitability could be materially diminished.
Macroeconomic and Social Risks
Adverse changes in general economic conditions or uncertainty about future economic conditions, including economic uncertainty from the departures
of critical personnel from the industry, could adversely affect us.
We are subject to the risks arising from adverse changes in general economic market conditions. Uncertainty about future economic conditions could
negatively affect our current and prospective customers causing them to delay the purchase of our products. Poor economic conditions could harm our business,
financial condition, operating results and cash flows. In addition, a number of nurses and other critical personnel in burn centers who are trained and well versed in the
use of the RECELL system have determined to change occupations. Nationally, this has been termed the “great resignation”. The fact that many burn center employees
have moved on to other positions or industries may limit our ability to increase adoption of our RECELL system as we will be required to train a new group of nurses
and other personnel critical to the implementation of the RECELL system.
Customer and consumer demand for our products may be impacted by weak economic conditions, recession, equity market volatility or other negative
economic factors in the U.S. or other nations. The severity and length of time that a downturn in economic and financial market conditions may persist, as well as the
timing, strength and sustainability of any recovery from such downturn, are unknown and are beyond our control.
Risks Relating to Our Common Stock and CDIs
We have never paid a dividend on our common stock and CDIs and do not intend to do so in the foreseeable future, and consequently, investors’ only
opportunity to realize a return on their investment in the Company is through the appreciation in the price of our common stock and CDIs.
We do not anticipate paying cash dividends on our common stock and CDIs in the foreseeable future and intend to retain all earnings, if any, for our
operations. If we decided to pay dividends at some future time, we may not have sufficient funds legally available to do so. Even if funds are legally available for
distribution, we may be unable to pay any dividends to our stockholders because of limitations imposed by a lack of liquidity. Accordingly, our stockholders may have
to sell some or all of their common stock or CDIs (as applicable) in order to generate cash flow from their investment. Our stockholders may not receive a gain on their
investment when they sell their common stock or CDIs and may lose some or all of their investment. Any determination to pay dividends in the future on our common
stock and CDIs will be made at the discretion of our Board of Directors and will depend on our results of operations, financial conditions, contractual restrictions,
restrictions imposed by applicable law, capital requirements, and other factors that our Board of Directors deems relevant.
As long as we remain subject to the rules of the ASX and of Nasdaq, we will be unable to access equity capital without stockholder approval if such
equity capital sales would result in an equity issuance above regulatory thresholds and consequently, we may be unable to obtain financing sufficient to sustain our
business if we are unsuccessful in soliciting requisite stockholder approvals.
Our ability to access equity capital is currently limited by ASX Listing Rule 7.1, which provides that a company must not, subject to specified exceptions, issue or agree
to issue during any consecutive 12-month period any equity securities, or other securities with rights to conversion to equity, if the number of those securities in
aggregate would exceed 15% of the number of outstanding common shares at the commencement of that 12-month period unless stockholder approval is obtained.
23
Table of Contents
Our equity issuances will be limited by ASX Listing Rule 7.1 so long as we continue to be listed on the ASX and this constraint may prevent us from raising
the full amount of equity capital needed for operations without prior stockholder approval.
In addition to ASX Listing Rule 7.1, we are also subject to Nasdaq Listing Rule 5635(d), commonly referred to as the Nasdaq 20% Rule, which requires
stockholder approval of a transaction other than a public offering involving the sale, issuance, or potential issuance by a company of common stock (or securities
convertible into or exercisable for common stock) equal to 20% or more of the common stock, or 20% or more of the voting power outstanding before the issuance for
less than the greater of book or market value of the shares. While less restrictive than ASX Listing Rule 7.1, the operation of the Nasdaq 20% rule could limit our ability
to raise capital through issuance of common stock or convertible securities without jeopardizing our listing status. If we were to violate the Nasdaq 20% rule, the
Company would be subject to delisting from Nasdaq and share prices and trading volumes would likely suffer.
There has been relatively limited trading volume in the markets for our common stock and CDIs, and more active, liquid trading markets for such
securities may never develop.
Trading in our common stock on Nasdaq and our CDIs on the ASX is often thin and susceptible to wide fluctuations in trading prices due to such limited
trading volume and other factors, some of which may have little to do with our operations or business prospects. Limited liquidity in the trading markets for our common
stock and CDIs may adversely affect a stockholder’s ability to sell its shares of our common stock or our CDIs at the time it wishes to sell them or at a price that it
considers acceptable. In addition, if a more active, liquid public trading market does not develop we may be limited in our ability to raise capital by selling shares of
common stock or CDIs. We cannot assure you that more active, liquid public trading markets for our common stock and CDIs will develop or, if developed, will be
sustained.
The market price and trading volume of our common stock and CDIs may be volatile and may be affected by variability in our performance from period
to period and economic conditions beyond management’s control.
The market price of our common stock (including common stock represented by CDIs) may be highly volatile and could be subject to wide fluctuations. This
means that our stockholders could experience a decrease in the value of their common stock or CDIs regardless of our operating performance or prospects. The market
prices of securities of companies operating in the medical device and biotech sectors have often experienced fluctuations that have been unrelated or disproportionate to
the operating results of these companies. In addition, the trading volume of our common stock and CDIs may fluctuate and cause significant price variations to occur. If
the market price of our common stock or CDIs declines significantly, our stockholders may be unable to resell our common stock or CDIs at or above their purchase
price, if at all. There can be no assurance that the market price of our common stock and CDIs will not fluctuate or significantly decline in the future.
Some specific factors that could negatively affect the price of our common stock and CDIs or result in fluctuations in their price and trading volume include:
•actual or expected fluctuations in our operating results;
•actual or expected changes in our growth rates or our competitors’ growth rates;
•results of clinical trials of our product candidates;
•results of clinical trials of our competitors’ products;
•regulatory actions with respect to our products or our competitors’ products;
•reports of one or more patient serious adverse events;
•publication of research reports by securities analysts about us or our competitors in the industry;
•our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;
•fluctuations of exchange rates between the U.S. dollar and the Australian dollar;
•issuances by us of debt or equity securities;
•litigation involving our company, including stockholder litigation;
•investigations or audits by regulators into the operations of our company;
•proceedings initiated by our competitors or clients;
•strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;
•sales or perceived potential sales of the common stock or CDIs by us, our directors, executive management team or our stockholders in the future;
•short selling or other market manipulation activities;
•announcement or expectation of additional financing efforts;
•terrorist acts, acts of war or periods of widespread civil unrest;
24
Table of Contents
•natural disasters and other calamities;
•changes in market conditions for biopharmaceutical stocks;
•our inability to raise additional capital, limiting our ability to continue as a going concern;
•changes in market prices for our product or for our raw materials;
•changes in market valuations of similar companies;
•changes in key personnel for us or our competitors;
•speculation in the press or investment community;
•changes or proposed changes in laws and regulations affecting our industry; and
•conditions in the financial markets in general or changes in general economic conditions.
The requirements of being a public company in the United States and listed on the ASX may strain our resources and divert management’s attention.
As a public company, we are subject to the reporting requirements of the Exchange Act, the U.S. Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-
Frank Act and the listing standards and the rules and regulations of Nasdaq. We are also subject to the reporting requirements under the ASX Listing Rules due to the
listing of our CDIs on ASX. The requirements of these rules and regulations will increase our legal, accounting and financial compliance costs, make some activities
more difficult, time consuming and costly, and can place significant strain on our personnel, systems and resources. As a result of our disclosure of information in filings
required of a public company, our business and financial condition is more visible, which may result in threatened or actual litigation, including by competitors,
stockholders or third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are
resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and
operating results.
We are an emerging growth company, and the reduced disclosure requirements applicable to emerging growth companies may make our common stock
less attractive to investors.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). For as long as we continue to be an
emerging growth company, we may take advantage of certain exemptions and relief from various U.S. reporting requirements that are applicable to other public
companies that are not emerging growth companies, including (i) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-
Oxley Act, (ii) having the option of delaying the adoption of certain new or revised financial accounting standards, (iii) reduced disclosure obligations regarding
executive compensation in our periodic reports and proxy statements and (iv) exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and stockholder approval of any golden parachute payments not previously approved. We have taken, and in the future may take, advantage of these
exemptions until such time that we are no longer an emerging growth company. Accordingly, the information contained herein and in other reports we file with the SEC
may be different than the information our investors receive from other public companies in which they hold stock. Further, we have elected to take advantage of the
extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our
operating results and financial statements may not be comparable to the operating results and financial statements of other companies who have adopted the new or
revised accounting standards. It is possible that some investors will find our common stock and CDIs less attractive as a result, which may result in a less active trading
market for our common stock and CDIs and higher volatility in our stock and CDI price.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the date of the first sale
of our common stock pursuant to an effective registration statement under the Securities Act which, given the filing of the S-8 Registration Statement on August 27,
2020, will be December 31, 2025, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the last day of the fiscal
year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, or (iv) the date on which we have issued more than $1.0
billion in non-convertible debt securities during the prior three-year period.
If research analysts publish unfavorable commentary or downgrade our common stock or CDIs it could adversely affect our share price and trading
volume.
The trading market for our common stock and CDIs depends, in part, on the research and reports that research analysts publish about us and our business and
industry. If one or more research analysts downgrade our shares or CDIs, publish unfavorable commentary about the Company or cease publishing reports about us or
our business, the price of our common stock and CDIs could decline. If one or more of the research analysts ceases coverage of our company or fails to publish reports
on us regularly, demand for our common stock and CDIs could decrease, which could cause our share price or trading volume to decline.
25
Table of Contents
General Risk Factors
The Company's cash, cash equivalents and marketable securities could be adversely affected by bank failures or other events affecting financial
institutions and could adversely affect our liquidity and financial performance.
We regularly maintain domestic cash deposits in Federal Deposit Insurance Corporation (“FDIC”) insured banks, which exceed the FDIC insurance limits.
We also maintain cash deposits in foreign banks where we operate, some of which are not insured or are only partially insured by the FDIC or other similar agencies.
The failure or rumored failure of a bank, or events involving limited liquidity, defaults, non-performance, bankruptcy, receivership or other adverse developments in the
financial or credit markets impacting financial institutions, may lead to disruptions in access to our bank deposits. These disruptions may adversely impact our liquidity
and financial performance. There can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. or
applicable foreign government, or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government
institutions or by acquisition in the event of a failure or liquidity crisis. As such, those funds in bank deposit accounts in excess of the standard FDIC insurance limits are
uninsured and subject to the risk of bank failure.
Currently, we have full access to all funds in deposit accounts or other money management arrangements. The failure of any bank in which we deposit our
funds could reduce the amount of cash that we have available for our operations or delay our ability to access such funds. In the event of such failure, we may experience
delays or other issues in meeting our financial obligations, our ability to access our cash and cash equivalents may be threatened and could have a material adverse effect
on our business and financial condition.
Future adverse developments with respect to specific financial institutions or the broader financial services industry may also lead to market-wide liquidity
shortages.
If we fail to manage our growth effectively, our business could be disrupted.
Our future financial performance and ability to successfully commercialize our products, which is not guaranteed, and to compete in the market will depend,
in part, on our ability to manage any future growth effectively. We expect to make significant investments to facilitate our future growth through, among other things:
•new product development;
•commercial development of our RECELL System to such areas full-thickness skin defects and vitiligo;
•clinical trials for additional indications; and
•funding of our marketing and sales infrastructure.
Any failure to manage future growth effectively could have a material adverse effect on our business and results of operations.
Our growth and success depend on our ability to attract and retain additional highly qualified and skilled sales and marketing, research and development,
operational, managerial and finance personnel.
Competition for skilled personnel is intense and the unexpected loss of an employee with a particular skill could have a material adverse effect on our
operations until a replacement can be found and trained. If we cannot attract and retain skilled scientific and operational personnel for our research and development and
manufacturing operations on acceptable terms, we may not be able to develop and commercialize our products. Further, any failure to effectively integrate new
personnel could prevent us from successfully growing our company.
Our operations are subject to anti-corruption laws, including Australian bribery laws, and the FCPA and other anti-corruption laws that apply in
countries where we do business.
Anti-corruption laws generally prohibit us and our employees and intermediaries from bribing, being bribed or making other prohibited payments to
government officials or other persons to obtain or retain business or gain some other business advantage. We participate in collaborations and relationships with third
parties whose actions could potentially subject us to liability under these anti-corruption laws. In addition, we cannot predict the nature, scope, or effect of future
regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.
26
Table of Contents
There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws or other laws including trade
related laws. If we are not in compliance with these laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures,
and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity.
Likewise, any investigation of any potential violations of these laws by respective government bodies could also have an adverse impact on our reputation,
our business, results of operations and financial condition.
Item 1B. UNRESOLVED STAFF COMMENTS
None
Item 1C. CYBERSECURITY
Risk Management and Strategy
AVITA Medical has implemented an Information Security Management System (“ISMS”). The Company’s ISMS is a continuous process designed to
analyze the potential risks, vulnerabilities, the likeliness of occurrence and the related consequences of cybersecurity threats. The process is based on establishing the
context, assessing the risks, and treating the risks. The key concept of the ISMS is to consistently maintain and improve confidentiality, integrity, and availability of
information assets that should be protected by the organization on behalf of itself and its clients, and third parties. Once a risk, threat or vulnerability is identified, the
Company establishes a risk treatment plan to take corrective action to prevent risks that can be avoided and minimize the ones that cannot. We engage an independent
third-party cybersecurity services and consulting firm to continuously review our information security. We also conduct internal phishing campaigns and perform an
independent penetration test on an annual basis. In addition, we conduct regular security awareness training and testing of our employees. The Company has not had any
material cybersecurity incidents.
All related activities ISMC activities have been structured into a framework consisting of:
1.Context establishment - Established in accordance with the requirements of International Organization for Standardization 27001 and 27002 (“ISO 27001” and
“ISO 27002”). The ISO 27001, Information security management systems, provides a framework and guidelines for establishing, implementing and managing an
ISMS and ISO 27002, Information security controls, provides a reference set of generic information security controls including implementation guidance.
2.Risk Assessment - Relates to an evaluation and identification of risks, threats and vulnerabilities that exist or could exist, identifies the likelihood of occurrence
and potential consequences. As part of the risk assessment management prioritizes the assessed risks from low to high based on likelihood and level of impact.
3.Risk Treatment – will detail the remediation process for risks, vulnerabilities and threats identified to reduce the risk to an acceptable level.
4.Risk Acceptance- The Company’s risk assessment is evaluated from a Low (1) to a High (3) on the Impact the threat would have on the Company and its
operations and the likelihood of occurrence. Threat ratings created from the Impact and probability calculations will result with a value from 1- 9.
a.Low (1 – 2.99) = Risk level acceptable and no further action deemed necessary
b.Medium (2 – 5.99) and High (6 - 9) – implement risk management to reduce the risk to an acceptable level
5.Risk Communications- Results of the risk assessment are communicated to appropriate level of management. Report includes the identified risk and
vulnerability summaries. Updates will include treatment plans and status updates.
6.Risk Monitoring and Review -Continuously performed to evaluate any changes or the need for changes. The Company uses the Ontrack software solution
(“Ontrack”) to monitor and track all aspects of risk assessment. Ontrack also serves as tool to track any cybersecurity incidents and remediation tasks.
Disclosure of Management’s Responsibility
The Company’s Chief Financial Officer is primarily responsible for overseeing the Cybersecurity Risk Management Program and leading the Company’s
efforts to mitigate technology risks in partnership with various business leaders in the organization. For qualifications of the CFO refer to Item 10 of the form 10-K. We
have protocols, policies and tools in place to mitigate cybersecurity risk. They also provide the administrative, technical, and physical safeguards to ensure the security,
confidentiality, integrity and availability of confidential information and personal information from unauthorized access, use, disclosure, alteration, destruction or theft.
In addition, we engage an independent third party annually to assess our IT general controls and IT security. Special focus is given to maintaining and improving our
alignment with ISO 27001. Additionally, we have a cybersecurity incident response plan in place that provides a documented framework for handling high and low
severity security incidents and facilitates coordination across
27
Table of Contents
multiple parts of the business. We have engaged an external consultant to provide oversight and technical expertise to our ISMS process. Finally, cybersecurity is
integrated into the Company’s training as all employees are required to take security awareness training.
Disclosure of the Board’s Responsibility
While management is primarily responsible for assessing and managing cybersecurity risks on a day-to-day basis, the Company’s Board of Directors
oversees management’s efforts to assess and manage risk. The Board (in conjunction particularly with the Audit Committee) monitors the cybersecurity risk assessment
and response process. The Audit Committee is briefed by our Chief Financial Officer on our cybersecurity ISMS program and the overall cybersecurity risk
environment. The briefing may include discussions on topics such as: information security and technology risks, cybersecurity risk assessment process and updates,
information risk management strategies, and progress on cybersecurity and data protection training initiatives for employees, among others.
Item 2. PROPERTIES
Our principal corporate office is located at 28159 Avenue Stanford, Suite 220, Valencia, California 91355. We lease the 17,500 square foot facility under a lease
agreement that expires on October 31, 2026. Our production plant in Ventura, California is a 27,480 square foot facility that we lease through September 30, 2027 with
the right to extend the lease, at our sole option, as a result of two, three-year options that allow us to extend the lease up to an additional six years in total. The Company
also has an administrative office lease in Irvine, California of approximately 10,700 square feet that is currently leased through the end of July 2028. We do not own any
real property. We believe that leased facilities are adequate to meet current needs and that additional facilities will, if required, be available for lease to meet future
needs.
Item 3. LEGAL PROCEEDINGS
We are currently not aware of any material pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any
such proceedings that are contemplated by any governmental authority. From time to time, as an operating business, we are involved in routine disputes (both formal and
informal) with customers, manufacturing partners and employees.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
28
Table of Contents
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Market Information
The Company’s common stock is quoted on the Nasdaq Capital Market under the ticker symbol “RCEL” and the Company’s CDIs are quoted on the ASX
under the ticker code “AVH”. One share of common stock on Nasdaq is equivalent to five CDIs on the ASX.
Holders
As of January 31, 2024, the Company had approximately 4 unique stockholders of record of our common stock (which includes 20,497 holders of record of
the Company’s CDIs, with each representing 1/5 of a share of common stock, and CHESS Depositary Nominees Pty Ltd, holds the legal title to all of the outstanding
common stock underlying the CDIs of the Company).
Dividends
We have never paid cash dividends to our stockholders or to the holders of ordinary shares in the former parent company, AVITA Australia. We intend to
retain future earnings for use in our business and do not anticipate paying cash dividends on our common stock and CDIs in the foreseeable future. Any future dividend
policy will be determined by our board of directors and will be based upon various factors, including our results of operations, financial condition, current and
anticipated cash needs, future prospects, contractual restrictions and other factors as our board of directors may deem relevant.
Item 6. [Reserved]
29
Table of Contents
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Objective
The purpose of this Management's Discussion and Analysis is to better allow our investors to understand and view our company from management's
perspective. We are providing an overview of our business and strategy including a discussion of our financial condition and results of operations. The following
discussion and analysis of our financial condition and results of operations for the years-ended December 31, 2023 and 2022, should be read in conjunction with our
consolidated financial statements and related notes included in this Annual Report.
Overview
AVITA Medical is a commercial-stage regenerative medicine company transforming the standard of care for skin restoration with innovative devices and
autologous cellular therapies. At the forefront of our portfolio is our patented and proprietary RECELL® System, approved by the United States Food & Drug
Administration (“FDA”) for the treatment of thermal burn wounds and full-thickness skin defects, and for repigmentation of stable depigmented vitiligo lesions.
RECELL harnesses the regenerative properties of a patient’s own skin to create an autologous skin cell suspension, Spray-On Skin™ Cells, delivering a transformative
solution at the point of care. This breakthrough technology serves as the catalyst for a new treatment paradigm enabling improved clinical outcomes.
Our objective is to become the leading provider of regenerative medicine addressing unmet medical needs in burn injuries, full-thickness skin defects, and in
skin repigmentation, such as vitiligo. To achieve this objective, we plan to:
•Become the standard of care in the U.S. burns industry by increasing RECELL System penetration in burn centers
•Continue to commercialize the RECELL System in the U.S. for treatment of full-thickness skin defects
•Expand our global presence within the European Union and Australia through the exclusive use of third-party distributors.
•Launch RECELL GO following FDA approval to increase market adoption, expand our customer base, and facilitate international commercialization
•Establish commercial payor coverage for the RECELL System in the U.S. for the repigmentation of stable depigmented vitiligo lesions, which we expect will
begin during the fourth quarter of 2025
•Further invest in our RECELL System platform to automate and improve workflow, speed, and ease of use as it relates to specific indications, as well as to build
upon our intellectual property estate
•Continue to build upon commercial activities in Japan through our partnership with COSMOTEC Company, Ltd with our current PMDA approval for RECELL
with an indication in burns
•Develop and pursue viable commercial activities outside of the U.S. and Japan following the FDA approvals of the RECELL System for full-thickness skin
defects and repigmentation of stable depigmented vitiligo lesions
•Pursue business development opportunities that are complementary to our core RECELL System indications and/or our targeted markets
•Improve our margins and profitability by leveraging our current team and infrastructure across an expanding base of business in burns and in future indications
•With the successful execution of the exclusive distribution agreement with Stedical Scientific, Inc., we will begin distribution of the PermeaDerm® Biosynthetic
Wound Matrix in the United States using our existing sales force. Refer to Note 20 of our Consolidated Financial Statements for further details
Business Environment and Current Trends
Changes in reimbursement rates by third party payors may place additional financial pressure on hospitals and the broader healthcare system. Healthcare
institutions may take actions to mitigate any persistent pressures on their budgets and such actions could impact the future demand for our products. Geopolitical
conditions may also impact our operations. Although we do not have operations in Russia, Ukraine or in the Middle East, the continuation of the Russia-Ukraine military
conflict and the conflict in the Middle East, and potential escalation of the conflicts beyond their current scope may further weaken the global economy and could result
in additional inflationary pressures and supply chain constraints.
30
Table of Contents
Results of Operations
Year-Ended December 31, 2023, compared to the Year-Ended December 31, 2022
The table below summarizes the results of our operations for each of the periods presented (in thousands).
Statement of Operations Data:
Revenues
Cost of sales
Gross profit
BARDA income
Operating expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Operating loss
Interest expense
Other income, net
Loss before income taxes
Income tax expense
Net loss
*nm = not meaningful
Year-Ended
December 31, 2023
Year-Ended
December 31, 2022
$
Change
%
Change
50,143 $
(7,780 )
42,363
1,428
(37,291 )
(28,334 )
(20,821 )
(86,446 )
(42,655 )
(1,143 )
8,483
(35,315 )
(66 )
(35,381 ) $
34,421
(6,041 )
28,380
3,215
(21,913 )
(23,330 )
(13,857 )
(59,100 )
(27,505 )
(16 )
892
(26,629 )
(36 )
(26,665 )
15,722
(1,739 )
13,983
(1,787 )
(15,378 )
(5,004 )
(6,964 )
(27,346 )
(15,150 )
(1,127 )
7,591
(8,686 )
(30 )
(8,716 )
46 %
(29 )%
49 %
(56 )%
(70 )%
(21 )%
(50 )%
(46 )%
(55 )%
*nm
*nm
(33 )%
(83 )%
(33 )%
$
$
Total net revenues increased by 46%, or $15.7 million, to $50.1 million, compared to $34.4 million in the year-ended December 31, 2022. Our commercial
revenue, which excludes BARDA revenue, was $49.8 million for the year-ended December 31, 2023, an increase of $15.8 million, or 46%, compared to $34 million in
the year-ended December 31, 2022. The growth in commercial revenues was largely driven by deeper penetration within individual customer accounts and the full-
thickness skin defects launch along with the commencement of commercial sales with our partner COSMOTEC in Japan.
Gross profit margin increased by 2% to 84.5% compared to 82.4% in the year-ended December 31, 2022. The increase in gross profit margin is largely driven
by higher production along with lower shipping costs.
BARDA income consisted of funding from BARDA, under the Assistant Secretary for Preparedness and Response, within the U.S. Department of Health and
Human Services, under ongoing USG Contract No. HHSO100201500028C. BARDA income decreased 56% or $1.8 million to $1.4 million, compared to $3.2 million
in the year-ended December 31, 2022, due to reimbursable clinical trials winding down.
Total operating expenses increased by 46% or $27.3 million to $86.4 million, compared with $59.1 million in the year-ended December 31, 2022.
Sales and marketing expenses increased by 70%, or $15.4 million, to $37.3 million, compared to $21.9 million incurred in the year-ended December 31,
2022. Higher costs in the current year were primarily attributed to higher salaries and benefits, commissions, recruitment fees and travel costs. The increase in salaries
and benefits and recruitment fees are due to the preparation of the commercial launch of full-thickness skin defects in June 2023. Higher commissions and travel costs
were directly associated with the increase in revenues.
General and administrative expenses increased by 21%, or $5.0 million, to $28.3 million, compared to $23.3 million incurred in the year-ended December 31,
2022. The increase was attributable to salaries and benefits, deferred compensation expense, stock-based compensation, and severance costs. Higher salary and benefits
are driven by the increase in headcount. The increase in deferred compensation expense is driven by our deferred compensation liability which generally tracks the
movements in the stock market. Severance costs in the current year were due to the termination of three former executive officers, partially offset by the termination of a
former executive officer in the prior year.
Research and development expenses increased by 50%, or $6.9 million, to $20.8 million, compared to $13.9 million incurred in the year-ended December 31,
2022. The increase was primarily due to higher clinical trial costs associated with the TONE study as well as other research and development costs associated with
furthering our pipeline, and the development of the next generation
31
Table of Contents
RECELL GO for preparation of Spray-On Skin Cells, which resulted in a PMA submission in June 2023. We also had increased expenses associated with building out a
team of Medical Science Liaisons in support of the new full-thickness skin defects indication.
Interest expense increased by $1.1 million due to the new Credit Agreement entered into with OrbiMed Advisors, LLC on October 18, 2023.
Other income, net increased by $7.6 million in the current year primarily due to an increase of $2.1 million in income from our investment activities, wind
down of certain foreign subsidiaries that resulted in a $9.4 million gain, partially offset by a loss on debt issuance of $1.2 million, debt issuance costs of $0.8 million and
the change of fair value for our debt of $1.6 million and change in fair value of warrants for $0.7 million. We had an increase of approximately $2.1 million in interest
income due to higher investment yields. By the end of the fourth quarter of 2023 the business activities of AVITA Medical Pty Limited, AVITA Medical Europe
Limited, Visiomed Group Pty Ltd, C3 Operations Pty Ltd and Infamed Pty Ltd were essentially dissolved. As part of the liquidation the company recognized $9.4
million of non-cash foreign currency exchange gains associated with the elimination of the foreign subsidiaries. The gains were offset by expenses related to issuance of
debt. We recognized approximately $1.2 million loss on debt issuance as the fair value of the debt and the warrants on the issuance date exceeded the proceeds received
on October 18, 2023, the closing date. In addition, we incurred approximately $0.8 million in debt issuance costs. We also recognized $1.7 million and $0.7 million of
non-cash charges due to the change in fair value of the debt and the warrant liability, respectively. As permitted under ASC 825, we elected the fair value option to
account for the debt, and recorded the debt and warrants at fair value with changes in fair value recorded in the Consolidated Statements of Operations. Changes in fair
value related to instrument specific credit risk for the debt are included in Other comprehensive income in the Consolidated Balance Sheet.
Net loss increased by $8.8 million, to $35.4 million, over the $26.7 million recognized in the year ended December 31, 2022. The increase in net loss was
driven by the higher operating expenses, partially offset by higher revenues and the non-cash charges as described above.
Year-Ended December 31, 2022, compared to the Year-Ended December 31, 2021
The table below summarizes the results of our operations for each of the periods presented (in thousands).
Statement of Operations Data:
Revenues
Cost of sales
Gross profit
BARDA income
Operating expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Operating loss
Interest expense
Other income, net
Loss before income taxes
Income tax expense
Net loss
*nm = not meaningful
Year-Ended
December 31, 2022
Year-Ended
December 31, 2021
$
Change
%
Change
34,421 $
(6,041 )
28,380
3,215
(21,913 )
(23,330 )
(13,857 )
(59,100 )
(27,505 )
(16 )
892
(26,629 )
(36 )
(26,665 ) $
33,025
(6,104 )
26,921
1,590
(16,267 )
(21,693 )
(15,669 )
(53,629 )
(25,118 )
(29 )
47
(25,100 )
(42 )
(25,142 )
1,396
63
1,459
1,625
(5,646 )
(1,637 )
1,812
(5,471 )
(2,387 )
13
845
(1,529 )
6
(1,523 )
4 %
1 %
5 %
102 %
(35 )%
(8 )%
12 %
(10 )%
(10 )%
45 %
*nm
(6 )%
14 %
(6 )%
$
$
Total net revenue increased by 4% or $1.4 million to $34.4 million, compared to $33.0 million in the year-ended December 31, 2021, which included $7.9
million from our delivery of units to managed inventory for BARDA (of the Office for the Assistant Secretary for Preparedness and Response) for emergency response
preparedness. Total commercial revenue, which excludes BARDA revenue, increased by 36% or $9.0 million to $34.0 million in the year-ended December 31, 2022,
compared to $25.1 million in the year-ended December 31, 2021. The growth in commercial revenues was largely driven by deeper penetration within individual
customer accounts along with the commencement of commercial sales with our partner COSMOTEC in Japan.
Gross profit margin was 82% and relatively flat compared to the year-ended December 31, 2021.
BARDA income consisted of funding from BARDA, under the Assistant Secretary for Preparedness and Response, within the U.S. Department of Health and
Human Services, under ongoing USG Contract No. HHSO100201500028C. Under the BARDA
32
Table of Contents
contract, income of $3.2 million was recognized during the year-ended December 31, 2022, compared to income of $1.6 million for the year-ended December 31, 2021.
BARDA income increased as a result of funding by BARDA for the pivotal trial for use of the RECELL System for soft tissue repair.
Total operating expenses increased by 10% or $5.5 million to $59.1 million, compared to $53.6 million in the year-ended December 31, 2021.
Sales and marketing expenses increased by 35%, or $5.6 million, to $21.9 million, compared to $16.3 million recognized in the year-ended December 31,
2021. Increased costs in the current year were primarily driven by higher selling costs, pre-commercialization costs and higher salaries and benefits. Higher selling costs
are attributable to increased commissions due to increased revenue and higher costs for travel, hands-on professional education, and training. Increased pre-
commercialization costs are driven by activities related to future RECELL launches in soft tissue repair and vitiligo. Higher salaries and benefits were primarily due to
additional field personnel added to deepen penetration within individual customer accounts.
General and administrative expenses increased by 8%, or $1.6 million, to $23.3 million, compared to $21.7 million recognized in the year-ended December
31, 2021. The increase was primarily driven by higher salaries and benefits and share-based compensation expenses. Higher salaries and benefits costs were due to the
expansion of our workforce to support overall operations along with severance costs associated with the termination of a former executive officer. Higher share-based
compensation expense was due to the new equity grants in the current period, partially offset by the reversal of expense for unvested awards related to the termination of
a former executive officer in the current year.
Research and development expenses decreased by 12%, or $1.8 million, to $13.9 million, compared to $15.7 million recognized in the year-ended December
31, 2021. Research and development costs were lower due to the following: pediatric burn study was closed for enrollment, soft tissue repair and vitiligo trial
participants were in less costly follow-up phases this period compared to more costly recruitment and treatment phases in the prior period, and lower expense for
sponsored research toward pipeline development in the current period. This is partially offset by higher development expenses in the current year from ongoing
development of next generation devices for preparation of Spray-On Skin™ Cells as compared to the prior year due to early prototype development and testing.
Net loss increased by 6%, or $1.5 million, to $26.7 million, over the $25.1 million recognized in the year-ended December 31, 2021. The increase in net loss
was driven by higher operating expenses as described above, partially offset by higher revenue.
Liquidity and Capital Resources
Overview
We expect to utilize cash reserves until U.S. sales of our products reach a level sufficient to fund ongoing operations. AVITA Medical has funded its research
and development activities, and more recently its substantial investment in sales and marketing activities, through raising capital by issuing securities and the issuance of
debt. As of December 31, 2023, the Company had approximately $22.1 million in cash and cash equivalents and $66.9 million in marketable securities.
On October 18, 2023 (the “Closing Date”), the Company entered into a Credit Agreement (the “Credit Agreement”), by and between the Company, as
borrower, and an affiliate of OrbiMed Advisors, LLC, as the lender and administrative agent (the “Lender”). The Credit Agreement provides for a five-year senior
secured credit facility in an aggregate principal amount of up to $90.0 million (the “Loan Facility”), of which $40.0 million was borrowed on the Closing Date (the
“Initial Commitment Amount”). In addition, an aggregate of $50.0 million will be made available in two separate $25.0 million tranches, at the Company’s discretion,
subject to certain net revenue requirements. The first tranche of $25.0 million will be made available on or before December 31, 2024. The second tranche of $25.0
million will be made available on or prior to June 30, 2025, only if the first tranche was drawn upon. On the Closing Date, the Company closed on the Initial
Commitment Amount, less certain fees and expenses payable to or on behalf of the Lender. The indebtedness under the Credit Agreement will be secured by
substantially all of our assets and will accrue interest at a rate equal to the greater of (a) forward-looking one-month term SOFR rate and (b) four percent (4%) per
annum, plus eight percent (8%). In the event that the Company does not meet certain twelve-month trailing revenue targets at the end of certain fiscal quarters, the
outstanding balance of the loan must be repaid in equal quarterly installments of 5% of the funded amount through the maturity date. The Credit Agreement contains
representations, warranties and covenants that are customary for this type of agreement.
On the Closing Date, we issued to an affiliate of the Lender a warrant (the “Warrant”) to purchase up to 409,661 shares of our common stock, at an exercise
price of $10.9847 per share, with a term of 10 years from the issuance date. The Warrant contains customary share adjustment provisions, as well as weighted average
price protection in certain circumstances.
33
Table of Contents
As of the date these financial statements were issued, we believe we have sufficient cash reserves to fund operations for the next 12 months.
Financing Activities
On April 14, 2023, we entered into a Sales Agreement with Cowen and Company, LLC pursuant to which the Company may sell from time-to-time up to
3,799,164 shares of its common stock (the “2023 ATM Program”). During the year-ended December 31, 2023, we did not make any sales under the 2023 ATM
Program.
On October 18, 2023, as discussed above, we completed a Credit Agreement with the Lender for an aggregate amount up to $90.0 million. On the closing
date of the agreement we drew $40.0 million.
On October 18, 2023, as discussed above, we issued to an affiliate of the Lender a warrant to purchase up to 409,661 shares of our common stock, at an
exercise price of $10.9847 per share, with a term of 10 years from the issuance date.
Given the above, we believe there is presently sufficient working capital to support our committed activities, our research and development programs and
other activities over the next twelve months.
The following table summarizes our cash flows for the periods presented:
(In thousands)
Net cash used in operations
Net cash provided by/(used in) investing activities
Net cash provided by financing activities
Effect of foreign exchange rate on cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
$
December 31, 2023
December 31, 2022
Year-Ended
$
(38,011 )
1,607
40,374
(16 )
3,954
18,164
22,118
(19,090 )
(19,332 )
900
(26 )
(37,548 )
55,712
18,164
Net cash used in operating activities was $38.0 million during the year-ended December 31, 2023, and $19.1 million during the year-ended December 31,
2022. The increase primarily resulted from higher operating costs, partially offset by increased revenues.
Net cash provided in investing activities was $1.6 million during the year-ended December 31, 2023 and cash used in investing activities was $19.3 million
during the during the year-ended December 31, 2022. Cash flows provided by investing activities were primarily attributable to maturities of marketable securities. Cash
flows used in investing activities for the year-ended December 31, 2022 is primarily attributable to purchase of marketable securities.
Net cash provided by financing activities was $40.4 million and $0.9 million for the years-ended December 31, 2023 and 2022, respectively. The increase in
cash provided by financing activities was due to the issuance debt.
Capital Management and Material Cash Requirements
We aim to manage capital to maintain optimal returns to stockholders and benefits for other stakeholders. We also aim to maintain a capital structure that
ensures the lowest cost of capital available to us. We regularly review our capital structure and seek to take advantage of available opportunities to improve outcomes for
us and our stockholders.
For the year-ended December 31, 2023, there were no dividends paid and we have no plans to commence the payment of dividends. We have no purchase
commitments or long-term contractual obligations, except for lease obligations as of December 31, 2023. Refer to Note 7 of our Consolidated Financial Statements for
further details on our lease obligations. In addition, we have no off-balance sheet arrangements (as defined in the rules and regulations of the SEC) that have or are
reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors. We have no committed plans to issue further shares on the market but will continue to assess market
conditions.
34
Table of Contents
Critical Accounting Policies and Estimates
The SEC defines “critical accounting policies” as those that require the application of management’s most difficult, subjective, or complex judgments, often
as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.
The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Practices, or U.S. GAAP, requires us to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. We base those estimates on historical experience and on various assumptions
that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
The following listing is not intended to be a comprehensive list of all of our accounting policies. Our significant accounting policies are described in Note 2
to our consolidated financial statements contained elsewhere in this Annual Report. In many cases, the accounting treatment of a particular transaction is dictated by U.S.
GAAP, with no need for our judgment in its application. There are also areas in which our judgment in selecting an available alternative would not produce a materially
different result. We have identified the following as our critical accounting policies.
Revenue Recognition
We recognize revenue when its customers obtain control of promised goods or services, in an amount that reflects the consideration which we expect to be
entitled in exchange for those goods or services.
To determine revenue recognition for arrangements that are within the scope of Topic 606, Revenue from contracts with customers, (“ASC 606”), we perform
the following five steps:
1.Identify the contract with a customer
2.Identify the performance obligations
3.Determine the transaction price
4.Allocate the transaction price to the performance obligations
5.Recognize revenue when/as performance obligation(s) are satisfied
In order for an arrangement to be considered a contract, it must be probable that we will collect the consideration to which it is entitled for goods or services
to be transferred. Once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised with each contract, determines whether
those are performance obligations and the related transaction price. We then recognize the sale of goods based on the transaction price that is allocated to the respective
performance obligation when the performance obligation is satisfied.
Our revenue consists primarily of the sale of the RECELL System to hospitals or other treatment centers, COSMOTEC and to BARDA (collectively,
“customers”), predominately in the United States. We evaluated the BARDA contract and concluded that a portion of the arrangement, such as the procurement of the
RECELL system and the emergency preparedness, represents a transaction with a customer and as such are in the scope of ASC 606. Amounts received from BARDA
for the research and development of the our product are classified as BARDA income in the Consolidated Statement of Operations and are accounted for under IAS 20.
For further details refer to BARDA Income and Receivables below.
Revenues for commercial customers (COSMOTEC, hospitals and treatment centers) are recognized as control of the product is transferred to customers, at an
amount that reflects the consideration expected to be received in exchange for the product. Revenues are recognized net of volume discounts. As such, revenue is
recognized only to the extent a significant reversal of revenues is not expected to occur in subsequent periods. For our contracts that have an original duration of one
year or less, we used the practical expedient applicable to such contracts and does not consider the time value of money. Further, because of the short duration of these
contracts, we have not disclosed the transaction price for the remaining performance obligations as of each reporting period or when we expect to recognize this revenue.
We have further applied the practical expedient to exclude sales tax in the transaction price and expense contract acquisition costs such as commissions and shipping and
handling expenses as incurred.
For revenues related to the BARDA contract within the scope of ASC 606, we identified two performance obligations (i) the procurement of 5,614 RECELL
units, (ii) emergency preparedness services. Through this contract we promise to procure the product through a vendor management inventory arrangement and to stand
ready to provide emergency deployment services related to the product. Emergency preparedness services include procuring necessary storage containers, housing, and
maintaining the containers (and product), and providing shipping and handling services in the event of an emergency situation. This stand ready obligation is a
35
Table of Contents
series of distinct services that are substantially the same and have the same pattern of transfer to the customer, overtime as services are consumed.
The total transaction price for the portion of the BARDA contract that is within the scope of ASC 606, was determined to be $9.2 million at contract
inception. The transaction price was allocated on a stand-alone selling price basis as follows: $7.6 million to the procurement of the RECELL product, which is classified
as revenues when recognized in the Consolidated Statement of Operations and $1.6 million to the emergency deployment services is classified as revenues when
recognized in the Consolidated Statement of Operations. The $1.6 million for emergency deployment includes variable consideration which is deemed immaterial to the
contract as a whole. We estimated the stand-alone selling price of the procurement of the RECELL product based on historical pricing of our product at the initial
execution of the contract. We estimated the stand-alone selling price of the emergency deployment services performed based on our projected cost of providing the
services plus an applicable profit margin as denoted in the contract.
Our performance obligations are either satisfied at a point in time or over time as services are provided. The product procurement performance obligation is
satisfied at a point in time, upon transfer of control of the product. As such, the related revenue for these performance obligations is recognized at a point in time as
revenue within our Consolidated Statement of Operations. In addition to guidance under ASC 606, we recognize revenue from the sales of RECELL product to BARDA
for placement into vaccine stockpiles in accordance with Securities and Exchange Commission (“SEC”) Interpretation, Commission Guidance regarding Accounting for
Sale of Vaccines and BioTerror Countermeasures to the Federal Government for Placement into the Pediatric Vaccine Stockpile or the Strategic National Stockpile
(SNS). Under this guidance, revenue is recognized when product is placed in the BARDA vendor-managed inventory (“VMI”) as control of the product has been
transferred to the customer at the time of delivery to the VMI. RECELL units that have been delivered to BARDA have a product replacement obligation at no cost to
BARDA due to product’s limited shelf-life. The estimated cost of the expired inventory over the term of the contract is accrued on a per unit basis at the time of delivery.
The liability is released upon replacement of the product along with a corresponding reduction to inventory. The emergency preparedness services performance
obligation is satisfied over time. Revenue for the emergency deployment will be recognized on a straight-line basis during the term of the contract as services are
consumed over time. Services recognized are included in sales within the Consolidated Statement of Operations. Contract costs to fulfil the performance obligation are
incremental and expected to be recovered are capitalized and amortized on a straight-line basis over the term of the contract. Contract costs are included in other long-
term assets.
See Note 5 to our Consolidated Financial Statements included in this Annual Report for additional detail on revenue recognition.
Government Grants / BARDA Income and Receivables
We were granted a BARDA contract in September 2015, wherein BARDA provided funding to us to support the ongoing U.S. clinical regulatory program
towards FDA premarket approval, Compassionate Use program, clinical and health economics research, and U.S. pediatric burn programs.
Income under the BARDA contract is earned under a cost-plus-fixed-fee arrangement in which we are reimbursed for direct costs incurred plus allowable
indirect costs and a fixed-fee earned. Billings under the contracts are based on approved provisional indirect billing rates, which permit recovery of fringe benefits,
general and administrative expenses and a fixed fee.
We have concluded that grants are not within the scope of ASC 606, as they do not meet the definition of a contract with a “customer”. We have further
concluded that Subtopic 958-605, Not-for-Profit-Entities-Revenue Recognition also does not apply, as the Company is a business entity, and the grants are with
governmental agencies. Government grants and related receivables are recognized when there is reasonable assurance that the grant will be received, and all attaching
conditions will be complied with. When the grant relates to an expense item, it is recognized as income over the periods necessary to match the grant on a systematic
basis to the costs that it is intended to compensate. When the grant relates to an asset, the fair value is credited to deferred income and is released to the profit or loss over
the expected useful life of the relevant asset by equal annual installments.
Share-Based Compensation
We measure and recognize compensation expense on a graded-vesting method, for stock options and restricted stock units (“RSUs”), to employees, directors
and consultants over the vesting period based on their grant date fair values. Compensation expense for performance-based awards is measured based on the number of
shares ultimately expected to vest, estimated at each reporting date based on management’s expectations regarding the relevant performance criteria. We estimate the fair
value of stock options on the date of grant using the Black-Scholes option pricing model. The fair value of RSUs is based on the closing stock price as determined per
Nasdaq at the date of grant.
36
Table of Contents
Determining the estimated fair value at the grant date requires judgment in determining the appropriate valuation model and assumptions, including, risk-free
rate, volatility rate, annual dividend yield and the expected term.
The following assumptions were used in the valuation of stock options.
•Expected volatility – determined using the historical volatility using daily intervals over the expected term.
•Expected dividends – None, based on the fact that we have never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
•Expected term – the expected term of our stock options for tenure only vesting has been determined utilizing the “simplified” method as described in the SEC’s
Staff Accounting Bulletin No. 107 relating to stock-based compensation. The simplified method was chosen because the we have limited historical option exercise
experience due to its short operating history of awards granted, the first plan was established in 2016 and was primarily used for Executives awards. Further, we do
not have sufficient history of exercises in the U.S. market given our redomiciliation from Australia to the United States in 2020.
•Risk-free interest rate – the risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for a period approximately equal to the expected
term of the award.
See Note 15 to our Consolidated Financial Statements included in this Annual Report for additional detail on share-based compensation.
Warrants
Warrants are accounted for in accordance with applicable accounting guidance provided in ASC Topic 815, Derivatives and Hedging – Contracts in Entity’s
Own Equity (“ASC 815”), as a liability based on the specific terms of the warrant agreement and recorded at fair value. The warrants are subject to re-measurement at
each settlement date and at each balance sheet date and any change in fair value is recognized in earnings. The fair value of the warrant liability, which is reported within
Warrant liability on the Consolidated Balance Sheets, is estimated by the Company based on the Black-Scholes option pricing model with the following inputs (Level 3):
•Price of common stock
•Estimated expected term
•Estimated exercise price
•Estimated expected volatility
•Estimated risk free interest rate
•Estimated expected dividend rate
Long-term debt
We elected the fair value option (“FVO”) of accounting under ASC 825-10, Financial Instruments (“ASC 825”), to account for the debt. ASC 825-10,
provides FVO election that allows companies an irrevocable election to use fair value at the date of issuance and subsequently remeasure every reporting period. The fair
value of the debt is reported in the Consolidated Balance Sheets. Changes in fair value are reported in earnings in Other income in the Consolidated Statements of
Operations. Any changes in fair value caused by instrument-specific credit risk are presented separately in other comprehensive income. We have elected to present
interest expense separately from changes in fair value and therefore will present interest expense associated with the debt. All costs associated with the issuance of the
Credit Agreement accounted for using the fair value option were expensed upon issuance. Refer to Note 6 for further details.
The fair value of the debt was determined using a Monte Carlo simulation in order to capture the probability of different potential cash flows outcomes
associated with the contractual terms of the instrument. The below assumptions were used in the Monte Carlo simulation (Level 3):
•Estimated risk free interest rate
•Estimated revenue volatility
•Estimated revenue discount rate
•Estimated future revenue projection
37
Table of Contents
•Estimated expected dividend rate
Income Taxes
Income taxes are accounted for using the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced
by a valuation allowance if it is more likely than not that a portion of the deferred tax asset will not be realized.
We review our uncertain tax positions regularly. An uncertain tax position represents our expected treatment of a tax position taken in a filed return or
planned to be taken in a future tax return or claim that has not been reflected in measuring income tax expense for financial reporting purposes. We recognize the tax
benefit from an uncertain tax position when it is more-likely-than-not that the position will be sustained upon examination on the basis of the technical merits or the
statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired.
See Note 16 to our Consolidated Financial Statements included in this Annual Report for additional detail on income taxes.
Recent accounting pronouncements
See discussion of recent accounting pronouncements in Note 2 of the Consolidated Financial Statements located in Item 8 in this Annual Report.
38
Table of Contents
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this item.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our financial statements and supplementary data are attached hereto beginning on Page F-1 and are incorporated by reference herein.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures of a company that are designed to ensure that information required to be disclosed by
the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be
disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its
chief executive officer and chief financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As
required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act, our management, with the participation of our chief executive officer and chief financial officer,
conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2023. Based on this evaluation, our chief executive officer
and chief financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2023.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company, as this term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act. As required by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, our management, with the participation
of our chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31,
2023, based on the criteria set forth in the Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2023.
This report does not include an attestation report of our independent registered public accounting firm regarding our internal control over financial reporting,
in accordance with applicable SEC rules that permit us to provide only management’s report in this report.
Changes in Internal Control over Financial Reporting
During the three-months ended December 31, 2023, there were no material changes made in our internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act).
Inherent Limitations on Disclosure Controls and Procedures
Management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving
their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Because of these
inherent limitations, our disclosure controls and procedures may not prevent or detect all instances of fraud, misstatements, or other control issues. In addition,
projections of any evaluation of the effectiveness of disclosure or internal controls to future periods are subject to risks, including, among others, that controls may
become inadequate because of changes in conditions or that the degree of compliance with policies or procedures may deteriorate.
39
Table of Contents
Item 9B. OTHER INFORMATION
None
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
40
Table of Contents
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Identification of Directors
PART III
Name
Age
Position with the Company and Principal Occupation
Director Since
Lou Panaccio
Jeremy Curnock Cook
Professor Suzanne Crowe
Jan Stern Reed
Robert McNamara
Cary Vance
James Corbett
66
74
73
64
67
58
65
Chairman of the Board of Directors
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Executive Director and Chief Executive Officer
July 2014
October 2012
January 2016
July 2021
June 2023
June 2023
July 2021
Board Term
Expires
June 2024
June 2024
June 2024
June 2024
June 2024
June 2024
June 2024
Lou Panaccio has served as Chairman of the Board of Directors since July 2014. Mr. Panaccio is a successful healthcare businessman with extensive
experience leading companies from concept to commercialization. Mr. Panaccio possesses more than 35 years of executive leadership experience in healthcare services
and life sciences, including more than 25 years of board-level experience. Mr. Panaccio is currently a Director of ASX50 company and one of the world’s largest
medical diagnostics companies, Sonic Healthcare Limited, where he has served since 2005. In addition, Mr. Panaccio is Director of Unison Housing Limited, was a
Chairman of Genera Biosystems Limited until June 2019, is a Chairman of Adherium Limited and a Director of Rhythm Biosciences Limited, both of which are publicly
listed (ASX) development-stage medical diagnostics/devices companies. We believe Mr. Panaccio is qualified to serve on our Board of Directors based on his extensive
experience in the healthcare services and life sciences sectors and his experience in serving on boards.
Jeremy Curnock Cook has served as a Director since October 2012. He is a veteran in the life sciences/healthcare industry and has been actively supporting
the commercialization of healthcare innovations and helping entrepreneurs build their international businesses over the past 45 years. Founder and Managing Director of
BioScience Managers, Mr. Curnock Cook brings his decades of international experience to our Board of Directors. Over his career, Mr. Curnock Cook has successfully
managed in excess of US $1 billion in equity investments. He launched the first dedicated biotechnology fund for the Australian market and is a former head of the life
science private equity team at Rothschild Asset Management, an early pioneer and significant investor in the sector. In his early career he founded the International
Biochemicals Group which he successfully sold to Royal Dutch Shell. Mr. Curnock Cook founded a European-focused seed fund with Johnson & Johnson and built the
International Biotechnology Trust. Mr. Curnock Cook has served on more than 40 boards of directors in the life science sector in the UK, Europe, USA, Canada, Japan
and Australia. In addition to serving on our Board of Directors, Mr. Curnock Cook currently serves on the following boards: International BioScience Managers Ltd
appointed March 2000, Bioscience Managers Pty Ltd appointed January 2003, REX Bionics Pty Ltd appointed February 2012, Sheldon LTD (formerly Sea Dragon)
appointed October 2012, Adherium Ltd appointed April 2015, Bioscience Managers UK Ltd appointed August 2017, Marine Department Ltd, appointed January 2019,
JLCC Ltd appointed December 2019, Tidal Sense LTD (formally CRiL) appointed November 2020 and Humanetix Ltd appointed September 2021. We believe Mr.
Curnock Cook is qualified to serve on our Board of Directors based on his extensive experience in the life sciences sector.
Professor Suzanne Crowe AO has served as a Director since January 2016. Australian-based, she is a physician-scientist and ASX/Nasdaq-listed company
director with expertise in supporting companies with their medical and scientific strategies. A Fellow of the Australian Institute of Company Directors, and Emeritus
Professor, Monash University Melbourne, she is currently a Director of Sonic Healthcare Ltd, a large global medical diagnostics company. Past board positions include
St Vincent’s Health Australia Ltd (2012-2021), the country’s largest not-for-profit health and aged care provider. After 35 years at both, she has recently retired from
the Burnet Institute, having served as Associate Director Clinical Research, and The Alfred Hospital Melbourne, where she held the appointment of Senior Specialist
Physician in Infectious Diseases. She was appointed as Officer of the Order of Australia in June 2020 in recognition of her distinguished services to health, clinical
governance, biomedical research, and education. We believe Professor Crowe is qualified to serve on our Board of Directors based on her technical experience and
extensive expertise in supporting companies with their medical and scientific strategies.
Jan Stern Reed has served as a Director since July 2021. She has more than 35 years of legal, management and business leadership experience primarily
within the healthcare industry, and brings significant expertise in corporate governance, compliance, and risk management. Ms. Reed served as Senior Vice President,
General Counsel and Corporate Secretary at Walgreens Boots Alliance, Inc., a global health and wellbeing company. Prior to Walgreens, Ms. Reed was Executive Vice
President, Human Resources, General Counsel and Corporate Secretary of Solo Cup Company, where she was responsible for the legal, human resources, internal audit,
corporate communications, and compliance functions. Prior to Solo Cup Company, she was Associate
41
Table of Contents
General Counsel, Corporate Secretary and Chief Corporate Governance Officer at Baxter International, Inc. Ms. Reed holds a Bachelor of Arts degree from the
University of Michigan and a Juris Doctor from the Northwestern University Pritzker School of Law. Ms. Reed currently serves as a board member of Stepan Co.
(NYSE: SCL), a major manufacturer of specialty and intermediate chemicals used in a broad range of industries, and AngioDynamics, Inc. (NASDAQ: ANGO), an
industry-leading and transformative medical technology company focused on restoring healthy blood flow in the body’s vascular system, expanding cancer treatment
options, and improving quality of life for patients. We believe Ms. Reed is qualified to serve on our Board of Directors based on her extensive experience in legal,
human resources, corporate governance, general management and business leadership, primarily within the healthcare industry.
Robert McNamara has served as a Director since April 2023. He is an accomplished senior executive with over 25 years of leadership experience in public
and privately held companies in the medical device and technology industries. His extensive experience in operations and financial management spans across early stage,
high growth, and mature companies. He is currently a member of the Board of Directors and Chair of Audit Committee for Axonics, Inc. Additionally, Mr. McNamara is
a member of the Board of Directors and Chair of Compensation Committee for Xtant Medical Holdings. Prior to these appointments, Mr. McNamara served as
Executive Vice President, Chief Financial Officer of LDR Holding/Spine. Prior to this role, he served as the Chief Financial Officer of three publicly traded medical
device companies including Accuray, Somnus Medical Technologies, and Target Therapeutics. Mr. McNamara holds a Bachelor of Science in Accounting from the
University of San Francisco and an MBA from The Wharton School, University of Pennsylvania. We believe Mr. McNamara is qualified to serve on our Board of
Directors because of his experience with financial management and other requirements of U.S. public and private companies, and considerable expertise in the medical
device and technology industries.
Cary Vance has served as a Director since April 2023. Mr. Vance has over 25 years of extensive leadership experience with commercial and operational
expertise in the healthcare industry. He is currently the President and Chief Executive Officer of PhotoniCare, Inc., a position he has held since May 2023. Prior to this
appointment, he was President and CEO of Titan Medical, and he continues to serve as an independent director for Titan Medical’s Board of Directors. Previously, Mr.
Vance served as President and CEO of XCath, a privately held neurovascular robotics company, having also served in similar roles at OptiScan Biomedical,
Myoscience, and Hansen Medical. He strategically transformed and commercialized these businesses and markets with disruptive, enabling, and game-changing novel
technologies. Mr. Vance has also executed on equity and debt financing strategies as an integral step to successful value creation and M&A events. Prior to his role at
Hansen Medical, he served in various global executive leadership roles at Teleflex, Covidien, and GE HealthCare. Mr. Vance is Lean/Six Sigma Black Belt Certified,
NACD Certified, and holds both a Bachelor of Arts degree in Economics and an MBA from Marquette University. We believe Mr. Vance is qualified to serve on our
Board of Directors based on his leadership experience and extensive expertise in commercial and operations in the healthcare industry.
James Corbett was appointed as President and CEO of the Company effective as of September 28, 2022. Mr. Corbett served as a Non-Executive Director
from July 2021 to September 28, 2022. He has approximately 40 years of leadership experience in the medical device field, most recently, as CEO of CathWorks Ltd., a
software-based medical technology company. Mr. Corbett has extensive global commercial and operating experience, serving as an expatriate General Manager of
Baxter Japan and later as General Manager and President of Scimed Life Systems Inc. and Boston Scientific International respectively. During his career he has served
as CEO of three publicly listed companies; Microtherapeutics Inc (MTIX), ev3 Inc (evvv), Alphatec Spine (ATEC). Mr. Corbett has also led two privately funded
companies as CEO: Home Diagnostics Inc. and Vertos Medical. Mr. Corbett has extensive capital market and governance experience from both public and private
environments. Mr. Corbett holds a Bachelor of Science in Business Administration from the University of Kansas. Mr. Corbett is a board member of two privately held
medical device companies. We believe Mr. Corbett is qualified to serve on our board of directors based on his global commercial and operating expertise in supporting
companies with their medical and scientific strategies.
Identification of Named Executive Officers
Name
James Corbett
David O'Toole
Donna Shiroma
Age
65
65
61
Position
Chief Executive Officer
Chief Financial Officer
General Counsel
Date First Elected or
Appointed
September 2022
June 2023
June 2018
James Corbett is discussed above under “Identification of Directors”.
David O'Toole an accomplished financial executive with extensive experience in both public company operations and capital markets, Mr. O’Toole joined
AVITA Medical in 2023 as its Chief Financial Officer. Mr. O’Toole most recently served as CFO of Opiant Pharmaceuticals, a biopharmaceutical company developing
treatments for addiction and drug overdose, which was acquired
42
Table of Contents
by Indivior in March of 2023. Prior to that, he served as CFO of Soleno Therapeutics, a company focused on the development and commercialization of novel
therapeutics for the treatment of rare diseases. Prior to Soleno, Mr. O’Toole held the role of CFO for three publicly traded life sciences companies where he built and led
high-performance teams. Prior to his CFO experience, he spent over 24 years in public accounting, including 16 years with Deloitte & Touche. He holds a Bachelor of
Science in accounting from the University of Arizona and is a Certified Public Accountant (non-active).
Donna Shiroma has served as General Counsel, Chief Compliance Officer, and Corporate Secretary since June 2018. Ms. Shiroma has more than 20 years of
legal and compliance experience in the pharmaceutical and medical device industries and has played an instrumental role in transitioning companies from clinical to
commercial entities. Prior to joining the Company, she served in roles of increasing responsibility as corporate counsel, vice president of legal, chief privacy officer,
chief compliance officer, chief commercial officer and general counsel. Her prior professional experiences are with: Astex Pharmaceuticals from 2017 to 2018, Ascend
Therapeutics from 2008 to 2017, PDL BioPharma from 2006 to 2008, and several Johnson & Johnson companies from 2001 to 2006. Ms. Shiroma holds a B.S. in
Environmental Sciences from University of California, Berkeley, and a Juris Doctor degree from Santa Clara University School of Law. She is licensed in the State of
California as an attorney.
Term of Office
Our Directors are elected for a term of one year and until their respective successors are elected and qualified, or until their earlier resignation,
disqualification, or removal. Our executive officers are appointed by our Board of Directors and hold office for such terms as may be prescribed by our Board of
Directors and until their successors are appointed, or until their earlier resignation or removal.
Family Relationships
There are no family relationships between our Directors or executive officers.
Involvement in Certain Legal Proceedings
None of our Directors or executive officers has been involved in any of the following events during the past ten years:
a)any bankruptcy petition filed by or against any business or property of such person or any partnership or business in which such person was a general partner
or executive officer either at the time of the bankruptcy or within two years prior to that time;
b)any conviction in a criminal proceeding or being a named subject of a pending criminal proceeding (excluding traffic violations and other minor offences);
c)being the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities;
d)being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or
state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
e)being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or
vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial
institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money
penalty or temporary or permanent cease- and-desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud
in connection with any business entity; or
f)being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in
Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(40) of the Commodity Exchange Act), or any equivalent exchange,
association, entity or organization that has disciplinary authority over its members or persons associated with a member.
43
Table of Contents
Gender Diversity
Under the 4th Edition of the ASX’s Corporate Governance Principles and Recommendations the Company is required to set measurable objectives for
achieving gender diversity in the composition of its board, senior executives and workforce generally. As of the date of this Form 10-K, the Company's Directors of the
Company are 28.5% female and 71.5% male.
The Company is also in the process of developing measurable objectives for achieving gender diversity in the composition of its senior executives and
workforce generally in accordance with its Code of Ethics and Business Conduct. The Company will disclose its measurable objectives, the time period for achieving
those objectives and the Company’s progress towards achieving those objectives in future reporting periods.
Performance Evaluations
At least annually, the Nominating and Corporate Governance Committee will lead the Board of Directors in a self-evaluation to determine whether the board,
its committees and individual directors are functioning effectively. The board completed its last self-evaluation during the fiscal year-ended December 31, 2023.
Additionally, the Nominating and Corporate Governance Committee, Compensation Committee and Audit Committee conduct an annual evaluation of each
Board committee as it relates to the composition of each committee, the frequency and length of meetings, each committees primary responsibilities, and the
effectiveness of the each of the committee’s duties. The Nominating and Corporate Governance Committee and Compensation Committee completed its self-evaluation
during the fiscal year-ended December 31, 2023
The Company's Compensation Committee undertakes a review of the performance of the Company's CEO and the executive management team annually
during the first quarter of the calendar year. While no performance evaluation for the fiscal year-ended December 31, 2022 took place in 2023, the Company's
Compensation Committee completed a performance evaluation for the fiscal year-ended December 31, 2023 on or around January 3, 2024.
Code of Ethics
We have adopted a Code of Conduct, or the Code, that constitutes a “code of ethics” as that term is defined in paragraph (b) of Item 406 of Regulation S-K
and that applies to our executive officers, non-executive Directors, management and employees of the Company. A copy of the Code is available on our website at
www.avitamedical.com.
If we make any amendments to the Code or grant any waivers, including any implicit waiver, from a provision of the Code, we will disclose the nature of
such amendment or waiver on our website. The information on our website is not incorporated by reference into this Annual Report.
Section 16(a) Beneficial ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires the Company’s Directors and certain of its executive officers and persons who beneficially own more
than 10% of the Company’s common shares to file reports of and changes in ownership with the SEC. Based solely on the Company’s review of copies of SEC filings it
has received or filed, the Company believes that each of its Directors, executive officers, and beneficial owners of more than 10% of the shares satisfied the Section
16(a) filing requirements during the fiscal year-ended December 31, 2023.
Election of Directors
Our Board of Directors consists of seven members. Directors are elected at our annual general meeting of stockholders and hold office for a term of one year
and until their successors have been elected and qualified or until the earlier of their resignation or removal. Our Directors were most recently elected at our 2023 annual
general meeting on June 6, 2023, to hold office for a term of one year or until his or her successor is duly elected and qualified. Any newly created directorship or any
vacancy occurring on our Board of Directors may be filled only by a majority of the remaining members of our Board, even if such majority is less than a quorum, and
each Director so elected shall hold office until the expiration of the term of office of the Director whom he or she has replaced or until his or her successor is elected and
qualified. Under ASX Listing Rule 14.4, any Directors of the Company (except a managing Director) must not hold office without re-election past the third annual
general meeting following the Director’s appointment or three years, whichever is longer.
44
Table of Contents
Stockholder Nominees for Director
There have been no material changes to the procedures by which stockholders may recommend nominees to the Board of Directors.
Committees of the Board of Directors
Our Board of Directors has established an audit committee, a compensation committee, and a nominating and corporate governance committee, each of which
operates pursuant to a written charter adopted by our Board of Directors. Our Board of Directors may also establish other committees from time to time to assist the
Board of Directors. The composition and functioning of all of our committees comply with all applicable requirements of the Sarbanes-Oxley Act, Nasdaq and SEC
rules and regulations and the ASX Listing Rules and also align with the ASX Corporate Governance Council’s 4th Edition Corporate Governance Principles and
Recommendations. Each committee has a charter, which is available on our website at www.avitamedical.com. As of the date of this report, the composition of our
audit, compensation, and nominating and corporate governance committees were as follows:
Director
Independent
Compensation Committee
Audit Committee
Lou Panaccio
Jeremy Curnock Cook
Professor Suzanne Crowe
Jan Stern Reed
Robert McNamara
Cary Vance
Audit Committee
X
X
X
X
X
X
Member
Member
Member
Member
Chair
Member
Member
Chair
Member
Nominating and
Corporate
Governance
Committee
Member
Member
Chair
Member
Nasdaq Marketplace Rules require us to establish an audit committee comprised of at least three members, each of whom is financially literate and satisfies
the respective “independence” requirements of the SEC and Nasdaq and one of whom has accounting or related financial management expertise at senior levels within a
company. In addition, the ASX Listing Rules and the 4th Edition of the ASX’s Corporate Governance Principles and Recommendations require us to have an Audit
Committee comprised of at least three members, all of whom are non-executive Directors and a majority of whom are “independent” Directors, and which is chaired by
an independent Director who is not the chair of the Board.
We have a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. Our Audit Committee
assists our Board of Directors in overseeing the accounting and financial reporting processes of our company and audits of our financial statements, including the
integrity of our financial statements, compliance with legal and regulatory requirements, our registered public accounting firm’s qualifications and independence, and
such other duties as may be directed by our Board of Directors. The Audit Committee is also required to assess risk management in conjunction with the Board of
Directors.
Our Audit Committee currently consists of four Board members, each of whom satisfies the “independence” requirements of the SEC, Nasdaq Marketplace
Rules, the ASX Listing Rules and the 4th Edition of the ASX’s Corporate Governance Principles and Recommendations. Our Audit Committee is currently composed of
Robert McNamara, Lou Panaccio, Cary Vance and Jan Stern Reed. Each qualifies as an “independent director” within the meaning of Nasdaq Marketplace Rules and the
4th Edition of the ASX’s Corporate Governance Principles and Recommendations. Mr. Curnock-Cook was interim, Chairman of the Audit Committee from September
2022 through April 2023. Mr. Robert McNamara is the current Audit Committee Chair and was appointed to that role as of May 2023, following his appointment to the
Board of Directors. Our Board of Directors has determined that Robert McNamara is an “audit committee financial expert”, as defined in item 407(d)(5)(ii) of
Regulations S-K. The Audit Committee meets at least two times per year. See below for summary of attendance.
The Audit Committee held a total of five meetings during the annual period ended December 31, 2023. The meetings attended by each Director, and the
number of meetings that they were each eligible to attend, is as follows:
45
Table of Contents
Robert McNamara
Jeremy Curnock Cook
Lou Panaccio
Jan Stern Reed
Cary Vance
James Corbett
Audit Committee Meeting Attendance
(1)
(2)
(3)
(4)
Meetings attended/Meetings held
3/5
5/5
4/5
5/5
3/5
5/5
(1)Mr. Robert McNamara was elected to the Board of Directors on April 1, 2023. Mr. McNamara was appointed by the Board of Directors to serve as Audit Committee
Chair, with effect from May 10, 2023.
(2)Mr. Jeremy Curnock Cook stepped down as a member of the Audit Committee, with effect from May 10, 2023.
(3)Mr. Cary Vance was elected to the Board of Directors on April 1, 2023. Mr. Vance was appointed by the Board of Directors to serve as an Audit Committee member, with
effect from May 10, 2023.
(4)Mr. James Corbett was not a member of the Audit Committee but was in attendance at all Audit Committee meetings in 2023 as CEO.
Compensation Committee
Our Board of Directors has established a Compensation Committee, which is comprised of independent Directors, within the meaning of Nasdaq Marketplace
Rules and also the 4th Edition of the ASX’s Corporate Governance Principles and Recommendations. The Compensation Committee must be comprised solely of non-
executive directors in accordance with the ASX Listing Rules and must also be chaired by an independent Director in accordance with the 4th Edition of the ASX’s
Corporate Governance Principles and Recommendations. The Compensation Committee is responsible for reviewing the salary, incentives, and other benefits of our
directors, senior executive officers and employees, and to make recommendations on such matters for approval by our Board of Directors. The Compensation Committee
is also responsible for overseeing and advising our Board of Directors with regard to the adoption of policies that govern our compensation programs. Professor Suzanne
Crowe, Jeremy Curnock Cook, Jan Stern Reed, Cary Vance and Lou Panaccio are the current members of the Compensation Committee, and each qualifies as an
“independent Director” within the meaning of Nasdaq Marketplace Rules and the 4th Edition of the ASX’s Corporate Governance Principles and Recommendations.
Cary Vance is the chair of this committee (being an independent Director who is not the chair of the Board).
The Compensation Committee held a total of five meetings during annual period ended December 31, 2023. The meetings attended by each Director, and the number of
meetings that they were each eligible to attend, is as follows:
Professor Suzanne Crowe
Jeremy Curnock Cook
Lou Panaccio
Jan Stern Reed
Cary Vance
James Corbett
Robert McNamara
Compensation Committee Meeting Attendance
Meetings attended/Meetings held
5/5
4/5
5/5
5/5
3/5
5/5
3/5
(1)
(2)
(3)
(4)
(1)Ms. Jan Stern Reed stepped down from role as Compensation Committee Chair and was appointed by Board of Directors to serve as Compensation Committee member,
with effect from May 10, 2023.
(2)Mr. Cary Vance was elected to the Board of Directors on April 1, 2023. Mr. Vance was appointed by the Board of Directors to serve as member of Compensation
Committee, with effect from May 10, 2023. Mr. Vance was then appointed to Compensation Committee Chair beginning with August 9, 2023 meeting.
(3)Mr. James Corbett was not a member of the Compensation Committee but was in attendance at all Compensation Committee meetings in 2023 as CEO.
(4)Mr. Robert McNamara was elected to the Board of Directors on April 1, 2023.
Nominating and Corporate Governance Committee
Our Board of Directors has established a Nominating and Corporate Governance Committee. Under the 4th Edition of the ASX’s Corporate Governance
Principles and Recommendations, our Nominating and Corporate Governance Committee should have at least three members, a majority of whom are independent, and
should also be chaired by an independent director. Professor Suzanne Crowe, Robert McNamara, Jan Stern Reed and Jeremy Curnock Cook are the current members of
the Nominating and Corporate
46
Table of Contents
Governance Committee and each qualifies as an “independent director” within the meaning of Nasdaq Marketplace Rules and the 4th Edition of the ASX’s Corporate
Governance Principles and Recommendations. Jan Stern Reed is the Chair of this committee (being an independent director). The Nominating and Corporate
Governance Committee is responsible for identifying individuals qualified to become members of our Board of Directors, recommending nominees for election at the
stockholders meetings or to fill vacancies that arise on our Board of Directors, and recommending qualified and experienced directors to serve on the committees of our
Board of Directors. In addition, the Nominating and Corporate Governance Committee is responsible for leading the Board of Directors to complete a self-evaluation of
the board, its committees, and the individual directors.
The Nominating and Corporate Governance Committee held a total of four meetings during the annual period ended December 31, 2023. The meetings
attended by each Director, and the number of meetings that they were each eligible to attend, is as follows:
Nominating and Corporate Governance Committee Meeting Attendance
Lou Panaccio
Jeremy Curnock Cook
Professor Suzanne Crowe
Jan Stern Reed
Robert McNamara
James Corbett
Cary Vance
(1)
(2)
(3)
(4)
Meetings attended/Meeting held
3/4
4/4
4/4
4/4
3/4
4/4
3/4
(1)Mr. Lou Panaccio stepped down as a member of the Nominating and Corporate Governance Committee, with effect from May 10, 2023.
(2)Mr. Robert McNamara was elected to the Board of Directors on April 1, 2023. Mr. McNamara was appointed by the Board of Directors to serve as member of the
Nominating and Corporate Governance Committee, with effect from May 10, 2023.
(3)Mr. James Corbett was not a member of the Nominating and Corporate Governance Committee but was in attendance at all Nominating and Corporate Governance
Committee meetings in 2023 as CEO.
(4)Mr. Cary Vance was elected to the Board of Directors on April 1, 2023.
Board of Directors’ Meetings
The Board of Directors held a total of seven meetings during the annual period ended December 31, 2023. The meetings attended by each Director, and the
number of meetings that they were each eligible to attend, is as follows:
Lou Panaccio
Jeremy Curnock Cook
Professor Suzanne Crowe
Jan Stern Reed
Robert McNamara
Cary Vance
James Corbett
Board of Directors' Meeting Attendance
Meetings attended/Meetings held
7/7
7/7
7/7
7/7
4/7
5/7
7/7
(1)
(2)
(1)Mr. Robert McNamara was elected to the Board of Directors on April 1, 2023.
(2)Mr. Cary Vance was elected to the Board of Directors on April 1, 2023.
Item 11. EXECUTIVE COMPENSATION
The particulars of the compensation paid to the below listed “named executive officers” of our company are set out in the summary compensation below.
oJames Corbett, Chief Executive Officer
oDavid O'Toole, Chief Financial Officer
oDonna Shiroma, General Counsel
47
Table of Contents
The following table sets forth for our named executive officers the following information for the annual period ended December 31, 2023 and December 31,
SUMMARY COMPENSATION TABLE
2022.
Name and
Position
Named Executive Officers:
James Corbett
Chief Executive Officer
David O'Toole
Chief Financial Officer
Donna Shiroma
General Counsel
Year
2023
2022
2023
2022
2023
2022
Salary
($)
625,000
156,992
245,048
-
431,526
416,902
Bonus
($)
491,188
100,726
146,753
-
209,829
178,662
Stock
Awards (1)
($)
-
-
-
-
178,672
Option
Awards (2)
($)
All Other
Compensation (3)
($)
912,500
1,232,747
1,607,150
-
547,500
82,524
39,987 (4)
5,119 (4)
7,875 (5)
-
47,249 (6)
47,155 (7)
Total
($)
2,068,675
1,495,584
2,006,826
-
1,236,104
903,915
(1)Amounts in this column represent awards of restricted stock units with the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.
The fair value determined at the date of grant in accordance with U.S. GAAP based on the closing price of our common stock on the applicable grant date. The
vesting of these stock awards is subject to continuation of employment over the relevant vesting period.
(2)Amounts in this column represent awards of stock options with the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.
Amounts in this column represent option awards issued to the individuals noted, based on the fair value determined at the date of grant in accordance with U.S.
GAAP. See Note 15- Share-Based Payment Plans to our Consolidated Financial Statements included in Part II, Item 8. “Financial Statements and Supplementary
Data” for the assumptions used in determining the grant date fair value of option awards. The vesting of these option awards are subject to various performance or
tenure related criteria.
(3)Amounts in this column represent all other compensation for the covered fiscal year that the smaller reporting company could not properly report in any other
column of the Summary Compensation Table. This includes the non-qualified deferred compensation employer match, 401(k) match, and fringe benefits such as
car allowance, accommodations and medical benefits, along with related taxes on grossed up fringe benefits.
(4)Relates to accommodation costs associated with the executive commuting from his home to our offices in Valencia, California (including an amount necessary
to gross up these costs for income tax purposes under U.S. federal and California State laws).
(5)Represents 401(k) employer match contribution.
(6)Comprised of (a) $28,045 in non-qualified deferred compensation employer match and (b) $19,204 in 401(k) employer match contribution.
(7)Comprised of (a) $28,855 in non-qualified deferred compensation employer match and (b) $18,300 in 401(k) employer match contribution.
48
Table of Contents
Employment Contracts
The following table outlines the specified terms of the relevant employment contracts for the named executive officers of the Company. For compensation
information of named executives refer to the table above.
Role
Chief Executive
Officer(CEO)
Chief Financial
Officer (CFO)
General Counsel
(GC)
Name
Contract Duration
Period of Notice (2) (3)
Termination payments
provided for by contract (1)
James Corbett
Three years with
automatic one-year
extensions on each
anniversary.
David O'Toole
Open ended contract
Donna Shiroma
Open ended contract
Termination by the Company
with or without Cause– No notice
period.
Termination by executive- with
or without Good Reason - 90
days prior written notice.
Termination by the Company or
Executive with or without Cause–
No notice period.
Termination by the Company or
Executive with or without Cause–
No notice period.
18 months
12 months
12 months
(1)Termination payments only in the event of employment termination for involuntary termination without cause or termination for “Good Reason.”
(2)“Cause” - For the CEO, "Cause" shall mean the occurrence of any of the following events: (i) Executive's unauthorized misuse of the Company's trade secrets or
proprietary information, (ii) Executive's conviction or plea of nolo contendere to a felony or a crime involving moral turpitude, (iii) Executive's committing an act
of fraud against the Company, or (iv) Executive's gross negligence or willful misconduct in the performance of his duties that has had or is likely to have a material
adverse effect on the Company. Except for a failure, breach or refusal which, by its nature, cannot reasonably be expected to be cured, Executive shall have ten
(10) business days from the delivery date of the Company's written notice of termination within which to cure any acts constituting Cause. For the CFO, Cause is
defined as (i) conviction of, or a plea of guilty or nolo contendere to, a felony or crime involving moral turpitude; (ii) participation in an act of fraud or theft against
the Company; (iii) willful and material breach of any contractual, statutory, fiduciary, or common law duty owed to the Company including without limitation
Section 4.1 of this Agreement; (iv) willful and repeated failure to satisfactorily perform job duties; or (v) any willful act that is likely to and which does in fact have
the effect of injuring the reputation, business, or a business relationship of the Company. For the GC, Cause is defined as: conviction of, or a plea of guilty or nolo
contendere to, a felony or crime involving moral turpitude; participation in an act of fraud or theft; willful and material breach of any contractual, statutory,
fiduciary or common law duty owed to the Company; intentional and repeated failure of Executive to perform Executive's job duties after receiving notice of the
stated deficiencies and Executive willfully falling to address the deficiencies and deliberately continuing to not perform stated job duties; or any willful, deliberate,
premeditated act by Executive that materially and demonstrably injures the reputation, business or a business relationship of the Company.
(3)“Good Reason” - For the CEO, Good Reason is defined as (i) a material reduction in Executive's Base Salary unless a proportionate reduction is made to the
Base Salary of all members of the Company's senior management, (ii) a permanent relocation of Executive's principal place of employment by more than 50 miles
from the location in effect immediately prior to such relocation, (iii) any material by the Company of any material provision of this Agreement, or (iv) a material
diminution in the nature or scope of Executive's authority or responsibilities from those applicable to Executive as of the Effective Date (date of hire). For the CFO
and GC, Good Reason is defined as (i) a material diminution in Executive’s authority, duties, or responsibilities in effect at the time of this Agreement; (ii) any
reduction in the Executive’s then current base salary; (iii) relocation of Executive’s principal place of work by a distance of fifty (50) miles or more from the
Executive’s then current principal place of work without the Executive’s consent; (iv) material breach by the Company of any provision of this Agreement;
provided, however, that the conduct described in the foregoing subsections (i) through (iv)
49
Table of Contents
will only constitute Good Reason if such conduct is not cured within thirty (30) days after the Company’s receipt of written notice from the Executive specifying
the particulars of the conduct the Executive believes constitutes Good Reason.”
Compensation Principles
The Compensation Committee has a formal Compensation Governance Framework which, at the core, consists of a Compensation Committee Charter (the
“Charter”). The Charter outlines responsibilities and duties of the members, sets forth the frequency of meetings, establishes and reviews the overall compensation
policies and practices of the Company and also sets forth the process to review and approve the executive compensation program for the Chief Executive Officer and
other executive officers, and make appropriate recommendations to the Board of Directors.
Compensation Committee
The Compensation Committee approves or makes recommendations to our Board of Directors on decisions concerning compensation of the executive
management team and Board of Directors on a periodic basis to ensure that it is consistent with our short-term and long-term goals. The Compensation Committee
assess the appropriateness of the nature and amount of compensation of our executives by reference to relevant employment market conditions with the overall objective
of ensuring maximum stakeholder benefit from the recruitment and retention of a high-quality board and executive team.
Additionally, the Compensation Committee is responsible for evaluating the performance of the Company’s key senior executives. The Company’s Chief
Executive Officer and other members of management regularly discuss the Company’s compensation issues with Compensation Committee members. The
Compensation Committee reviews and recommends to the Board of Directors the overall bonus and equity incentive awards for employees of the Company
Additionally, the Company’s Chief Executive Officer makes recommendations to the Compensation Committee for review, modification (if applicable) and approval in
relation to bonuses and equity incentive awards for members of the executive management team.
Resignation, Retirement, Termination for Cause, or Resignation without Good Reason Arrangements
The Company does not have any agreements or plans other than the current employment contracts in place for the named executive officers that would
provide additional compensation in connection with a retirement.
Potential Payments upon Involuntary Termination, Resignation without Good Reason or Change-In-Control
The employment contract provides for the following severance payments upon termination by us without cause or by the employee for good reason (as
defined in the particular employment agreement): (i) payment of the employee’s then-current base salary for a period of 18-months for the CEO and 12-months for the
CFO or General Counsel, following termination (ii) a pro-rated target bonus for the period during which the employee was employed in the year of termination and (iii)
continued coverage under our group health and benefits plan consistent with the term of the base salary; and (iv) immediate acceleration of unvested stock options and
restricted stock unit awards.
50
Table of Contents
Outstanding Equity Awards at Fiscal Year-End
The following table presents information regarding outstanding equity awards held by our named executive officers as of December 31, 2023 (in US dollars).
Name
James Corbett, Chief Executive Officer
David O'Toole, Chief Financial Officer
Donna Shiroma, General Counsel
Option awards
Stock awards
Number of
securities
underlying
unexercised
options
exercisable
Number of
securities
underlying
unexercised
unearned
options
Option
exercise
price
(2)
Option
expiration
date
(2)
Number of
unearned
shares, units
or other rights
have not
vested
Market or
payout value
of unearned
shares, units
or other rights
have not
vested
(1)
5,834
56,574
-
-
17,000
26,100
64,700
3,462
6,884
-
1,641 $
169,722 $
100,000 $
150,000 $
- $
- $
- $
3,463 $
13,766 $
60,000 $
12.18
5.64
14.17
17.00
4.38
6.38
5.99
20.21
4.97
14.17
12/22/2031
9/28/2032
6/6/2033
6/15/2033
6/25/2028
11/1/2028
11/30/2028
7/6/2031
7/1/2032
6/6/2033
2,891 $
14,455
29,216 $
146,080
(1)Amounts in this column are calculated by multiplying the closing market price of the Company’s stock as of December 31, 2023 by the number of shares or
units of stock awards.
(2)Represents range of exercise price and expiration dates as options were granted on different dates throughout their tenure.
Director Compensation
The following table sets forth certain information regarding the compensation earned by or awarded to each non-employee Director who served on our Board
during the fiscal year-ended December 31, 2023 (in US dollars). We do not provide separate compensation to our executive Directors, such as James Corbett, who
served as our Chief Executive Officer during the fiscal year-ended December 31, 2023.
Non-Executive Directors
Lou Panaccio - Chairman
Jeremy Curnock Cook
Suzanne Crowe
Jan Stern Reed
Robert McNamara
Cary Vance
Total Non-Executive Directors
Fees earned in cash
(1)
Stock awards
(2)
Option awards
(3)
Total
$
$
123,983
89,164
84,580
100,417
70,836
66,669
535,649
$
$
87,500
87,500
87,500
87,500
234,499
234,499
818,998
$
$
23,203
23,203
23,203
23,203
63,773
63,773
220,358
$
$
234,686
199,867
195,283
211,120
369,108
364,941
1,575,005
(1)Amounts are composed of the following: $70,000 for fees as a Board Member, $35,000 for Chair of the Board, $20,000 for Audit Committee Chair, $15,000 for
Compensation Committee Chair, $10,000 for Nominating and Corporate Governance Chair, $10,000 for Audit Committee Member, $7,500 for Compensation
Committee Member, and $5,000 for Nominating and Corporate Governance Member.
(2)Amounts in this column represent awards of restricted stock units with the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.
The fair value determined at the date of grant in accordance with U.S. GAAP based on the closing price of our common stock on the applicable grant date. The
vesting of these stock awards are service based and subject to continued participant as Board Members.
(3)Amounts in this column represent awards of stock options with the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.
Amounts in this column represent option awards issued to the individuals noted, based on the fair value determined at the date of grant in accordance with U.S.
GAAP. See Note 15- Share-Based Payment Plans to our Consolidated Financial Statements included in Part II, Item 8. “Financial Statements and Supplementary
Data” for the assumptions used in determining the grant date fair value of option awards. The vesting of these option awards are service based and subject to
continued participant as Board Members.
51
Table of Contents
Equity Compensation Plan Information as of December 31, 2023
Plan Category
Equity compensation plans approved by security holders
2016 Equity Incentive Plan
Stock Options
2020 Equity Incentive Plan
Stock Options
RSUs
2021 AGM Awards
Stock Options
RSUs
2022 AGM Awards
Stock Options
RSUs
2023 AGM Awards
Stock Options
RSUs
Equity compensation plans not approved by
security holders
Total
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
(2)
740,945
$
1,553,969
171,552
$
$
22,600
5,782
$
$
247,876
-
$
$
124,768
57,798
$
$
-
2,925,290
13.69
13.58
-
12.18
-
5.75
-
14.17
-
-
Number of securities
remaining available
for future issuance
under equity
compensation
plans (excluding
securities reflected
in column (a))
(c)
- (1)
2,294,367
-
-
-
-
2,294,367
(1)Upon closing of the Redomiciliation, the 2016 Plan was terminated with respect to future grants and accordingly, there are no more shares available to be issued
under the 2016 Plan.
(2)The 2016 Plan were previously approved and adopted by the shareholders of AVITA Australia, the former parent company.
No securities were purchased on-market:
•under or for the purposes of an employee incentive plan; or
•to satisfy the entitlements of the holders of options or other rights to acquire securities granted under an employee incentive plan.
52
Table of Contents
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
For common stockholders, the information required with respect to this item will be incorporated herein by reference to our Definitive Proxy Statement for
our 2024 Annual Meeting of Stockholders or an amendment of this report to be filed with the SEC no later than 120 days after the close of our year ended December 31,
2023.
In addition to the Company’s primary listing on the Nasdaq Capital Market, the Company’s shares of common stock are also quoted in the form of CDIs on
the ASX and trade under the ticker symbol “AVH”. As part of our ASX listing, we are required to comply with the various disclosure requirements as set out under the
ASX Listing Rules. The following information is intended to comply with the ASX Listing Rules (where that information has not been provided elsewhere in this
Annual Report).
Australian Disclosure Requirements
Principal Stockholders and Management
The following table provides certain information regarding the ownership of our common stock (including our CDIs), as of January 31, 2024 by each person
or group of affiliated persons known to us to be the beneficial owner of more than 5% of our common stock (including our CDIs); each of our named executive
officers; each of our Directors; and all of our named executive officers and Directors as a group. The table also sets out the names of all persons (to the best of the
Company's knowledge) who have disclosed pursuant to the Corporations Act 2001 (Cth) that they are “substantial shareholders” of the Company and carry 5% or more
of the voting rights attached to the issued securities of the Company.
Unless otherwise indicated in the table or the related notes, the address for each person named in the table is c/o AVITA Medical, Inc., 28159 Avenue
Stanford Suite 220, Valencia, CA 91355.
Title of Class
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Name and Address of Beneficial Owner
More than 5% stockholders:
BlackRock, Inc. 50 Hudson Yards New York, NY 10001
The Vanguard Group, Inc. 100 Vanguard Blvd., Malvern, PA 19355
Directors and named executive officers:
Lou Panaccio
Jeremy Curnock Cook
Professor Suzanne Crowe
Jan Stern Reed
Cary Vance
Robert McNamara
James Corbett
David O'Toole
Donna Shiroma
All executive officers and directors as a group (9 persons)
Amount and Nature of Beneficial
Ownership
(1)
Percentage of Class
(2)
7.03%
5.42%
1,806,149
1,392,780
44,948
22,384
28,996
33,952
-
-
71,097
17,484
132,656
351,517
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
*
*
*
*
*
*
*
*
*
1.37%
* Represents beneficial ownership of less than 1% of the outstanding common stock.
(1)Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with
the rules of the SEC and generally includes voting or investment power with respect to securities.
(2)Percentage of ownership is based on 25,706,578 shares of our common stock issued and outstanding as of January 31, 2024 (including common stock represented by
CDIs). Common stock subject to options or RSUs exercisable within 60 days of January 31, 2024 are deemed outstanding for purposes of computing the percentage
ownership of the person holding such option or RSUs but are not deemed outstanding for purposes of computing the percentage ownership of any other person.
(3)Represents shares beneficially owned by BlackRock, Inc, as of December 31, 2023, obtained from Schedule 13G filed by BlackRock, Inc. with the SEC on January
26, 2024.
(4)Represents shares beneficially owned by Vanguard, Inc, as of December 31, 2023, as obtained from Schedule 13G filed by Vanguard, Inc. with the SEC on February
13, 2024.
53
Table of Contents
(5)Reflects 16,939 shares of common stock and 100,320 CDIs, which translates into 20,064 shares of common stock. CDIs include 29,860 CDIs which translates into
5,972 shares of common stock that are held by The Panaccio Superannuation Fund. In addition, the amount includes 7,945 shares of stock options to acquire 7,945
shares of our common stock exercisable within 60 days of January 31, 2024.
(6)Reflects 14,439 shares of common stock and 7,945 shares of stock options to acquire 7,945 shares of our common stock exercisable within 60 days of January 31,
2024.
(7)Reflects 16,939 shares of common stock, 20,560 CDIs, which represent 4,112 shares of our common stock and 7,945 shares of stock options to acquire 7,945 shares
of our common stock exercisable within 60 days of January 31, 2024.
(8)Reflects 22,723 shares of common stock and 11,229 shares of stock options to acquire 11,229 shares of our common stock exercisable within 60 days of January 31,
2024.
(9)Reflects 8,689 shares of common stock and 62,408 shares of stock options to acquire 62,408 shares of our common stock exercisable within 60 days of January 31,
2024.
(10)Reflects 17,484 shares of common stock.
(11)Reflects 14,510 shares of common stock and 118,146 shares of stock options to acquire 118,146 shares of our common stock exercisable within 60 days of January
31, 2024.
Jurisdiction of incorporation and restrictions on the acquisition of securities
The Company is incorporated in the State of Delaware in the United States of America. As a foreign company registered in Australia, the Company is not
subject to Chapters 6, 6A, 6B and 6C of the Corporations Act 2001 (Cth) dealing with the acquisition of its shares (including substantial holdings and takeovers).
Under the Delaware General Corporation Law, the Company’s shares are generally freely transferable, subject to restrictions imposed by United States
federal or state securities laws, by the Company’s certificate of incorporation or by-laws or by an agreement signed with the holders of shares on issue. The Company’s
certificate of incorporation and bylaws do not impose any specific restrictions on the transfer of its shares. Repurchases of the Company’s securities are governed by the
safe harbor provisions set forth in Rule 10b-18 of the Securities Exchange Act of 1934. However, provisions of the Delaware General Corporation Law, the Company’s
certificate of incorporation and the Company’s by-laws could make it more difficult to acquire the Company by means of a tender offer (takeover), a proxy contest or
otherwise, or to remove incumbent officers and directors of the Company. These provisions could discourage certain types of coercive takeover practices and takeover
bids that the Company’s board may consider inadequate and encourage persons seeking to acquire control of the Company to first negotiate with the board.
Australian Corporate Governance Statement
The Board of Directors and employees of the Company are committed to developing, promoting and maintaining a strong culture of good corporate
governance and ethical conduct. The Board of Directors confirm that the Company’s corporate governance framework is generally consistent with the ASX’s Corporate
Governance Council’s “Corporate Governance Principles and Recommendations” (4th Edition) (“ASX Governance Recommendations”). The Company’s Corporate
Governance Statement is available for viewing at https://ir.avitamedical.com/corporate-governance. The Corporate Governance Statement sets out the ASX Governance
Recommendations and the Company’s response as to how and whether it follows those recommendations. Where the Company’s practices depart from a
recommendation, the Board of Directors has disclosed in the Corporate Governance Statement the departure along with reasons for the adoption of its own practices.
The Company’s most recent Corporate Governance Statement, dated February 22, 2024 and approved by the Board of Directors remains accurate as of the date of this
Annual Report on Form 10-K.
Issued capital
As of January 31, 2024, the Company’s issued share capital was as follows:
•25,706,578 shares of common stock, of which:
•13,436,606 shares of common stock were held by 4 stockholders of record quoted on Nasdaq; and
•12,269,972 shares of common stock were held by CHESS Depositary Nominees Pty Limited (“Authorized Nominee”) (on behalf of 20,497 CDI
securityholders) representing 61,349,860 CDIs quoted on ASX.
As of January 31, 2024, the following unquoted securities were on issue, which entitle the holders of those securities, upon vesting of their conversion rights,
to be issued shares of common stock (including in certain cases in the form of CDIs) of the Company:
•the equivalent of 3,695,568 unquoted options held amongst 126 option holders. Specifically:
•the equivalent of 333,771 options are on issue to Mr. James Corbett, CEO;
54
Table of Contents
•the equivalent of 3,361,797 options were granted (and are on issue) to 125 employees and directors of the Company under Avita Australia's 2016
Equity Incentive Plan and 2020 Equity Incentive Plan and the Company's 2021, 2022 and 2023 AGM Awards; and
•the equivalent of 225,180 unquoted restricted stock units (“RSUs”) held as follows:
•the equivalent of 2,891 RSUs held by Mr. Corbett, CEO; and
•the equivalent of 222,289 RSUs held by 31 employees of the Company under Avita Australia's 2020 Employee Incentive Plan and the Company's
2021, 2022 and 2023 AGM Awards.
As of January 31, 2024, the Company does not have any restricted securities that are on issue or any securities subject to voluntary escrow that are on issue.
Voting Rights
The Company’s bylaws provide that each stockholder has one vote for every share of common stock entitled to vote held of record by such stockholder. If
holders of CDIs wish to attend and vote at the Company’s general meetings, they will be able to do so, provided, in case of voting, that the relevant steps as set out
below are complied with by the CDI holder. Under the ASX Listing Rules and ASX Settlement Operating Rules, the Company must allow CDI holders to attend any
meeting of the holders of the underlying securities, unless relevant United States laws at the time of the meeting prevent CDI holders from attending those meetings.
In order to vote at such meetings, CDI holders have the following options:
•instruct the Authorized Nominee (as the legal owner of the shares of common stock) to vote the common stock represented by their CDIs in a particular
manner. A voting instruction form will be sent to CDI holders with the notice of meeting or proxy statement for the meeting and that instruction form must
be completed and returned to the Company’s registry prior to the record date fixed for the relevant meeting (“CDI Voting Instruction Receipt Time”), which
is notified to the CDI holder in the voting instructions included in the notice of meeting; or
•inform the Company that they wish to nominate themselves or a third party to be appointed as the Authorized Nominee’s proxy with respect to their
common stock underlying their CDIs for the purposes of attending and voting at the meeting. The instruction form must be completed and returned to the
Company’s registry prior to the CDI Voting Instruction Receipt Time.
Alternatively, a CDI holder can convert their CDIs into a holding of common stock and vote those shares of common stock at a meeting of stockholders.
Such a conversion must be undertaken prior to the record date fixed by the Company’s Board of Directors for determining the entitlement of stockholders to attend and
vote at the meeting. However, if the former CDI holder later wishes to sell their investment on the ASX, it would be necessary to convert those shares of common stock
back to CDIs.
As CDI holders will not appear on the Company’s register as the legal holders of the underlying common stock, they will not be entitled to vote at a
stockholder meeting unless one of the above steps is undertaken. As each CDI represents 1/5 of a share of common stock, if the CDI holder takes one of the steps noted
above to allow it to vote at a stockholder meeting, the CDI holder will be entitled to one vote for every five CDIs it holds.
Holders of options, warrants and RSUs are not entitled to vote at the Company's general meetings.
Substantial Stockholders
The information required in relation to the substantial shareholders of the Company is included in this Annual Report at Item 12 of Part III.
55
Table of Contents
Distribution of Common Stock and CDI Holders at January 31, 2024
Below is a distribution schedule of the number of holders of common stock and CDIs, categorized by the size of their holdings, based on the Company’s
registers as at January 31, 2024.
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over
Number of Holders of
Record
Common Stock
Shares of common
stock
Percentage of total common
stock ownership (1)
1
-
-
1
2
4
20
-
-
56,944
13,379,642
13,436,606
0.00 %
0.22 %
52.05 %
(1)Percentage of ownership is based on 25,706,578 shares of our common stock issued and outstanding as of January 31, 2024 (including common stock
represented by CDIs).
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - and over
Number of Holders
13,668
4,985
1,029
766
49
20,497
CDIs
Number of common stock
equivalents
(CDIs divided by 5) (1)
Percentage of total
common stock
ownership (2)
955,455
2,401,553
1,543,639
3,713,271
3,656,054
12,269,972
3.72 %
9.34 %
6.00 %
14.44 %
14.22 %
(1)Assuming all CDI's are held as common stock of the Company, with 5 CDIs representing a beneficial ownership interest in one share of common stock of the
Company.
(2)Percentage of ownership is based on 25,706,578 shares of our common stock issued and outstanding as of January 31, 2024 (including common stock
represented by CDIs).
The number of holders holding less than a marketable parcel of securities
The number of stockholders and/or CDI holders holding less than a marketable parcel of shares of common stock and/or CDIs (where a “marketable parcel”
means a parcel of securities worth at least A$500, pursuant to the ASX Operating Rules) as of January 31, 2024 was as follows:
•2,591 holders of less than a marketable parcel of CDIs.
•No common stockholders owning less than a marketable parcel of shares of common stock.
Buy-back of securities
There is no current on-market buy-back of our securities.
56
Table of Contents
Twenty Largest Holders as of January 31, 2024
Below is a statement of the 20 largest stockholders and CDI holders, and the number and percentage of issued common stock held by those holders, based on
the Company’s registers at January 31, 2024. (assuming all CDI's are held as common stock of the Company, with 5 CDIs representing a beneficial ownership interest in
one share of common stock of the Company).
Rank
Name
Shares of common stock
Percentage of total
common stock
outstanding (1)
Common Stock
1 CEDE & CO
2 DR MIKE PERRY
ARLENE O E PERRY
3
4 GARY L ORLOFF
Total
13,250,330
129,312
56,944
20
13,436,606
51.54 %
0.50 %
0.22 %
0.00 %
(1)Percentage of ownership is based on 25,706,578 shares of our common stock issued and outstanding as of January 31, 2024 (including common stock
represented by CDIs).
Rank
Name
CDIs
Number of
Common stock equivalents (CDIs
divided by 5) (1)
Percentage of total
common stock
outstanding (2)
1 UBS NOMINEES PTY LTD
2 CITICORP NOMINEES PTY LIMITED
3 WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED
4 BNPP NOMS PTY LTD HUB24 CUSTODIAL SERV LTD
5 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
MR EVAN PHILIP CLUCAS + MS LEANNE JANE WESTON
6
7 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
8 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
9 WARBONT NOMINEES PTY LTD
10 BNP PARIBAS NOMS PTY LTD
11 BNP PARIBAS NOMINEES PTY LTD
12 TAGGART INVESTMENTS PTY LTD
NULIS NOMINEES (AUSTRALIA) LIMITED
13
14 MR EDUARD AVETISOV
15 BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
16 MR ANDRE WALL ELLIS + MRS OLIVIA LOUISE ELLIS
17 MRS ARLENE PERRY
18 WAIRAHI INVESTMENTS LIMITED
19 SANDHURST TRUSTEES LTD
20 MR DAVID ANTHONY DEELEN
Total
Remaining CDI Holders
Total common stock held with CDI shares
417,970
400,634
302,529
285,593
204,641
159,013
122,390
97,530
92,521
90,998
85,911
76,800
63,116
62,060
61,873
60,000
60,000
60,000
55,740
50,800
2,810,119
9,459,853
12,269,972
1.63 %
1.56 %
1.18 %
1.11 %
0.80 %
0.62 %
0.48 %
0.38 %
0.36 %
0.35 %
0.33 %
0.30 %
0.25 %
0.24 %
0.24 %
0.23 %
0.23 %
0.23 %
0.22 %
0.20 %
(1)Assuming all CDIs are held as shares of common stock of the Company, with 5 CDIs representing a beneficial ownership interest in one share of common stock
in the Company.
57
Table of Contents
(2)Percentage of ownership is based on 25,706,578 shares of our common stock issued and outstanding as of January 31, 2024 (including common stock
represented by CDIs).
General Information
The name of our Secretary is Donna Shiroma.
The Company’s ASX liaison officer who is responsible for communications with the ASX is Mark Licciardo.
The complete mailing address, including zip code, of our principal executive office is 28159 Avenue Stanford, Suite 220, Valencia, CA 91355, USA. The
telephone number is +1(661) 367-9170.
The address of our registered office in Australia is c/o Acclime Ltd (formerly Merton’s Corporate Services), Level 7, 330 Collins Street, Melbourne VIC
3000, Australia and our telephone number there is +61 3 8689 9997.
Registers of securities are held as follows:
•for CDIs in Australia at Computershare Investor Services Pty Limited, Level 2, 45 St Georges Terrace, Perth WA 6000 Australia, Investor Enquiries +61 8
9323 2000 (within Australia) +61 3 9415 4677 (outside Australia); and
•for common stock in the United States at Computershare Investor Services, 250 Royall Street, Canton, MA 02021 USA, Tel: +1 866-644-4127.
The Company advises that it has used the cash and assets in a form readily convertible to cash that it had at the time of the Company’s admission to the
Official List of ASX in a way that is consistent with its business objectives.
Application of funds
Directors’ Declaration
As at the date of this Annual Report, the directors confirm that they are of the opinion that there are reasonable grounds to believe that the members of the
“extended closed group” identified in Note 19, being the Company and the Australian Subsidiaries that are party to the deed of cross guarantee that is detailed in Note
19, will be able to meet any liabilities to which they are, or may become, subject, by virtue of the deed of cross guarantee.
58
Table of Contents
Item 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with Related Persons
SEC rules require us to disclose any transaction or currently proposed transaction in which the Company is a participant and in which any related person has
or will have a direct or indirect material interest involving the lesser of $120,000 or 1% of the average of the Company’s total assets as of the end of the last two
completed fiscal years. A related person is any executive officer, director, nominee for director, or holder of 5% or more of the Company’s Common Stock, or an
immediate family member of any of those persons. Since January 1, 2023, the Company has not participated in any such related party transaction.
Director Independence
The Company’s Board of Directors has determined that all members of our Board of Directors, except Mr. James Corbett, are independent directors for
purposes of the rules of Nasdaq and the SEC and for the purposes of the ASX Listing Rules and the ASX Corporate Governance Council’s 4th Edition Corporate
Governance Principles and Recommendations. In making this determination, our Board of Directors considered the relationships that each non-executive director has
with us and all other facts and circumstances that our Board of Directors deemed relevant, including the beneficial ownership of our common stock by each non-
executive director and Mr. Corbett’s executive role within AVITA Medical.
The composition and functioning of the Company’s Board of Directors and each of its committees complies with all applicable requirements of Nasdaq and
the rules and regulations of the SEC as well as the ASX Listing Rules and the ASX Corporate Governance Council’s 4th Edition Corporate Governance Principles and
Recommendations.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Principal Accounting Fees and Services
Grant Thornton LLP, the U.S. member of Grant Thornton International Ltd, independent registered public accountants have served as our independent public
accountant for the years-ended December 31, 2023 and 2022. The following table sets forth fees billed or accrued by our independent registered public accountants
during the years-ended December 31, 2023 and 2022.
Audit fees - Grant Thornton LLP (1)
Grant Thornton UK LLP (1)
Tax fees - Grant Thornton LLP (2)
Total fees
Year-Ended
December 31, 2023
Year-Ended
December 31, 2022
$
$
775,020
47,301
137,812
960,133
$
$
605,900
46,832
87,281
740,013
(1)Audit fees consist of fees for the professional services by the principal accountant for the audit of the registrant’s annual financial statements and review of financial
statements included in the registrant’s Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or
engagements.
(2)Tax fees include the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax
advice, and tax planning.
Pre-Approval Policies and Procedures
The Audit Committee’s policy is for the Audit Committee to approve all audit and non-audit services prior to such services being performed by the
independent registered public accounting firm. Before engaging an independent registered public accountant firm to render audit or non-audit services, the engagement
is approved by the Company’s Audit Committee or the engagement to render services is entered into pursuant to pre-approval policies and procedures established by the
audit committee. The Audit Committee pre-approved all audit services provided by independent registered public accountants during the years-ended December 31,
2023 and 2022.
59
Table of Contents
PART IV
Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)The following documents are filed as part of this Annual Report:
(1)All Financial Statements
See Index to Financial Statements in Part II, Item 8 of this Annual Report.
(2)Financial Statement Schedules
All financial statement schedules have been omitted since the required information was not applicable or was not present in amounts sufficient to
require submission of the schedules, or because the information required is included in the financial statements or the accompanying notes.
(3)Exhibits
The exhibits listed in the following Index to Exhibits are filed, furnished or incorporated by reference as part of this Annual Report
Exhibit
Number
Exhibit
Description
EXHIBITS
2.1
3.1
3.2
3.3
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Scheme Implementation Agreement (incorporated by reference to Exhibit 99.2 of Form 6-K of Avita Medical Limited dated April 20, 2020)
Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the registrant’s Form 8-K12B filed on June 30, 2020)
Certificate of Amendment of Certificate of Incorporation (incorporated by reference to Exhibit 3.2 to the registrant’s Form 10-KT filed on February 28,
2022)
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.3 to the registrant’s Form 10-KT filed on February 28, 2022)
Description of Capital Stock (incorporated by reference to Exhibit 4.1 to the registrant's Form 10-K filed on February 23, 2023)
Employee Incentive Option Plan (incorporated by reference to Exhibit 4.1 of the Form 20-F of Avita Medical Limited filed September 27, 2019)†
Employee Share Plan (incorporated by reference to Exhibit 4.2 of the Form 20-F of Avita Medical Limited filed September 27, 2019)†
Award Contract dated September 29, 2015 by and between the registrant and the U.S. Department of Health and Human Services Biomedical
Advanced Research and Development Authority (BARDA) (incorporated by reference to Exhibit 4.3 of the Form 20-F of Avita Medical Limited filed
September 27, 2019)*
Award Contract dated September 29, 2015 by and between the registrant and BARDA (incorporated by reference to Exhibit 4.4 of the Form 20-F of
Avita Medical Limited filed September 27, 2019) *
Amendment of Solicitation/Modification of Contract dated June 24, 2016 by and between the registrant and BARDA (incorporated by reference to
Exhibit 4.5 of the Form 20-F of Avita Medical Limited filed September 27, 2019) *
Amendment of Solicitation/Modification of Contract dated September 28, 2017 by and between the registrant and BARDA (incorporated by reference
to Exhibit 4.6 of the Form 20-F of Avita Medical Limited filed September 27, 2019) *
Amendment of Solicitation/Modification of Contract dated July 2, 2018 by and between the registrant and BARDA (incorporated by reference to
Exhibit 4.7 of the Form 20-F of Avita Medical Limited filed September 27, 2019) *
Lease Agreement between the registrant and Hartco Ventura Inc. dated January 25, 2018 (incorporated by reference to Exhibit 4.8 of the Form 20-F of
Avita Medical Limited filed September 27, 2019)
Lease Agreement between the registrant and RIF-Avenue Stanford LLC, dated October 3, 2016, as amended (incorporated by reference to Exhibit 4.9
of the Form 20-F of Avita Medical Limited filed September 27, 2019)
60
Table of Contents
Exhibit
Number
Exhibit
Description
10.10
Third Amendment to the Lease Agreement between the registrant and RIF III-Avenue Stanford LLC, dated November 17, 2020, as amended)
(incorporated by reference to Exhibit 10.10 to the registrant’s Form 10-KT filed on February 28, 2022)
10.11
Executive Employment Agreement between the registrant and James Corbett dated September 26, 2022 (incorporated by reference to Exhibit 10.1 of
the registrant's Form 10Q filed on November 10, 2022)
10.12
Amendment One to Employment Agreement between the registrant and James Corbett, dated March 16, 2023 (incorporated by reference to Exhibit
10.1 of the registrant’s Form 8-K filed on March 22, 2023) †
10.13
Executive Employment Agreement between the registrant and David O'Toole dated June 17, 2023 (incorporated by reference to Exhibit 10.3 to the
registrants Form 10Q filed August 10, 2023) †*
10.14
Executive Employment Agreement between the registrant and Donna Shiroma, dated effective June 25, 2018 (incorporated by reference to Exhibit
10.18 to the registrant’s Form 10-KT filed on February 28, 2022) †
10.15
10.16
10.17
10.18
10.19
Amendment No. 1 to the 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed on June 7, 2023) †
AVITA Medical, Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K filed on June 7, 2023) †
Form of Stock Option Grant (incorporated by reference to Exhibit 10.19 to the registrant's Form 10-K filed on February 23, 2023)†
Form of RSU Agreement (incorporated by reference to Exhibit 10.20 to the registrant's Form 10-K filed on February 23, 2023)†
2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.29 to the registrant’s Form 10-KT filed on February 28, 2022) †
10.20
Fourth Amendment to the Lease Agreement between the registrant and RIF III-Avenue Stanford LLC, dated August 25, 2021, as amended)
(incorporated by reference to Exhibit 10.30 to the registrant’s Form 10-KT filed on February 28, 2022)
10.21
Stock Option Grant Agreement between the registrant and James Corbett, dated effective September 28, 2022 (incorporated by reference to Exhibit
10.23 of Form 10-K filed on February 23, 2023).
1
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
Fifth Amendment to the Lease Agreement between the registrant and 28159 Avenue Stanford Properties, LLC, (formerly RIF III-Avenue Stanford
LLC), dated January 26, 2023, as amended) (incorporated by reference to Exhibit 10.24 to the registrant's Form 10-K filed on February 23, 2023)
Engagement Letter dated March 15, 2023, between the registrant and Mr. Cary Vance (incorporated by reference to Exhibit 10.1 of the registrant’s
Form 8-K filed on March 21, 2023) †
Non-Qualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.4 on Form 10Q issued May 11, 2023) †
Lease agreement between URP X LLC and AVITA Medical, Inc. dated May 11, 2023 (incorporated by reference to Exhibit 10.5 on Form 10Q issued
May 11, 2023)
Engagement Letter dated March 22, 2023, between AVITA Medical, Inc. and Mr. Robert McNamara (incorporated by reference to Exhibit 10.1 on
Form 8K issued March 27, 2023)
Warrant Certificate, dated October 18, 2023, by and between the Company, and OrbiMed Royalty & Credit Opportunities IV, LP (incorporated by
reference to Exhibit 4.1 to the registrant's Form 8-K filed on October 18, 2023)
Credit Agreement, dated October 18, 2023, by and between the Company, as borrower, and ORCO IV LLC as lender and administrative agent
(incorporated by reference to Exhibit 10.1 to the registrant's Form 8-K filed on October 18, 2023)
Pledge and Security Agreement, dated October 18, 2023, by and among the Company, the guarantors party thereto and ORCO IV LLC (incorporated
by reference to Exhibit 10.2 to the registrant's Form 8-K filed on October 18, 2023)
Lease Agreement between the registrant and Hartco Ventura Inc. dated December 6, 2023**
Amendment One to Employment Agreement between the registrant and Donna Shiroma, dated March 23, 2022** †
Amendment Two to Employment Agreement between the registrant and Donna Shiroma, dated August 9, 2023** †
61
Table of Contents
Exhibit
Number
Exhibit
Description
10.33
10.34
10.35
10.36
10.37
10.38
10.39
10.40
10.41
10.42
21.1
97.1
23.1
31.1
31.2
32.1
Amendment One to Employment Agreement between the registrant and David O'Toole, dated August 9, 2023** †
Waiver and First Amendment to Orbimed Credit Agreement**
Trademark Security Agreement**
Supplement to Guarantee**
Patent Security Agreement**
Supplement to Pledge and Security Agreement**
Security Trust Deed**
Specific security Deed (marketable securities)**
General Security Deed**
Exclusive Distribution Agreement between the registrant and PolyMedics Innovation GmbH**
Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the registrant’s Form 10-KT filed on February 28, 2022)
Incentive-Based Compensation Recovery Policy**†
Consent of Independent Registered Public Accounting Firm**
Certification of CEO pursuant to Section 302 of The Sarbanes-Oxley Act of 2002 **
Certification of CFO pursuant to Section 302 of The Sarbanes-Oxley Act of 2002 **
Certification of CEO and CFO pursuant to Section 906 of The Sarbanes-Oxley Act of 2002***
101.INS
Inline XBRL Instance Document.
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
† Management contract or compensation plan or arrangement.
* Certain identified confidential information has been redacted from this exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly
disclosed.
** Filed herewith
*** Furnished herewith
Item 16. Form 10-K Summary
None
62
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: February 22, 2024
Date: February 22, 2024
AVITA Medical, Inc.
(Registrant)
/s/ James Corbett
James Corbett
Chief Executive Officer (Principal Executive Officer)
/s/ David O'Toole
David O'Toole
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Name
/s/ James Corbett
James Corbett
/s/ David O'Toole
David O'Toole
/s/ Lou Panaccio
Lou Panaccio
/s/ Jeremy Curnock Cook
Jeremy Curnock Cook
/s/ Suzanne Crowe
Suzanne Crowe
/s/ Jan Stern Reed
Jan Stern Reed
/s/ Robert McNamara
Robert McNamara
/s/ Cary Vance
Cary Vance
Title
Chief Executive Officer and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date
February 22, 2024
February 22, 2024
Chairman of the Board of Directors
February 22, 2024
Director
Director
Director
Director
Director
63
February 22, 2024
February 22, 2024
February 22, 2024
February 22, 2024
February 22, 2024
Table of Contents
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2023 and 2022
Consolidated Statements of Operations for the Years-Ended December 31, 2023 and 2022
Consolidated Statements of Comprehensive Loss for the Years-Ended December 31, 2023 and 2022
Consolidated Statements of Stockholders’ Equity for the Years-Ended December 31, 2023 and 2022
(PCAOB ID Number 248)
Consolidated Statements of Cash Flows for the Years-Ended December 31, 2023 and 2022
Notes to Consolidated Financial Statements
F-1
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-9
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
AVITA Medical, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of AVITA Medical, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December
31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period
ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years
in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based
on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial
reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no
such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2020.
Los Angeles, California
February 22, 2024
F-2
AVITA MEDICAL, INC.
Consolidated Balance Sheets
(In thousands, except share and per share data)
$
Table of Contents
ASSETS
Cash and cash equivalents
Marketable securities
Accounts receivable, net
BARDA receivables
Prepaids and other current assets
Inventory
Total current assets
Marketable securities long-term
Plant and equipment, net
Operating lease right-of-use assets
Corporate-owned life insurance ("COLI") asset
Intangible assets, net
Other long-term assets
Total assets
LIABILITIES, NON-QUALIFIED DEFERRED COMPENSATION PLAN SHARE AWARDS AND
STOCKHOLDERS' EQUITY
$
Accounts payable and accrued liabilities
Accrued wages and fringe benefits
Current non-qualified deferred compensation ("NQDC") liability
Other current liabilities
Total current liabilities
Long-term debt
Non-qualified deferred compensation liability
Contract liabilities
Operating lease liabilities, long term
Warrant liability
Total liabilities
Non-qualified deferred compensation plan share awards
Commitments and contingencies (Note 13)
Stockholders' equity:
Common stock, $0.0001 par value per share, 200,000,000 shares authorized, 25,682,078 and
25,208,436, shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively
Preferred stock, $0.0001 par value per share, 10,000,000 shares authorized, no shares issued or
outstanding at December 31, 2023 and December 31, 2022
Company common stock held by the non-qualified deferred compensation plan
Additional paid-in capital
Accumulated other comprehensive income/(loss)
Accumulated deficit
Total stockholders' equity
Total liabilities, non-qualified deferred compensation plan share awards and stockholders' equity
$
The accompanying notes form part of the consolidated financial statements
F-3
December 31, 2023
December 31, 2022
As of
22,118 $
66,939
7,664
30
1,659
5,596
104,006
-
1,877
2,440
2,475
487
355
111,640 $
3,793
7,972
168
1,266
13,199
39,812
3,663
357
1,702
3,158
61,891
693
3
-
(1,130 )
350,039
(1,887 )
(297,969 )
49,056
111,640 $
18,164
61,178
3,515
898
1,578
2,125
87,458
6,930
1,200
851
1,238
465
122
98,264
3,002
6,623
78
990
10,693
-
1,270
698
306
-
12,967
557
3
-
(127 )
339,825
7,627
(262,588 )
84,740
98,264
Table of Contents
Revenues
Cost of sales
Gross profit
BARDA income
Operating expenses:
Sales and marketing
General and administrative
Research and development
Total operating expenses
Operating loss
Interest expense
Other income, net
Loss before income taxes
Income tax expense
Net loss
Net loss per common share:
Basic and Diluted
Weighted-average common shares:
Basic and Diluted
AVITA MEDICAL, INC.
Consolidated Statements of Operations
(In thousands, except share and per share data)
Year-Ended
December 31, 2023
Year-Ended
December 31, 2022
$
$
$
$
50,143
(7,780 )
42,363
1,428
(37,291 )
(28,334 )
(20,821 )
(86,446
)
(42,655 )
(1,143 )
8,483
(35,315 )
(66 )
(35,381
)
(1.40 )
$
$
34,421
(6,041 )
28,380
3,215
(21,913 )
(23,330 )
(13,857 )
(59,100
)
(27,505 )
(16 )
892
(26,629 )
(36 )
(26,665
)
(1.07 )
25,331,264
25,000,180
The accompanying notes form part of the consolidated financial statements
F-4
Table of Contents
AVITA MEDICAL, INC.
Consolidated Statements of Comprehensive Loss
(In thousands)
Year-Ended
December 31, 2023
Year-Ended
December 31, 2022
Net loss
Foreign currency translation loss
Cumulative translation adjustment gain recognized in earnings as part of the reorganization of
foreign subsidiaries
Change in fair value due to credit risk on Long-term debt
Net unrealized gain/(loss) on marketable securities, net of tax
Comprehensive loss
$
$
(35,381 )
-
$
(9,415 )
(621 )
522
(44,895 )
$
(26,665 )
(111 )
-
-
(322 )
(27,098 )
The accompanying notes form part of the consolidated financial statements
F-5
Table of Contents
AVITA MEDICAL, INC.
Consolidated Statements of Stockholders’ Equity
(In thousands, except shares)
Common Stock
Shares
Amount
Company common
stock held by the
NQDC Plan
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Gain (Loss)
Accumulated
Deficit
Total
Stockholders'
Equity
Balance at December 31, 2021
Net loss
Stock-based compensation
Exercise of stock options
Vesting of restricted stock units
Company common stock held by the NQDC Plan
Change in classification of deferred compensation share
awards
Change in redemption value of share awards in NQDC
plan
Other comprehensive loss
Balance at December 31, 2022
Net loss
Stock-based compensation
Exercise of stock options
Vesting of restricted stock units
Company common stock held by the NQDC Plan
Distribution/diversification of Company common stock
held by the NQDC Plan
Change in redemption value of share awards in NQDC
plan
ESPP purchases
Net unrealized gain on marketable securities
Change in fair value due to credit risk on Long-term debt
Cumulative translation adjustments recognized in earnings
as part of the reorganization of foreign subsidiaries
Balance at December 31, 2023
24,925,743 $
-
-
150,125
114,641
17,927
-
-
-
25,208,436 $
-
-
166,675
106,476
128,172
-
-
72,319
-
-
-
25,682,078 $
3 $
-
-
-
-
-
-
-
-
3 $
-
-
-
-
-
-
-
-
-
-
-
3 $
- $
-
-
-
-
(127 )
-
-
-
(127 ) $
-
-
-
-
(1,401 )
398
-
-
-
-
332,484 $
-
6,527
900
-
127
(192 )
(21
)
-
339,825 $
-
7,866
957
-
1,401
354
(1,019 )
655
-
-
8,060 $
-
-
-
-
-
(235,923 ) $
(26,665 )
-
-
-
-
-
-
-
(433 )
7,627 $
-
-
-
-
-
-
-
-
522
(621 )
-
-
(262,588 ) $
(35,381 )
-
-
-
-
-
-
-
-
-
-
(1,130 ) $
-
350,039 $
(9,415 )
(1,887 ) $
-
(297,969 ) $
104,624
(26,665 )
6,527
900
-
-
(192 )
(21
)
(433 )
84,740
(35,381 )
7,866
957
-
-
752
(1,019 )
655
522
(621 )
(9,415 )
49,056
The accompanying notes form part of the consolidated financial statements
F-6
Table of Contents
AVITA MEDICAL, Inc.
Consolidated Statement of Cash Flows
(In thousands)
Cash flow from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Cumulative translation adjustments recognized in earnings as part of the reorganization of foreign
subsidiaries
Loss on issuance under credit agreement
Change in fair value of long-term debt
Change in fair value of warrant liability
Depreciation and amortization
Stock-based compensation
Non-cash lease expense
Loss on fixed asset disposal
Investment losses
Patent impairment loss
Remeasurement and foreign currency transaction gain/(loss)
Excess and obsolete inventory related charges
BARDA deferred costs
Contract cost amortization
Provision for credit losses
Amortization of premium of marketable securities
Non-cash changes in the fair value of NQDC plan
Changes in operating assets and liabilities:
Trade and other receivables
BARDA receivables
Prepaids and other current assets
Inventory
Operating lease liability
Corporate-owned life insurance ("COLI") asset
Other long-term assets
Accounts payable and accrued expenses
Accrued wages and fringe benefits
Current non-qualified deferred compensation liability
Other current liabilities
Non-qualified deferred compensation plan liability
Contract liabilities
Other long-term liabilities
Net cash used in operations
Cash flows from investing activities:
Purchase of marketable securities
Sale of marketable securities
Maturities of marketable securities
Purchase of plant and equipment
Patent filing fees
Net cash provided by/(used in) investing activities
Cash flow from financing activities:
Proceeds from long-term debt
Proceeds from exercise of stock options
Employee stock purchase plan ("ESPP") purchases
Net cash provided by financing activities
Effect of foreign exchange rate on cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents beginning of the period
Cash and cash equivalents end of the period
$
F-7
December 31, 2023
December 31, 2022
Year-Ended
$
(35,381 )
$
(26,665 )
(9,415 )
1,238
1,616
733
632
8,384
748
83
17
4
37
221
(194 )
341
24
(1,381 )
856
(4,172 )
868
(451 )
(3,693 )
(713 )
(1,008 )
(233 )
809
1,347
(1,504 )
266
2,251
(341 )
-
(38,011 )
(78,757 )
2,372
79,439
(1,381 )
(66 )
1,607
38,762
957
655
40,374
(16 )
3,954
18,164
22,118
$
-
-
-
-
568
6,998
692
3
-
-
(85 )
375
130
338
(5 )
(281 )
38
(395 )
(590 )
(366 )
(371 )
(720 )
(1,084 )
178
282
1,272
-
(92 )
994
(254 )
(50 )
(19,090 )
(74,362 )
-
55,555
(452 )
(73 )
(19,332 )
-
900
-
900
(26 )
(37,548 )
55,712
18,164
Table of Contents
Supplemental Disclosure of Cash Flow Information:
Income taxes paid during the period
Interest paid during the period
Non-cash investing activities:
Plant and equipment purchases not yet paid
Right-of-use-asset obtained in exchange for lease liabilities
Non-cash financing activities:
Warrant liability recognized upon issuance of term loan
$
$
$
$
$
44
1,143
6
2,337
2,425
$
$
$
$
$
17
15
33
-
-
The accompanying notes form part of the consolidated financial statements
F-8
Table of Contents
1. The Company
AVITA MEDICAL, INC.
Notes to Consolidated Financial Statements
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America (“U.S. GAAP”). These financial statements include the assets, liabilities, revenues and expenses of all wholly-owned subsidiaries.
Nature of the Business
AVITA Medical and its subsidiaries (collectively, “AVITA Medical”, “we”, “our”, “us”, or “Company”) is a commercial-stage regenerative medicine
company transforming the standard of care in wound management and skin restoration with innovative devices. At the forefront of our portfolio is our patented and
proprietary RECELL® System (“RECELL System” or “RECELL”), approved by the FDA for the treatment of thermal burn wounds and full-thickness skin defects, and
for repigmentation of stable depigmented vitiligo lesions. RECELL harnesses the regenerative properties of a patient’s own skin to create an autologous skin cell
suspension, Spray-On Skin™ Cells, delivering a transformative solution at the point of care. This breakthrough technology serves as the catalyst for a new treatment
paradigm enabling improved clinical outcomes. In September 2018, the FDA granted PMA to the RECELL System for use in the treatment of acute thermal burns in
patients eighteen years and older. Following receipt of the original PMA, the Company commenced commercialization of the RECELL System in January 2019 in the
United States. In June 2021, the FDA approved the expanded use of the RECELL System in combination of meshed autografting for acute full-thickness thermal
wounds in pediatric and adult patients. In February 2022, the FDA approved a PMA supplement for the RECELL Autologous Cell Harvesting Device, an enhanced ease-
of-use device aimed at providing clinicians a more efficient user experience and simplified workflow. On June 7, 2023, the FDA approved a PMA supplement for full-
thickness skin defects based on results of the Company's pivotal trial for soft tissue repair and reconstruction. Following this approval, the Company commenced a
commercial launch on June 8, 2023.
On June 16, 2023, the FDA approved a PMA application for the repigmentation of stable depigmented vitiligo lesions. Following FDA approval, the
Company established a framework, which consists of three steps, to secure reimbursement for vitiligo. The first step is to conduct the 100-patient post market study
called TONE. TONE will evaluate repigmentation using the RECELL device and will also seek to measure the improvement in the quality-of-life following treatment of
stable vitiligo with RECELL. TONE, including publication, is expected to be complete by the end of 2024. The second step is to initiate a health economics study to
capture the longitudinal healthcare costs for a vitiligo patient, which is expected to be completed by the end of 2024. The purpose of these studies is to demonstrate how
treating vitiligo with RECELL can significantly reduce the lifetime healthcare cost of patients. As a result, commercial payors will stand to benefit economically by
providing coverage of RECELL for the repigmentation of stable depigmented vitiligo lesions. Conversations with commercial payors will begin during the first quarter
of 2025. Commercial coverage will be rolled out on a tiered basis based on state and geographic factors. The Company anticipates that the initial phase of
reimbursement coverage will likely begin in the fourth quarter of 2025 with appropriately sized commercial support as coverage is established.
Additionally, on June 29, 2023, the Company submitted a PMA supplement to the FDA for RECELL GO™. RECELL GO maintains the FDA Breakthrough
Device designation from predecessor devices. On September 29, 2023, the Company received notice from the FDA that additional information regarding the PMA is
required for the continuation of a substantive review for RECELL GO. This request, which is not unique to the Breakthrough Device Program, placed the application file
on hold while the Company addresses the FDA's questions. A category of questions posed by the FDA will require additional in-house testing. The Company has already
made significant progress in developing the data plan for testing with some testing underway. Consequently, the Company expects to submit the complete response to
the FDA no later than February 28, 2024. Upon the submission to the FDA, the application will reenter the 180-day cycle, with 90 days remaining in the review period.
This timing would imply a product launch on May 31, 2024.
In February 2019, the Company entered into a collaboration with COSMOTEC, an M3 Group company, to market and distribute the RECELL System in
Japan. Under the terms of the agreement, AVITA Medical will supply the RECELL product, and COSMOTEC will be the sole distributor of the product in Japan. The
Company worked with COSMOTEC to advance its application for approval of the RECELL System in Japan pursuant to PMDA. In February 2022, COSMOTEC’s
application for regulatory approval was approved by the PMDA with labeling for burns only. In September 2022, COSMOTEC commercially launched RECELL in
Japan following Japan’s Ministry of Health, Labor, and Welfare approval of reimbursement pricing.
F-9
Table of Contents
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions
and balances have been eliminated upon consolidation.
Reclassification of prior year presentation
Certain prior year amounts within Other current liabilities have been reclassified to Current non-qualified deferred compensation liability, in the Consolidated
Balance Sheets for consistency with current period presentation. These reclassifications had no effect on the reported results of operations or financial position.
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands
public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly reviewed by the Chief operating decision maker
("CODM") and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim
disclosures of a reportable segment’s profit or loss and assets. The ASU also allows, in addition to the measure that is most consistent with U.S. GAAP, the disclosure of
additional measures of segment profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources. All disclosure
requirements under ASU 2023-07 are also required for public entities with a single reportable segment. The ASU is effective for the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2025, and subsequent interim periods, with early adoption permitted. The Company is currently evaluating the impact of
adopting this ASU on its consolidated financial statements and disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments require (i)
enhanced disclosures in connection with an entity's effective tax rate reconciliation and (ii) income taxes paid disaggregated by jurisdiction. The amendments are
effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial
statements and disclosures.
Use of Estimates
The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts (including allowance for credit losses, carrying value of long-lived assets, the useful lives of long-lived assets, accounting
for marketable securities, income taxes, fair value of the debt, fair value of warrants, stock-based compensation and the stand-alone selling price for the BARDA
contract) and related disclosures. Estimates have been prepared on the basis of the current and available information. However, actual results could differ from estimated
amounts.
Foreign Currency Translation and Foreign Currency Transactions
The financial position and results of operations of the Company’s operating non-U.S. subsidiaries are generally determined using the respective local
currency as the functional currency of that subsidiary. Assets and liabilities of these subsidiaries are translated at the exchange rate in effect at each period end. Income
statement accounts are translated at the average rate of exchange prevailing during the period. Adjustments arising from the use of differing exchange rates from period
to period are included in accumulated other comprehensive gain (loss) in shareholders’ equity. Gains and losses resulting from foreign currency transactions are included
in general and administrative expenses and were losses of $22,000 and a gain of $91,000 for the years-ended December 31, 2023 and 2022, respectively.
The Company’s subsidiaries that use the U.S. dollar as their functional currency remeasure monetary assets and liabilities at exchange rates in effect at the
end of each period, nonmonetary assets and liabilities at historical rates. Gains and losses resulting from these remeasurements and foreign currency transactions are
included in general and administrative expenses and were a loss of $15,000 and a loss of $6,000 for the years-ended December 31, 2023 and 2022, respectively.
Comprehensive Loss
The components of comprehensive loss consist of net loss, foreign currency translation adjustments ("CTA") from its subsidiaries not using the U.S. dollar as
their functional currency, unrealized gains and losses in investments available for sale and changes in fair value due to instrument specific credit risk on the debt. During
the year-ended December 31, 2023, the Company
F-10
Table of Contents
liquidated the Company's foreign subsidiaries. In accordance with ASC 830-30, Foreign Currency Matters (“ASC 830”), the CTA was reclassified into earnings. As
such, the Company reclassified $9.4 million from comprehensive loss to earnings for the winding down of the foreign subsidiaries. The amount is recorded in Other
income, net in the Consolidated Statement of Operations. The Company did not have reclassifications from other comprehensive loss to net loss during the year-ended
December 31, 2022.
Revenue Recognition
The Company recognizes revenue when its customers obtain control of promised goods or services, in an amount that reflects the consideration which the
Company expects to be entitled in exchange for those goods or services.
To determine revenue recognition for arrangements that are within the scope of Topic 606 Revenue from contracts with customers (“ASC 606”), the
Company performs the following five steps:
1.Identify the contract with a customer
2.Identify the performance obligations
3.Determine the transaction price
4.Allocate the transaction price to the performance obligations
5.Recognize revenue when/as performance obligation(s) are satisfied
In order for an arrangement to be considered a contract, it must be probable that the Company will collect the consideration to which it is entitled for goods or
services to be transferred. Once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised with each contract,
determines whether those are performance obligations and the related transaction price. The Company then recognizes the sale of goods based on the transaction price
that is allocated to the respective performance obligation when the performance obligation is satisfied.
The Company’s revenue consists primarily of the sale of the RECELL System to hospitals or other treatment centers, COSMOTEC and BARDA
(collectively, “customers”), predominately in the United States. The Company evaluated the BARDA contract and concluded that a portion of the arrangement, such as
the procurement of the RECELL system and the emergency preparedness, represents a transaction with a customer and as such are in the scope of ASC 606. Amounts
received from BARDA for the research and development of the Company’s product are classified as BARDA income in the Consolidated Statement of Operations and
are accounted for under International Accounting Standards 20 (“IAS 20”). For further details refer to BARDA Income and Receivables below.
Revenues for commercial customers (hospitals, treatment centers and COSMOTEC) are recognized as control of the product is transferred to customers, at an
amount that reflects the consideration expected to be received in exchange for the product. Revenues are recognized net of volume discounts. As such, revenue is
recognized only to the extent a significant reversal of revenues is not expected to occur in subsequent periods. For the Company’s contracts that have an original duration
of one year or less, the Company elected the practical expedient applicable to such contracts and does not consider the time value of money. Further, because of the short
duration of these contracts, the Company has not disclosed the transaction price for the remaining performance obligations as of each reporting period or when the
Company expects to recognize this revenue. The Company has further applied the practical expedient to exclude sales tax in the transaction price and expense contract
acquisition costs such as commissions and shipping and handling expenses as incurred.
For revenues related to the BARDA contract within the scope of ASC 606, the Company identified two performance obligations (i) the procurement of 5,614
RECELL units, (ii) emergency preparedness services. Through this contract the Company promises to procure the product through a vendor management inventory
arrangement and to stand ready to provide emergency deployment services related to the product. Emergency preparedness services include procuring necessary storage
containers, housing, and maintaining the containers (and product), and providing shipping and handling services in the event of an emergency situation. This stand ready
obligation is a series of distinct services that are substantially the same and have the same pattern of transfer to the customer, overtime as services are consumed.
At contract inception, the total transaction price for the portion of the BARDA contract that is within the scope of ASC 606, was determined to be $9.2
million. The transaction price was allocated on a stand-alone selling price basis as follows: $7.6 million to the procurement of the RECELL product, which is classified
as Revenues when recognized in the Consolidated Statement of Operations and $1.6 million to the emergency deployment services which is classified as Revenues when
recognized in the Consolidated Statement of Operations. The $1.6 million for emergency deployment includes variable consideration which is deemed immaterial to the
contract as a whole. The Company estimated the stand-alone selling price of the procurement of the RECELL product based on historical pricing of the Company’s
product at the initial execution of the contract. The Company estimated the
F-11
Table of Contents
stand-alone selling price of the emergency deployment services performed based on the Company’s projected cost of providing the services plus an applicable profit
margin as denoted in the contract.
The Company’s performance obligations are either satisfied at a point in time or over time as services are provided. The product procurement performance
obligation is satisfied at a point in time, upon transfer of control of the product. RECELL units that have been delivered to BARDA have a product replacement
obligation at no cost to BARDA due to product’s limited shelf-life. The estimated cost of the expired inventory over the term of the contract is recognized on a per unit
basis at the time of delivery. The estimated liability is released upon replacement of the product along with a corresponding reduction to inventory. The emergency
preparedness services performance obligation is satisfied over time. Revenue for the emergency deployment will be recognized on a straight-line basis during the term
of the contract as services are consumed over time. Services recognized are included in sales within the Consolidated Statement of Operations. Contract costs to fulfil the
performance obligations are incremental and expected to be recovered are capitalized and amortized on a straight-line basis over the term of the contract. Contract costs
are included in other current assets.
Contract Liabilities
The Company receives payments from customers based on contractual terms. Trade receivables are recorded when the right to consideration becomes
unconditional. The Company satisfies its performance obligation on product sales when the products are shipped or delivered, depending on the terms of the sale.
Payment terms on invoiced amounts are typically 30 days, and do not include a financing component. Contract liabilities are recorded when the Company receives
payment prior to satisfying its obligation to transfer goods to a customer.
Cost of Sales
Cost of sales related to products includes costs to manufacture or purchase, package, and ship the Company’s products. Costs also include relevant production
overhead and depreciation and amortization. These costs are recognized when control of the product is transferred to the customer and revenue is recognized.
Income Taxes
Income taxes are accounted for using the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income or loss in the years in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Deferred tax assets are reduced by a
valuation allowance if it is more likely than not that a portion of the deferred tax asset will not be realized. We recognize interest and penalties related to unrecognized
tax benefits on the income tax expense line in the accompanying Consolidated Statement of Operations. Accrued interest and penalties are included on the related tax
liability line in the Consolidated Balance Sheet.
The Company reviews its uncertain tax positions regularly. An uncertain tax position represents the Company’s expected treatment of a tax position taken in a
filed return, or planned to be taken in a future tax return or claim that has not been reflected in measuring income tax expense for financial reporting purposes. The
Company recognizes the tax benefit from an uncertain tax position when it is more-likely-than-not that the position will be sustained upon examination on the basis of
the technical merits or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired.
Cash and cash equivalents
Cash and cash equivalents consists of cash held at deposit institutions, money market funds and short-term highly liquid investments with original maturities
of three months or less from the date of purchase. The Company holds cash at deposit institutions in the amount of $10.7 million and $4.1 million, of which $69,000 and
$737,000 is denominated in foreign currencies in foreign institutions as of December 31, 2023 and 2022, respectively. As of December 31, 2023 and 2022, the
Company held cash equivalents in the amount of $11.4 million and $14.1 million, respectively.
Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, marketable
securities, trade receivables, BARDA receivables and other receivables. As of December 31, 2023 and 2022, substantially all of the Company’s cash was deposited in
accounts at financial institutions, and amounts may exceed federally insured limits and subject to the risk of bank failure.
F-12
Table of Contents
As of December 31, 2023, no single commercial customer accounted for more than 10% of accounts receivable. As of December 31, 2022, one commercial
customer accounted for approximately 10% of net accounts receivable. For the year-ended December 31, 2023, no single commercial customer accounted for more than
10% of total revenues. For the year-ended December 31, 2022, one commercial customer accounted for more than 10% of total revenues.
BARDA revenues for the procurement of the RECELL system accounted for approximately 1% of total revenues for the years-ended December 31, 2023 and
2022, respectively. BARDA receivables for the procurement of the RECELL system and emergency preparedness accounted for approximately 27% and 2% of BARDA
receivables as of December 31, 2023 and 2022, respectively. See table below for breakdown of BARDA receivables (in thousands).
BARDA procurement and emergency preparedness services $
BARDA expense reimbursements
Total
$
8
22
30
$
$
16
882
898
December 31, 2023
December 31, 2022
As of
Fair Value of Financial Instruments
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the
measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial
assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are
considered observable and the last is considered unobservable:
● Level 1 — Quoted prices in active markets for identical assets or liabilities.
● Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices
in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
● Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or
liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair
value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
At December 31, 2023 and 2022, the Company’s financial instruments included cash, accounts payable, accrued expenses, convertible notes and warrant
liabilities. The carrying amounts of accounts payable and accrued expenses approximate fair value due to the short-term maturities of these instruments.
Long-term debt
The Company elected the fair value option ("FVO") of accounting under ASC 825-10, Financial Instruments (“ASC 825”), to record the debt at fair value at
issuance and subsequently remeasures to fair value each reporting period. The Company elected the fair FVO option of accounting of ASC 825 for the debt from the
issuance date in order to not have to bifurcate any embedded derivatives in accordance with ASC 815 Derivatives and Hedging – Contracts in Entity's Own Equity
(“ASC 815”). The debt accounted for under the FVO represents a financial instrument containing embedded features which would otherwise be required to be bifurcated
from the debt-host and recognized as separate derivative liabilities subject to initial and subsequent periodic estimated fair value measurements under ASC 815. The
Company has elected to present interest expense separately from changes in fair value and therefore will present interest expense associated with the debt as Interest
expense in the Consolidated Statement of Operations. Any changes in fair value caused by instrument-specific credit risk are presented separately in Other
comprehensive income ("OCI") in the Consolidated Balance Sheets. Changes in fair value attributable to changes in credit risk are determined using observable option
adjusted spreads for the issuer or comparable companies with similar credit ratings. All costs associated with the issuance of the Credit Agreement
F-13
Table of Contents
accounted for using the FVO were expensed upon issuance. The fair value of the debt is determined using a Monte Carlo Simulation and classified as Level 3 in the fair
value hierarchy. For further details refer to Note 4.
Presentation and Valuation of the Warrants
Warrants are accounted for as liabilities in accordance with ASC 815- 40 and were presented within Warrant liability on the Consolidated Balance Sheet as of
December 31, 2023. The initial fair value of the warrant liability is measured at fair value at the date of issuance and are remeasured at each reporting date until
settlement. Changes in the fair value of the warrant liability is recognized in Other income, net in the Consolidated Statement of Operations for the year ended December
31, 2023.
The Company established the fair value of the warrants utilizing the Black-Scholes pricing model. Assumptions used in the valuation are the price of the
company stock, expected share-price volatility, expected term, risk-free interest rate and dividend yield. The Company estimates the volatility based on historical
volatility that matches the expected remaining life of the warrants. The expected term of the warrants is assumed to be equivalent to their remaining contractual term.
The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. The warrants were classified Level 3 fair value measurement, due to
the use of unobservable inputs.
Marketable Securities
We classify all highly liquid investments with original maturities of three months or less from the date of purchase as cash equivalents and all highly liquid
investments with stated maturities of greater than three months as marketable securities. The Company classifies marketable securities as short-term when they have
remaining contractual maturities of one year or less from the balance sheet date, and as long-term when the investments have remaining contractual maturities of more
than one year from the balance sheet date. Classification is determined at the time of purchase and re-evaluated each balance sheet date. Short-term marketable securities
represent investment of cash available for current operations. We account for our marketable securities as available-for-sale securities.
All marketable securities, which consist of corporate debt securities, asset backed securities, U.S treasury and commercial paper are denominated in the U.S.
dollars, have been classified as “available for sale”, and are carried at fair value. Unrealized gains and losses, net of any related tax effects, are excluded from earnings
and are included in other comprehensive income (loss) and reported as a separate component of stockholders equity until realized. Realized gains and losses on
marketable securities are included in Other income, net, in the accompanying Consolidated Statements of Operations. The cost of any marketable securities sold is based
on the specific identification method. The amortized cost of marketable securities is adjusted for amortization of premiums and accretion of discounts to maturity.
Interest on marketable securities is included in Other income, net in the Consolidated Statements of Operations. In accordance with the Company’s investment policy,
management invests to diversify credit risk and only invests in securities with high credit quality, including U.S. government securities, and the maximum final maturity
from the date of purchase is thirty-seven months.
If necessary, the Company will recognize an allowance for credit losses on available-for-sale debt securities on an individual basis, and will no longer
consider other than-temporary impairment or immediately reduce the cost basis of the investment provided that it is more likely than not that the security will be held to
recovery or maturity. Further, the Company will recognize any improvements in estimated credit losses on available-for-sale debt securities immediately in earnings and
reduce the existing allowance for credit losses. The Company will disaggregate its available-for-sale marketable securities into the following categories: commercial
paper, corporate debt, government and agency securities and money market funds. The Company’s corporate bonds are comprised of predominantly high-grade corporate
bonds while its government and agency securities are U.S. treasury bonds, and U.S. agency bonds. The Company has analyzed both corporate bonds and government and
agency securities and identified that both types of securities have similar risk characteristics in that they are traded infrequently and have contractual interest rates and
maturity dates.
To evaluate for impairment, management reviews credit rating changes, securities trends, interest rate movements and unrealized loss at the security level of
the Company’s available for sale debt securities. If any of these give rise to a potential credit concern, the Company performs a discounted cash flow analysis to
determine the credit portion of the impairment. The discounted cash flow analysis will be performed either internally or through the assistance of a qualified third party.
Once the credit component of the impairment is determined, the Company will record the impaired amount as an allowance to the available-for-sale debt securities
balance and as a charge to other income in the accompanying Consolidated Statements of Operations, not to exceed the amount of the unrealized loss. The Company
assesses expected credit losses at the end of each reporting period and adjusts the allowance through Other income, net.
F-14
Table of Contents
Accounts Receivable
Accounts receivable are recorded net of customer allowances for credit losses. The Company estimates an allowance for expected credit losses (i.e., the
inability of our customers to make required payments). These estimates are based on a combination of past experience and current trends. In estimating the allowance for
expected credit losses, consideration is given to the current aging of receivables, a specific review for potential bad debts and an evaluation of historic write-offs. The
resulting bad debt expense is included in sales and marketing expenses in the Consolidated Statement of Operations. Receivables are written-off when deemed
uncollectible. As of December 31, 2023 and 2022, the allowance for credit losses was $48,000 and $24,000, respectively.
A rollforward of the activity in the Company’s allowance for doubtful account is as follows (in thousands):
Balance at beginning of year
Additions: change to cost and expense
Deductions: write-offs, net of recovery
Balance at end of year
BARDA Income and Receivables
December 31, 2023
December 31, 2022
Year-ended
$
$
24
24
-
48
$
$
28
5
(9 )
24
The Company was awarded a BARDA grant in September 2015. Under this grant BARDA supported the Company’s research and development for the
Company’s product, including U.S. clinical regulatory program targeted towards FDA PMA, compassionate use programs, clinical and health economics research, U.S.
pediatric burn programs and the clinical trial in soft-tissue reconstruction, which led to the full-thickness skin defect indication.
Consideration received under the BARDA grant is earned and recognized under a cost-plus-fixed-fee arrangement in which the Company is reimbursed for
direct costs incurred plus allowable indirect costs and a fixed-fee earned. Billings under the contracts are based on approved provisional indirect billing rates, which
permit recovery of fringe benefits, general and administrative expenses and a fixed fee.
The Company has concluded that grants under the BARDA grant are not within the scope of ASC 606, as they do not meet the definition of a contract with a
“customer.” The Company has further concluded that Subtopic 958-605, Not-for-Profit-Entities-Revenue Recognition also does not apply, as the Company is a business
entity and the grants are with governmental agencies or units. With respect to the BARDA grant, we considered the guidance in IAS 20, Accounting for Government
Grants and Disclosure of Government Assistance, by analogy. BARDA income and related receivables are recognized when there is reasonable assurance that the grant
will be received, and all attaching conditions have been complied with. When the grant relates to an expense item, the grant received is recognized as income over the
period when the expense was incurred.
Inventory
Inventory is valued at the lower of cost or estimated net realizable value and is reflected in cost of sales. Costs incurred in bringing each product to its present
location and condition are accounted for at purchase cost on a first-in, first-out basis (“FIFO”). The Company capitalizes inventory costs associated with the Company’s
products when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized;
otherwise, such costs are expensed as research and development. Inventory is evaluated for impairment periodically to identify inventory obsolescence when an
inventory item’s cost basis is in excess of its net realizable value. These adjustments are based upon multiple factors, including inventory levels, projected demand, and
product shelf life.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and costs to complete the sale.
Leases
The Company has operating leases for corporate office space, manufacturing and warehouse facility. The Company’s operating leases have remaining lease
terms of one year to five years, some of which include options to renew the lease. At contract inception, the Company determines whether the contract is a lease or
contains a lease. A contract contains a lease if the Company is both able to identify an asset and can conclude it has the right to control the identified asset for a period of
time. Leases with an initial term of twelve months or less are not recorded on the Consolidated Balance Sheet.
F-15
Table of Contents
Right-of-use (“ROU”) assets represent the Company’s right to control an underlying asset for the lease term, and lease liabilities represent the Company’s
obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at commencement date based on the present value of lease
payments over the lease term. As the Company’s leases do not provide an explicit rate, the Company used its incremental borrowing rate (“IBR”) based on the
information available at commencement date in determining the discount rate used to present value lease payments. In determining the IBR, the Company considered its
credit rating and current market interest rates. The IBR used approximates the interest that the Company would be required to pay for a collateralized loan over a similar
term. The Company’s leases typically do not include any residual value guarantees or asset retirement obligations.
The Company’s lease terms are only for periods in which it has enforceable rights. A lease is no longer enforceable when both the lessee and the lessor each
have the right to terminate the lease without permission from the other party with no more than an insignificant penalty. The Company has options to renew some of
these leases for three years after their expiration. The Company considers these options, which may be elected at the Company’s sole discretion, in determining the lease
term on a lease-by-lease basis. Lease expense is recognized on a straight-line basis over the lease term and is primarily included in general and administrative expenses
in the accompanying consolidated statements of operations.
The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component for all underlying asset
classes. Some leases require variable payments for common area maintenance, property taxes, parking, insurance and other variable costs. The variable portion of lease
payments is not included in operating lease assets or liabilities. Variable lease costs are expensed when incurred.
Property, Plant and Equipment
The Company’s property, plant and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is computed based on the
straight-line method over the estimated useful lives of the various asset classes, generally three to seven years. Leasehold improvements are amortized over the shorter of
the life of the related asset or the remaining term of the lease. Costs associated with customized internal-use software systems that have reached the application
development stage and meet recoverability tests are capitalized and include external direct costs utilized in developing or obtaining the applications and payroll and
payroll-related expenses for employees who are directly associated with the application development. Maintenance and repairs are expensed as incurred.
Intangible Assets
The Company maintains definite-lived intangible assets related to patents initially measured at cost and amortized over estimated useful lives of
approximately 3—20 years. The Company had capitalized patent costs of $616,000 and $558,000 as of December 31, 2023 and 2022, respectively, related to regulatory
approval of the RECELL System, and are being amortized over their estimated useful lives.
Impairment of Long-Lived Assets
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. If the sum of the estimated, undiscounted future cash flows is less than the carrying amount of the asset, then an impairment is recognized for the amount
by which the carrying value of the asset exceeds its estimated fair value. Fair value is determined using the market, income, or cost approaches as appropriate for the
asset. Any write-downs are treated as permanent reductions in the carrying amount of the asset and recognized as an operating loss. The Company had $4,000 of
impairments of long-lived assets for the year-ended December 31, 2023. The Company did not have any impairments in long-lived assets for the year-ended December
31, 2022.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of compensation and employee benefits of sales and marketing personnel and related field sales organization,
marketing events, advertising costs, travel, trade shows and other marketing materials. The Company expenses all selling and marketing costs as incurred. Advertising
expenses were $398,000 and $216,000 for the years-ended December 31, 2023 and 2022, respectively.
F-16
Table of Contents
Research and Development Expenses
Research and development expenses represent costs incurred to develop the Company’s products. Research and development expenses consist primarily of
salaries and other personnel costs, clinical trial costs, regulatory costs and manufacturing costs for non-commercial products. The Company expenses all research and
development costs in the periods in which they are incurred.
Stock-Based Compensation
The Company records compensation expense for stock options and restricted stock units ("RSU") based on the fair market value of the awards on the date of
grant. The fair value of stock-based compensation awards is amortized over the vesting period of the award. Compensation expense for performance-based awards is
evaluated based on the number of shares ultimately expected to vest, evaluated each reporting period and based on management’s expectations regarding the relevant
performance criteria. The Black-Scholes option pricing model and Monte Carlo Simulation are used to estimate the fair value of the time-based and performance-based
options, respectively. Under ASU 2016-09, Compensation – Stock Compensation (“ASC 718”) Improvements to Employee Share-Based Payment Accounting, the
Company elected to account for forfeitures as they occur.
The following assumptions were used in the valuation of stock options.
•Expected volatility – determined using the historical volatility using daily intervals over the expected term.
•Expected dividends - based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future
•Expected term – the expected term of the Company’s stock options for tenure only vesting has been determined utilizing the “simplified” method as described in
the SEC’s Staff Accounting Bulletin No. 107 relating to share-based compensation. The simplified method was chosen because the Company has limited
historical option exercise experience due to its short operating history of awards granted, with the first plan being established in 2016 which was primarily used
for executive awards. Further, the Company does not have sufficient history of exercises in the U.S. market given the Company’s redomiciliation from Australia
to the United States in 2020. The expected term of options with a performance condition or market condition was set to the contractual term of 10 years. The
contractual term was used for options with a performance or market condition as these are primarily awarded to executives and the Company assumes that they
will hold them longer than rank and file employees.
•Risk-free interest rate – the risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for a period approximately equal to the
expected term of the award.
Employee Stock Purchase Plan ("ESPP")
The Company's ESPP, features two six-month offering periods per year, running from June 1 to November 30 and December 1 to May 31. The ESPP
provides eligible employees with an opportunity to purchase shares of the Company’s common stock through payroll deductions of up to 15% of their eligible
compensation. Under the ESPP, employees can purchase the Company's Common Stock at the lower of 85% of the fair value of shares on either the first or last day of
the offering period. Amounts deducted and accumulated by the participant are recorded as ESPP liability and included in Accrued wages and fringe benefits in the
Consolidated Balance Sheets. This amount is used to purchase shares of common stock at the end of each six-month purchase period. Once the shares are purchased, the
ESPP liability is reclassified to stockholders’ equity on the purchase date. The ESPP is a compensatory plan accounted for under the expense recognition provision of
share-based payment accounting standards. Compensation expense is recorded based on the fair market value at the grant date, which corresponds to the first day of each
purchase period. The Black-Scholes option pricing model is used to estimate the grant date fair value.
Loss per Share
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted earnings
per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period, assuming potentially dilutive ordinary
shares from option exercises, employee share awards, ESPP and warrants and other dilutive instruments that have been issued. For periods where the Company has
presented a net loss, potentially dilutive securities are excluded from the computation of diluted net loss per share as they would be anti-dilutive. In accordance with
ASC 710-10, Compensation – General (“ASC 710”), shares of common stock held by the rabbi trust are excluded from the denominator in the basic and diluted EPS
calculations.
Non-Qualified Deferred Compensation Plan Liability and Corporate-Owned Life Insurance Asset
The Company’s non-qualified deferred compensation plan (the "NQDC plan"), which became effective in October 2021, allows highly compensated key
employees to elect to defer a portion of their salary, bonus and RSU awards to later years.
F-17
Table of Contents
Management determined that the cash deferrals under the NQDC plan shall be accounted for similarly to a defined benefit plan under ASC 715, Compensation –
Retirement Benefits (“ASC 715”), and should follow accounting treatment that is similar to a cash balance plan. Management determined that the employee portion and
employer portion of the deferred compensation should be recognized as a compensation expense with a corresponding credit to deferred compensation liability. The
matching contribution will be accrued over the vesting period of two years with 25% vesting in the first year and 75% vesting in the second year. Employees aged 55 or
older immediately vest in employer matching contributions. The change in the liability between each reporting period is accounted for as compensation expense with a
corresponding adjustment to deferred compensation liability. Upon distribution, the Company will record the distribution as a decrease to deferred compensation liability
with a corresponding credit to cash. The Company funds the NQDC plan through a Corporate-Owned Life Insurance (“COLI”). Per the ASC 325-30-25-1A,
Investments – Other, COLI is recorded as an asset on the Consolidated Balance Sheets as it does not meet the definition of a plan asset under ASC 715. The Company
invests in COLI policies relating to its deferred compensation plan. Investments in COLI policies are recorded at their cash surrender values as of each balance sheet
date. Changes in the cash surrender value during the period are recorded as a gain or loss in the Consolidated Statements of Operations in Other income, net.
Rabbi Trust
During April 2022, the Company established a rabbi trust for a select group of participants in which share awards granted under the 2020 Omnibus Incentive
Plan (“2020 Plan”) and deferred under the NQDC plan may be deposited. In addition to the deferral of shares, the rabbi trust holds the assets in the COLI for the NQDC
plan. The rabbi trust is an irrevocable trust, and no portion of the trust fund may be used for any purpose other than the delivery of those assets to the participants. The
assets held in the rabbi trust are subject to the claims of our general creditors in the event of bankruptcy or insolvency. The value of the assets of the rabbi trust is
consolidated into our financial statements.
The NQDC plan permits diversification of vested shares (common stock) into other equity securities subject to a six-month and one day holding period
subsequent to vesting. Per ASC 710-10-25-15, accounting for deferred common stock will be under plan type C or D. Accounting will depend on whether or not the
employee has diversified the common stock. Under Plan type C, diversification is permitted but the employee has not diversified. Under plan type D, diversification is
permitted, and the employee has diversified.
For common stock that have not been diversified, the employer stock held in the rabbi trust is classified in a manner similar to treasury stock and presented
separately on the Consolidated Balance Sheets as Company common stock held by the NQDC plan. The common stock will be recorded at the fair value of the stock at
the time it vested, subsequent changes in the value of the common stock will not be recognized. The deferred compensation obligation is measured independently at fair
value of the common stock with a corresponding charge or credit to compensation cost. The fair value is calculated as the product of the common stock and the closing
price of the stock each reporting period.
Under plan type D, the accounting for the assets held by the rabbi trust is subject to the accounting pronouncements under applicable GAAP for each asset
type. The deferred compensation obligation is measured independently at fair value of the underlying assets. During the year-ended December 31, 2023, diversified
stock was invested in funds under the COLI policy.
Non-Qualified Deferred Compensation Stock Awards
In accordance with ASC 718, Compensation — Stock Compensation, the deferred RSU awards under the NQDC plan are classified as an equity instrument
and changes in fair value of the amount owed to the participant are not recognized. As the plan permits diversification, presentation outside of permanent equity in
accordance with ASR 268, Redeemable Preferred Stock is appropriate. The redemption amounts are based on the vested percentage and are recorded outside of equity as
Non-qualified deferred compensation share awards on the Consolidated Balance Sheets. Deferred awards will be presented outside of permanent equity until the awards
are vested. For further details refer to Note 18.
Segment Reporting
Operating segments are defined as components of an enterprise for which separate discrete financial information is available for evaluation by the chief
operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company’s chief operating decision-maker is its Chief
Executive Officer. To date, the Company has viewed its operations and manages its business as one segment.
F-18
Table of Contents
3. Marketable Securities
The following table summarizes the amortized cost and estimates fair values of debt securities available for sale:
(in thousands)
Cash equivalents:
Money market funds
U.S. Treasury securities
Total cash equivalents
Current marketable securities:
U.S. Treasury securities
U.S. Government agency obligations
Total current marketable securities
(in thousands)
Cash equivalents:
Money market funds
Total cash equivalents
Current marketable securities:
U.S. Treasury securities
Commercial paper
Corporate debt securities
U.S. Government agency obligations
Total current marketable securities
Long-term marketable securities:
Asset backed securities
U.S. Treasury securities
U.S. Government agency obligations
Total long-term marketable securities
As of December 31, 2023
Gross
Unrealized
Holding
Gains
Gross
Unrealized
Holding
Losses
Carrying
Value
Amortized
Cost
8,427 $
2,992
11,419 $
65,145 $
1,699
66,844 $
- $
-
- $
100 $
-
100 $
- $
-
- $
(3 ) $
(2 )
(5 ) $
8,427
2,992
11,419
65,242
1,697
66,939
As of December 31, 2022
Gross
Unrealized
Holding
Gains
Gross
Unrealized
Holding
Losses
Carrying
Value
Amortized
Cost
14,089 $
14,089 $
43,092 $
12,743
3,865
1,901
61,601 $
3,568 $
2,416
949
6,933 $
- $
- $
1 $
-
-
-
1 $
7 $
-
-
7 $
- $
- $
(393 ) $
-
(23 )
(8 )
(424 ) $
(3 ) $
(6 )
(1 )
(10 ) $
14,089
14,089
42,700
12,743
3,842
1,893
61,178
3,572
2,410
948
6,930
$
$
$
$
$
$
$
$
$
$
The maturities of debt securities available for sale are summarized in the following table using contractual maturities. Actual maturities may differ from
contractual maturities due to obligations that are called or prepaid.
(in thousands)
Due in one year or less
Due after one year through three years
As of December 31, 2023
As of December 31, 2022
Amortized
Cost
Carrying
Value
Amortized
Cost
Carrying
Value
$
$
66,844 $
- $
66,939 $
- $
61,601 $
6,933 $
61,178
6,930
Gross unrealized gains and losses on the Company’s marketable securities were an unrealized gain of $100,000 and an unrealized loss of $5,000 as of December
31, 2023 which resulted in a net unrealized gain of $95,000. Gross unrealized gains and losses on the Company’s marketable securities were an unrealized gain of $8,000
and an unrealized loss of $434,000 as of December 31, 2022 which resulted in a net unrealized loss of $426,000.
During the years-ended December 31, 2023 and 2022, the Company did not recognize credit losses. The Company has accrued interest income of $227,000 and
$168,000 as of December 31, 2023 and, 2022, recorded in Prepaids and Other Current Assets, respectively. Money market funds were included in the cash and cash
equivalents line item.
F-19
Table of Contents
4. Fair Value Measurements
The authoritative guidance on fair value measurements establishes a framework with respect to measuring assets and liabilities at fair value on a recurring basis
and non-recurring basis. Under the framework, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants, as of the measurement date. The framework also establishes a three-tier hierarchy for inputs used in measuring fair
value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.
Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of
the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability and
are developed based on the best information available in the circumstances. The hierarchy consists of the following three levels:
Level 1: Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.
Level 2: Inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Inputs are unobservable inputs for the asset or liability
The following tables present information about the Company’s financial assets measured at fair value on a recurring basis, based on the three-tier fair value
hierarchy:
(in thousands)
Cash equivalents:
Money market funds
U.S. Treasury securities
Total cash equivalents
Current marketable securities:
U.S. Treasury securities
U.S. Government agency obligations
Total current marketable securities
Total marketable securities and cash equivalents
Financial liabilities:
Long-term debt
Warrant liability
Non-qualified deferred compensation plan liability
Total financial liabilities
Financial assets:
Corporate-owned life insurance policies
Total financial assets
$
$
$
$
$
$
$
$
$
$
Level 1
Level 2
Level 3
Total
As of December 31, 2023
8,427
-
8,427 $
- $
-
- $
8,427 $
- $
-
-
- $
- $
- $
$
2,992 $
2,992 $
65,242 $
1,697
66,939 $
69,931 $
- $
-
3,831
3,831 $
2,475 $
2,475 $
- $
-
- $
- $
-
- $
- $
39,812 $
3,158 $
- $
42,970 $
- $
- $
8,427
2,992
11,419
65,242
1,697
66,939
78,358
39,812
3,158
3,831
46,801
2,475
2,475
F-20
Table of Contents
(in thousands)
Cash equivalents:
Money market funds
Total cash equivalents
Current marketable securities:
U.S. Treasury securities
Commercial paper
Corporate debt securities
U.S. Government agency obligations
Total current marketable securities
Long-term marketable securities:
Asset backed securities
U.S. Treasury securities
U.S. Government agency obligations
Total long-term marketable securities
Total marketable securities and cash equivalents
Financial liabilities:
Non-qualified deferred compensation plan liability
Total financial liabilities
Financial assets:
Corporate-owned life insurance policies
Total financial assets
$
$
$
$
$
$
$
$
$
$
Level 1
Level 2
Level 3
Total
As of December 31, 2022
14,089 $
14,089 $
- $
- $
-
-
-
-
- $
- $
-
-
- $
14,089 $
- $
- $
- $
- $
42,700
12,743
3,842
1,893
61,178 $
3,572 $
2,410
948
6,930 $
68,108 $
1,348 $
1,348 $
1,238 $
1,238 $
- $
- $
-
-
-
-
- $
- $
-
-
- $
- $
- $
- $
- $
- $
The following table presents the summary of changes in the fair value of our Level 3 financial instruments:
Value at beginning of period
Fair value at issuance date - October 18, 2023
Change in fair value in earnings
Change in fair value in OCI
Balance at December 31, 2023
As of December 31, 2023
Long-term debt
Warrant liability
$
$
- $
37,575
1,616
621
39,812 $
The Company’s Level 1 assets include money market instruments and are valued based upon observable market prices. Level 2 assets consist of commercial
paper, asset back securities and corporate debt securities, U.S. Government Agency obligations and U.S Treasury securities. Level 2 securities are valued based upon
observable inputs that include reported trades, broker/dealer quotes, bids and offers. As of December 31, 2022, the Company had no investments that were measured
using unobservable (Level 3) inputs. There were no transfers between fair value measurement levels during the years-ended December 31, 2023 and 2022. Cash
equivalents consist of money market funds and are classified as a Level 1. The corporate-owned life insurance contracts are recorded at cash surrender value, which is
provided by a third party and reflects the net asset value of the underlying publicly traded mutual funds and are categorized as Level 2. Non-qualified deferred
compensation plan liability is measured at fair value based on quoted prices of identical instruments to the investment vehicles selected by the participants.
Long-term debt
The fair value of the debt was determined using a Monte Carlo simulation in order to predict the probability of different outcomes. The valuation was performed
based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the debt is recorded
in the Consolidated Balance Sheets. The fair value is estimated by the Company each reporting period and the change in the fair value is recorded in earnings.
The below assumptions were used in the Monte Carlo simulation
•risk free interest rate
•revenue volatility
•revenue discount rate
F-21
14,089
14,089
42,700
12,743
3,842
1,893
61,178
3,572
2,410
948
6,930
82,197
1,348
1,348
1,238
1,238
-
2,425
733
-
3,158
Table of Contents
Warrant Liability
•future revenue projection
•expected dividend rate
The fair value of the warrant liability is recognized in connection with the Credit Agreement. The fair value of the warrant liability was determined based on
significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the warrant liability, which is
reported within Warrant liabilities on the Consolidated Balance Sheets, is estimated by the Company based on the Black Scholes option pricing model with the following
unobservable inputs (Level 3):
•price of common stock
•expected term
•exercise price
•expected volatility
•expected risk free interest rate
•expected dividend rate
5. Revenues
The Company’s revenues consists of sale of the RECELL System to hospitals or other treatment centers, COSMOTEC and to BARDA (collectively
“customers”), predominately in the United States. In addition, the Company records service revenue for the emergency preparedness services provided to BARDA.
Performance Obligations
For commercial contracts, we identified the hospital or treatment center and COSMOTEC as the customer in Step 1 of the ASC 606 5 step model and have
determined a contract exists with those customers in Step 1. As these contracts typically have a single performance obligation (i.e. product delivery), no allocation of the
transaction price is required in Step 4 of the model. Control of the product is transferred to the customer at a point in time. Specifically, we determined the customer
obtains control of the product at point in time at which the goods are either shipped or delivered to our customers’ facilities, depending on the terms of the contract. The
transaction price is stated within the contract and is therefore fixed consideration. The transaction price does not include the sales tax that are imposed by governmental
authorities.
For the contract with BARDA, the Company identified two performance obligations (i) the procurement of 5,614 RECELL units, (ii) emergency preparedness
services. The Company’s performance obligations are either satisfied at a point in time or over time as services are provided. The product procurement performance
obligation is satisfied at a point in time, upon transfer of control of the product. RECELL units that have been delivered to BARDA have a product replacement
obligation at no cost to BARDA due to product’s limited shelf-life. The estimated cost of the expired inventory over the term of the contract is recognized on a per unit
basis at the time of delivery. The estimated liability is released upon replacement of the product along with a corresponding reduction to inventory. The Company has
estimated deferred cost of approximately $0 and $194,000 as of December 31, 2023 and 2022, respectively, for the rotation cost of the product, such amounts are
recorded in Other current liabilities. The emergency preparedness services performance obligation is satisfied over time. Revenue for the emergency deployment will be
recognized on a straight-line basis during the term of the contract as services are consumed over time. Services recognized of $335,000 and $370,000 for the years-ended
December 31, 2023 and 2022, respectively, and are included in Revenues within the Consolidated Statement of Operations. Contract costs to fulfil the performance
obligation are incremental and expected to be recovered are capitalized and amortized on a straight-line basis over the term of the contract. As of December 31, 2023 and
December 31, 2022, contract cost of $0 and $252,000 are included in Other current assets, respectively.
Remaining Performance Obligations
Revenues from remaining performance obligations are calculated as the dollar value of the remaining performance obligations on executed contracts and
relate to BARDA and COSMOTEC. The estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially
unsatisfied) pursuant to the Company’s existing customer agreements is $390,000 and $698,000 as of December 31, 2023 and December 31, 2022, respectively. As of
December 31, 2023 and December 31, 2022, the Company had $0 and $274,000, respectively, in contract liabilities related to our contract with BARDA for the
purchase, delivery and storage of the RECELL system for emergency response preparedness. We are contracted to manage this inventory of product until the federal
government requests shipment or at contract termination on December 31, 2023. The Company had $390,000 and $424,000 in contract liabilities as of December 31,
2023 and December 31, 2022, respectively, related to the contract with COSMOTEC. These amounts are split between Other current liabilities and Contract Liabilities
in the Consolidated
F-22
Table of Contents
Balance Sheets. As of December 31, 2023 and December 31, 2022, the Company had $33,000 and $0 in Other current liabilities, respectively. As of December 31, 2023
and December 31, 2022, the Company had $357,000 and $424,000 in Contract Liabilities, respectively. The Company expects to recognize these amounts as revenue on
a straight-line basis over the term of the contract with COSMOTEC.
Variable Consideration
The Company evaluates its contracts with customers for forms of variable consideration, which may require an adjustment to the transaction price based on
their estimated impact. For commercial customers, revenue from the sale of goods is recognized net of volume discounts. The Company uses the expected value method
when estimating variable consideration. Revenue is only recognized to the extent that it is probable that a significant reversal will not occur. Variable consideration
under the BARDA contract is not material to the consolidated financial statements.
Volume Discounts — The Company generally provides contracted customers with volume discounts that are explicitly stated in the Company’s customer
contracts. The RECELL system is sold with respective volume discounts based on aggregated sales over a 12-month period on a customer-by-customer basis. Revenue
from these sales is recognized based on the price specified in the contract, net of estimated volume discounts, and net of any sales tax charged. Goods sold are not
eligible for return. The Company has determined such discounts are not distinct from the Company’s sale of products to the customer and, therefore, these payments
have been recorded as a reduction of revenue and as a reduction to accounts receivable, net.
Contract Assets and Contract Liabilities
Contract assets include amounts related to the Company’s contractual right to consideration for both completed and partially completed performance for
which the Company does not have the right to payment. As of December 31, 2023 and December 31, 2022, the Company does not have any contract assets.
Contract liabilities are recorded when the Company receives payment prior to satisfying its obligation to transfer goods to a customer. The Company had a
total of $390,000 and $698,000 in contract liabilities as of December 31, 2023 and December 31, 2022, respectively. These amounts split between Other current
liabilities and Contract liabilities in the Consolidated Balance Sheets. The Company had $33,000 and $0 in Other current liabilities as of December 31, 2023 and
December 31, 2022, respectively. The Company had $357,000 and $698,000 in Contract liabilities as of December 31, 2023 and December 31, 2022, respectively. The
balance relates to the unsatisfied performance obligation for emergency preparedness under the BARDA contract and COSMOTEC. Performance obligation will be
recognized over time over the term of the contract. For the years-ended December 31, 2023 and 2022, the Company recognized $335,000 and $370,000 of BARDA
revenue from amounts included in the beginning balance of contract liabilities, respectively. For the years-ended December 31, 2023 and 2022, the Company recognized
$33,000 and $11,000 of revenue for COSMOTEC for amounts included in the beginning balance of contract liabilities, respectively.
Cost to Obtain and Fulfill a Contract
Contract fulfillment costs include commissions and shipping expenses. The Company has opted to immediately expense the incremental cost of obtaining a
contract when the underlying related asset would have been amortized over one year or less. The Company generally does not incur costs to obtain new contracts.
BARDA Contract Costs
Cost to fullfil the BARDA emergency preparedness performance obligation, which primarily consist of billed costs to BARDA incurred in connection with
the emergency deployment services, are incremental and expected to be recovered. Costs are capitalized and amortized on a straight-line basis over the term of the
contract. As of December 31, 2023, the Company did not have any contract costs remaining in Other current assets. As of December 31, 2022, the Company had
$252,000 of contract costs included in other current assets. Amortization expense related to deferred contract costs were $341,000 and $338,000 during the years-ended
December 31, 2023 and 2022, respectively and are classified as cost of sales on the accompanying Consolidated Statements of Operations. There was no impairment loss
in relation to deferred contract costs during the years-ended December 31, 2023 and 2022.
Disaggregated Revenue
The Company disaggregates revenue from contracts with customers into geographical regions and by customer type. As noted in the segment footnote, the
Company’s business consists of one reporting segment. A reconciliation of disaggregated revenue by geographical region and customer type is provided in Segment
Note 12.
F-23
Table of Contents
6. Long-term debt
On October 18, 2023 (“Closing Date”) the Company entered into a Credit Agreement, by and between the Company, as borrower, and an affiliate of
OrbiMed as the lender and administrative agent (the “Lender”). The Credit Agreement provides for a five-year senior secured credit facility in an aggregate principal
amount of up to $90.0 million, of which (i) $40.0 million was made available on the Closing Date (the “Initial Commitment Amount”), (ii) $25.0 million will be made
available, at the Company’s discretion, on or prior to December 31, 2024, subject to certain net revenue requirements, and (iii) $25.0 million will be made available, at
the Company’s discretion, on or prior to June 30, 2025, subject to certain net revenue requirements. The maturity date of the agreement is October 18, 2028 ("Maturity
Date"). On the Closing date, the Company closed on the Initial Commitment Amount of $40.0 million, less certain fees and expenses payable to or on behalf of the
Lender. The Company received net proceeds of $38.8 million upon closing after deducting the Lender's transaction costs in connection with the issuance.
All obligations under the Credit Agreement will be guaranteed by all of the Company’s wholly owned subsidiaries (subject to certain exceptions) and secured
by substantially all of the Company's and each guarantor's assets. The loan will be due in full on the Maturity Date unless the Company elects to repay the principal
amount at any time prior to the Maturity Date. Upon prepayment, the Company will owe the applicable repayment premium and exit fee of 3% on the principal amount
of the Loans. The repayment premium varies between 0% - 3%, depending on certain conditions that are defined in the Credit Agreement. Note that the Repayment
premium incorporates the make-whole amount. The make-whole amount represents the remaining scheduled interest payments on the loan during the period
commencing on the prepayment date through the 24-month anniversary of the closing date. The Credit Agreement further states that the Company will be required to
repay the principal amount of the Loans if the Company does not achieve certain net revenue thresholds. If, for any quarter until the maturity date, the Company’s net
revenue does not equal or exceed the applicable trailing twelve-month amount as set forth in the Credit Agreement, then the Company shall repay in equal quarterly
installments equal to 5.0% of the outstanding principal amount on the date the net revenue amount was not satisfied, together with a repayment premium and exit fee.
The Company shall repay amounts outstanding in full immediately upon an acceleration as a result of an event of default as set forth in the Credit Agreement, together
with a repayment premium and other fees. As of December 31, 2023, the Company has not made any repayments on the outstanding debt balance.
During the term of the Credit Agreement, interest payable in cash by the Company shall accrue on any outstanding debt at a rate per annum equal to the
greater of (x) the SOFR rate for such period and (y) 4.00% plus, in either case, 8.00%. As of December 31, 2023, the interest rate was 13.34%. During an event of
default, any outstanding amount will bear interest at a rate of 4.00% in excess of the otherwise applicable rate of interest. The Company will pay certain fees with respect
to the Credit Agreement, including an upfront fee, an unused fee on the undrawn portion of the Loan Facility, an administration fee, a repayment premium and an exit
fee, as well as certain other fees and expenses of the Lender. The undrawn fee accrues at 0.5% of the undrawn balance and its recorded as an asset in the Consolidated
Balance Sheets.
The Credit Agreement contains certain customary events of default, including with respect to nonpayment of principal, interest, fees or other amounts;
material inaccuracy of a representation or warranty; failure to perform or observe covenants; material defaults on other indebtedness; bankruptcy and insolvency events;
material monetary judgments; loss of certain key permits, persons and contracts; material adverse effects; certain regulatory matters; and any change of control. As of
December 31, 2023, the Company was in compliance with all financial covenants in the Credit Agreement.
Each of the Credit Agreement and a Pledge and Security Agreement entered into by the Company, the guarantors and the Lender on October 18, 2023 (the
“Pledge and Security Agreement”) contains a number of customary representations, warranties and covenants that, among other things, will limit or restrict the ability of
the Company and its subsidiaries to (subject to certain qualifications and exceptions): create liens and encumbrances; incur additional indebtedness; merge, dissolve,
liquidate or consolidate; make acquisitions, investments, advances or loans; dispose of or transfer assets; pay dividends or make other payments in respect of their capital
stock; amend certain material documents; redeem or repurchase certain debt; engage in certain transactions with affiliates; and enter into certain restrictive agreements.
In addition, the Company and guarantors will be required to maintain at least $10.0 million of unrestricted cash and cash equivalents.
On the Closing Date, the Company issued to an affiliate of the Lender a warrant (the “Warrant”) to purchase up to 409,661 shares of the Company’s common
stock, par value $0.0001 per share (“Common Stock”), at an exercise price of $10.9847 per share, with a term of 10 years from the issuance date. The Warrant contains
customary share adjustment provisions, as well as weighted average price protection in certain circumstances.
As permitted under ASC 825, the Company elected the fair value option to account for the Credit Agreement, and recorded the Credit Agreement and
warrants at fair value with changes in fair value recorded in the Consolidated Statements of Operations in Other income, net. Changes related to instrument specific
credit risk are recorded in other comprehensive income in the Consolidated
F-24
Table of Contents
Balance Sheet. For changes in fair value refer to Note 4. The Company incurred debt issuance costs of $775,000, which were expensed as incurred and recorded in Other
income, net. The Company also incurred a loss on issuance of $1.2 million as the fair value of the debt and warrant exceeded the proceeds received.
7. Leases
During February 2023, the Company remeasured the lease liability for an office lease due to an increase in the lease term. As a result of the remeasurement of
the lease liability, there was an increase of approximately $1.1 million to the operating lease ROU assets and operating lease liabilities. There was no impact on earnings
as a result of the lease modification.
During May 2023, the Company entered into a new office lease in Irvine, California. The lease commenced during July 2023 and resulted in an increase of
$1.1 million in the operating lease ROU asset and operating lease liabilities.
During December 2023, the Company expanded the square footage of the Ventura Warehouse by 3,360 square feet for a term of 12.5 months. The lease
commenced during December 2023 and resulted in an increase of approximately $50,000 in the operating lease ROU asset and operating lease liabilities.
The following table sets forth the Company’s operating lease expenses which are included in operating expenses in the Consolidated Statements of
Operations (in thousands):
Operating lease cost
Variable lease cost
Total lease cost
Year-Ended
December 31, 2023
December 31, 2022
$
$
929 $
101
1,030 $
775
51
826
Supplemental cash flow information related to operating leases was as follows (in thousands):
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases
$
815 $
803
Year-Ended
December 31, 2023
December 31, 2022
Supplemental balance sheet information, as of December 31, 2023 and 2022, related to operating leases was as follows (in thousands, except for operating
lease weighted average remaining lease term and operating lease weighted average discount rate):
Reported as:
Operating lease right-of-use assets
Total right-of-use assets
Other current liabilities:
Operating lease liabilities, short-term
Operating lease liabilities, long term
Total operating lease liabilities
Operating lease weighted average remaining lease term (years)
Operating lease weighted average discount rate
F-25
December 31, 2023
December 31, 2022
As of
$
$
$
$
2,440 $
2,440 $
895 $
1,702
2,597 $
3.31
8.75 %
851
851
612
306
918
1.44
6.71 %
Table of Contents
As of December 31, 2023, maturities of the Company’s operating lease liabilities are as follows (in thousands):
2024
2025
2026
2027
2028
Total lease payments
Less imputed interest
Total operating lease liabilities
Operating Leases
1,079
738
684
318
190
3,009
(412 )
2,597
$
$
At December 31, 2023 there were no leases entered into that had not yet commenced. On January 4, 2024, the Company executed the second amendment to the
Ventura Warehouse to extend the lease for an additional three years. Refer to subsequent events footnote for more information.
8. Inventory
The composition of inventories is as follows (in thousands):
Raw materials
Work in process
Finished goods
Total inventory
December 31, 2023
December 31, 2022
As of
$
$
3,683
878
1,035
5,596
$
$
1,131
384
610
2,125
The Company has reduced the carrying value of its inventories to reflect the lower of cost or net realizable value. Charges for estimated excess and obsolescence
are recorded in cost of sales in the Consolidated Statement of Operations and were $221,000 and $375,000 for the years-ended December 31, 2023 and 2022,
respectively.
9. Intangible Assets
The composition of intangible assets is as follows (in thousands):
Patent 1
Patent 2
Patent 3
Patent 5
Patent 6
Patent 7
Patent 8
Patent 9
Patent 10
Patent 11
Trademarks
Weighted
Average
Useful Life
3
13
13
19
19
13
18
3
19
19
Indefinite
Total intangible assets
$
As of December 31, 2023
As of December 31, 2022
Gross
Amount
Accumulated
Amortization
Net
Carry
Amount
Gross
Amount
Accumulated
Amortization
Net
Carry
Amount
17 $
141
206
99
56
2
29
3
3
6
54
616 $
(17 )
(39 )
(54 )
(11 )
(6 )
-
(1 )
-
-
(1 )
-
(129 ) $
- $
102
152
88
50
2
28
3
3
5
54
487 $
17 $
137
194
89
43
2
13
-
3
6
54
558 $
(16 ) $
(28 )
(39 )
(6 )
(4 )
-
-
-
-
-
-
(93 ) $
1
109
155
83
39
2
13
-
3
6
54
465
During the year-ended December 31, 2023, the Company recorded an impairment charge of approximately $4,000 in General and administrative expenses in the
Consolidated Statement of Operations. During the year-ended December 31, 2022, the Company did not identify any events or changes in circumstances that indicated
the carrying value of its intangibles may not be recoverable. As such, there was no impairment of intangibles assets recognized for the year-ended December 31, 2022.
Amortization expense of
F-26
Table of Contents
intangibles included in the Consolidated Statements of Operations was $35,000 and $58,000 for the years-ended December 31, 2023 and 2022, respectively.
The Company expects the future amortization of amortizable intangible assets held at December 31, 2023 to be (in thousands):
Estimated
Amortization
Expense
38
38
37
37
37
246
433
$
2024
2025
2026
2027
2028
Thereafter
Total
10. Property and Equipment, net
The composition of property and equipment, net is as follows (in thousands):
Useful Lives
Computer equipment
Computer software
Construction in progress
Furniture and fixtures
Laboratory equipment
Leasehold improvements
RECELL moulds
Less: accumulated amortization and depreciation
Total plant and equipment, net
As of
December 31, 2023 December 31, 2022
755
871
258
439
643
984
840
87
824
769
$
3 - 5 years $
3 years
7 years
5 years
Lesser of life or lease
term
5 years
$
367
438
(2,432 )
1,877
$
257
129
(2,152 )
1,200
Depreciation expense related to plant and equipment was $597,000 and $510,000 for the years-ended December 31, 2023 and 2022, respectively. The
Company recorded an impairment of approximately $83,000 for the year-ended December 31, 2023. Amounts are recorded in General and administrative expenses in
the Consolidated Statement of Operations. During the year-ended December 31, 2022, the Company did not identify any events or changes in circumstances that
indicated that the carrying value of its plant and equipment may not be recoverable. As such, there was no impairment of plant and equipment recognized for the year-
ended December 31, 2022.
11. Prepaids and Other Current Assets and Other Long—Term Assets
Prepaids and other current assets consisted of the following (in thousands):
Prepaid expenses
Accrued investment income
Lease deposits
BARDA contract costs
Other receivables
Total prepaids and other current assets
December 31, 2023
December 31, 2022
As of
1,376 $
227
38
-
18
1,659 $
921
168
110
252
127
1,578
$
$
F-27
Table of Contents
Prepaid expenses primarily consist of prepaid benefits and insurance.
Other long-term assets consisted of the following (in thousands):
Long-term lease deposits
Long-term prepaids
Other long-term assets
Total other long-term assets
Other current liabilities consisted of the following (in thousands):
Operating lease liability
BARDA deferred costs
COSMOTEC deferred revenue
Other current liabilities
Total other current liabilities
12. Reporting Segment and Geographic Information
December 31, 2023
December 31, 2022
As of
155 $
148
52
355 $
As of
December 31, 2023
December 31, 2022
895 $
-
33
338
1,266 $
25
97
-
122
612
194
-
184
990
$
$
$
$
The Company views its operations and manages its business in one reporting segment. Long-lived assets were primarily located in the United States as of
December 31, 2023 and December 31, 2022 with an insignificant amount located in Australia and the United Kingdom.
Revenues by region and customer location were as follows (in thousands):
December 31, 2023
December 31, 2022
Year-Ended
Revenue:
United States
Foreign:
Japan
European Union
Australia
United Kingdom
Total
Revenues by customer type were follows (in thousands):
Revenue:
Commercial sales
Deferred commercial revenue
BARDA:
Services for emergency preparedness
Total
46,359
$
3,370
51
222
141
50,143
$
December 31, 2023
December 31, 2022
Year-Ended
49,775
33
$
335
50,143
$
33,257
729
-
275
160
34,421
34,051
-
370
34,421
$
$
$
$
F-28
Table of Contents
Cost of sales by customer type were as follows (in thousands):
Cost of sales:
Commercial cost
BARDA:
Product cost
Emergency preparedness service cost
Total
13. Contingencies
December 31, 2023
December 31, 2022
Year-Ended
$
$
7,544
$
(105 )
341
7,780
$
5,573
130
338
6,041
The Company is subject to certain contingencies arising in the ordinary course of business. The Company records accruals for these contingencies to the extent
that a loss is both probable and reasonably estimable. If some amount within a range of loss appears to be a better estimate than any other amount within the range, that
amount is accrued. Alternatively, when no amount within a range of loss appears to be a better estimate than any other amount, the lowest amount in the range is
accrued. The Company expenses legal costs associated with loss contingencies as incurred. As of December 31, 2023, the Company does not have any outstanding or
threatened litigation that would have a material impact to the financial statements.
14. Common and Preferred Stock
The Company’s shares of common stock are quoted on Nasdaq under AVITA Medical’s previous Nasdaq ticker code, “RCEL”. The Company’s CDIs are
quoted on the ASX under AVITA Medical’s previous ASX ticker code, “AVH”. One share of common stock on Nasdaq is equivalent to five CDIs on the ASX.
The Company is authorized to issue 200,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value
$0.0001 per share, issuable in one or more series as designated by the Company’s board of directors. No other class of capital stock is authorized. The Company has
25,682,078 and 25,208,436 shares of common stock issued and outstanding as of December 31, 2023 and December 31, 2022, respectively. The Company has no shares
of preferred stock outstanding during any period.
15. Share-Based Payment Plans
Overview of Employee Share-Based Compensation Plans
Our former parent company, AVITA Medical Pty Limited, adopted the Employee Share Plan and the Incentive Option Plan (collectively, the “2016 Plans”).
Upon completion of the redomiciliation of the Company from Australia to the United States in June 2020 (“Redomiciliation”), the 2016 Plans were terminated with
respect to future grants and accordingly, there are no more shares available to be issued under the 2016 Plans. During November 2020, the Company filed a registration
statement on Form S-8 to register a total of 1,750,000 shares of common stock which may be issued pursuant to the terms of the 2020 Plan. During June 2023, the
Company filed a registration statement on Form S-8 to register an additional 2,500,000 shares of common stock under the 2020 Plan. The increase in shares available for
issuance was a result of the stockholders of AVITA Medical, Inc. approving an amendment to the 2020 Plan on June 6, 2023 at the Company’s 2023 Annual Meeting of
Stockholders (the “2023 Annual Meeting”).
On December 22, 2021, the Company’s stockholders approved the issuance of options and RSUs to the Board of Directors in accordance with ASX rules.
These awards are subject to the vesting and performance conditions as denoted in the individual agreements (collectively, the "2021 Annual Meeting Awards"). On
December 12, 2022, the Company's stockholders approved the issuance of options and RSUs to the Board of Directors and the CEO in accordance with ASX rules.
These awards are subject to vesting conditions as denoted in the individual agreements (collectively, the "2022 Annual Meeting Awards"). On June 6, 2023, the
Company's stockholders approved the issuance of options and RSUs to the Board of Directors and the CEO in accordance with ASX rules. These awards are subject to
vesting conditions as denoted in the individual agreements (collectively, the "2023 Annual Meeting Awards").
The 2020 Plan provides for the grant of the following Grants: (a) Incentive Stock Options, (b) Nonstatutory Stock Options, (c) Stock Appreciation Rights, (d)
Restricted Stock Grants, (e) Restricted Stock Unit Grants, (f) Performance Grants, and (g) Other Grants. The 2020 Plan will be administered by the Compensation
Committee or by the Board acting as the Compensation Committee. Subject to the general purposes, terms and conditions of the 2020 Plan, applicable law and any
charter adopted by the Board
F-29
Table of Contents
governing the actions of the Compensation Committee, the Compensation Committee will have full power to implement and carry out the 2020 Plan. Without limitation,
the Compensation Committee will have the authority to interpret the plan, approve persons to receive grants, determine the terms and number of shares of the grants,
determine vesting and exercisability of grants, and make all other determinations necessary or advisable in connection with the administration of this Plan.
The contractual term of stock option awards granted under the 2020 Plan is ten years from the grant date. Unless otherwise specified, the vesting periods of
options and RSUs granted under the 2020 Plan are: (i) vest over a three-year or four-year period in equal installments at the end of each year from the date of grant, and
/or (ii) subject to other performance criteria, as determined by the Compensation Committee.
Modifications
During the fourth quarter of 2023, the Company had administrative changes to employment agreements of five executives. Changes included clarification that
equity awards are inclusive of options and RSUs, and a change in the post-termination exercise period from 6-months to 3-months. In addition, four employees received
employment agreements for the first time as a result of a promotion. Per the terms of the employment agreement outstanding awards (options and RSUs) will
immediately accelerate upon a qualifying termination. These employees were previously governed by the terms of the 2020 Plan, which upon separation from service,
unvested awards will forfeit. We accounted for these changes in the accelerated vesting provision upon termination and the decrease in the post-termination exercise
period as modifications. The modifications did not result in incremental expense.
The following table summarizes information about the Company’s stock-based award plans as of December 31, 2023:
2016 Equity Incentive Plan
2020 Equity Incentive Plan
2021 AGM Awards
2022 AGM Awards
2023 AGM Awards
Share-Based Payment Expenses
Outstanding
Options
Outstanding Restricted
Stock Units
Shares available
for future issuance
740,945
1,553,969
22,600
247,876
124,768
-
171,552
5,782
-
57,798
-
2,294,367
-
-
-
Stock-based payment transactions are recognized as compensation expense based on the fair value of the instrument on the date of grant. The Company uses
the graded-vesting method to recognize compensation expense. Compensation cost is reduced for forfeitures as they occur in accordance with ASU 2016-09, Simplifying
the Accounting for Share-Based Payment. The Company recorded stock-based compensation expense of $8.4 million and $7.0 million for the years-ended December 31,
2023 and 2022, respectively. No income tax benefit was recognized in the Consolidated Statements of Operations for stock-based payment arrangements for the years-
ended December 31, 2023 and 2022.
The Company has included stock-based compensation expense and ESPP expense as part of operating expenses in the accompanying Consolidated
Statements of Operations as follows:
Sales and marketing expenses
General and administrative expenses
Research and development expenses
Total operating expenses
December 31, 2023
December 31, 2022
Year-Ended
1,401
5,948
1,035
8,384
$
$
1,393
4,668
937
6,998
$
$
F-30
Table of Contents
A summary of share option activity as of December 31, 2023 and changes during the year then ended is presented below:
Outstanding shares at December 31, 2022
Granted
Exercised
Expired
Forfeited
Outstanding shares at December 31, 2023
Exercisable at December 31, 2023
Vested and expected to vest
Service Only Share
Options
Performance
Based Share
Options
Total Share Options
Weighted-
Average Exercise
Price
1,724,252
972,193
(136,675 )
(61,062 )
(101,137 )
2,397,571
909,162
2,397,571
511,194
-
(30,000 )
(180,473 )
(8,134 )
292,587
255,629
292,587
2,235,446 $
972,193
(166,675 )
(241,535 )
(109,271 )
2,690,158
1,164,791
2,690,158 $
12.47
14.52
5.74
20.95
11.53
12.91
12.96
12.91
Weighted-
Average
Remaining
Contractual
Term (in years)
7.71 $
Aggregate
Intrinsic
Value
1,530,263
7.67
5.98
7.67 $
1,530,263
587,632
1,530,263
The weighted-average grant-date fair value of options granted during the years-ended December 31, 2023 and 2022 was $9.46 and $4.64, respectively. The
total intrinsic value of options exercised during the years-ended December 31, 2023 and 2022 was $1.7 million and $179,000, respectively. Intrinsic value is measured
using the fair market value at the date of exercise for options exercised, or at balance sheet date for outstanding options, less the applicable exercise price.
Cash received from the exercise of options was approximately $957,000 and $900,000, for the years-ended December 31, 2023 and 2022, respectively.
As of December 31, 2023, there was approximately $7.4 million of total unrecognized compensation cost related to share-based compensation expense. Of
this amount $7.3 million relates to service only share options to be recognized over a weighted average period of 1.15 years, $0.1 million related to performance-based
share options to be recognized over a weighted average period of 0.74 years.
Restricted Stock Units
Restricted stock units are granted to executives as part of their long-term incentive compensation. RSUs granted to directors as a result of stockholder
approval 2021 Annual Meeting, 2022 Annual Meeting and 2023 Annual Meeting are issued pursuant to award agreements between the Company and the holders of
such securities. These RSU awards were approved by the Compensation Committee. All RSU awards vest in accordance with the tenure or performance conditions as
determined by the Compensation Committee and set out in the contracts between the Company and the holders of such securities. The grant date fair value is determined
based on the price of the Company stock price on the date of grant (stock price determined on Nasdaq).
A summary of the status of the Company’s unvested RSUs as of December 31, 2023, and changes that occurred during the year is presented below:
Unvested Shares
Unvested RSUs outstanding at December 31, 2022
Granted
Vested
Forfeited
Unvested RSUs outstanding at December 31, 2023
Service
Condition RSU
Performance
Condition RSU
Total RSU's
Weighted Average
Grant Date Fair Value
per Unit
394,872
57,798
(205,308 )
(40,250 )
207,112
65,646
-
(29,751 )
(7,875 )
28,020
460,518 $
57,798
(235,059 )
(48,125 )
235,132 $
6.30
14.17
6.37
5.67
8.29
The weighted-average grant-date fair value of the RSUs granted during the years-ended December 31, 2023 and 2022, was $14.17 and $5.28, respectively.
The total fair value of shares vested during the years-ended December 31, 2023 and 2022, was $2.9 million and $894,000, respectively.
As of December 31, 2023, there was $829,000 of total unrecognized compensation cost related to RSU awards. Of this amount $734,000 relates to service
only RSUs to be recognized over a weighted average period of 0.63 years, $95,000 related to performance-based awards to be recognized over a weighted average
period of 0.51 years.
F-31
Table of Contents
2021 Annual Meeting Awards
Awards to non-executive members of the Board of Directors ("Director awards") under the 2021 Annual Meeting Awards
The Director awards that were granted in 2021 consist of an aggregate 68,600 options and RSUs. A total of 41,400 tenure-based options are RSUs (15,300
options and 26,100 RSUs) vested 12 months from the grant date. A total of 27,200 tenure-based options and RSUs (9,850 options and 17,350 RSUs) vest over 3 three
years in equal installment each year.
2022 Annual Meeting Awards
Awards to the CEO under the 2022 Annual Meeting Awards
On December 12, 2022, the CEO was issued an aggregate 226,296 options with 25% of those options vesting annually commencing on September 28, 2023.
Non-Executive Director awards under the 2022 Annual Meeting Awards
The Director awards consist of an aggregate 71,936 options and RSUs (21,580 options and 50,356 RSUs) vesting 12 months from the grant date.
2023 Annual Meeting Awards
Awards to the CEO under the 2023 Annual Meeting Awards
On June 6, 2023, the CEO was issued an aggregate 100,000 options with 33.3% of those options vesting annually commencing on June 6, 2024.
Non-Executive Director awards under the 2023 Annual Meeting Awards
The Director awards consist of an aggregate 82,566 options and RSUs. A total of 52,926 tenure-based options and RSUs (15,876 options and 37,050 RSUs)
vest 12 months from the grant date. A total of 29,640 tenure-based options and RSUs (8,892 options and 20,748 RSUs) vest over three years in equal installments each
year.
Option Pricing Model
The Company estimates the fair value of tenure-based share options using the Black-Scholes option pricing model on the date of grant.
The valuation of the options is affected by the Company's share price as well as assumptions regarding a number of highly complex and subjective variables.
These variables include, but are not limited to, expected share price volatility over the term of the awards and actual and projected employee share option exercise
behaviors. The risk-free rate is based on the U.S. Treasury rate for the expected term at the time of grant, volatility is based on the historical volatility. For tenure-based
options, the expected term is based on the estimated average of the life of options using the simplified method as prescribed by SAB 107. The Company utilizes the
simplified method for plain vanilla options to determine the expected term of the options due to insufficient exercise activity during recent years. The expected dividend
assumption is based on the Company’s history and expectation of dividend payouts.
Included in the following table is a summary of the related assumptions used in the Black-Scholes Option pricing model for the years-ended December 31,
2023 and 2022.
Expected volatility
Weighted-average volatility
Expected dividends
Expected term (in years)
Risk-free interest rate
Year-Ended
December 31, 2023
Year-Ended
December 31, 2022
66% - 114%
71 %
0 %
5 -7
3.51% - 4.44%
72% - 113%
103 %
0 %
5 - 9.8
1.42% - 3.94%
F-32
Table of Contents
Employee Stock Purchase Plan
In June 2023, the stockholders approved the AVITA Medical, Inc. Employee Stock Purchase Plan (the “ESPP”). The ESPP became effective on July 1, 2023.
On June 30, 2023, the Company filed Registration Statement on Form S-8 to register 1,000,000 shares of common stock under the ESPP, as a result of the Company’s
stockholders approving the ESPP at the 2023 Annual Meeting. The ESPP features two six-month offering periods per year, from June 1 to November 30 and December
1 to May 31. The first offering period for the ESPP was July 1 – November 30, 2023. Subsequent offering periods will begin the first trading day of December and June
each year. For the year-ended December 31, 2023, 72,319 shares, were issued under the ESPP at a purchase price of $9.06. Total proceeds received from the purchase
of shares under the ESPP were approximately $655,000. During the year-ended December 31, 2023, the Company recorded $382,000 in ESPP expense and has
unamortized expense remaining of $327,000 to be recognized over a term of 0.42 years. As of December 31, 2023, the Company had approximately $122,000 in
accrued payroll contributions for future ESPP purchases. As of December 31, 2022, the Company did not have any accrued payroll contributions related to the ESPP.
The Company estimates the fair value of the ESPP using the Black-Scholes option pricing model on the date of grant. The valuation is affected by the
Company's share price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected
term, expected share price, volatility over the expected term and risk-free rate. The risk-free interest rate is based on the U.S. Treasury rate for the expected term at the
time of grant, volatility is based on the historical volatility. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts.
Included in the following table is a summary of the related assumptions used in the Black-Scholes Option pricing model for the year-ended December 31,
2023.
Expected volatility
Weighted-average volatility
Expected dividends
Expected term (in years)
Risk-free interest rate
16. Income Taxes
Year-Ended
December 31, 2023
81.98% - 82%
81.99 %
0 %
0.42 - 0.5
5.19% - 5.31%
Geographic sources of loss before income taxes are as follows:
(amounts in thousands)
United States
Foreign
Loss before income taxes
December 31, 2023
December 31, 2022
Year-Ended
$
$
$
(44,691 ) $
9,376
(35,315 ) $
(26,764 )
135
(26,629 )
The income tax expense as shown in the accompanying Consolidated Statements of Operations includes the following:
(amounts in thousands)
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Total income tax expense
December 31, 2023
December 31, 2022
Year-Ended
- $
66
-
66
-
-
-
-
66 $
-
36
-
36
-
-
-
-
36
$
$
F-33
Table of Contents
The provision for income taxes differs from the tax computed using the statutory United States federal income tax rate of 21% for the years-ended December 31,
2023 and 2022 as a result of the following items:
(amounts in thousands)
Tax benefit at U.S. statutory rate
State income taxes
Foreign rate differential
Share-based compensation
Fair value change in debt and warrants
Foreign exchange gain/(loss) on intercompany trade balances
Gain of transfer of intellectual property
Permanent differences
Change in tax rate
Net change in valuation allowance
Income tax expense
A summary of deferred income tax assets is as follows (in thousands):
(amounts in thousands)
Deferred tax liabilities
ROU Asset
Intangible assets
Property, plant and equipment
Total deferred tax liabilities
Deferred tax assets
Property, plant and equipment
Accrued expenses
Intangible assets
Stock based compensation
Lease liability
Research and development
Net operating loss carryforward
Other
Total deferred tax assets
Less valuation allowance
Net deferred tax assets
Net deferred tax assets / (liabilities)
December 31, 2023
December 31, 2022
Year-Ended
(7,416 ) $
66
375
774
494
(2,354 )
2,804
554
(847 )
5,616
66 $
December 31, 2023
December 31, 2022
Year- Ended
(618 ) $
-
(6 )
(624 ) $
- $
2,714
12
3,763
657
5,357
50,438
992
63,933 $
(63,309 )
624
- $
(5,592 )
35
5
719
-
-
-
(30 )
-
4,899
36
(229 )
(11 )
-
(240 )
3
1,833
-
3,405
247
2,215
48,413
630
56,746
(56,506 )
240
-
$
$
$
$
$
$
$
At December 31, 2023, the Company and its subsidiaries had net operating loss carryforwards for federal, state, United Kingdom, and Australia income tax
purposes of $145.2 million, $89.5 million, $29.9 million and $24.9 million respectively. The net operating loss carryforwards may be subject to limitation regarding
their utilization against taxable income in future periods due to “change of ownership” provisions of the Internal Revenue Code and similar state and foreign provisions.
Of these carryforwards, $19.5 million will expire, if not utilized, between 2028 through 2038. The remaining carryforwards have no expiration.
In assessing the recoverability of its deferred tax assets, the Company considers whether it is more likely than not that its deferred assets will be realized. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible
and/or net operating losses can be utilized. The Company considers all positive and negative evidence when determining the amount of the net deferred tax assets that are
more likely than not to be realized. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning
strategies and projected future taxable income. Based upon the weight of available evidence including the uncertainty regarding the Company’s ability to utilize certain
net operating losses and tax credits in the future, the Company has established a valuation allowance against its net deferred tax assets of $63.3 million and $56.5
million as of December 31, 2023 and 2022, respectively. The deferred tax assets are primarily net operating loss carryforwards for which management has determined it
is more likely than not that the deferred tax assets will not be realized.
F-34
Table of Contents
The Company recognizes the tax benefit from an uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by
the taxing authorities based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements related to a particular tax position
are measured based on the largest benefit that has a greater than a 50% likelihood of being realized upon settlement. The amount of unrecognized tax benefits is adjusted
as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by the taxing authorities,
new information obtained during a tax examination, or resolution of an examination.
The Company has not identified any uncertain tax positions as of December 31, 2023 and 2022.
The Company files income tax returns in the U.S. federal, California and certain other state and foreign jurisdictions. The Company remains subject to income
tax examinations for its U.S. federal and state income taxes generally for fiscal years ended June 30, 2006 and forward. The Company also remains subject to income tax
examinations for international income taxes for fiscal years ended June 30, 2019 through December 31, 2022, and for certain other U.S. state and local income taxes
generally for the fiscal years ended June 30, 2019 through December 31, 2022.
17. Loss per Share
The following is a reconciliation of the basic and diluted loss per share computations:
(in thousands, except per share amounts)
Net loss
Weighted-average common shares—outstanding, basic and diluted
Net loss per common share, basic and diluted
$
$
Anti-dilutive shares excluded from diluted net loss per common share:
Stock options
Restricted stock units
ESPP
Warrants
December 31, 2023
December 31, 2022
Year-Ended
35,381 $
25,331
1.40 $
Year-Ended
26,665
25,000
1.07
December 31, 2023
December 31, 2022
2,690,158
235,132
91,152
409,661
2,235,446
460,518
-
-
The Company’s basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the
relevant period. In accordance with ASC 710-10 Compensation - General, shares of common stock held by the rabbi trust are excluded from the denominator in the
basic and diluted net loss per common share calculations. As of December 31, 2023 and 2022 a total of 99,106 and 17,927, shares of common stock were excluded,
respectively. For details on shares of common stock held by the rabbi trust refer to Note 18. For the purposes of the calculation of diluted net loss per share, options to
purchase common stock, restricted stock units and unvested shares of common stock issued upon the early exercise of stock options have been excluded from the
calculation of diluted net loss per share as their effect is anti-dilutive. Because the Company has reported a net loss for years-ended December 31, 2023 and 2022,
diluted net loss per common share is the same as the basic net loss per share for those periods.
18. Retirement Plans
The Company offers a 401(k)-retirement savings plan (the “401(k) Plan”) for its employees, including its executive officers, who satisfy certain eligibility
requirements. The Internal Revenue Code of 1986, as amended, allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax
basis through contributions to the 401(k) Plan. The Company matches contributions to the 401(k) Plan based on the amount of salary deferral contributions the
participant makes to the 401(k) Plan. The Company will match up to 6% of an employee’s compensation that the employee contributes to his or her 401(k) Plan account.
Total Company matching contributions to the 401(k) Plan were $1.2 million and $1.0 million for the years-ended December 31, 2023, and 2022, respectively.
Non-qualified deferred compensation plan
The Company’s non-qualified deferred compensation plan (the "NQDC plan"), which became effective on October 2021 allows for eligible management and
highly compensated key employees to elect to defer a portion of their salary, bonus, commissions and RSU awards to later years. Cash deferrals are immediately vested
and are subject to investment risk and a risk of forfeiture under
F-35
Table of Contents
certain circumstances. RSU deferrals are subject to the vesting conditions of the award. Once RSUs vest, subject to a six-month and one day holding period, employees
are allowed to diversify the common stock into other investment options offered by the plan. For cash deferrals, the Company matches 4% to 6% (depending on level)
of employee contributions. These matching employer contributions are vested over a two-year period with 25% vesting on year one and 75% vesting on year two for
employees under 55 years of age. Employer contributions for employees over 55 years of age are immediately vested. Employer contributions to the NQDC plan for the
years-ended December 31, 2023 and 2022 were $171,000 and $258,000, respectively. The Company’s deferred compensation plan liability was $3.8 million and $1.3
million as of December 31, 2023 and 2022, respectively. These amounts are split between current and long term on the Consolidated Balance Sheets. As of December
31, 2023 and 2022, $168,000 and $78,000 is included in Current non-qualified deferred compensation liability and $3.7 million and $1.3 million in Non-qualified
deferred compensation liability, respectively. During the years-ended December 31, 2023 and 2022, the Company had a payout of approximately $950,000 in the
deferred compensation liability for terminated employees.
The Company established a COLI to fund the NQDC plan. Amounts in the COLI are invested in a number of funds. The securities are carried at the cash
surrender value on the Consolidated Balance Sheets. We record investment gains and losses of the COLI as other income. Refer to Note 4, Fair Value Measurements for
the fair values of the COLI policies and the NQDC liability.
Rabbi Trust
During April 2022, we established a rabbi trust to hold the assets of the NQDC plan. The rabbi trust holds the COLI asset and the common stock from
deferred RSU awards that have vested. The NQDC permits diversification of fully vested shares into other equity securities subject to a six month and one day holding
period. In accordance with ASR 268, Redeemable Preferred Stock, and ASC 718, prior to vesting, the deferred share awards are classified as an equity instrument and
changes in fair value of the amount owed to the participant are not recognized. The redemption amounts of the deferred awards are based on the vested percentage and
are recorded outside of permanent equity as Non-qualified deferred compensation share awards on the Consolidated Balance Sheets. As of December 31, 2023 and
December 31, 2022, a total of 81,052 and 253,048, shares awards have been deferred, respectively. Vested shares are converted to common stock and are reclassified to
permanent equity. Common stock held in the rabbi trust is classified in a manner similar to treasury stock and presented separately on the Consolidated Balance Sheets
as Common stock held by the NQDC plan. For the years-ended December 31, 2023 and December 31, 2022 a total of 99,106 and 17,927 shares were vested at the
redemption value of $1.1 million and $127,000, respectively.
The following table summarizes the eligible share award activity as of December 31, 2023 and December 31, 2022.
(in thousands)
Non-qualified deferred compensation share awards:
Balance at inception/beginning of period
Change in classification of deferred compensation share awards
Stock-based compensation expense
Change in redemption value
Vesting of share awards held by NDQC
Ending Balance
19. Deed of Cross Guarantee
December 31, 2023
December 31, 2022
As of
$
$
557 $
-
518
1,019
(1,401 )
693 $
-
192
471
21
(127 )
557
The Company (as the parent entity of the AVITA Group) is party to a deed of cross guarantee dated June 29, 2020 (“Deed”) with each of its Australian wholly-
owned subsidiaries, namely:
•AVITA Medical Pty Ltd (ACN 058 466 523);
•C3 Operations Pty Ltd (ACN 090 161 505);
•Visiomed Group Pty Ltd (ACN 003 010 580); and
•Infamed Pty Limited (ACN 084 800 653),
(together, the “Australian Subsidiaries”).
F-36
Table of Contents
The Company and the Australian Subsidiaries were the only parties to the Deed at December 31, 2023 and comprise the “closed group” for the purposes of
the Deed (and also the “extended closed group”). No parties were added to or removed from the Deed, or subject to a notice of disposal, during or since the financial
year-ended December 31, 2023. Since December 31, 2023, there has been no change in ownership of any of the Australian Subsidiaries.
By entering into the Deed, the Company and the Australian Subsidiaries have guaranteed the debts of each other.
Relief under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785
By entering into the Deed, the Australian Subsidiaries have been relieved from the requirement to prepare a financial report and directors’ report for the
financial year-ended December 31, 2023 under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.
Consolidated financial information of parties to the Deed
The financial statements below are additional disclosure items specifically required by the Australian Securities and Investments Commission and represent
the consolidated financial statements of the entities that are party to the Deed only (being the ‘closed group’ and also the ‘extended closed group’ under the Deed).
(in thousands)
Revenues
Cost of sales
Gross profit
Operating Expenses:
Sales and marketing expenses
General and administrative expenses
Product development expense
Total operating expenses
Other income
Net Income
(in thousands)
ASSETS
Cash
Prepaids and other current assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities
Accrued wages and fringe benefits
Other current liabilities
Total liabilities
Accumulated equity
Total stockholders' equity
Total liabilities and stockholders' equity
20. Subsequent Events
Ventura Lease Extension
Year-Ended
December 31, 2023
As of
December 31, 2023
222
(263 )
(41 )
(206 )
(79 )
(28 )
(313 )
21,717
21,363
25
1
26
1
4
7
12
14
14
26
$
$
$
$
On January 1, 2024, the Company executed the second amendment to the Ventura Warehouse to extend the lease for an additional three years until September
30, 2027. The lease was set to expire in September 30, 2024. The average monthly rent payment on the extended lease is approximately $36,000 per month. The
Company will account for the lease extension during the three months ended March 31, 2024.
F-37
Table of Contents
Stedical Scientific Distributor Agreement
On January 26, 2024, the Company entered into an exclusive multi-year distribution agreement with Stedical Scientific, Inc. ("Stedical") to commercialize
PermeaDerm® Biosynthetic Wound Matrix in the United States. PermeaDerm is cleared by the FDA as a transparent matrix for use in the treatment of a variety of
wound types until healing is achieved. Under the terms of the agreement, the Company will hold the exclusive rights to market, sell, and distribute PermeaDerm
products, including any future enhancements or modifications, within the United States. The initial term is for five years, with the option to renew for an additional five
years, contingent upon meeting certain minimum requirements. During February 2024, the Company purchased a total of $2.5 million in inventory from Stedical
Scientific.
OVIK Health was the distributor for Stedical from March 20, 2020 until January 26, 2024. As part of the distribution agreement with Stedical, the Company
entered into a separate agreement with OVIK Health. As part of this agreement Stedical and OVIK Health agreed to terminate their previous distribution agreement and
all rights thereunder, transfer customer lists to the Company and the purchase by the Company of existing inventory held by OVIK Health for $1.2 million. As
consideration for the covenants, agreements, undertakings and purchase of the inventory the Company paid OVIK Health a total of $1.75 million. The inventory
purchased from OVIK is included in the purchase by Stedical.
BARDA Contract
On February 16, 2024, the Company executed a contract modification with BARDA to extend the period of performance, under the original contract dated
September 29, 2015, from December 31, 2023 to September 28, 2025. Under the modified contract, BARDA shall have access to AVITA Medical’s RECELL inventory
in the event of a national emergency. No additional inventory build will be required. In the case of a national emergency, BARDA shall pay for RECELL devices at a
reduced price for the first 1,000 units and retail price for any units over 1,000 requested. BARDA will pay AVITA Medical approximately $333,000 in maintenance fee
over the term of the contract to ensure first right of access.
F-38
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Provisions ("Basic Provisions").
Basic Provisions ("Basic Provisions").
1.1 Parties:
Parties: This Lease ("Lease"), dated for reference purposes only, December 06, 2023 is made by and between
Hartco Ventura Inc._______________________________________(“Lessor”)
Hartco Ventura Inc._______________________________________(“Lessor”)
Exhibit 10.30
and Avita Medical Americas___________________________________________________________________(“Lessee”),
Avita Medical Americas___________________________________________________________________(“Lessee”),
(collectively the "Parties,"
"Parties," or individually a "Party
"Party").
1.2(a) Premises: That certain portion of the Building, including all improvements therein or to be provided by Lessor under the terms of this Lease, commonly known by the
street address of 3007 Bunsen Avenue, Unit G , located in the City of ___Ventura___________, County of ____Ventura_________, state of California with zip code___93003__, as
outlined on Exhibit ___A_________ attached hereto ("Premises"). The "Building" is that certain building containing the Premises and generally described as (describe briefly the
nature of the
Building):An approximately 3360 square feet (unit -G) ,Part of a larger 88,080 square feet multi-tenant industrial complex located on approximately 192,500 square feet of MPD
zoned land.
In addition to Lessee's rights to use and occupy the Premises as hereinafter specified, Lessee shall have non‑exclusive rights to the Common Areas (as defined in Paragraph 2.7
below) as hereinafter specified, but shall not have any rights to the roof, exterior walls or utility raceways of the Building or to any other buildings in the Industrial Center. The
Premises, the Building, the Common Areas, the land upon which they are located, along with all other buildings and improvements thereon, are herein collectively ref to as the
"industrial Center." (Also see Paragraph 2.)
Parking:_Four (4) unreserved vehicle parking spaces ("Unreserved Parking Spaces
Reserved Parking
Unreserved Parking Spaces"); and __Twelve (2)___ ___________ reserved vehicle parking spaces ("Reserved Parking
1.2(b) Parking
Spaces"). (Also see Paragraph 2.6.)
Spaces
1.3TermTerm:____1____years and _____0___months ("Original Term
Original Term") commencing__January 1,2024 ________________________________________________
("Commencement Date
Commencement Date") and ending __December 31,2024______________________________________(Expiration Date
Expiration Date"). (Also see Paragraph 3.)
1.4 Early Possession
Early Possession: ___December 18,2023 With pro-rated rent of $1896.77____ _______________________________________________("Early Possession Date
Early Possession Date").
1.5 Base Rent
Base Rent: _$4200.00___per month ("Base Rent'
Base Rent') payable on the____First_______day of each month commencing January1,2024.
[] If this box is checked, this Lease provides for the Base Rent to be adjusted per Addendum __51_____, attached hereto.
1.6(a) Base Rent Paid Upon Execution
Base Rent Paid Upon Execution: _________________ as Base Rent for the period ___________________________________________________________,
1.6(b) Lessee's Share of Common Area Operating Expenses
Lessee's Share of Common Area Operating Expenses: _____________Zero____________________percent ( %) ("Lessee's Share
Lessee's Share") as determined by
[ ] prorata square footage of the Premises as compared to the total square footage of the Building or[ ] other criteria as described in Addendum
1.7 Security Deposit
Security Deposit: ___________$$4200___________________("Security Deposit
Security Deposit"). (Also see Paragraph 5.)
1.8 Permitted use
Permitted use Manufacturing of medical products
_____________________________________________________________________________________________________________________("Permitted Use
Paragraph 6.)
Permitted Use") (Also see
1.9 Insuring Party
Insuring Party. Lessor is the "Insuring Party
Insuring Party." (Also see Paragraph 8.)
1.10(a) Real Estate Brokers
Real Estate Brokers. The following real estate brokers) (collectively, the "Brokers
Brokers") and brokerage relationships exist in this transaction and are
consented to by the Parties (check applicable boxes):
[ ] _____________N/A___________________________represents Lessor exclusively ("Lessor's Broker
Lessor's Broker");
[ ]____________N/A____________________________________________represents Lessee exclusively ("Lessee's Broker
Lessee's Broker"); or
[ ]______________N/A__________________________________________represents both Lessor and Lessee ("Dual Agency"). (Also see Paragraph 15.)
1.10(b) Payment to Brokers. Upon the execution of this Lease by both Parties, Lessor shall pay to said Brokers) jointly, or in such separate shares as they
may mutually designate in writing, a fee as set forth in a separate written agreement between Lessor and said Brokers) (or in the event there is no separate written
agreement between Lessor and said Broker(s), the sum of $____N/A__________ J for brokerage services rendered by said Brokers) in connection with this transaction.
1.11Guarantor. The obligations of the Lessee under this Lease are to be guaranteed
by____________________________________________________________________________
_________________________________________________________________________________________________________________________("Guarantor"). (Also see
Paragraph 37.)
1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda consisting of Paragraphs _____________________through__________________, and Exhibits
_______________________through _____________________________, all of which constitute a part of‑this Lease.
2. Premises, Parking and Common Areas.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set
forth in this Lease. Unless otherwise provided herein, any statement of square footage set forth in this Lease, or that may have been used in calculating rental and/or Common Area
Operating Expenses, is an approximation which Lessor and Lessee agree is reasonable and the rental and Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is not
subject to revision whether or not the actual square footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and free of debris on the Commencement Date and warrants to Lessee that the existing plumbing, electrical systems
fire sprinkler system, lighting, air conditioning and heating systems and loading doors, if any, in the Premises, other than those constructed by Lessee, shall be in good operating
condition on the Commencement Date. If a non‑compliance with said warranty exists as of the Commencement Date, Lessor shall, except as otherwise provided in this Lease,
promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non‑compliance, rectify same at Lessor's expense. If Lessee does not
give Lessor written notice of a non‑compliance with this warranty within thirty (30) days after the Commencement Date, correction of that non‑compliance shall be the obligation of
Lessee at Lessee's sole cost and expense.
2.3 Compliance with Covenants, Restrictions and Building Code. Lessor warrants that any improvements (other than those constructed by Lessee or at Lessee's direction) on or in
the Premises which have been constructed or installed by Lessor or with Lessor's consent or at Lessor's direction shall comply with all applicable covenants or restrictions of record
and applicable building codes, regulations and ordinances in effect on the Commencement Date. Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of applicable building codes, regulations, or ordinances exist with regard to the Premises as of the
Commencement Date. Said warranties shall not apply to any Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be made by Lessee. If the Premises do not
comply with said warranties, Lessor shall, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of such non‑compliance, take such action, at Lessor's expense, as may be reasonable or appropriate to
rectify the non‑compliance. Lessor makes no warranty that the Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable Laws (as defined in Paragraph 2.4).
2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that it has been advised by the Brokers) to satisfy itself with respect to the condition of the Premises (including but
not limited to the electrical and fire sprinkler systems, security, environmental aspects, seismic and earthquake requirements, and compliance with the Americans with Disabilities
Act and applicable zoning, municipal, county, state and federal laws, ordinances and regulations and any covenants or restrictions of record (collectively, "Applicable Laws") and the
present and future suitability of the Premises for Lessee's intended use; (b) that Lessee has made such investigation as it deems necessary with reference to such matters, is
satisfied with reference thereto, and assumes all responsibility therefore as the same relate to Lessee's occupancy of the Premises and/or the terms of this Lease; and (c) that
neither Lessor, nor any of Lessor's agents, has made any oral or written representations or warranties with respect to said matters other than as set forth in this Lease.
2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in this Paragraph 2 shall be of no force or effect if immediately prior to the date set forth in Paragraph 1.1
Lessee was the owner or occupant of the Premises. In such event, Lessee shall, at Lessee's sole cost and expense, correct any non-compliance of the Premises with said warranties.
2.6 Vehicle Parking.
2.6 Vehicle Parking. Lessee shall be entitled to use the number of Unreserved Parking Spaces and Reserved Parking S aces specified In Paragraph 1.2(b) on those portions of the
Common Areas designated from time to time by Lessor for parking. Lessee shall not use more parking spaces than said number. Said parking spaces shall be used for parking by
vehicles no larger than full‑size passenger automobiles or pick‑up trucks, herein called "Permitted Size Vehicles." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor In the Rules and Regulations (as defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that belong to or are controlled by Lessee or Lessee's employees, suppliers, shippers, customers, contractors or invitees
to be loaded, unloaded, or parked in areas other than those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities described !n this Paragraph 2.6 then Lessor shall have the right, without notice, in addition to such other rights and
remedies that it may have, to remove or tow away the vehicle Involved and charge the cost to Lessee, which cost shall be Immediately payable upon demand by Lessor. ‑
(c) Lessor shall at the Commencement Date of this Lease, provide the parking facilities required by Applicable Law.
2.7 Common Areas‑Definition. The term "Common Areas"
"Common Areas" Is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Industrial
Center and interior utility raceways within the Premises that are provided and designated by the Lessor from lime to time for the general nonexclusive use of Lessor, Lessee and
other lessees of the Industrial Center and their respective employees, suppliers, shippers, customers, contractors and Invitees, Including parking areas, loading and unloading areas,
trash areas, roadways, sidewalks, walkways, parkways, driveways and landscaped areas.
2.6 Common Areas
Common Areas‑Lessee's Rights.
Lessee's Rights. Lessor hereby grants to Lessee, for the benefit of Lessee and Its employees, suppliers, shippers, contractors, customers and invitees,
during the term of this I‑ease, the non‑exclusive right to use, in common with others entitled to such use, the Common Areas as they exist from time to time, subject to any rights,
powers, and privileges reserved by Lessor under the terms hereof or under the terms of any rules and regulations or restrictions governing the use of the Industrial Center. Under
no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any property, temporarily or permanently, In the Common Areas.
Any such storage shall be permitted only by the prior written consent of Lessor or Lessor's designated agent which consent may be revoked at any lime. In the event that any
unauthorized storage shall occur then Lessor shall have the right, without notice, In addition to such other rights and remedies that it may have, to remove the property and charge
the cost to Lessee, which cost shall be Immediately payable upon demand by Lessor.
2.9 Common Areas‑Rules and Regulations. Lessor or such other person(s) as Lessor may appoint shall have the exclusive control and management of the Common Areas and
shall have the right, from time to time, to establish, modify, amend and enforce reasonable Rules and Regulations with respect thereto In accordance with Paragraph 40. Lessee
agrees to abide by and conform to ail such Rules and Regulations, and to cause its employees, suppliers,
Initials:_____________________
_____________________
© American Industrial Real Estate Association 1993
MULTI‑TENANT ‑ GROSS
2
shippers, customers, contractors and Invitees to so abide and conform. Lessor shall not be responsible to Lessee for the non‑compliance with said rules and regulations by other
lessees of the Industrial Center.
2.10 Common Areas‑Changes. Lessor shall have the right, In Lessor's sole discretion, from time to time:
(a) To make changes to the Common Areas, Including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces,
parking areas, loading and unloading areas, Ingress, egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the Industrial Center to be a part of the Common Areas;
(d) To add additional buildings and Improvements to the Common Areas;
(e) To use the Common Areas while engaged In making additional Improvements, repairs or alterations to the Industrial Center, or any portion thereof;
and
(f) To do and perform such other acts and make such other changes (n, to or with respect to the Common Areas and Industrial Center as Lessor may, In the exercise of
sound business judgment, deem to be appropriate.
3. Term.
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If an Early Possession Dale is specified fn Paragraph 1.4 and If Lessee totally or partially occupies the Premises after the Early Possession Date but prior to the
Commencement Date, the obligation to pay Base Rent shall be abated for the period of such early occupancy. All other terms of this Lease, however, (including but not limited to
the obligations to pay Lessee's Share of Common Area Operating Expenses and to carry the Insurance required by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original Term.
3.3 Delay in Possession.
Delay in Possession. II for any reason Lessor cannot deliver possession of the Premises to Lessee by the Early Possession Dale, II one is specified in Paragraph 1.4, or If no Early
Possession Date is specified, by the Commencement Date, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease, or the obligations
of Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not, except as otherwise provided herein, be obligated to pay rent or perform any other obligation of
Lessee under the terms of this Lease until Lessor delivers possession of the Premises to Lessee. II possession of the Premises is not delivered to Lessee within sixty (60) days after
the Commencement Dale, Lessee may, at its option, by notice in writing to Lessor within ten (10) days after the end of said sixty (60) day period, cancel this Lease, in which event
the parties shall be discharged from all obligations hereunder; provided further, however That it such written notice of Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease hereunder shall terminate and be of no further force or effect. Except as may `.e otherwise provided, and regardless of when the Original
Term actually commences, if possession is not tendered to Lessee when required by this Lease and Lessee does not terminate this Lease, as aforesaid, the period free of the
obligation to pay Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to the period during
which the Lessee would have otherwise enjoyed under the terms hereof, but minus any days of delay caused by the acts, changes or omissions of Lessee.
. Rent.
4. Rent.
4.1 Base Rent.
Base Rent. Lessee shall pay Base Rent and other tent or charges, as the same may be adjusted from time to time, to Lessor in lawful money of the United States, without
offset or deduction, on or before the day on which it is due under the terms of this Lease. Base Rent and all other rent and charges for any period during he term hereof which is for
less than one full month shall be prorated bused upon the actual number of days of the month involved: Payment of Base Rent and other charges shall be made to Lessor at its
address stated herein or to such other persons or al such other addresses as Lessor may from time to lime designate (n writing to Lessee.
4.2 Common Area Operating Expenses
Common Area Operating Expenses. Lessee shall pay to Lessor during 'he term hereof, In addition to the Base Rent, Lessee's Share (as specified in Paragraph 1.6(b)) of all
Common Area Operating Expenses, as hereinafter defined, during each calendar year of the term of this Lease, In accordance with the following provisions:
(a) "Common Area Operating Expenses" are defined, for purposes o' this Lease, as all costs incurred by Lessor relating to the ownership and operation of the Industrial
Center, Including, but not limited to, the following:
(i) The operation, repair and maintenance, In neat, clean, good order and condition, of the following:
(aa) The Common Areas, including parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways,
landscaped areas, striping, bumpers, irrigation systems, Common Area lighting facilities, fences and gates, elevators and roof.
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems.
(ii) The cost of water, gas, electricity and telephone to service the Common Areas.
(iii) Trash disposal, property management and security services and tile costs of any environmental Inspections.
(iv) Reserves set aside for maintenance and repair of Common Areas.
(v) Any Increase above the Base Real Property Taxes (as defined in Paragraph 10.2(b)) for the Building and the Common Areas.
(vi) Any "Insurance Cost Increase" (as defined In Paragraph 8.1).
(vii) The cost of insurance carried by Lessor with respect to the Common Areas.
(viii) Any deductible portion of an insured loss concerning the Building or the Common Areas.
(ix) Any other services to be provided by Lessor that are staled elsewhere in this Lease to be a Common Area Operating Expense.
© American Industrial Real Estate Association 1993
MULTI‑TENANT ‑ GROSS
3
Initials:_____________________
_____________________
(b) Any Common Area Operating Expenses and Real Property Taxes that are specifically attributable to the Building or to any other building in the industrial Center or to
the operation. repair and maintenance thereof shall be allocated entirely in the Building or in such other building. However any Common Area Operating Expenses and Real Property
Taxes that are not attributable to the Building or to any other building or to the operation, repair and maintenance thereof, shall be equitably allocated by Lessor to all buildings in
the Industrial Center.
(c)The inclusion of the improvements, facilities and services set forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon Lessor to either have said
improvements or facilities or to provide those services unless the Industrial Center already has the same, Lessor already provides the services, or Lessor has agreed elsewhere in this
Lease to provide the same or some of them.
(d) Lessee’s Share of Common Area Operating Expenses shall be payable by Lessee within ten(10) days after a reasonably detailed statement of actual expenses is
presented to Lessor, At Lessor’s option, however, an amount may be estimated by Lessor from time to time of Lessee’s Share of annual Common Area Operating Expenses and the
same shall be payable monthly or quarterly, as Lessor shall designate, during each 12-month period of the Lease term, on the same day as the Base Rent is due hereunder. Lessor
shall deliver to Lessee within sixty (60) days after the expiration of each calendar year a reasonably detailed statement showing Lessee’s Share of the actual Common Area
Operating Expenses incurred during the preceding year. If Lessee’s payments under this Paragraph 4.2(d) during said preceding year exceed Lessee’s Share as indicated on said
statement, Lessor shall be credited the amount of such overpayment against Lessee's Share of Common Area Operating Expenses next becoming due. If Lessee's payments under
this Paragraph 4.2(d) during said preceding year were less than Lessee's Share as Indicated on said statement, Lessee shat; pay to Lessor the amount of the deficiency within ten
(10) days after delivery by Lessor to Lessee of said statement.
5. Security Deposit
Security Deposit. Lessee shall deposit with Lessor upon Lessee's execution hereof the Security Deposit set forth In Paragraph 1.7 as security for Lessee's faithful performance of
Lessee's obligations under this Lease. If Lessee fails to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults under this Lease (as defined in Paragraph 13.1),
Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensate Lessor for any liability, cost,
expense, loss or damage (Including attorneys' fees) which Lessor may suffer or Incur by reason thereof. If Lessor uses or applies all or any portion of said Security Deposit, Lessee
shall within ten (10) days after written request therefore deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. Any time
the Base Rent Increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional monies with Lessor as an addition to the Security Deposit
so that the total amount of the Security Deposit shall at all times bear the same proportion to the then current Base Rent as the Initial Security Deposit bears to the initial Base Rent
set forth in Paragraph 1.5. Lessor shall not be required to keep all or any part of the Security Deposit separate from Its general accounts. Lessor shall, at the expiration or earlier
termination of the term hereof and after Lessee has vacated the Premises, return to Lessee (or, at Lessor's option, to the last assignee, if any, of Lessee's Interest herein), that
portion of the Security Deposit not used or applied by Lessor. Unless otherwise expressly agree d In writing by Lessor, no part of the Security Deposit shall be considered to be held
in trust, to bear Interest or other increment for its use, or to be prepayment for any monies to be paid by Lessee under this Lease.
. Use.
6. Use.
Permitted Use.
6.1 Permitted Use.
(a) Lessee shall use and occupy the Premises only for the Permitted Use ;;et forth In Paragraph 1.8, or any other legal use which Is reasonably comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises In a manner that Is unlawful, creates waste or a nuisance, or that disturbs owners and/or occupants of,
or causes damage to the Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay Its consent to any written request by Lessee, Lessee's assignees or subtenants and by prospective
assignees‑and subtenants of Lessee, Its assignees and subtenants, for a modification of said Permitted Use, so long as the same will not impair the structural integrity of the
Improvements on the Premises or in the Building or the mechanical or electrical systems therein, does not conflict with uses by other lessees, Is not significantly more burdensome
to the Premises or the Building and the improvements thereon, and Is otherwise permissible pursuant to this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall
within five (5) business days after such request give a written notification of same, which notice shall include an explanation of Lessor's reasonable objections to the change in use.
Hazardous Substances.
6.2 Hazardous Substances
(a) Reportable Uses Require Consent.
Reportable Uses Require Consent. The term "Hazardous Substance"
"Hazardous Substance" as used In this Lease shall mean any product, substance, chemical, material or waste whose
presence, nature, quantity and/or Intensity of existence, use, manufacture, disposal, transportation, spill, release or effect, either by Itself or in combination with other materials
expected to be on the Premises, Is either: (I) potentially Injurious to the public health, safety or welfare, the environment, or the Premises; (it) regulated or monitored by any
governmental authority; or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory. Hazardous
Substance shall include, but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any products or by‑products thereof. Lessee shall not engage in any activity i n or
about the Premises which constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances without the express prior written consent of Lessor and compliance in a
timely manner (at Lessee's sole cost and expense) with all Applicable Requirements (as defined in Paragraph 6.3). "Reportable Use" shall mean (i) the Installation or use of any
above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect
to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and (iii) the presence in, on or about the Premises of a Hazardous
Substance with respect to which any Applicable Laws require that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the
foregoing, Lessee may, without Lessor's prior consent, but upon notice to Lesser and In compliance with all Applicable Requirements, use any ordinary and customary materials
reasonably required to be used by Lessee In the normal course of the Permitted Use, so long as such use is not a Reportable Use and does not expose the Premises or neighboring
properties to any meaningful risk of contamination or damage or expose Lessor to any liability therefore. In addition, Lessor may (but without any obligation to do so) condition Its
consent to any Reportable Use of any Hazardous Substance by Lessee upon Lessee's giving Lessor such additional assurances as Lessor, in its reasonable discretion, deems
necessary to protect Itself, the public, the Premises and the environment against damage, contamination or Injury and/or liability therefore, including but not limited to the
Installation (and, at Lessor's option, removal on or before Lease expiration or earlier termination) of reasonably necessary protective modifications to the Premises (such as concrete
encasements) and/or the deposit of an additional Security Deposit under Paragraph 5 hereof.
(b) Duty to Inform Lessor.
Duty to Inform Lessor. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises or
the Building, other than as previously consented to by Lessor, Lessee shall Immediately give Lessor written notice thereof, together with a copy of any statement, report, notice,
registration, application, permit, business plan, license, claim, action, or proceeding given to, or received from, any governmental authority or private party concerning the presence,
spill, release, discharge of, or exposure to, such Hazardous Substance including but not limited to all such documents as may be involved in any Reportable Use involving the
Premises, Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under or about the Premises (including, without limitation, through the
plumbing or sanitary sewer system).
(c) Indemnification. Lessee shall indemnify, protect, defend and hold Lessor, its agents, employees, lenders and ground Lessor, if any, and the Premises; harmless from and
against any and all damages, liabilities, judgments, costs, claims, Liens, expenses, penalties, loss of permits and attorneys' and consultants' lees arising out of or involving any
Hazardous Substance brought onto the Premises by or for Lessee or by anyone‑under Lessee's control. Lessee's obligations under this Paragraph 6.2(c) shall include, but not be
limited to, the effects of any contamination or Injury to person, property or the environment created or suffered by Lessee, and the cost of investigation (including consultants' and
attorneys' fees and testing), removal, remediation, restoration and/or abatement thereof, or of any contamination therein involved, and shall survive the expiration or earlier
termination of this Lease. No termination, cancellation or release agreement entered Into by Lessor and Lessee shall release Lessee from its obligations under this Lease with
respect to Hazardous Substances, unless specifically so agreed by Lessor In writing al the time of such agreement.
Initials:_____________________
_____________________
© American Industrial Real Estate Association 1993
MULTI‑TENANT ‑ GROSS
4
6.3 Lessee's Compliance with Requirements. Lessee shall, at Lessee's sole cost and expense, fully, diligently and in a timely manner, comply with all "Applicable
6.3 Lessee's Compliance with Requirements
Requirements," which term is used in this Lease to mean ail laws, rule;;, regulations, ordinances, directives, covenants, easements and restrictions of record, permits, the
requirements of any applicable fire Insurance underwriter or rating bureau, and the recommendations of Lessor's engineers and/or consultants, relating in any manner to the
Premises (including but not limited to matters pertaining to (f) Industrial hygiene, (if) environmental conditions on, in, under or about the Premises, Including soil and groundwater
conditions, and (iii) the use, generation, manufacture, production, installation, maintenance, removal, transportation, storage, spill, or release of any Hazardous Substance), now In
effect or which may hereafter come into effect. Lessee shall, within live (5) days after receipt of Lessor's written request, provide Lessor with copies of all documents and
Information, Including but not limited to permits, registrations, manifests, applications, reports and certificates, evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning,
complaint or report pertaining to or involving failure by Lessee or the Premises to comply with any Applicable Requirements.
6.4 Inspection; Compliance with Law. Lessor, Lessor's agents, employees, contractors and designated representatives, and the holders of any mortgages, deeds of trust or
6.4 Inspection; Compliance with Law.
("Lenders") shall have the right to enter the Premises at any time in the case of an emergency, and otherwise at reasonable times, for the purpose of
ground leases on the Premises ("Lenders")
inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease and all Applicable Requirements (as defined in Paragraph 6.3), and Lessor shall be
entitled to employ experts and/or consultants in connection therewith to advise Lessor with respect to Lessee's activities, including but not limited to Lessee's installation, operation,
use, monitoring, maintenance, or removal of any Hazardous Substance on or from the Premises. The costs and expenses of any such inspections shall be paid by the party
requesting same, unless a Default or Breach of this Lease by Lessee or a violation of Applicable Requirements or a contamination, caused or materially contributed to by Lessee, is
found to exist or to be imminent, or unless the inspection is requested or ordered by a governmental authority as the result of any such existing or Imminent violation or
contamination. In such case, Lessee shall upon request reimburse Lessor or Lessor's Lender, as the case may be, for the costs and expenses of such inspections.
7. Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations.
7. Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations.
7.1 Lessee's Obligations.
7.1 Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's Obligations), 9 (Damage or
Destruction), and 14 (Condemnation), Lessee shall, at Lessee's sole cost and expense and at all times, keep the Premises and every part thereof in good order, condition and repair
(whether or not such portion of the Premises requiring repair, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for
such repairs occurs as a result of Lessee's use, any prior use, the elements or the age of such portion of the Premises), including, without limiting the generality of the foregoing, all
equipment or facilities specifically serving the Premises, such as plumbing, heating, air conditioning, ventilating, electrical, lighting facilities, boilers, fired or unfired pressure vessels,
fire hose connections if within the Premises, fixtures, Interior walls, interior surfaces of exterior walls, ceilings, floors, windows, doors, plate glass, and skylights, but excluding any
items which are the responsibility of Lessor pursuant to Paragraph 7.2 below. Lessee, in keeping the Premises In good order, condition and repair, shall exercise and perform good
maintenance practices. Lessee's obligations shall include restorations, replacements or renewals when necessary to keep the Premises and all improvements thereon or a part
thereof in good order, condition and state of repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and maintain a contract, with copies to Lessor, in customary form and substance for and with a contractor
specializing and experienced In the Inspection, maintenance and service of the heating, air conditioning and ventilation system for the Premises. However, Lessor reserves the right,
upon notice to Lessee, to procure and maintain the contract for the heating, air conditioning and ventilating systems, and if Lessor so elects, Lessee shall reimburse Lessor, upon
demand, for the cost thereof.
(c) If Lessee fails to perform Lessee’s obligations under Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days’ prior written notice to Lessee (except in
the case of an emergency, in which case no notice shall be required), perform such obligations on Lessee’s behalf, and put the Premises in good order, condition and repair, in
accordance with Paragraph 13.2 below.
7.2 Lessor’s Obligations
Lessor’s Obligations. Subject to the provisions pf Paragraph 2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building Codes), 4.2 (Common Area
Operating Expenses), 6 (Use), 7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall
keep in good order, condition and repair the foundations, exterior walls, structural condition of interior bearing walls, exterior roof, fire sprinkler and/or standpipe and hose (if
located in the Common Areas) or other automatic fire extinguishing system including fire alarm and/or smoke detection systems and equipment, fire hydrants, parking lots,
walkways. parkways, driveways, landscaping fences, signs and utility systems serving the Common Areas and all parts thereof, as well as providing the services for which there Is a
Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the exterior or Interior surfaces of exterior walls nor shall Lessor be obligated to
maintain, repair or replace windows, doors or plate glass of the Premises. Lessee expressly waives the benefit of any statute now or hereafter In effect which would otherwise afford
Lessee the right to make repairs at Lessor's expense or to terminate this Lease because of Lessor's failure to keep the Building, Industrial Canter or Common Areas in good order,
condition and repair.
Utility Installations, Trade Fixtures, Alterations.
7.3 Utility Installations, Trade Fixtures, Alterations.
(a) Definitions; Consent Required. The term "Utility Installations"
"Utility Installations" Is used In this Lease to refer to all air lines, power panels, electrical distribution, security, fire protection
systems, communications systems, lighting fixtures, heating, ventilating and air conditioning equipment, plumbing, and fencing In, on or about the Premises. The term "Trade
Fixtures" shall mean Lessee's machinery and equipment which can be removed without doing material damage to the Premises. The term "Alterations" shall mean any modification
of the improvements on the Premises which are provided by Lessor under the terms of this Lease, other than Utility Installations or Trade Fixtures. "Lessee
and/or Utility Installations" are defined as Alterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a). Lessee shall not
and/or Utility Installations"
make nor cause to be made any Alterations or Utility Installations in, on, under or about the Premises without Lessor's prior written consent. Lessee May, however, make
non‑structural Utility Installations to the interior of the Premises (excluding the roof) without Lessor's consent but upon notice to Lessor, so long as they are not visible from the
outside of the Premises, do not involve puncturing, relocating or removing the roof or any existing walls, or changing or interfering with the fire sprinkler or fire detection systems
and the cumulative cost thereof during the term of this Lease as extended does not exceed $2,500.00.
Owned Alterations
"Lessee‑Owned Alterations
(b) Consent.
Consent. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written
form with detailed plans. All consents given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent, shall be deemed conditioned upon: (I) Lessee's
acquiring all applicable permits required by governmental authorities; (Ii) the furnishing of copies of such permits together with a copy of the plans and specifications for the
Alteration or Utility Installation to Lessor prior to commencement of the work thereon; and (Iii) the compliance by Lessee with all conditions of said permits In a prompt and
expeditious manner. Any Alterations or Utility Installations by Lessee during the term of this Lease shall be done in a good and workmanlike manner, with good and sufficient
materials, and be In compliance with all Applicable Requirements. Lessee shall promptly upon completion thereof furnish Lessor with as‑built plans and specifications therefore.
Lessor may, (but without obligation to do so) condition its consent to any requested Alteration or Utility Installation that costs $2,500.00 or more upon Lessee's providing Lessor
with a lien and completion bond In an amount equal to one and one‑half times the estimated cost of such Alteration or Utility Installation.
(c) Lien Protection.
Lien Protection. Lessee shall pay when due all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises,
which claims are or may be secured by any mechanic's or material man’s lien against the Premises or any Interest therein. Lessee shall give Lessor not less than ten (10) days'
notice prior to the commencement of any work In, on, or about the Premises, and Lessor shall have the right to post notices of non‑responsibility In or on the Premises as provided
by law. If Lessee shall, in good faith, contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense, defend and protect Itself, Lessor and the
Premises against the same and shall pay and satisfy
Initials:_____________________
_____________________
© American Industrial Real Estate Association 1993
MULTI‑TENANT ‑ GROSS
5
any such adverse judgment that may be rendered thereon before the enforcement thereof against the Lessor or the Premises. It Lessor shall require, Lessee shall furnish to Lessor a
surely bond satisfactory to Lessor in an amount equal to one and one‑half times the amount of such contested lien claim or demand, indemnifying Lessor against liability for the
same, as required by law for the holding of the Premises free from the effect of such lien or claim. In addition, Lessor may require Lessee to pay Lessor's attorneys' fees and costs in
participating in such action If Lessor shall decide it Is to Its best Interest to d:) so.
Ownership, Removal, Surrender, and Restoration.
7.4 Ownership, Removal, Surrender, and Restoration.
(a) Ownership. Subject to Lessor's right to require their removal and ,o cause Lessee to become the owner thereof as hereinafter provided in this Paragraph 7.4, all
Alterations and Utility Installations made to the Premises by Lessee shall be the property of and owned by Lessee, but considered a part of the Premises. Lessor may, at any time
and at its option, elect in writing to Lessee to be the owner of all or any specified part of the Lessee‑Owned Alterations and Utility Installations. Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee‑Owned Alterations and Utility Installations shall, at the expiration or earlier termination of this Lease, become the property of Lessor and
remain upon the Premises and be surrendered with the Premises by Lessee.
(b) Removal. Unless otherwise agreed in writing, Lessor may require that any or all Lessee‑Owned Alterations or Utility Installations be removed by the expiration or
earlier termination of this Lease, notwithstanding that their installation may have been consented to by Lessor. Lessor may require the removal at any time of all or any part of any
Alterations or Utility Installations made without the required consent of Lessor.
(c) Surrender/Restoration. Lessee shall surrender the Premises by the end of the last day of the Lease term or any earlier termination date, clean and free of debris and
in good operating order, condition and state of repair, ordinary wear and tear excepted. Ordinary wear and tear shall not include any damage or deterioration that would have been
prevented by good maintenance practice or by Lessee performing all of Its obligations under this Lease. Except as otherwise agreed or specified herein, the Premises as
surrendered, shall Include the Alterations and Utility Installations. The obligation of Lessee shall Include the repair of any damage occasioned by the installation, maintenance or
removal of Lessee's Trade Fixtures, furnishings, equipment, and Lessee‑Owned Alterations and Utility Installations, as well as the removal of any storage tank Installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or ground water contaminated by Lessee, all as may then be required by Applicable Requirements and/or
good practice. Lessee's Trade Fixtures shall remain the property of Lessee and shall be removed by Lessee subject to its obligation to repair and restore the Premises per this Lease.
8. Insurance; Indemnity.
Payment of Premium Increases.
8.1 Payment of Premium Increases.
(a) As used herein, the term "Insurance Cost Increase"
"Insurance Cost Increase" is defined as. any increase In the actual cost of the insurance applicable to the Building and required to be carried
by Lessor pursuant to Paragraphs 8.2(b), 8.3(a) and 8.3(b), ("Required Insurance"), over and above the Base Premium, as hereinafter defined, calculated on an annual basis.
"Insurance Cost Increase" shall Include, but not be limited to, requirements of the holder of a mortgage or deed of trust covering the Premises, Increased valuation of the Promises,
and/or a general premium rate Increase. he term `Insurance Cost Increase" shall not, however, Include any premium increases resulting from the nature of the occupancy of any
the nature of the occupancy of any
other lessee of the
other lessee of the Building. If the parties Insert a dollar amount In Paragraph 1.9, such amount shall be considered the "Base Premium." If a dollar amount has not been Inserted
In Paragraph 1.9 and If the Building has been previously occupied during the twelve (12) month period immediately preceding the Commencement Date, the 'Base Premium" shall
be the annual premium applicable to such twelve (12) month period. If the Building was not fully occupied during such twelve (.12) month period, the "Base Premium" shall be the
lowest annual premium reasonably obtainable for the Required Insurance as of the Commencement Date, assuming the most nominal use possible of the Building. In no event,
however, shall Lessee be responsible for any portion of the premium cost attributable to liability Insurance coverage In excess of $1,000,000 procured under Paragraph 8.2(b).
(b) Lessee shall pay any Insurance Cost Increase to Lessor pursuant to Paragraph 4.2. Premiums for policy periods commencing prior to, or extending beyond, the term of
this Lease shall be prorated to coincide with the corresponding Commencement Date or Expiration Date.
8.2 Liability Insurance.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep In force during the, term of this Lease a Commercial General Liability policy of insurance protecting Lessee, Lessor and
any Lender(s) whose names have been provided to Lessee in writing (as additional Insured) against claims for bodily Injury, personal Injury and property damage based upon,
Involving or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant
thereto. Such insurance shall be on an occurrence basis providing single limit coverage in an amount not less than $1,000,000 per occurrence with an "Additional Insured‑Managers
or Lessor of Premises" endorsement and contain the "Amendment of the Pollution Exclusion" endorsement for damage caused by heat, smoke or fumes from a hostile fire. The
policy shall not contain any Infra‑insured exclusions as between Insured persons or organizations, but shall Include coverage for liability assumed under this Lease as an "Insured
contract" for the performance o"' Lessee's indemnity obligations under this Lease. The limits of said insurance required by this Lease or as carried by Lessee shall not, however,
limit the liability .A Lessee nor relieve Lessee of any obligation hereunder. All insurance to be carried by Lessee shall be primary to and not contributory with any similar insurance
carried by Lessor, whose Insurance shall be considered excess insurance only.
(b) Carried by Lessor. Lessor shall also maintain liability insurance described in Paragraph 8.2(a) above, in addition to and not in lieu of, the insurance required to be
maintained by Lessee. Lessee shall not be named as an additional insured therein.
8.3 Property Insurance
Building, Improvements end Rental Value.
Property Insurance‑Building, Improvements end Rental Value.
(a) Building and Improvements. Lessor shall obtain and keep In force during the term of this Lease a policy or policies in the name of Lessor, with loss payable to Lessor
and to any Lender(s), Insuring against loss or damage to the Premises. Such insurance shall be for full replacement cost, as the same shall exist from time to time, or the amount
required by any Lender(s), but in no event more than the commercially reasonable and available Insurable value thereof If, by reason of the unique nature or age of the
Improvements involved, such latter amount Is less than full replacement cost. Lessee‑Owned Alterations and Utility Installations, Trade Fixtures and Lessee's personal property shall
be insured by Lessee pursuant to Paragraph 8.4. If the coverage Is available and commercially appropriate, Lessor's policy or policies shall insure against all risks of direct physical
loss or damage (except the perils of flood and/or earthquake unless required by a Lender or included in the Base Premium), including coverage for any additional costs resulting
from debris removal and reasonable amounts of coverage for the enforcement of any ordinance or law regulating the reconstruction or replacement of any undamaged sections of
the Building required to be demolished or removed by reason of the enforcement of any building, zoning, safety or land use laws as the result of a covered loss, but not including
plate glass insurance. Said policy or policies shall also contain an agreed valuation provision in lieu of any co‑insurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban
Consumers for the city nearest to where the Premises are located.
Rental Value. Lessor shall also obtain and keep In force during the term of this Lease a policy or policies In the name of Lessor, with loss payable to Lessor and any Lender(s),
(b) Rental Value.
Insuring the loss of the full rental and other charges payable by all lessees of the Building to Lessor for one year (including all Real Property Taxes, insurance costs,. all Common
Area Operating Expenses and any scheduled rental Increases). Said Insurance may Provide that In the event the Lease is terminated by reason of an insured loss, the period of
indemnity for such coverage shall be extended beyond the date of the completion of repairs or replacement of the Premises, to provide for one full year’s loss of rental revenues
from the date of any such loss. Said insurance shall contain
Initials:_____________________
_____________________
© American Industrial Real Estate Association 1993
MULTI‑TENANT ‑ GROSS
6
an agreed valuation provision in lieu of any co-insurance clause, and the amount of coverage shall be adjusted annually to reflect the projected rental income, Real Property Taxes,
insurance premium costs and other expenses, if any, otherwise payable, for the next 12-month period. Common Area Operating Expenses shall include any deductible amount in the
event of such loss.
(c)Adjacent Premises. Lessee shall pay for any increase in the premiums for the property insurance of the Building and for the Common Areas or other buildings in the Industrial
Center if said increase is caused by Lessee’s acts, omissions, use or occupancy of the premises.
Lessee's Improvements. Since Lessor is the Insuring Party, Lessor shall not be required to insure Lessee‑Owned Alterations and Utility Installations unless the item in question
(d) Lessee's Improvements.
has become the property of Lessor under the terms of this Lease.
8.4 Lessee's Property Insurance.
Lessee's Property Insurance. Subject to the requirements of Paragraph 8.5, Lessee at its cost shall either by separate policy or, at Lessor's option, by endorsement to a policy
already carried, maintain insurance coverage on all of Lessee's personal property, Trade Fixtures and Lessee‑Owned Alterations and Utility Installations in, on, or about the Premises
similar in coverage to that carried by Lessor as the Insuring Party under Paragraph 8.3(a). Such insurance shall be full replacement cost coverage with a deductible not to exceed
$1,000 per occurrence. The proceeds from any such insurance shall be used by Lessee for the replacement of personal property and the restoration of Trade Fixtures and
Lessee‑Owned Alterations and Utility Installations. Upon request from Lessor, Lessee shall provide Lessor with written evidence that such insurance is in force.
8.5 Insurance Policies.
Insurance Policies. Insurance required hereunder shall be in companies duly licensed to transact business in the state where the Premises are located, and maintaining during
the policy term a "General Policyholders Rating" of at least B+, V, or such other rating as may be required by a Lender, as set forth in the most current issue of "Best's Insurance
Guide." Lessee shall not do or permit to be done anything which shall invalidate the insurance policies referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor,
within seven (7) days after the earlier of the Early Possession Date or the Commencement Date, certified copies of, or certificates evidencing the existence and amounts of, the
insurance required under Paragraph 8.2(a) and 8.4. No such policy shall be cancelable or subject to modification except after thirty (30) days' prior written notice to Lessor. Lessee
shall at least thirty (30) days prior to the expiration of such policies, furnish Lessor with evidence of renewals or "insurance binders" evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand.
8.6 Waiver of Subrogation.
Waiver of Subrogation. Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other, and waive their entire right to recover
damages (whether in contract or in tort) against the other, for loss or damage to their property arising out of or incident to the perils required to be insured against under Paragraph
8. The effect of such releases and waivers of the right to recover damages shall not be limited by the amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies issuing property damage insurance waive any right to subrogation that such companies may have
against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby.
Indemnity. Except for Lessor's negligence and/or breach of express warranties, Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor and its agents,
8.7 Indemnity.
Lessor's master or ground Lessor, partners and Lenders, from and against any and all claims, loss of rents and/or damages, costs, liens, judgments, penalties, loss of permits,
attorneys' and consultants' fees, expenses and/or liabilities arising out of, involving, or in connection with, the occupancy of the Premises by Lessee, the conduct of Lessee's
business, any act, omission or neglect of Lessee, its agents, contractors, employees or invitees, and out of any Default or Breach by Lessee in the performance in a timely manner of
any obligation on Lessee's part to be performed under this Lease. The foregoing shall include, but not be limited to the defense or pursuit of any claim or any action or proceeding
involved therein, and whether or not (in the case of claims made against Lessor) litigated and/or reduced to judgment. In case any action or proceeding be brought against Lessor
by reason of any of the foregoing matters, Lessee upon notice from Lessor shall defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor shall
cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be so indemnified.
8.8 Exemption of Lessor from Liability.
Exemption of Lessor from Liability. Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee's employees,
contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain,
or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause,
whether said injury or damage results from conditions arising upon the Premises or upon other portions of the Building of which the Premises are a part, from other sources or
places, and regardless of whether the cause of such damage or injury or the means of repairing the same is accessible or not. Lessor shall not be liable for any damages arising from
any act or neglect of any other lessee of Lessor nor from the failure by Lessor to enforce the provisions of any other lease in the Industrial Center. Notwithstanding Lessor's
negligence or breach of this Lease, Lessor shall under no circumstances be liable for injury to Lessee's business or for any loss of income or profit therefrom.
9. Damage or Destruction.
9. Damage or Destruction.
Definitions.
9.1 Definitions.
"Premises Partial Damage" shall mean damage or destruction to the Premises, other than Lessee‑Owned Alterations and Utility Installations, the repair cost of which damage or
(a) "Premises Partial Damage"
destruction is less than fifty percent (50%) of the then Replacement Cost (as defined in Paragraph 9.1(d)) of the Premises (excluding Lessee‑Owned Alterations and Utility
Installations and Trade Fixtures) immediately prior to such damage or destruction.
"Premises Total Destruction" shall mean damage or destruction to the Premises, other than Lessee‑Owned Alterations and Utility Installations, the repair cost of which damage or
(b) "Premises Total Destruction"
destruction is fifty percent (50%) or more of the then Replacement Cost of the Premises (excluding Lessee‑Owned Alterations and Utility Installations and Trade Fixtures)
immediately prior to such damage or destruction. In addition, damage or destruction to the Building, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures
of any lessees of the Building, the cost of which damage or destruction is fifty percent (50%) or more of the then Replacement Cost (excluding Lessee‑Owned Alterations and Utility
Installations and Trade Fixtures of any lessees of the Building) of the Building shall, at the option of Lessor, be deemed to be Premises Total Destruction.
"Insured Loss" shall mean damage or destruction to the Premises, other than Lessee‑Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event
(c) "Insured Loss"
required to be covered by the insurance described in Paragraph 8.3(a) irrespective of any deductible amounts or coverage limits involved.
"Replacement Cost" shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto,
(d) "Replacement Cost"
including demolition, debris removal and upgrading required by the operation of applicable building codes, ordinances or laws, and without deduction for depreciation.
"Hazardous Substance Condition" shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance as defined in
(e) "Hazardous Substance Condition"
Paragraph 6,2(a), in, on, or under the Premises.
Premises Partial Damage‑Insured Loss.
Insured Loss. If Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage (but not Lessee's
9.2 Premises Partial Damage
Trade Fixtures or Lessee‑Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in full force and effect. In the event, however, that
there is a shortage of insurance proceeds and such shortage is due to the fact that, by reason of the unique nature of the improvements in the Premises, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique
aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within ten (10) days following receipt of written notice of such
shortage and request therefore. If Lessor receives said funds or adequate assurance thereof within said ten (10) day period, Lessor shall complete them as soon as reasonably
possible and this Lease shall remain in full force and effect. If Lessor does not receive such funds or assurance within said period, Lessor may nevertheless
© American Industrial Real Estate Association 1993
MULTI‑TENANT ‑ GROSS
7
Initials:_____________________
_____________________
elect by written notice to Lessee within ten (10) days thereafter to make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in
which case this Lease shall remain in full force and effect. If Lessor does not receive such funds or assurance within such ten (10) day period, and if Lessor does not so elect to
restore and repair, then this Lease shall terminate sixty (60) days following the occurrence of the damage or destruction. Unless otherwise agreed, Lessee shall in no event have any
right to reimbursement from Lessor for any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be
subject to Paragraph 9.3 rather than Paragraph 9.2 notwithstanding that there may be some insurance coverage, but the net proceeds of any such insurance shall be made
available for the repairs if made by either Party.
Partial Damage‑Uninsured Loss.
Uninsured Loss. If Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall
9.3 Partial Damage
make the repairs at Lessee's expense and this Lease shall continue in full force and effect), Lessor may at Lessor's option, either (i) repair such damage as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii) give written notice to Lessee within thirty (30) days after receipt by Lessor of
knowledge of the occurrence of such damage of Lessor's desire to terminate this Lease as of the date sixty (60) days following the date of such notice. In the event Lessor elects to
give such notice of Lessor's intention to terminate this Lease, Lessee shall have the right within ten (10) days after the receipt of such notice to give written notice to Lessor of
Lessee's commitment to pay for the repair of such damage totally at Lessee's expense and without reimbursement from Lessor. Lessee shall provide Lessor with the required funds
or satisfactory assurance thereof within thirty (30) days following such commitment from Lessee. In such event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the funds or assurance thereof
within the times specified above, this Lease shall terminate as of the date specified in Lessor's notice of termination.
Total Destruction. Notwithstanding any other provision hereof, if Premises Total Destruction occurs (including any destruction required by any authorized public authority), this
9.4 Total Destruction.
Lease shall terminate sixty (60) days following the date of such Premises Total Destruction, whether or not the damage or destruction is an Insured Loss or was caused by a
negligent or willful act of Lessee. In the event, however, that the damage or destruction was caused by Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 9.7.
9.5 Damage Near End of Term. If at any time during the last six (6) months of the term of this Lease there is damage for which the cost to repair exceeds one month's Base Rent,
whether or not an insured Loss, Lessor may, at Lessor's option, terminate this Lease effective sixty (60) days following the date of occurrence of such damage by giving written
notice to Lessee of Lessor's election to do so within thirty (30) days after the date of occurrence of such damage. Provided, however, if Lessee at that time has an exercisable option
to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by (a) exercising such option, and (b) providing Lessor with any shortage in insurance
proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier of (i) the date which is ten (10) days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with
funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's expense repair such damage as soon as reasonably possible and this
Lease shall continue in full force and effect. If Lessee fails to exercise such option and provide such funds or assurance during such period. then this Lease shall terminate as of the
date set forth in the first sentence of this Paragraph 9.5.
9.6Abatement of Rent; Lessee’s Remedies
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous Substance Condition for which Lessee is not legally responsible, the Base Rent, Common Area Operating
Expenses and other charges, if any, payable by Lessee hereunder for the period during which such damage or condition, its repair, remediation or restoration continues, shall be
abated in proportion to the degree to which Lessee’s use of the Premises is impaired, but not in excess of proceeds from insurance required to be carried under Paragraph 8.3(b).
Except for abatement of Base Rent, Common Area Operating Expenses and other charges, if any, as aforesaid, all other conditions of Lessee hereunder shall be performed by
Lessee, and Lessee shall have no claim against Lessor for any damage suffered by reason of any such damage, destruction, repair, remediation or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises under the provisions of this Paragraph 9 and shall not commence, in a substantial and meaningful way, the repair or
restoration of the Premises within ninety (90) days after such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or restoration, give written
notice to Lessor and to any Lenders of which Lessee has actual notice of Lessee's election to terminate this Lease on a date not less than sixty (60) days following the giving of such
notice. If Lessee gives such .notice to Lessor and such Lenders and such repair or restoration is not commenced within thirty (30) days after receipt of such notice, this Lease shall
terminate as of the date specified in said notice. If Lessor or a Lender commences the repair or restoration of the Premises within thirty (30) days after the receipt of such notice.
this Lease shall continue in full force and effect. "Commence" as used in this Paragraph 9.6 shall mean either the unconditional authorization of the preparation of the required plans,
or the beginning of the actual work on the Premises, whichever occurs first. .
Hazardous Substance Conditions. If a Hazardous Substance Condition occurs, unless Lessee is legally responsible therefore (in which case Lessee shall make the investigation
9.7 Hazardous Substance Conditions.
and remediation thereof required by Applicable Requirements and this Lease shall continue in full force and effect, but subject to Lessor's rights under Paragraph 6.2(c) and
Paragraph 13), Lessor may at Lessor's option either (i) investigate and remediate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or (ii) if the estimated cost to investigate and remediate such condition exceeds twelve (12) times the then
monthly Base Rent or $100,000 whichever is greater, give written notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition of Lessor's desire to terminate this Lease as of the data sixty (60) days following the date of such notice. In the event Lessor elects to give such notice of
Lessor's intention to terminate this Lease, Lessee shall have the right within ten (10) days after the receipt of such notice to give written notice to Lessor of Lessee's commitment to
pay for the excess costs of (a) investigation and remediation of such Hazardous Substance Condition to the extent required by Applicable Requirements, over (b) an amount equal
to twelve (12) times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall provide Lessor with the funds required of Lessee or satisfactory assurance thereof
within thirty (30) days following said commitment by Lessee. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such investigation and
remediation as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the
time period specified above, this Lease shall terminate as of the date specified in Lessor's notice of termination.
9.8 Termination
9.8 Termination‑Advance Payments.
so much of Lessee's Security Deposit as has not been, or is not then required to be, used by Lessor under the terms of this Lease.
Advance Payments. Upon termination of this Lease pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment made by Lessee to Lessor and
9.9 Waiver of Statutes.
9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this Lease shall govern the effect of any damage to or destruction of the Premises and the Building with respect to
the termination of this Lease and hereby waive the provisions of any present or future statute to the extent it is inconsistent herewith.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as defined in Paragraph 10.2(a), applicable to the Industrial Center, and except as otherwise provided in Paragraph
10.3, any increases in such amounts over the Base Real Property Taxes shall be included in the calculation of Common Area Operating Expenses in accordance with the provisions of
Paragraph 4.2.
10.2 Real Property Tax Definitions.
(a) As used herein, the term "Real Property Taxes"
commercial rental tax, improvement bond or bonds, levy or tax (other than inheritance, personal income or estate taxes) imposed
"Real Property Taxes" shall include any form of real estate tax or assessment, general, special, ordinary or extraordinary, and any license fee,
Initials:_____________________
_____________________
© American Industrial Real Estate Association 1993
MULTI‑TENANT ‑ GROSS
8
upon the Industrial Center by any authority having the direct or indirect power to tax, including any city, state or federal government, or any school, agricultural, sanitary, fire,
street, drainage, or other improvement district thereof, levied against any legal or equitable interest of Lessor in the Industrial Center or any portion thereof, Lessor's right to rent or
other income therefrom, and/or Lessor's business of leasing the Premises. The term "Real Property Taxes"
increase therein, imposed by reason. of events occurring, or changes in Applicable Law taking effect, during the term of this Lease, including but not limited to a change in the
ownership of the Industrial Center or in the improvements thereon, the execution of this Lease, or any modification, amendment or transfer thereof, and whether or not
contemplated by the Parties.
Property Taxes" shall also include any tax, fee, levy, assessment or charge, or any
(b) As used herein, the term "Base Real Property Taxes"
calendar year during which the Lease is executed. In calculating Real Property Taxes for any calendar year, the Real Property Taxes for any real estate tax year shall be included in
the calculation of Real Property Taxes for such calendar year based upon the number of days which such calendar year and tax year have in common.
"Base Real Property Taxes" shall be the amount of Real Property Taxes, which are assessed against the Premises, Building or Common Areas in the
Additional Improvements. Common Area Operating Expenses shall not include Real Property Taxes specified in the tax assessor's records and work sheets as being caused by
10.3 Additional Improvements.
additional improvements placed upon the Industrial Center by other lessees or by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding Paragraph 10.1 hereof,
Lessee shall, however, pay to Lessor at the time Common Area Operating Expenses are payable under Paragraph 4.2, the entirety of any increase in Real Property Taxes if assessed
solely by reason of Alterations, Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at Lessee's request.
10.4 Joint Assessment. If the Building is not separately assessed. Real Property Taxes allocated to the Building shall be an equitable proportion of the Real Properly Taxes for all of
the land and improvements included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuations assigned in the assessor's work
sheets or such other information as may be reasonably available. Lessor's reasonable determination thereof, in good faith, shall be conclusive.
10.5 Lessee's Property Taxes.
Lessee's Property Taxes. Lessee shall pay prior to delinquency all taxes assessed against and levied upon Lessee‑Owned Alterations and Utility Installations, Trade Fixtures,
furnishings, equipment and all personal property of Lessee contained in the Premises or stored within the Industrial Center. When possible, Lessee shall cause its Lessee‑Owned
Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor. If
any of Lessee's said property shall be assessed with Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee's property within ten (10) days after receipt of a
written statement setting forth the taxes applicable to Lessee's property.
11. Utilities. Lessee shall pay directly for all utilities and services supplied to the Premises, including but not limited to electricity, telephone, security, gas and cleaning of the
Premises, together with any taxes thereon. If any such utilities or services are not separately metered to the Premises or separately billed to the Premises, Lessee shall pay to Lessor
a reasonable proportion to be determined by Lessor of alt such charges jointly metered or billed with other premises in the Building, in the manner and within the time periods set
forth in Paragraph 4.2(d).
12. Assignment and Subletting.
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or sublet all or any part of Lessee's interest
in this Lease or in the Premises without Lessor's prior written consent given under and subject to the terms of Paragraph 36.
(b) A change in the control of Lessee shall constitute an assignment requiring Lessor's consent. The transfer, on a cumulative basis, of twenty‑five percent (25%) or more of the
voting control of Lessee shall constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale acquisition financing, refinancing, transfer, leveraged buy‑out or
otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee's assets occurs, which results or will result in a reduction of the Net Worth of
hereinafter defined, by an amount equal to or greater than twenty‑five percent (25%) of such Net Worth of Lessee as it was represented to Lessor at the time of full execution and
deliver] of this Lease or at the time of the most recent assignment to which Lessor has consented, or as it exists immediately prior to said transaction or transactions constituting
such reduction, at whichever time said Net Worth of Lessee was or is greater, shall be considered an assignment of this Lease by Lessee to which Lessor may reasonably withhold
its consent. "Net Worth of Lessee"
consistently applied.
"Net Worth of Lessee" for purposes of this Lease shall be the net worth of Lessee (excluding any Guarantors) established under generally accepted accounting principles
Net Worth of Lessee, as
(d) An assignment or subletting of Lessee's interest in this Lease without Lessor's specific prior written consent shall, at Lessor's option, be a Default curable after notice per
Paragraph 13.1, or a non‑curable Breach without the necessity of any notice and grace, period. If Lessor elects to treat such unconsented to assignment or subletting as a
non‑curable Breach, Lessor shall have the right to either: (i) terminate this Lease, or (ii) upon thirty (30) days' written notice ("Lessor's Notice"),
("Lessor's Notice"), increase the monthly Base Rent for
the Premises to the greater of the then fair market rental value of the Premises, as reasonably determined by Lessor, or one hundred ten percent (110%) of the Base Rent then in
effect. Pending determination of the new fair market rental value, if disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice, with any overpayment credited
against the next installment(s) of Base Rent coming due, and any underpayment for the period retroactively to the effective date of the adjustment being due and payable
immediately upon the determination thereof. Further, in the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by
Lessee shall be subject to similar adjustment to the then fair market value as reasonably determined by Lessor (without the Lease being considered an encumbrance or any
deduction for depreciation or obsolescence, and considering the Premises at its highest and best use and in good condition) or one hundred ten percent (110%) of the price
previously in effect, (ii) any index‑oriented rental or price adjustment formulas contained in this Lease shall be adjusted to require that the base index be determined with reference
to the index applicable to the time of such adjustment, and (iii) any fixed rental adjustments scheduled during the remainder of the Lease term shall be increased in the same ratio
as the new rental bears to the Base Rent in effect immediately prior to the adjustment specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief.
Terms and Conditions Applicable to Assignment and Subletting.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting shall not (i) be effective without the express written assumption by such assignee or sublessee of the obligations of
Lessee under this Lease, (ii) release Lessee of any obligations hereunder, nor (iii) alter the primary liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by Lessee under this Lease.
(a)Lessor may accept any rent or performance of Lessee's obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in
the approval or disapproval of such assignment nor the acceptance of any rent for performance shall constitute a waiver or estoppel of Lessor’s right to exercise itsd remedies
for the Default or Breach by Lessee of any of the terms, covenants or conditions of this Lease.
(b)The consent of Lessor to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting by Lessee or to any subsequent or
successive assignment or subletting by the assignee or sublessee. However, Lessor may consent to subsequent sublettings and assignments of the sublease or any
amendments or modifications thereto without notifying Lessee or anyone else liable under this Lease or the sublease and without obtaining their consent, and such action shall
not relieve such persons from liability under this Lease or the sublease.
Initials:_____________________
_____________________
© American Industrial Real Estate Association 1993
MULTI‑TENANT ‑ GROSS
9
(d) In the event of any Default or Breach of Lessee's obligation under this Lease Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the
performance of the Lessee's obligations under this Lease, including any sublessee, without first exhausting Lessor's remedies against any other person or entity responsible therefor
to Lessor, or any security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor's determination as to the financial and operational
responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any, together
with a non‑refundable deposit of $1,000 or ten percent (10%) of the monthly Base Rent applicable to the portion of the Premises which is the subject of the proposed assignment or
sublease, whichever is greater, as reasonable consideration for Lessor's considering and processing the request for consent. Lessee agrees to provide Lessor with such other or
additional information and/or documentation as may be reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall by reason of accepting such assignment or entering into such sublease, be deemed for the benefit of Lessor, to have
assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said
assignment or sublease, other than such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented in
writing.
(g) The occurrence of a transaction described in Paragraph 12.2(c) shall give Lessor the right (but not the obligation) to require that the Security Deposit be increased by an amount
equal to six (6) times the then monthly Base Rent, and Lessor may make the actual receipt by Lessor of the Security Deposit increase a condition to Lessor's consent to such
transaction.
(h) Lessor, as a condition to giving its consent to any assignment or subletting, may require that the amount and adjustment schedule of the rent payable under this Lease be
adjusted to what is then the market value and/or adjustment schedule for property similar to the Premises as then constituted, as determined by Lessor.
Additional Terms and Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall
12.3 Additional Terms and Conditions Applicable to Subletting.
be deemed included in all subleases under this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's interest in all rentals and income arising from any sublease of all or a portion of the Premises heretofore or hereafter
made by Lessee, and Lessor may collect such rent and income and apply same toward Lessee's obligations under this Lease; provided, however, that until a Breach (as defined in
Paragraph 13.1) shall occur in the performance of Lessee's obligations under this Lease, Lessee may, except as otherwise provided in this Lease, receive, collect and enjoy the rents
accruing under such sublease. Lessor shall not, by reason of the foregoing provision or any other assignment of such sublease to Lessor, nor by reason of the collection of the rents
from a sublessee, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee's obligations to such sublessee under such Sublease. Lessee
hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of Lessee's obligations
under this Lease, to pay to Lessor the rents and other charges due and to become due under the sublease. Sublessee shall rely upon any such statement and request from Lessor
and shall pay such rents and other charges to Lessor without any obligation or right to inquire as to whether such Breach exists and notwithstanding any notice from or claim from
Lessee to the contrary. Lessee shall have no right or claim against such sublessee, or, until the Breach has been cured, against Lessor, for any such rents and other charges so paid
by said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its obligations under this Lease, Lessor, at its option and without any obligation to do so, may require any sublessee to
attorn to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such
sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any other prior defaults or breaches
of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further assign or sublet all or any part of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shall have the right to cure the Default of Lessee within the grace period, if any,
specified in such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee.
Default; Breach; Remedies.
13. Default; Breach; Remedies.
13.1 Default; Breach.
Default; Breach. Lessor and Lessee agree that if an attorney is consulted by Lessor in connection with a Lessee Default or Breach (as hereinafter defined), $350.00 is a
reasonable minimum sum per such occurrence for legal services and costs in the preparation and service of a notice of Default, and that Lessor may include the cost of such
services and costs in said notice as rent due and payable to cure said default. A "Default"
terms, covenants, conditions or rules applicable to Lessee under this Lease. A "Breach"
where a grace period for cure after notice is specified herein, the failure by Lessee to cure such Default prior to the expiration of the applicable grace period, and shall entitle Lessor
to pursue the remedies set forth in Paragraphs 13.2 and/or 13.3:
A "Breach" by Lessee is defined as the occurrence of any one or more of the following Defaults, and,
"Default" by Lessee is defined as a failure by Lessee to observe, comply with or perform any of the
(a) The vacating of the Premises without the intention to reoccupy same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure by Lessee to make any payment of Base Rent, Lessee's Share of Common Area Operating Expenses, or any
other monetary payment required to be made by Lessee hereunder as and when due the failure by Lessee to provide Lessor with reasonable evidence of insurance or surety bond
required under this Lease, or the failure of Lessee to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of
three (3) days following written notice thereof by or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure by Lessee to provide Lessor with reasonable written evidence (in duly executed original form, if applicable) of (i)
compliance with Applicable Requirements per Paragraph 6.3, (ii) the inspection, maintenance and service contracts required under Paragraph 7.1(b), (iii) the rescission of an
unauthorized assignment or subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37, (v) the subordination or non‑subordination of this Lease per
Paragraph 30, (vi) the guaranty of the performance of Lessee's obligations under this Lease if required under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this lease, where
any such failure continues for a period of ten (10) days following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that are to be observed, complied with
or performed by Lessee, other than those described in Subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a period of thirty (30) days after written notice
thereof by or on behalf of Lessor to Lessee; provided, however, that if the nature of Lessee's Default is such that more than thirty (30) days are reasonably required for its cure,
then it shall not be deemed to be a Breach of this Lease by Lessee if Lessee commences such cure within said thirty (30) day period and thereafter diligently prosecutes such cure
to completion.
(e) The occurrence of any of the following events: (i) the making by Lessee of any general arrangement or assignment for the benefit of creditors; (ii) Lessee's becoming a "debtor"
as defined in 11 U.S. Code Section 101 or any successor statute thereto (unless, in the case of a petition filed against
© American Industrial Real Estate Association 1993
10
Initials:_____________________
_____________________
MULTI‑TENANT ‑ GROSS
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or
of Lessee's interest in this Lease, where possession is not restored to Lessee within thirty (30) days; or (iv) the attachment, execution or other judicial seizure of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in this Lease, where such seizure is not discharged within thirty (30) days; provided, however, in the event that any
provision of this Subparagraph 13.1 (e) is contrary to any applicable law, such provision shall be of no force or effect, and shall not affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement of Lessee or of any Guarantor, given to Lessor by Lessee or any Guarantor, was materially false.
(g) If the performance of Lessee's obligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's liability with respect to this Lease
other than in accordance with the terms of such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the
guaranty, or (v) a Guarantor's breach of its guaranty obligation on an anticipatory breach basis, and Lessee's failure, within sixty (60) days following written notice by or on behalf of
Lessor to Lessee of any such event, to provide Lessor with written alternative assurances of security, which, when coupled with the then existing resources of Lessee, equals or
exceeds the combined financial resources of Lessee and the Guarantors that existed at the time of execution of this Lease.
Remedies. If Lessee fails to perform any affirmative duty or obligation of Lessee under this Lease, within ten (10) days after written notice to Lessee (or in case of an
13.2 Remedies.
emergency, without notice), Lessor may at its option (but without obligation to do so), perform such duty or obligation on Lessee's behalf, including but not limited to the obtaining
of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. The costs and expenses of any such performance by Lessor shall be due and
payable by Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its own option, may
require all future payments to be made under this Lease by Lessee to be made only by cashier's check. In the event of a Breach of this Lease by Lessee (as defined in Paragraph
13.1), with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any lawful means, in which case this Lease and the term hereof shall terminate and Lessee shall immediately surrender
possession of the Premises to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the worth at the time of the award of the unpaid rent which had been earned
at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award
exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rent for
the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to
compensate Lessor for all the detriment proximately caused by the Lessee's failure to perform its obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the
Premises, reasonable attorneys’ fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired term of this Lease. The
worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District in which the Premises are located at the time of award plus one percent (1%). Efforts by Lessor to
mitigate damages caused by Lessee’s Default or Breach of this Lease shall not waive Lessor’s right to recover damages under this Paragraph 13.2. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding the unpaid rent and damages as are recoverable therein, or
Lessor may reserve the right to recover all or any part thereof in a separate suit for such rent and/or damages. If a notice and grace period required under Subparagraph 13.1(b),
(c) or (d) was not previously given, a notice to pay rent or quit, or to perfcrm or quit, as the case may be, given to Lessee under any statute authorizing the forfeiture of leases for
unlawful detainer shall also constitute the applicable notice for grace period purposes required by Subparagraph 13.1(b),(c) or (d). In such case, the applicable grace period under
the unlawful detainer statue shall run concurrently after the one such statutory notice, and the failure of Lessee to cure the Default within the greater of the two (2) such grace
periods shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in California under California Civil Code Section 1951.4) after Lessee's Breach and recover the rent as it becomes
due, provided Lessee has the right to sublet or assign, subject only to reasonable limitations. Lessor and Lessee agree that the limitations on assignment and subletting in this Lease
are reasonable. Acts of maintenance or preservation, efforts to relet the Premises, or the appointment of a receiver to protect the Lessor's interest under this Lease, shall not
constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor under the laws or judicial decisions of the state wherein the Premises are located.
(d) The expiration or termination of this Lease and/or the termination of Lessee's right to possession shall not relieve Lessee from liability under any indemnity provisions of this
Lease as to matters occurring or accruing during the term hereof or by reason of Lessee's occupancy of the Premises.
13.3 Inducement Recapture In Event of Breach.
13.3 Inducement Recapture In Event of Breach. Any agreement by Lessor for free or abated rent or other charges applicable to the Premises, or for the giving or paying by Lessor to
or for Lessee of any cash or other bonus, inducement or consideration for Lessee's entering into this Lease, all of which concessions are hereinafter referred to as "Inducement
"Inducement
Provisions"
Provisions" shall be deemed conditioned upon Lessee's full and faithful performance of all of the terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such Inducement
Provision shall automatically be deemed deleted from this Lease and of no further force o; effect, and any rent, other charge, bonus, inducement or consideration theretofore
abated, given or paid by Lessor under such an Inducement Provision shall be immediately due and payable by Lessee to Lessor, and recoverable by Lessor, as additional rent due
under this Lease. notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of such acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur costs not contemplated by
this Lease, the exact amount of which will be extremely difficult to ascertain. Such cots include, but are not limited to, processing and accounting charges, and late charges which
may be imposed upon Lessor by the terms of any ground lease, mortgage or deed of trust covering the Premises. Accordingly, if any installment of rent or other sum due from
Lessee shaii not be received by Lessor or Lessor's designee within ten (10) days after such amount shall be due, then, without any requirement for notice to Lessec, Lessee shall pay
to Lessor a late charge equal to six percent (6%) of such overdue amount. The parties hereby agree that such !ate charge represents a fair and reasonable estimate of the costs
Lessor will incur by reason of late payment by Lessee. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's Default or Breach with respect to
such overdue amount, nor prevent Lessor from exercising any of the other rights and remedies granted hereunder. In the event that a late charge is payable nereunder, whether or
no; collected, for three (3) consecutive installments of Base Rent, then notwithstanding Paragraph 4.1 or any other provision of this Lease to the contrary. Base Rant shall, at
Lessor's option, become due and payable quarterly in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by Lessor.
For purposes of this Paragraph 13.5, a reasonable time shall in no event be less than thirty (30) days after receipt by Lessor, and by any Lender(s) whose name and address shall
have been furnished to Lessee in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such notice are reasonably required for its performance, then Lessor shall not be in breach of this Lease if
performance is commenced within such thirty (30) day period and thereafter diligently pursued to completion.
14. Condemnation.
Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (all of which are
herein called "condemnation"), this Lease shall terminate as to the part so taken as of the date the condemning authority takes title or possession, whichever first occurs. If more
than ten percent (10%) of the floor area of the Premise, or more than twenty‑five percent (25%) of
Initials:_____________________
_____________________
© American Industrial Real Estate Association 1993
MULTI‑TENANT ‑ GROSS
11
the portion of the Common Areas designated for Lessee's parking, is taken by condemnation, Lessee may, at Lessee's option, to be exercised in writing within ten (10) days after
Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within ten (10) days after the condemning authority shall have taken possession)
terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in the same proportion as the rentable floor area of the
Premises taken bears to the total rentable floor area of the Premise. No reduction of Base Rent shall occur if the condemnation does not apply to any portion of the Premises. Any
award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of
Lessor, whether such award shall be made as compensation for diminution of value of the leasehold or for the taking of the fee, or as severance damages; provided, however, that
Lessee shall be entitled to any compensation, separately awarded to Lessee for Lessee's relocation expenses and/or loss of Lessee's Trade Fixtures. In ties event that this Lease is
not terminated by reason of such condemnation, Lessor shall to !he extent of its net severance damages received, over and above Lessee's Share of the legal anal other expenses
incurred by Lessor in the condemnation natter, repair any damage to the Premises caused by such condemnation authority. Lessee shall be responsible for the payment of any
amount in excess of such net severance damages required to complete such repair.
15. Brokers'
Brokers' Fees.
15.1 Procuring Cause.
Procuring Cause. The Brokers) named in Paragraph 1.10 is/are the procuring cause of this Lease.
15.2 Additional Terms.
Additional Terms. Unless Lessor and Broker(s) have otherwise agreed in writing, Lessor agrees that: (a) if Lessee exercises any Option (as defined in Paragraph 39.1) granted
under this Lease or any Option subsequently granted, or (b) if Lessee acquires any rights to the Premises or other premises in which Lessor has an interest, or (c) if Lessee remains
in possession of tile Premises with tile consent of Lesser aft‑3i the expiration of the term of this Lease after having failed to exercise an Option, or (d) if said Brokers are the
procuring cause of any oilier lease or saie entered into between the Parties pertaining to the Premises and/or any adjacent property in which Lessor has an interest, or (e) if Base
Rent is increased, whether by agreement or operation of an escaiation c!‑use herein, then as to any of said transactions, Lessor shall pay said Broker(s) a fee in accordance with the
schedule of said Broker(s) in effect at the time of the execution of this Lease.
Assumption of Obligations. Any buyer or transferee of lessor's interest in this Lease whether such transfer is by agreement or by operation of law, shall be deemed to have
15.3 Assumption of Obligations.
assumed Lessor's obligation under this Paragraph 15. Each Broker shall be an intended third party beneficiary of the provisions of Paragraph 1.10 and of this Paragraph 15 to the.
extent of its interest in any commission arising from this Lease and may enforce that right directly against Lessor and its successors.
15.4 Representations and Warranties.
15.4 Representations and Warranties. Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder other than as
named in Paragraph 1.10(a) in connection with the negotiation of this Lease and/or the consummation of the transaction. contemplated hereby, and that no broker or other person,
firm or entity ether than said named Broker(s) is entitled to any commission or finder's fee in connection with said transaction. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other
similar party by reason of any dealings or actions of the indemnifying Party, including any costs, expenses, and/or attorneys' fees reasonably incurred with respect thereto.
Tenancy and Financial Statements.
16. Tenancy and Financial Statements.
Tenancy Statement. Each Party (as "Responding Party")
16.1 Tenancy Statement.
deliver to the Requesting Party a statement in writing in a form similar to the then most current "Tenancy Statement" form published by the American Industrial Real Estate
Association, plus such additional information, confirmation and/or statements as may be reasonably requested by the Requesting Party.
"Responding Party") shall within ten (10) days after written notice from the other Party (the "Requesting Party")
"Requesting Party") execute, acknowledge and
16.2 Financial Statement.
Financial Statement. If Lessor desires to finance, refinance, or sell the Premises or the Building, or any part thereof, Lessee and all Guarantors shall deliver to any potential
lender or purchaser designated by Lessor such financial statements of Lessee and such Guarantors as may be reasonably required by such lender or purchaser, including but not
limited to Lessee's financial statements for the past three (3) years. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be
used only for the purposes herein set forth.
Lessor's Liability. The term "Lessor"
"Lessor" as used herein shall mean the owner or owners at the time in question of the fee title to the Premises. In the event of a transfer of Lessor's
17. Lessor's Liability.
tifle or interest in the Premises or in this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit held by Lessor at the time of
such transfer or assignment. Except as provided in Paragraph 15.3, upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of ail liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or
covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined.
18. Severability. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof.
Interest on Past‑Due Obligations.
19. Interest on Past
Due Obligations. Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor within ten (10) days following the date on which
it was due, shall bear interest from the date due at the prime rate charged by the largest state chartered bank in the state in which the Premises are located plus four percent (4%)
per annum, but not exceeding the maximum rate allowed by law, in addition to the potential late charge provided for in Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under this Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease are deemed to be rent.
22. No Prior or other Agreenments; Broker Disclaimer. This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or
contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that it has made, and is relying solely upon, its
own investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the nature, quality and character of the Premises. Brokers
have no responsibility with respect thereto or with respect to any default or breach hereof by either Party. Each Broker shall be an intended third party beneficiary of the provisions
of this Paragraph 22.
Notices
23.23.Notices
Notice Requirements. All notices required or permitted by this Lease shall be in writing and may be delivered in person (by hand or by messenger or courier service) or may be
23.123.1 Notice Requirements.
sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission during normal business hours, and shall be deemed
sufficiently given if served in a manner specified in this Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease shall be that Party's address for delivery or
mailing of notice purposes. Either Party may by written notice to the other specify a different address for notice purposes, except that upon Lessee's taking possession of the
Premises, the Premises shall constitute Lessee's address for the purpose of mailing or delivering notices to Lessee. A copy of all notices required or permitted to be given to Lessor
hereunder shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate by written notice to Lessee.
© American Industrial Real Estate Association 1993
MULTI‑TENANT ‑ GROSS
12
Initials:_____________________
_____________________
23.223.2 Date of Notice.
Date of Notice. Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no
delivery date is shown, the postmark thereon. If sent by regular mail, the notice shall be deemed given forty‑eight (48) hours after the same is addressed as required herein and
mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantees next day delivery shall be deemed given twenty‑four (24) hours
after delivery of the same to the United States Postal Service or courier. If any notice is transmitted by facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone or facsimile confirmation of receipt of the transmission thereof, provided a copy is also delivered via delivery or mail. If notice is received on a Saturday or
a Sunday or a legal holiday, it shall be deemed received on the next business day.
24.24. Waivers.
Waivers. No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition
hereof, or of any subsequent Default or Breach by Lessee of the same or any other term, covenant or condition hereof. Lessor's consent to, or approval of, any such act shall not be
deemed to render unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent or similar act by Lessee, or be construed as the basis of an estoppel to enforce
the provision or provisions of this Lease requiring such consent. Regardless of Lessor's knowledge of a Default or Breach at the time of accepting rent, the acceptance of rent by
Lessor shall not be a waiver of any Default or Breach by Lessee of any provision hereof. Any payment given Lessor by Lessee may be accepted by Lessor on account of moneys or
damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith, which such statements and/or conditions shall be of no force
or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment.
25. Recording.
25. Recording. Either Lessor or Lessee shall, upon request of the other, execute, acknowledge and deliver to the other a short form memorandum of this Lease for recording
purposes. The Party requesting recordation shall be responsible for payment of any fees or taxes applicable thereto.
2626. No Right To Holdover.
No Right To Holdover. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or earlier termination of this Lease. In the event that
Lessee holds over in violation of this Paragraph 26 then the Base Rent payable from and after the time of the expiration or earlier termination of this Lease shall be increased to two
hundred percent (200%) of the Base Rent applicable during the month immediately preceding such expiration or earlier termination. Nothing contained herein shall be construed as
a consent by Lessor to any holding over by Lessee.
27.27. Cumulative Remedies.
Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed or performed by Lessee are both covenants and conditions.
28. Covenants and Conditions
Binding Effect; Choice of Law. This Lease shall be binding upon the Parties, their personal representatives, successors and assigns and be governed by the laws of the State in
29. Binding Effect; Choice of Law.
which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall be initiated in the county in which the Premises are located.
30.30. Subordination; Attornment; Non
Disturbance.
Subordination; Attornment; Non‑Disturbance.
30.1 Subordination
30.1 Subordination. This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security
device (collectively, "Security Device"), now or hereafter placed by Lessor upon the real property of which the Premises are a part, to any and all advances made on the security
thereof, and to all renewals, modifications, consolidations, replacements and extensions thereof. Lessee agrees that the Lenders holding any such Security Device shall have no
duty, liability or obligation to perform any of the obligations of Lessor under this Lease, but that in the event of Lessor's default with respect to any such obligation, Lessee will give
any Lender whose name and address have been furnished Lessee in writing for such purpose notice of Lessor's default pursuant to Paragraph 13.5. If any Lender shall elect to have
this Lease and/or any Option granted hereby superior to the lien of its Security Device and shall give written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the documentation or recordation thereof.
Attornment. Subject to the non‑disturbance provisions of Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who acquires ownership of the Premises by
30.230.2 Attornment.
reason of a foreclosure of a Security Device, and that in the event of such foreclosure, such new owner shall not: (i) be liable for any act or omission of any prior lessor or with
respect to events occurring prior to acquisition of ownership, (ii) be subject to any offsets or defenses which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
Disturbance. With respect to Security Devices entered into by Lessor after the execution of this lease, Lessee's subordination of this Lease shall be subject to receiving
30.330.3 NonNon‑Disturbance.
assurance (a "non‑disturbance agreement") from the Lender that Lessee's possession and this Lease, including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorns to the record owner of the Premises.
Executing. The agreements contained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that upon written request
30.430.4 SelfSelf‑Executing.
from Lessor or a Lender in connection with a sale, financing or refinancing of Premises, Lessee and Lessor shall execute such further writings as may be reasonably required to
separately document any such subordination or non‑subordination, attornment and/or non‑disturbance agreement as is provided for herein.
Attorneys' Fees. If any Party or Broker brings an action or proceeding to enforce the terms hereof or, declare rights hereunder, the Prevailing Party (as hereafter defined) in any
31.31. Attorneys' Fees.
such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or
not such action or proceeding is pursued to decision or judgment. The term "Prevailing Party"
the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys' fee
award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys' fees reasonably incurred. Lessor shall be entitled to
attorneys' fees, costs and expenses incurred in preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently
commenced in connection with such Default or resulting Breach. Broker(s) shall be intended third party beneficiaries of this Paragraph 31.
"Prevailing Party" shall include, without limitation, a Party or Broker who substantially obtains or defeats
Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall have the right to enter the Premises at any time, in the case of an emergency, and otherwise at
32.32. Lessor's Access; Showing Premises; Repairs.
reasonable times for the purpose of showing the same to prospective purchasers, lenders, or lessees, and making such alterations, repairs, improvements or additions to the
Premises or to the Building as Lessor may reasonably deem necessary. Lessor may at any time place on or about the Premises or Building any ordinary "For Sale" signs and Lessor
may at any time during the last one hundred eighty (180) days of the term hereof place on or about the Premises any ordinary "For Lease" signs. All such activities of Lessor shall
be without abatement of rent or liability to Lessee.
33.33. Auctions.
Auctions. Lessee shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction upon the Premises without first having obtained Lessor's prior
written consent. Notwithstanding anything to the contrary in this Lease, Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to grant
such consent.
Signs. Lessee shall not place any sign upon the exterior of the Premises or the Building, except that Lessee may, with Lessor's prior written consent, install (but not on the roof)
34. Signs.
such signs as are reasonably required to advertise Lessee's own business so long as such signs are in a location designated by Lessor and comply with Applicable Requirements and
the signage criteria established for the Industrial Center by Lessor. The installation of any sign on the Premises by or for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations). Unless otherwise expressly agreed herein, Lessor reserves all rights to the use of the roof of the Building,
and the right to install advertising signs on the Building, including the roof, which do not unreasonably interfere with the conduct of Lessee's business; Lessor shall be entitled to all
revenues from such advertising signs.
© American Industrial Real Estate Association 1993
MULTI‑TENANT ‑ GROSS
13
Initials:_____________________
_____________________
35.35. Termination; Merger.
Termination; Merger. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation
hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises; provided, however, Lessor shall, in the
event of any such surrender, termination or cancellation, have the option to continue any one or all of any existing subtenancies. Lessor's failure within ten (10) days following any
such event to make a written election to the contrary by written notice to the holder of any such lesser interest, shall constitute Lessor's election to have such event constitute the
termination of such interest.
36. Consents.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided herein, wherever in this Lease the consent of a Party is required to an act by or for the other Party, such
consent shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs and expenses (including but not limited to architects', attorneys', engineers' and other
consultants' fees) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent pertaining to this Lease or the Premises, including but not limited to
consents to an assignment a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an invoice and supporting documentation
therefor. In addition to the deposit described in Paragraph 12.2(e), Lessor may, as a condition to considering any such request by Lessee, require that Lessee deposit with Lessor an
amount of money (in addition to the Security Deposit held under Paragraph 5) reasonably calculated by Lessor to represent the cost Lessor will incur in considering and responding
to Lessee's request. Any unused portion of said deposit shall be refunded to Lessee without interest. Lessor's consent to any act, assignment of this Lease or subletting of the
Premises by Lessee shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing
Default or Breach, except as may be otherwise specifically stated in writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are acknowledged by Lessee as being reasonable. The failure to specify herein any particular condition to Lessor's
consent shall not preclude the impositions by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for
which consent is being given.
37. Guarantor.
37. Guarantor.
37.1 Form of Guaranty. If there are to be any Guarantors of this Lease per Paragraph 1.11, the form of the guaranty to be executed by each such Guarantor shall be in the form
most recently published by the American Industrial Real Estate Association, and each such Guarantor shall have the same obligations as Lessee under this lease, including but not
limited to the obligation to provide the Tenancy Statement and information required in Paragraph 16.
37.2 Additional Obligations of Guarantor.
Additional Obligations of Guarantor. It shall constitute a Default of the Lessee under this Lease if any such Guarantor fails or refuses, upon reasonable request by Lessor to
give: (a) evidence of the due execution of the guaranty called for by this Lease, including the authority of the Guarantor (and of the party signing on Guarantor's behalf) to obligate
such Guarantor on said guaranty, and resolution of its board of directors authorizing the making of such guaranty, together with a certificate of incumbency showing the signatures
of the persons authorized to sign on its behalf, (b) current financial statements of Guarantor as may from time to time be requested by Lessor, (c) a Tenancy Statement, or (d)
written confirmation that the guaranty is still in effect.
38. Quiet Possession. Upon payment by Lessee of the rent for the Premises and the performance of all of the covenants, conditions and provisions on Lessee's part to be observed
and performed under this Lease, Lessee shall have quiet possession of the Premises for the entire term hereof subject to all of the provisions of this Lease.
39. Options.
39.1 Definition. As used in this Lease, the word "Option"
lease that Lessee has on other property of Lessor; (b) the right of first refusal to lease the Premises or the right of first offer to lease the Premises or the right of first refusal to
lease other property of Lessor or the right of first offer to lease other property of Lessor; (c) the right to purchase the Premises, or the right of first refusal to purchase the Premises,
or the right of first offer to purchase the Premises, or the right to purchase other property of Lessor, or the right of first refusal to purchase other property of Lessor, or the right of
first offer to purchase other property of Lessor.
"Option" has the following meaning: (a) the right to extend the term of this Lease or to renew this Lease or to extend or renew any
39.2 Options Personal to Original Lessee. Each Option granted to Lessee in this Lease is personal to the original Lessee named in Paragraph 1.1 hereof, and cannot be voluntarily or
involuntarily assigned or exercised by any person or entity other than said original Lessee while the original Lessee is in full and actual possession of the Premises and without the
intention of thereafter assigning or subletting. The Options, if any, herein granted !o Lessee are not assignable, either as a part of an assignment of this Lease or separately or apart
therefrom, and no Option may be separated from this Lease in any manner, by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple Options to extend or renew this Lease, a later option cannot be exercised unless the prior Options to extend or
renew this Lease have been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding any provision in the grant of Option to the contrary: (i) during the period commencing with the giving of any
notice of Default under Paragraph 13.1 and continuing until the noticed Default is cured, or (ii) during the period of time any monetary obligation due Lessor from Lessee is unpaid
(without regard to whether notice thereof is given Lessee), or (iii) during the time Lessee is in Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three (3) or
more notices of separate Defaults under Paragraph 13.1 during the twelve (12) month period immediately preceding the exercise of the Option, whether or not the Defaults are
cured.
(b) The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise an Option because of the provisions of
Paragraph 39.4(a)
(c) All rights of Lessee under the provisions of an Option shall terminate and be of no further force or effect, notwithstanding Lessee's due and timely exercise of the Option, if, after
such exercise and during the term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to Lessee three (3) or more notices of separate Defaults under Paragraph 13.1 during any
twelve (12) month period, whether or not the Defaults are cured, or (iii) if Lessee commits a Breach of this Lease.
40. Rules and Regulations. Lessee agrees that it will abide by, and keep and observe all reasonable rules and regulations ("Rules and Regulations") which Lessor may make from
time to time for the management, safety, care, and cleanliness of the grounds, the parking and unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of the Building and the Industrial Center and their invitees.
41. Security Measures.
Security Measures. Lessee hereby acknowledges that the rental payable to Lessor hereunder does not include the cost of guard service or other security measures, and that
Lessor shall have no obligation whatsoever to provide same. Lessee assumes ail responsibility for the protection of the Premises, Lessee, its agents and invitees and their property
from the acts of third parties.
42. Reservations. Lessor reserves the right, from time to time, to grant, without the consent or joinder of Lessee, such easements, rights of way, utility raceways, and dedications
that Lessor deems necessary, and to cause the recordation of parcel maps and restrictions, so long as such easements, rights of way, utility raceways, dedications, maps and
restrictions do not reasonably interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate any such
easement rights, dedications, map or restrictions.
© American Industrial Real Estate Association 1993
14
Initials:_____________________
_____________________
MULTI‑TENANT ‑ GROSS
43. Performance Under Protest.
Performance Under Protest. If at any time a dispute shelf arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party
against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment
and there shall survive the right on the part of said Party to institute suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said Party
to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as it was not legally required to pay under the provisions of this Lease.
44. Authority.
Authority. If either Party hereto is a corporation, trust, or general or limited partnership, each individual executing this Lease on behalf of such entity represents and warrants
that he or she is duly authorized to execute and deliver this Lease on its behalf. If Lessee is a corporation, trust or partnership, Lessee shall, within thirty (30) days after request by
Lessor, deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions.
Offer. Preparation of this Lease by either Lessor or Lessee or Lessor's agent or Lessee's agent and submission of same to Lessee or Lessor shall not be deemed an offer to lease.
46. Offer.
This Lease is not intended to be binding until executed and delivered by all Parties hereto.
47. Amendments. This Lease may be modified only in writing, signed by the parties in interest at the time of the modification. The Parties shall amend this Lease from time to time
to reflect any adjustments that are made to the Base Rent or other rent payable under this Lease. As long as they do not materially change Lessee's obligations hereunder, Lessee
agrees to make such reasonable non‑monetary modifications to this Lease as may be reasonably required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property of which the Premises are a part.
48. Multiple Parties. Except as otherwise expressly provided herein, if more than one person or entity is named herein as either Lessor or Lessee, the obligations of such multiple
parties shall be the joint and several responsibility of all persons or entities named herein as such Lessor or Lessee.
49.The Lesse has the option to renew this lease with two additional one year terms at $4368.00 for the year 2025 and $4536.00 for the year 2026 with a 90 day notice.
50. 50. Avita is taking the unit as is and is responsible for its upkeep.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE
THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY'S REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE CONDITION OF THE
PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX
CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place and on the dates specked above their respective signatures.
VENTURA , CA.
December 06,2023
Executed at::
On:
By LESSOR:
Valencia, CA
December 11, 2023
Executed at::
On:
By LESSEE:
HARTCO-VENTURA INC.
Avita Medical Americas
By:
/s/ John Saleh
JOHN SALEH
Name Printed:
PRESIDENT
Title:
By:
Name Printed:
Title:
Address:
Telephone:
Facsimile:
(
)
(
)
/s/ James Corbett
By:
Name Printed:
James Corbett
Chief Executive Officer
Title:
By:
Name Printed:
Title:
Address:
Telephone:
Facsimile:
(
)
(
)
© American Industrial Real Estate Association 1993
MULTI‑TENANT ‑ GROSS
15
Initials:_____________________
_____________________
© American Industrial Real Estate Association 1993
MULTI‑TENANT ‑ GROSS
16
Initials:_____________________
_____________________
AMENDMENT ONE TO EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.31
THIS AMENDMENT ONE (“Amendment One”) made and entered into on March 23, 2022, to the EXECUTIVE EMPLOYMENT
AGREEMENT (the “Agreement”), by and between Avita Medical Ltd, an Australian corporation (the “Company”) and Donna Shiroma, an
individual (the “Executive”). The Company and Executive are sometimes referred to individually as a “Party” and collectively as the “Parties.”
WHEREAS, the Company and Executive (the “Parties”) entered into an Executive Employment Agreement with an Effective Date of
June 25, 2018;
WHEREAS, the Executive has served as General Counsel of the Company since June 25, 2018; WHEREAS, due to the
redomiciliation of the Company from Australia to the state of Delaware
U.S.A. in June 2020, reference to the Company is changed to reflect the United States Company name;
WHEREAS, modification to Executive’s base salary, notice term, and benefits in the event of an involuntary termination Without
Cause or a resignation with Good Reason (definitions further defined in Executive’s Agreement) was approved at the Board of Directors
meeting of February 23, 2022 (“Amendment One Effective Date”);
WHEREAS, the Parties wish to modify the Executive Employment Agreement to reflect the changes.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and intending to be legally bound, it is
hereby agreed by and between the Parties hereto as follows:
1)Due to the redomiciliation of Avita Medical Ltd, an Australian corporation to Avita Medical, Inc. a Delaware corporation, Avita
Medical Americas, LLC, its subsidiary and Executive’s direct employer, is intended to replace reference to the “Company” along
with any and all references and its obligations throughout the Agreement.
2)Section 3.3 (b) (i) and (ii) will be deleted in its entirety and restated hereunder:
(i)Base Salary. The Company shall pay the Executive the equivalent of nine (9) months of the Executive’s annual salary in effect
at the time of the involuntary termination Without Cause or a resignation with Good Reason in one lump sum payment, less
standard deductions and withholdings.
Three Months Notice. The Company shall provide the Executive three (3) months prior written notice in the event of
involuntary termination of the Executive’s employment Without Cause or a resignation by the Executive for Good
Reason.
(ii)Benefits Coverage. The Company shall continue to provide group health, vision, and dental plan benefits to the Executive for
a period of nine (9) months from and after the date of termination, with the cost of all regular premiums for such benefits paid by
the Company (or its successor).
Except as set forth herein, all other terms and conditions of the original Agreement shall be unaffected and remain unchanged and in full force
and effect. If there is a conflict between this Amendment One and the Agreement, the terms of this Amendment One will prevail.
IN WITNESS WHEREOF, the Parties have caused this Amendment One to be executed as of the date noted below.
“COMPANY”
Avita Medical Pty Ltd., an Australian corporation
By: /s/ Michael Perry
Name: Dr. Michael S. Perry
Title: Executive Director
Date: 4/20/2022
Amended “COMPANY”
Avita Medical Americas, LLC, a limited liability company incorporated in Delaware
By: /s/ Michael Perry
Name: Dr. Michael S. Perry
Title: Chief Executive Officer and Executive Director
Date: 4/20/2022
Executive
Donna Shiroma
By: /s/ Donna Shiroma
Name: Donna Shiroma
Title: General Counsel
Date: 3/23/2022
Exhibit 10.32
THIS AMENDMENT TWO (“Amendment Two”) to the EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”), by and between Avita Medical
Americas, LLC, a limited liability company incorporated in Delaware (the “Company”) and Donna Shiroma, an individual (the “Executive”). The Company and
Executive are sometimes referred to individually as a “Party” and collectively as the “Parties.”
AMENDMENT TWO TO EXECUTIVE EMPLOYMENT AGREEMENT
WHEREAS, the Company and Executive (the “Parties”) entered into the Agreement on May 7, 2018;
WHEREAS, the Parties entered into an Amendment One to the Agreement on March 23, 2023;
WHEREAS, certain modifications to the Agreement were approved at the Board of Directors meeting of August 9, 2023; and
WHEREAS, the Parties wish to modify the Agreement to reflect the changes.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and intending to be legally bound, it is hereby agreed by and
between the Parties hereto as follows:
1)Section 3.2 (b) Good Reason is replaced in its entirety with the following:
“Good Reason. For purposes of this Agreement, “Good Reason” shall mean: (i) a material diminution in Executive’s authority, duties, or
responsibilities in effect at the time of this Agreement; (ii) any reduction in the Executive’s then current base salary; (iii) relocation of Executive’s
principal place of work by a distance of fifty (50) miles or more from the Executive’s then current principal place of work without the Executive’s
consent; (iv) material breach by the Company of any provision of this Agreement; provided, however, that the conduct described in the foregoing
subsections (i) through (iv) will only constitute Good Reason if such conduct is not cured within thirty (30) days after the Company’s receipt of written
notice from the Executive specifying the particulars of the conduct the Executive believes constitutes Good Reason.”
2)Sub-sections 3.3(b)(i)-(iv) “Base Salary”, “Pro-Rated Annual Bonus”, “Benefits Coverage”, and “Equity” are replaced in their entirety with the following:
“(i) Base Salary: The Company shall pay the Executive the equivalent of 12 months of the Executive’s annual base salary in effect at the
time of the termination Without Cause or resignation with Good Reason in one lump sum payment, less standard deductions and
withholdings.
(ii) Bonus: The Company shall pay the Executive a pro-rata portion of
her Annual Bonus payment for the then current fiscal year. The pro-rata Annual Bonus calculation shall assume that the Executive attained
100% of the performance target established for the then current fiscal year and will be prorated for the time the Executive remained
employed during the then current fiscal year.
(iii) Benefits Coverage. The Company shall continue to provide group health, vision, and dental plan benefits to the Executive for a period
12 months from and after the date of termination, with the cost of all regular premiums for such benefits paid by the Company (or its
successor).
(iv) Equity. Executive's stock options and RSUs shall immediately accelerate so that 100% of any then unvested stock options and RSUs
shall immediately vest and become exercisable upon the date of Executive’s termination Without Cause or resignation with Good Reason
and shall continue to be exercisable for a period of ninety (90) days after such termination or resignation. In the event there is a conflict
between this clause and any then active equity
P 1
incentive plan regarding the vesting of options at the time of termination, this clause shall prevail.”
3)Section 3.3(c) Termination or Resignation in Connection with Change in Control is deleted in its entirety and replaced with the following:
(c) Termination in Connection with Change in Control. In the event of a termination arising out of a Change of Control, Executive is entitled to
immediate acceleration of Executive's stock options and RSUs so that 100% of any then unvested stock options and RSUs shall immediately vest and
become exercisable and shall continue to be exercisable for a period of 90 days. In the event there is a conflict between this clause and any then active
equity incentive plan regarding the vesting of options at the time of termination, this clause shall prevail.
Except as set forth herein, all other terms and conditions of the original Agreement shall be unaffected and remain unchanged and in full force and effect. If there is a
conflict between this Amendment and the Agreement, the terms of this Amendment will prevail.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed, effective as of August 9, 2023.
“EXECUTIVE”
By: /s/ Donna Shiroma
Date: November 14, 2023
Name: Donna Shiroma
Title: General Counsel
“COMPANY”
Avita Medical Americas, LLC
By: /s/ James Corbett
Date: December 11, 2023
James Corbett
Chief Executive Officer
P 2
Exhibit 10.33
AMENDMENT ONE TO EXECUTIVE EMPLOYMENT AGREEMENT
THIS AMENDMENT (“Amendment”) to the EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”), by and between AVITA Medical, Inc a
Delaware corporation and its wholly owned subsidiary, AVITA Medical Americas, LLC, a Delaware limited liability company (the “Company”) and David O’Toole, an
individual (the “Executive”). The Company and Executive are sometimes referred to individually as a “Party” and collectively as the “Parties.”
WHEREAS, the Company and Executive (the “Parties”) entered into an Executive Employment Agreement with an Effective Date on or around June 15, 2023;
WHEREAS, certain modifications to the Agreement were approved at the Board of Directors meeting of August 9, 2023;
WHEREAS, the Parties wish to modify the Agreement to reflect the changes.
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and intending to be legally bound, it is hereby agreed by and
between the Parties hereto as follows:
1)Section 3.2 (b) Good Reason is replaced in its entirety with the following:
“Good Reason. For purposes of this Agreement, “Good Reason” shall mean: (i) a material diminution in Executive’s authority, duties, or
responsibilities in effect at the time of this Agreement; (ii) any reduction in the Executive’s then-current base salary; (iii) relocation of Executive’s
principal place of work by a distance of fifty (50) miles or more from the Executive’s then-current principal place of work without the Executive’s
consent; (iv) material breach by the Company of any provision of this Agreement; provided, however, that the conduct described in the foregoing
subsections (i) through (iv) will only constitute Good Reason if such conduct is not cured within thirty (30) days after the Company’s receipt of written
notice from the Executive specifying the particulars of the conduct the Executive believes constitutes Good Reason.”
Except as set forth herein, all other terms and conditions of the original Agreement shall be unaffected and remain unchanged and in full force and effect. If there is a
conflict between this Amendment and the Agreement, the terms of this Amendment will prevail.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed, effective as of the August 9, 2023.
“EXECUTIVE”
“COMPANY”
By: /s/ David O'Toole
Date: December 1, 2023
Name: David O’Toole
Title: Chief Financial Officer
By: /s/ James Corbett
Date: December 11, 2023
Name: James Corbett
Title: Chief Executive Officer
P 1
Exhibit 10.34
Execution Version
WAIVER AND FIRST AMENDMENT TO CREDIT AGREEMENT
This WAIVER AND FIRST AMENDMENT TO CREDIT AGREEMENT
(this “Amendment”) is made and entered into as of November 30, 2023 by and among AVITA MEDICAL, INC., a
Delaware corporation (the “Borrower”), ORCO IV LLC, as a Lender (the “Initial Lender”), and ORCO IV LLC, as
administrative agent for the Lenders (together with its Affiliates, successors, transferees and assignees, the
“Administrative Agent”).
WHEREAS, the Borrower, the Initial Lender and the Administrative Agent entered into a Credit
Agreement, dated as of October 18, 2023 (the “Credit Agreement”), pursuant to which the Lenders have extended credit
to the Borrower on the terms set forth therein;
WHEREAS, pursuant to the definition of “Excluded Subsidiaries” in Section 1.1 of the Credit
Agreement and Section 7.12(a)(i)(B) of the Credit Agreement, the amount of cash and Cash Equivalent Investments held
by Excluded Subsidiaries shall not exceed $250,000 (the “Excluded Subsidiary Cash Cap” and such requirements, the
“Existing Subsidiary Cash Cap Requirement”);
WHEREAS, the Excluded Subsidiaries have held, now hold and will continue to hold, to (and
including) December 31, 2023 (or such later date agreed to by the Administrative Agent in its sole discretion), cash and
Cash Equivalent Investments in excess of the Excluded Subsidiary Cash Cap (the “Existing Excluded Subsidiary Cash
Cap Default”);
WHEREAS, pursuant to Section 7.12(a) and Section 7.16(e), the Borrower and each Guarantor are
required to cause their accounts (other than Excluded Accounts) to be Controlled Accounts, subject to an account control
agreement in form and substance reasonably acceptable to the Administrative Agent;
WHEREAS, pursuant to Section 10.1 of the Credit Agreement, the Credit Agreement may be
amended by an instrument in writing signed by each of the Borrower and the Lenders and acknowledged by the
Administrative Agent;
WHEREAS, the Initial Lender comprises all Lenders under the Credit Agreement;
and
provisions of the Credit Agreement as provided in this Amendment.
WHEREAS, the Borrower and the Initial Lender desire to amend certain
NOW, THEREFORE, in consideration of the mutual agreements herein contained, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree
as follows:
1.Definitions; Loan Document. Capitalized terms used herein without definition shall have the
meanings assigned to such terms in the Credit Agreement. This Amendment shall constitute a Loan Document for all
purposes of the Credit Agreement and the other Loan Documents.
and (ii) solely from the First Amendment Effective Date to (and
2.Waiver. The Initial Lender hereby (i) waives the Existing Excluded Subsidiary Cash Cap Default
including) December 31, 2023 (or such later date agreed to by the Administrative Agent in its sole discretion), agrees
that the Excluded Subsidiary Cash Cap shall be $675,000. The Initial Lender waives any Default or Event of Default that
has or may have occurred or would otherwise arise
solely as a result thereof. Notwithstanding the amendments set forth herein, the Borrower shall immediately
recommence (or cause to be recommenced) compliance with the Excluded Subsidiary Cash Cap Requirement as in
effect prior to this Amendment and related provisions under the Credit Agreement at all times after December 31, 2023
(or such later date agreed to by the Administrative Agent in its sole discretion).
3.Amendments to Section 1.1.
(a)Section 1.1 of the Credit Agreement is hereby amended by inserting the following new
defined terms therein in the proper alphabetical order:
“First Amendment” means the Waiver and First Amendment to the Agreement, dated as of the
First Amendment Effective Date, among the Borrower, the Lenders and the Administrative
Agent.
“First Amendment Effective Date” means November 30, 2023.
(b)The definition of “Loan Documents” in Section 1.1 of the Credit Agreement is hereby
amended by inserting “the First Amendment,” immediately after the phrase “the Security
Agreement,”.
4.Amendments to Section 7.16. Section 7.16 of the Credit Agreement is hereby amended by (i)
replacing the phrase “within 30 days of the Closing Date” in clause (e) thereof with the phrase “on or prior to December
4, 2023”, (ii) replacing the phrase “within 45 days of the Closing Date” in clause (a) thereof with the phrase “on or prior
to January 5, 2024”, and (iii) inserting new clauses (h), (i) and (j) immediately after clause (g) thereof, as follows:
“(h) with respect to the Controlled Accounts constituting securities accounts existing as of the First
Amendment Effective Date (the “Securities Accounts”), the Borrower will, concurrently with the
dashboard delivered under Section 7.1(i), provide a statement certifying or evidence of
correspondence with the securities intermediary of the Securities Accounts regarding its form of
securities account control agreement and status updates, if any, on such securities intermediary’s
internal audit of such form control agreement with respect to the Securities Accounts (the updated
form resulting from such internal audit, the “Updated SACA”);
(i) within 180 days of the First Amendment Effective Date (or such later date agreed to by the
Administrative Agent in its sole discretion), the Administrative Agent shall have received evidence
that the Securities Accounts are subject to a Control Agreement in a form based on the Updated
SACA and subject to such modifications as the Administrative Agent and such securities intermediary
shall agree, and which Control Agreement shall be in form and substance reasonably acceptable to the
Administrative Agent; and
(j) until the covenant in Section 7.16(i) is satisfied, the Borrower and its Subsidiaries shall comply
with the Borrower’s investment policy as in effect on the First Amendment Effective Date and will
continue to comply with such investment policy and will not amend such investment policy to allow
use of margin in the Securities Accounts.”
5.Conditions to Effectiveness of Amendment. This Amendment shall become effective upon
receipt by the Initial Lender, the Administrative Agent and the Borrower of a counterpart signature of the other to this
Amendment duly executed and delivered by each of the
Initial Lender, the Administrative Agent and the Borrower.
6.Expenses. The Borrower agrees to pay on demand all expenses of the Administrative Agent and
the Lenders (including, without limitation, the fees and out-of-pocket expenses of Covington & Burling LLP, counsel to
the Administrative Agent and the Lenders) incurred in connection with the negotiation, preparation, execution and
delivery of this Amendment.
the effective date of this Amendment, as follows:
7.Representations and Warranties. The Borrower represents and warrants to the Lenders, as of
(a)Until Section 7.16(i) of the Credit Agreement (as amended by this Amendment) is satisfied, the
Borrower represents, warrants and confirms that it and its Subsidiaries have complied with the Borrower’s investment
policy as in effect on the date hereof, will continue to comply with such investment policy and will not amend such
investment policy to allow use of margin in the Securities Accounts.
(b)After giving effect to this Amendment, the representations and warranties of the Borrower and
the Subsidiaries contained in the Credit Agreement or any other Loan Document are true and correct in all material
respects as of the date hereof (except (i) with respect to representations and warranties expressly made as of an earlier
date, in which case such representations and warranties are true and correct in all material respects as of such earlier date
and (ii) if any such representation or warranty contains any materiality qualifier, such representation or warranty is true
and correct in all respects).
Agreement has occurred and is continuing or would result from the effectiveness of this Amendment.
(c)After giving effect to this Amendment, no Default or Event of Default under the Credit
8.No Implied Amendment or Waiver. Except as expressly set forth in this Amendment, this
Amendment shall not, by implication or otherwise, limit, impair, constitute a waiver of or otherwise affect any rights or
remedies of the Administrative Agent and the Lenders under the Credit Agreement or the other Loan Documents, or
alter, modify, amend or in any way affect any of the terms, obligations or covenants contained in the Credit Agreement
or the other Loan Documents, all of which shall continue in full force and effect. Nothing in this Amendment shall be
construed to imply any willingness on the part of the Administrative Agent or any Lender to agree to or grant any similar
or future amendment, consent or waiver of any of the terms and conditions of the Credit Agreement or the other Loan
Documents.
9.Waiver and Release. TO INDUCE THE ADMINISTRATIVE AGENT AND THE LENDERS
TO AGREE TO THE TERMS OF THIS AMENDMENT, THE BORROWER AND ITS AFFILIATES
(COLLECTIVELY, THE “RELEASING PARTIES”) REPRESENT AND WARRANT THAT, AS OF THE DATE
HEREOF, THERE ARE NO CLAIMS OR OFFSETS AGAINST, OR RIGHTS OF RECOUPMENT WITH RESPECT
TO, OR DISPUTES OF, OR DEFENSES OR COUNTERCLAIMS TO, THEIR OBLIGATIONS UNDER THE LOAN
DOCUMENTS, AND IN ACCORDANCE THEREWITH THE RELEASING PARTIES:
(a)WAIVE ANY AND ALL SUCH CLAIMS, OFFSETS, RIGHTS OF RECOUPMENT,
DISPUTES, DEFENSES AND COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING
PRIOR TO THE DATE HEREOF.
(b)FOREVER RELEASE, RELIEVE, AND DISCHARGE THE ADMINISTRATIVE AGENT,
THE LENDERS, THEIR AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS,
SHAREHOLDERS, MEMBERS,
PARTNERS, PREDECESSORS, SUCCESSORS, ASSIGNS, ATTORNEYS, ACCOUNTANTS, AGENTS,
EMPLOYEES, AND REPRESENTATIVES (COLLECTIVELY, THE “RELEASED PARTIES”), AND
EACH OF THEM, FROM ANY AND ALL CLAIMS, LIABILITIES, DEMANDS, CAUSES OF ACTION,
DEBTS, OBLIGATIONS, PROMISES, ACTS, AGREEMENTS, AND DAMAGES, OF WHATEVER
KIND OR NATURE, WHETHER KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED,
CONTINGENT OR FIXED, LIQUIDATED OR UNLIQUIDATED, MATURED OR UNMATURED,
WHETHER AT LAW OR IN EQUITY, WHICH THE RELEASING PARTIES EVER HAD, NOW HAVE,
OR MAY, SHALL, OR CAN HEREAFTER HAVE, DIRECTLY OR INDIRECTLY ARISING OUT OF OR
IN ANY WAY BASED UPON, CONNECTED WITH, OR RELATED TO MATTERS, THINGS, ACTS,
CONDUCT, AND/OR OMISSIONS AT ANY TIME FROM THE BEGINNING OF THE WORLD
THROUGH AND INCLUDING THE DATE HEREOF, INCLUDING WITHOUT LIMITATION ANY
AND ALL CLAIMS AGAINST THE RELEASED PARTIES ARISING UNDER OR RELATED TO ANY
OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY.
(c)IN CONNECTION WITH THE RELEASE CONTAINED HEREIN, ACKNOWLEDGE THAT
THEY ARE AWARE THAT THEY MAY HEREAFTER DISCOVER CLAIMS PRESENTLY UNKNOWN
OR UNSUSPECTED, OR FACTS IN ADDITION TO OR DIFFERENT FROM THOSE WHICH THEY
KNOW OR BELIEVE TO BE TRUE, WITH RESPECT TO THE MATTERS RELEASED HEREIN.
NEVERTHELESS, IT IS THE INTENTION OF THE RELEASING PARTIES, THROUGH THIS
AMENDMENT AND WITH ADVICE OF COUNSEL, FULLY, FINALLY, AND FOREVER TO
RELEASE ALL SUCH MATTERS, AND ALL CLAIMS RELATED THERETO, WHICH DO NOW
EXIST, OR HERETOFORE HAVE EXISTED. IN FURTHERANCE OF SUCH INTENTION, THE
RELEASES HEREIN GIVEN SHALL BE AND REMAIN IN EFFECT AS A FULL AND COMPLETE
RELEASE OR WITHDRAWAL OF SUCH MATTERS
NOTWITHSTANDING THE DISCOVERY OR EXISTENCE OF ANY SUCH ADDITIONAL OR
DIFFERENT CLAIMS OR FACTS RELATED THERETO.
(d)COVENANT AND AGREE NOT TO BRING ANY CLAIM, ACTION, SUIT, OR
PROCEEDING AGAINST THE RELEASED PARTIES, DIRECTLY OR INDIRECTLY, REGARDING OR
RELATED IN ANY MANNER TO THE MATTERS RELEASED HEREBY, AND FURTHER
COVENANT AND AGREE THAT THIS AMENDMENT IS A BAR TO ANY SUCH CLAIM, ACTION,
SUIT, OR PROCEEDING.
(e)REPRESENT AND WARRANT TO THE RELEASED PARTIES THAT THEY HAVE NOT
HERETOFORE ASSIGNED OR TRANSFERRED, OR PURPORTED TO ASSIGN OR TRANSFER, TO
ANY PERSON OR ENTITY ANY CLAIMS OR OTHER MATTERS HEREIN RELEASED.
(f)ACKNOWLEDGE THAT THEY HAVE HAD THE BENEFIT OF INDEPENDENT LEGAL
ADVICE WITH RESPECT TO THE ADVISABILITY OF ENTERING INTO THIS RELEASE AND
HEREBY KNOWINGLY, AND UPON SUCH ADVICE OF COUNSEL, WAIVE ANY AND ALL
APPLICABLE RIGHTS AND BENEFITS UNDER, AND PROTECTIONS OF, CALIFORNIA CIVIL
CODE SECTION 1542, AND ANY AND ALL STATUTES AND DOCTRINES OF SIMILAR EFFECT.
CALIFORNIA CIVIL CODE SECTION 1542 PROVIDES AS FOLLOWS:
A general release does not extend to claims that the creditor or releasing party does not know or
suspect to exist in his or her favor at the time of executing the release, and that if known by him or
her, would have materially affected his or her settlement with the debtor or released party.
10.Counterparts; Governing Law. This Amendment may be executed by the parties hereto in
several counterparts, each of which shall be an original and all of which shall constitute together but one and the same
agreement. Delivery of an executed counterpart of a signature page to this Amendment by email (e.g., “pdf” or “tiff”) or
telecopy shall be effective as delivery of a manually executed counterpart of this Amendment. THIS AMENDMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5- 1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK).
[Remainder of Page Intentionally Left Blank]
respective officers thereunto duly authorized as of the day and year first above written.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their
AVITA MEDICAL, INC.
as the Borrower
By: /s/ James Corbett
Name: James Corbett
Title: Chief Executive Officer
[Signature Page to Waiver and First Amendment to Credit Agreement]
ORCO IV LLC
as Lender
By: OrbiMed Royalty & Credit Opportunities IV, LP, its Sole Member
By: OrbiMed ROF IV LLC, its General Partner
By: OrbiMed Advisors LLC, its Managing Member
By: /s/ Matthew Rizzo
Name: Matthew Rizzo
Title: Member
ACKNOWLEDGED BY:
ORCO IV LLC
as the Administrative Agent
By: OrbiMed Royalty & Credit Opportunities IV, LP, its Sole Member
By: OrbiMed ROF IV LLC, its General Partner
By: OrbiMed Advisors LLC, its Managing Member
By: /s/ Matthew Rizzo
Name: Matthew Rizzo
Title: Member
[Signature Page to Waiver and First Amendment to Credit Agreement]
Exhibit 10.35
Execution Version
TRADEMARK SECURITY AGREEMENT
This TRADEMARK SECURITY AGREEMENT, dated as of 11 December, 2023 (this “Agreement”), is made by AVITA MEDICAL
PTY LIMITED ACN 058 466 523, an Australian proprietary company limited by shares (the “Grantor”), in favor of ORCO IV LLC, a
Delaware limited liability company (together with its Affiliates, successors, transferees and assignees, the “Administrative Agent”), as
Administrative Agent for the Secured Parties.
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, dated as of October 18, 2023 (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”), by and among AVITA Medical, Inc. (the “Borrower”), the Lenders party
thereto and the Administrative Agent, the Lenders have extended Commitments to make Loans to the Borrower;
WHEREAS, in connection with the Credit Agreement, the Grantor and its Affiliates have executed and delivered a
Pledge and Security Agreement in favor of the Administrative Agent, for the benefit of the Secured Parties, dated as of October
18, 2023 (as amended, supplemented or otherwise modified from time to time, the “Security Agreement”);
WHEREAS, pursuant to the Credit Agreement and pursuant to clause (e) of Section 4.5 of the Security Agreement, the
Grantor is required to execute and deliver this Agreement and to grant to the Administrative Agent, for the benefit of the Secured
Parties, a continuing security interest in all of the Trademark Collateral to secure all of the Obligations; and
WHEREAS, the Grantor has duly authorized the execution, delivery and performance of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Grantor agrees, for the benefit of the Secured Parties, as follows:
SECTION 1. Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this
Agreement, including its preamble and recitals, have the meanings provided (or incorporated by reference) in the Security
Agreement.
SECTION 2. Grant of Security Interest. The Grantor hereby grants to the Administrative Agent, for the benefit of the
Secured Parties, a continuing security interest in all of Grantor’s right, title and interest in and to the Trademark Collateral,
including those Trademarks referred to in Item A of Schedule I hereto and each Trademark license referred to in Item B of
Schedule I hereto.
Notwithstanding anything to the contrary, the Trademark Collateral does not include (a) Trademark applications filed in the
United States Patent and Trademark Office on the basis of such Grantor’s “intent to use” of such Trademark, unless and until
acceptable evidence of use of the Trademark has been filed with the United States Patent and Trademark Office pursuant to
Section 1(c) or Section 1(d) of the Lanham Act (15 U.S.C. 1051, et seq.), to the extent that granting a Lien in such Trademark
application prior to such filing would adversely affect the enforceability or validity of such Trademark application or (b) other
Excluded Property.
SECTION 3. Security Agreement. This Agreement has been executed and delivered by the
Grantor for the purpose of registering the security interest of the Administrative Agent in the Trademark Collateral with the
United States Patent and Trademark Office. The security interest granted hereby has been granted in furtherance of, and not in
limitation of, the security interest granted to the Administrative Agent for its benefit under the Security Agreement. The Security
Agreement (and all rights and remedies of the Administrative Agent thereunder) shall remain in full force and effect in accordance
with its terms.
SECTION 4. Release of Liens. Upon (a) the sale of Trademark Collateral to Persons who are not the Borrower or any
Subsidiary thereof in accordance with the Credit Agreement or (b) the occurrence of the Termination Date, the security interests
granted herein shall automatically terminate with respect to (i) such Trademark Collateral (in the case of clause (a)) or (ii) all
Trademark Collateral (in the case of clause (b)). Upon any such sale or termination, the Administrative Agent will, at the
Grantor’s sole expense, deliver to the Grantor, without any representations, warranties or recourse of any kind whatsoever, all
such Trademark Collateral held by the Administrative Agent hereunder, and execute and deliver to the Grantor such documents as
the Grantor shall reasonably request to evidence such termination.
SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge and affirm that the rights and remedies of
the Administrative Agent with respect to the security interest in the Trademark Collateral granted hereby are more fully set forth
in the Security Agreement, the terms and provisions of which (including the remedies provided for therein) are incorporated by
reference herein as if fully set forth herein.
SECTION 6. Loan Document. This Agreement is a Loan Document executed pursuant to the Credit Agreement and
shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including Article X thereof.
SECTION 7. Effectiveness. (a) This Agreement shall become effective when a counterpart hereof executed by the
Grantor shall have been received by the Administrative Agent.
(b) This document may be executed in any number of counterparts or copies, each of which may be executed by physical
signature in wet ink or electronically (whether in whole or part). A party who has executed a counterpart of this document may
exchange it with another party (the “Recipient”) by: (i) emailing a copy of the executed counterpart to the Recipient; or (ii)
utilizing an electronic platform (including DocuSign) to circulate the executed counterpart, and will be taken to have adequately
identified themselves by so emailing the copy to the Recipient or utilizing the electronic platform. (c) Each party consents to
signatories and parties executing this document by electronic means and to identifying themselves in the manner specified in this
clause. (d) Each counterpart constitutes an original (whether kept in electronic or paper form), all of which together constitute one
instrument as if the signatures (or other execution markings) on the counterparts or copies were on a single physical copy of this
document in paper form. Without limiting the foregoing, if any of the signatures or other markings on behalf of one party are on
different counterparts or copies of this document, this shall be taken to be, and have the same effect as, signatures on the same
counterpart and on a single copy of this document.
[Signature Page Follows]
IN WITNESS WHEREOF, the Grantor hereto has caused this Agreement to be duly executed and delivered by its Authorized
Officer as of the date first above written.
Grantor
Executed as a deed by AVITA MEDICAL PTY LIMITED ACN 058
466 523 in accordance with Section 127 of the Corporations Act 2001
(Cth)
/s/ Lou Panaccio
Signature of director
Lou Panaccio
Name of director (print)
/s/ Suzanne Mary Crowe
Signature of director/company secretary
Suzanne Mary Crowe
Name of director/company secretary (print)
Signature Page to Trademark Security Agreement
Item A. Trademarks
SCHEDULE I
to Trademark Security Agreement
Trademark
Appl. #
Reg. #
Status
Coutry
RECELL
2575728
2103006
Registered
Argentin
a
1710701
Registered
Australia
AVITA LOGO
RECELL
REGENERCE LL
1258199
(IR number)
1265045
(IR number)
RENOVACEL L
Appl.
Date
Mar 8,
2005
May 13,
2015
Reg.
Date
Aug 4,
2006
Oct
28,
2015
Int'l
Clas s
010
005,
010
Owner
AVITA
Medical Pty
Ltd
1
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
1722240
Registered
Australia
May 13,
2015
Nov 2,
2016
005,
010
Registered
Australia
May 13,
2015
005
Jun
21,
2017
Registered
Australia
May 13,
2015
Jan
10,
2017
005,
010
AVITA
Medical Pty
Ltd
1722242
(Now a National
Registration,
Transformed from IR
1265047)
1722241
(Now a National
Registration,
Transformed
from IR
1265046)
RES
1284000
(IR number)
1747552
Registered
Australia
Oct 8,
2015
AVITA LOGO
1258199
1258199
Registered
Benelux May 13,
2015
RECELL
1265045
1265045
Registered
Benelux May 13,
2015
Jan
10,
2018
May
19,
2016
005
005,
010
Nov 4,
2016
005,
010
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
1 Owner identified as AVITA Medical Pty Ltd in this schedule refers either to AVITA Medical Pty Ltd or AVITA Medical Ltd. On October 1, 2020, AVITA
Medical Ltd converted to a proprietary company and changed its name to AVITA Medical PTY Limited.
REGENERATI VE
EPITHELIAL
SUSPENSION
1284165
1284165
Registered
Benelux
REGENERCE LL
1265047
1419798
Registered
Benelux
RENOVACEL L
1265046
1419800
Registered
Benelux
RES
1284000
1284000
Registered
Benelux
AVITA LOGO
909371300
909371300
Registered
Brazil
AVITA LOGO
909371407
909371407
Registered
Brazil
RECELL
827197926
827197926
Registered
Brazil
RECELL
909371482
909371482
Registered
Brazil
RENOVACEL L
909370567
909370567
Registered
Brazil
RENOVACEL L
909370753
909370753
Registered
Brazil
RES
RES
REGENERATI VE
EPITHELIAL
SUSPENSION
910105227
910105227
Registered
Brazil
910105294
910105294
Registered
Brazil
910105146
Pending
Brazil
AVITA LOGO
1258199
1258199
Registered
China
RECELL
1265045
1265045
Registered
China
Oct 8,
2015
May 13,
2015
May 13,
2015
Oct 8,
2015
May 13,
2019
May 13,
2015
Mar 7,
2005
May 13,
2015
May 13,
2015
May 13,
2015
Oct 8,
2015
Oct 8,
2015
Oct 8,
2015
May 13,
2015
May 13,
2015
Aug
16,
2016
Sept.
17,
2020
Sept.
17,
2020
Aug
16,
2016
Oct
17,
2017
Oct
17,
2017
Nov
13,
2007
Oct
17,
2017
Oct
17,
2017
Oct
17,
2017
Jun
19,
2018
Nov
28,
2017
Nov
10,
2016
Jan
24,
2017
003,
005
005,
010
005,
010
003,
005
005
010
010
005
005
010
003
005
005
005
005,
010
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
ReCell (stylized)
854939
854939
Registered
China
RES
1284000
1284000
Registered
China
RENOVACEL L
1265046/47625
110
Published
China
AVITA LOGO
1258199
1258199
Registered
Colombia
RECELL
1265045
1265045
Registered
Colombia
REGENERATI VE
EPITHELIAL
SUSPENSION
1284165
1284165
Registered
Colombia
RES
1284000
1284000
Registered
Colombia
AVITA LOGO
1258199
1258199
Registered
Egypt
RECELL
1265045
1265045
Registered
Egypt
REGENERATI VE
EPITHELIAL
SUSPENSION
1284165
1284165
Registered
Egypt
RES
1284000
1284000
Registered
Egypt
Jun 3,
2004
Oct 8,
2015
Jun 29,
2020
May 13,
2015
May 13,
2015
Oct 8,
2015
Oct 8,
2015
May 13,
2015
May 13,
2015
Oct 8,
2015
Oct 8,
2015
AVITA LOGO
1258199
1258199
Registered
RECELL
1265045
1265045
Registered
REGENERATI VE
EPITHELIAL
SUSPENSION
013919022
013919022
Registered
REGENERCE LL
1265047
018261233
Registered
RENOVACEL L
1265046
018261234
Registered
RES
013920673
013920673
Registered
European
Union
May 13,
2015
European
Union
May 13,
2015
European
Union
Apr 8,
2015
European
Union
Jun 24,
2020
European
Union
Jun 24,
2020
European
Union
Apr 8,
2015
Aug
25,
2005
Jul 6,
2017
Jul 30,
2015
Aug
23,
2018
Sep 5,
2017
Sep
27,
2018
Jul 30,
2015
Sep
17,
2015
Jan
21,
2016
Jan
21,
2016
Jun
16,
2016
Jul 19,
2016
Sep
10,
2015
Aug
25,
2020
Aug
25,
2020
Apr 8,
2015
005,
010,
044
005
005,
010
005,
010
005,
010
003,
005
003
005,
010
005,
010
003,
005
003,
005
005,
010
005,
010
003,
005,
041
005,
010
005,
010
003,
005,
041
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
SPRAY-ON SKIN
1072803
1072803
Registered
European
Union
Mar 10,
2011
AVITA LOGO
303407201
303407201
Registered
RECELL
303407229
303407229
Registered
REGENERCE LL
303407238
303407238
Registered
RENOVACEL L
303407210
303407210
Registered
RES
303558385
303558385
Registered
Hong
Kong
Hong
Kong
Hong
Kong
Hong
Kong
Hong
Kong
AVITA LOGO
1258199
1258199
Registered
India
RECELL
1265045
1265045
Registered
India
RECELL
993211
993211
Registered
India
RECELL
993212
993212
Registered
India
RES
1284000
1284000
Registered
India
AVITA LOGO
1258199
1258199
Registered
Iran
RES
1284000
1284000
Registered
Iran
RECELL
1265045
Pending
Iran
AVITA LOGO
1258199
1258199
Registered
Israel
RECELL
1265045
1265045
Registered
Israel
REGENERCE LL
1265047
328959
Registered
Israel
May 13,
2015
May 13,
2015
May 13,
2015
May 13,
2015
Oct 8,
2015
May 13,
2015
May 13,
2015
Feb 27,
2001
Feb 27,
2001
Oct 8,
2015
May 13,
2015
Oct 8,
2015
May 13,
2015
May 13,
2015
May 13,
2015
May 13,
2015
Mar
22,
2012
Dec
14,
2015
May
13,
2015
May
13,
2015
May
13,
2015
Oct 8,
2015
Jan
12,
2017
Oct
21,
2019
Feb
27,
2011
Feb
27,
2011
Oct 8,
2015
Jul 30,
2015
Jan
21,
2016
Jun 7,
2018
May 4,
2017
Jun
24,
2020
003,
005,
010
005,
010
005,
010
005,
010
010
003,
005
005,
010
005,
010
003
005
003,
005
005,
010
003,
005
005,
010
005,
010
005,
010
005,
010
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
RENOVACEL L
1265046
328960
Registered
Israel
RES
1284000
1284000
Registered
Israel
AVITA LOGO
1258199
1258199
Registered
Japan
RECELL
1265045
1265045
Registered
Japan
REGENERCE LL
1265047
2020079285
Registered
Japan
RENOVACEL L
1265046
2020079284
Registered
Japan
RES
1284000
1284000
Registered
Japan
RECELL
706367 (706367T)
888621
Registered
Mexico
AVITA LOGO
1258199
1258199
Registered
Oman
RECELL
1265045
1265045
Registered
Oman
REGENERATI VE
EPITHELIAL
SUSPENSION
1284165
1284165
Registered
Oman
RES
1284000
1284000
Registered
Oman
May 13,
2015
Oct 8,
2015
May 13,
2015
May 13,
2015
Jun 26,
2020
Jun 26,
2020
Oct 8,
2015
Mar 9,
2005
May 13,
2015
May 13,
2015
Oct 8,
2015
Oct 8,
2015
AVITA LOGO
1258199
1258199
Registered
RECELL
1265045
1265045
Registered
ReCell (stylized)
854939
854939
Registered
Republic of
Korea
May 13,
2015
Republic of
Korea
May 13,
2015
Republic of
Korea
Jun 3,
2004
REGENERCE LL
1265047
402020011289
7
Registered
Republic of
Korea
Jul 1,
2020
Jun
24,
2020
Sep 4,
2017
Aug
18,
2016
May
18,
2017
May
13,
2015
May
13,
2015
Jun
21,
2018
Jun
27,
2005
Jul 30,
2015
Sep
17,
2015
Jan
21,
2016
Dec
31,
2019
Oct
13,
2016
Feb
23,
2017
Oct
10,
2006
May
13,
2015
005,
010
003,
005
005,
010
005,
010
005,
010
005,
010
003,
005
010
005,
010
005,
010
003,
005
003,
005
005,
010
005,
010
010,
044
005,
010
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
RENOVACEL L
1265046
402020012762
7
Registered
Republic of
Korea
Jul 22,
2020
RES
1284000
1284000
Registered
Republic of
Korea
Oct 8,
2015
ReCell (stylized)
854939
854939
Registered
Singapore
AVITA LOGO
1258199
1258199
Registered
RECELL
1265045
1265045
Registered
REGENERATI VE
EPITHELIAL
SUSPENSION
1284165
1284165
Registered
RES
1284000
1284000
Registered
AVITA LOGO
104026597
01888179
Registered
RECELL
104026598
1882092
Registered
Syrian
Arab
Republic
Syrian
Arab
Republic
Syrian
Arab
Republic
Syrian
Arab
Republic
Taiwan
R.O.C.
Taiwan
R.O.C.
Jun 3,
2004
May 13,
2015
May 13,
2015
Oct 8,
2015
Oct 8,
2015
May 13,
2015
May 13,
2015
RES
01888885
Registered
Taiwan
R.O.C.
Oct 8,
2015
AVITA LOGO
985783
191114045
Registered
Thailand
AVITA LOGO
985784
191114073
Registered
Thailand
RECELL
985786
191111618
Registered
Thailand
REGENERCE LL
985779
191113559
Registered
Thailand
REGENERCE LL
985780
191113564
Registered
Thailand
May 14,
2015
May 14,
2015
May 14,
2015
May 14,
2015
May 14,
2015
May
13,
2015
May
10,
2018
Jul 13,
2006
Jan
12,
2017
Dec
15,
2016
005,
010
005
005,
010,
044
005,
010
005,
010
Jul 11,
2017
003,
005
Jul 11,
2017
003,
005
Dec
16,
2017
Nov
16,
2017
Jan 1,
2018
Aug
16,
2019
Aug
16,
2019
Jul 19,
2019
Aug 9,
2019
Aug 9,
2019
005,
010
005,
010
005
005
010
010
005
010
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
RENOVACEL L
985781
191113555
Registered
Thailand
RENOVACEL L
985782
191114048
Registered
Thailand
RES
1008348
181100952
Registered
Thailand
RECELL
985785
Published
Thailand
RES
1008347
231111839
Registered
Thailand
AVITA LOGO
1258199
1258199
Registered
Turkey
RECELL
1265045
1265045
Registered
Turkey
ReCell (stylized)
854939
854939
Registered
Turkey
REGENERCE LL
1265047
201581059
Registered
Turkey
RENOVACEL L
1265046
201581057
Registered
Turkey
RES
1284000
1284000
Registered
Turkey
AVITA LOGO
1258199
UK008125819 9
Registered
RECELL
1265045
UK008126504 5
Registered
United
Kingdom
United
Kingdom
May 14,
2015
May 14,
2015
Oct 8,
2015
May 13,
2015
Oct 8,
2015
May 13,
2015
May 13,
2015
Jun 3,
2004
May 13,
2015
May 13,
2015
Oct 8,
2015
May 13,
2015
May 13,
2015
REGENERATI VE
EPITHELIAL
SUSPENSION
013919022
UK009013919 022
Registered
REGENERCE LL
1265047
UK009018261 233
Registered
RENOVACEL L
1265046
UK009018261 234
Registered
RES
013920673
UK009013920 673
Registered
United
Kingdom
Apr 8,
2015
United
Kingdom
United
Kingdom
Jun 24,
2020
Jun 24,
2020
United
Kingdom
Apr 8,
2015
Aug 9,
2019
Aug
16,
2019
Jan
12,
2018
April
25,
2023
_
Jan
21,
2016
Oct
26,
2017
Feb
10,
2020
Jun
30,
2020
Jun
30,
2020
Dec
31,
2016
Jun
16,
2016
Jul 19,
2016
Sep
10,
2015
Aug
25,
2020
Aug
25,
2020
Apr 8,
2015
005
010
005
005
003
005,
010
005,
010
005,
010,
044
005,
010
005,
010
003,
005
005,
010
005,
010
003,
005,
041
005,
010
005,
010
003,
005,
041
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
SPRAY-ON SKIN
1072803
UK008107280 3
Registered
RECELL
LOGO
86453769
5703468
Registered
RECELL
86456218
5703469
Registered
RES
1284000
5225178
Registered
SPRAY-ON SKIN
88000377
RENOVACEL L
86453832
REGENERCE LL
86452818
SPRAY SKIN
86270016
-
-
-
-
United
Kingdom
United
States of
America
United
States of
America
United
States of
America
United
States of
America
Mar 10,
2011
Nov 13,
2014
Nov 17,
2014
Oct 8,
2015
June 14,
2018
Abandon ed
Abandon ed
United
States of
America
December
22,
2015
Abandon ed
United
States of
America
November
13,
2014
Abandon ed
United
States of
America
May 2,
2014
Mar
22,
2012
Mar
19,
2019
Mar
19,
2019
Jun
20,
2017
-
-
-
-
003,
005,
010
005,
010,
041,
044
005,
010,
041,
044
005
005
010
005,
010,
041,
044
003,
005,
010
003,
005,
010
003,
005
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
SPRAY-ON SKIN
85127139
4072126
Cancelled
REGENERATI VE
EPITHELIAL
SUSPENSION
79180907
-
Abandon ed
United
States of
America
September
10,
2010
Dec.
13,
2011
United
States of
America
Oct. 8,
2015
-
Item B. Trademark Licenses None
SUPPLEMENT TO GUARANTEE
Exhibit 10.36
Execution Version
This SUPPLEMENT, dated as of 11 December, 2023 (this “Supplement”), is to the Guarantee, dated as of October 18, 2023 (as
amended, supplemented, amended and restated or otherwise modified from time to time, the “Guarantee”), by the Guarantors (such term,
and other terms used in this Supplement, to have the meanings set forth in Article I of the Guarantee, unless otherwise defined herein or
if the context otherwise requires) from time to time party thereto, in favor of ORCO IV LLC, a Delaware limited liability company
(together with its Affiliates, successors, transferees and assignees, the “Administrative Agent”), as Administrative Agent for the Lenders.
W I T N E S S E T H:
WHEREAS, pursuant to a Credit Agreement, dated as of October 18, 2023 (as amended, supplemented, or otherwise
modified from time to time, the “Credit Agreement”), by and among AVITA MEDICAL, INC., a Delaware corporation (the
“Borrower”), the Lenders party thereto and the Administrative Agent, the Lenders have extended Commitments to make the Loans to
the Borrower; and
WHEREAS, pursuant to the provisions of Section 5.5 of the Guarantee, the undersigned is becoming a Guarantor under the
Guarantee; and
WHEREAS, the undersigned desires to become a “Guarantor” under the Guarantee in order to induce the Lenders to
continue to extend the Loans under the Credit Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
undersigned agrees, for the benefit of the Secured Parties, as follows.
SECTION 1. Party to Guarantee, Etc. In accordance with the terms of the Guarantee, by its signature below, the undersigned
hereby irrevocably agrees to become a Guarantor under the Guarantee with the same force and effect as if it were an original
signatory thereto and the undersigned hereby (a) agrees to be bound by and comply with all of the terms and provisions of the
Guarantee applicable to it as a Guarantor and (b) represents and warrants that the representations and warranties made by it as a
Guarantor thereunder are true and correct as of the date hereof, unless stated to relate solely to an earlier date, in which case such
representations and warranties shall be true and correct as of such earlier date. In furtherance of the foregoing, each reference to a
“Guarantor” or “Guarantors” in the Guarantee shall be deemed to include the undersigned.
SECTION 2. Representations. The undersigned Guarantor hereby represents and warrants that this Supplement has been duly
authorized, executed and delivered by it and that this Supplement and the Guarantee constitute its legal, valid and binding obligation,
enforceable against it in accordance with its terms.
SECTION 3. Full Force of Guarantee. Except as expressly supplemented hereby, the Guarantee shall remain in full force and
effect in accordance with its terms.
SECTION 4. Severability. Wherever possible each provision of this Supplement shall be interpreted in such manner as to be
effective and valid under applicable Law, but if any provision of this Supplement shall be prohibited by or invalid under such Law,
such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Supplement or the Guarantee.
SECTION 5. Governing Law, Entire Agreement, Etc. THIS SUPPLEMENT AND ANY CLAIMS, CONTROVERSY,
DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT
OF OR RELATING TO THIS SUPPLEMENT OR ANY DOCUMENT CONTEMPLATED HEREBY SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
FOR SUCH PURPOSE SECTIONS 5-1401 AND 5 1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK).
This Supplement, along with the other Loan Documents, constitutes the entire understanding among the parties hereto with respect to
the subject matter thereof and supersedes any prior agreements, written or oral, with respect thereto.
SECTION 6. Effectiveness. (a) This Supplement shall become effective with respect to a Guarantor when a counterpart
hereof executed by such undersigned Guarantor shall have been received by the Administrative Agent. (b) This Supplement may be
executed in any number of counterparts or copies, each of which may be executed by physical signature in wet ink or electronically
(whether in whole or part). A party who has executed a counterpart of this Supplement may exchange it with another party (the
“Recipient”) by: (i) emailing a copy of the executed counterpart to the Recipient; or (ii) utilizing an electronic platform (including
DocuSign) to circulate the executed counterpart, and will be taken to have adequately identified themselves by so emailing the copy to
the Recipient or utilizing the electronic platform. (c) Each party consents to signatories and parties executing this Supplement by
electronic means and to identifying themselves in the manner specified in this clause. (d) Each counterpart constitutes an original
(whether kept in electronic or paper form), all of which together constitute one instrument as if the signatures (or other execution
markings) on the counterparts or copies were on a single physical copy of this Supplement in paper form. Without limiting the
foregoing, if any of the signatures or other markings on behalf of one party are on different counterparts or copies of this Supplement,
this shall be taken to be, and have the same effect as, signatures on the same counterpart and on a single copy of this Supplement.
[ Signature Page Follows ]
IN WITNESS WHEREOF, the party hereto has caused this Supplement to be duly executed and delivered by its Authorized
Officer as of the date first above written.
Guarantor
Executed as a deed by AVITA MEDICAL PTY LIMITED ACN 058
466 523 in
accordance with Section 127 of the
Corporations Act 2001 (Cth)
/s/ Lou Panaccio
Signature of director
Lou Panaccio
Name of director (print)
/s/ Suzanne Mary Crowe
Signature of director/company secretary
Suzanne Mary Crowe
Name of director/company secretary (print)
Signature Page to Guarantee Supplement
Exhibit 10.37
Execution Version
PATENT SECURITY AGREEMENT
This PATENT SECURITY AGREEMENT, dated as of 11 December, 2023 (this “Agreement”), is made by AVITA MEDICAL
PTY LIMITED ACN 058 466 523 , an Australian proprietary company limited by shares (the “Grantor”), in favor of ORCO IV LLC, a
Delaware limited liability company (together with its Affiliates, successors, transferees and assignees, the “Administrative Agent”), as
Administrative Agent for the Secured Parties.
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, dated as of October 18, 2023 (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”), by and among AVITA Medical, Inc. (the “Borrower”), the Lenders party thereto
and the Administrative Agent, the Lenders have extended Commitments to make Loans to the Borrower;
WHEREAS, in connection with the Credit Agreement, the Grantor and its Affiliates have executed and delivered a Pledge
and Security Agreement in favor of the Administrative Agent, for the benefit of the Secured Parties, dated as of October 18, 2023 (as
amended, supplemented or otherwise modified from time to time, the “Security Agreement”);
WHEREAS, pursuant to the Credit Agreement and pursuant to clause (e) of Section 4.5 of the Security Agreement, the
Grantor is required to execute and deliver this Agreement and to grant to the Administrative Agent, for the benefit of the Secured
Parties, a continuing security interest in all of the Patent Collateral to secure all of the Obligations; and
WHEREAS, the Grantor has duly authorized the execution, delivery and performance of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the Grantor agrees, for the benefit of the Secured Parties, as follows:
SECTION 1. Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Agreement,
including its preamble and recitals, have the meanings provided (or incorporated by reference) in the Security Agreement.
SECTION 2. Grant of Security Interest. The Grantor hereby grants to the Administrative Agent, for the benefit of the
Secured Parties, a continuing security interest in all of the Grantor’s right, title and interest in and to the Patent Collateral, including
each patent and patent application referred to in Item A of Schedule I attached hereto and each patent license referred to in Item B of
Schedules 1 attached hereto. Notwithstanding anything to the contrary, the Patent Collateral does not include Excluded Property.
SECTION 3. Security Agreement. This Agreement has been executed and delivered by the Grantor for the purpose of
registering the security interest of the Administrative Agent in the Patent Collateral with the United States Patent and Trademark
Office. The security interest granted hereby has been granted in furtherance of, and not in limitation of, the security interest granted to
the Administrative Agent for its benefit under the Security Agreement. The Security Agreement (and all rights and remedies of the
Administrative Agent thereunder) shall remain in full force and effect in accordance with its terms.
SECTION 4. Release of Liens. Upon (a) the sale of Patent Collateral to Persons who are not the Borrower or any Subsidiary
thereof in accordance with the Credit Agreement or (b) the occurrence of the Termination Date, the security interests granted herein
shall automatically terminate with respect to (i) such Patent Collateral (in the case of clause (a)) or (ii) all Patent Collateral (in the case
of clause (b)). Upon any such sale or termination, the Administrative Agent will, at the Grantor’s sole expense, deliver to the Grantor,
without any representations, warranties or recourse of any kind whatsoever, all such Patent Collateral held by the Administrative
Agent hereunder, and execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such
termination.
SECTION 5. Acknowledgment. The Grantor does hereby further acknowledge and affirm that the rights and remedies of the
Administrative Agent with respect to the security interest in the Patent Collateral granted hereby are more fully set forth in the
Security Agreement, the terms and provisions of which (including the remedies provided for therein) are incorporated by reference
herein as if fully set forth herein.
SECTION 6. Loan Document. This Agreement is a Loan Document executed pursuant to the Credit Agreement and shall
(unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions
thereof, including Article X thereof.
SECTION 7. Effectiveness. (a) This Agreement shall become effective when a counterpart hereof executed by the Grantor
shall have been received by the Administrative Agent.
(b) This document may be executed in any number of counterparts or copies, each of which may be executed by physical signature in
wet ink or electronically (whether in whole or part). A party who has executed a counterpart of this document may exchange it with
another party (the “Recipient”) by: (i) emailing a copy of the executed counterpart to the Recipient; or (ii) utilizing an electronic
platform (including DocuSign) to circulate the executed counterpart, and will be taken to have adequately identified themselves by so
emailing the copy to the Recipient or utilizing the electronic platform. (c) Each party consents to signatories and parties executing this
document by electronic means and to identifying themselves in the manner specified in this clause. (d) Each counterpart constitutes an
original (whether kept in electronic or paper form), all of which together constitute one instrument as if the signatures (or other
execution markings) on the counterparts or copies were on a single physical copy of this document in paper form. Without limiting the
foregoing, if any of the signatures or other markings on behalf of one party are on different counterparts or copies of this document,
this shall be taken to be, and have the same effect as, signatures on the same counterpart and on a single copy of this document.
[Signature Page Follows]
2
IN WITNESS WHEREOF, the Grantor hereto has caused this Agreement to be duly executed and delivered by its Authorized Officer
as of the date first above written.
Grantor
Executed as a deed by AVITA MEDICAL PTY LIMITED ACN 058 466
523 in accordance with Section 127 of the Corporations Act 2001 (Cth)
/s/ Lou Panaccio
Signature of director
Lou Panaccio
Name of director (print)
/s/ Suzanne Mary Crowe
Signature of director/company secretary
Suzanne Mary Crowe
Name of director/company secretary (print)
[Signature Page to Patent Security Agreement]
Item A. Patents
Title
Pub. No.
App. No.
SCHEDULE I
to Patent Security Agreement
Filing
Date
2/28/
2011
3/14/
2013
3/14/
2013
Country
Status
Patent No.
Granted
9029140
United
States of
America
Australia
Granted
Brazil
Granted
AU2013
202587B
2
BR11201
4023272
B1
Issue
Date
5/12/
2015
11/2
6/20
15
6/7/2
022
Antici
pated
Expira
tion
4/9/2
024
3/14/
2033
3/14/
2033
Assignee
AVITA
Medical
1
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
US2011
015084
8A1
AU201
320258
7A1
BR1120
140232
72A2
13/036,
569
201320
2587
BR1120
140232
725
CA2874
091A1
CA2874
091
3/14/
2013
Canada
Granted
CA2874
091
9/26/
2023
3/14/
2033
AVITA
Medical
Pty Ltd
1 Assignee identified as AVITA Medical Pty Ltd in this schedule refers either to AVITA Medical Pty Ltd or AVITA Medical Ltd. On October 1, 2020, AVITA
Medical Ltd converted to a proprietary company and changed its name to AVITA Medical PTY Limited.
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
AND USE
THEREOF
MÉTODO
PARA
PREPARAR
CÉLULAS
PARA USO
COSMÉTICO
EM UM
PROCEDIMEN
TO
RELACIONAD
O AO EPITÉLIO
(METHOD FOR
PREPARING
CELLS FOR
COSMETIC
USE IN A
PROCEDURE
RELATED TO
THE
EPITHELIUM)
Method for
Preparing Cell
Suspension
Comprising
Undifferentiated/
Progenitor Cells
and/or
Differentiated
Cells
CN1046
85049A
CN2013
800247
37
EP2828
378A1
EP2013
764726
ES2864
772T3
EP2013
764726
EP2828
378A1
EP2013
764726
EP2828
378A1
EP2013
764726
HK120
7662A
HK151
08195
EP2828
378A1
EP2013
764726
EP3896
152A1
EP2021
156318
US2020
009395
1A1
US2020
009395
2A1
AU201
320514
8A1
16/592,
108
16/592,
117
201320
5148
3/14/
2013
3/14/
2013
3/14/
2013
3/14/
2013
3/14/
2013
3/14/
2013
3/14/
2013
3/14/
2013
10/3/
2019
10/3/
2019
4/13/
2013
China
Pending
3/14/
2033
AVITA
Medical Pty
Ltd
Germany
Granted
EP28283
78B1
2/17/
2021
3/14/
2033
Spain
Granted
ES28647
72T3
2/17/
2021
3/14/
2033
France
Granted
EP28283
78B1
2/17/
2021
3/14/
2033
United
Kingdom
Granted
EP28283
78B1
2/17/
2021
3/14/
2033
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
Hong Kong
Pending
3/14/
2033
AVITA
Medical Pty
Ltd
Italy
Granted
EP28283
78B1
2/17/
2021
3/14/
2033
Pending
Pending
Pending
European
Patent
Office
United
States of
America
United
States of
America
3/14/
2033
3/14/
2033
3/14/
2033
Australia
Granted
AU2013
205148B
2
2/12/
2015
4/13/
2033
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
细胞悬液及其
用途 (CELL
SUSPENSIONS
AND THEIR
USES)
CELL
SUSPENSION
AND USE
THEREOF
CELL
SUSPENSION
AND USE
THEREOF
CELL
SUSPENSION
AND USE
THEREOF
CELL
SUSPENSION
AND USE
THEREOF
細胞懸液及其 用途
(CELL SUSPENSIONS
AND THEIR USES)
CELL
SUSPENSION
AND USE
THEREOF
CELL
SUSPENSION
AND USE
THEREOF
CELL
SUSPENSION
AND USE
THEREOF
CELL
SUSPENSION
AND USE
THEREOF
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
CA2906
088A1
CA2906 088
3/14/
2014
Canada
Pending
3/14/
2034
AVITA
Medical Pty
Ltd
CN1051
89729A
CN2014
800256
99.5
3/14/
2014
China
Granted
CN1051
89729B
1/10/
2020
3/14/
2034
AVITA
Medical Pty
Ltd
EP2970
856A1
EP2014
770177
3/14/
2014
Germany
Granted
EP29708
56B1
11/1
3/20
19
3/14/
2034
AVITA
Medical
Pty Ltd
ES2759
063T3
ES2014
770177
T
3/14/
2014
Spain
Granted
ES27590
63T3
11/1
3/20
19
3/14/
2034
AVITA
Medical
Pty Ltd
EP2970
856A1
EP2014
770177
3/14/
2014
France
Granted
EP29708
56B1
11/1
3/20
19
3/14/
2034
AVITA
Medical
Pty Ltd
SYSTEMS AND
METHODS FOR
TISSUE PROCESSING
AND PREPARATION
OF CELL
SUSPENSION
THEREFROM
用于组织处理以及由
其制备
细胞悬液的系
统和方法
(SYSTEMS AND
METHODS FOR
TISSUE PROCESSING
AND PREPARATION
OF CELL
SUSPENSIONs
THEREFROM)
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
EP2970
856A1
EP2014
770177
3/14/
2014
United
Kingdom
Granted
EP29708 56B1 11/1
3/20
19
3/14/
2034
AVITA
Medical Pty
Ltd
HK121
9291A
HK161
07310
6/23/
2016
Hong Kong
Granted
HK1219 291
1/29/
2021
3/14/
2034
AVITA
Medical Pty
Ltd
EP2970
856A1
EP2014
770177
3/14/
2014
Italy
Granted
EP29708
56B1
11/1
3/20
19
3/14/
2034
AVITA
Medical
Pty Ltd
JP2016
512689
A
JP2016-
502942
3/14/
2014
Japan
Granted
JP64797
57B2
2/15/
2019
3/14/
2034
US2016
002445
0A1
14/776,
038
3/14/
2014
United
States of
America
Granted
US10626
358B2
4/21/
2020
3/14/
2034
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
SYSTEMS AND
METHODS FOR
TISSUE PROCESSING
AND PREPARATION
OF CELL
SUSPENSION
THEREFROM
用於組織處理以及由
其製備
細胞懸液的系
統和方法
(SYSTEMS AND
METHODS FOR
TISSUE PROCESSING
AND PREPARATION
OF CELL
SUSPENSION
THEREFROM)
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE PROCESSING
AND PREPARATION
OF CELL
SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE PROCESSING
AND PREPARATION
OF CELL
SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE PROCESSING
AND PREPARATION
OF CELL
SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CN1113
04081A
CN2019
113434
17.7
3/14/
2014
China
Pending
3/14/
2034
AVITA
Medical Pty
Ltd
EP3674
396A1
EP2019
208169
3/14/
2014
European
Patent Office
Pending
3/14/
2034
AVITA
Medical Pty
Ltd
HK400
32292A
HK420
200219
09
6/23/
2016
Hong Kong
Pending
3/14/
2034
AVITA
Medical Pty
Ltd
US2020
020808
6A1
16/787,
882
2/11/
2020
United
States of
America
Granted
US11124
752B2
9/21/
2021
3/14/
2034
AVITA
Medical
Pty Ltd
18/370,
842
9/20/
2023
United
States of
America
Pending
Reissue
Application
3/14/
2034
AVITA
Medical
Pty Ltd
AT5105
48T
AT2002
709917
T
2/7/2
002
Austria
Expired
AT51054
8T
05/2
5/20
11
2/7/2
022
AVITA
Medical
Pty. Ltd.
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
AU200
222780
2A1
AU200
222780
2
2/7/2
002
Australia
Expired
BRPI0
206692
A2
BRPI02
06692
2/7/2
002
Brazil
Expired
AU2002
227802B
2
BRPI020
6692B1
DE6024
0127T2
DE6024
0127
2/7/2
002
Germany
Expired
DE60240
127T2
135792
2
135792
2
2/7/2
002
Spain
Expired
1357922
135792
2
027099
175
02/07
/2002
Belgium
Expired
1357922
135792
2
EP2002
709917
2/7/2
002
France
Expired
EP13579
22
135792
2
EP2002
709917
2/7/2
002
United
Kingdom
Expired
EP13579
22
03/0
5/20
07
06/1
9/20
18
05/2
5/20
11
05/2
5/20
11
05/2
5/20
11
05/2
5/20
11
05/2
5/20
11
HK105
7713
410062
8.6
2/7/2
002
Hong
Kong
Expired
HK1057
713
4081
6
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
02/07
/2022
AVITA
Medical
Pty. Ltd.
2/7/2
022
2/7/2
022
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
135792
2
EP2002
709917
2/7/2
002
Italy
Expired
EP13579
22
05/2
5/20
11
2/7/2
022
AVITA
Medical
Pty. Ltd.
2004-
529872
2002-
562365
2/7/2
002
Japan
Expired
JP52140
85
4134
1
2/7/2
022
135792
2
EP2002
709917
2/7/2
002
Netherlands
Expired
EP13579
22
PT1357
922E
EP2002
709917
2/7/2
002
Portugal
Expired
EP13579
22
135792
2
EP2002
709917
2/7/2
002
Sweden
Expired
EP13579
22
135792
2
EP2002
709917
2/7/2
002
Turkey
Expired
EP13579
22
AT717
889T
AT2010
184235
T
2/7/2
002
Austria
Expired
AT71788
9
234307
9
101842
35.9
2/7/2
002
Belgium
Expired
EP23430
79
05/2
5/20
11
09/0
1/20
11
05/2
5/20
11
05/2
5/20
11
03/2
5/20
15
03/2
5/20
15
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
CELL SUSPENSION
PREPARATION
DEVICE
DE602
47071
602470
71-4
2/7/2
002
Germany
Expired
DE60247
071T2
CELL SUSPENSION
PREPARATION
DEVICE
234307
9
101842
35.9
2/7/2
002
Spain
Expired
EP23430 79
CELL SUSPENSION
PREPARATION
DEVICE
234307
9
101842
35.9
2/7/2
002
France
Expired
EP23430 79
CELL SUSPENSION
PREPARATION
DEVICE
234307
9
101842
35.9
2/7/2
002
United
Kingdom
Expired
EP23430 79
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
502015
000011
254
101842
35.9
2/7/2
002
Italy
Expired
EP23430
79
234307
9
101842
35.9
2/7/2
002
Netherlands
Expired
EP23430
79
PT1357
922E
PT2002
709917
T
2/7/2
002
Portugal
Expired
PT13579
22E
234307
9
101842
35.9
2/7/2
002
Sweden
Expired
EP23430
79
03/2
5/20
15
03/2
5/20
15
03/2
5/20
15
03/2
5/20
15
03/2
5/20
15
03/2
5/20
15
09/0
1/20
11
03/2
5/20
15
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
AVITA
Medical Pty.
Ltd.
AVITA
Medical Pty.
Ltd.
AVITA
Medical Pty.
Ltd.
AVITA
Medical Pty.
Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
234307
9
101842
35.9
2/7/2
002
Turkey
Expired
EP23430
79
DE602
49971T
2
DE6024
9971
2/7/2
002
Germany
Expired
DE60249
971T2
234307
9
151598
90.1
2/7/2
002
Spain
Expired
EP29572
88
234307
9
151598
90.1
2/7/2
002
France
Expired
EP29572
88
234307
9
151598
90.1
2/7/2
002
United
Kingdom
Expired
EP29572
88
HK121
2885A1
HK161
00778
2/7/2
002
Hong
Kong
Expired
HK1610
0778
234307
9
151598
90.1
2/7/2
002
Italy
Expired
EP29572
88
JP2014
193415
A
JP2014
134495
2/7/2
002
Japan
Expired
JP60423
77
03/2
5/20
15
08/0
7/20
19
08/0
7/20
19
08/0
7/20
19
08/0
7/20
19
08/2
1/20
20
08/0
7/20
19
11/1
8/20
16
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
METHOD FOR
PREPARING
CELL
SUSPENSION,
AND CELL
SUSPENSION
US2011
031149
7A1
US2015
018273
9A1
US201
800988
40A1
US2019
030755
0A1
JP2010
269159
A
US200
201063
53A1
US201
001963
34A1
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
METHOD FOR
PREPARING
CELL
SUSPENSION,
AND CELL
SUSPENSION
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
13/223,
577
9/1/2
011
14/645,
933
3/12/
2015
15/838,
429
12/12
/2017
16/436,
693
6/10/
2019
United
States of
America
United
States of
America
United
States of
America
United
States of
America
Expired
9078741
Expired
9867692
07/1
4/20
15
01/1
6/20
18
2/7/2
022
2/7/2
022
Expired
1072953
6
8/4/2
020
2/7/2
022
Expired
1072953
6
4/28/
2020
2/7/2
022
JP2010-
163176
2/7/2
002
Japan
Withdrawn
10/068,
299
2/6/2
002
12/699,
554
2/3/2
010
Abandoned
Abandoned
Abandoned
United
States of
America
United
States of
America
European
Patent
Office
EP3632
452A1
EP2019
190195
2/7/2
002
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
HK400
18126A
HK420
200074
98
2/7/2
002
Hong
Kong
Abandoned
US2021
016963
6A1
US2015
007915
3A1
16/935,
015
7/21/
2020
14/386,
519
3/14/
2013
N/A
17/462,
694
8/31/
2021
United
States of
America
United
States of
America
United
States of
America
Abandoned
Abandoned
Abandoned
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
AND USE
THEREOF
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
Item B. Patent Licenses None
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Ltd.
AVITA
Medical
Ltd.
SUPPLEMENT TO
PLEDGE AND SECURITY AGREEMENT
Exhibit 10.38
Execution Version
This SUPPLEMENT, dated as of 11 December, 2023 (this “Supplement”), is to the Pledge and Security Agreement, dated as of
October 18, 2023 (as amended, supplemented, amended and restated or otherwise modified from time to time, the “Security
Agreement”), among the Grantors (such term, and other terms used in this Supplement, to have the meanings set forth in Article I of the
Security Agreement, unless otherwise defined herein or if the context otherwise requires) from time to time party thereto, in favor of
ORCO IV, LLC, a Delaware limited liability company (together with its Affiliates, successors, transferees and assignees, the
“Administrative Agent”), as Administrative Agent for the Secured Parties.
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, dated as of October 18, 2023 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”), by and among AVITA MEDICAL, INC., a Delaware
corporation (the “Borrower”), the Lenders party thereto and the Administrative Agent, the Lenders have extended
Commitments to make Loans to the Borrower
WHEREAS, pursuant to the provisions of Section 7.6 of the Security Agreement, the undersigned is becoming a
Grantor under the Security Agreement; and
WHEREAS, the undersigned desires to become a “Grantor” under the Security Agreement in order to induce the
Lenders to continue to extend Loans under the Credit Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the undersigned agrees, for the benefit of the Secured Parties, as follows.
SECTION 1. Party to Security Agreement, Etc. In accordance with the terms of the Security Agreement, by its
signature below, the undersigned hereby irrevocably agrees to become a Grantor under the Security Agreement with the same
force and effect as if it were an original signatory thereto and the undersigned hereby (a) agrees to be bound by and comply
with all of the terms and provisions of the Security Agreement applicable to it as a Grantor and (b) represents and warrants
that the representations and warranties made by it as a Grantor thereunder are true and correct as of the date hereof, unless
stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct as of such
earlier date. In furtherance of the foregoing, each reference to a “Grantor” or “Grantors” in the Security Agreement shall be
deemed to include the undersigned.
SECTION 2. Schedules. The undersigned hereby authorizes the Administrative Agent to add the information set
forth on the Schedules to this Supplement to the correlative Schedules attached to the Security Agreement.
SECTION 3. Representations. The undersigned hereby represents and warrants that this Supplement has been duly
authorized, executed and delivered by it and that this Supplement and
the Security Agreement constitute its legal, valid and binding obligation, enforceable against it in accordance with its terms.
SECTION 4. Full Force of Security Agreement. Except as expressly supplemented hereby, the Security Agreement
shall remain in full force and effect in accordance with its terms.
SECTION 5. Severability. Wherever possible each provision of this Supplement shall be interpreted in such manner
as to be effective and valid under applicable Law, but if any provision of this Supplement shall be prohibited by or invalid
under such Law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Supplement or the Security Agreement.
SECTION 6. Governing Law, Entire Agreement, Etc. THIS SUPPLEMENT AND ANY CLAIMS,
CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE)
BASED UPON, ARISING OUT OF OR RELATING TO THIS SUPPLEMENT OR ANY DOCUMENT CONTEMPLATED
HEREBY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK).
This Supplement, along with the other Loan Documents, constitutes the entire understanding among the parties hereto with
respect to the subject matter thereof and supersedes any prior agreements, written or oral, with respect thereto.
SECTION 7. Effectiveness. (a) This Supplement shall become effective with respect to a Grantor when a
counterpart hereof executed by such Grantor shall have been received by the Administrative Agent. (b) This Supplement may
be executed in any number of counterparts or copies, each of which may be executed by physical signature in wet ink or
electronically (whether in whole or part). A party who has executed a counterpart of this Supplement may exchange it with
another party (the “Recipient”) by: (i) emailing a copy of the executed counterpart to the Recipient; or (ii) utilizing an
electronic platform (including DocuSign) to circulate the executed counterpart, and will be taken to have adequately identified
themselves by so emailing the copy to the Recipient or utilizing the electronic platform. (c) Each party consents to signatories
and parties executing this Supplement by electronic means and to identifying themselves in the manner specified in this
clause. (d) Each counterpart constitutes an original (whether kept in electronic or paper form), all of which together constitute
one instrument as if the signatures (or other execution markings) on the counterparts or copies were on a single physical copy
of this Supplement in paper form. Without limiting the foregoing, if any of the signatures or other markings on behalf of one
party are on different counterparts or copies of this Supplement, this shall be taken to be, and have the same effect as,
signatures on the same counterpart and on a single copy of this Supplement.
[Signature Page Follows]
IN WITNESS WHEREOF, the party hereto has caused this Supplement to be duly executed and delivered by its
Authorized Officer as of the date first above written.
Grantor
Executed as a deed by AVITA MEDICAL PTY LIMITED
ACN 058 466 523 in
accordance with Section 127 of the
Corporations Act 2001 (Cth)
/s/ Lou Panaccio
Signature of director
Lou Panaccio
Name of director (print)
/s/ Suzanne Mary Crowe
Signature of director/company secretary
Suzanne Mary Crowe
Name of director/company secretary (print)
Signature Page to Security Agreement Supplement
SCHEDULE I
to Security Agreement
Subsidiary
Name of Grantor
C3 Operations Pty Limited ACN 090 161
505
Visiomed Group Pty Ltd ACN 003 010
580
Avita Medical Europe Limited
AVITA Medical Pty Limited ACN 058
466 523
AVITA Medical Pty Limited ACN 058
466 523
AVITA Medical Pty Limited ACN 058
466 523
Interest
78,509,954 Ordinary
Shares
Percentage
100%
690,966,652
Ordinary Shares
5,210, 772 Ordinary Shares 100%
100%
Item A. Location of each Grantor.
SCHEDULE II
to Security Agreement
Name of Grantor:
Location for purposes of UCC:
AVITA Medical Pty Limited ACN 058 466
523
DC
Executive office / principal place of
business:
Level 7, 330 Collins Street Melbourne VIC
3000 Australia
Item B. [Reserved].
Item C. Trade names. None.
Item D. Merger or other corporate reorganization.
On October 1, 2020, AVITA Medical Ltd converted to a proprietary company and changed its name to AVITA Medical PTY
Limited.
Item E. Grantor's federal taxpayer ID numbers.
Name of Grantor:
AVITA Medical Pty Limited
Taxpayer ID number:
82 047 065 / 28 058 466 523
Item F. Government Contracts. None.
Item G. Deposit Accounts, Securities Accounts and Commodity Accounts.
Name of Grantor:
AVITA Medical Pty Limited
Description of Deposit Accounts, Securities Accounts and Commodity
Accounts:
National Australian Bank; Operating (Account #: 55-151- 1018)
Item H. Letter of Credit Rights. None.
Item I. Commercial Tort Claims. None.
Item J. Pledged Notes.
•Global Intercompany Note dated as of the Closing Date.
SCHEDULE III
to Security Agreement
Item A. Patents
Title
Pub.
No.
App.
No.
Filing
Date
Country
Status
Patent
No.
13/036,
569
2/28/
2011
United
States of
America
Granted
9029140
201320
2587
BR1120
140232
725
3/14/
2013
3/14/
2013
Australia
Granted
Brazil
Granted
AU2013
202587B
2
BR11201
4023272
B1
3/14/
2033
11/2
6/20
15
6/7/2
022
3/14/
2033
Issue
Date
5/12/
2015
Antici
pated
Expira
tion
4/9/2
024
Assignee
AVITA
Medical
1
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
US2011
015084
8A1
AU201
320258
7A1
BR1120
140232
72A2
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
AND USE
THEREOF
MÉTODO
PARA
PREPARAR
CÉLULAS
PARA USO
COSMÉTICO
EM UM
PROCEDIMEN
TO
RELACIONAD
O AO EPITÉLIO
(METHOD FOR
PREPARING
CELLS FOR
COSMETIC
USE IN A
PROCEDURE
RELATED TO
1 Assignee identified as AVITA Medical Pty Ltd in this schedule refers either to AVITA Medical Pty Ltd or AVITA Medical Ltd. On October 1, 2020,
AVITA Medical Ltd converted to a proprietary company and changed its name to AVITA Medical PTY Limited.
THE EPITHELIUM)
Method for
Preparing Cell
Suspension
Comprising
Undifferentiated/
Progenitor Cells
and/or
Differentiated
Cells
细胞悬液及其
用途 (CELL
SUSPENSIONS
AND THEIR
USES)
CELL
SUSPENSION
AND USE
THEREOF
CELL
SUSPENSION
AND USE
THEREOF
CELL
SUSPENSION
AND USE
THEREOF
CA2874
091A1
CA2874
091
3/14/
2013
Canada
Granted
CA2874
091
9/26/
2023
3/14/
2033
CN1046
85049A
CN2013
800247
37
EP2828
378A1
EP2013
764726
ES2864
772T3
EP2013
764726
EP2828
378A1
EP2013
764726
3/14/
2013
3/14/
2013
3/14/
2013
3/14/
2013
China
Pending
3/14/
2033
Germany
Granted
EP28283
78B1
2/17/
2021
3/14/
2033
Spain
Granted
ES28647
72T3
2/17/
2021
3/14/
2033
France
Granted
EP28283
78B1
2/17/
2021
3/14/
2033
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
EP2828
378A1
EP2013
764726
3/14/
2013
United
Kingdom
Granted
EP28283
78B1
2/17/
2021
3/14/
2033
HK120
7662A
HK151
08195
3/14/
2013
Hong
Kong
Pending
3/14/
2033
EP2828
378A1
EP2013
764726
3/14/
2013
Italy
Granted
EP28283
78B1
2/17/
2021
3/14/
2033
EP3896
152A1
EP2021
156318
3/14/
2013
US2020
009395
1A1
16/592,
108
10/3/
2019
US2020
16/592,
009395
2A1
AU201
320514
8A1
117
201320
5148
10/3/
2019
4/13/
2013
Pending
Pending
Pending
European
Patent
Office
United
States of
America
United
States of
America
3/14/
2033
3/14/
2033
3/14/
2033
Australia
Granted
AU2013
205148B
2
2/12/
2015
4/13/
2033
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
CA2906
088A1
CA2906
088
3/14/
2014
Canada
Pending
3/14/
2034
AVITA
Medical
Pty Ltd
CELL
SUSPENSION
AND USE
THEREOF
細胞懸液及其
用途 (CELL
SUSPENSIONS
AND THEIR
USES)
CELL
SUSPENSION
AND USE
THEREOF
CELL
SUSPENSION
AND USE
THEREOF
CELL
SUSPENSION
AND USE
THEREOF
CELL
SUSPENSION
AND USE
THEREOF
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
CN1051
89729A
CN2014
800256
99.5
3/14/
2014
China
Granted
CN1051
89729B
1/10/
2020
3/14/
2034
AVITA
Medical
Pty Ltd
EP2970
856A1
EP2014
770177
3/14/
2014
Germany
Granted
EP29708
56B1
3/14/
2034
11/1
3/20
19
AVITA
Medical
Pty Ltd
ES2759
063T3
ES2014
770177
T
3/14/
2014
Spain
Granted
ES27590
63T3
3/14/
2034
11/1
3/20
19
AVITA
Medical
Pty Ltd
EP2970
856A1
EP2014
770177
3/14/
2014
France
Granted
EP29708
56B1
3/14/
2034
11/1
3/20
19
AVITA
Medical
Pty Ltd
用于组织处理
以及由其制备
细胞悬液的系
统和方法
(SYSTEMS
AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSIONs
THEREFROM)
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
EP2970
856A1
EP2014
770177
3/14/
2014
United
Kingdom
Granted
EP29708
56B1
3/14/
2034
11/1
3/20
19
AVITA
Medical
Pty Ltd
HK121
9291A
HK161
07310
6/23/
2016
Hong Kong
Granted
HK1219
291
1/29/
2021
3/14/
2034
AVITA
Medical
Pty Ltd
EP2970
856A1
EP2014
770177
3/14/
2014
Italy
Granted
EP29708
56B1
3/14/
2034
11/1
3/20
19
AVITA
Medical
Pty Ltd
JP2016
512689
A
JP2016-
502942
3/14/
2014
Japan
Granted
JP64797
57B2
2/15/
2019
3/14/
2034
AVITA
Medical
Pty Ltd
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING AND
PREPARATION OF
CELL SUSPENSION
THEREFROM
用於組織處理
以及由其製備細胞
懸液的系
統和方法
(SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING AND
PREPARATION OF
CELL SUSPENSION
THEREFROM)
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
US2016
002445
0A1
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING AND
PREPARATION OF
CELL SUSPENSION
THEREFROM
14/776,
038
3/14/
2014
United States
of America
Granted
US10626
358B2
4/21/
2020
3/14/
2034
AVITA
Medical
Pty Ltd
CN1113
04081A
CN2019
113434
17.7
3/14/
2014
China
Pending
3/14/
2034
AVITA
Medical
Pty Ltd
EP3674
396A1
EP2019
208169
3/14/
2014
European
Patent Office
Pending
3/14/
2034
AVITA
Medical
Pty Ltd
HK400
32292A
HK420
200219
09
6/23/
2016
Hong Kong
Pending
3/14/
2034
AVITA
Medical
Pty Ltd
US2020
020808
6A1
16/787,
882
2/11/
2020
United
States of
America
Granted
US11124
752B2
9/21/
2021
3/14/
2034
AVITA
Medical
Pty Ltd
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING AND
PREPARATION OF
CELL SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING AND
PREPARATION OF
CELL SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING AND
PREPARATION OF
CELL SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
18/370,
842
9/20/
2023
United
States of
America
Pending
Reissue
Applica
tion
AT5105
48T
AT2002
709917
T
2/7/2
002
Austria
Expired
AT51054
8T
AU200
222780
2A1
AU200
222780
2
2/7/2
002
Australia
Expired
BRPI0
206692
A2
BRPI02
06692
2/7/2
002
Brazil
Expired
AU2002
227802B
2
BRPI020
6692B1
DE6024
0127T2
DE6024
0127
2/7/2
002
Germany
Expired
DE60240
127T2
135792
2
135792
2
2/7/2
002
Spain
Expired
1357922
135792
2
027099
175
02/07
/2002
Belgium
Expired
1357922
3/14/
2034
AVITA
Medical
Pty Ltd
2/7/2
022
AVITA
Medical
Pty. Ltd.
2/7/2
022
AVITA
Medical
Pty. Ltd.
2/7/2
022
AVITA
Medical
Pty. Ltd.
2/7/2
022
AVITA
Medical
Pty. Ltd.
2/7/2
022
AVITA
Medical
Pty. Ltd.
02/07
/2022
AVITA
Medical
Pty. Ltd.
05/2
5/20
11
03/0
5/20
07
06/1
9/20
18
05/2
5/20
11
05/2
5/20
11
05/2
5/20
11
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
135792
2
EP2002
709917
2/7/2
002
France
Expired
EP13579
22
135792
2
EP2002
709917
2/7/2
002
United
Kingdom
Expired
EP13579
22
05/2
5/20
11
05/2
5/20
11
2/7/2
022
AVITA
Medical
Pty. Ltd.
2/7/2
022
AVITA
Medical
Pty. Ltd.
HK105
7713
410062
8.6
2/7/2
002
Hong
Kong
Expired
HK1057
713
4081
6
2/7/2
022
AVITA
Medical
Pty. Ltd.
135792
2
EP2002
709917
2/7/2
002
Italy
Expired
EP13579
22
05/2
5/20
11
2/7/2
022
AVITA
Medical
Pty. Ltd.
2004-
529872
2002-
562365
2/7/2
002
Japan
Expired
JP52140
85
4134
1
2/7/2
022
AVITA
Medical
Pty. Ltd.
135792
2
EP2002
709917
2/7/2
002
Netherla
nds
Expired
EP13579
22
PT1357
922E
EP2002
709917
2/7/2
002
Portugal
Expired
EP13579
22
135792
2
EP2002
709917
2/7/2
002
Sweden
Expired
EP13579
22
05/2
5/20
11
09/0
1/20
11
05/2
5/20
11
2/7/2
022
AVITA
Medical
Pty. Ltd.
2/7/2
022
AVITA
Medical
Pty. Ltd.
2/7/2
022
AVITA
Medical
Pty. Ltd.
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
135792
2
EP2002
709917
2/7/2
002
Turkey
Expired
EP13579
22
AT717
889T
AT2010
184235
T
2/7/2
002
Austria
Expired
AT71788
9
234307
9
101842
35.9
2/7/2
002
Belgium
Expired
EP23430
79
DE602
47071
602470
71-4
2/7/2
002
Germany
Expired
DE60247
071T2
234307
9
101842
35.9
2/7/2
002
Spain
Expired
EP23430
79
234307
9
101842
35.9
2/7/2
002
France
Expired
EP23430
79
234307
9
101842
35.9
2/7/2
002
United
Kingdom
Expired
EP23430
79
502015
000011
254
101842
35.9
2/7/2
002
Italy
Expired
EP23430
79
05/2
5/20
11
03/2
5/20
15
03/2
5/20
15
03/2
5/20
15
03/2
5/20
15
03/2
5/20
15
03/2
5/20
15
03/2
5/20
15
2/7/2
022
AVITA
Medical
Pty. Ltd.
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
234307
9
101842
35.9
2/7/2
002
Netherlands
Expired
EP23430
79
PT1357
922E
PT2002
709917
T
2/7/2
002
Portugal
Expired
PT13579
22E
234307
9
101842
35.9
2/7/2
002
Sweden
Expired
EP23430
79
234307
9
101842
35.9
2/7/2
002
Turkey
Expired
EP23430
79
DE602
49971T
2
DE6024
9971
2/7/2
002
Germany
Expired
DE60249
971T2
234307
9
151598
90.1
2/7/2
002
Spain
Expired
EP29572
88
234307
9
151598
90.1
2/7/2
002
France
Expired
EP29572
88
234307
9
151598
90.1
2/7/2
002
United
Kingdom
Expired
EP29572
88
03/2
5/20
15
09/0
1/20
11
03/2
5/20
15
03/2
5/20
15
08/0
7/20
19
08/0
7/20
19
08/0
7/20
19
08/0
7/20
19
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
2/7/2
022
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
HK121
2885A1
HK161
00778
2/7/2
002
Hong
Kong
Expired
HK1610
0778
234307
9
151598
90.1
2/7/2
002
Italy
Expired
EP29572
88
JP2014
134495
2/7/2
002
Japan
Expired
JP60423
77
08/2
1/20
20
08/0
7/20
19
11/1
8/20
16
07/1
4/20
15
01/1
6/20
18
2/7/2022 AVITA
Medical
Pty. Ltd.
2/7/2022 AVITA
Medical
Pty. Ltd.
2/7/2022 AVITA
Medical
Pty. Ltd.
2/7/2022 AVITA
Medical
Pty. Ltd.
2/7/2022 AVITA
Medical
Pty. Ltd.
Expired
9078741
Expired
9867692
13/223,
577
9/1/2
011
14/645,
933
3/12/
2015
15/838,
429
12/12
/2017
16/436,
693
6/10/
2019
United
States of
America
United
States of
America
United
States of
America
United
States of
America
Expired
1072953
6
8/4/2
020
2/7/2022 AVITA
Medical
Pty. Ltd.
Expired
1072953
6
4/28/
2020
2/7/2022 AVITA
Medical
Pty. Ltd.
JP2010-
163176
2/7/2
002
Japan
Withdrawn
AVITA
Medical
Pty. Ltd.
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
METHOD FOR
PREPARING
CELL
SUSPENSION,
AND CELL
SUSPENSION
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
METHOD FOR
PREPARING
CELL
SUSPENSION,
AND CELL
SUSPENSION
JP2014
193415
A
US2011
031149
7A1
US2015
018273
9A1
US201
800988
40A1
US2019
030755
0A1
JP2010
269159
A
US200
201063
53A1
US201
001963
34A1
10/068,
299
2/6/2
002
12/699,
554
2/3/2
010
EP3632
452A1
EP2019
190195
2/7/2
002
Abandoned
Abandoned
Abandoned
United
States of
America
United
States of
America
European
Patent
Office
HK400
18126A
HK420
200074
98
2/7/2
002
Hong
Kong
Abandoned
US2021
016963
6A1
US2015
007915
3A1
16/935,
015
7/21/
2020
14/386,
519
3/14/
2013
N/A
17/462,
694
8/31/
2021
United
States of
America
United
States of
America
United
States of
America
Abandoned
Abandoned
Abandoned
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
PREPARATION
DEVICE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND USE
CELL
SUSPENSION
PREPARATION
TECHNIQUE
AND DEVICE
CELL
SUSPENSION
AND USE
THEREOF
SYSTEMS AND
METHODS FOR
TISSUE
PROCESSING
AND
PREPARATION
OF CELL
SUSPENSION
THEREFROM
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Pty. Ltd.
AVITA
Medical
Ltd.
AVITA
Medical
Ltd.
Item B. Patent Licenses
None.
SCHEDULE IV
to Security Agreement
Item A. Trademarks
Trademark
Appl. #
Reg. #
Status
Countr y
RECELL
2575728
2103006
Registered
Argentina
AVITA LOGO
1258199
1258199
Registered
Australia
RECELL
1265045
1265045
Registered
Australia
Registered
Australia
REGENERCE
LL
RENOVACEL
L
RES
1284000
1722242
(Now a
National
Registration,
Transformed
from IR
1265047)
1722241
(Now a
National
Registration,
Transformed
from IR
1265046)
1284000
Appl.
Date
Mar 8,
2005
May 13,
2015
May 13,
2015
May 13,
2015
Reg.
Date
Int'l
Clas s
Owner
Aug 4,
2006
010
AVITA
Medical Pty
Ltd
2
Nov
12,
2015
Nov
4,
2016
Jun
24,
2020
005,
010
005,
010
005
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
Registered
Australia
May 13,
2015
Jun
24,
2020
005,
010
AVITA
Medical
Pty Ltd
Registered
Australia
AVITA LOGO
1258199
1258199
Registered
Benelux
RECELL
1265045
1265045
Registered
Benelux
1284165
1284165
Registered
Benelux
REGENERATI
VE
EPITHELIAL
SUSPENSION
Oct 8,
2015
May 13,
2015
May 13,
2015
Oct 8,
2015
Jan
12,
2018
May
19,
2016
Nov
4,
2016
Aug
16,
2016
005
005,
010
005,
010
003,
005
AVITA
Medical Pty
Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
2 Owner identified as AVITA Medical Pty Ltd in this schedule refers either to AVITA Medical Pty Ltd or AVITA Medical Ltd. On
October 1, 2020, AVITA Medical Ltd converted to a proprietary company and changed its name to AVITA Medical PTY Limited.
REGENERCE LL
1265047
1419798
Registered
Benelux
RENOVACEL L
1265046
1419800
Registered
Benelux
RES
1284000
1284000
Registered
Benelux
AVITA LOGO
909371300
909371300
Registered
Brazil
AVITA LOGO
909371407
909371407
Registered
Brazil
RECELL
827197926
827197926
Registered
Brazil
RECELL
909371482
909371482
Registered
Brazil
RENOVACEL L
909370567
909370567
Registered
Brazil
RENOVACEL L
909370753
909370753
Registered
Brazil
RES
RES
REGENERATI VE
EPITHELIAL
SUSPENSION
910105227
910105227
Registered
Brazil
910105294
910105294
Registered
Brazil
910105146
Pending
Brazil
AVITA LOGO
1258199
1258199
Registered
China
RECELL
1265045
1265045
Registered
China
ReCell (stylized)
854939
854939
Registered
China
RES
1284000
1284000
Registered
China
May 13,
2015
May 13,
2015
Oct 8,
2015
May 13,
2019
May 13,
2015
Mar 7,
2005
May 13,
2015
May 13,
2015
May 13,
2015
Oct 8,
2015
Oct 8,
2015
Oct 8,
2015
May 13,
2015
May 13,
2015
Jun 3,
2004
Oct 8,
2015
Sept.
17,
2020
Sept.
17,
2020
Aug
16,
2016
Oct
17,
2017
Oct
17,
2017
Nov
13,
2007
Oct
17,
2017
Oct
17,
2017
Oct
17,
2017
Jun
19,
2018
Nov
28,
2017
Nov
10,
2016
Jan
24,
2017
Aug
25,
2005
Jul 6,
2017
005,
010
005,
010
003,
005
005
010
010
005
005
010
003
005
005
005
005,
010
005,
010,
044
005
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
RENOVACEL
L
1265046/47625
110
Published
China
AVITA LOGO
1258199
1258199
Registered
Colombia
RECELL
1265045
1265045
Registered
Colombia
REGENERATI
VE
EPITHELIAL
SUSPENSION
RES
1284165
1284165
Registered
Colombia
1284000
1284000
Registered
Colombia
AVITA LOGO
1258199
1258199
Registered
Egypt
RECELL
1265045
1265045
Registered
Egypt
REGENERATI
VE
EPITHELIAL
SUSPENSION
RES
1284165
1284165
Registered
Egypt
1284000
1284000
Registered
Egypt
Jun 29,
2020
May 13,
2015
May 13,
2015
Oct 8,
2015
Oct 8,
2015
May 13,
2015
May 13,
2015
Oct 8,
2015
Oct 8,
2015
AVITA LOGO
1258199
1258199
Registered
RECELL
1265045
1265045
Registered
REGENERATI
VE
EPITHELIAL
SUSPENSION
REGENERCE
LL
RENOVACEL
L
013919022
013919022
Registered
1265047
018261233
Registered
1265046
018261234
Registered
RES
013920673
013920673
Registered
SPRAY-ON
SKIN
1072803
1072803
Registered
AVITA LOGO
303407201
303407201
Registered
European
Union
May 13,
2015
European
Union
May 13,
2015
European
Union
Apr 8,
2015
European
Union
Jun 24,
2020
European
Union
Jun 24,
2020
European
Union
Apr 8,
2015
European
Union
Mar 10,
2011
Hong
Kong
May 13,
2015
Jul
30,
2015
Aug
23,
2018
Sep
5,
2017
Sep
27,
2018
Jul
30,
2015
Sep
17,
2015
Jan
21,
2016
Jan
21,
2016
Jun
16,
2016
Jul
19,
2016
Sep
10,
2015
Aug
25,
2020
Aug
25,
2020
Apr
8,
2015
Mar
22,
2012
Dec
14,
2015
005,
010
005,
010
005,
010
003,
005
003
005,
010
005,
010
003,
005
003,
005
005,
010
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
005,
010
AVITA
Medical
Pty Ltd
003,
AVITA
005, Medical
Pty Ltd
041
005,
010
005,
010
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
003,
AVITA
005, Medical
Pty Ltd
041
003,
AVITA
005, Medical
Pty Ltd
010
AVITA
005,
Medical
010
Pty Ltd
RECELL
303407229
303407229
Registered
REGENERCE LL
303407238
303407238
Registered
RENOVACEL L
303407210
303407210
Registered
RES
303558385
303558385
Registered
Hong
Kong
Hong
Kong
Hong
Kong
Hong
Kong
AVITA LOGO
1258199
1258199
Registered
India
RECELL
1265045
1265045
Registered
India
RECELL
993211
993211
Registered
India
RECELL
993212
993212
Registered
India
RES
1284000
1284000
Registered
India
AVITA LOGO
1258199
1258199
Registered
Iran
RES
1284000
1284000
Registered
Iran
RECELL
1265045
Pending
Iran
AVITA LOGO
1258199
1258199
Registered
Israel
RECELL
1265045
1265045
Registered
Israel
REGENERCE
LL
RENOVACEL
L
1265047
328959
Registered
Israel
1265046
328960
Registered
Israel
RES
1284000
1284000
Registered
Israel
May 13,
2015
May 13,
2015
May 13,
2015
Oct 8,
2015
May 13,
2015
May 13,
2015
Feb 27,
2001
Feb 27,
2001
Oct 8,
2015
May 13,
2015
Oct 8,
2015
May 13,
2015
May 13,
2015
May 13,
2015
May 13,
2015
May 13,
2015
Oct 8,
2015
May
13,
2015
May
13,
2015
May
13,
2015
Oct
8,
2015
Jan
12,
2017
Oct
21,
2019
Feb
27,
2011
Feb
27,
2011
Oct
8,
2015
Jul
30,
2015
Jan
21,
2016
Jun
7,
2018
May
4,
2017
Jun
24,
2020
Jun
24,
2020
Sep
4,
2017
005,
010
005,
010
010
003,
005
005,
010
005,
010
003
005
003,
005
005,
010
003,
005
005,
010
005,
010
005,
010
005,
010
005,
010
003,
005
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA LOGO
1258199
1258199
Registered
Japan
RECELL
1265045
1265045
Registered
Japan
REGENERCE
LL
RENOVACEL
L
1265047
2020079285
Registered
Japan
1265046
2020079284
Registered
Japan
RES
1284000
1284000
Registered
Japan
RECELL
706367
(706367T)
888621
Registered
Mexico
AVITA LOGO
1258199
1258199
Registered
Oman
RECELL
1265045
1265045
Registered
Oman
REGENERATI
VE
EPITHELIAL
SUSPENSION
RES
1284165
1284165
Registered
Oman
1284000
1284000
Registered
Oman
AVITA LOGO
1258199
1258199
Registered
Republic
RECELL
1265045
1265045
Registered
ReCell
(stylized)
854939
854939
Registered
REGENERCE
LL
1265047
402020011289
7
Registered
Korea
Republic
Korea
Republic
Korea
Republic
Korea
RENOVACEL
1265046
402020012762
Registered
Republic
L
7
Korea
May 13,
2015
May 13,
2015
Jun 26
2020
Jun 26
2020
Aug
18,
2016
May
18,
2017
May
13,
2015
, May
13,
2015
Jun
21,
2018
Jun
27,
2005
Jul
30,
2015
Sep
17,
2015
Jan
21,
2016
Dec
31,
2019
Oct
13,
2016
Feb
23,
2017
, Oct
10,
2006
May
13,
2015
Oct 8,
2015
Mar 9,
2005
May 13,
2015
May 13,
2015
Oct 8,
2015
Oct 8,
2015
May 13,
2015
May 13,
2015
Jun 3,
2004
Jul 1,
2020
Jul
22,
2020
of
of
of
of
of
005,
010
005,
010
005,
010
005,
010
003,
005
010
005,
010
005,
010
003,
005
003,
005
005,
010
005,
010
010,
044
005,
010
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
AVITA
Medical
Pty Ltd
May
005,
AVITA
13,
2015
010
Medical
Pty Ltd
RES
1284000
1284000
Registered
Republic of
Korea
Oct 8,
2015
May
10,
2018
ReCell (stylized)
854939
854939
Registerd
Singapore
AVITA LOGO
1258199
1258199
Registerd
RECELL
1265045
1265045
Registered
REGENERATI VE
EPITHELIAL
SUSPENSION
1284165
1284165
Registered
RES
1284000
1284000
Registered
AVITA LOGO
104026597
01888179
Registered
RECELL
104026598
1882092
Registered
Syrian
Arab
Republic
Syrian
Arab
Republic
Syrian
Arab
Republic
Syrian
Arab
Republic
Taiwan
R.O.C.
Taiwan
R.O.C.
Jun 3,
2004
May 13,
2015
May 13,
2015
Oct 8,
2015
Oct 8,
2015
May 13,
2015
May 13,
2015
RES
01888885
Registered
Taiwan
R.O.C.
Oct 8,
2015
AVITA LOGO
985783
191114045
Registered
Thailand
AVITA LOGO
985784
191114073
Registered
Thailand
RECELL
985786
191111618
Registered
Thailand
REGENERCE LL
985779
191113559
Registered
Thailand
REGENERCE LL
985780
191113564
Registered
Thailand
RENOVACEL L
985781
191113555
Registered
Thailand
RENOVACEL L
985782
191114048
Registered
Thailand
May 14,
2015
May 14,
2015
May 14,
2015
May 14,
2015
May 14,
2015
May 14,
2015
May 14,
2015
005
005,
010,
044
005,
010
005,
010
Jul 13,
2006
Jan
12,
2017
Dec
15,
2016
Jul 11,
2017
003,
005
Jul 11,
2017
003,
005
005,
010
005,
010
005
005
010
010
005
010
005
010
Dec
16,
2017
Nov
16,
2017
Jan 1,
2018
Aug
16,
2019
Aug
16,
2019
Jul 19,
2019
Aug 9,
2019
Aug 9,
2019
Aug 9,
2019
Aug
16,
2019
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
RES
1008348
181100952
Registered
Thailand
RECELL
985785
Published
Thailand
RES
1008347
231111839
Registered
Thailand
AVITA LOGO
1258199
1258199
Registered
Turkey
RECELL
1265045
1265045
Registered
Turkey
ReCell (stylized)
854939
854939
Registered
Turkey
REGENERCE LL
1265047
201581059
Registered
Turkey
RENOVACEL L
1265046
201581057
Registered
Turkey
RES
1284000
1284000
Registered
Turkey
Oct 8,
2015
May 13,
2015
Oct 8,
2015
May 13,
2015
May 13,
2015
Jun 3,
2004
May 13,
2015
May 13,
2015
Oct 8,
2015
AVITA LOGO
1258199
UK008125819 9
Registered
RECELL
1265045
UK008126504 5
Registered
REGENERATI VE
EPITHELIAL
SUSPENSION
013919022
UK009013919 022
Registered
REGENERCE LL
1265047
UK009018261 233
Registered
RENOVACEL L
1265046
UK009018261 234
Registered
RES
013920673
UK009013920 673
Registered
SPRAY-ON
SKIN
RECELL
LOGO
1072803
UK008107280 3
Registered
86453769
5703468
Registered
United
Kingdom
May 13,
2015
United
Kingdom
May 13,
2015
United
Kingdom
Apr 8,
2015
United
Kingdom
United
Kingdom
Jun 24,
2020
Jun 24,
2020
United
Kingdom
Apr 8,
2015
United
Kingdom
Mar 10,
2011
United
States of
Nov 13,
2014
Jan
12,
2018
April
25,
2023
_
Jan
21,
2016
Oct
26,
2017
Feb
10,
2020
Jun
30,
2020
Jun
30,
2020
Dec
31,
2016
Jun
16,
2016
Jul 19,
2016
Sep
10,
2015
Aug
25,
2020
Aug
25,
2020
Apr
8,
2015
Mar
22,
2012
Mar
19,
2019
005
005
003
005,
010
005,
010
005,
010,
044
005,
010
005,
010
003,
005
005,
010
005,
010
003,
005,
041
005,
010
005,
010
003,
005,
041
003,
005,
010
005,
010,
041,
044
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
RECELL
86456218
5703469
Registered
RES
1284000
5225178
Registered
SPRAY-ON
SKIN
88000377
RENOVACEL L
86453832
REGENERCE LL
86452818
SPRAY SKIN
86270016
-
-
-
-
America
United
States of
America
United
States of
America
United
States of
America
Nov 17,
2014
Oct 8,
2015
June 14,
2018
Abandoned
Abandoned
United
States of
America
December
22,
2015
Abandoned
United
States of
America
November
13,
2014
Abandoned
United
States of
America
May 2,
2014
Mar
19,
2019
Jun
20,
2017
-
-
-
-
005,
010,
041,
044
005
005
010
005,
010,
041,
044
003,
005,
010
003,
005,
010
003,
005
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
AVITA
Medical Pty
Ltd
SPRAY-ON
SKIN
REGENERATI VE
EPITHELIAL
SUSPENSION
85127139
4072126
Cancelled
79180907
-
Abandoned
United
States of
America
September
10,
2010
Dec.
13,
2011
United
States of
America
Oct. 8,
2015
-
Item B. Trademark Licenses
None.
SCHEDULE V
to Security Agreement
SCHEDULE VI
to Security Agreement
Item A. Copyrights/Mask Works
None.
Item B. Copyright/Mask Work Licenses
None.
Trade Secret or Know-How Licenses
None.
Exhibit 10.39
Execution version
Security trust deed
AVITA Security Trust
ORCO IV LLC (Security Trustee) ORCO IV LLC
(Administrative Agent) AVITA Medical, Inc. (Borrower)
Each entity named in Schedule 1 (each an Initial Beneficiary)
Each entity named in Schedule 2 (each an Initial Security Provider)
3rd Floor Randall House 6 Dowgate Hill London EC4R 2SU United Kingdom
T +44 20 7429 2780 F +44 20 7429 2788
minterellison.com
Security trust deed
AVITA Security Trust
Details
Parties
Background
Agreed terms
1.Defined terms & interpretation
1.1.Defined terms from Credit Agreement
1.2.Defined terms
1.3.Interpretation
1.4.Beneficiary obligations several
1.5.Inconsistency
1.6.Loan Document
2.Trust creation and appointment of Security Trustee
2.1.Declaration of trust
2.2.Name
2.3.Term and perpetuity period
2.4.Appointment and authority
2.5.Security Provider acknowledgment
3.Security Trustee to act on instruction
3.1.Instructions
3.2.Exercise of enforcement and other powers
3.3.Consent of Beneficiaries
3.4.Reliance on instructions
3.5.Absence of instructions
3.6.No inquiry by Security Provider permitted
4.Duties and responsibilities of Security Trustee
4.1.Duties and responsibilities limited
4.2.When the Security Trustee need not act
4.3.No investigation or monitoring
4.4.Knowledge and awareness of Security Trustee
4.5.Information duties
5.Beneficiary provisions
5.1.Security Trustee to have same rights as Beneficiaries
5.2.Actions binding on all Beneficiaries
5.3.No exercise of Powers by Beneficiaries
5.4.Independent decision by Beneficiaries
5.5.Requirements of reasonableness
5.6.Information about Exposure
5.7.Rights of each Beneficiary
6.Security Trustee's rights and powers
6.1.Rights of Security Trustee
6.2.Statutory powers
6.3.Notice of enforcement
6.4.Dealing in different capacities
6.5.Right to appoint attorney and agents
6.6.Right to delegate
6.7.Acting on advice
6.8.Security Trustee may rely on certain things
6.9.Minor amendments to Security Trustee Documents
7.Liability of Security Trustee
7.1.Limit on liability
2
7
7
10
11
12
12
12
12
12
12
12
12
12
13
13
13
13
13
13
14
14
14
14
15
15
15
15
15
16
16
16
16
16
16
16
16
17
17
17
17
17
17
18
18
18
18
7.2.Exceptions to limit on liability
7.3.Recourse to Security Trustee
7.4.Duties of the Security Trustee
7.5.PPSA security interests
8.Security Trustee's indemnities
8.1.Indemnity out of Security Trust Fund
8.2.Indemnity by Beneficiaries
8.3.Exceptions to indemnities
8.4.Indemnity by Security Provider
8.5.First indemnified
9.Payments and distributions
9.1.Obligations received before Enforcement Date
9.2.Payments directed through Security Trustee
9.3.Distribution of Obligations received on or after Enforcement Date
9.4.Exclusion from amounts for distribution
9.5.Appropriation by Security Provider
9.6.Suspense account
9.7.Credit of available funds
9.8.Turnover – amounts not received through distribution
9.9.Entitlement to share in recovery
9.10.Overriding application
10.Replacement of Security Trustee
10.1.Resignation of Security Trustee
10.2.Removal of Security Trustee
10.3.Effect of resignation or removal
10.4.Costs of resignation or removal
10.5.Assurances
10.6.Appointment of successor Security Trustee
11.Administrative Agent provisions
11.1.Communication by Lenders
11.2.Capacity and dealings
11.3.Information about Lenders
11.4.Notification of Event of Default and Enforcement Date
11.5.Assignment by Administrative Agent
12.Changes to Security Providers and Beneficiaries
12.1.Assignment by Security Provider
12.2.New Security Provider
12.3.Assignment by Beneficiary
12.4.New Beneficiary by assignment or novation
12.5.Accession Deeds
12.6.Opting out by Beneficiary
13.Payments
13.1.Payment requirements
14.Notices, demands and communications
14.1.Defined term
14.2.Service
15.Protection of Security Trustee, Beneficiaries and third parties
15.1.Security Trustee and Beneficiaries not restricted
15.2.Security Trustee and Beneficiaries not liable
15.3.Security Trustee may set off
15.4.Set off by a Security Provider
15.5.Reinstating avoided transaction
15.6.Authorised Representatives
15.7.Security Trustee's opinion
15.8.Protection of third parties
3
19
19
19
20
20
20
21
21
21
21
21
21
12
22
22
22
22
22
22
23
23
23
23
24
24
24
24
24
25
25
25
26
26
26
26
26
26
26
27
27
27
28
28
28
28
28
28
28
28
28
28
28
29
29
29
16.General provisions
16.1.Prompt performance
16.2.Powers
16.3.Consent, approvals and waivers
16.4.Indemnities and reimbursement obligations
16.5.Notices or demands as evidence
16.6.Law and legislation
16.7.Severability
16.8.Variation of this document
16.9.Governing law and jurisdiction
16.10.Service of process
16.11.Counterparts
Schedule 1 – Initial Beneficiaries
Schedule 2 – Initial Security Providers
Schedule 3 – Accession Deed
Signing pages
4
29
29
29
29
30
30
30
30
30
30
30
31
32
33
34
36
Details
Date 11 December 2023
Parties
Name ORCO IV LLC, a Delaware limited liability company
Short form name Security Trustee
Notice details c/o OrbiMed Advisors LLC
601 Lexington Avenue, 54th Floor New York, NY 10022
Attention: OrbiMed Credit Reporting Email:
RoSCreditOps@OrbiMed.com
with a copy to (which shall not constitute notice): Covington & Burling LLP
The New York Times Building, 620 Eighth Avenue New York, NY 10018-1405
Attention: Peter A. Schwartz Email:
pschwartz@cov.com Telephone: (212) 841-1268
Name ORCO IV LLC, a Delaware limited liability company
Short form name Administrative Agent
Notice details c/o OrbiMed Advisors LLC
601 Lexington Avenue, 54th Floor New York, NY 10022
Attention: OrbiMed Credit Reporting Email:
RoSCreditOps@OrbiMed.com
with a copy to (which shall not constitute notice): Covington & Burling LLP
The New York Times Building, 620 Eighth Avenue New York, NY 10018-1405
Attention: Peter A. Schwartz Email:
pschwartz@cov.com Telephone: (212) 841-1268
Name Each entity named in Schedule 1 Short form name Each an Initial Beneficiary
Notice details As set out in Schedule 1
5
Name AVITA Medical, Inc., a Delaware corporation
Short form name Borrower
Notice details 28159 Avenue Stanford, Suite 220
Valencia, CA 91355
Attention: David O’Toole, Chief Financial Officer Email:
dotoole@avitamedical.com
With a copy to:
AVITA Medical, Inc.
28159 Avenue Stanford, Suite 220
Valencia, CA 91355 Attention: Legal Department
Email: legal@avitamedical.com
Name Each entity named in Schedule 2
Short form name Each an Initial Security Provider Notice details As set out in Schedule
2
Background
This document sets out the terms on which the Security Trustee will hold the Security Trust Fund for the Beneficiaries.
6
Agreed terms
1.Defined terms & interpretation
1.1Defined terms from Credit Agreement
Terms defined in (or incorporated by reference to) the Credit Agreement (as defined below) have the same meanings when used in this
document unless otherwise defined in this document.
Parties to the Credit Agreement referred to by short form name in this document are more fully described in the Credit Agreement.
1.2Defined terms
In this document:
Accession Deed means a deed substantially in the form set out in Schedule 3or a document taken to be an Accession Deed under
clause 12.4.
Administrative Agent means the person so named in this document, or any successor or replacement agent for the Lenders under the
terms of the Credit Agreement.
Affiliate has the meaning given to that term in the Credit Agreement and includes, when used in relation to the Australian Security
Provider, a "related body corporate" as defined in section 50 of the Corporations Act.
Attorney means an attorney appointed by a Security Provider under a Security Document.
Australian Security Agreement means:
(a)the General Security Deed;
(b)the Specific Security Deed (Marketable Securities);
(c)any other documents, incidental, collateral or supplementary to the Australian Security Agreements required by the Administrative
Agent (including for purposes of payment of stamp duty and registration); and
(d)any other security agreement or other instrument or document executed and delivered by any Loan Party to the Security Trustee
pursuant to this document or any other Loan Document granting a Security Interest on assets of the Initial Security Provider for the
benefit of the Secured Parties.
Australian Security Provider means AVITA Medical Pty Limited ACN 058 466 523.
Authorised Representative means:
(a)in respect of any Loan Party, a person it specifies in writing (with a certified copy of that person's specimen signature) as being its
authorised representative for the purposes of the Loan Documents where the Security Trustee has no notice of revocation of that
authority; and
(b)in respect of the Security Trustee or a Beneficiary, a person whose title or acting title includes 'manager', 'associate', 'director',
'executive', 'chief', 'head', 'counsel', 'vice president' or 'president', or a person notified to the other parties as being its attorney or
authorised representative for the purposes of the Security Trustee Documents.
Beneficiary means:
(a)each Secured Party;
(b)the Security Trustee (on its own account and not in its capacity as trustee of the Security Trust);
(c)the Administrative Agent;
7
(d)each Lender; and
(e)any other person who becomes a 'Beneficiary' in accordance with this document,
but excluding a person who ceases to be a Beneficiary under clause 12.6 or who has assigned or novated to one or more existing or new
Beneficiaries all of its rights and obligations under (and in accordance with) the Loan Documents.
Corporations Act means the Corporations Act 2001 (Cth) of Australia.
Credit Agreement means the credit agreement dated 18 October 2023 as amended, modified or supplemented from time to time between,
amongst others, the Administrative Agent and AVITA Medical, Inc. as Borrower.
Default has the meaning given to that term in the Credit Agreement.
Enforcement Date means the first date after an Event of Default has occurred and while it is continuing on which:
(a)any Obligations have been declared due and payable before its specified due date; or
(b)the Security Trustee appoints a Receiver under, or otherwise enforces, a Security Document.
Event of Default has the same meaning given to that term in the Credit Agreement.
Exposure means at any time (without double-counting), in the case of a Beneficiary, the Obligations which any Security Provider is at
that time actually or contingently liable to pay to such Beneficiary or which is for the account of such Beneficiary.
External Administrator means an administrator, controller or managing controller (each as defined in the Corporations Act), trustee,
provisional liquidator, liquidator or any other person (however described) holding or appointed to an analogous office or acting or
purporting to act in an analogous capacity.
General Security Deed means the general security deed granted by the Australian Security Provider in favour of the Security Trustee dated
on or after the date of this document.
Guarantee has the same meaning given to that term in the Credit Agreement.
Insolvency Event means, in respect of a person, any of the following occurring:
(a)it becomes insolvent within the meaning of section 95A, or is taken to have failed to comply with a statutory demand under section
459F(1), or must be presumed by a court to be insolvent under section 459C(2), or is the subject of a circumstance specified in section 461
(whether or not an application to court has been made under that section) or,
if the person is a Part 5.7 body, is taken to be unable to pay its debts under section 585, of the Corporations Act;
(b)except with the Security Trustee's consent:
(i)it is the subject of a Liquidation, or an order or an application is made for its Liquidation; or
(ii)an effective resolution is passed or meeting summoned or convened to consider a resolution for its Liquidation;
(c)an External Administrator is appointed to it or any of its assets or a step is taken to do so or its Affiliate requests such an appointment;
(d)if a registered corporation under the Corporations Act, a step is taken under sections 601AA, 601AB or 601AC of the
Corporations Act to cancel its registration;
(e)if a trustee of a trust, it is unable to satisfy out of the assets of the trust the liabilities incurred by it for which it has a right to be
indemnified from the assets of the trust as and when those liabilities fall due;
(f)an analogous or equivalent event to any listed above occurs in any jurisdiction; or
8
(g)it stops or suspends payment to all or a class of creditors generally.
Insurance Policy means each policy relating to the insurance required to be obtained or maintained under a Loan Document.
KYC Checks means, for a Beneficiary, the Beneficiary's 'know your customer' or similar identification and verification checks and
procedures required for the Security Trustee to comply with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth),
the Anti-Money Laundering and Counter-Terrorism Financing Rules and any other law or regulation of Australia or comparable law or
regulation of another country, and to manage anti-money laundering, counter- terrorism financing or economic and trade sanctions risk.
Lender has the meaning given to that term in the Credit Agreement.
Liquidation means:
(a)a winding up, dissolution, liquidation, provisional liquidation, administration, bankruptcy or other proceeding for which an External
Administrator is appointed, or an analogous or equivalent event or proceeding in any jurisdiction; or
(b)an arrangement, moratorium, assignment or composition with or for the benefit of creditors or any class or group of them.
Loan Document means:
(a)this document;
(b)each Security Document;
(c)the Credit Agreement;
(d)any Accession Deed;
(e)any 'Loan Document' as defined in the Credit Agreement or in another Loan Document;
(f)a document that the Borrower and the Security Trustee (acting in accordance with the instructions of the Administrative Agent in
accordance with this document) agree is a 'Loan Document'; and
(g)a document entered into or given under or in connection with, or for the purpose of amending or novating, any document
referred to in a paragraph above.
Loan Party means:
(a)each Security Provider;
(b)the Borrower; and
(c)each Guarantor (as that term is defined in the Credit Agreement).
Loss means a loss, claim, action, damage, liability, cost, charge, expense, penalty, compensation, fine or outgoing suffered, paid or
incurred.
Notice has the meaning given to it in clause 14.
Obligations has the same meaning as in the Credit Agreement and includes, for the avoidance of doubt, any Obligations of the Security
Providers to the Security Trustee.
Power means any right, power, discretion or remedy of the Security Trustee, a Beneficiary, a Receiver or an Attorney under any Loan
Document or applicable law.
PPS Law means:
(a)the PPSA and any regulation made at any time under the PPSA, including the PPS Regulations (each as amended from time to
time); and
(b)any amendment made at any time to any other legislation as a consequence of a law or regulation referred to in paragraph (a).
PPS Regulations means the Personal Property Securities Regulations 2010 (Cth).
PPSA means the Personal Property Securities Act 2009 (Cth).
9
Proportionate Exposure means, for a Beneficiary at any time, the proportion which the total of its Exposure bears to the Total Exposure
at that time.
Receiver means a receiver or receiver and manager appointed under a Loan Document.
Secured Party has the same meaning as in the Credit Agreement and for the avoidance of doubt includes the Security Trustee.
Secured Property means the property and assets the subject of a Security Document.
Security Document means:
(a)each Australian Security Agreement; and
(b)each other present or future Security Interest, Guarantee or other document or agreement created as security in favour of the Security
Trustee in its capacity as trustee of the Security Trust (directly or indirectly) for the payment or performance of any Obligations in favour of
the Security Trustee or a Beneficiary under a Loan Document; and
(c)any other document which the Beneficiaries, the Security Trustee and the Security Providers agree at any time is a Security
Document for the purposes of this document.
Security Interest means any 'Lien' (as defined in the Credit Agreement) and includes, for the avoidance of doubt, any 'security interest' as
defined in sections 12(1) or (2) of the PPSA.
Security Provider means:
(a)each Initial Security Provider; and
(b)each person who becomes a 'New Security Provider' under an Accession Deed (on the Accession Deed taking effect).
Security Trust means the trust established under this document.
Security Trust Fund means:
(a)the amount held by the Security Trustee under clause 2.1;
(b)the Security Trustee's right, title and interest under each Security Document and each other Security Trustee Document (except to
the extent held for its own account);
(c)any other property acquired by the Security Trustee on or after the date of this document and intended to be held for the benefit of the
Beneficiaries under the Security Trust, including:
(i)any Security Document or other Loan Document which the Security Trustee enters into or which is given in its favour, and all
money recovered under them, whether or not on enforcement;
(ii)any property representing the proceeds of sale or other disposition of any property forming part of the Security Trust Fund;
(iii)any property representing the proceeds of any insurance claims payable to the Security Trustee in respect of the Secured
Property; and
(iv)any property into which any other property forming part of the Security Trust Fund is converted or invested and the proceeds
of any such property.
Security Trustee means the person so named in this document or any successor or replacement security trustee under the terms of this
document.
Security Trustee Document means a Loan Document to which the Security Trustee is a party and includes, for the avoidance of doubt,
this document.
Specific Security Deed (Marketable Securities) means the specific security deed (marketable securities) granted by the Borrower in
favour of the Security Trustee dated on or after the date of this document.
Total Exposure means, at any time, the sum of the Exposures of all the Beneficiaries at that
10
time.
US$ means the lawful money of the United States of America.
1.3Interpretation
In this document:
(a)headings are for reference only and do not affect interpretation;
(b)subject to clause 1.4, any undertaking, representation, warranty or indemnity by two or more parties (including where two or more
persons are included in the same defined term) binds them jointly and severally;
(c)the single includes the plural and vice versa, a gender includes other genders and different grammatical forms of defined
expressions have corresponding meanings;
(d)unless stated otherwise, anything (other than making a payment) required to be done on or by a day which is not a Business Day,
must be done on or by the next Business Day;
(e)no provision or expression is to be construed against a party on the basis that the party (or its advisers) was responsible for its drafting;
(f)examples and use of the word 'including' and similar expressions do not limit what else may to be included.
Unless the context requires otherwise, a reference in this document to:
(g)a party to any document includes that person's successors and permitted substitutes and assigns;
(h)an agreement includes any legally enforceable arrangement, understanding, undertaking or representation whether or not in writing;
(i)a document or agreement includes that document or agreement as novated, altered, amended, supplemented or replaced from
time to time;
(j)any thing includes any part of it and a reference to a group of things or persons includes each thing or person in that group;
(k)clauses and schedules are to those in this document, and a reference to this document includes any schedule;
(l)a person, corporation, trust, partnership, unincorporated body or other entity includes any of them;
(m)time is to New York time unless stated otherwise;
(n)legislation or other law or a provision of them includes regulations and other instruments under them, and any consolidation,
amendment, re-enactment or replacement;
(o)'wilful default' in relation to the Security Trustee means any wilful failure to comply with, or wilful breach by, the Security Trustee of
any of its obligations under any Security Trustee Document other than a failure or breach which:
(i)arises as a result of a breach of a Security Trustee Document by a person other than the Security Trustee or the
Administrative Agent (for so long as the same legal entity performs those roles) and (subject to any provisions of the Security
Trustee Documents which limit its liability in respect of the acts and omissions thereof) its directors, officers, employees,
agents, delegates or attorneys;
(ii)is in accordance with a lawful court order or direction or is required by law; or
(iii)is in accordance with a proper instruction or direction of the Administrative Agent at any time while the Security Trustee is
not the same legal entity as the Administrative Agent; and
11
(p)'property' or an 'asset' includes any real or personal, present or future, tangible or intangible property or asset and any right, interest,
revenue or benefit in, under or derived from the property or asset.
1.4Beneficiary obligations several
Except to the extent expressly provided for otherwise in this document, each Beneficiary's obligations under this document are several. A
Beneficiary's failure to perform an obligation does not relieve another Beneficiary or a Security Provider of its obligations. No Beneficiary is
responsible for the obligations of another Beneficiary.
1.5Inconsistency
(a)The obligations of the Security Providers under this document and any Security Document are in addition to any obligations of the
Security Providers under the Credit Agreement or any other Loan Document.
(b)If there is any inconsistency between the rights and obligations of the Security Trustee under this document and the rights and
obligations of the Security Trustee under any other Security Trustee Document (other than the Credit Agreement), such rights and
obligations under this document prevail to the extent of the inconsistency.
(c)Subject to paragraph (d) below, in the event of any inconsistency arising between any of the provisions of this document and the
Credit Agreement, the provisions of the Credit Agreement shall prevail.
(d)Notwithstanding any provision to the contrary in any other Loan Document, the parties agree that the definition of 'Collateral' in the
Credit Agreement includes any property secured by the Security Documents (including any 'Collateral' as defined therein).
(e)The inclusion of an obligation or permission in one document which is not included in another is not an inconsistency for the
purposes of this clause 1.5.
1.6Loan Document
The parties agree that this document is a 'Loan Document' for the purposes of the Credit Agreement.
2.Trust creation and appointment of Security Trustee
2.1Declaration of trust
The Security Trustee declares that as at the time of execution of this document it holds the sum of US$10, and after execution of this
document will hold the rest of the Security Trust Fund, on trust for the Beneficiaries on the terms of this document.
2.2Name
The Security Trust will be named the AVITA Security Trust.
2.3Term and perpetuity period
The Security Trust begins on the date of this document and, unless ended earlier, ends on the day before the 80th anniversary of the
date of this document. The perpetuity period is 80 years from the date of this document.
2.4Appointment and authority
The Beneficiaries:
(a)appoint the Security Trustee (which appointment the Security Trustee accepts) to act as trustee of the Security Trust Fund for the
benefit of the Beneficiaries; and
(b)irrevocably authorise the Security Trustee to enter into and perform its obligations and exercise its Powers under each Security
Trustee Document and any incidental rights, powers, discretions or remedies.
12
2.5Security Provider acknowledgment
(a)Each Security Provider acknowledges and consents to the arrangements set out in this document.
(b)Subject to clause 2.5(c), each Security Provider must pay to each Beneficiary the amounts payable to that Beneficiary under the Loan
Documents in the manner, at the time and in the currency specified in the Loan Documents and otherwise in accordance with the Loan
Documents.
(c)At any time after the Security Documents have become enforceable, the Security Trustee may direct the Security Providers to pay all or
any part of the amounts payable under the
Loan Documents to the Security Trustee or as the Security Trustee otherwise directs. Each Security Provider must comply with
all such directions made by the Security Trustee unless an inconsistent direction is given by the Administrative Agent under any
other Loan Document, in which case each Security Provider must comply with the directions of the Administrative Agent under
such other Loan Document.
(d)Any payment made by a Security Provider to or to the order of the Security Trustee under and as required by this clause 2.5 discharges,
to the extent of the payment received, the obligation of the Security Provider to make the relevant payment to the relevant Beneficiary.
3.Security Trustee to act on instruction
3.1Instructions
Unless expressly provided otherwise in a Security Trustee Document, the Security Trustee must act, and need only act, if and only if it
receives clear instructions to do so from the Administrative Agent (acting in accordance with the Credit Agreement).
3.2Exercise of enforcement and other powers
(a)The Security Trustee must, if so instructed by the Administrative Agent following the occurrence and during the continuance of
an Event of Default:
(i)give notice in writing to a Security Provider declaring that the relevant Obligations are immediately due and payable;
(ii)appoint, or remove, a Receiver under a Security Document; and
(iii)enforce or take steps to enforce a Security Document as directed by the Administrative Agent.
(b)The Security Trustee must, at any time after action has been taken under clause 3.2(a), do any other things it considers appropriate (or
as instructed by the Administrative Agent) to enforce the relevant Security Document and exercise its Powers under that Security
Document.
(c)The Security Trustee must not release:
(i)any specified Security Document in full; or
(ii)any specified assets from any Security Document,
unless it has been instructed to do so by the Administrative Agent or unless required by law or by the express terms of a Loan
Document to do so.
3.3Consent of Beneficiaries
Each Beneficiary authorises the Security Trustee to give any consent, and do any other matter or thing, necessary or appropriate for it to
give effect to any instructions given to the Security Trustee in accordance with the Loan Documents.
13
3.4Reliance on instructions
A notice from the Administrative Agent to the Security Trustee as to the instructions of the Administrative Agent is conclusive and may be
relied on by the Security Trustee to determine its instructions to the exclusion of any other instructions or communications from individual
Lenders as Beneficiaries.
3.5Absence of instructions
Except as expressly provided otherwise in this document, in the absence of instructions which are required to be obtained from the
Administrative Agent, the Security Trustee is not obliged to act, but may act in what it (in its sole discretion) considers to be in the best
interests of the Beneficiaries.
3.6No inquiry by Security Provider permitted
(a)A Security Provider may not inquire as to whether any instructions have been given to the Security Trustee by the Administrative Agent
or as to the terms of those instructions.
(b)As between each Security Provider on the one hand, and the Security Trustee and the Beneficiaries on the other hand, all action
taken by the Security Trustee under this document or any other Security Trustee Document is deemed to be authorised by the
Beneficiaries.
4.Duties and responsibilities of Security Trustee
4.1Duties and responsibilities limited
The Security Trustee's obligations, duties and responsibilities in its capacity as trustee of the Security Trust under or in connection with
this document and each other Security Trustee Document are limited to those expressly set out in the Security Trustee Documents.
Without limitation, except to the extent expressly provided for in a Security Trustee Document, the Security Trustee is not:
(a)an agent for, and does not owe any fiduciary obligations to, any Beneficiary or Security Provider, regardless of whether a Default
has occurred and is continuing;
(b)responsible or liable if it acts in good faith on an instruction purportedly given by the Administrative Agent that is later found to be
defective, invalid or not binding on the Security Trustee or any Beneficiary purportedly bound by the instruction;
(c)responsible or liable for, or to see the proper use or application of, any financial accommodation or other consideration provided or to
be provided by any Beneficiary to a Security Provider in connection with the Loan Documents;
(d)liable to any Beneficiary or Security Provider because any other Beneficiary or Security Provider fails to perform its obligations under
any Loan Document or (in the case of a Beneficiary) provide instructions where requested by the Administrative Agent in accordance
with the Loan Documents; or
(e)responsible or liable for the validity, effectiveness, genuineness, enforceability or sufficiency of any Security Document or any other
Loan Document or any other certificate or document given under any of them (except to the extent of Loss due to the Security Trustee's
own fraud, gross negligence or wilful default),
provided that nothing in this clause 4.1 releases or discharges the Security Trustee from any responsibility or liability which it has as a
Beneficiary in any capacity other than as security trustee of the Security Trust.
4.2When the Security Trustee need not act
Despite any other provision of any Loan Document and regardless of whether it has received instructions from the Administrative Agent,
the Security Trustee is not obliged to act or exercise any Power:
(a)unless its liability is limited in the manner set out in clause 7;
14
(b)until it is first indemnified to its reasonable satisfaction in accordance with clause 8 or otherwise or the Beneficiaries place the
Security Trustee in funds equivalent to the amount which the Security Trustee reasonably determines may become payable in
respect of any liabilities, costs or expenses which will or may arise from the Security Trustee taking that action;
(c)where in the Security Trustee's opinion, or in the opinion of its counsel, to do so would or may result in the Security Trustee breaching
the terms of a Loan Document or any law or expose the Security Trustee to any liability; or
(d)if it is impossible for the Security Trustee to act or to act lawfully due to any cause beyond its control (including but not limited to act of
God, war, riot, terrorism, fire, natural disaster, labour dispute or change in or introduction of law taking effect after the date of this
document).
No Beneficiary may have recourse to the Security Trustee where the Security Trustee does not act on the Beneficiary's instructions (on
behalf of the Administrative Agent) as contemplated by this clause 4.2.
4.3No investigation or monitoring
The Security Trustee is not obliged to:
(a)keep itself informed as to any Security Provider's performance or observance of its obligations under a Loan Document or any
other document;
(b)enquire or investigate whether or not a Default or an Event of Default has occurred or is continuing;
(c)examine or enquire into, nor will it be liable for, any defect or failure in title to property intended to be Secured Property, and may
accept any such title without requisition or objection; or
(d)inspect, investigate or enquire into any matter relating to or concerning the Secured Property or books of any Security Provider
or to assess or keep under review the business, operations, financial condition, creditworthiness or status of affairs of any Security
Provider.
4.4Knowledge and awareness of Security Trustee
(a)For the purposes of each Security Trustee Document, the Security Trustee in its capacity as trustee of the Security Trust will only be
considered to have knowledge, notice of or awareness of any matter or thing to the extent of actual knowledge, notice of or awareness of
the officers or employees of the Security Trustee who have day to day responsibility for the administration of the Security Trustee's
obligations under this document or the Security Trust.
(b)The Security Trustee in its capacity as trustee of the Security Trust is not deemed to know of a Default or Event of Default unless the
Security Trustee has received Notice from a Beneficiary or a Security Provider stating that a Default or Event of Default has occurred.
4.5Information duties
(a)The Security Trustee must give the Administrative Agent a copy of each document which the Security Trustee gives to or receives in
connection with any Loan Document. It is not required to review or check the accuracy or completeness of any such document.
(b)The Security Trustee has no duty to provide any Beneficiary with any credit or other information concerning the assets, liabilities,
financial condition or business of any Loan Party or any other person other than as specified in clause 4.5(a).
(c)The Security Trustee has no duty or responsibility to (but is authorised by each Security Provider to) provide any Beneficiary with any
information concerning the affairs or financial condition of any Security Provider which may come into the possession of the Security
Trustee.
15
(d)The Security Trustee is not bound to disclose to any person any information relating to any party to a Loan Document if the
disclosure would or might in its reasonable opinion breach any Loan Document, a law or duty of secrecy or confidentiality or otherwise
be actionable at the suit of any person.
5.Beneficiary provisions
5.1Security Trustee to have same rights as Beneficiaries
If the Security Trustee is or becomes a Beneficiary in a capacity other than as trustee of the Security Trust, it has the same rights, powers
and discretions as a Beneficiary under each Security Trustee Document as any other Beneficiary and may exercise the same as if it were
not acting as trustee of the Security Trust.
5.2Actions binding on all Beneficiaries
Any action taken or decision made by the Security Trustee in accordance with any Security Trustee Document is:
(a)as between the Security Trustee and the Beneficiaries, binding on all the Beneficiaries; and
(b)as between each Security Provider on the one hand, and the Security Trustee and the Beneficiaries on the other hand, deemed to
be authorised by the Beneficiaries.
5.3No exercise of Powers by Beneficiaries
No Beneficiary may exercise any Power comprised in the Security Trust Fund except through the Security Trustee on the terms of this
document.
5.4Independent decision by Beneficiaries
(a)Each Beneficiary acknowledges that it has, independently and without reliance on the Security Trustee or any other Beneficiary, and
based on such documents and information as it has deemed appropriate, made its own investigation into the affairs and financial condition
of each Security Provider and other relevant persons and the value, validity, effectiveness, genuineness and enforceability of each Loan
Document.
(b)Each Beneficiary must independently and without reliance upon the Security Trustee or any other Beneficiary, and based on the
documents and information as it deems appropriate at the time, continue to make its own analyses and decisions in taking or not taking
action under any Loan Document.
(c)The Security Trustee is not liable if a Beneficiary fails to do anything referred to in paragraph (a) or (b) or if a Beneficiary suffers loss or
damage as a result of doing anything referred to in paragraph (a) or (b).
5.5Requirements of reasonableness
If a Loan Document expressly requires the Security Trustee to act reasonably or not act unreasonably in forming an opinion or exercising its
Powers, each Beneficiary agrees to act in the required manner when instructing the Security Trustee on that matter.
5.6Information about Exposure
(a)Each Beneficiary agrees to give the Security Trustee, promptly following a request, information reasonably required by the Security
Trustee from time to time to determine the amount of the Beneficiary's Exposure.
(b)As between the Security Trustee and the Beneficiaries only, the Security Trustee may rely on information provided by an Authorised
Representative of a Beneficiary pursuant to clause 5.6(a) (or if a Beneficiary fails to provide that information, on such information held or
obtained by the Security Trustee concerning the amount of the Beneficiary's Exposure) as being correct unless proved incorrect.
16
5.7Rights of each Beneficiary
Subject to the provisions of this document, each Beneficiary has the benefit of, and rights under, this document even if it is not a party to
this document and it may not have been in existence at the time that this document is executed.
6.Security Trustee's rights and powers
6.1Rights of Security Trustee
Except as expressly set out in this document and the Credit Agreement, the Security Trustee:
(a)may exercise all of its Powers under the Security Trustee Documents and all of the powers conferred by law or equity on a trustee
generally in respect of the Security Trustee Documents as if it alone beneficially owned the Security Trustee Documents; and
(b)may determine whether or not to enforce a Security Trustee Document or to seek to recover any Obligations and may determine
the manner in which that enforcement or recovery is conducted.
6.2Statutory powers
The powers of the Security Trustee under this document or any other Security Trustee Document are in addition to any powers the Security
Trustee has under any applicable law.
6.3Notice of enforcement
To the extent not prohibited by law or except as expressly required under this document or a Security Document, before enforcing this
document or any other Security Document, or exercising any Power, the Security Trustee is not required to give any notice or allow the
expiration of time to any person.
6.4Dealing in different capacities
(a)The Security Trustee may:
(i)engage in any kind of banking, trust or other business with any Security Provider or any Beneficiary; and
(ii)accept fees and other consideration from any Security Provider for services in connection with the Loan Documents or
any other arrangement,
as if it were not the trustee of the Security Trust. The Security Trustee need not notify the Beneficiaries if it does so, nor account
to the Beneficiaries for any income or other benefit it derives in doing so, and the Beneficiaries release the Security Trustee from
any obligation it might otherwise have to the Beneficiaries in relation to those matters.
(b)In this clause 6.4, a reference to the Security Trustee, a Beneficiary or a Security Provider includes any Affiliate of those persons.
(c)The Security Trustee may exercise a Power even if it, one of its directors or one of its shareholders has a personal interest in
whether, or the way in which, the Power is exercised or may benefit (directly or indirectly) from the exercise of the Power.
6.5Right to appoint attorney and agents
The Security Trustee, instead of acting personally, may appoint an attorney or employ an agent or contractor to do any act required or
permitted to be done by the Security Trustee under the Security Trustee Documents.
6.6Right to delegate
The Security Trustee may:
(a)delegate its Powers under this document or in relation to the Security Documents, either wholly or partially or subject to any limitations
or restrictions, to any person (including
17
any Beneficiary) as it thinks fit, proper or appropriate in its absolute discretion;
(b)from time to time execute such powers of attorney or other instruments as it thinks proper;
(c)revoke any delegation under paragraph (a); and
(d)act notwithstanding the existence of any conflict of interest,
without being responsible for Loss occasioned by so doing if the Security Trustee has not been guilty of fraud, gross negligence or wilful
default in so delegating or so revoking any such delegation. No person dealing with the Security Trustee or any person to whom the
exercise of the Powers referred to in this clause 6.6 has been delegated, need enquire whether the delegation remains in force.
6.7Acting on advice
The Security Trustee may obtain and act on the opinion, certificate or advice of or information obtained from, any attorney, agent, contractor
or delegatee appointed by it under clauses 6.5 or
6.6 or any lawyer, banker, valuer, surveyor, broker, auctioneer, accountant or other consultant
reasonably believed by the Security Trustee to have expertise in relation to the relevant matter. The Security Trustee is not liable for any
Loss for doing so, except to the extent of such Loss due to the Security Trustee's fraud, gross negligence or wilful default in so acting.
6.8Security Trustee may rely on certain things
The Security Trustee is entitled to rely:
(a)on any Notice, communication or document (including any facsimile or electronic transmission) that it believes to be genuine;
and
(b)as to any matters of fact which might reasonably be expected to be within the knowledge of any party to any of the Loan Documents, on
a certificate signed by or on behalf of such party,
in each case without liability for Loss for doing so, except to the extent of such Loss due to the Security Trustee's fraud, gross negligence or
wilful default in so acting.
6.9Minor amendments to Security Trustee Documents
(a)Each Beneficiary authorises the Security Trustee, in its capacity as trustee of the Security Trust, to agree or effect any amendment to a
Security Trustee Document if:
(i)the amendment will not increase the obligations or reduce the rights of the Beneficiary, change the times or amounts of payment
of any money payable to the Beneficiary under any Security Trustee Document or adversely affect the value of any Security
Document;
(ii)the amendment does not amend or purport to amend this clause or any provision under which the agreement or instructions
of the Administrative Agent are required; and
(iii)the Security Trustee, acting reasonably, is satisfied that the amendment is of a formal or technical nature only or is made to
correct a manifest error or an error of a minor nature.
(b)Each Beneficiary will be bound by any amendment made by the Security Trustee in accordance with this clause 6.9. The Security
Trustee must notify all Beneficiaries of any such amendment.
7.Liability of Security Trustee
7.1Limit on liability
Subject to clause 7.2, the Security Trustee is not, and its directors, Authorised Representatives, employees, agents and attorneys are not,
liable to any party for:
18
(a)any Loss occurring as a result of it exercising, failing to exercise or purporting to exercise any Power under this document or in relation
to the Security Documents or the Security Trustee Documents;
(b)subject to this document, the actions of any agent, delegate, Authorised Representative or employee of the Security Trustee;
(c)any mistake or omission made by it or its agent, delegate, Authorised Representative or employee;
(d)any other matter or thing done, or not done, in relation to the Security Documents or the Security Trustee Documents;
(e)any absence of, or defect in title or for its inability to exercise any of its Powers under the Security Documents or the Security Trustee
Documents;
(f)any failure by a Security Provider to perform its obligations under any Loan Document or Security Document;
(g)any failure by a Beneficiary to:
(i)perform its obligations under any other Loan Document; or
(ii)provide instructions where requested by the Security Trustee in accordance with this document;
(h)the financial condition or solvency of a Security Provider;
(i)any statement, representation or warranty of a Security Provider being incorrect or misleading in any respect;
(j)any failure or delay in performing its duties or obligations where it is impossible for the Security Trustee to act or to act lawfully due to
any cause beyond its control (including but not limited to act of God, war, riot, terrorism, fire, natural disaster, labour dispute or law taking
effect after the date of this document);
(k)acting in accordance with the instructions of the Administrative Agent in accordance with this document, or in the absence of
instructions in accordance with clauses 3.5 or 4.2, or for refraining from acting:
(i)in accordance with the instructions of the Administrative Agent, in accordance with this document; or
(ii)where there are no instructions which are required by this document for the Security Trustee to act or refrain from
acting;
(l)the value, validity, effectiveness, genuineness, enforceability or sufficiency of any Security Document or any other Loan Document or any
other certificate or document given under any of them; and
(m)any recitals, statements, representations or warranties contained in any Loan Document or in any certificate or other document
referred to in or provided for in, or received by it under, any Loan Document.
The limitation of the Security Trustee's liability under this clause 7.1 applies despite any other provision of any Security Trustee Document
(other than clause 7.2 (Exceptions to limit on liability)) and extends to all liabilities and obligations of the Security Trustee in relation to any
representation, warranty, conduct, omission, agreement or transaction related to this document.
7.2Exceptions to limit on liability
Clause 7.1 will not apply to the extent that the Security Trustee or any of its employees, agents or Authorised Representatives has been
guilty of fraud, gross negligence or wilful default. None of the following of itself will amount to fraud, gross negligence or wilful default of the
Security Trustee:
(a)failure by the Security Trustee to act due to lack of instructions or lack of proper or clear instructions from the Administrative Agent,
except while the Security Trustee is the
19
same legal entity as the Administrative Agent; or
(b)any act or omission, to the extent caused or contributed to by any failure by any other person (other than the Security Trustee's
employee or officer).
7.3Recourse to Security Trustee
Except to the extent that the Security Trustee has been guilty of fraud, gross negligence or wilful default:
(a)a liability of the Security Trustee to the Beneficiaries or Security Providers can be enforced against the Security Trustee only to the
extent to which the Security Trustee is entitled to be and is in fact indemnified for that liability out of the Security Trust Fund; and
(b)no Beneficiary or Security Provider may sue the Security Trustee in any capacity other than as a trustee of the Security Trust in
respect of any matter arising out of a Security Trustee Document. Without limitation, no Beneficiary or Security Provider may seek the
appointment of an External Administrator to or prove in any Liquidation of the Security Trustee, except in relation to and to the extent of
the Security Trust Fund.
7.4Duties of the Security Trustee
(a)The Security Trustee is not:
(i)responsible if it acts upon any instruction purported to have been given by the Administrative Agent even though it may
subsequently be found that there was some defect in the instruction or for any other reason the instruction was not valid or
binding upon any of those Beneficiaries whom it purports to bind or upon the Security Trustee;
(ii)except as expressly set out in this document:
(A)responsible in respect of financial accommodation provided by any Beneficiary to a Security Provider; or
(B)bound or concerned to see to the due application of them by a Security Provider; or
(iii)bound or concerned to examine or enquire into, nor be liable for, any defect or failure in the title of a Security Provider to the
assets of a Security Provider and is entitled to accept any such title without requisition or objection.
(b)Failure by the Security Trustee to act due to lack of instructions or lack of proper or clear instructions from the Administrative Agent
does not in itself amount to bad faith, fraud, gross negligence or wilful misconduct of the Security Trustee unless at the relevant time the
same legal entity is also the Administrative Agent.
7.5PPSA security interests
(a)The Security Trustee is not, and its directors, Authorised Representatives, employees, agents or attorneys (including an Attorney) are
not, liable to any party, for taking, or failing to take, any action for the purposes of the PPSA, whether for the benefit of all the Beneficiaries
or one or more of them, unless the Security Trustee:
(i)is expressly instructed to do so by the Administrative Agent; and
(ii)is satisfied that it is indemnified (or otherwise put in funds) to its reasonable satisfaction in relation to that matter.
(b)Without limiting clause 7.5(a), none of the Security Trustee nor its directors, Authorised Representatives, employees, agents or
attorneys (including an Attorney) are:
(i)required to review or check whether any Loan Document or any other agreement, arrangement or document relating to them is
or contains a security interest for the purposes of the PPSA or whether any such security interest has been or should be
perfected under the PPSA;
20
(ii)liable to any party, for not identifying or perfecting under the PPSA any security interest which may be constituted by or
contained in any Loan Document or any other agreement, arrangement or document; or
(iii)guilty of bad faith, fraud, gross negligence or wilful misconduct solely because they have not identified, or have failed to
perfect under the PPSA, any security interest which may be constituted by or be contained in any Loan Document or any
other agreement, arrangement or document relating to them, unless the Security Trustee has been expressly instructed to do
so by the Administrative Agent.
(c)This clause 7.5 does not limit in any way any other provision of a Loan Document which benefits, releases, exonerates or indemnifies
the Security Trustee or any of its directors, Authorised Representatives, employees, agents or attorneys (including an Attorney).
8.Security Trustee's indemnities
8.1Indemnity out of Security Trust Fund
Subject to clause 8.3, the Security Trustee is and will be indemnified out of any money from time to time received or recovered by the
Security Trustee under each Security Document in respect of
all Losses (including any moneys paid or to be paid for the employment or appointment of any agent and including legal costs and
expenses on a full indemnity basis) incurred by it:
(a)in the exercise, protection or defence of any Powers or in performing any of its obligations, duties or responsibilities; or
(b)otherwise in relation to a Security Document or other Security Trustee Document.
The Security Trustee may, from time to time, retain and pay out of any moneys recovered from the Securities an amount to satisfy such
indemnity.
8.2Indemnity by Beneficiaries
(a)Subject to clause 8.3, if there are insufficient moneys available for the Security Trustee to promptly satisfy its right to indemnity under
clause 8.1, each Beneficiary severally in its Proportionate Exposure:
(i)indemnifies the Security Trustee against that amount; and
(ii)must pay to the Security Trustee an amount equal to its share within 3 Business Days after demand from the Security
Trustee.
(b)The indemnity in clause 8.2(a) is in addition to, and without prejudice to, any right of indemnity available to the Security Trustee
in law or equity or in any other Security Trustee Document.
8.3Exceptions to indemnities
The indemnities in clauses 8.1 and 8.2(a) do not apply to the extent of any Loss of the Security Trustee as a result of the Security Trustee's
fraud, gross negligence or wilful default.
8.4Indemnity by Security Provider
Each Security Provider jointly and severally indemnifies each Beneficiary against, and must pay to a Beneficiary on demand amounts equal
to, any Loss in connection with amounts that the Beneficiary is required to pay under clause 8.2(a).
8.5First indemnified
Despite any other provision of any Loan Document, the Security Trustee is not obliged to take any action under any Security Trustee
Document, or exercise any Power, (including in connection with enforcement or proposed enforcement of any Security Document), until it is
first indemnified to its satisfaction in accordance with this clause 8 or otherwise.
21
9.Payments and distributions
9.1Obligations received before Enforcement Date
(a)Any principal amounts of financial accommodation repaid or prepaid under the terms of the Credit Agreement before the
Enforcement Date will be for the account of the Administrative Agent and the Lenders in accordance with the Credit Agreement.
(b)Subject to the Security Trustee Documents, if before the Enforcement Date the Security Trustee receives or recovers any money
which form Obligations then due and payable to a Beneficiary (whether pursuant to a Security Document or otherwise from a Security
Provider), the Security Trustee will promptly pay that money to that Beneficiary.
9.2Payments directed through Security Trustee
If, on or after the Enforcement Date, the Administrative Agent instructs the Security Trustee to direct each Security Provider to make all
payments of the Obligations through the Security Trustee:
(a)the Security Trustee will make that direction to each Security Provider; and
(b)on and after receipt of that direction each Security Provider will make all payments under the Loan Documents to the Security Trustee
on behalf of the Beneficiaries until directed otherwise by the Security Trustee (acting on the instructions of the Administrative Agent),
and to the extent received by the Security Trustee, any such payment strictly in accordance with the direction is taken to satisfy
the Security Provider's obligation to pay that amount to the Security Trustee and the Beneficiaries.
9.3Distribution of Obligations received on or after Enforcement Date
Any amount (including the proceeds of any enforcement of a Security Document) received by the Security Trustee or a Receiver or otherwise
recovered by the Security Trustee or a Receiver on or after the Enforcement Date must be applied and distributed in accordance with the
Credit Agreement.
9.4Exclusion from amounts for distribution
Amounts due for distribution under clause 9.1 or clause 9.3 will not include:
(a)the proceeds of a claim under an Insurance Policy which are permitted under the terms of any Loan Document to be applied to reinstate
or replace property any damaged or destroyed Secured Property covered by that Insurance Policy or which are not otherwise required to
be paid to any Secured Party under the terms of the Loan Documents;
(b)amounts (and any interest paid on those amounts) credited to a suspense account established in accordance with any Loan Document
(for so long as those amounts remain credited to that suspense account); or
(c)amounts received or recovered by a Beneficiary under arrangements (including credit derivatives and sub-participations) entered into
by the Beneficiary in good faith with parties unrelated to the Security Providers to cover some or all of its risk under the Loan
Documents.
9.5Appropriation by Security Provider
A distribution under clause 9.2 or clause 9.3 overrides any appropriation made by a Security Provider.
9.6Suspense account
(a)If any Obligations are contingently owing to any Beneficiary at the time of a distribution of an amount under clause 9.3, the Security
Trustee may retain any of that amount and place it on short term interest bearing deposit until the relevant Obligations become
22
actually due or ceases to be contingently owing, following which the Security Trustee will:
(i)pay to that Beneficiary the amount which becomes actually due to it; and
(ii)apply the balance of the amount retained (together with interest earned on the deposit) in accordance with clause 9.3.
(b)If the Obligations have been fully and finally paid or discharged and the Security Trustee is satisfied that such payment or discharge is
not liable to be set aside, avoided or reversed, then the balance standing to the credit of the deposit account and any accrued interest must
be paid to or for the account of the relevant Security Provider for distribution to the persons entitled to it and no Beneficiary will have any
further liability in relation to it.
9.7Credit of available funds
In applying money received under this document or any Security Document towards the satisfaction of the Obligations:
(a)the account of the relevant Security Provider will be credited with only so much of the money available for the purpose as is actually
received by the Security Trustee and not credited to a suspense account; and
(b)the credit will date from the time of receipt (as determined by the Security Trustee).
9.8Turnover – amounts not received through distribution
Subject to clauses 9.4 and 9.9, if after the Enforcement Date a Beneficiary receives or recovers (whether by direct payment, set-off or
otherwise) an amount in respect of any Obligations
otherwise than by distribution in accordance with the Credit Agreement or by the Security Trustee under this document:
(a)the Beneficiary must promptly notify the Security Trustee and (unless the Security Trustee otherwise directs on the instructions of all
other Beneficiaries) pay that amount to the Security Trustee;
(b)unless paragraph (c) applies, the receipt or recovery will be treated as having been received by the Security Trustee (and not by the
Beneficiary) for distribution under this document, and will not reduce the Obligations owing to the Beneficiary (except to the extent of any
distribution subsequently received by the Beneficiary in accordance with the Credit Agreement or from the Security Trustee under this
document);
(c)if the receipt or recovery was obtained other than by payment (such as by set-off) from a person who was or became insolvent at the
time of the receipt or recovery or otherwise in accordance with the Credit Agreement, each other Beneficiary is automatically taken to have
assigned to the Beneficiary all right, title and interest to an amount of the Obligations equal to the amount received or recovered by the
Beneficiary, with the intent that the Beneficiaries then have the same rights and obligations as if the receipt or recovery had been paid to
the Security Trustee for the account of the Beneficiaries and distributed under this document or otherwise in accordance with the Credit
Agreement;
(d)each Security Provider must indemnify the Beneficiary against, and must pay on demand amounts equal to, any Loss arising as a result
of or in connection with a payment made by the Beneficiary under paragraph (a) to the extent that the Security Provider's liability has been
discharged by the receipt or recovery; and
(e)if all or part of the amount received or recovered by the Beneficiary must subsequently be refunded or restored by the Beneficiary:
(i)the other Beneficiaries must repay to the Security Trustee (for the account of the Beneficiary) the amount necessary to
ensure that all the Beneficiaries share rateably in the amount of the recovery or payment retained; and
(ii)each Security Provider must indemnify the Security Trustee and each Beneficiary against, and must pay on demand amounts
equal to, any Loss arising as a result of or in connection with any Beneficiary making or becoming liable to make any
23
payment under sub-paragraph (i) to the extent that the Security Provider's liability has been discharged by the amount received
by that Beneficiary from either the Security Provider or another Beneficiary.
9.9Entitlement to share in recovery
If the Security Trustee or a Beneficiary receives or recovers an amount as a result of any legal action or proceedings against a Security
Provider, any Beneficiary which (being entitled and having been given a reasonable opportunity to do so) did not join in or share in the
costs of the action from the time it was instituted is not entitled to share in the amount received or recovered until each Beneficiary who did
join in or share in those costs, receives the amounts contributed by it in joining in or sharing in the costs of the action. Once the above
amounts have been repaid, the balance of the recovered amount will be distributed in accordance with clause 9.
9.10Overriding application
This clause 9 applies despite any rule of law or equity to the contrary or the respective dates on which anything is done.
10.Replacement of Security Trustee
10.1Resignation of Security Trustee
The Security Trustee may resign at any time by giving at least 30 days' notice (or such shorter period as the Borrower and the
Administrative Agent may agree) to that effect to:
(a)each Beneficiary at the time (if any) or the Administrative Agent; and
(b)the Borrower.
10.2Removal of Security Trustee
The Security Trustee may be removed from being trustee of the Security Trust at any time:
(a)by the Administrative Agent giving to the Security Trustee at least 30 days notice to that effect; and
(b)except where an Event of Default is continuing or the removal of the Security Trustee is due to the Security Trustee's fraud, gross
negligence or wilful default, with the agreement of the Borrower, which agreement must not be unreasonably withheld or delayed.
10.3Effect of resignation or removal
(a)Upon the resignation or removal of the Security Trustee pursuant to clauses 10.1 or 10.2, the Security Trustee is released from any
further obligations as trustee of the Security Trust under this document and the Security Documents, but such release does not prejudice
any liability in respect of any default arising before the termination of appointment.
(b)Clauses 7 (Liability of Security Trustee) and 8 (Security Trustee's indemnities) will continue to benefit the outgoing Security
Trustee in respect of any action taken or not taken by it in connection with the Loan Documents while it was the Security Trustee.
10.4Costs of resignation or removal
(a)Subject to clause 10.4(b)(i), the Borrower must indemnify the Security Trustee and the Beneficiaries for the costs of any
resignation, removal and replacement of the Security Trustee under this clause 10.
(b)The Security Trustee will bear its own costs of resignation, removal and replacement (including the cost of appointing a new
Security Trustee) under this clause 10 if:
(i)the Security Trustee is removed due to the Security Trustee's fraud, gross negligence or wilful default or due to a change in the
identity of the Administrative
24
Agent where the outgoing Administrative Agent is required to bear its own costs of resignation pursuant to the Credit Agreement;
or
(ii)the Security Trustee chooses to resign pursuant to clause 10.1.
10.5Assurances
Despite clauses 10.1 and 10.2, no resignation or removal of the Security Trustee takes effect unless:
(a)a successor Security Trustee has been appointed in accordance with clause 10.6;
(b)the successor Security Trustee undertakes to act as trustee of the Security Trust and be bound in that capacity by the terms of this
document and each other Security Trustee Document (subject to any agreed amendment to those documents); and
(c)the successor Security Trustee obtains title to each Security Interest, Security Document and the Security Trust Fund in its capacity as
trustee of the Security Trust.
10.6Appointment of successor Security Trustee
(a)If the Security Trustee resigns or is removed, the Administrative Agent may appoint a successor Security Trustee approved by the
Borrower, which approval:
(i)must not be unreasonably withheld or delayed;
(ii)is not required if:
(A)an Event of Default is continuing; or
(B)the successor Security Trustee is to be an Affiliate of the retiring Security Trustee or is to be the same person as
any successor Administrative Agent appointed at the same time under Section 11.6 (Resignation or Removal of
Administrative Agent) of the Credit Agreement; and
(iii)is deemed to be given if the Borrower does not reply within 10 Business Days after the request for its approval is made.
(b)If no successor Security Trustee is so appointed or accepts the appointment within 30 days after:
(i)notice of resignation or removal is given in accordance with clauses 10.1 or 10.2; or
(ii)the Security Trustee's appointment is otherwise terminated,
the Security Trustee may, on behalf of each Beneficiary, appoint a successor Security Trustee on substantially the same terms
and conditions as are provided for in this document.
(c)Each Beneficiary and each Security Provider are bound by the terms and conditions of any appointment effected under clause
10.6(b).
(d)Each Beneficiary and each Security Provider must do all things reasonably necessary, including executing any deeds of appointment
or vesting, to ensure that the appointment of any successor Security Trustee is properly and promptly effected.
(e)When a successor Security Trustee is appointed, the successor Security Trustee and each other party to the Security Trustee
Documents have the same rights and obligations among themselves as they would have had if the successor Security Trustee had been
an original party to the Security Trustee Documents (other than in relation to any accrued right against the terminated Security Trustee for
default under the Security Trustee Documents) in place of the terminated Security Trustee.
(f)A party appointing a successor Security Trustee must cause the successor Security Trustee to execute novation deeds or
agreements with third parties as required or appropriate to give effect to clause 10.6(e).
25
(g)Each Beneficiary, for consideration received, appoints the Security Trustee and each director, company secretary or other Authorised
Representative of the Security Trustee severally its attorney, in their respective names and on their respective behalf, to do all things and
execute, sign, seal and deliver (conditionally or unconditionally in the attorneys discretion) all documents, deeds and instruments
necessary or desirable for:
(i)the appointment of a successor Security Trustee under clause 10.6(b); and
(ii)the vesting in that successor Security Trustee of all of the Security Trust Fund or any part of it.
This power may be delegated or a sub-power may be given, and any delegate or sub- attorney may be removed, by the attorney
appointing it.
11.Administrative Agent provisions
11.1Communication by Lenders
All communication by a Lender (in its capacity as a Beneficiary) to a Security Provider in connection with the Security Documents, the
Security Trust Fund or this document must be made through the Security Trustee, except during any period in which the Administrative
Agent and the Security Trustee (on its own account and not in its capacity as trustee of the Security Trust) are the only Beneficiaries.
11.2Capacity and dealings
(a)The Administrative Agent enters into this document as the administrative agent for and on behalf of the relevant Lenders pursuant to
the Credit Agreement.
(b)The parties acknowledge that:
(i)any instruction or direction of the Lenders (or, in each case, the relevant number of them) will be communicated to the Security
Trustee by the Administrative Agent and will relate to, and be in respect of, the Exposure of all of those Lenders under the Credit
Agreement (and the Security Trustee may rely on that instruction or direction without further enquiry); and
(ii)a Lender may not give an instruction or direction independently to the Security Trustee in respect of its Exposure under
the Credit Agreement.
(c)The Security Trustee need not inquire whether any instruction or direction given or not given by the Administrative Agent under this
document has been given or not given in accordance with the Credit Agreement.
(d)All action taken or not taken by the Administrative Agent is, as regards the Security Trustee, deemed to be authorised by all relevant
Lenders under the Credit Agreement, and without the Security Trustee being responsible, or liable to any person, for any Loss due to
lack of authority (save for any responsibility or liability accruing to the Security Trustee by reason of it being the same legal entity as the
Administrative Agent).
11.3Information about Lenders
The Administrative Agent will inform the Security Trustee promptly following a request as to the identity of the Lenders and their respective
Exposures, and the Security Trustee may rely on such information without further investigation.
11.4Notification of Event of Default and Enforcement Date
The Administrative Agent will inform the Security Trustee in writing of the occurrence of:
(a)an Event of Default under the Credit Agreement; and
(b)the Enforcement Date,
and the Security Trustee may rely on such information without further investigation.
26
11.5Assignment by Administrative Agent
The Administrative Agent may assign or otherwise deal with all or any of its rights and obligations under this document in accordance with the
Credit Agreement.
12.Changes to Security Providers and Beneficiaries
12.1Assignment by Security Provider
A Security Provider may not assign or otherwise deal with its rights under this document or any Security Document without the consent
of the Security Trustee (acting on the instructions of the Administrative Agent).
12.2New Security Provider
(a)The Borrower and each other Security Provider must ensure that any person who grants a Security Document and is not already a
Security Provider will, on the same day that it grants the Security Document, become bound by this document as if it were a party to this
document as a 'Security Provider' by:
(i)executing 2 counterparts of an Accession Deed and delivering these to the Security Trustee; and
(ii)providing to the Security Trustee all information and documents required for the Security Trustee to complete KYC Checks in
respect of the new Security Provider.
(b)Each of the parties to this document (other than the Security Trustee) appoints the Security Trustee as its agent to sign on its behalf
any Accession Deed referred to in paragraph (a). The execution of an Accession Deed referred to in paragraph (a) does not operate to
release any party from its obligations under this document or any other Loan Document.
12.3Assignment by Beneficiary
Subject to the other Loan Documents, a Beneficiary may assign or otherwise deal with all or any of its rights and transfer all or any of its
obligations under this document.
12.4New Beneficiary by assignment or novation
(a)If a Lender transfers, substitutes or novates any of its rights and obligations under the Credit Agreement to a person who is to become a
new 'Lender' pursuant to a documented transfer, substitution or novation procedure in accordance with the terms of the Credit Agreement
the new Lender automatically becomes a Beneficiary without the requirement to take any action and the parties agree that the relevant
transfer, substitution or novation documents are taken to be an Accession Deed.
(b)If a Beneficiary other than a Lender assigns any of its rights or novates any of its rights and obligations under a Loan Document (or
proposes to do so) in accordance with the Loan Documents:
(i)the Beneficiary must notify the Security Trustee accordingly; and
(ii)the Beneficiary and the assignee or novatee must enter into an Accession Deed with the Security Trustee so that the
assignee or novatee will become bound by this document as if it were a party to this document as a 'Beneficiary'.
(c)If a Beneficiary's assignment or novation is of only part of its rights and obligations under the Loan Documents, it continues to have the
benefit of, and to be bound by, this document as a Beneficiary.
(d)If a Beneficiary's assignment or novation is of all of its rights and obligations under the Loan Documents, on the relevant Accession
Deed taking effect, it ceases to be a Beneficiary and is released from any further obligations as a Beneficiary under this document
other than in respect of any breach by it of this document arising before it ceased to be a Beneficiary.
27
For the purposes of this clause 12.4, 'Loan Document' does not include this document.
12.5Accession Deeds
(a)An Accession Deed will not be effective until the Security Trustee has executed the Accession Deed.
(b)On an Accession Deed taking effect the relevant new Beneficiary or new Security Provider becomes bound as, and obtains benefits as, a
'Beneficiary' or 'Security Provider' (as applicable) under this document on the same basis as if it were a party to this document.
(c)The Security Trustee must notify the Administrative Agent of a person becoming a new 'Beneficiary' or 'Security Provider' (as
applicable) promptly after the relevant Accession Deed takes effect.
(d)Each Beneficiary and each Security Provider for valuable consideration irrevocably authorises each of the Security Trustee and the
Security Trustee's Authorised Representatives separately to execute on its behalf any Accession Deed contemplated to be entered into
pursuant to this document, and to do anything else that the Security Trustee considers appropriate to effect the accession contemplated by
the Accession Deed.
12.6Opting out by Beneficiary
(a)A Beneficiary will cease to be a Beneficiary at the time it receives payment in full and final satisfaction of all Obligations due to it under
the Loan Documents and, subject to
clause 15.5 (Reinstating avoided transaction), has no further actual or contingent obligations under any Loan Document. At that
time, but subject to clause 15.5 (Reinstating avoided transaction), it will also cease to have any rights and obligations under this
document.
(b)If the Administrative Agent is replaced in its capacity as Administrative Agent under the Credit Agreement and the other Loan
Documents, it will cease to have any rights and obligations under this document in its capacity as Administrative Agent when its
replacement executes an Accession Deed and delivers it to the Security Trustee.
13.Payments
13.1Payment requirements
(a)All payments by a Security Provider under this document or any Security Document must be made in accordance with Credit
Agreement.
(b)If the Security Trustee directs a Security Provider to pay a particular person or in a particular manner, the Security Provider's payment
obligation is only discharged when the person to whom payment is directed actually receives the relevant amount.
14.Notices, demands and communications
14.1Defined term
In this clause 14, Notice means a notice, demand, consent, approval or communication given by a party pursuant to or in connection with
this document or any Security Trustee Document.
14.2Service
A Notice given by a party in connection with this document or any Security Document must be given in accordance to the Credit
Agreement and, in the case of a Notice given by or to the Security Trustee, as if the Notice were a Notice given by or to the Administrative
Agent.
15.Protection of Security Trustee, Beneficiaries and third parties
15.1Security Trustee and Beneficiaries not
28
restricted
The Security Trustee or a Beneficiary need not:
(a)exercise a Power, give a consent or make a decision under a Loan Document unless the Loan Document expressly provides otherwise
or, in the case of the Security Trustee, as instructed by the Administrative Agent; or
(b)resort to a Security Document or Power before resorting to any other of them.
15.2Security Trustee and Beneficiaries not liable
Except as expressly provided otherwise in this document, to the extent permitted by law, the Security Trustee, a Beneficiary or an
Attorney will not be liable to anyone for any Loss in relation to an exercise or attempted exercise of a Power, or a failure or delay in
exercising a Power.
15.3Security Trustee may set off
At any time while an Event of Default is continuing, the Security Trustee may, without any demand or notice, set off and apply indebtedness
it owes to a Security Provider (whatever the currency) against any money owing to it by a Security Provider under any Loan Document,
whether or not the amount owed by the Security Trustee or a Security Provider is immediately payable or is owed alone or with any other
person. Each Security Provider irrevocably authorises the Security Trustee to do anything necessary (including to sign any document and
effect appropriate currency exchanges) for that purpose.
15.4Set off by a Security Provider
Except as may be expressly provided for in a Loan Document, a Security Provider may not (either directly or indirectly) claim, exercise or
attempt to exercise a right of set-off or counterclaim against the Security Trustee (whether its or any other person's right) or any other right
which might have the effect of reducing the Obligations.
15.5Reinstating avoided transaction
Each Security Provider agrees that if a payment or other transaction relating to the Obligations is void, voidable, unenforceable or defective
for any reason or a related claim is upheld, conceded
or settled (each an Avoidance), then even though the Security Trustee or a Beneficiary knew or should have known of the Avoidance:
(a)each Power and the Security Provider's liability under each Loan Document will be what it would have been, and will continue, as if the
payment or transaction the subject of the Avoidance had not occurred; and
(b)it will immediately execute and do anything necessary or required by the Security Trustee to restore the Security Trustee or Beneficiary
(as applicable) to its position immediately before the Avoidance (including reinstating any Loan Document).
This clause survives any termination or full or partial discharge or release of any Loan Document.
15.6Authorised Representatives
Each Security Provider irrevocably authorises the Security Trustee to rely on a certificate by any person purporting to be its director or
company secretary as to the identity and signatures of its Authorised Representatives, and to rely on any Notice or other document
contemplated by a Loan Document which bears the purported signature (whether given by facsimile or otherwise) of its Authorised
Representative. Each Security Provider warrants that those persons have been authorised to give notices and communications under or in
connection with this document and any Security Trustee Document.
15.7Security Trustee's opinion
An opinion or view of the Security Trustee for the purposes of the Loan Documents may be formed or held on its behalf by its Authorised
Representative, its board of directors or by any other person it authorises to act on its behalf in relation to the Loan Documents.
29
15.8Protection of third parties
No person dealing with the Security Trustee is bound to enquire whether the Security Trustee:
(a)has been properly appointed under this document; or
(b)has the requisite Power under this document or another Loan Document,
and any person dealing with the Security Trustee may assume that anything purported to be done by the Security Trustee under this
document or another Security Trustee Document has been duly authorised by this document and the Beneficiaries.
16.General provisions
16.1Prompt performance
If a time is not specified for the performance by a Security Provider of an obligation under this document or any Security Document, it must
be performed promptly.
16.2Powers
Powers under the Loan Documents are cumulative and do not limit or exclude Powers under law. Full or partial exercise of a Power does
not prevent a further exercise of that or any other Power. No failure or delay in exercising a Power operates as a waiver or representation.
Unless expressly provided in a Loan Document, no Power or Loan Document merges in, limits or excludes any other Power, Loan
Document or judgment which the Security Trustee or a Beneficiary (or anyone claiming through it) may have or obtain.
16.3Consent, approvals and waivers
A consent, approval or waiver by the Security Trustee or a Beneficiary in relation to this document or any Security Document is effective
only if in writing. If given subject to conditions, the consent, approval or waiver only takes effect when the conditions are complied with to
the Security Trustee's or Beneficiary's satisfaction.
16.4Indemnities and reimbursement obligations
The Security Trustee or a Beneficiary need not incur an expense or make a payment before enforcing an indemnity or reimbursement
obligation in a Security Trustee Document. Unless otherwise stated, each such indemnity or reimbursement obligation is separate and
independent of each other obligation of the party giving it, is absolute, irrevocable, unconditional and payable on demand and continues
despite any settlement of account, termination of any Security Trustee Document or anything else.
16.5Notices or demands as evidence
A notice or certificate from or demand by the Security Trustee stating that an Event of Default has occurred, or that a specified sum of
money is owing or payable under a Loan Document or stating any other fact or determination relevant to the rights or obligations of the
Security Trustee or a Security Provider under a Loan Document, is taken to be correct unless proved incorrect.
16.6Law and legislation
To the extent permitted by law:
(a)each Security Trustee Document prevails to the extent of inconsistency with any law; and
(b)any present or future legislation operating to reduce a Security Provider's obligations under a Security Trustee Document or the
effectiveness of the Powers is excluded.
16.7Severability
A provision of a Security Trustee Document that is illegal, invalid or unenforceable in a jurisdiction is ineffective in that jurisdiction to the
extent of the illegality, invalidity or unenforceability. This does not affect the validity or enforceability of that provision in any other
jurisdiction, nor the
30
remainder of that Security Trustee Document in any jurisdiction.
16.8Variation of this document
(a)Subject to paragraph (b) below, a variation of this document must be in writing and signed by or on behalf of each Security Provider and
the Security Trustee (on the instructions of the Administrative Agent).
(b)The Security Trustee may vary any provision of this document on behalf of the Beneficiaries if permitted under clause 6.9
(Minor amendments to Security Trustee Documents).
16.9Governing law and jurisdiction
(a)This document is governed by the laws of New South Wales, Australia. Each Security Provider irrevocably and unconditionally
submits to the non-exclusive jurisdiction of the courts of that place (and any court of appeal) and waives any right to object to an action
being brought in those courts, including on the basis of an inconvenient forum or those courts not having jurisdiction.
(b)The Security Trustee or a Beneficiary may take proceedings in connection with the Security Trustee Documents in any other court with
jurisdiction or concurrent proceedings in any number of jurisdictions.
16.10Service of process
(a)Without preventing any other mode of service, any document in an action or process may be served on any party by being delivered to
or left for that party at its address for service of Notices under this document, an Accession Deed or any Security Document.
(b)Each Security Provider appoints the Australian Security Provider as its agent to accept service of process under or in connection with
this document and the Security Trustee Documents, and the Australian Security Provider accepts the appointment. The appointment may
not be revoked without the Security Trustee's consent. Each Security Provider agrees that service of documents on its process agent is
sufficient service on the Security Provider, and that failure by a process agent to notify the Security Provider of any
document in an action in connection with this document and any Security Trustee Document will not invalidate the action
concerned.
16.11Counterparts
(a)This document may be executed in any number of counterparts or copies, each of which may be executed by physical signature in
wet ink or electronically (whether in whole or part). A party who has executed a counterpart of this document may exchange it with
another party (the Recipient) by:
(i)emailing a copy of the executed counterpart to the Recipient; or
(ii)utilising an electronic platform (including DocuSign) to circulate the executed counterpart,
and will be taken to have adequately identified themselves by so emailing the copy to the Recipient or utilising the electronic
platform.
(b)Each party consents to signatories and parties executing this document by electronic means and to identifying themselves in the
manner specified in this clause.
(c)Each counterpart constitutes an original (whether kept in electronic or paper form), all of which together constitute one instrument as if
the signatures (or other execution markings) on the counterparts or copies were on a single physical copy of this document in paper form.
Without limiting the foregoing, if any of the signatures or other markings on behalf of one party are on different counterparts or copies of this
document, this shall be taken to be, and have the same effect as, signatures on the same counterpart and on a single copy of this
document.
31
Schedule 1 – Initial Beneficiaries
Name ORCO IV LLC, a Delaware limited liability company
Notice details c/o OrbiMed Advisors LLC
601 Lexington Avenue, 54th Floor New York, NY 10022
Attention: OrbiMed Credit Reporting Email:
RoSCreditOps@OrbiMed.com
with a copy to (which shall not constitute notice): Covington & Burling LLP
The New York Times Building, 620 Eighth Avenue New York, NY 10018-1405
Attention: Peter A. Schwartz Email:
pschwartz@cov.com Telephone: (212) 841-1268
32
Schedule 2 – Initial Security Providers
Notice details 28159 Avenue Stanford, Suite 220 Valencia, CA 91355
Name AVITA Medical, Inc., a Delaware corporation
Attention: David O’Toole, Chief Financial Officer Email:
dotoole@avitamedical.com
With a copy to:
AVITA Medical, Inc.
28159 Avenue Stanford, Suite 220
Valencia, CA 91355 Attention: Legal Department
Email: legal@avitamedical.com
Notice details Level 7, 330 Collins Street Melbourne, Victoria 3000 Attention: Lou Panaccio
Email: Lou.Panaccio@cpwcapital.net.au
Name AVITA Medical Pty Limited
ACN 058 406 523
33
Schedule 3 – Accession Deed
Accession deed
Date [Insert date]
Parties
Name [Full name of New Security Provider/Beneficiary]
ABN [ ]
Short form name New [Security Provider/Beneficiary]
Attention: [ ]
Name ORCO IV LLC, a Delaware limited liability company
Capacity For itself and for and on behalf of each other party to the Security Trust Deed at the date of this document
Short form name Security Trustee
Notice details As specified in the Security Trust Deed
Agreed terms
1.Defined terms & interpretation
In this document:
(a)Accession Date means the date on which all parties have executed this document;
(b)Security Trust Deed means the deed titled [insert title] between the Security Trustee, AVITA Medical, Inc. and others dated
[insert date];
(c)terms defined in the Security Trust Deed have the same meanings when used in this document unless otherwise defined in this
document; and
(d)the provisions of clause [interpretation provisions] of the Security Trust Deed are incorporated in, and apply to, this document
as if set out in full with any necessary amendments.
2.Accession
On and from the Accession Date:
(a)the New [Security Provider/Beneficiary] agrees to become, and each other party to this document agrees with each other and with the
New [Security Provider/Beneficiary] that the New [Security Provider/Beneficiary] will become a party to the Security Trust Deed as a
[Security Provider/Beneficiary];
(b)the New [Security Provider/Beneficiary] acquires all rights and benefits of, and agrees to comply with and be bound by all present and
future obligations of, a [Security Provider/Beneficiary] under the Security Trust Deed as a party to that document in that capacity;
34
(c)the New [Security Provider/Beneficiary] agrees to do all things that a [Security Provider/Beneficiary] is required under the Security Trust
Deed or another Loan Document
to procure or ensure are to be done by the New [Security Provider/Beneficiary] in connection with it becoming a [Security
Provider/Beneficiary]; and
(d)without limiting the general application of this clause 2, the New [Security Provider/Beneficiary] appoints as its attorney each person
who under the terms of the Security Trust Deed or another Loan Document, is appointed an attorney of a [Security Provider/Beneficiary]
on the same terms and for the same purposes as contained in the Security Trust Deed or that other Loan Document.
3.Acknowledgment
The New [Security Provider/Beneficiary] acknowledges having received a copy of, and approved, the Security Trust Deed, together with all
other documents and information it requires in connection with this document, before signing this document.
4.Representations and warranties
The New Security Provider gives the representations and warranties in clause [clause number] of [relevant Loan Document/s containing full
party representations and warranties to be given by a Security Provider] as at the Accession Date.
5.Notices and other communications
The notice details of the New [Security Provider/Beneficiary] for the purposes of the Security Trust Deed are specified in the 'Parties' section
of this document.
6.Counterparts
This document may be executed in any number of counterparts. Each counterpart constitutes an original of this document, all of which
together constitute one instrument. A party who has executed a counterpart of this document may exchange it with another party by faxing,
or by emailing a pdf (portable document format) copy of, the executed counterpart to that other party, and if requested by that other party,
will promptly deliver the original by hand or post. Failure to make that delivery will not affect the validity of this document.
7.Governing law and jurisdiction
This document is governed by the laws of New South Wales, Australia and each party irrevocably and unconditionally submits to the non-
exclusive jurisdiction of the courts of that place. [Insert where new party has no presence in Australia:] The New [Security
Provider/Beneficiary] appoints [ ] to act as its agent for service of process in connection with the Security Trust Deed.
EXECUTED as a deed.
Each attorney signing this document under a power of attorney certifies, by the attorney's signature, that the attorney has no notice of the
revocation of the power of attorney.
[Execution by the New [Security Provider/Beneficiary]]
[Execution by the Security Trustee (for itself and each other party to the Security Trust Deed at the date of this document)]
35
Signing pages
EXECUTED as a deed.
Each signatory executing this document (electronically or otherwise) intends by that execution to be bound by this document, and where the signatory has
signed as an officer or attorney of a party, for that party to be bound by this document. Each attorney signing this document under a power of attorney
certifies, by the attorney's signature, that the attorney has no notice of the revocation of the power of attorney.
Security Trustee
Signed sealed and delivered by ORCO IV LLC in the presence of
/s/ Brendan Weber
Signature of Witness
Brendan Weber
Name of Witness
36
/s/ W. Carter Neild
Signature of authorised signatory
W. Carter Neild
Name of authorised signatory
Administrative Agent
Signed sealed and delivered by ORCO IV LLC in
the presence of
/s/ Brendan Weber
Signature of Witness
Brendan Weber
Name of Witness
/s/ W. Carter Neild
Signature of authorised signatory
W. Carter Neild
Name of authorised signatory
Borrower
Signed sealed and delivered by AVITA Medical, Inc. in the presence of
/s/ Lydia Martinez
Signature of Witness
Lydia Martinez
Name of Witness
37
/s/ James Corbett
Signature of authorised signatory
James Corbett
Name of authorised signatory
Initial Beneficiary
Signed sealed and delivered by ORCO IV LLC in the presence of
/s/ Brendan Weber
Signature of Witness
Brendan Weber
Name of Witness
38
/s/ W. Carter Neild
Signature of authorised signatory
W. Carter Neild
Name of authorised signatory
Initial Security Providers
Executed by AVITA Medical Pty Limited in accordance with
Section 127 of the Corporations Act 2001 (Cth)
/s/ Lou Panaccio
Signature of director
Lou Panaccio
Name of director (print)
/s/ Suzanne Mary Crowe
Signature of director/company secretary
Suzanne Mary Crowe
Name of director/company secretary (print)
Security trust deed
MinterEllison | Ref: LNMM: ERB 1464626
39
Signed sealed and delivered by AVITA Medical,
Inc. In the presence of
/s/ Lydia Martinez
Signature of Witness
Lydia Martinez
Name of Witness
/s/ James Corbett
Signature of authorised signatory
James Corbett
Name of authorised signatory
40
Security trust deed
MinterEllison I Ref: LNMM: ERB 1464626
41
Name of authorised signatory
42
Page 41
43
Execution version
Specific security deed (marketable
securities)
AVITA
AVITA Medical, Inc. (Grantor) ORCO IV LLC (Secured
Party)
3rd Floor Randall House 6 Dowgate Hill London EC4R 2SU United Kingdom
T +44 20 7429 2780 F +44 20 7429 2788
minterellison.com
LON1_1061177_1
Specific security deed (marketable securities)
AVITA
Details
Parties
Background
Agreed terms
1.Defined terms & interpretation
1.1.Defined terms from Credit Agreement
1.2.Other defined terms
1.3.PPSA terms incorporated
1.4.Interpretation
1.5.Security Agreement, Loan Document and Specific Security Deed (Marketable Securities)
2.Secured Party's limit on liability
2.1.Capacity and acts
2.2.Duties and responsibilities limited
2.3.Benefit and survival
3.Grant of security
3.1.Security interest and charge
3.2.Continuing security and obligations
4.Dealings with Collateral
5.Priority
5.1.Priority of Security Interest in Collateral
5.2.No agreement or consent to subordination or attachment
5.3.Contrary agreements
6.General security provisions
6.1.Security continuing and independent
6.2.Collateral Security Documents
6.3.Release of Collateral
7.Representations and warranties
7.1.Representations and warranties
7.2.Repetition
7.3.Reliance and survival
8.Undertakings
8.1.General undertakings
8.2.Undertakings relating to Collateral
8.3.Undertakings relating to the Relevant Marketable Securities
8.4.Voting powers and Proceeds
8.5.Further assurances
9.Grantor liability and exclusion of rights
9.1.Principal and independent obligation
9.2.Grantor's liabilities not affected
9.3.Exclusion of subrogation and other rights
9.4.Prove in Liquidation
9.5.Variations and replacements
10.Consequences of Event of Default
10.1.Consequences of Event of Default
10.2.Secured Party's general powers
10.3.Secured Party's PPSA powers – sections 1 and 128
10.4.Secured Party's specific powers
10.5.Discharge or acquire prior Security Interest
10.6.Co-operation in exercise of power of sale
10.7.Appoint Receivers
2
5
5
5
6
6
6
6
8
8
8
8
8
8
8
8
8
9
9
9
9
9
9
9
9
9
10
10
10
11
11
11
11
11
12
12
13
14
14
14
14
15
15
15
15
15
16
16
17
17
17
10.8.Agency of Receiver
10.9.Receiver's powers
10.10.Appointments of Attorney
11.Costs and expenses
11.1.Costs and expenses
11.2.PPSA expenses
11.3.Enforcement and other expenses
11.4.Costs and expenses of Grantor
12.Interest on overdue amounts
12.1.Accrual and calculation
12.2.Judgment or order
12.3.Payment
13.Payments
14.Receipt of money and application
14.1.Credit of received payment
14.2.Applying or appropriating money received
14.3.Suspense account
14.4.Surplus proceeds
15.Statutory powers and notices
15.1.Exclusion of PPSA provisions
15.2.Exercise of rights by Secured Party
15.3.No notice required unless mandatory
15.4.Appointment of nominee for registration
15.5.Other rights
16.Assignment
16.1.By Grantor
16.2.Change in security trustee
16.3.Assistance
17.Notices, demands and communications
18.Protection of third parties
18.1.Receipt of Secured Party, Receiver
18.2.Third parties need not enquire
19.Protection of Secured Party, Receiver and Attorney
19.1.Notice, demand or lapse of time required by law
19.2.Costs and expenses
19.3.Costs and expenses
19.4.PPSA expenses
19.5.Enforcement and other expenses
19.6.Costs and expenses of Grantor
19.7.Interest on overdue amounts
20.General provisions
20.1.Consideration
20.2.Prompt performance
20.3.Performance of Grantor's obligations by Secured Party
20.4.Powers
20.5.Consent and waivers
20.6.Indemnities and reimbursement obligations
20.7.Notices or demands as evidence
20.8.Law and legislation
20.9.Severability
20.10.Variation
20.11.Governing law – security agreement
20.12.Governing law – Security Interest
20.13.Jurisdiction
20.14.Service of process
20.15.Counterparts
3
18
18
18
18
18
19
19
19
19
19
19
19
20
20
20
20
20
20
20
21
21
21
21
21
22
22
22
22
22
22
22
22
22
22
22
23
23
23
23
23
23
23
23
23
24
24
24
24
24
24
24
24
24
24
24
25
21.Schedule 1 – Relevant Marketable Securities
22.Signing Pages
26
27
4
Details
Date 11 December 2023
Parties
Name AVITA Medical, Inc., a Delaware corporation
Short form name Grantor
Notice details Address: 28159 Avenue Stanford, Suite 220, Santa Clarita CA 91355 Email: dotoole@avitamedical.com
Attention: David O’Toole, Chief Financial Officer
Name ORCO IV LLC, a Delaware limited liability company
Capacity As trustee of the trust established under the Security Trust Deed Short form name Secured Party
Notice details c/o OrbiMed Advisors LLC
601 Lexington Avenue, 54th Floor New York, NY 10022
Attention: OrbiMed Credit Reporting Email:
RoSCreditOps@OrbiMed.com
Background
AThe Grantor agrees to grant the Secured Party a security interest in the Collateral to secure payment and performance of the Obligations.
BThe Grantor does this in return for the Secured Party and the other Beneficiaries entering into the Loan Documents, the transactions
contemplated by those documents and other valuable consideration.
5
Agreed terms
1.Defined terms & interpretation
1.1Defined terms from Credit Agreement
Terms defined in (or incorporated by reference to) the Credit Agreement (as defined below) have the same meanings when used in this
document unless otherwise defined in this document.
Parties to the Credit Agreement referred to by short form name in this document are more fully described in the Credit Agreement.
1.2Other defined terms
In this document:
A$ means the lawful currency of Australia.
Affiliate has the meaning given to that term in the Security Trust Deed.
Attorney means an attorney appointed by the Grantor under this document.
Authorisation means any consent, authorisation, registration, filing, agreement, notarisation, certificate, permit, licence, approval,
authority or exemption of, from or required by, a Governmental Authority or required by law. Where intervention or action of a
Governmental Authority within a specified period would fully or partly prohibit or restrict something by law, Authorisation includes the
expiry of that period without that intervention or action.
Authorised Representative has the meaning given to that term in the Security Trust Deed.
Avoidance has the meaning given to that term in clause 19.5.
Beneficiary has the meaning given to that term in the Security Trust Deed, but also includes the Secured Party in any capacity.
Collateral means all the Grantor's present and future Relevant Marketable Securities, Rights and Proceeds and any certificate,
registration, title or other evidence of ownership of, or rights to, any of those things.
Credit Agreement has the meaning given to that term in the Security Trust Deed. Event of Default has the meaning given
to that term in the Security Trust Deed. Governmental Authority has the meaning given to that term in the Credit
Agreement. Guarantee has the meaning given to that term in the Security Trust Deed.
Insolvency Event has the meaning given to that term in the Security Trust Deed.
Liquidation has the meaning given to that term in the Security Trust Deed. Loan Document has the meaning given
to that term in the Security Trust Deed. Loan Party has the meaning given to that term in the Security Trust Deed.
Loss has the meaning given to that term in the Security Trust Deed.
Marketable Security means:
(a)a 'marketable security' (as defined in the Corporations Act);
(b)a negotiable instrument (within the ordinary meaning of that term);
(c)a unit or other interest in a trust or partnership; and
(d)a right or an option in respect of any of the above, whether issued or unissued.
Notice has the meaning given to that term in the Security Trust Deed.
Obligations has the meaning given to that term in the Security Trust Deed.
Permitted Lien means each Lien (as defined in the Credit Agreement) permitted by section 8.3 (Liens) of the Credit Agreement.
6
Permitted Restriction means:
(a)each Permitted Lien;
(b)a Restriction disclosed in writing to, and consented to in writing by, the Secured Party on or before the date of this document (unless
the consent was conditional and any of the conditions are not complied with); and
(c)a Restriction created after the date of this document which was consented to by the Secured Party in writing on or before its creation
(unless the consent was conditional and any of the conditions are not complied with).
Power means any right, power, discretion or remedy of the Secured Party, a Beneficiary, a Receiver or an Attorney under any Loan
Document or applicable law.
PPS Law has the meaning given to that term in the Security Trust Deed.
PPS Regulations has the meaning given to that term in the Security Trust Deed.
PPSA has the meaning given to that term in the Security Trust Deed.
Proceeds means all money (in whatever currency) and amounts payable to the Grantor or to which the Grantor is entitled now or in the
future (whether alone or with any other person) on any account or in any way whatsoever under, or as holder of, any Relevant Marketable
Securities or Rights, including:
(a)distributions, dividends, bonuses, profits, return of capital, interest and all proceeds of sale (within the ordinary meaning of those words),
redemption or disposal; and
(b)all 'proceeds' (as defined in section 31 of the PPSA), including all proceeds identified in sections 31(1)(a) to 31(1)(c) of the PPSA.
Receiver means a receiver or receiver and manager appointed under this document.
Relevant Marketable Securities means the Marketable Securities owned by the Grantor in the Share Issuer, including those described in
Schedule 1 and any other Marketable Securities located, for the purposes of the PPSA, in Australia:
(a)that the Grantor deposits with the Secured Party;
(b)acquired by the Grantor, or to which the Grantor becomes entitled, under its Rights; or
(c)that the Grantor and Secured Party designate as 'Relevant Marketable Securities' for the purposes of this document.
Restriction means any agreement, obligation or arrangement that restricts, or entitles another person to rights of pre-emption or refusal
for, a sale, assignment or other dealing with Relevant Marketable Securities.
Rights means:
(a)rights to acquire Marketable Securities arising because the Grantor has an interest in the Relevant Marketable Securities, including
due to any allotment, offer, substitution, conversion, consolidation, reclassification, redemption, reconstruction, amalgamation,
subdivision, reduction of capital, Liquidation or scheme of arrangement in relation to any Relevant Marketable Securities; and
(b)any other rights of the Grantor of any kind in connection with the Relevant Marketable Securities, including in relation to any
Proceeds.
Security Document has the meaning given to that term in the Security Trust Deed.
Security Interest has the meaning given to that term in the Security Trust Deed.
Security Trust has the meaning given to that term in clause 2.1.
Security Trust Deed means the document titled 'Security trust deed – AVITA Security Trust' between, amongst others, the Secured
Party, the Grantor and others dated on or about the date of this document.
Security Trustee Documents has the meaning given to that term in the Security Trust Deed.
Share Issuer means a company specified as such in Schedule 1.
7
Title Documents means each certificate, confirmation, grant, assurance, conveyance, deed and other document of title or evidencing
title to, or rights to acquire, possess, use or dispose of, any Collateral.
wilful default has the meaning given in clause 1.3 (Interpretation) of the Security Trust Deed.
1.3PPSA terms incorporated
In this document, unless the context requires otherwise, the following words and expressions (and grammatical variations of them) have the
same meanings given to them in the PPSA or the PPS Regulations (as applicable): advance, after-acquired property, amendment
demand, attach, consumer property, control, documents of title, financing change statement, financing statement, future
advance, investment instrument, negotiable instrument, personal property, purchase money security interest and verification
statement.
1.4Interpretation
(a)The provisions of clause 1.3 (Interpretation) of the Security Trust Deed are incorporated in, and apply to, this document as if set out in
full with any necessary amendments.
(b)In this document to 'grant a security interest' includes to charge, mortgage, pledge, encumber, assign by way of security and
transfer by way of security.
1.5Security Agreement, Loan Document and Specific Security Deed (Marketable Securities)
The parties agree that this document is:
(a)a 'Security Agreement' and 'Loan Document' for the purposes of the Credit Agreement; and
(b)the 'Specific Security Deed (Marketable Securities)' referred to in the Security Trust Deed.
2.Secured Party's limit on liability
2.1Capacity and acts
The Secured Party enters into this document only in its capacity as trustee of the trust established under the Security Trust Deed (Security
Trust) and in no other capacity. Each other party acknowledges that under the terms of the Security Trust Deed, the Secured Party:
(a)holds the benefit of this document for the Beneficiaries from time to time; and
(b)is bound to act on the instructions of the Beneficiaries, and is not bound to act without instructions or where the Security Trust Deed
otherwise provides that the Secured Party is not bound to act.
2.2Duties and responsibilities limited
The Secured Party's obligations, duties and responsibilities under or in connection with this document are limited to those expressly set out in
the Security Trust Deed and this document.
2.3Benefit and survival
Clause 2 applies for the benefit of the Secured Party's officers and agents and will survive termination of this document.
3.Grant of security
3.1Security interest and charge
(a)The Grantor grants a security interest in the Collateral to the Secured Party (for the benefit of the Beneficiaries) to secure payment and
performance of the Obligations.
(b)For the purposes of section 20(2)(b) of the PPSA (but without limiting the meaning of 'Collateral' in this document), this security interest
is taken in all the Grantor's present and after-acquired property, except any such property which is not Collateral. This security interest is a
charge.
(c)If for any reason it is necessary to determine the nature of this charge, it is a fixed charge over the Collateral.
8
3.2Continuing security and obligations
Each Security Interest granted under this document is a continuing security until the Secured Party releases all Collateral from the
Security Interest, despite any intermediate payment, discharge, settlement, release or other matter. The Grantor's obligations under this
document continue despite any full or partial release of the Collateral and no full or partial release of Collateral will release the Grantor
from personal liability under this document until all the Obligations have in fact been received by the Secured Party and are not liable to
be disgorged.
4.Dealings with Collateral
The Grantor must not do, or agree to do, any of the following except as permitted by the Credit Agreement:
(a)create or allow another interest (including without limitation any Security Interest) in any Collateral; or
(b)transfer or dispose or part with possession of any Collateral.
5.Priority
5.1Priority of Security Interest in Collateral
(a)The parties intend that each Security Interest created under this document:
(i)takes priority over all other Security Interests and other interests in the Collateral at any time other than any Permitted Lien
as agreed in writing by the Secured Party as having priority or as mandatorily preferred by law; and
(ii)has the same priority in relation to all Obligations, including future advances.
(b)Nothing in this clause 5.1 restricts the Secured Party from claiming that a Security Interest granted under this document is a purchase
money security interest in respect of all or part of the Collateral.
5.2No agreement or consent to subordination or attachment
Nothing in this document may be construed as an agreement or consent by the Secured Party to:
(a)(subordination) subordinate a Security Interest created under this document in favour of any person;
(b)(security) any Security Interest other than any Permitted Lien attaching to or being created in any Collateral; or
(c)(deferral of attachment) defer or postpone the date of attachment of a Security Interest created under this document in any
Collateral.
5.3Contrary agreements
This clause 5 is subject to any express written agreement to the contrary between the parties, including the overriding provisions of any
subordination and/or priority agreement entered into by the Secured Party in respect of any other holder of security.
6.General security provisions
6.1Security continuing and independent
(a)Each of this document, each Security Interest created under it and each other Security Document is in addition to and enforceable
independently of any other Security Interest, Guarantee or Security Document.
(b)Each of this document and, subject to any release pursuant to clause 6.3 below, each Security Interest created under it is to remain in
full force and effect (whether or not at any given time the Grantor is indebted to the Secured Party or any other Beneficiary) until the
execution by the Secured Party and delivery to the Grantor of an unconditional release of this document and each Security Document.
6.2Collateral Security Documents
This document is collateral to each other Security Document. This document and each other
9
Security Document will be read and construed together so that the Secured Party may exercise any of its rights under any one or more of
them separately or concurrently or not at all, and in such order as it chooses.
6.3Release of Collateral
(a)At the request in writing of the Grantor and at the sole expense of the Grantor, the Secured Party will release the Collateral from
this document or the Security Interest created under it if:
(i)all Obligations have been irrevocably paid in full and all commitments which might give rise to Obligations have terminated;
(ii)the Secured Party is satisfied that no amount will subsequently become an Obligation due to an Avoidance; and
(iii)the Secured Party has not enforced the Security Interest under this document pursuant to clause 9.
(b)At the request in writing of the Grantor and at the sole expense of the Grantor, the Secured Party will release any Collateral sold or
disposed of in any transaction permitted by the Credit Agreement from this document or the Security Interest created under it to the extent
provided, and subject to the terms and conditions set forth, in section 11.9 (Collateral and Guarantee Matters) of the Credit Agreement.
7.Representations and warranties
7.1Representations and warranties
The Grantor represents and warrants to the Secured Party (and for the benefit of the Beneficiaries), except as to matters disclosed by it to
the Secured Party and accepted by the Secured Party in writing, that:
(a)(no trust) it has not entered into this document and does not hold any of the Collateral as trustee of any trust;
(b)(details of Grantor) all information in the 'Details' section of this document is true, correct and complete as at the date of this document
and reflects the information contained in the source from which information in relation to the Grantor must be taken for the purposes of the
PPS Regulations in order to register a financing statement in respect of any Security Interest in the Collateral;
(c)(no foreign property) all the Collateral is situated in Australia;
(d)(consumer property) none of the Collateral is consumer property;
(e)(ownership of Collateral) it is the sole legal owner and sole beneficial owner of the Collateral, and it will be the sole legal owner and
sole beneficial owner of any property or asset it acquires as Collateral, subject always to the interest of the secured party under any
Permitted Lien;
(f)(Security Interests) the Collateral is free from any Security Interest other than Permitted Liens;
(g)(no other owners) there are no shareholders in the Share Issuer other than the Grantor;
(h)(disclosure of Marketable Securities) it holds 100% of all issued Marketable Securities in the Share Issuer and there is no
agreement, arrangement or understanding under which further Marketable Securities in the Share Issuer may be issued, or called to be
issued, to any person other than the Grantor;
(i)(constitution) its execution and performance of this document do not and will not conflict with or contravene, and it is not in default
under, the constitution of the Share Issuer;
(j)(issue valid) the Relevant Marketable Securities have been validly issued and their issue does not contravene the constitution of the
Share Issuer, any law or any rule or directive of any Governmental Authority;
(k)(fully paid) the Relevant Marketable Securities are fully paid; and
10
(l)(no Restriction) the Relevant Marketable Securities are free from any Restriction other than a Permitted Restriction.
7.2Repetition
The Grantor repeats each representation and warranty in this clause 7 with reference to the facts and circumstances at the time when
representations and warranties are repeated in the Credit Agreement.
7.3Reliance and survival
The Grantor acknowledges that:
(a)it makes the representations and warranties in this clause 7 with the intention of inducing the Secured Party to enter into the Loan
Document and the Secured Party enters into the Loan Documents on the basis of, and in full reliance on, each of the representations and
warranties; and
(b)those representations and warranties survive execution and delivery of the Loan Documents and the provision of financial
accommodation under them.
8.Undertakings
8.1General undertakings
The Grantor must:
(a)(Obligations) fully and punctually perform, satisfy, or procure the performance or satisfaction of, all of its Obligations at the times
and in the way specified in the relevant Loan Documents;
(b)(details of Grantor):
(i)without limiting any restrictions contained in the Loan Documents, notify the Secured Party at least 14 days before:
(A)it changes its name;
(B)any ABN, ARBN or ARSN allocated to it changes, is cancelled or otherwise ceases to apply to it (or if it does not
have an ABN, ARBN or ARSN, one is allocated, or otherwise starts to apply, to it); and
(C)it becomes a trustee of a trust, or a partner in a partnership, not stated in this document; and
(ii)provide to the Secured Party, on request, a certified copy of each source or source document necessary (in the Secured
Party's opinion), for the purposes of the PPS Regulations, to verify the information in the 'Details' section of this document (or any
part of it) or to otherwise register one or more financing statements in relation to any Security Interest in the Collateral created by
any Loan Document;
(c)(notify details of or changes relating to Collateral) notify the Secured Party promptly:
(i)if any Collateral is moved outside Australia;
(ii)on the Secured Party's request, of the present location of any Collateral; and
(iii)on the Secured Party's request, of the details of each Security Interest perfected by control in any of the Grantor's
Collateral; and
(d)(no Event of Default) ensure that no Event of Default occurs.
8.2Undertakings relating to Collateral
The Grantor must:
(a)(compliance with laws) comply with all laws and requirements of Governmental Authorities in respect of the Collateral;
(b)(Title Documents) unless the Secured Party agrees otherwise in writing, deposit with the Secured Party:
11
(i)all Title Documents relating to the Grantor's interests in the Collateral on execution of this document;
(ii)transfer forms for the Relevant Marketable Securities as specified by the Secured Party, in each case executed by the
Grantor as transferor and blank as to the date, consideration and transferee's name;
(c)(replacement Title Documents) where title to any Relevant Marketable Securities is evidenced by a certificate, obtain the issue
of replacement certificates if the original certificates are lost or destroyed or believed by the Secured Party to be so;
(d)(protect title) protect and enforce its title to, and the Secured Party's title as Secured Party and chargee of, the Collateral;
(e)(perform obligations, Taxes) pay on time all rates, Taxes, calls for payment, instalments and any other amounts for which it is liable as
owner of the Collateral; and
(f)(maintain value) not do, allow or omit anything which is likely to lower the value of the Collateral unless permitted by the Credit
Agreement.
8.3Undertakings relating to the Relevant Marketable Securities
The Grantor must:
(a)(Restrictions):
(i)comply with the terms of each Permitted Restriction binding on it in respect of the Collateral from time to time;
(ii)not create or permit to exist any Restriction over any Relevant Marketable Securities other than a Permitted
Restriction; and
(iii)not release or vary any Permitted Restriction or waive the obligations of another person in relation to a Permitted
Restriction;
(b)(new Collateral) immediately notify the Secured Party of any Rights, Proceeds or Marketable Securities acquired by or accruing to the
Grantor in any company incorporated in Australia (including, for the avoidance of doubt, the Share Issuer), or to which the Grantor
becomes entitled, after the date of this document;
(c)(exercise Rights) at the Grantor's cost exercise or take up all Rights (other than for Proceeds);
(d)(delivery of notices, reports) deliver to the Secured Party, promptly after receipt, a copy of any material report, notice, circular or other
document issued to it as holder of any of the Relevant Marketable Securities (including any notice convening a meeting of the holders of
the Relevant Marketable Securities); and
(e)(conversion, change of register) on request by the Secured Party, do all things necessary to effect (but otherwise not consent to,
request or effect without the Secured Party's prior written consent):
(i)a conversion of the title to any Relevant Marketable Securities as to being certificated or uncertificated; or
(ii)a change of register for any Relevant Marketable Securities (including to, from or within an electronic register system) from
that on which they are recorded or registered at the date of this document (or if later acquired, the date on which they are
recorded or registered).
8.4Voting powers and Proceeds
(a)Subject to clause 8.4(b), if the Relevant Marketable Securities are not registered in the Secured Party's name and if no Event of
Default has occurred and is continuing, the Grantor may do any of the following without the need for consent or direction from the
Secured Party:
(i)(voting powers) exercise any voting powers it has as holder of the Collateral as it sees fit, provided that it does so prudently
and does not otherwise cause or permit a breach of any of the Grantor's other obligations under the Loan Documents; and
12
(ii)(Proceeds) retain and use in the ordinary course of its business any Proceeds (other than Proceeds from a reduction of
capital, a buy-back of shares under a buy-back scheme or otherwise under a scheme of arrangement).
(b)If an Event of Default has occurred and is continuing, the rights of the Grantor under clauses 8.4(a)(i) and 8.4(a)(ii) immediately
cease, and:
(i)(voting powers) the Secured Party is entitled to exercise all voting rights in respect of all of the Collateral to the
exclusion of the Grantor; and
(ii)(Proceeds) the Grantor must pay over amounts of any Proceeds, or otherwise must ensure that any Proceeds are paid
directly, to the Secured Party to be applied in accordance with clause 14.2.
(c)Nothing in this clause 8.4 obliges the Secured Party to vote or exercise other rights in relation to the Collateral or to obtain any
Proceeds, and the Secured Party will have no responsibility or liability for any Loss arising due to the Secured Party's failure or delay in
so acting.
8.5Further assurances
The Grantor must do (and must procure that anyone else who has an interest in the Collateral or who claims under or in trust for the
Grantor does) whatever the Secured Party reasonably requires to:
(a)better secure the Collateral for payment and performance or satisfaction of the Obligations, and to enable the better exercise of any
Power (including the granting of further specific security in the form required by the Secured Party and depositing with the Secured Party
documents or evidence of titles and transfers in relation to investment instruments); and
(b)perfect, preserve, maintain, protect, or otherwise give full effect to the Collateral, this document or each Security Interest intended to
be created under this document, and the priority of that Security Interest required by the Secured Party,
including:
(c)anything the Secured Party requires in order for it to:
(i)register and maintain (including renew before expiry) one or more financing statements in relation to any Security Interest in
Collateral created by any Loan Document;
(ii)remove any financing statement which is registered against the Grantor in relation to any Security Interest which is not a
Permitted Lien; or
(iii)obtain possession or control of any Collateral for the purpose of perfecting the Secured Party's Security Interest in that
Collateral by possession or control;
(d)providing details of the Collateral and noting the interest of the Secured Party on the share register of the Share Issuer;
(e)procuring that any other person holding a Security Interest in all or any part of the Collateral provides to the Secured Party such
information in relation to that Security Interest as the Secured Party may reasonably request;
(f)perfecting or improving the Grantor's title to, or other right or interest in, all or any part of the Collateral;
(g)facilitating the exercise of any right by the Secured Party or any Receiver or Attorney at any time or the realisation of the Collateral
following the occurrence of an Event of Default which is continuing, including the exercise of all rights of inspection and taking all necessary
copies, which the Grantor is entitled to exercise or take;
(h)paying any Taxes on this document;
(i)executing and delivering to the Secured Party transfer forms in relation to any of the Collateral, undated and blank as to
transferee and consideration; and
(j)otherwise enabling the Secured Party to obtain the full benefit of the provisions of any Loan Document.
13
9.Grantor liability and exclusion of rights
9.1Principal and independent obligation
Subject to clause 6.2, this document comprises principal and independent obligations of the Grantor and is not ancillary or collateral to, or
affected by, any other obligation, Security Interest or Guarantee.
9.2Grantor's liabilities not affected
The Grantor's liabilities under this document are not affected by any act, omission or other thing which would reduce or discharge those
liabilities, including:
(a)a Beneficiary granting time or any other indulgence or concession to a Loan Party or any other person;
(b)a Beneficiary increasing the amount of, opening further accounts in connection with or otherwise varying or replacing the type or terms
of, financial accommodation provided to a Loan Party or any other person;
(c)any transaction or agreement, or variation, novation or assignment of a transaction or agreement (including any Loan Document),
between a Beneficiary and a Loan Party or any other person;
(d)an Insolvency Event in relation to a Loan Party or any other person, or a Beneficiary becoming a party to or bound by any
Liquidation;
(e)any judgment, proceedings or order being obtained or made against a Loan Party or any other person;
(f)an obligation of a Loan Party or any other person or any provision of a Loan Document being void, voidable, unenforceable,
defective, released, waived, impaired, novated, enforced or impossible or illegal to perform;
(g)the whole or partial discharge or release of, or the granting of, a Security Document;
(h)any Obligations not being recoverable or the liability of a Loan Party or any other person to a Beneficiary ceasing (including as a result
of giving a release or discharge or by law);
(i)the failure of a Loan Party or any other person to execute any Loan Document, properly or at all;
(j)the Grantor not being a party to a Loan Document (such as a Loan Document solely between the Secured Party and a Loan
Party);
(k)a Beneficiary exercising or not exercising its rights (including any right to elect to terminate a contract) under a Loan Document or at law
against a Loan Party or any other person;
(l)any default, misrepresentation, negligence, breach of contract, misconduct, acquiescence, delay, waiver, mistake, failure to give notice or
other action or inaction of any kind (whether or not prejudicial to the Grantor) by a Beneficiary or any other person;
(m)any change to, or in the membership of, any partnership, joint venture or association; or
(n)any Collateral being destroyed, forfeited, extinguished, surrendered or resumed,
whether or not the Grantor, a Loan Party, a Beneficiary or any other person is aware of it or consents to it and despite any legal
rule to the contrary.
9.3Exclusion of subrogation and other rights
Until there are no Obligations, and each Beneficiary is satisfied (acting reasonably) that it will not have to repay any money received by it,
the Grantor must not (either directly or indirectly) without the Secured Party's prior written consent:
(a)claim, exercise or attempt to exercise a right of set-off or counterclaim or any other right or raise any defence which might reduce or
discharge the Grantor's liability under this document;
14
(b)claim or exercise a right of subrogation or contribution or otherwise claim the benefit of:
(i)a Security Document or Guarantee relating to the Obligations; or
(ii)any Security Interest or Guarantee which would rank in priority or preference to a Security Document or Guarantee relating to
the Obligations,
and any money the Grantor receives in breach of this clause 9.3(b) will be held on trust for each Beneficiary and must be paid
promptly to a Beneficiary for the account of each Beneficiary; or
(c)unless expressly permitted in a Loan Document or each Beneficiary has given a direction to do so (in which case it must do so in
accordance with the direction as trustee for each Beneficiary):
(i)prove, claim or vote in, or receive the benefit of a distribution, dividend or payment arising out of, the Liquidation of a Loan
Party; or
(ii)demand, or accept payment of, any money owed to the Grantor by a Loan Party,
and any such money it receives will be held on trust each Beneficiary and must be paid promptly to a Beneficiary for the account of
each Beneficiary.
9.4Prove in Liquidation
(a)The Grantor, for valuable consideration, irrevocably appoints each of the Secured Party and its Authorised Representatives separately
as its attorney to prove in the Liquidation of a Loan Party for all money that the Grantor can claim against that person on any account
whatever. The terms of appointment are that the attorney:
(i)must pay to the Grantor dividends it receives in excess of the Obligations, without interest, and any other dividends must be
paid to the Secured Party; and
(ii)may delegate its powers (including the power to delegate) to any person for any period and may revoke the delegation.
(b)The Grantor agrees to ratify anything done by an attorney under clause 9.4(a). The power of attorney created under clause 9.4(a) is
granted to secure the Grantor's performance of its obligations under each Loan Document to which it is expressed to be a party.
9.5Variations and replacements
The Grantor acknowledges that the Loan Documents may be varied or replaced from time to time. The Grantor confirms that the
Obligations includes any amount payable under any Loan Document which is relevant to the Obligations as varied or replaced. The Grantor
confirms that this applies regardless of:
(a)how a Loan Document is varied or replaced;
(b)the reasons for the variation or replacement; and
(c)whether the Obligations decreases or increases or a Loan Document is otherwise more onerous as a result of the variation or
replacement.
10.Consequences of Event of Default
10.1Consequences of Event of Default
If an Event of Default has occurred and is continuing, in addition to all other rights and remedies granted to the Secured Party each Security
Interest created under this document will become immediately enforceable.
10.2Secured Party's general powers
While an Event of Default is continuing, regardless of whether the Secured Party has appointed a Receiver, the Secured Party may, without
demand or notice to anyone (unless notice is required as described in clause 19.1), do all things that a secured party with a Security
Interest in, or a mortgagee or an absolute owner of, the Collateral can do, and exercise all rights, powers and remedies:
(a)of a secured party with a Security Interest in, or a mortgagee or an absolute owner of, the Collateral;
15
(b)given to a Receiver under the Corporations Act; and
(c)specified in clause 10.4.
10.3Secured Party's PPSA powers – sections 123 and 128
Without limiting any other provision of this document, any Security Interest or any other Loan Document, the Grantor agrees that, at any
time while an Event of Default is continuing, the Secured Party may:
(a)seize any Collateral; and/or
(b)dispose of any Collateral in such manner and generally on such terms and conditions as the Secured Party thinks desirable,
and otherwise do anything that the Grantor could do in relation to the Collateral.
10.4Secured Party's specific powers
While an Event of Default is continuing, the Secured Party may do any or all of the following in connection with its Powers, whether in its or
the Grantor's name or otherwise and whether or not it has possession of the Collateral:
(a)(recover, possess and control) access, recover, manage, take or give up possession or 'control' (within the ordinary meaning of that
term and as defined in the PPSA) of, and surrender or release, any Collateral;
(b)(receive income and profits) receive the income and profits of the Collateral;
(c)(insurance) insure the Collateral and settle and compromise insurance claims;
(d)(sell, assign or exchange) sell, assign or help sell all or any Collateral to any person or exchange it for any other property or rights,
on terms the Secured Party thinks fit, with or without other property;
(e)(deposited documents) complete and deal with any document deposited with the Secured Party relating to any Collateral,
including any transfer in blank;
(f)(options and rights) grant, acquire, renew, vary, accept the surrender of or terminate an option or other right over the Collateral on the
terms it thinks fit, and with or without any other property;
(g)(hive off) promote the formation of any company to acquire any Collateral or assume obligations of the Grantor or both;
(h)(contracts, instruments and rights) perform or observe the Grantor's obligations or enforce or exercise the Grantor's rights,
powers, discretions or remedies (or refrain from doing so) under:
(i)a contract, instrument, arrangement or Marketable Security forming part of the Collateral (including voting and proxy
rights); or
(ii) a Loan Document (including to cure an Event of Default) or other document entered into by the Secured Party or a
Receiver in exercise of a Power,
and vary, terminate or rescind any of them or novate or otherwise transfer to any person the Grantor's obligations under any of
them;
(i)(Liquidation) initiate and participate in any Liquidation of any person (including voting at meetings and appointing proxies);
(j)(proceedings) commence, prosecute, defend, discontinue, compromise, submit to arbitration and settle proceedings in
connection with this document or the Collateral, whether in or before a Governmental Authority;
(k)(Marketable Securities) exercise the rights and powers of an absolute owner in connection with Marketable Securities which form part
of the Collateral (including voting at meetings and appointing proxies, and effecting conversion of the title to any Marketable Securities as to
being certificated or uncertificated);
(l)(raise money) obtain financial accommodation (including from a Beneficiary or its
16
associate) and give Guarantees, in each case with or without granting a Security Interest over the Collateral and regardless of priority
ranking;
(m)(receipts) give receipts for money and other property it receives;
(n)(employ and delegate) employ and discharge staff, professional advisers, consultants, contractors, agents and auctioneers for the
purposes of this document, and at the remuneration that the Secured Party thinks fit, and to delegate to any person any of its Powers
(including this right of delegation);
(o)(Authorisations) apply for any Authorisation which is necessary or desirable in connection with the exercise of a Power;
and
(p)(incidental power) do anything expedient or incidental to exercise any of its Powers, without limiting those Powers.
10.5Discharge or acquire prior Security Interest
(a)While an Event of Default is continuing, the Secured Party may do any one or more of the following:
(i)purchase a debt or liability secured by a prior Security Interest (including a debt secured by a Permitted Lien);
(ii)pay the amount required to discharge or satisfy that debt or liability; and
(iii)take a transfer or assignment of that Security Interest and any Guarantee, document or right ancillary or collateral to
it.
(b)If the Secured Party exercises its rights under this clause 10.5(a):
(i)the Grantor is indebted to the Secured Party for the same amount paid by the Secured Party or the amount of the debt or
liability acquired (whichever is higher) and that amount is immediately payable to the Secured Party and forms part of the
Obligations;
(ii)the Secured Party may rely on a written notice from the holder of a prior Security Interest (Prior Secured Party), or on an
ancillary or collateral document, as to the amount and property secured by that prior Security Interest;
(iii)the Prior Secured Party need not enquire whether any amount is owing under a Loan Document; and
(iv)the Grantor irrevocably directs any such Prior Secured Party to give the Secured Party any information it requires in
connection with the prior Security Interest.
10.6Co-operation in exercise of power of sale
If the Secured Party or a Receiver wishes to exercise a right to sell any Collateral, the Grantor must do or cause to be done all things
necessary to enable an expeditious sale and transfer to the purchaser for the value as estimated by the Secured Party, in the manner and
on terms the Secured Party thinks fit.
10.7Appoint Receivers
(a)While an Event of Default is continuing, the Secured Party may do any one or more of the following:
(i)appoint one or more persons (severally, unless specified otherwise in the instrument of appointment) to be a receiver or
receiver and manager of all or any of the Collateral;
(ii)fix and vary the Receiver's remuneration at an amount agreed between the Secured Party and the Receiver from time
to time;
(iii)terminate a receivership or remove or replace a Receiver; and
(iv)appoint an additional Receiver.
(b)The Secured Party may do any of these things even if a resolution or order for the Grantor's Liquidation has been passed or
made.
17
(c)Each party agrees that if a Receiver is appointed under this document on the basis of an Event of Default which subsequently ceases
to continue, the Event of Default is taken to continue for the purposes of the Receiver's appointment under this document.
10.8Agency of Receiver
To the extent permitted by law, a Receiver is the agent of the Grantor and the Grantor alone is responsible for the Receiver's costs,
expenses, remuneration, acts, omissions and defaults. The Secured Party is not liable to the Grantor for the acts or omissions of the
Receiver. To the extent that a Receiver is not, or ceases to be, the agent of the Grantor as a result of a resolution or order for the Grantor's
Liquidation or by operation of law, the Receiver immediately becomes the agent of the Secured Party.
10.9Receiver's powers
(a)Unless the terms of a Receiver's appointment say otherwise, the Receiver has the following rights and powers over the
Collateral which the Receiver is appointed to:
(i)deal with all the rights, powers, discretions or remedies given by law to mortgagees in possession, receivers or
receivers and managers;
(ii)deal with all of the Secured Party's Powers under this document and at law (other than the power to appoint receivers or
receivers and managers); and
(iii)obtain financial accommodation from a Beneficiary and give Guarantees on terms that the Receiver considers expedient in
connection with the Collateral, in each case whether alone or together with any other person, and with or without granting a
Security Interest (regardless of priority ranking) over the Collateral.
(b)The Receiver may exercise the rights and powers under clause 10.9(a) in the name of the Grantor or otherwise.
10.10Appointment of Attorney
(a)The Grantor for valuable consideration, to secure the performance of the Obligations, irrevocably appoints the Secured Party, each
Authorised Representative of the Secured Party and each Receiver separately as its attorney to do any or all of the following on the
Grantor's behalf and in the Grantor's or the attorney's name while an Event of Default is continuing:
(i)prove in the Liquidation of a Loan Party;
(ii)anything which the Grantor must do under a Loan Document or under law in connection with a Loan Document;
(iii)anything which the Attorney considers necessary or expedient to give effect to a Power or exercise of a Power, or to perfect
any Loan Document, including by signing any document for that purpose; and
(iv)anything which an Attorney is expressly empowered to do under a Loan Document on the Grantor's behalf.
(b)The Grantor agrees to ratify anything done by its Attorney pursuant to the power of attorney granted by the Grantor under clause
10.10(a). An Attorney may delegate its powers (including the power to delegate) to any person for any period and may revoke the
delegation.
11.Costs and expenses
11.1Costs and expenses
The Grantor agrees to pay all costs and expenses set out in section 10.3 (Payment of Costs and Expenses) and Section 10.4
(Indemnification) of the Credit Agreement as if each reference to:
(a)'Borrower' were to the Grantor;
(b)'Administrative Agent' and 'Lender' includes a reference to the Secured Party (including, for the avoidance of doubt, so that the
Secured Party would be an 'Indemnified Party' under the Credit Agreement);
18
(c)'Collateral' includes any Collateral defined under this document; and
(d)'this Agreement' includes this document.
11.2PPSA expenses
Without limiting clause 11.1 above, the Grantor must pay or reimburse on demand by the Secured Party all reasonable costs and expenses
of a Beneficiary, a Receiver and an Attorney (and any of their respective officers, employees and agents) in connection with:
(a)the negotiation, preparation, execution, delivery, registration and completion of, and payment of Taxes (including stamp duty) on,
the Loan Documents;
(b)preparing, registering and maintaining any financing statement or financing change statement (including pursuant to section
167 of the PPSA); and
(c)complying with any amendment demand in accordance with Part 5.6 of the PPSA.
This includes legal costs and expenses (on a full indemnity basis) and any professional consultant's fees.
11.3Enforcement and other expenses
Without limiting clause 11.1 above, the Grantor must pay or reimburse on demand by the Secured Party all costs and expenses of the a
Beneficiary, a Receiver and an Attorney (and any of their respective officers, employees and agents) in connection with:
(a)enforcing a Loan Document, or exercising, enforcing or protecting a Power, or attempting to do so;
(b)obtaining or receiving payment of, and distributing, any Obligations;
(c)a breach of, obtaining or procuring performance or satisfaction of the Obligations;
(d)a Default or Event of Default;
(e)any Governmental Authority enquiry concerning the Grantor or any of its Affiliates, or the involvement of a Beneficiary in the Loan
Documents; and
(f)maintaining, preserving or protecting the Collateral.
This includes any legal costs and expenses (on a full indemnity basis) and any professional consultant's fees.
11.4Costs and expenses of Grantor
The Grantor will pay its own costs and expenses in connection with this document.
12.Interest on overdue amounts
12.1Accrual and calculation
Unless another Loan Document already obliges the Grantor to pay interest on an unpaid amount that is due and payable by it under a
Loan Document, interest on that overdue amount (including on unpaid interest under this clause 12) will accrue daily:
(a)from and including the due date (or, for an amount payable by reimbursement or indemnity, any earlier date the amount was
incurred), up to but excluding the date of actual payment; and
(b)subject to clause 12.2, at the Default Rate.
12.2Judgment or order
If the Grantor's liability under a Loan Document is the subject of a judgment or order:
(a)its obligation to pay interest under clause 12.1 is separate from, and continues despite, the judgment or order; and
(b)the interest accrues both before and after judgment at the higher of the Default Rate and the rate payable under that judgment or
order.
12.3Payment
The Grantor must pay to the Secured Party accrued interest under this clause 12 on the last
19
Business Day of each calendar month and on demand.
13.Payments
All payments by the Grantor under this document must be made:
(a)in accordance with the other Loan Documents; and
(b)if no date for payment is specified in another Loan Document, on demand by the Secured Party.
14.Receipt of money and application
14.1Credit of received payment
The Grantor is only credited with a payment of the Obligations from the date of actual receipt in cleared funds by the relevant Beneficiary
(whether received from the Grantor or a Receiver).
14.2Applying or appropriating money received
(a)Subject to the Security Trust Deed, the Secured Party may apply or appropriate all money received under this document (even if
insufficient to discharge all of the Grantor obligations at that time) to reduce the Obligations in the order, and to satisfy any part of the
Obligations, as the Secured Party sees fit (including as between principal, interest and other amounts owing to the Secured Party and
including so as to enable the Secured Party to preserve any purchase money security interest) provided that no application or appropriation
may be made by the Secured Party where the relevant application or appropriation would not be permitted to be made by the
Administrative Agent under any Loan Document if the money had been received by the Administrative Agent.
(b)An application or appropriation by the Secured Party will override any appropriation made by the Grantor unless the Grantor is entitled
to make the appropriation under the terms of any Loan Document. For the purposes of section 14(6)(a) of the PPSA, this clause 14.2
constitutes the method of payment application agreed by the parties.
14.3Suspense account
(a)The Secured Party may credit money received in or towards satisfaction of the Obligations (including dividends received in any
Liquidation) to a suspense account. The Secured Party may keep the money in that account for as long as, and at whatever interest rate,
the Secured Party thinks fit. The Secured Party may apply the money (including interest) to reduce the Obligations whenever the Secured
Party thinks fit.
(b)If the Obligations have been fully and finally paid or discharged and the Secured Party is satisfied that such payment or discharge is not
liable to be set aside, avoided or reversed, then the balance standing to the credit of the suspense account and any accrued interest must
be paid to or for the account of the Grantor and the Secured Party will not have any further liability in relation to it.
14.4Surplus proceeds
If the Secured Party, a Receiver or an Attorney (as the case may be) holds any surplus money after:
(a)payment of the Obligations in full and the application of proceeds in accordance with clause 14.2; and
(b)the making of all payments that the Secured Party, Receiver or Attorney has the right or obligation to make under the Loan
Documents or at law,
then:
(c)no trust arises, or interest accrues, over that surplus money; and
(d)each Beneficiary, Receiver or Attorney may pay that money to an account in the name of the Grantor with any bank, in which case
each Beneficiary, Receiver or Attorney will have no further liability in relation to that money.
15.Statutory powers and notices
20
15.1Exclusion of PPSA provisions
To the extent the law permits:
(a)for the purposes of sections 115(1) and 115(7) of the PPSA:
(i)the Secured Party need not comply with sections 95, 118, 121(4), 125, 130, 132(3)(d) or 132(4); and
(ii)sections 142 and 143 are excluded;
(b)for the purposes of section 115(7) of the PPSA, the Secured Party need not comply with sections 132 and 137(3);
(c)if the PPSA is amended after the date of this document to permit the Grantor and the Secured Party to agree to not comply with or to
exclude other provisions of the PPSA, the Secured Party may notify the Grantor that any of these provisions is excluded, or that the
Secured Party need not comply with any of these provisions, as notified to the Grantor by the Secured Party; and
(d)the Grantor agrees not to exercise its rights to make any request of the Secured Party under section 275 of the PPSA, to authorise
the disclosure of any information under that section or to waive any duty of confidence that would otherwise permit non‐disclosure under
that section.
15.2Exercise of rights by Secured Party
If the Secured Party exercises a Power in connection with this document, that exercise is taken not to be an exercise of a right, power or
remedy under the PPSA unless the Secured Party states otherwise at the time of exercise. However, this clause does not apply to a Power
which can only be exercised under the PPSA.
15.3No notice required unless mandatory
(a)To the extent the law permits, the Grantor waives:
(i)its rights to receive any notice that is required by:
(A)any provision of the PPSA (including a notice of a verification statement); or
(B)any other law before a secured party or Receiver exercises a Power; and
(ii)any time period that must otherwise lapse under any law before a secured party or Receiver exercises a Power.
(b)If the law which requires a period of notice or a lapse of time cannot be excluded, but the law provides that the period of notice or lapse
of time may be agreed, that period or lapse is one day or the minimum period the law allows to be agreed (whichever is the longer).
(c)However, nothing in this clause prohibits the Secured Party or any Receiver from giving a notice under the PPSA or any other law.
15.4Appointment of nominee for registration
For the purposes of section 153 of the PPSA, the Secured Party appoints the Grantor as its nominee, and authorises the Grantor to act
on its behalf, in connection with a registration under the PPSA of any security interest in favour of the Grantor which is:
(a)evidenced or created by chattel paper;
(b)perfected by registration under the PPSA; and
(c)transferred to the Secured Party under this document.
This authority ceases when the registration is transferred to the Secured Party.
15.5Other rights
Where the Secured Party has Powers in addition to, or existing separately from, those in Chapter 4 of the PPSA, those Powers will
continue to apply and are not limited or excluded (or
otherwise adversely affected) by the PPSA. This is despite clause 15.1 or any other provision of a Loan Document.
21
16.Assignment
16.1By Grantor
The Grantor may not assign, transfer or otherwise deal with its rights, interests or obligations under this document without the Secured
Party's prior written consent.
16.2Change in security trustee
The Grantor agrees that:
(a)the Secured Party may assign its rights and novate or otherwise transfer its obligations under this document to any replacement or
successor security trustee that is appointed in accordance with the Security Trust Deed (New Security Trustee); and
(b)if requested, it will enter in to a novation deed with the Secured Party and any New Security Trustee in a form acceptable to the
Secured Party and the New Security Trustee.
16.3Assistance
The Grantor agrees to do or execute anything reasonably requested by the Secured Party to effect an assignment, transfer, novation or
other dealing under this clause 16.
17.Notices, demands and communications
Clause 14 (Notices, demands and communications) of the Security Trust Deed applies to the giving of any notice, demand, consent,
approval or communication in connection with this document.
18.Protection of third parties
18.1Receipt of Secured Party, Receiver
A receipt given by a Beneficiary (or its Authorised Representative), a Receiver or an Attorney for any money payable to it, or any asset
receivable by it, relieves the person paying that money or delivering the asset from all liability to enquire as to the dealing with, or
application of, that money or asset.
18.2Third parties need not enquire
A person dealing with a Beneficiary, a Receiver or an Attorney is protected from any impropriety or irregularity of that dealing, and need
not enquire whether:
(a)any of them has been properly appointed or has executed or registered an instrument or exercised a Power properly or with authority;
or
(b)any Obligation has become due, a Loan Document is enforceable or a default or event of default (however described) has occurred
under a Loan Document.
19.Protection of Secured Party, Receiver and Attorney
19.1Notice, demand or lapse of time required by law
If a notice, demand or lapse of time is required by law before a Beneficiary can exercise a Power, then for the purposes of this document:
(a)that notice, demand or lapse of time is dispensed with to the extent allowed by that law; or
(b)if not allowed to be dispensed with, but the period of notice, demand or lapse of time is allowed by that law to be shortened or fixed,
it is shortened and fixed to one day.
19.2Secured Party and Receiver not restricted
A Beneficiary or a Receiver need not:
(a)exercise a Power, give a consent or make a decision under this document unless a Loan Document expressly provides otherwise; or
(b)resort to a Security Document or Power before resorting to any other of them.
22
19.3Secured Party, Receiver and Attorney not mortgagee in possession or liable
To the extent permitted by law, a Beneficiary, a Receiver and any Attorney will:
(a)not be, nor account or be liable as, mortgagee in possession due to exercise of a Power; or
(b)not be liable to anyone for any Loss in relation to an exercise or attempted exercise of a Power, or a failure or delay in exercising a
Power, except for its own gross negligence, fraud or wilful default.
19.4Secured Party may set off
At any time while an Event of Default is continuing, the Secured Party may, without any demand or notice, set off and apply indebtedness it
owes to the Grantor (whatever the currency) against any money owing to it by the Grantor under any Security Trustee Document, whether
or not the amount owed by the Secured Party or the Grantor is immediately payable or is owed alone or with any other person. The
Grantor irrevocably authorises the Secured Party to do anything necessary (including to sign any document and effect appropriate currency
exchanges) for that purpose.
19.5Reinstating avoided transaction
(a)The Grantor agrees that if a payment or other transaction relating to the Obligations is void, voidable, unenforceable or defective for
any reason or a related claim is upheld, conceded or settled (each an Avoidance), then even though the Secured Party knew or should
have known of the Avoidance:
(i)each Power and the Grantor's liability under each Loan Document will be what it would have been, and will continue, as if the
payment or transaction the subject of the Avoidance had not occurred; and
(ii)the Grantor will immediately execute and do anything required by the Secured Party to restore the Secured Party to its
position immediately before the Avoidance (including reinstating any Loan Document).
(b)This clause 19.5 survives any termination or full or partial discharge or release of any Loan Document.
19.6Authorised Representatives and communications
The Grantor irrevocably authorises the Beneficiaries to rely on a certificate by any person purporting to be its director or company secretary
as to the identity and signatures of its Authorised Representatives, and to rely on any Notice or other document contemplated by any Loan
Document which bears the purported signature (whether given by facsimile or otherwise) of its Authorised Representative. The Grantor
warrants that those persons have been authorised to give notices and communications under or in connection with the Loan Documents.
19.7Secured Party's opinion
An opinion or view of the Secured Party for the purposes of this document may be formed or held on its behalf by its Authorised
Representative, its board of directors or by any other person it authorises to act on its behalf in relation to the Loan Documents.
20.General provisions
20.1Consideration
The Grantor acknowledges entering this document in return for the Secured Party and the other Beneficiary entering into the Loan
Documents, the transactions contemplated by those documents and other valuable consideration.
20.2Prompt performance
If a time is not specified for the performance by the Grantor of an obligation under this document, it must be performed promptly.
20.3Performance of Grantor's obligations by Secured Party
The Secured Party may do anything which the Grantor fails to do as required by, or in accordance with, this document. This does not limit or
exclude the Secured Party's Powers in any way.
23
20.4Powers
Powers under the Loan Documents are cumulative and do not limit or exclude Powers under law. Full or partial exercise of a Power does
not prevent a further exercise of that or any other Power. No failure or delay in exercising a Power operates as a waiver or representation.
Unless expressly provided in a Loan Document, no Power or Loan Document merges in, limits or excludes any other Power, Loan
Document or judgment which the Secured Party or a Receiver (or anyone claiming through it) may have or obtain.
20.5Consent and waivers
A consent or waiver by the Secured Party or a Receiver in relation to this document is effective only if in writing. If given subject to
conditions, the consent or waiver only takes effect subject to compliance with those conditions to the Secured Party's or Receiver's
satisfaction.
20.6Indemnities and reimbursement obligations
The Secured Party or a Receiver need not incur an expense or make a payment before enforcing an indemnity or reimbursement obligation
in a Security Trustee Document. Unless otherwise stated, each such indemnity or reimbursement obligation is separate and independent of
each other obligation of the party giving it, is absolute, irrevocable, unconditional and payable on demand and continues despite any
settlement of account, termination of any Security Trustee Document or anything else.
20.7Notices or demands as evidence
A notice or certificate from or demand by the Secured Party stating that an Event of Default has occurred, or that a specified sum of
money is owing or payable under a Security Trustee Document or stating any other fact or determination relevant to the rights or
obligations of the Secured Party or the Grantor under a Loan Document, is taken to be correct unless proved incorrect.
20.8Law and legislation
To the extent permitted by law:
(a)each Loan Document to which the Grantor is expressed to be a party prevails to the extent of inconsistency with any law; and
(b)any present or future legislation operating to reduce the Grantor's obligations under a Loan Document or the effectiveness of the
Powers is excluded.
20.9Severability
A provision of this document that is illegal, invalid or unenforceable in a jurisdiction is ineffective in that jurisdiction to the extent of the
illegality, invalidity or unenforceability. This does not affect the validity or enforceability of that provision in any other jurisdiction, nor the
remainder of this document in any jurisdiction.
20.10Variation
A variation of this document must be in writing and signed by or on behalf of each party to it.
20.11Governing law – security agreement
This document is governed by the laws of New South Wales, Australia.
20.12Governing law – Security Interest
(a)Subject to paragraph (b), each Security Interest created under this document is governed by the laws of New South Wales, Australia.
(b)Paragraph (a) does not apply to the extent that a Security Interest is created under this document in any personal property described in
section 237(2) of the PPSA, in which case the law determined by the PPSA will govern the Security Interest in that property.
20.13Jurisdiction
Each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of New South Wales, Australia (and any
court of appeal) and waives any right to object to an action being brought in those courts, including on the basis of an inconvenient forum
or those courts not having jurisdiction.
20.14Service of process
24
(a)Without preventing any other mode of service, any document in an action or process may be served on any party by being delivered to
or left for that party at its address for service of Notices under this document.
(b)The Grantor appoints the Share Issuer as its agent to accept service of process under or in connection with this document, and the
Share Issuer accepts the appointment. The appointment may not be revoked without the Secured Party's consent.
20.15Counterparts
(a)This document may be executed in any number of counterparts or copies, each of which may be executed by physical signature in
wet ink or electronically (whether in whole or part). A party who has executed a counterpart of this document may exchange it with
another party (the Recipient) by:
(i)emailing a copy of the executed counterpart to the Recipient; or
(ii)utilising an electronic platform (including DocuSign) to circulate the executed counterpart,
and will be taken to have adequately identified themselves by so emailing the copy to the Recipient or utilising the electronic
platform.
(b)Each party consents to signatories and parties executing this document by electronic means and to identifying themselves in the
manner specified in this clause.
(c)Each counterpart constitutes an original (whether kept in electronic or paper form), all of which together constitute one instrument as if
the signatures (or other execution markings) on the counterparts or copies were on a single physical copy of this document in paper form.
Without limiting the foregoing, if any of the signatures or other markings on behalf of one party are on different counterparts or copies of this
document, this shall be taken to be, and have the same effect as, signatures on the same counterpart and on a single copy of this
document.
25
Schedule 1 – Relevant Marketable Securities
Shares
Grantor (who holds shares in a Share
Issuer)
Share Issuer
Relevant Marketable Securities
AVITA Medical, Inc.
AVITA Medical Pty Limited ACN 058
466 523
100% of the issued capital of the Share Issuer, which as at
the date of this document consists of 2,146,791,155
shares fully paid to A$332,772,448.08 value, together with
all other shares in the Share Issuer legally or beneficially
owned by the Grantor from time to time.
26
Signing pages
EXECUTED as a deed.
Each signatory executing this document (electronically or otherwise) intends by that execution to be bound by this document, and where the signatory has
signed as an officer or attorney of a party, for that party to be bound by this document. Each attorney signing this document under a power of attorney certifies,
by the attorney's signature, that the attorney has no notice of the revocation of the power of attorney.
Grantor
Signed sealed and delivered by AVITA Medical,
Inc. in the presence of
/s/ Lydia Martinez
Signature of Witness
Lydia Martinez
Name of Witness
/s/ James Corbett
Signature of authorised signatory
James Corbett
Name of authorised signatory
Secured Party
Signed sealed and delivered by ORCO IV LLC in
the presence of
/s/ Brendan Weber
Signature of Witness
Brendan Weber
Name of Witness
/s/ W. Carter Neild
Signature of authorised signatory
W. Carter Neild
Name of authorised signatory
Exhibit 10.41
Execution version
General security deed
AVITA
AVITA Medical Pty Limited (Grantor) ORCO IV LLC
(Secured Party)
3rd Floor Randall House 6 Dowgate Hill London EC4R 2SU
United Kingdom
T +44 20 7429 2780 F +44 20 7429 2788
minterellison.com
LON1_1061175_3
General security deed
AVITA
Details
Parties
Background
Agreed terms
1.Defined terms & interpretation
1.1.Defined terms from Credit Agreement
1.2.Other defined terms
1.3.PPSA terms incorporated
1.4.Interpretation
1.5.Security Agreement, Loan Document and General Security Deed
2.Secured Party's limit on liability
2.1.Capacity and acts
2.2.Duties and responsibilities limited
2.3.Benefit and survival
3.Grant of security
3.1.Security interest and charge
3.2.Continuing security and obligations
4.Dealings with Collateral
4.1.Restricted dealings
4.2.Permitted dealings
4.3.Revolving Assets
4.4.Conversion to Revolving Assets
4.5.Inventory
5.Priority
5.1.Priority of Security Interest in Collateral
5.2.No agreement or consent to subordination, attachment or accessions
5.3.Contrary agreements
6.General security provisions
6.1.Security continuing and independent
6.2.Collateral Security Documents
6.3.Release of Collateral
7.Representations and warranties
7.1.Representations and warranties
7.2.Repetition
7.3.Reliance and survival
8.Undertakings
8.1.General undertakings
8.2.Undertakings relating to Collateral
8.3.Collection Account
8.4.Collection and deposit of proceeds
2
5
5
5
6
6
6
6
8
8
8
8
8
9
9
9
9
9
9
9
9
9
10
10
10
10
10
10
11
11
11
11
11
11
12
12
12
12
13
14
14
8.5.Further assurances
9.Grantor liability and exclusion of rights
9.1.Indemnity
9.2.Principal and independent obligation
9.3.Grantor's liabilities not affected
9.4.Exclusion of subrogation and other rights
9.5.Prove in Liquidation
9.6.Variations and replacements
10.Consequences of Event of Default
10.1.Consequences of Event of Default
10.2.Secured Party's general powers
10.3.Secured Party's PPSA powers – sections 123 and 128
10.4.Secured Party's specific powers
10.5.Discharge or acquire prior Security Interest
10.6.Co-operation in exercise of power of sale
10.7.Appoint Receivers
10.8.Agency of Receiver
10.9.Receiver's powers
10.10.Appointment of Attorney
11.Costs and expenses
11.1.Costs and expenses
11.2.PPSA expenses
11.3.Enforcement and other expenses
11.4.Costs and expenses of Grantor
12.Interest on overdue amounts
12.1.Accrual and calculation
12.2.Judgment or order
12.3.Payment
13.Payments
14.Receipt of money and application
14.1.Credit of received payment
14.2.Applying or appropriating money received
14.3.Suspense account
14.4.Surplus proceeds
14.5.Payments after notice of subsequent Security Interests
15.Statutory powers and notices
15.1.Exclusion of PPSA provisions
15.2.Exercise of rights by Secured Party
15.3.No notice required unless mandatory
15.4.Appointment of nominee for registration
15.5.Other rights
16.Assignment
16.1.By Grantor
16.2.Change in security trustee
16.3.Assistance
17.Notices, demands and communications
3
15
16
16
16
16
17
17
17
18
18
18
18
18
19
20
20
20
20
21
21
21
21
22
22
22
22
22
22
22
23
23
23
23
23
23
24
24
24
24
25
25
25
25
25
25
25
18.Protection of third parties
18.1.Receipt of Secured Party, Receiver
18.2.Third parties need not enquire
19.Protection of Secured Party, Receiver and Attorney
19.1.Notice, demand or lapse of time required by law
19.2.Secured Party and Receiver not restricted
19.3.Secured Party, Receiver and Attorney not mortgagee in possession
19.4.or liable
19.5.Secured Party may set off
19.6.Reinstating avoided transaction
19.7.Authorised Representatives and communications
19.8.Secured Party's opinion
20.General provisions
20.1.Consideration
20.2.Prompt performance
20.3.Performance of Grantor's obligations by Secured Party
20.4.Powers
20.5.Consent and waivers
20.6.Indemnities and reimbursement obligations
20.7.Notices or demands as evidence
20.8.Law and legislation
20.9.Severability
20.10.Variation
20.11.Governing law – security agreement
20.12.Governing law – Security Interest
20.13.Jurisdiction
20.14.Service of process
20.15.Acceptance of appointments
20.16.Counterparts
Schedule 1 – Notice of Security Interest (account)
Schedule 2 – Serial Numbered Property
Signing pages
4
25
25
26
26
26
26
26
26
26
27
27
27
27
27
27
27
27
27
27
28
28
28
28
28
28
28
28
28
30
32
39
Details
Date 11 December 2023
Parties
Name AVITA Medical Pty Limited
ACN 058 466 523
Short form name Grantor
Notice details Address: Level 7, 330 Collins Street, Melbourne, Victoria 3000 Email: Lou.Panaccio@cpwcapital.net.au
Attention: Lou Panaccio
Name ORCO IV LLC, a Delaware limited liability company
Capacity As trustee of the trust established under the Security Trust Deed Short form name Secured Party
Notice details c/o OrbiMed Advisors LLC
601 Lexington Avenue, 54th Floor New York,
NY 10022
Attention: OrbiMed Credit Reporting Email:
RoSCreditOps@OrbiMed.com
Background
AThe Grantor agrees to grant the Secured Party a security interest in the Collateral to secure payment and performance of the
Obligations.
BThe Grantor does this in return for the Secured Party and the other Beneficiaries entering into the Loan Documents, the
transactions contemplated by those documents and other valuable consideration.
5
Agreed terms
1.Defined terms & interpretation
1.1Defined terms from Credit Agreement
Terms defined in (or incorporated by reference to) the Credit Agreement (as defined below) have the same meanings when
used in this document unless otherwise defined in this document.
Parties to the Credit Agreement referred to by short form name in this document are more fully described in the Credit
Agreement.
1.2Other defined terms
In this document:
A$ means the lawful currency of Australia.
Affiliate has the meaning given to that term in the Security Trust Deed.
Attorney means an attorney appointed by the Grantor under this document.
Authorisation means any consent, authorisation, registration, filing, agreement, notarisation, certificate, permit, licence,
approval, authority or exemption of, from or required by,
a Governmental Authority or required by law. Where intervention or action of a Governmental Authority within a specified
period would fully or partly prohibit or restrict something by law, Authorisation includes the expiry of that period without that
intervention or action.
Authorised Representative has the meaning given to that term in the Security Trust Deed.
Avoidance has the meaning given to that term in clause 19.5.
Beneficiary has the meaning given to that term in the Security Trust Deed, but also includes the Secured Party in any
capacity.
Borrower means AVITA Medical, Inc., a Delaware Corporation.
Collateral means all the Grantor's present and future property of any kind. It includes anything in respect of which the
Grantor has at any time a sufficient right, interest or power to grant a security interest.
Collection Account means the account established under clause 8.3.
Control Event means:
(a)in respect of any Collateral that is, or would have been, a Revolving Asset:
(i)the Grantor breaches, or attempts to breach clause 4.1 in respect of the Collateral or takes any step which
would result in it doing so; or
(ii)a person takes a step (including signing a notice or direction) which may result in Taxes, or an amount owing
to an authority, ranking ahead of the security interest in the Collateral under this document; or
(iii)distress is levied or a judgment, order or Security Interest is enforced or a creditor takes any step to levy
distress or enforce a judgment, order or Security Interest, over the Collateral; or
(iv)the Secured Party gives a notice to the Grantor that the Collateral is not a Revolving Asset (however, the
Secured Party may only give a notice if the Secured Party reasonably considers that it is necessary to do so
to protect its rights under this document or if an Event of Default has occurred and is continuing); or
(b)in respect of all Collateral that is or would have been Revolving Assets:
(i)a voluntary administrator, liquidator or provisional liquidator is appointed in respect
6
of the Grantor or the winding up of the Grantor begins; or
(ii)a receiver, receiver and manager or controller is appointed to any of the Grantor's property; or
(iii)something having a substantially similar effect to paragraph (i) or (ii) happens in respect of the Grantor or its
assets under any law.
Credit Agreement has the meaning given to that term in the Security Trust Deed.
Default Rate has the meaning given to that term in the Credit Agreement.
Event of Default has the meaning given to that term in the Credit Agreement. Governmental Authority has the
meaning given to that term in the Credit Agreement. Guarantee has the meaning given to that term in the Security
Trust Deed.
Insolvency Event has the meaning given to that term in the Security Trust Deed.
Investment Document has the meaning given to that term in the Credit Agreement.
Lease means any arrangement whereby an asset may be used, occupied, operated or managed by a person other than
the owner. It includes a lease, licence, charter, hire purchase or hiring arrangement.
Liquidation has the meaning given to that term in the Security Trust Deed. Loan Document has the
meaning given to that term in the Security Trust Deed. Loan Party has the meaning given to that term
in the Security Trust Deed.
Loss has the meaning given to that term in the Security Trust Deed.
Marketable Security means:
(a)a 'marketable security' (as defined in the Corporations Act);
(b)a negotiable instrument (within the ordinary meaning of that term);
(c)a unit or other interest in a trust or partnership; and
(d)a right or an option in respect of any of the above, whether issued or unissued.
Non-Transfer Collateral means any account or chattel paper which is located, or taken to be located, in Western Australia
for the purposes of the Duties Act 2008 (WA), other than trade debts.
Notice has the meaning given to that term in the Security Trust Deed.
Obligations has the meaning given to that term in the Security Trust Deed.
Permitted Lien means each Lien (as defined in the Credit Agreement) permitted by section 8.3 (Liens) of the Credit
Agreement.
Power means any right, power, discretion or remedy of the Secured Party, a Beneficiary, a Receiver or an Attorney under
any Loan Document or applicable law.
PPS Law has the meaning given to that term in the Security Trust Deed.
PPS Regulations has the meaning given to that term in the Security Trust Deed.
PPSA has the meaning given to that term in the Security Trust Deed.
Real Property means all of the Grantor's present and future estates and interests in freehold and leasehold land and in all
buildings, structures and fixtures from time to time on that land.
Receiver means a receiver or receiver and manager appointed under this document.
Records means, in relation to a person, all information relating in any way to that person's business or any transaction
entered into by the person, whether recorded electronically, magnetically or otherwise.
7
Revolving Asset means any Collateral:
(a)which is:
(i)inventory (within the ordinary meaning of that term);
(ii)a negotiable instrument (within the ordinary meaning of that term); or
(iii)money (including money withdrawn or transferred to a third party from an account of the Grantor with a bank or
other financial institution); and
(b)in relation to which no Control Event has occurred, subject to clause 4.4. Security Document has the
meaning given to that term in the Security Trust Deed. Security Interest has the meaning given to that
term in the Security Trust Deed. Security Trust has the meaning given to that term in clause 2.1.
Security Trust Deed means the document titled 'Security trust deed – AVITA Security Trust' between, amongst others, the
Secured Party, the Grantor and others dated on or about the date of this document.
Security Trustee Documents has the meaning given to that term in the Security Trust Deed.
Serial Numbered Property means personal property that may or must be described by serial number in a financing
statement under the PPSA or the PPS Regulations whether or not the Serial Numbered Property has been issued a serial
number by IP Australia.
Title Documents means each certificate, confirmation, grant, assurance, conveyance, deed and other document of title or
evidencing title to, or rights to acquire, possess, use or dispose of, any Collateral.
1.3PPSA terms incorporated
In this document, unless the context requires otherwise and except when used in the definition of 'Revolving Asset' in
clause 1.2, the following words and expressions (and grammatical variations of them) have the same meanings given to
them in the PPSA or the PPS Regulations
(as applicable): accession, ADI, advance, after-acquired property, amendment demand, attach, chattel paper,
commercial consignment, consumer property, control, documents of title, financing change statement, financing
statement, future advance, goods, inventory, investment instrument, land, negotiable instrument, personal
property, purchase money security interest, serial number and verification statement.
1.4Interpretation
(a)The provisions of clause 1.3 (Interpretation) of the Security Trust Deed are incorporated in, and apply to, this
document as if set out in full with any necessary amendments.
(b)In this document to 'grant a security interest' includes to charge, mortgage, pledge, encumber, assign by way of
security and transfer by way of security.
1.5Security Agreement, Loan Document and General Security Deed
The parties agree that this document is:
(a)a 'Security Agreement' and 'Loan Document' for the purposes of the Credit Agreement; and
(b)the 'General Security Deed' referred to in the Security Trust Deed.
2.Secured Party's limit on liability
2.1Capacity and acts
The Secured Party enters into this document only in its capacity as trustee of the trust established under the Security Trust
Deed (Security Trust) and in no other capacity. Each other party
8
acknowledges that under the terms of the Security Trust Deed, the Secured Party:
(a)holds the benefit of this document for the Beneficiaries from time to time; and
(b)is bound to act on the instructions of the Beneficiaries, and is not bound to act without instructions or where the Security
Trust Deed otherwise provides that the Secured Party is not bound to act.
2.2Duties and responsibilities limited
The Secured Party's obligations, duties and responsibilities under or in connection with this document are limited to those
expressly set out in the Security Trust Deed and this document.
2.3Benefit and survival
Clause 2 applies for the benefit of the Secured Party's officers and agents and will survive termination of this document.
3.Grant of security
3.1Security interest and charge
(a)The Grantor grants a security interest in the Collateral to the Secured Party (for the benefit of the Beneficiaries) to secure
payment and performance of the Obligations.
(b)For the purposes of section 20(2)(b) of the PPSA (but without limiting the meaning of 'Collateral' in this document), this
security interest is taken in all the Grantor's present and after-acquired property.
(c)This security interest is a transfer by way of security of Collateral consisting of accounts and chattel paper (each as
defined in the PPSA) which are not, or cease to be, Revolving Assets, other than any Non-Transfer Collateral.
(d)To the extent any Collateral is not transferred, this security interest is a charge. If for any reason it is necessary to
determine the nature of this charge, it is a floating charge over Revolving Assets and a fixed charge over all other
Collateral.
3.2Continuing security and obligations
Each Security Interest granted under this document is a continuing security until the Secured Party releases all Collateral
from the Security Interest, despite any intermediate payment, discharge, settlement, release or other matter. The Grantor's
obligations under this document continue despite any full or partial release of the Collateral and no full or partial release of
Collateral will release the Grantor from personal liability under this document until all the Obligations have in fact been
received by the Secured Party and are not liable to be disgorged.
4.Dealings with Collateral
4.1Restricted dealings
The Grantor must not do, or agree to do, any of the following except as permitted by clause 4.2 or the Credit Agreement:
(a)create or allow another interest (including without limitation any Security Interest) in any Collateral; or
(b)dispose, or part with possession, of any Collateral.
4.2Permitted dealings
The Grantor may do any of the following in the ordinary course of the Grantor's ordinary business unless it is prohibited from
doing so by another provision in a Loan Document:
(a)create or allow another interest in, or dispose or part with possession of, any Collateral which is a Revolving Asset; or
9
(b)withdraw or transfer money from an account with a bank or other financial institution.
4.3Revolving Assets
If a Control Event occurs in respect of any Collateral then automatically:
(a)that Collateral is not (and immediately ceases to be) a Revolving Asset;
(b)any floating charge over that Collateral immediately operates as a fixed charge;
(c)if the Collateral is accounts or chattel paper (and excluding any Non-Transfer Collateral), it is transferred to the Secured
Party by way of security; and
(d)the Grantor may no longer deal with the Collateral under clause 4.2.
4.4Conversion to Revolving Assets
If any Collateral is not, or ceases to be, a Revolving Asset, and becomes subject to a fixed charge or transfer under this
clause 4, the Secured Party may give the Grantor a notice stating that, from a date specified in the notice, the Collateral
specified in the notice is a Revolving Asset, or becomes subject to a floating charge or is transferred back to the Grantor.
This may occur any number of times.
4.5Inventory
Any inventory which is not, or ceases to be, a Revolving Asset is specifically appropriated to a security interest under this
document. The Grantor may not remove it without obtaining the specific and express authority of the Secured Party to do
so.
5.Priority
5.1Priority of Security Interest in Collateral
(a)The parties intend that each Security Interest created under this document:
(i)takes priority over all other Security Interests and other interests in the Collateral at any time other than any
Permitted Lien as agreed in writing by the Secured Party as having priority or as mandatorily preferred by law;
and
(ii)has the same priority in relation to all Obligations, including future advances.
(b)Nothing in this clause 5.1 restricts the Secured Party from claiming that a Security Interest granted under this document
is a purchase money security interest in respect of all or part of the Collateral.
5.2No agreement or consent to subordination, attachment or accessions
Nothing in this document may be construed as an agreement or consent by the Secured Party to:
(a)(subordination) subordinate a Security Interest created under this document in favour of any person;
(b)(security) any Security Interest other than any Permitted Lien attaching to or being created in any Collateral;
(c)(deferral of attachment) defer or postpone the date of attachment of a Security Interest created under this document
in any Collateral;
(d)(accessions to Collateral) any personal property becoming an accession to any Collateral; or
(e)(accessions to non-Collateral) any Collateral becoming an accession or affixed to any asset that is not Collateral.
5.3Contrary agreements
This clause 5 is subject to any express written agreement to the contrary between the parties, including the overriding
provisions of any subordination and/or priority agreement entered into by
10
the Secured Party in respect of any other holder of security.
6.General security provisions
6.1Security continuing and independent
(a)Each of this document, each Security Interest created under it and each other Security Document is in addition to and
enforceable independently of any other Security Interest, Guarantee or Security Document.
(b)Each of this document and, subject to any release pursuant to clause 6.3 below, each Security Interest created under it is
to remain in full force and effect (whether or not at any given time the Grantor is indebted to the Secured Party or any other
Beneficiary) until the execution by the Secured Party and delivery to the Grantor of an unconditional release of this
document and each Security Document.
6.2Collateral Security Documents
This document is collateral to each other Security Document. This document and each other Security Document will be
read and construed together so that the Secured Party may exercise any of its rights under any one or more of them
separately or concurrently or not at all, and in such order as it chooses.
6.3Release of Collateral
(a)At the request in writing of the Grantor and at the sole expense of the Grantor, the Secured Party will release the
Collateral from this document or the Security Interest created under it if:
(i)all Obligations have been irrevocably paid in full and all commitments which might give rise to Obligations have
terminated;
(ii)the Secured Party is satisfied that no amount will subsequently become an Obligation due to an
Avoidance; and
(iii)the Secured Party has not enforced the Security Interest under this document pursuant to clause 9.
(b)At the request in writing of the Grantor and at the sole expense of the Grantor, the Secured Party will release any
Collateral sold or disposed of in any transaction permitted by the Credit Agreement from this document or the Security
Interest created under it to the extent provided, and subject to the terms and conditions set forth, in section 11.9 (Collateral
and Guarantee Matters) of the Credit Agreement.
7.Representations and warranties
7.1Representations and warranties
The Grantor represents and warrants to the Secured Party (and for the benefit of the Beneficiaries), except as to matters
disclosed by it to the Secured Party and accepted by the Secured Party in writing, that:
(a)(no trust) it has not entered into this document and does not hold any of the Collateral as trustee of any trust;
(b)(details of Grantor) all information in the 'Details' section of this document is true, correct and complete as at the date of
this document;
(c)(no Real Property) as at the date of this document, it does not own any Real Property;
(d)(Serial Numbered Property):
(i)the information in Schedule 2 is, at the date of this document, true and correct and includes the details of all of
the Grantor's Serial Numbered Property which is material to the Grantor's business; and
11
(ii)the information provided as a consequence of:
(A)the Grantor's obligation under clause 8.1(c)(iii); or
(B)the Secured Party's request under clause 8.2(d)(ii),
is true and correct and includes all the details of such Serial Numbered Property necessary under the
PPSA (or any foreign law in the jurisdiction in which the property is granted which provides for the public
registration or recording of the security interest, or of a notice relating to the security interest, if possible)
to perfect the relevant Security Interest in respect of such Serial Numbered Property;
(e)(consumer property) none of its Collateral is consumer property;
(f)(ownership of Collateral) it is the sole legal owner and sole beneficial owner of the Collateral, and it will be the sole
legal owner and sole beneficial owner of any property or asset it acquires as Collateral, subject always to the interest of:
(i)any owner or lessor of any personal property in respect of which the Grantor has an interest as buyer, lessee
or bailee or which the Grantor receives as a commercial consignment; and
(ii)the secured party under any Permitted Lien; and
(g)(Security Interests) the Collateral is free from any Security Interest other than Permitted Liens.
7.2Repetition
The Grantor repeats each representation and warranty in this clause 7 with reference to the facts and circumstances at the
time when representations and warranties are repeated in the Credit Agreement.
7.3Reliance and survival
The Grantor acknowledges that:
(a)it makes the representations and warranties in this clause 7 with the intention of inducing the Secured Party to enter into
the Loan Document and the Secured Party enters into the Loan Documents on the basis of, and in full reliance on, each of
the representations and warranties; and
(b)those representations and warranties survive execution and delivery of the Loan Documents and the
provision of financial accommodation under them.
8.Undertakings
8.1General undertakings
The Grantor must:
(a)(Obligations) fully and punctually perform, satisfy, or procure the performance or satisfaction of, all of its Obligations
at the times and in the way specified in the relevant Loan Documents;
(b)(details of Grantor):
(i)without limiting any restrictions contained in the Loan Documents, not change any of its details as set out in the
'Details' section of this document without giving the Secured Party 14 days' prior written notice; and
(ii)provide to the Secured Party, on request, a certified copy of each source or source document necessary (in the
Secured Party's opinion), for the purposes of the PPS Regulations, to verify the information in the 'Details' section
of this document
(or any part of it) or to otherwise register one or more financing statements in relation to any
Security Interest in Collateral created by any Loan Document;
12
(c)(notify details of or changes relating to Collateral) notify the Secured Party promptly:
(i)on the Secured Party's request, of the present location of any Collateral;
(ii)if it acquires any Marketable Securities;
(iii)of the acquisition of any Serial Numbered Property which forms part of the Grantor's assets and is material
to the Grantor's business and, in respect of that Serial Numbered Property, all the details referred to in
Schedule 2; and
(iv)on the Secured Party's request, of the details of each purchase money security interest and each Security
Interest perfected by control in any of the Grantor's Collateral; and
(d)(no Event of Default) ensure that no Event of Default occurs.
8.2Undertakings relating to Collateral
The Grantor must (unless the Secured Party otherwise agrees):
(a)(other Security Interests) comply in all material respects with the terms of each Security Interest binding on it in respect
of the Collateral from time to time, and unless the Secured Party first consents in writing, ensure that there is no increase in
the amount secured under a Security Interest held by someone other than the Secured Party in respect of the Collateral
other than where the Security Interest is a Permitted Lien;
(b)(accessions and fixtures) not allow any Collateral to become an accession or fixture to any asset (other than land) that is
not Collateral (or otherwise subject to a Security Interest in favour of the Secured Party) or to be affixed to any land (other
than any freehold interest in land in respect of which the Secured Party has a first-ranking registered mortgage), except in
the ordinary course of, and for the purpose of carrying on, the Grantor's ordinary business;
(c)(location of Collateral) not move (or allow to be moved) any Collateral situated in Australia as at the date of
this document outside Australia, except;
(i)in the ordinary course of, and for the purpose of carrying on, the Grantor's ordinary business; or
(ii)where in the Secured Party's opinion, the Collateral remains subject to a satisfactory (including in terms of
priority ranking) Security Interest in favour of the Secured Party;
(d)(Serial Numbered Property):
(i)not change any serial number in respect of any Serial Numbered Property;
(ii)if, at the time this document is signed by the Grantor, or if the Secured Party so requests, at the time of that
request, the Collateral includes any Serial Numbered Property, complete Schedule 2 and provide it to the
Secured Party;
(e)(Title Documents) unless the Secured Party agrees otherwise in writing, deposit with the Secured Party all Title
Documents relating to the Grantor's interests in the Collateral as soon as they are available to the Grantor or its agents;
(f)(delivery of Collateral) without limiting clause 8.2(e), on request by the Secured Party (acting reasonably), deliver to the
Secured Party, or ensure the Secured Party has possession of all chattel paper, negotiable instruments, Title Documents
and all other documents of title to the Collateral where possession of that Collateral by a third party could have the result that
the interest of that third party in that Collateral would defeat or have priority over the Security Interest of the Secured Party
(except to the extent that such documents or evidence of title are in the possession of the holder of a Permitted Lien for the
purpose of giving effect to that Permitted Lien);
(g)(income) if the Secured Party directs after an Event of Default has occurred and is continuing, ensure that rent and
other income from the Collateral is paid to the Secured Party (or that the Grantor pays over such amounts to the Secured
Party), to be applied in accordance with clause 14.2;
13
(h)(access and inspection) ensure that the Collateral and the Grantor's Records relating to the Collateral are available for
inspection (and in the case of Records, for copying) by the Secured Party and persons authorised by the Secured Party:
(i)during business hours on giving reasonable notice; and
(ii) at any time without prior notice while an Event of Default is continuing or while an event or circumstance is
continuing that the Secured Party believes (acting reasonably) exposes a substantial part of the
Collateral to risk of loss, damage or material reduction in value,
and in each case the Grantor must assist with each inspection (including obtaining any necessary consents or
permits of other persons) and ensure that its employees and officers do the same;
(i)(condition and protection) keep all Collateral in good working order and condition and protected from loss, theft and
damage;
(j)(maintain value) not do, allow or omit anything which is likely to lower the value of the Collateral unless permitted by
the Credit Agreement; and
(k)(trademarks) as soon as possible and in any event within 20 Business Days of the date of this document, lodge an
application with the World Intellectual Property Organization and/or IP Australia (as applicable) for the recorded owner to be
updated to "AVITA Medical Pty Limited" for each of the following Australian trademarks:
(i)IR 1258199 / AU 1710701;
(ii)IR 1265045 / AU 1722240;
(iii)AU 1722242;
(iv)AU 1722241; and
(v)IR 1284000 / AU 1747552.
8.3Collection Account
If the Secured Party requests at any time after an Event of Default has occurred and while it is continuing, the Grantor must:
(a)open and maintain an account designated as 'Collection Account' with an ADI at a branch approved by the Secured
Party;
(b)sign and do everything necessary (including give notice to the ADI and execute all documents required by the ADI and
the Secured Party) so that the Secured Party's nominated Authorised Representatives are signatories to the Collection
Account and no withdrawal or fund transfer can be made from the account without the signature of at least two of those
Authorised Representatives;
(c)give a notice substantially in the form of Schedule 1 to the ADI with whom the account is held, promptly on being required
to do so, and use its best endeavours to procure that the ADI provides the acknowledgment contemplated in the notice;
(d)ensure that any money withdrawn from the Collection Account in breach of this document or any other Loan Document is
kept separate from any other money and is held in trust for the Secured Party; and
(e)not close or, at any time after an Event of Default has occurred and is continuing, make withdrawals from or transfer
funds from the Collection Account, without the Secured Party's prior written consent or otherwise operate the Collection
Account except as expressly contemplated in the Loan Documents.
The Grantor agrees that the Secured Party:
(f)is not responsible for the Grantor's performance of its obligations in relation to the Collection Account; and
(g)has no duties in relation to the Collection Account except as specified in a Loan
14
Document, and will not be liable for any error of judgment or any mistake of fact or law, except to the extent of its own
gross negligence, wilful default or fraud.
8.4Collection and deposit of proceeds
(a)If the Secured Party requests at any time after an Event of Default has occurred and while it is continuing, the Grantor
must until the Secured Party otherwise directs, ensure the
prompt collection (as agent for the Secured Party) and immediate deposit directly into the Collection Account, of all
proceeds, money and other amounts on account or in respect of:
(i)any book debt or other debt due to the Grantor (whether or not received by it);
(ii)any amount payable to the Grantor under an Investment Document;
(iii)any insurance (other than workers compensation or public liability insurance proceeds payable to another
person entitled to compensation) where the Secured Party is not the loss payee; and
(iv)the disposal of any Collateral.
(b)If the Secured Party notifies the Grantor at any time that the Secured Party intends to collect the amounts referred
to in clause 8.4(a), the Grantor agrees that:
(i)the Secured Party will collect those amounts instead of the Grantor and the Grantor is prohibited from
doing so;
(ii)the Secured Party may notify relevant persons of the Secured Party's interest in those amounts; and
(iii)the Grantor must use its best endeavours to assist the Secured Party to collect those amounts (including but
not limited to signing and doing anything desirable, in the Secured Party's reasonable opinion, for that purpose).
8.5Further assurances
The Grantor must do (and must procure that anyone else who has an interest in the Collateral or who claims under or in
trust for the Grantor does) whatever the Secured Party reasonably requires to:
(a)better secure the Collateral for payment and performance or satisfaction of the Obligations, and to enable the better
exercise of any Power (including the granting of further specific security in the form required by the Secured Party and
depositing with the Secured Party documents or evidence of titles and transfers in relation to investment instruments); and
(b)perfect, preserve, maintain, protect, or otherwise give full effect to the Collateral, this document or each Security
Interest intended to be created under this document, and the priority of that Security Interest required by the Secured
Party,
including:
(c)anything the Secured Party requires in order for it to:
(i)register and maintain (including renew before expiry) one or more financing statements in relation to any
Security Interest in Collateral created by any Loan Document;
(ii)remove any financing statement which is registered against the Grantor or any caveat which is lodged against
land which is Collateral in relation to any Security Interest which is not a Permitted Lien; or
(iii)obtain possession or control of any Collateral for the purpose of perfecting the Secured Party's Security
Interest in that Collateral by possession or control;
(d)providing details of the Collateral;
(e)procuring that any other person holding a Security Interest in all or any part of the Collateral provides to the
Secured Party such information in relation to that Security Interest as the Secured Party may reasonably request;
15
(f)granting an all-obligations mortgage in the form required by the Secured Party over such of the Grantor's interests in any
Real Property which forms part of the Collateral as the Secured Party may require, and delivering to the Secured Party any
document, and doing any other thing, which the Secured Party requires in order to register any such mortgage;
(g)perfecting or improving the Grantor's title to, or other right or interest in, all or any part of the Collateral;
(h)facilitating the exercise of any right by the Secured Party or any Receiver or Attorney at any time or the realisation of the
Collateral following the occurrence of an Event of Default which is continuing, including the exercise of all rights of
inspection, requesting all Records and taking all necessary copies, which the Grantor is entitled to exercise, request or take;
(i)paying any Taxes on this document;
(j)executing and delivering to the Secured Party transfer forms in relation to any of the Collateral, undated and blank
as to transferee and consideration; and
(k)otherwise enabling the Secured Party to obtain the full benefit of the provisions of any Loan Document.
9.Grantor liability and exclusion of rights
9.1Indemnity
The Grantor indemnifies the Secured Party and each other Beneficiary against, and must pay to the Secured Party on
demand amounts equal to, any Loss (including loss of profit) arising as a result or in connection with:
(a)the Grantor or a Loan Party failing to observe or perform its Obligations on time; or
(b)an Insolvency Event in relation to the Grantor,
for any reason and whether or not the Grantor or a Beneficiary knew or ought to have known anything about these matters.
9.2Principal and independent obligation
Subject to clause 6.2, this document comprises principal and independent obligations of the Grantor and is not ancillary or
collateral to, or affected by, any other obligation, Security Interest or Guarantee.
9.3Grantor's liabilities not affected
The Grantor's liabilities under this document are not affected by any act, omission or other thing which would reduce or
discharge those liabilities, including:
(a)a Beneficiary granting time or any other indulgence or concession to a Loan Party or any other person;
(b)a Beneficiary increasing the amount of, opening further accounts in connection with or otherwise varying or replacing the
type or terms of, financial accommodation provided to a Loan Party or any other person;
(c)any transaction or agreement, or variation, novation or assignment of a transaction or agreement (including any Loan
Document), between a Beneficiary and a Loan Party or any other person;
(d)an Insolvency Event in relation to a Loan Party or any other person, or a Beneficiary becoming a party to or bound
by any Liquidation;
(e)any judgment, proceedings or order being obtained or made against a Loan Party or any other person;
(f)an obligation of a Loan Party or any other person or any provision of a Loan Document
16
being void, voidable, unenforceable, defective, released, waived, impaired, novated, enforced or impossible or illegal to
perform;
(g)the whole or partial discharge or release of, or the granting of, a Security Document;
(h)any Obligations not being recoverable or the liability of a Loan Party or any other person to a Beneficiary ceasing
(including as a result of giving a release or discharge or by law);
(i)the failure of a Loan Party or any other person to execute any Loan Document, properly or at all;
(j)the Grantor not being a party to a Loan Document (such as a Loan Document solely between the Secured Party
and a Loan Party);
(k)a Beneficiary exercising or not exercising its rights (including any right to elect to terminate a contract) under a Loan
Document or at law against a Loan Party or any other person;
(l)any default, misrepresentation, negligence, breach of contract, misconduct, acquiescence, delay, waiver, mistake, failure to
give notice or other action or inaction of any kind (whether or not prejudicial to the Grantor) by a Beneficiary or any other
person;
(m)any change to, or in the membership of, any partnership, joint venture or association; or
(n)any Collateral being destroyed, forfeited, extinguished, surrendered or resumed,
whether or not the Grantor, a Loan Party, a Beneficiary or any other person is aware of it or consents to it and despite any
legal rule to the contrary.
9.4Exclusion of subrogation and other rights
Until there are no Obligations, and each Beneficiary is satisfied (acting reasonably) that it will not have to repay any money
received by it, the Grantor must not (either directly or indirectly) without the Secured Party's prior written consent:
(a)claim, exercise or attempt to exercise a right of set-off or counterclaim or any other right or raise any defence which might
reduce or discharge the Grantor's liability under this document;
(b)claim or exercise a right of subrogation or contribution or otherwise claim the benefit of:
(i)a Security Document or Guarantee relating to the Obligations; or
(ii)any Security Interest or Guarantee which would rank in priority or preference to a Security Document or
Guarantee relating to the Obligations,
and any money the Grantor receives in breach of this clause 9.4(b) will be held on trust for each Beneficiary and
must be paid promptly to a Beneficiary for the account of each Beneficiary; or
(c)unless expressly permitted in a Loan Document or each Beneficiary has given a direction to do so (in which case it must
do so in accordance with the direction as trustee for each Beneficiary):
(i)prove, claim or vote in, or receive the benefit of a distribution, dividend or payment arising out of, the Liquidation
of a Loan Party; or
(ii)demand, or accept payment of, any money owed to the Grantor by a Loan Party,
and any such money it receives will be held on trust each Beneficiary and must be paid promptly to a Beneficiary for
the account of each Beneficiary.
9.5Prove in Liquidation
(a)The Grantor, for valuable consideration, irrevocably appoints each of the Secured Party and its Authorised
Representatives separately as its attorney to prove in the Liquidation of a Loan Party for all money that the Grantor can
claim against that person on any account whatever. The terms of appointment are that the attorney:
17
(i)must pay to the Grantor dividends it receives in excess of the Obligations, without interest, and any other
dividends must be paid to the Secured Party; and
(ii)may delegate its powers (including the power to delegate) to any person for any period and may revoke the
delegation.
(b)The Grantor agrees to ratify anything done by an attorney under clause 9.5(a). The power of attorney created under
clause 9.5(a) is granted to secure the Grantor's performance of its obligations under each Loan Document to which it is
expressed to be a party.
9.6Variations and replacements
The Grantor acknowledges that the Loan Documents may be varied or replaced from time to time. The Grantor confirms that
the Obligations includes any amount payable under any Loan
Document which is relevant to the Obligations as varied or replaced. The Grantor confirms that this applies regardless of:
(a)how a Loan Document is varied or replaced;
(b)the reasons for the variation or replacement; and
(c)whether the Obligations decreases or increases or a Loan Document is otherwise more onerous as a result of the
variation or replacement.
10.Consequences of Event of Default
10.1Consequences of Event of Default
If an Event of Default has occurred and is continuing, in addition to all other rights and remedies granted to the Secured Party:
(a)each Security Interest created under this document will become immediately enforceable; and
(b)the floating charge created under this document will become a fixed charge, to the extent that it is not already fixed, and
all Collateral that was subject to the floating charge is not (or immediately ceases to be) a Revolving Asset.
10.2Secured Party's general powers
While an Event of Default is continuing, regardless of whether the Secured Party has appointed a Receiver, the Secured
Party may, without demand or notice to anyone (unless notice is required as described in clause 19.1), do all things that a
secured party with a Security Interest in, or a mortgagee or an absolute owner of, the Collateral can do, and exercise all
rights, powers and remedies:
(a)of a secured party with a Security Interest in, or a mortgagee or an absolute owner of, the Collateral;
(b)given to a Receiver under the Corporations Act; and
(c)specified in clause 10.4.
10.3Secured Party's PPSA powers – sections 123 and 128
Without limiting any other provision of this document, any Security Interest or any other Loan Document, the Grantor
agrees that, at any time while an Event of Default is continuing, the Secured Party may:
(a)seize any Collateral; and/or
(b)dispose of any Collateral in such manner and generally on such terms and conditions as the Secured Party thinks
desirable,
and otherwise do anything that the Grantor could do in relation to the Collateral.
18
10.4Secured Party's specific powers
While an Event of Default is continuing, the Secured Party may do any or all of the following in connection with its Powers,
whether in its or the Grantor's name or otherwise and whether or not it has possession of the Collateral:
(a)(recover, possess and control) access, recover, manage, take or give up possession or 'control' (within the ordinary
meaning of that term and as defined in the PPSA) of, and surrender or release, any Collateral;
(b)(receive income and profits) receive the income and profits of the Collateral;
(c)(carry on business) carry on, promote, restructure or participate in the Grantor's business in relation to the
Collateral, and access the land or premises of that business;
(d)(insurance) insure the Collateral and settle and compromise insurance claims;
(e)(improve or invest) maintain, invest, deposit, improve or alter the Collateral to improve its value or saleability or to obtain
income or returns from it (including to acquire, take on or Lease any asset as part of the Collateral or build, rebuild, pull down
or alter a structure or improvement on Real Property);
(f)(sell, assign or exchange) sell, assign or help sell all or any Collateral to any person or exchange it for any other
property or rights, on terms the Secured Party thinks fit, with or without other property;
(g)(deposited documents) complete and deal with any document deposited with the Secured Party relating to any
Collateral, including any transfer in blank;
(h)(options, Lease, rights) grant, acquire, renew, vary, accept the surrender of or terminate an option, Lease or other right
over the Collateral on the terms it thinks fit, and with or without any other property;
(i)(hive off) promote the formation of any company to acquire any Collateral or assume obligations of the Grantor or
both;
(j)(accounts) operate bank accounts forming part of the Collateral and open and operate further bank accounts in the
Grantor's name and to the Grantor's exclusion;
(k)(contracts, instruments and rights) perform or observe the Grantor's obligations or enforce or exercise the Grantor's
rights, powers, discretions or remedies (or refrain from doing so) under:
(i)a contract, instrument, arrangement or Marketable Security forming part of the Collateral (including voting
and proxy rights); or
(ii)a Loan Document (including to cure an Event of Default) or other document entered into by the Secured
Party or a Receiver in exercise of a Power,
and vary, terminate or rescind any of them or novate or otherwise transfer to any person the Grantor's obligations
under any of them;
(l)(make calls) make calls on the members of the Grantor for uncalled capital forming part of the Collateral;
(m)(Liquidation) initiate and participate in any Liquidation of any person (including voting at meetings and appointing
proxies);
(n)(proceedings) commence, prosecute, defend, discontinue, compromise, submit to arbitration and settle
proceedings in connection with this document or the Collateral, whether in or before a Governmental Authority;
(o)(raise money) obtain financial accommodation (including from a Beneficiary or its associate) and give Guarantees, in
each case with or without granting a Security Interest over the Collateral and regardless of priority ranking;
(p)(receipts) give receipts for money and other property it receives;
(q)(employ and delegate) employ and discharge staff, professional advisers,
19
consultants, contractors, agents and auctioneers for the purposes of this document, and at the remuneration that the
Secured Party thinks fit, and to delegate to any person any of its Powers (including this right of delegation);
(r)(Authorisations) apply for any Authorisation which is necessary or desirable in connection with the exercise
of a Power; and
(s)(incidental power) do anything expedient or incidental to exercise any of its Powers, without limiting those Powers.
10.5Discharge or acquire prior Security Interest
(a)While an Event of Default is continuing, the Secured Party may do any one or more of the following:
(i)purchase a debt or liability secured by a prior Security Interest (including a debt secured by a Permitted
Lien);
(ii)pay the amount required to discharge or satisfy that debt or liability; and
(iii)take a transfer or assignment of that Security Interest and any Guarantee, document or right ancillary
or collateral to it.
(b)If the Secured Party exercises its rights under clause 10.5(a):
(i)the Grantor is indebted to the Secured Party for the same amount paid by the Secured Party or the amount of the
debt or liability acquired (whichever is higher) and that amount is immediately payable to the Secured Party and
forms part of the Obligations;
(ii)the Secured Party may rely on a written notice from the holder of a prior Security Interest (Prior Secured
Party), or on an ancillary or collateral document, as to the amount and property secured by that prior Security
Interest;
(iii)the Prior Secured Party need not enquire whether any amount is owing under a Loan Document; and
(iv)the Grantor irrevocably directs any such Prior Secured Party to give the Secured Party any information it
requires in connection with the prior Security Interest.
10.6Co-operation in exercise of power of sale
If the Secured Party or a Receiver wishes to exercise a right to sell any Collateral, the Grantor must do or cause to be done
all things necessary to enable an expeditious sale and transfer to the purchaser for the value as estimated by the Secured
Party, in the manner and on terms the Secured Party thinks fit.
10.7Appoint Receivers
(a)While an Event of Default is continuing, the Secured Party may do any one or more of the following:
(i)appoint one or more persons (severally, unless specified otherwise in the instrument of appointment) to be a
receiver or receiver and manager of all or any of the Collateral;
(ii)fix and vary the Receiver's remuneration at an amount agreed between the Secured Party and the
Receiver from time to time;
(iii)terminate a receivership or remove or replace a Receiver; and
(iv)appoint an additional Receiver.
(b)The Secured Party may do any of these things even if a resolution or order for the Grantor's Liquidation has
been passed or made.
(c)Each party agrees that if a Receiver is appointed under this document on the basis of an Event of Default which
subsequently ceases to continue, the Event of Default is taken to
20
continue for the purposes of the Receiver's appointment under this document.
10.8Agency of Receiver
To the extent permitted by law, a Receiver is the agent of the Grantor and the Grantor alone is responsible for the
Receiver's costs, expenses, remuneration, acts, omissions and defaults. The Secured Party is not liable to the Grantor for
the acts or omissions of the Receiver. To the extent that a Receiver is not, or ceases to be, the agent of the Grantor as a
result of a resolution or order for the Grantor's Liquidation or by operation of law, the Receiver immediately becomes the
agent of the Secured Party.
10.9Receiver's powers
(a)Unless the terms of a Receiver's appointment say otherwise, the Receiver has the following rights and powers
over the Collateral which the Receiver is appointed to:
(i)deal with all the rights, powers, discretions or remedies given by law to mortgagees in
possession, receivers or receivers and managers;
(ii)deal with all of the Secured Party's Powers under this document and at law (other than the power to appoint
receivers or receivers and managers); and
(iii)obtain financial accommodation from a Beneficiary and give Guarantees on terms that the Receiver considers
expedient in connection with the Collateral, in each case whether alone or together with any other person, and with
or without granting a Security Interest (regardless of priority ranking) over the Collateral.
(b)The Receiver may exercise the rights and powers under clause 10.9(a) in the name of the Grantor or otherwise.
10.10Appointment of Attorney
(a)The Grantor for valuable consideration, to secure the performance of the Obligations, irrevocably appoints the Secured
Party, each Authorised Representative of the Secured Party and each Receiver separately as its attorney to do any or all
of the following on the Grantor's behalf and in the Grantor's or the attorney's name while an Event of Default is continuing:
(i)prove in the Liquidation of a Loan Party;
(ii)anything which the Grantor must do under a Loan Document or under law in connection with a Loan
Document;
(iii)anything which the Attorney considers necessary or expedient to give effect to a Power or exercise of a
Power, or to perfect any Loan Document, including by signing any document for that purpose; and
(iv)anything which an Attorney is expressly empowered to do under a Loan Document on the Grantor's behalf.
(b)The Grantor agrees to ratify anything done by its Attorney pursuant to the power of attorney granted by the Grantor under
clause 10.10(a). An Attorney may delegate its powers (including the power to delegate) to any person for any period and
may revoke the delegation.
11.Costs and expenses
11.1Costs and expenses
The Grantor agrees to pay all costs and expenses set out in section 10.3 (Payment of Costs and Expenses) and Section 10.4
(Indemnification) of the Credit Agreement as if each reference to:
(a)'Borrower' were to the Grantor;
(b)'Administrative Agent' and 'Lender' includes a reference to the Secured Party
21
(including, for the avoidance of doubt, so that the Secured Party would be an 'Indemnified Party' under the Credit
Agreement);
(c)'Collateral' includes any Collateral defined under this document; and
(d)'this Agreement' includes this document.
11.2PPSA expenses
Without limiting clause 11.1 above, the Grantor must pay or reimburse on demand by the Secured Party all reasonable
costs and expenses of a Beneficiary, a Receiver and an Attorney (and any of their respective officers, employees and
agents) in connection with:
(a)the negotiation, preparation, execution, delivery, registration and completion of, and payment of Taxes on, the
Loan Documents;
(b)preparing, registering and maintaining any financing statement or financing change statement (including
pursuant to section 167 of the PPSA); and
(c)complying with any amendment demand in accordance with Part 5.6 of the PPSA.
This includes legal costs and expenses (on a full indemnity basis) and any professional consultant's fees.
11.3Enforcement and other expenses
Without limiting clause 11.1 above, the Grantor must pay or reimburse on demand by the Secured Party all costs and
expenses of the a Beneficiary, a Receiver and an Attorney (and any of their respective officers, employees and agents) in
connection with:
(a)enforcing a Loan Document, or exercising, enforcing or protecting a Power, or attempting to do so;
(b)obtaining or receiving payment of, and distributing, any Obligations;
(c)a breach of, obtaining or procuring performance or satisfaction of the Obligations;
(d)a Default or Event of Default;
(e)any Governmental Authority enquiry concerning the Grantor or any of its Affiliates, or the involvement of a Beneficiary
in the Loan Documents; and
(f)maintaining, preserving or protecting the Collateral.
This includes any legal costs and expenses (on a full indemnity basis) and any professional consultant's fees.
11.4Costs and expenses of Grantor
The Grantor will pay its own costs and expenses in connection with this document.
12.Interest on overdue amounts
12.1Accrual and calculation
Unless another Loan Document already obliges the Grantor to pay interest on an unpaid amount that is due and payable
by it under a Loan Document, interest on that overdue amount (including on unpaid interest under this clause 12) will
accrue daily:
(a)from and including the due date (or, for an amount payable by reimbursement or indemnity, any earlier date the
amount was incurred), up to but excluding the date of actual payment; and
(b)subject to clause 12.2, at the Default Rate.
12.2Judgment or order
If the Grantor's liability under a Loan Document is the subject of a judgment or order:
22
(a)its obligation to pay interest under clause 12.1 is separate from, and continues despite, the judgment or order; and
(b)the interest accrues both before and after judgment at the higher of the Default Rate and the rate payable under that
judgment or order.
12.3Payment
The Grantor must pay to the Secured Party accrued interest under this clause 12 on the last Business Day of each calendar
month and on demand.
13.Payments
All payments by the Grantor under this document must be made:
(a)in accordance with the other Loan Documents; and
(b)if no date for payment is specified in another Loan Document, on demand by the Secured Party.
14.Receipt of money and application
14.1Credit of received payment
The Grantor is only credited with a payment of the Obligations from the date of actual receipt in cleared funds by the relevant
Beneficiary (whether received from the Grantor or a Receiver).
14.2Applying or appropriating money received
(a)Subject to the Security Trust Deed, the Secured Party may apply or appropriate all money received under this document
(even if insufficient to discharge all of the Grantor obligations at that time) to reduce the Obligations in the order, and to
satisfy any part of the Obligations, as the Secured Party sees fit (including as between principal, interest and other amounts
owing to the Secured Party and including so as to enable the Secured Party to preserve any purchase money security
interest) provided that no application or appropriation may be made by the Secured Party where the relevant application or
appropriation would not be permitted to be made by the Administrative Agent under any Loan Document if the money had
been received by the Administrative Agent.
(b)An application or appropriation by the Secured Party will override any appropriation made by the Grantor unless the
Grantor is entitled to make the appropriation under the terms of any Loan Document. For the purposes of section 14(6)(a) of
the PPSA, this clause 14.2 constitutes the method of payment application agreed by the parties.
14.3Suspense account
(a)The Secured Party may credit money received in or towards satisfaction of the Obligations (including dividends received
in any Liquidation) to a suspense account. The Secured Party may keep the money in that account for as long as, and at
whatever interest rate, the Secured Party thinks fit. The Secured Party may apply the money (including interest) to reduce
the Obligations whenever the Secured Party thinks fit.
(b)If the Obligations have been fully and finally paid or discharged and the Secured Party is satisfied that such payment or
discharge is not liable to be set aside, avoided or reversed, then the balance standing to the credit of the suspense account
and any accrued interest must be paid to or for the account of the Grantor and the Secured Party will not have any further
liability in relation to it.
14.4Surplus proceeds
If the Secured Party, a Receiver or an Attorney (as the case may be) holds any surplus money after:
(a)payment of the Obligations in full and the application of proceeds in accordance with clause 14.2; and
23
(b)the making of all payments that the Secured Party, Receiver or Attorney has the right or obligation to make under the
Loan Documents or at law,
then:
(c)no trust arises, or interest accrues, over that surplus money; and
(d)each Beneficiary, Receiver or Attorney may pay that money to an account in the name of the Grantor with any bank, in
which case each Beneficiary, Receiver or Attorney will have no further liability in relation to that money.
14.5Payments after notice of subsequent Security Interests
(a)Subject to clause 14.5(b), effective from the time at which the Secured Party receives actual or constructive notice of a
subsequent Security Interest in respect of any Collateral to which the PPSA does not apply:
(i)the Secured Party and the Grantor agree that for all purposes there is opened a new account in the name of
the Grantor in the Secured Party's books;
(ii)all payments made by the Grantor to the Secured Party and all accommodation and advances made by the
Secured Party to the Grantor, are to be credited or debited (as applicable) to that new account; and
(iii)all payments credited to the new account must be applied first towards reduction of any debit balance in the
new account, and then towards reduction of any other Obligations.
(b)Clause 14.5(a) is subject to the Secured Party's general rights of appropriation under clauses 14.1 and 14.2.
15.Statutory powers and notices
15.1Exclusion of PPSA provisions
To the extent the law permits:
(a)for the purposes of sections 115(1) and 115(7) of the PPSA:
(i)the Secured Party need not comply with sections 95, 118, 121(4), 125, 130, 132(3)(d) or 132(4); and
(ii)sections 142 and 143 are excluded;
(b)for the purposes of section 115(7) of the PPSA, the Secured Party need not comply with sections 132 and 137(3);
(c)if the PPSA is amended after the date of this document to permit the Grantor and the Secured Party to agree to not
comply with or to exclude other provisions of the PPSA, the Secured Party may notify the Grantor that any of these
provisions is excluded, or that the Secured Party need not comply with any of these provisions, as notified to the Grantor by
the Secured Party; and
(d)the Grantor agrees not to exercise its rights to make any request of the Secured Party under section 275 of the PPSA,
to authorise the disclosure of any information under that section or to waive any duty of confidence that would otherwise
permit non‐disclosure under that section.
15.2Exercise of rights by Secured Party
If the Secured Party exercises a Power in connection with this document, that exercise is taken not to be an exercise of a
right, power or remedy under the PPSA unless the Secured Party states otherwise at the time of exercise. However, this
clause does not apply to a Power which can only be exercised under the PPSA.
15.3No notice required unless mandatory
24
(a)To the extent the law permits, the Grantor waives:
(i)its rights to receive any notice that is required by:
(A)any provision of the PPSA (including a notice of a verification statement); or
(B)any other law before a secured party or Receiver exercises a Power; and
(ii)any time period that must otherwise lapse under any law before a secured party or Receiver exercises a Power.
(b)If the law which requires a period of notice or a lapse of time cannot be excluded, but the law provides that the period of
notice or lapse of time may be agreed, that period or lapse is one day or the minimum period the law allows to be agreed
(whichever is the longer).
(c)However, nothing in this clause prohibits the Secured Party or any Receiver from giving a notice under the PPSA or any
other law.
15.4Appointment of nominee for registration
For the purposes of section 153 of the PPSA, the Secured Party appoints the Grantor as its nominee, and authorises the
Grantor to act on its behalf, in connection with a registration under the PPSA of any security interest in favour of the
Grantor which is:
(a)evidenced or created by chattel paper;
(b)perfected by registration under the PPSA; and
(c)transferred to the Secured Party under this document.
This authority ceases when the registration is transferred to the Secured Party.
15.5Other rights
Where the Secured Party has Powers in addition to, or existing separately from, those in Chapter 4 of the PPSA, those
Powers will continue to apply and are not limited or excluded (or otherwise adversely affected) by the PPSA. This is
despite clause 15.1 or any other provision of a Loan Document.
16.Assignment
16.1By Grantor
The Grantor may not assign, transfer or otherwise deal with its rights, interests or obligations under this document without
the Secured Party's prior written consent.
16.2Change in security trustee
The Grantor agrees that:
(a)the Secured Party may assign its rights and novate or otherwise transfer its obligations under this document to any
replacement or successor security trustee that is appointed in accordance with the Security Trust Deed (New Security
Trustee); and
(b)if requested, it will enter in to a novation deed with the Secured Party and any New Security Trustee in a form acceptable
to the Secured Party and the New Security Trustee.
16.3Assistance
The Grantor agrees to do or execute anything reasonably requested by the Secured Party to effect an assignment, transfer,
novation or other dealing under this clause 16.
17.Notices, demands and communications
Clause 14 (Notices, demands and communications) of the Security Trust Deed applies to the
25
giving of any notice, demand, consent, approval or communication in connection with this document.
18.Protection of third parties
18.1Receipt of Secured Party, Receiver
A receipt given by a Beneficiary (or its Authorised Representative), a Receiver or an Attorney for any money payable to it,
or any asset receivable by it, relieves the person paying that money or delivering the asset from all liability to enquire as to
the dealing with, or application of, that money or asset.
18.2Third parties need not enquire
A person dealing with a Beneficiary, a Receiver or an Attorney is protected from any impropriety or irregularity of that
dealing, and need not enquire whether:
(a)any of them has been properly appointed or has executed or registered an instrument or exercised a Power properly or
with authority; or
(b)any Obligation has become due, a Loan Document is enforceable or a default or event of default (however described)
has occurred under a Loan Document.
19.Protection of Secured Party, Receiver and Attorney
19.1Notice, demand or lapse of time required by law
If a notice, demand or lapse of time is required by law before a Beneficiary can exercise a Power, then for the purposes of this
document:
(a)that notice, demand or lapse of time is dispensed with to the extent allowed by that law; or
(b)if not allowed to be dispensed with, but the period of notice, demand or lapse of time is allowed by that law to be
shortened or fixed, it is shortened and fixed to one day.
19.2Secured Party and Receiver not restricted
A Beneficiary or a Receiver need not:
(a)exercise a Power, give a consent or make a decision under this document unless a Loan Document expressly provides
otherwise; or
(b)resort to a Security Document or Power before resorting to any other of them.
19.3Secured Party, Receiver and Attorney not mortgagee in possession or liable
To the extent permitted by law, a Beneficiary, a Receiver and any Attorney will:
(a)not be, nor account or be liable as, mortgagee in possession due to exercise of a Power; or
(b)not be liable to anyone for any Loss in relation to an exercise or attempted exercise of a Power, or a failure or delay in
exercising a Power, except for its own gross negligence, fraud or wilful default.
19.4Secured Party may set off
At any time while an Event of Default is continuing, the Secured Party may, without any demand or notice, set off and apply
indebtedness it owes to the Grantor (whatever the currency) against any money owing to it by the Grantor under any
Security Trustee Document, whether or not the amount owed by the Secured Party or the Grantor is immediately payable or
is owed alone or with any other person. The Grantor irrevocably authorises the Secured Party to do anything necessary
(including to sign any document and effect appropriate currency exchanges) for that purpose.
26
19.5Reinstating avoided transaction
(a)The Grantor agrees that if a payment or other transaction relating to the Obligations is void, voidable, unenforceable or
defective for any reason or a related claim is upheld, conceded or settled (each an Avoidance), then even though the
Secured Party knew or should have known of the Avoidance:
(i)each Power and the Grantor's liability under each Loan Document will be what it would have been, and will
continue, as if the payment or transaction the subject of the Avoidance had not occurred; and
(ii)the Grantor will immediately execute and do anything required by the Secured Party to restore the Secured
Party to its position immediately before the Avoidance (including reinstating any Loan Document).
(b)This clause 19.5 survives any termination or full or partial discharge or release of any Loan Document.
19.6Authorised Representatives and communications
The Grantor irrevocably authorises the Beneficiaries to rely on a certificate by any person purporting to be its director or
company secretary as to the identity and signatures of its Authorised Representatives, and to rely on any Notice or other
document contemplated by any Loan Document which bears the purported signature (whether given by facsimile or
otherwise) of its Authorised Representative. The Grantor warrants that those persons have been authorised to give notices
and communications under or in connection with the Loan Documents.
19.7Secured Party's opinion
An opinion or view of the Secured Party for the purposes of this document may be formed or held on its behalf by its
Authorised Representative, its board of directors or by any other person it authorises to act on its behalf in relation to the
Loan Documents.
20.General provisions
20.1Consideration
The Grantor acknowledges entering this document in return for the Secured Party and the other Beneficiary entering into the
Loan Documents, the transactions contemplated by those documents and other valuable consideration.
20.2Prompt performance
If a time is not specified for the performance by the Grantor of an obligation under this document, it must be performed
promptly.
20.3Performance of Grantor's obligations by Secured Party
The Secured Party may do anything which the Grantor fails to do as required by, or in accordance with, this document. This
does not limit or exclude the Secured Party's Powers in any way.
20.4Powers
Powers under the Loan Documents are cumulative and do not limit or exclude Powers under law. Full or partial exercise of
a Power does not prevent a further exercise of that or any other Power. No failure or delay in exercising a Power operates
as a waiver or representation. Unless expressly provided in a Loan Document, no Power or Loan Document merges in,
limits or excludes any other Power, Loan Document or judgment which the Secured Party or a Receiver (or anyone
claiming through it) may have or obtain.
20.5Consent and waivers
A consent or waiver by the Secured Party or a Receiver in relation to this document is effective only if in writing. If given
subject to conditions, the consent or waiver only takes effect subject to compliance with those conditions to the Secured
Party's or Receiver's satisfaction.
27
20.6Indemnities and reimbursement obligations
The Secured Party or a Receiver need not incur an expense or make a payment before enforcing an indemnity or
reimbursement obligation in a Security Trustee Document. Unless otherwise stated, each such indemnity or reimbursement
obligation is separate and independent of each other obligation of the party giving it, is absolute, irrevocable, unconditional
and payable on demand and continues despite any settlement of account, termination of any Security Trustee Document or
anything else.
20.7Notices or demands as evidence
A notice or certificate from or demand by the Secured Party stating that an Event of Default has occurred, or that a
specified sum of money is owing or payable under a Security Trustee Document or stating any other fact or determination
relevant to the rights or obligations of the
Secured Party or the Grantor under a Loan Document, is taken to be correct unless proved incorrect.
20.8Law and legislation
To the extent permitted by law:
(a)each Loan Document to which the Grantor is expressed to be a party prevails to the extent of inconsistency with
any law; and
(b)any present or future legislation operating to reduce the Grantor's obligations under a Loan Document or the
effectiveness of the Powers is excluded.
20.9Severability
A provision of this document that is illegal, invalid or unenforceable in a jurisdiction is ineffective in that jurisdiction to the
extent of the illegality, invalidity or unenforceability. This does not affect the validity or enforceability of that provision in any
other jurisdiction, nor the remainder of this document in any jurisdiction.
20.10Variation
A variation of this document must be in writing and signed by or on behalf of each party to it.
20.11Governing law – security agreement
This document is governed by the laws of New South Wales, Australia.
20.12Governing law – Security Interest
(a)Subject to paragraph (b), each Security Interest created under this document is governed by the laws of New South
Wales, Australia.
(b)Paragraph (a) does not apply to the extent that a Security Interest is created under this document in any personal
property described in section 237(2) of the PPSA, in which case the law determined by the PPSA will govern the Security
Interest in that property.
20.13Jurisdiction
Each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the courts of New South Wales,
Australia (and any court of appeal) and waives any right to object to an action being brought in those courts, including on
the basis of an inconvenient forum or those courts not having jurisdiction.
20.14Service of process
Without preventing any other mode of service, any document in an action or process may be served on any party by being
delivered to or left for that party at its address for service of Notices under this document.
20.15Acceptance of appointments
28
The Grantor acknowledges that:
(a)the Borrower has, or will, appoint the Grantor as its agent to accept service of process under or in connection with the
Specific Security Deed (Marketable Securities) (as defined in the Security Trust Deed), and the Grantor accepts the
appointment;
(b)the appointments may not be revoked without the Secured Party's consent.
20.16Counterparts
(a)This document may be executed in any number of counterparts or copies, each of which may be executed by physical
signature in wet ink or electronically (whether in whole or part). A party who has executed a counterpart of this document
may exchange it with another party (the Recipient) by:
(i)emailing a copy of the executed counterpart to the Recipient; or
(ii)utilising an electronic platform (including DocuSign) to circulate the executed counterpart,
and will be taken to have adequately identified themselves by so emailing the copy to the Recipient or utilising the
electronic platform.
(b)Each party consents to signatories and parties executing this document by electronic means and to identifying
themselves in the manner specified in this clause.
(c)Each counterpart constitutes an original (whether kept in electronic or paper form), all of which together constitute one
instrument as if the signatures (or other execution markings) on the counterparts or copies were on a single physical copy of
this document in paper form. Without limiting the foregoing, if any of the signatures or other markings on behalf of one party
are on different counterparts or copies of this document, this shall be taken to be, and have the same effect as, signatures on
the same counterpart and on a single copy of this document.
29
Schedule 1 – Notice of Security Interest (account)
Financial institution name] (you) [Financial institution address]
[Date]
Copy to: ORCO IV LLC
[secured party address]
Customer/depositor: AVITA Medical Pty Limited (we/us)
Account: [ ] (Collection Account)
We have granted a general security deed (GSD) to ORCO IV LLC (Secured Party) under which we have created a security interest in
the Collection Account. Under the terms of the GSD, we must not operate or deal with the Collection Account in any way (including
any fund transfer or withdrawal) without the Secured Party's prior written consent. Accordingly, unless you receive notice to the
contrary from the Secured Party, you are directed to:
1.deal with the Collection Account and any balance only in accordance with the Secured Party's instructions, and to not permit the
Collection Account to be operated without those instructions;
2.credit all interest and proceeds in relation to the Collection Account into the Collection Account.
Any notice or subsequent instructions given by the Secured Party under this notice must be authorised by no less than two authorised
officers. The authorised officers for the Collection Account must be properly identified using your usual procedures before you can
accept notifications or instructions from a particular authorised officer.
Notices to [Financial institution name] must be sent to: [insert address]
Facsimile: [insert facsimile] Attention:
[insert attention]
You are also directed to promptly give the Secured Party:
(a)all information requested by the Secured Party from time to time in relation to the Collection Account (whether or
not such information you may disclose to the Secured Party is deemed confidential) and any interest and proceeds
credited or paid to the Collection Account; and
(b)a copy of any notice you receive of any security interest (other than the security interest created under the GSD)
granted in the Collection Account or any proceeds from the Collection Account.
You may rely on any notice and/or instructions reasonably believed by you to be genuine and correct and in the case of a notice
and/or instruction purporting to be from the Secured Party, signed by two persons who purport to be authorised officers of the Secured
Party. We acknowledge and agree that you can rely on such notice and/or instructions and will not be held liable for acting in good
faith on the notice and/or instruction to the extent that you and your officers have not been guilty of fraud, wilful misconduct or
negligence.
You are not liable for any stamp duty that may arise out of this arrangement.
Please acknowledge receipt of this notice by signing and returning a copy of this notice. The acknowledgment will be your confirmation
for the benefit of the Secured Party that:
30
1.you will comply with the above directions and not pay money in the Collection Account to us or anyone else without the
Secured Party's consent;
2.you waive any right of set-off or combination or any security interest to the extent it would affect the Collection Account;
3.without limiting paragraph 2, you agree to, if requested by the Secured Party, subordinate in favour of the Secured Party,
any security interest in the Collection Account that you have perfected by control to the security interest created under the
GSD; and
4.you have received no notice of any prior security interest granted in the Collection Account or any proceeds from the Collection
Account.
Terms defined in the Personal Property Securities Act 2009 (Cth) have the same meaning when used in this notice.
Receipt and agreement confirmed:
Signed for and on behalf of AVITA Medical Pty Limited
31
Signed for and on behalf of [Financial institution name]
Title:
Date:
Receipt and agreement confirmed:
Signed for and on behalf of
ORCO IV LLC
Title:
Date:
32
Schedule 2 – Serial Numbered Property
Serial Numbered Property (including motor vehicle(s), aircraft, watercraft, design(s), patent(s), plant breeder's right(s) and trade mark(s))
which is material to the Grantor's business:
Terms used in this Schedule have the same meaning as in the PPSA and the PPS Regulations (as applicable).
Motor vehicles
Complete if any Serial Numbered Property consists of any motor vehicle(s):
vehicle identification number (if any)
chassis number (if any)
manufacturer's number
None as at the date of this
document
None as at the date of this
document
None as at the date of this
document
Aircraft
Complete if any Serial Numbered Property consists of any aircraft:
nationality*
registration mark*
manufacturer's
serial number
manufacturer's
name
manufacturer's model
description
None as at the date of
this document
None as at the date of
this document
None as at the date of
this document
None as at the date of
this document
None as at the date of
this document
* to be included in the case of small aircraft and to be assigned by the Chicago Convention
Watercraft
Complete if any Serial Numbered Property consists of any watercraft:
manufacturer's number*
official number (if any)
hull identification number
None as at the date of this
document
None as at the date of this
document
None as at the date of this
document
* to be included in the case of an outboard motor
Designs
Complete if any Serial Numbered Property consists of any design(s):
design number* (if any)
design application number*
None as at the date of this document
None as at the date of this document
* as issued by IP Australia
33
Patents
Complete if any Serial Numbered Property consists of any patent(s):
patent number (if any)
patent application number (if any)
Jurisdiction
9029140
AU2013202587B2
BR112014023272B1
CA2874091
EP2828378B1
Pending
ES2864772T3
EP2828378B1
EP2828378B1
Pending
EP2828378B1
Pending
Pending
Pending
AU2013205148B2
Pending
CN105189729B
EP2970856B1
ES2759063T3
EP2970856B1
EP2970856B1
HK1219291
EP2970856B1
JP6479757B2
US10626358B2
Pending
Pending
Pending
US11124752B2
Pending
34
13/036,569
2013202587
BR1120140232725
CA2874091
EP2013764726
CN201380024737
EP2013764726
EP2013764726
EP2013764726
HK15108195
EP2013764726
EP2021156318
16/592,108
16/592,117
2013205148
CA2906088
CN201480025699.5
EP2014770177
ES2014770177T
EP2014770177
EP2014770177
HK16107310
EP2014770177
JP2016-502942
14/776,038
USA
Australia
Brazil
Canada
Germany
China
Spain
France
United Kingdom
Hong Kong
Italy
European Patent Office
United States of America
United States of America
Australia
Canada
China
Germany
Spain
France
United Kingdom
Hong Kong
Italy
Japan
United States of America
CN201911343417.7
China
EP2019208169
HK42020021909
16/787,882
18/370,842
European Patent Office
Hong Kong
United States of America
United States of America
AT510548T
AU2002227802B2
AT2002709917T
AU2002227802
Austria
Australia
patent number (if any)
patent application number (if any)
Jurisdiction
BRPI0206692B1
DE60240127T2
1357922
1357922
EP1357922
EP1357922
HK1057713
EP1357922
JP5214085
EP1357922
EP1357922
EP1357922
EP1357922
AT717889
EP2343079
DE60247071T2
EP2343079
EP2343079
EP2343079
EP2343079
EP2343079
PT1357922E
EP2343079
EP2343079
DE60249971T2
EP2957288
EP2957288
EP2957288
HK16100778
EP2957288
35
BRPI0206692
DE60240127
1357922
027099175
EP2002709917
EP2002709917
4100628.6
EP2002709917
2002-562365
EP2002709917
EP2002709917
EP2002709917
EP2002709917
AT2010184235T
10184235.9
60247071-4
10184235.9
10184235.9
10184235.9
10184235.9
10184235.9
PT2002709917T
10184235.9
10184235.9
DE60249971
15159890.1
15159890.1
15159890.1
HK16100778
15159890.1
Brazil
Germany
Spain
Belgium
France
United Kingdom
Hong Kong
Italy
Japan
Netherlands
Portugal
Sweden
Turkey
Austria
Belgium
Germany
Spain
France
United Kingdom
Italy
Netherlands
Portugal
Sweden
Turkey
Germany
Spain
France
United Kingdom
Hong Kong
Italy
JP6042377
9078741
9867692
JP2014134495
13/223,577
14/645,933
Japan
United States of America
United States of America
patent number (if any)
patent application number (if any)
Jurisdiction
10729536
10729536
Plant breeder's rights
15/838,429
16/436,693
United States of America
United States of America
Complete if any Serial Numbered Property consists of any plant breeder's right(s):
plant breeder's right number* (if any)
plant breeder's right application number*
None as at the date of this document
None as at the date of this document
* as issued by IP Australia
Trade marks
Complete if any Serial Numbered Property consists of any trade mark(s):
trade mark number (if any)
trade mark application number
Jurisdiction
2103006
1710701
1722240
1722242
(Now a National Registration, Transformed from
IR 1265047)
1722241
(Now a National Registration, Transformed from
IR 1265046)
1747552
1258199
1265045
1284165
1419798
1419800
1284000
909371300
909371407
36
2575728
1258199
(IR number)
1265045
(IR number)
1284000
(IR number)
1258199
1265045
1284165
1265047
1265046
1284000
909371300
909371407
Argentina
Australia
Australia
Australia
Australia
Australia
Benelux
Benelux
Benelux
Benelux
Benelux
Benelux
Brazil
Brazil
827197926
909371482
909370567
909370753
910105227
827197926
909371482
909370567
909370753
910105227
Brazil
Brazil
Brazil
Brazil
Brazil
trade mark number (if any)
trade mark application number
Jurisdiction
910105294
1258199
1265045
854939
1284000
1258199
1265045
1284165
1284000
1258199
1265045
1284165
1284000
1258199
1265045
013919022
018261233
018261234
013920673
1072803
303407201
303407229
303407238
303407210
303558385
1258199
1265045
993211
993212
1284000
37
910105294
910105146
1258199
1265045
854939
1284000
1265046/47625110
1258199
1265045
1284165
1284000
1258199
1265045
1284165
1284000
1258199
1265045
013919022
1265047
1265046
013920673
1072803
303407201
303407229
303407238
303407210
303558385
1258199
1265045
993211
993212
1284000
Brazil
Brazil
China
China
China
China
China
Colombia
Colombia
Colombia
Colombia
Egypt
Egypt
Egypt
Egypt
European Union
European Union
European Union
European Union
European Union
European Union
European Union
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
India
India
India
India
India
1258199
1284000
1258199
1265045
328959
328960
1258199
1284000
1265045
1258199
1265045
1265047
1265046
Iran
Iran
Iran
Israel
Israel
Israel
Israel
trade mark number (if any)
trade mark application number
Jurisdiction
1284000
1258199
1265045
2020079285
2020079284
1284000
888621
1258199
1265045
1284165
1284000
1258199
1265045
854939
4020200112897
4020200127627
1284000
854939
1258199
1265045
1284165
1284000
01888179
1882092
01888885
191114045
191114073
191111618
191113559
191113564
38
1284000
1258199
1265045
1265047
1265046
1284000
706367 (706367T)
1258199
1265045
1284165
1284000
1258199
1265045
854939
1265047
1265046
1284000
854939
1258199
1265045
1284165
1284000
104026597
104026598
985783
985784
985786
985779
985780
Israel
Japan
Japan
Japan
Japan
Japan
Mexico
Oman
Oman
Oman
Oman
Republic of Korea
Republic of Korea
Republic of Korea
Republic of Korea
Republic of Korea
Republic of Korea
Singapore
Syrian Arab Republic
Syrian Arab Republic
Syrian Arab Republic
Syrian Arab Republic
Taiwan R.O.C.
Taiwan R.O.C.
Taiwan R.O.C.
Thailand
Thailand
Thailand
Thailand
Thailand
191113555
191114048
181100952
231111839
1258199
1265045
854939
201581059
985781
985782
1008348
985785
1008347
1258199
1265045
854939
1265047
Thailand
Thailand
Thailand
Thailand
Thailand
Turkey
Turkey
Turkey
Turkey
trade mark number (if any)
trade mark application number
Jurisdiction
201581057
1284000
UK0081258199
UK0081265045
UK009013919022
UK009018261233
UK009018261234
UK009013920673
UK0081072803
5703468
5703469
5225178
4072126
39
1265046
1284000
1258199
1265045
013919022
1265047
1265046
013920673
1072803
86453769
86456218
1284000
88000377
86453832
86452818
86270016
85127139
79180907
Turkey
Turkey
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United States of America
United States of America
United States of America
United States of America
United States of America
United States of America
United States of America
United States of America
United States of America
DocuSign Envelope ID: 68E27166-3FFC-482A-A2BA-4C571BA395BA
Signing pages
EXECUTED as a deed.
Each signatory executing this document (electronically or otherwise) intends by that execution to be bound by this document, and
where the signatory has signed as an officer or attorney of a party, for that party to be bound by this document. Each attorney signing
this document under a power of attorney certifies, by the attorney's signature, that the attorney has no notice of the revocation of the
power of attorney.
Grantor
Executed by AVITA Medical Pty Limited in accordance with
Section 127 of the Corporations Act 2001 (Cth)
/s/ Lou Panaccio
Signature of director
Lou Panaccio
Name of director (printed)
/s/ Suzanne Mary Crowe
Signature of director/company secretary
Suzanne Mary Crowe
Name of director/company secretary (print)
40
Secured Party
Signed sealed and delivered by ORCO IV LLC in
the presence of
/s/ Brendan Weber
Signature of witness
Brendan Weber
Name of witness
/s/ W. Carter Neild
Signature of authorised signatory
W. Carter Neild
Name of authorised signatory
General security deed
MinterEllison I Ref: LNMM:ERB 1464626
Page 40
Exhibit 10.42
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT BOTH (I) IS NOT MATERIAL
AND (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED
EXCLUSIVE DISTRIBUTION AGREEMENT
This Exclusive Distribution Agreement (this "Agreement"), is effective as of the date of the last signature (the "Effective
Date"), and is entered into between AVITA Medical Americas, LLC having its principle place of business at 28159 Avenue Stanford,
Suite 220 Valencia, CA ("Seller"), and PolyMedics Innovation GmbH having its principle place of business at Heerweg 15 D,
Denkendorf, 73770 Germany ("Distributor", and together with Seller, the "Parties", and each, a "Party"). This Agreement replaces
and supersedes any prior agreements between the Parties, which are of no further effect.
WHEREAS, Seller is in the business of manufacturing and selling the Products (as defined in Schedule A) in the United
States;
WHEREAS, Distributor intends to market and sell the Products in Germany, Austria, and Switzerland (the “Territory”) with
the option for expansion of the Territory to [******] at Seller’s sole discretion in accordance with Section 1.2 below;
WHEREAS, Seller desires to appoint Distributor as its exclusive distributor to sell the Products to customers located in the
Territory and Distributor desires to accept such appointment, subject to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants, terms and conditions set out herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1.Exclusive Appointment & Right of First Refusal.
1.1Exclusive Appointment. Seller appoints Distributor as its exclusive authorized distributor of the Products listed in
Schedule A within the Territory during the Term and Distributor accepts such appointment. Distributor shall not directly or
indirectly actively market, advertise, promote, sell, or distribute the Products to any person or entity located outside the Territory,
including selling, or distributing the Products to any person where ultimate resale to any person or entity outside the Territory
occurs or is reasonably foreseeable to occur. Seller shall not directly or indirectly actively market, advertise, promote, sell, or
distribute the Products to any person or entity located in the Territory, including selling, or distributing the Products to any
person where ultimate resale to any person or entity in the Territory occurs or is reasonably foreseeable to occur.
1.2If Seller intends to grant distribution rights for [******] to a third party, Seller shall in advance inform Distributor and
distributor shall have, within 30 days after receipt of that information, the right of first negotiation for the respective countries and
if Distributor and Seller successfully negotiate terms of such distribution rights, the respective countries shall be added to the
exclusive appointment under Section 1.1 above and the Parties shall convene and agree in good faith on a reasonable
Minimum Purchase Requirement for those countries.
2.Conduct of the Parties. The Parties agree that the essence of their business relationship shall be built on providing both
Parties with predictability, responsiveness, dependability, and communication. To that end, the Parties agree:
2.1Upon receipt of a reasonable request for a specific action, the receiving Party shall reply within five business days
stating either (i) the date upon which it will provide the corresponding deliverable, or (ii) a counter proposal for achieving the
same business goal.
2.2Should any governmental entity with jurisdiction over the use or sale of the Products in the Territory request
information that is in the other Party’s possession, that Party shall have three business days from the date of receipt of such
request to (i) provide the information to the requesting Party; or (ii) propose an alternative due date for the deliverable.
2.3Should either Party experience difficulty in meeting the terms in this Section 2, that Party shall promptly communicate
the difficulty to the other Party’s designated contact.
3.Distribution Services
3.1Distributor Obligations. Distributor shall:
(a)comply with all local laws and regulations regarding the marketing, promotion, and sale of the Products;
(b)during the Term and any extension of the Term, not engage, directly or indirectly, without the written
consent of Seller, in the sale in the Territory, production for the Territory, licensing for the Territory, promotion,
advertising, or distribution of any multi-phenotype suspension of spray-on skin cells (“Competing Products”) in the
Territory.
(c)market, advertise, promote, and sell the Products in the Territory in a manner that reflects favorably at all
times on the Products and the good name, goodwill, and reputation of Seller and consistent with good business practice,
in each case using its reasonable best efforts to maximize the sales volume of the Products;
(d)maintain a place or places of business in the Territory, including adequate office, storage, and warehouse
facilities and all other facilities as required for Distributor to perform its duties under this Agreement;
(e)purchase and maintain at all times a representative quantity of each Product sufficient for and consistent
with the needs of customers in the Territory;
(f)have sufficient knowledge of the industry and products competitive with the Products (including
specifications, features, and benefits) so as to be able to explain in detail to customers:
(i)the differences between the Products and competing products; and
(ii)information on standard protocols and features of each Product;
(g)establish and maintain a sales and marketing organization sufficient to develop to the satisfaction of Seller
the market potential for the sale of the Products, and independent sales representatives, facilities, and a distribution
organization sufficient to make the Products available for shipment by Distributor to each of its customers in the Territory
within a reasonable period of time on receipt of order;
2
(h)develop and execute a marketing plan sufficient to fulfill its obligations under this Agreement;
(i)not make any materially misleading or untrue statements concerning Seller or the Products, including
refraining from any disparagement of Seller or the Products;
(j)submit to Seller complete and accurate monthly reports including at a minimum the items listed in Schedule
B and maintain books, records and accounts of all transactions and permit full examination thereof by Seller; and
(k)use commercially reasonable efforts to take all steps necessary in order to have the Products declared
reimbursable by the relevant payors in the Territory as soon as possible, but no later than [******].
3.2Seller Obligations. Seller shall:
(a)provide any information and support that may be reasonably requested by Distributor regarding the
marketing, advertising, promotion, and sale of Products;
(b)allow Distributor to participate, at its own expense, in any marketing, advertising, promotion, and sales
programs or events that Seller may make generally available to its authorized distributors of Products, provided that
Seller may alter or eliminate any program at any time;
(c)provide promotional information and material for use by Distributor in accordance with this Agreement;
(d)once per calendar year, provide up to four nonconsecutive weeks of in-person training to Distributor
employees at Distributor’s facility. Distributor must explicitly request this training in writing and Seller shall respond within
thirty days;
(e)respond to Distributor’s questions related to technical or market access issues within five business days;
and
(f)Promptly obtain and during the Term always maintain full marketing authorization for the Products in the
whole Territory under applicable law.
3.3Regulatory Obligations.
(a)Distributor shall not, except with the prior written approval of Seller, (i) make available in the Territory a
Product under Distributor’s name, registered trade name or registered trademark, (ii) change the intended purpose of a
Product, or (iii) modify a Product in such a way that compliance with the applicable requirements may be affected.
(b)Seller shall be responsible for maintaining EU and Swiss CE marks.
(c)Seller has appointed Emergo Europe B.V. as authorized representative in accordance with Art. 11 of
regulation (EU) 2017/745 on medical devices, as amended from time to time and Emergo Europe B.V. as authorized
representative in
3
accordance with applicable Swiss medical devices regulations (each a “Seller Regulatory Representative”), each as
amended from time to time. Seller may at any time change the Seller Regulatory Representatives and notify Distributor.
Subject to and in accordance with instructions by Seller, Distributor shall involve the Seller Regulatory Representatives
in all regulatory matters in the EU and Switzerland in accordance with regulation applicable laws, including (i) to provide
copies of the regulatory documentation and updates thereof as well as copies of any requests by competent regulatory
authorities, (ii) to involve it in any discussions or communications with health authorities or in connection with regulatory
approvals, (iii) to involve it in any regulatory actions in the Territory, (iv) to inform it about complaints and reports from
healthcare professionals, patients and users about suspected incidents related to a Product, and (v) to support the
Seller Regulatory Representatives upon request in all other matters and means deemed necessary by an Seller
Regulatory Representative.
(d)Distributor shall keep up to date records demonstrating at all times to which Customers it has sold any
Product and require any of its customers who are not end customers to so, allowing for a traceability of the Products to
the final customer.
(e)The Parties may specify or change the regulatory obligations with respect to the performance of this
Agreement by entering into a separate Quality Agreement.
4.Agreement to Purchase and Sell Products; Minimum Purchase Requirements.
4.1Terms of Sale; Orders. Seller shall make available and sell Products to Distributor at the prices and under the terms
and conditions of this Section 4.
4.2Price.
(a)For every quarter of the calendar year 2024 and thereafter, no later than the 15th day of the first month of
each quarter, Distributor shall provide monthly the report described in Schedule B. The price of the Products for that
quarter shall be 50% of the average sales price (“ASP”) of the product from the second last quarter. The ASP shall be
expressed in Euros and sales made in Swiss Francs shall, for the calculation of the ASP, be converted by the Distributor
to Euros.
(b)All prices are exclusive of all sales, use and excise taxes, and any other similar taxes, duties, and charges
of any kind imposed by any governmental authority on any amounts payable by Distributor under this Agreement.
(c)Distributor is responsible for all charges, costs, and taxes, provided that, Distributor is not responsible for
any taxes imposed on, or regarding, Seller's income, revenues, gross receipts, personnel or real or personal property or
other assets.
(d)Distributor shall pay interest on all late payments, calculated daily and compounded monthly, at the lesser of
the rate of ten percent per month or the highest rate permissible under applicable law, whichever is lower.
4.3Payment Terms. Distributor shall pay all properly invoiced amounts due to Seller within sixty days from Distributor's
receipt of such invoice. Distributor shall make all payments
4
in United States Dollars (USD) by wire transfer or automated clearing house. Seller’s bank wire information is provided in
Schedule A.
4.4Availability/Changes in Products. Seller may, in its sole discretion, add or make changes to Products in, or remove
Products from Schedule A upon one-year prior notice to Distributor, in each case, without obligation to modify or change any
Products previously delivered or to supply new goods meeting earlier specifications. In case Products which are removed by
Seller from Schedule A represent a separate category of Products, Distributor´s non-competition obligations under Section
3.1(b) above shall no longer apply in respect to such category of Products, but Seller´s obligation under the exclusivity granted
under Section 1.1 not to distribute such category of Products in the Territory other than through the Distributor shall survive
such removal of such Products.
4.5Minimum Purchase Requirements. Distributor’s purchasing of Products from Seller shall be subject to certain
minimum purchase requirements, the timing and establishment of which is explained below.
(a)Within thirty days of the Effective Date, Distributor and Seller shall mutually agree on the minimum number
of Products that Distributor is required to purchase from Seller for Q4 2023 (“Initial Minimum Purchase
Requirement”).
(b)No later than November 30, 2023 (and annually thereafter until the termination or expiration of this
Agreement), Distributor shall provide to Seller its proposed minimum purchase requirement for the upcoming year
divided quarterly which, for each of the first three years after the Effective Date, shall be greater than or equal to a
[******] percent increase year over year. The Seller may accept the proposal or reject it and negotiate with Distributor. If
the Parties reach an agreement on a requirement, that agreed-upon requirement shall become the “Minimum
Purchase Requirement”. If the Parties are unable to agree on a new Minimum Purchase Requirement within thirty
days, each Party shall be entitled to terminate this Agreement with 12 months’ notice effective at the end of a calendar
year. For the time between declaration of such termination and the end of the respective calendar year, no Minimum
Purchase Requirements shall apply, and Seller shall be relieved of the Exclusivity provisions of Section 1.
(c)If Distributor purchases, in a given period of time, less than the Initial Minimum Purchase Requirements or
the Minimum Purchase Requirements, as the case may be, Distributor shall not be required to purchase the missing
volume of Products, but the failure to reach the Minimum Purchase Requirements shall only result in Seller´s termination
right under Section 10.3(a)(i) below and in no other claims whatsoever of Seller against Distributor.
4.6Exchange Rate Risk-Sharing. If the exchange rate between the United States Dollar (USD) and the Euro fluctuates
more than ten percent for two consecutive quarters, the Parties agree to bear the change equally and adjust the then-applicable
Products price in proportion to fifty percent of the two quarters’ change. By way of example only, if the exchange rate fluctuates
twenty percent across two consecutive quarters, the Products’ price shall be adjusted by ten percent.
5
4.7Growth Rebate. If sales in a given calendar year are more than 50% higher than sales in the immediately prior
calendar year (a “Growth Year”), Seller shall pay to Distributor a one-time rebate of [******]% of Distributor’s total purchase price
of Products from Seller for that Growth Year within sixty days of the end of the Growth Year. Provided, however, that no
calendar year may be a Growth Year if the Agreement was not continuously in effect for twelve months prior to the first day of
that Growth Year.
5.Distributor Reporting Obligations.
5.1Customer Complaints and Adverse Events. Distributor shall report to Seller as without undue delay after such
complaint has come to Distributor´s attention, any complaint from a customer concerning the use of a Product or any report of
an adverse patient reaction from being treated with a Product. In the event of death or an unanticipated serious deterioration in
a person's state of health; the report shall be provided by Distributor to Seller immediately.
Reports shall be made to Seller’s Quality Assurance Department via email: [******].
5.2Monthly Reporting. Beginning on the one-month anniversary of the Effective Date, and continuing until the
Agreement expires or is terminated, Distributor shall deliver to Seller a report in compliance with the requirements of Schedule
B. If Distributor’s forecast required by Schedule B indicates a failure or anticipated failure to reach the Minimum Purchase
Requirement for two consecutive quarters, Seller may elect to treat this failure as a breach under Section 10.3(a)(i).
6.Orders Procedure.
6.1Purchase Orders. Distributor shall issue all purchase orders ("Purchase Order(s)") to Seller in written form via e-
mail. By placing an order, Distributor makes an offer to purchase Products under the terms and conditions of this Agreement
and the following commercial terms listed in the purchase order ("Purchase Order Transaction Terms"), and on no other
terms: (a) the Products to be purchased, including Product names (b) the quantities ordered; and (c) the requested delivery
date. Except regarding the Purchase Order Transaction Terms, any variations made to the terms and conditions of this
Agreement by Distributor in any Purchase Order are void and have no effect.
6.2Acceptance and Rejection of Purchase Orders. Seller, in its sole discretion, may accept or reject any Purchase
Order. Seller may accept any Purchase Order by confirming the order (whether by written confirmation, invoice, or otherwise) or
by delivering the Products, whichever occurs first. If Seller does not accept the Purchase Order under the terms of this Section
6.2 within thirty days of Seller's receipt of the Purchase Order, the Purchase Order will lapse. Distributor has no right to cancel
any Purchase Order submitted by it. If Seller rejects a Purchase Order or it lapses, or if Seller does not ship Products under an
order, the quantity of Products which was subject of such Purchase Order shall nevertheless count against Seller´s Minimum
Purchase Requirements for the respective quarter.
7.Shipment and Delivery.
6
7.1Shipment and Delivery Requirements. Unless otherwise expressly agreed to by the Parties, Seller shall deliver the
Products to a shipping company at Seller’s facility, using Seller's standard methods for packaging and shipping the Products.
Seller may, in its sole discretion, without liability or penalty, make partial shipments of Products, each of which constitutes a
separate sale, and Distributor shall pay for the units shipped in accordance with the payment terms specified in 54.3 whether
such shipment is in whole or partial fulfillment of a Purchase Order, provided, however, that if partial shipments are made,
Seller shall re-imburse to Distributor the difference between the transportation costs which Distributor has paid for all partial
shipments and the transportation costs which Distributor would have had to pay if all the partial shipments would have been
made in one shipment. Seller will use commercially reasonable efforts to timely provide the Products for shipment to meet the
times quoted for delivery.
7.2Title and Risk of Loss. Title and risk of loss passes to Distributor upon departure of the Products from a Seller facility.
7.3Acceptance of Products. Distributor shall inspect Products received under this Agreement. Within five business days
after receipt of the Products at Distributor´s facility, Distributor shall check the Products for identity of the ordered Products to
the ordered products, for quantity and for visible damages. Distributor shall be deemed to have accepted the Products in
respect to identity, quantity, and visible defects after such five business days term unless it earlier notifies Seller in writing
(email being sufficient) and furnishes written evidence or other documentation as required by Seller that the Products have
visible defects or do not conform to the ordered quantity or are not identical to the ordered Products. If Distributor later detects
defects of the Products, it shall notify Seller in writing (email being sufficient) within five business days after detection of such
defect.
whether to repair or replace the Products.
If Distributor notifies Seller pursuant to this Section 7.3, then Seller shall determine, in its sole discretion,
Distributor shall ship at Seller´s expense and risk of loss, all goods to be returned, repaired, or replaced under
this Section 7.3 to Seller's facility located at AVITA Medical Americas, LLC, [******], United States. If Seller exercises its option
to replace the Products, Seller shall, after receiving Distributor's shipment of the Products under this provision, ship to
Distributor, at Seller's expense and Seller´s risk of loss, the replaced Products to an address of Distributor’s choosing. .
made on a one-way basis and Distributor has no other right to return Products purchased under this Agreement.
Except as provided under Sections 7.3 and 14.1, all sales of Products to Distributor under this Agreement are
8.Seller's Trademark License Grant. Seller hereby grants to Distributor a non-exclusive, non-transferable, and non-
sublicensable license in the Territory during the Term solely in connection with the promotion, advertising, and sale of the Products
in accordance with the terms and conditions of this Agreement to use all Seller's trademarks and service marks, whether registered
or unregistered, including the listed registrations and applications and any registrations which may be granted pursuant to such
applications. On expiration or earlier termination of this Agreement or upon Seller request, Distributor shall promptly discontinue the
display or use of any trademark or service mark or change the way it is displayed or used with regard to the Products.
7
Upon expiration or earlier termination of this Agreement, Distributor's rights under this Section 8 shall cease immediately. Other than
the express licenses granted by this Section 8, Seller grants no right or license to Distributor, by implication, estoppel or otherwise, to
the Products or any intellectual property rights of Seller or its affiliates.
9.Distributor’s Handling of Products and Promotional Materials.
9.1The handling and intake of the Products and the storage of the Products by Distributor shall be in strict accordance
with any and all instructions and quality requirements of Seller, unless a regulatory body with jurisdiction over the Products in
the Territory or Distributor provide stricter requirements, in which case the most stringent requirement shall govern. Distributor
shall not re-sterilize without the prior written consent of Seller.
9.2Distributor shall have no right to alter the original labeling or packaging of the Products unless required by the law in
the Territory. Distributor shall consult with Seller if such change is required. Distributor represents and warrants that in the
promotion of the Products it shall only use unaltered (other than accurate translation into the native language of the Territory)
promotional materials produced by Seller and approved by Seller’s internal medical-legal-regulatory review team. In the event
this Section 9.2 conflicts with Section 12 (“Compliance with Laws”) Distributor shall notify Seller and work collaboratively with
Seller to reach a solution. If Distributor identifies a promotional need not addressed by Seller’s approved promotional materials,
Distributor shall notify Seller and work collaboratively with Seller to reach a solution.
9.3Distributor represents and warrants that any translation of written materials related to the Products, including but not
limited to their instructions for use and labeling, are accurate translations in the native language of the Territory.
10.Term; Termination.
10.1Term. The term of this Agreement commences on the Effective Date and terminates on the fifth anniversary of that
date, unless terminated earlier under the terms of this Agreement. (the "Term"). At least thirty days before the expiration of the
Term, the Parties may extend the Term by a mutual written agreement. If Distributor has successfully met the Minimum
Purchase Requirements for the entire duration of the Term, the Agreement shall automatically renew for additional five-year
period (the “Renewal Term”), unless terminated earlier under the terms of this Agreement, subject to an adjustment of
Minimum Purchase Requirements as set forth in Section 4.5(b) above. This renewal for additional five-year Renewal Term shall
be revolving, which means that if at the end of such Renewal Term the conditions for another Renewal Term are met, this
Agreement shall again automatically renew.
10.2Mutual Termination Rights. Either Party may terminate this Agreement upon notice to the other Party if the other
Party is in material breach of this Agreement and either the breach cannot be cured or, if the breach can be cured, it is not
cured within forty-five days following the other Party's receipt of notice of such breach. Either Party may also terminate this
Agreement if the other Party:
(i)becomes insolvent or is generally unable to pay, or fails to pay, its debts as they become due;
8
(ii)files or has filed against it, a petition for voluntary or involuntary bankruptcy or otherwise becomes
subject, voluntarily or involuntarily, to any proceeding under any domestic or foreign bankruptcy or insolvency
law;
(iii)seeks reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition,
or other relief with respect to it or its debts;
(iv)makes or seeks to make a general assignment for the benefit of its creditors; or
(v)applies for or has a receiver, trustee, custodian, or similar agent appointed by order of any court of
competent jurisdiction to take charge of or sell any material portion of its property or business.
10.3Seller Termination Rights.
(a)Seller may terminate this Agreement if Distributor:
(i)after the one-year anniversary of the Effective Date, fails to meet the Minimum Purchase
Requirement for two consecutive quarters, provided however that for termination under this sub-Section 10.3(a)
Seller shall pay to Distributor one year of Distributor’s gross annual profits based on the gross profits of the
immediately preceding two quarters; or
(ii)is indicted under any Anti-Bribery Law or conducts itself in such a way that raises a reasonable
suspicion that it has violated any Anti-Bribery Law as defined in sub-Section 13.1. For the avoidance of doubt,
this sub-Section 10.3(a)(ii) also applies to any employees, agents, directors, and officers of Distributor.
(b)In the event Seller reasonably anticipates the sale of more than 50% of Seller’s equity or a sale of
substantially all of its assets (each a “Change of Control”) Seller may terminate this Agreement upon one-year written
notice. In lieu of one year notice, Seller may elect to pay Distributor one year of Distributor’s gross annual profits based
on the gross profits of the immediately preceding two quarters.
10.4Effect of Expiration or Termination. Upon the expiration or earlier termination of this Agreement:
(a)All outstanding Purchase Orders shall not be affected by the termination;
(b)Each Party shall promptly return or destroy all documents and tangible materials (and any copies)
containing, reflecting, incorporating, or based on the other Party's Confidential Information;
(c)If applicable, Distributor shall transfer any and all reimbursement approvals to an entity of Seller’s choosing
within sixty days of termination or expiration of the Agreement;
9
(d)Distributor shall transfer (or provide an unlimited, worldwide, fully paid-up license to) any and all intellectual
property created by Distributor in performance of this Agreement; and
(e)Seller shall repurchase, in consideration for the original Seller´s purchase price, all Distributor’s inventory of
Product with at least six months shelf life remaining, except for such Products which are subject of a binding purchase
agreement between Distributor and a customer.
11.Confidential Information. From time to time during the Term, either Party may disclose or make available to the other Party
information about its business affairs, products, confidential intellectual property, trade secrets, third-party confidential information,
and other sensitive or proprietary information (collectively, "Confidential Information"). Confidential Information shall not include
information that: (a) at the time of disclosure or later is in the public domain; (b) is known to the receiving party at the time of
disclosure; or (c) is rightfully obtained by receiving party on a non-confidential basis from a third party or (d) is developed by the
receiving party independent from and without use of the disclosing party´s Confidential Information.
The receiving party shall not disclose any such Confidential Information to any person or entity, except to the receiving
party's employees who have a need to know the Confidential Information for the receiving party to perform its obligations hereunder.
12.Compliance with Laws. Distributor represents and warrants to Seller that (a) Distributor is in compliance with and shall
comply with all applicable laws, regulations, and ordinances, including but not limited to all laws in the Territory regarding the sale
and promotion of the Products, the EU General Data Protection Regulations, as applicable; and (b) Distributor has and shall maintain
in effect all the licenses, permissions, authorizations, consents, and permits that it needs to carry out its obligations under this
Agreement.
13.Anti-Bribery Representations and Warranties. Each party represents and warrants to the other party that:
13.1Such party and its shareholders, partners, officers, directors, employees, agents, and anyone acting on its behalf
(collectively, the "Representatives") are and shall remain in compliance with all applicable anti-bribery and anti-corruption
laws, including the US Foreign Corrupt Practices Act and any laws or regulations of the Territory concerning similar subject
matter (collectively, the "Anti-Bribery Laws").
13.2Neither such party nor any of its Representatives has, directly or indirectly, offered, paid, promised, or authorized
the giving of money or anything of value to any:
(a)Government Official (as defined in Section 13.5(c));
(b)person or entity; or
(c)other person or entity while knowing or having reason to believe that some portion or all of the payment or
thing of value will be offered, given, or promised, directly or indirectly, to a Government Official or another person or
entity; for the purpose of:
10
(i)influencing any act or decision of such Government Official or such person or entity in their official
capacity, including a decision to do or omit to do any act in violation of their lawful duties or proper performance
of functions; or
(ii)inducing such Government Official or such person or entity to use their influence or position with
any Government Entity or other person or entity to influence any act or decision.
in order to obtain or retain business for, direct business to, or secure an improper advantage for a party to this Agreement.
13.3Neither such party nor any of its Representatives:
(a)is a Government Official or employs any Government Official or Close Family Member of any Government
Official; or
(b)has a personal, business, or other relationship or association with any Government Official or Close Family
Member of any Government Official who may have responsibility for or oversight of any business activities of Seller or
any of its subsidiaries, other than any relationships or associations that have been disclosed in writing to the other party.
13.4Neither such party nor any of its Representatives is or has been the subject of any investigation, inquiry, or
enforcement proceeding by any court, governmental, administrative, or regulatory body, or customer regarding any violation or
alleged violation of any Anti-Bribery Law. To the knowledge of such party, (i) no such investigation, inquiry, or proceeding has
been threatened or is pending; and (ii) there are no circumstances likely to give rise to any such investigation, inquiry, or
proceeding.
13.5For purposes of this Agreement:
(a)"Close Family Member" means (i) the individual's spouse; (ii) the individual's and the spouse's
grandparents, parents, siblings, children, nieces, nephews, aunts, uncles, and first cousins; (iii) the spouse of any
persons listed in subcategory (ii); and (iv) any other person who shares the same household with the individual.
(b)"Government Entity" means (i) any national, state, regional, or local government (including, in each case,
any agency, department, or subdivision of such government); (ii) any political party; (iii) any entity or business that is
owned or controlled by any of those bodies listed in subcategory (i) or (ii); or (iv) any international organization, such as
the United Nations or the World Bank.
(c)"Government Official" means (i) any director, officer, employee, agent, or representative (including anyone
elected, nominated, or appointed to be a director, officer, employee, agent, or representative) of any Government Entity,
or anyone otherwise acting in an official capacity on behalf of a Government Entity; (ii) any political party, political party
official, or political party employee; (iii) any candidate for public or political office; (iv) any royal or ruling family member;
or (v) any agent or representative of any of those persons listed in subcategories (i) through (iv).
11
13.6such party has adopted and maintains adequate policies, procedures, and controls to ensure that Distributor has
complied and is in compliance with all Anti-Bribery Laws, including at a minimum policies and procedures relating to prevention
of bribery, accounting for financial transactions, due diligence on third parties, and training of personnel.
14.Limited Product Warranty and Disclaimer.
14.1Limited Product Warranty. Seller warrants that the Products are free from defects in material and workmanship
under normal use and service with proper maintenance, that the Products are fit for their intended purpose, and that the
Products do not infringe upon Third Party´s intellectual property rights, both for a period of time which shall be the shelf life of
the Products plus three months. The term for such warranties shall begin upon receipt of the Product by Distributor at its facility.
Distributor or its customer shall promptly notify Seller of any known warranty claims and shall cooperate in the investigation of
such claims. If any Product is proven to not conform with this warranty during the applicable warranty period, Seller shall, at its
exclusive option, either repair or replace the Product or, if such repair or replacement is not successful, refund the purchase
price paid by Distributor for each non-conforming Product. Any Product returned under this Section shall follow the return
procedure in Section 7.3.
Seller shall have no obligation under the warranty set forth above if Distributor or its customer:
(a)fails to notify Seller in writing during the warranty period of a non-conformity; or
(b)uses, misuses, or neglects the Product in a manner inconsistent with the Product's specifications or use or
maintenance directions, modifies the Product, or improperly installs, handles, or maintains the Product.
Except as explicitly authorized in this Agreement or in a separate written agreement with Seller, Distributor
shall not service, repair, modify, alter, replace, reverse engineer, or otherwise change the Products it sells to its customers.
Notwithstanding Distributor´s statutory warranty towards its customers, Distributor shall not provide its own warranty regarding
any Product which goes beyond the statutory warranty.
14.2DISCLAIMER. EXCEPT FOR THE WARRANTIES SET OUT UNDER THIS SECTION 14, NEITHER SELLER NOR
ANY PERSON ON SELLER'S BEHALF HAS MADE OR MAKES FOR DISTRIBUTOR'S OR ITS CUSTOMERS' BENEFIT ANY
EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WHATSOEVER, DISTRIBUTOR ACKNOWLEDGES THAT IT
HAS NOT RELIED ON ANY REPRESENTATION OR WARRANTY MADE BY SELLER, OR ANY OTHER PERSON ON
SELLER'S BEHALF EXCEPT THOSE SET FORTH IN THIS AGREEMENT.
15.Distributor´s Indemnification. Subject to the terms and conditions of this Agreement, Distributor shall indemnify, hold
harmless, and defend Seller and its parent, officers, directors, partners, members, shareholders, employees, agents, affiliates,
successors, and permitted assigns (collectively, "Seller Indemnified Party") against any and all losses, damages, liabilities,
deficiencies, claims, actions, judgments, settlements, interest, awards, penalties, fines, costs, or expenses of whatever kind,
including attorneys' fees, fees and the costs of enforcing
12
any right to indemnification under this Agreement, and the cost of pursuing any insurance providers relating to any claim of a third
party or Seller arising out of or occurring in connection with: (a) Distributor's acts or omissions as Distributor of the Products,
including negligence, willful misconduct, or breach of this Agreement; (b) Distributor or its employees or agents making assertions or
promoting claims about the Product that do not conform with the Products’ approved indications; (c) Distributor or its employees or
agents whether willfully or negligently, using the Product outside of its approved specifications and instructions for use; (d) any failure
by Distributor or its personnel to comply with any applicable laws; or (e) any breach of Distributor of its agreement with a third party
as a result of or in connection with entering into, performing under, or terminating this Agreement.
16.Indemnification. Subject to the terms and conditions of this Agreement, Seller shall indemnify, hold harmless, and defend
Distributor and its parent, officers, directors, partners, members, shareholders, employees, agents, affiliates, successors, and
permitted assigns (collectively, "Distributor Indemnified Party") against any and all losses, damages, liabilities, deficiencies,
claims, actions, judgments, settlements, interest, awards, penalties, fines, costs, or expenses of whatever kind, including attorneys'
fees, fees and the costs of enforcing any right to indemnification under this Agreement, and the cost of pursuing any insurance
providers relating to any claim of a third party or Distributor arising out of or occurring in connection with: (a) Seller´s acts or
omissions as Seller of the Products, including negligence, willful misconduct, or breach of this Agreement; (b) Seller or its employees
or agents making assertions or promoting claims about the Product that do not conform with the Products’ approved indications; (c)
any failure by Distributor or its personnel to comply with any applicable laws (d) product liability claims of third parties in respect to
the Products, except if such Products have been used outside of its approved specifications and instructions, as set forth in the
instruction for use and except if the Products have been modified by the Distributor; or (e) any breach of Seller of its agreement with
a third party as a result of or in connection with entering into, performing under, or terminating this Agreement.
17.Limitation of Liability. IN NO EVENT SHALL A PARTY OR ANY OF ITS REPRESENTATIVES BE LIABLE FOR, OR BE
OBLIGED TO INDEMNIFY THE OTHER PARTY FROM, CONSEQUENTIAL, INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY,
PUNITIVE, OR ENHANCED DAMAGES, ARISING OUT OF, OR RELATING TO, AND/OR IN CONNECTION WITH ANY BREACH
OF THIS AGREEMENT, REGARDLESS OF (A) WHETHER SUCH DAMAGES WERE FORESEEABLE, (B) WHETHER OR NOT
SUCH PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND (C) THE LEGAL OR EQUITABLE THEORY
(CONTRACT, TORT OR OTHERWISE) UPON WHICH THE CLAIM IS BASED. IN NO EVENT SHALL A PARTY´S LIABILITY
ARISING OUT OF OR RELATED TO THIS AGREEMENT, WHETHER ARISING OUT OF OR RELATED TO BREACH OF
CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, EXCEED THE TOTAL OF THE AMOUNTS PAID AND
AMOUNTS ACCRUED BUT NOT YET PAID BY DISTRIBUTOR TO SELLER UNDER THIS AGREEMENT IN THE THREE MONTH
PERIOD PRECEDING THE EVENT GIVING RISE TO THE CLAIM
THE FOREGOING LIMITATIONS APPLY EVEN IF THE OTHER PARTY´S REMEDIES UNDER THIS AGREEMENT FAIL OF
THEIR ESSENTIAL PURPOSE.
18.Insurance. For a period of two years after the Effective Date, each party shall, at its own expense, maintain and carry
insurance in full force and effect that includes, but is not limited to, commercial general liability (including product liability) with limits
no less than $3MM
13
USD for each occurrence and $5MM USD in the aggregate with financially sound and reputable insurers. Upon the other party´s
request, a party shall provide such other party with a certificate of insurance and policy endorsements for all insurance coverage
required by this Section 18 and shall not do anything to invalidate such insurance. Each party shall provide the other party with ninety
days' advance written notice in the event of a cancellation or material change in its insurance policy.
19.Seller´s assistance to Distributor. If Distributor is exposed to claims of third parties related to the performance or failure of
the Products (including, but not limited to, customers of Distributor), Seller shall, at Distributor’s expense, use reasonable best efforts
to assist Distributor in the defense against such claims, including but not limited to, through the provision of documents and studies
on the Products.
20.Entire Agreement. This Agreement, including and together with any related exhibits, schedules, and attachments constitutes
the sole and entire agreement of the Parties with respect to the subject matter contained herein, and supersedes all prior and
contemporaneous understandings, agreements, representations, and warranties, both written and oral, regarding such subject
matter. In the event of conflict between the terms of this Agreement and the terms of any purchase order or other document
submitted by one Party to the other, this Agreement shall control unless the Parties specifically otherwise agree in writing.
21.Survival. Subject to the limitations and other provisions of this Agreement: (a) the representations and warranties of the
Distributor contained herein will survive the expiration or earlier termination of this Agreement for a period of eighteen months after
such expiration or termination; and (b) any other provision that, in order to give proper effect to its intent, should survive such
expiration or termination, will survive the expiration or earlier termination of this Agreement for the period specified therein, or if
nothing is specified for a period of eighteen months after such expiration or termination.
22.Notices. All notices, requests, consents, claims, demands, waivers, and other communications under this Agreement must
be in writing and addressed to the other Party at its address set forth below (or to such other address that the receiving Party may
designate from time to time in accordance with this Section). Unless otherwise agreed herein, all notices must be delivered by
personal delivery, nationally recognized overnight courier, or certified or registered mail (in each case, return receipt requested,
postage prepaid). Except as otherwise provided in this Agreement, a notice is effective only (a) on receipt by the receiving Party, and
(b) if the Party giving the notice has complied with the requirements of this Section.
Notice to Distributor:
PolyMedics Innovation GmbH
Heerweg 15 D
Denkendorf, 73770 Germany
Email: Christian.planck@polymedics.com
14
Notice to Seller:
28159 Avenue Stanford, Suite 220 Valencia, CA, 91355
Attention: Terry Bromley, Senior Vice President, Global Sales [******]
CC: Legal Department – [******]
23.Severability. If any term or provision of this Agreement is invalid, illegal, or unenforceable in any jurisdiction, such invalidity,
illegality, or unenforceability shall not affect the enforceability of any other term or provision of this Agreement or invalidate or render
unenforceable such term or provision in any other jurisdiction. Upon a determination that any term or provision is invalid, illegal, or
unenforceable, the Parties shall negotiate in good faith to modify this Agreement to affect the original intent of the Parties as closely
as possible in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent
possible.
24.Amendments. No amendment to this Agreement is effective unless it is in writing and signed by an authorized representative
of each Party.
25.Waiver. No waiver by any Party of any of the provisions of this Agreement shall be effective unless explicitly set forth in
writing and signed by the Party so waiving. Except as otherwise set forth in this Agreement, no failure to exercise, or delay in
exercising, any rights, remedy, power, or privilege arising from this Agreement shall operate or be construed as a waiver thereof, nor
shall any single or partial exercise of any right, remedy, power, or privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, power, or privilege.
26.Assignment. Neither Party may assign any of its rights or delegate any of its responsibilities under this Agreement without
the prior written consent of the other Party. The other Party shall not unreasonably withhold or delay its consent. Any purported
assignment or delegation in violation of this Section 26 shall be null and void.
27.Successors and Assigns. This Agreement is binding on and inures to the benefit of the Parties to this Agreement and their
respective permitted successors and permitted assigns.
28.No Third-Party Beneficiaries. Subject to the next paragraph, this Agreement benefits solely the Parties to this Agreement
and their respective permitted successors and permitted assigns and nothing in this Agreement, express or implied, confers on any
other Person any legal or equitable right, benefit, or remedy of any nature whatsoever under or by reason of this Agreement.
The Parties hereby designate the Distributor Indemnified Parties and the Seller Indemnified Partes as third-party
beneficiaries of 1215 and 16 with the right to enforce such Sections.
29.Choice of Law & Forum. This Agreement, including all exhibits, schedules, attachments to this Agreement, and all matters
arising out of or relating to this Agreement, are governed by, and construed in accordance with, the laws of Delaware, United States
of America, without regard to the conflict of laws of the state of California, USA. The Parties to this Agreement hereby submit to the
exclusive jurisdiction of the California courts, both state and federal.
15
30.Force Majeure. No Party shall be liable or responsible to the other Party, or be deemed to have defaulted under or breached
this Agreement, for any failure or delay in fulfilling or performing any term of this Agreement (except for any obligations of the
Distributor to make payments to Seller hereunder), when and to the extent such failure or delay is caused by or results from acts
beyond the impacted party's ("Impacted Party") control, including, without limitation, the following force majeure events ("Force
Majeure Event(s)"): (a) acts of God; (b) flood, fire, earthquake, global pandemic, or explosion; (c) war, invasion, hostilities (whether
war is declared or not), terrorist threats or acts, riot or other civil unrest; (d) government order, law, or actions; (e) embargoes or
blockades in effect after the Effective Date of this Agreement; and (f) national or regional emergency; The Impacted Party shall give
notice within five days of the Force Majeure Event to the other Party, stating the period of time the occurrence is expected to
continue. The Impacted Party shall use diligent efforts to end the failure or delay and ensure the effects of such Force Majeure Event
are minimized. The Impacted Party shall resume the performance of its obligations as soon as reasonably practicable after the
removal of the cause. In the event that the Impacted Party's failure or delay remains uncured for a period of sixty consecutive days
following written notice given by it under this Section 30, the other Party may thereafter terminate this Agreement upon ten days
written notice.
31.Relationship of the Parties. The relationship between the Parties is that of independent contractors. Nothing contained in
this Agreement shall be construed as creating any agency, partnership, franchise, business opportunity, joint venture or other form of
joint enterprise, employment, or fiduciary relationship between the Parties, and neither Party shall have authority to contract for or
bind the other Party in any manner whatsoever.
32.English Language Controls. This Agreement shall be written and signed in English. In the event of any conflict or
inconsistency between the forms of the English language text of this Agreement and any schedules, exhibits, or attachments hereto
and any translations thereof, the English text shall prevail. Each Party’s signature below indicates proficiency with the English
language and complete understanding of all provisions of this Agreement and any schedules, exhibits, or attachments hereto.
33.Counterparts. This Agreement may be executed in counterparts, each of which is deemed an original, but all of which
together are deemed to be one and the same agreement.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the last date written below by their
respective officers thereunto duly authorized.
PolyMedics Innovation GmbH
AVITA Medical Americas, LLC
By__/s/Christian Plancke________________
Name: Christian Plancke
Title: Co-CEO
By_/s/James Corbett__________________
Name: James Corbett
Title: CEO
Date:___11/7/2023__________________
Date:____11/8/2023_______________
16
17
Products and Price List
·“Product” or “Products” means RECELL® 1920, RECELL GO™, RECELL GO™ cartridges, and any new releases,
enhancements or modifications thereof as agreed by Distributor and Seller from time to time.
Schedule A
·YEAR 1 PRICING
Product
RECELL® 1920
RECELL GO™
Price
Per Section 4.2 of the Agreement
Per Section 4.2 of the Agreement
RECELL GO™ cartridge
Per Section 4.2 of the Agreement
•AVITA Medical Bank Account: [******]
Account Number: [******]
Routing Number ACH/EFT: [******]
Routing Number DOM. WIRES: [******]
SWIFT Code: [******]
Account Name: [******]
Account Address: 28159 Avenue Stanford Ste 220 Valencia, CA 91355-2203
18
Schedule B
Monthly Reporting Parameters
Distributor shall provide to Seller, beginning on the tenth business day after the one-month anniversary of the Effective Date,
monthly reports that (1) are in English, (2) are in an easily readable, electronic format and (3) provide the following information from
the previous calendar month:
•Summary report of all customer complaints reported in accordance with Section 5
•Number of Products sold, by Product name;
•Average sale price of Products, by Product name
•Number of hospitals purchasing;
•Number of new customers;
•Number of patients treated, by indication; (directional, using best commercial efforts to reach on a realistic estimate)
•Market intelligence of competitive activity;
•Emerging training deficits (if any);
•New physician studies involving the Products of which Distributor becomes aware;
•Rolling [******] forecast for Distributor inventory needs to be provided on a quarterly basis, adjustments to be included in the
monthly report; and
•Any other pertinent information related to the performance of the Agreement.
19
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our report dated February 22, 2024, with respect to the consolidated financial statements included in the Annual Report of AVITA Medical, Inc. on
Form 10-K for the year ended December 31, 2023. We consent to the incorporation by reference of said report in the Registration Statements of AVITA Medical, Inc. on
Form S-3 (File No. 333-271276, effective date April 25, 2023) and on Forms S-8 (File No. 333-273072, effective date June 30, 2023; File No. 333-250924, effective
date November 24, 2020; and File No. 333-248446, effective date August 27, 2020).
Exhibit 23.1
/s/ GRANT THORNTON LLP
Los Angeles, California
February 22, 2024
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James Corbett, certify that:
Exhibit 31.1
1.I have reviewed this annual report on Form 10-K for the fiscal year ended December 31, 2023 of AVITA Medical, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this
report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Date: February 22, 2024
/s/ James Corbett
Name:
Title:
James Corbett
President and Chief Executive Officer
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David O'Toole, certify that:
Exhibit 31.2
1.I have reviewed this annual report on Form 10-K for the fiscal year ended December 31, 2023 of AVITA Medical, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this
report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Date: February 22, 2024
/s/ David O'Toole
Name:
Title:
David O'Toole
Chief Financial Officer
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the
undersigned officers of AVITA Medical, Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:
The Annual Report on Form 10-K for the annual period ended December 31, 2023 of the Company fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of
the Company.
Dated: February 22, 2024
Dated: February 22, 2024
/s/ James Corbett
Name:
Title:
James Corbett
President and Chief Executive Officer
/s/ David O'Toole
Name:
Title:
David O'Toole
Chief Financial Officer
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350,
Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-K or as a separate disclosure document.
Exhibit 97.1
AVITA MEDICAL, INC.
INCENTIVE-BASED COMPENSATION RECOVERY POLICY
ADOPTED NOVEMBER 8, 2023
1.Policy Purpose. The purpose of this AVITA Medical, Inc. (and its subsidiaries and affiliates) (the “Company”) Incentive-Based Compensation Recovery Policy (the
“Policy”) is to enable the Company to recover Erroneously Awarded Compensation in the event that the Company is required to prepare an Accounting Restatement.
This Policy is intended to comply with the requirements set forth in Listing Rule 5608 of the corporate governance rules of The Nasdaq Stock Market (the “Listing
Rule”) and shall be construed and interpreted in accordance with such intent. Unless otherwise defined in this Policy, capitalized terms shall have the meaning ascribed
to such terms in Section 7. This Policy shall become effective on December 1, 2023. Where the context requires, reference to the Company shall include the Company’s
subsidiaries and affiliates (as determined by the Committee in its discretion).
2.Policy Administration. This Policy shall be administered by the Compensation Committee of the Board (the “Committee”) unless the Board determines to administer
this Policy itself. The Committee has full and final authority to make all determinations under this Policy. All determinations and decisions made by the Committee
pursuant to the provisions of this Policy shall be final, conclusive and binding on all persons, including the Company, its affiliates, its stockholders and Executive
Officers. Any action or inaction by the Committee with respect to an Executive Officer under this Policy in no way limits the Committee’s actions or decisions not to act
with respect to any other Executive Officer under this Policy or under any similar policy, agreement or arrangement, nor shall any such action or inaction serve as a
waiver of any rights the Company may have against any Executive Officer other than as set forth in this Policy.
3.Policy Application. This Policy applies to all Incentive-Based Compensation received by a person: (a) after October 2, 2023, and beginning service as an Executive
Officer; (b) who served as an Executive Officer at any time during the performance period for such Incentive-Based Compensation; (c) while the Company had a class
of securities listed on a national securities exchange or a national securities association; and (d) during the three completed fiscal years immediately preceding the
Accounting Restatement Date. In addition to such last three completed fiscal years, the immediately preceding clause (d) includes any transition period that results from
a change in the Company’s fiscal year within or immediately following such three completed fiscal years; provided, however, that a transition period between the last day
of the Company’s previous fiscal year end and the first day of its new fiscal year that comprises a period of nine to twelve months shall be deemed a completed fiscal
year. For purposes of this Section 3, Incentive-Based Compensation is deemed received in the Company’s fiscal period during which the Financial Reporting Measure
specified in the Incentive-Based Compensation award is attained, even if the payment or grant of the Incentive-Based Compensation occurs after the end of that period.
For the avoidance of doubt, Incentive-Based Compensation that is subject to both a Financial Reporting Measure vesting condition and a service-based vesting condition
shall be considered received when the relevant Financial Reporting Measure is achieved, even if the Incentive-Based Compensation continues to be subject to the
service-based vesting condition.
4.Policy Recovery Requirement. In the event of an Accounting Restatement, the Company must recover, reasonably promptly, Erroneously Awarded Compensation, in
amounts determined pursuant to this Policy. The Company’s obligation to recover Erroneously Awarded Compensation is not dependent on if or when the Company
files restated financial statements. Recovery under this Policy with respect to an Executive Officer shall not require the finding of any misconduct by such Executive
Officer or such Executive Officer being found responsible for the accounting error leading to an Accounting Restatement. In the event of an Accounting Restatement,
the Company shall satisfy the Company’s obligations under this Policy to recover any amount owed from any applicable Executive Officer by exercising its sole and
absolute discretion in how to accomplish such recovery. The Company’s recovery obligation pursuant to this Section 4 shall not apply to the extent that the Committee,
or in the absence of the Committee, a majority of the independent directors serving on the Board, determines that such recovery would be impracticable and:
a.The direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recovered. Before concluding that it would be
impracticable to recover any amount of Erroneously
Awarded Compensation based on expense of enforcement, the Company must make a reasonable attempt to recover such Erroneously Awarded
Compensation, document such reasonable attempt(s) to recover, and provide that documentation to the Stock Exchange; or
b.Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the registrant, to
fail to meet the requirements of Section 401(a)(13) or Section 411(a) of the Code.
5.Policy Prohibition on Indemnification and Insurance Reimbursement. The Company is prohibited from indemnifying any Executive Officer or former Executive
Officer against the loss of Erroneously Awarded Compensation. Further, the Company is prohibited from paying or reimbursing an Executive Officer for purchasing
insurance to cover any such loss.
6.Required Policy-Related Filings. The Company shall file all disclosures with respect to this Policy in accordance with the requirements of the Federal securities laws,
including disclosures required by U.S. Securities and Exchange Commission filings.
7.Definitions.
a.“Accounting Restatement” means an accounting restatement due to the material noncompliance of the Company with any financial reporting
requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is
material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or
left uncorrected in the current period.
b.“Accounting Restatement Date” means the earlier to occur of: (i) the date the Board, a committee of the Board, or the officer or officers of the
Company authorized to take such action if the Board action is not required, concludes, or reasonably should have concluded, that the Company is
required to prepare an Accounting Restatement; and (ii) the date a court, regulator, or other legally authorized body directs the Company to prepare an
Accounting Restatement.
c.“Board” means the board of directors of the Company.
d.“Code” means the U.S. Internal Revenue Code of 1986, as amended. Any reference to a section of the Code or regulation thereunder includes such
section or regulation, any valid regulation or other official guidance promulgated under such section, and any comparable provision of any future
legislation or regulation amending, supplementing, or superseding such section or regulation.
e.“Erroneously Awarded Compensation” means, in the event of an Accounting Restatement, the amount of Incentive-Based Compensation previously
received that exceeds the amount of Incentive-Based Compensation that otherwise would have been received had it been determined based on the
restated amounts in such Accounting Restatement, and must be computed without regard to any taxes incurred or paid by the relevant Executive
Officer; provided, however, that for Incentive-Based Compensation based on stock price or total stockholder return, where the amount of Erroneously
Awarded Compensation is not subject to mathematical recalculation directly from the information in an Accounting Restatement: (i) the amount of
Erroneously Awarded Compensation must be based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total
stockholder return upon which the Incentive-Based Compensation was received; and (ii) the Company must maintain documentation of the
determination of that reasonable estimate and provide such documentation to the Stock Exchange.
2
f.“Executive Officer” means the Company’s president, principal financial officer, principal accounting officer (or if there is no such accounting officer,
the controller), any vice-president of the Company in charge of a principal business unit, division, or function (such as sales, administration, or finance),
any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for the Company. An
executive officer of the Company’s parent or subsidiary is deemed an “Executive Officer” if the executive officer performs such policy making
functions for the Company. For the avoidance of doubt, “Executive Officer” includes, but is not limited to, any person identified as an executive officer
pursuant to Item 401(b) of Regulation S-K under the U.S. Securities Act of 1933, as amended.
g.“Financial Reporting Measure” means any measure that is determined and presented in accordance with the accounting principles used in preparing
the Company’s financial statements, and any measure that is derived wholly or in part from such measure; provided, however, that a Financial
Reporting Measure is not required to be presented within the Company’s financial statements or included in a filing with the U.S. Securities and
Exchange Commission to qualify as a “Financial Reporting Measure.” For purposes of this Policy, “Financial Reporting Measure” includes, but is not
limited to, stock price and total stockholder return.
h.“Incentive-Based Compensation” means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a
Financial Reporting Measure.
i.“Stock Exchange” means the national stock exchange on which the Company’s common stock is listed.
8.Acknowledgement. Each Executive Officer shall sign and return to the Company, within 30 calendar days following the later of (i) the effective date of this Policy first
set forth above or (ii) the date the individual becomes an Executive Officer, the Acknowledgement Form attached hereto as Exhibit A, pursuant to which the Executive
Officer agrees to be bound by, and to comply with, the terms and conditions of this Policy.
9.Committee Indemnification. Any members of the Committee, and any other members of the Board who assist in the administration of this Policy, shall not be
personally liable for any action, determination or interpretation made with respect to this Policy and shall be fully indemnified by the Company to the fullest extent under
applicable law and Company policy with respect to any such action, determination or interpretation. The foregoing sentence shall not limit any other rights to
indemnification of the members of the Board under applicable law or Company policy.
10.Severability. The provisions in this Policy are intended to be applied to the fullest extent of the law. To the extent that any provision of this Policy is found to be
unenforceable or invalid under any applicable law, such provision shall be applied to the maximum extent permitted, and shall automatically be deemed amended in a
manner consistent with its objectives to the extent necessary to conform to any limitations required under applicable law.
11.Amendment; Termination. The Board may amend this Policy from time to time in its sole and absolute discretion and shall amend this Policy as it deems necessary to
reflect the Listing Rule. The Board may terminate this Policy at any time.
12.Other Recovery Obligations; General Rights. To the extent that the application of this Policy would provide for recovery of Incentive-Based Compensation that the
Company recovers pursuant to Section 304 of the Sarbanes-Oxley Act or other recovery obligations, the amount the relevant Executive Officer has already reimbursed
the Company will be credited to the required recovery under this Policy. This Policy shall not limit the rights of the Company to take any other actions or pursue other
remedies that the Company may deem appropriate under the circumstances and under applicable law. To the maximum extent permitted under the Listing Rule, this
Policy shall be administered in compliance with (or pursuant to an exemption from the application of) Section 409A of the Code.
3
13.Successors. This Policy is binding and enforceable against all Executive Officers and their beneficiaries, heirs, executors, administrators or other legal
representatives.
14.Governing Law; Venue. This Policy and all rights and obligations hereunder are governed by and construed in accordance with the internal laws of the State of
Delaware, excluding any choice of law rules or principles that may direct the application of the laws of another jurisdiction. All actions arising out of or relating to this
Policy shall be heard and determined exclusively in the Court of Chancery of the State of Delaware or, if such court declines to exercise jurisdiction or if subject matter
jurisdiction over the matter that is the subject of any such legal action or proceeding is vested exclusively in the U.S. Federal courts, the U.S. District Court for the
District of Delaware.
4
EXHIBIT A
AVITA MEDICAL, INC.
INCENTIVE-BASED COMPENSATION RECOVERY POLICY
ACKNOWLEDGEMENT FORM
By signing below, the undersigned acknowledges and confirms that the undersigned has received and reviewed a copy of the AVITA Medical, Inc. (and its subsidiaries
and affiliates) (the “Company”) Incentive-Based Compensation Recovery Policy (the “Policy”).
By signing this Acknowledgement Form, the undersigned acknowledges and agrees that the undersigned is and will continue to be subject to the Policy and that the
Policy will apply both during and after the undersigned’s employment with the Company. Further, by signing below, the undersigned agrees to abide by the terms of the
Policy, including, without limitation, by returning any Erroneously Awarded Compensation (as defined in the Policy) to the Company to the extent required by, and in a
manner consistent with, the Policy. Further, by signing below, the undersigned agrees that the terms of the Policy shall govern in the event of any inconsistency between
the Policy and the terms of any employment agreement to which the undersigned is a party, or the terms of any compensation plan, program or agreement under which
any compensation has been granted, awarded, earned or paid.
EXECUTIVE OFFICER
Signature
Print Name
Date
5