Under the Sublease, iBio CDMO is required to pay base rent at an annual rate of $2,100,000, paid in equal quarterly installments on the first day of each February, May, August and November. The base rent is subject to increase annually in accordance with increases in the Consumer Price Index. The base rent under the Sublandlord’s ground lease for the property is subject to adjustment, based on an appraisal of the property, in 2030 and upon any extension of the ground lease. The base rent under the Sublease will be increased by any increase in the base rent under the ground lease as a result of such adjustments. In addition to the base rent, iBio CDMO is required to pay, for each calendar year during the term, a portion of the total gross sales for products manufactured or processed at the facility, equal to 7% of the first $5,000,000 of gross sales, 6% of gross sales between $5,000,001 and $25,000,000, 5% of gross sales between $25,000,001 and $50,000,000, 4% of gross sales between $50,000,001 and $100,000,000, and 3% of gross sales between $100,000,001 and $500,000,000. However, if for any calendar year period from January 1, 2018 through December 31, 2019, iBio CDMO’s applicable gross sales are less than $5,000,000, or for any calendar year period from and after January 1, 2020, its applicable gross sales are less than $10,000,000, then iBio CDMO is required to pay the amount that would have been payable if it had achieved such minimum gross sales and shall pay no less than the applicable percentage for the minimum gross sales for each subsequent calendar year. iBio CDMO is responsible for all costs and expenses in connection with the ownership, management, operation, replacement, maintenance and repair of the property under the Sublease. General and administrative expenses related to the Sublease were approximately $1,051,000 and $852,000 for 2019 and 2018, respectively. Interest expense incurred under the capital lease obligation amounted to $1,900,000 and $1,915,000 for 2019 and 2018, respectively.
Director Consulting Agreement
Effective as of May 1, 2019, the Company entered into a Statement of Work (the “May 1 2019 SOW”) pursuant to a Consulting Agreement, dated as of February 20, 2019, between the Company and i.e.Advising, LLC (the “Consultant”). Mr. Isett is the Managing Director and sole owner of the Consultant. The Consultant has been retained by the Company as a strategy and management consultant, with services to be provided pursuant to statements of work that may be entered into between the Company and Consultant from time to time. The May 1, 2019 SOW has a term from May 1, 2019 to August 31, 2019. The May 1 2019 SOW was amended to extend the term to October 31, 2019. The engagement under the May 1, 2019 SOW is being conducted on a retainer basis for Mr. Isett, as the primary engagement resource, at a rate of $40,000 per month, and on a time and materials basis for all other engagement resources provided by Consultant, which are billable at the rate of $85.00 to $450 per hour. Consulting expenses totaled $168,348 in 2019. The Consultant and the Company entered into an additional Statement of Work on December 1, 2019, which provides that the Consultant is entitled to a bonus of 3% to 4.5% of the transaction value if the Company or any of its assets are sold during the term of the Statement of Work, which ends on December 31, 2020 (together with the May 1 2019 SOW, the “SOWs”).
On April 1, 2019, the Company appointed Mr. Isett to its Board of Directors.
Research and Development Services Vendor
In January 2012, the Company entered into an agreement with Novici in which iBio’s President is a minority stockholder. Novici performs technology development services for iBio, including laboratory feasibility analyses of gene expression, protein purification and preparation of research samples. The accounts payable balance includes amounts due to Novici of approximately $65,000 and $181,000 at June 30, 2019 and 2018, respectively. Research and development expenses related to Novici were approximately $954,000 and $877,000 for 2019 and 2018, respectively.
Limitation of Liability of Officers and Directors and Indemnification
Our certificate of incorporation, as amended, provides for indemnification of our officers and directors to the extent permitted by Delaware law, which generally permits indemnification for actions taken by officers or directors as our representatives if the officer or director acted in good faith and in a manner he or she reasonably believed to be in the best interest of the corporation.
As permitted under Delaware law, the by-laws contain a provision indemnifying directors against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by them in connection with an action, suit or proceeding if they acted in good faith and