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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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93-0979187
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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11500 South Eastern Avenue, Suite 240
Henderson, Nevada
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89052
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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¨
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Accelerated filer
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ý
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Emerging Growth Company
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¨
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Item
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Page
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PART I. FINANCIAL INFORMATION
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Item 1.
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Condensed Consolidated Financial Statements (unaudited):
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||
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Item 2.
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Item 3.
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Item 4.
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PART II. OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 6.
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June 30,
2018 |
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December 31,
2017 |
||||
ASSETS
|
|
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|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
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$
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174,371
|
|
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$
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227,323
|
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Marketable securities
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95,287
|
|
|
248
|
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Accounts receivable, net of allowance for doubtful accounts of $70 and $71, respectively
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27,658
|
|
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32,260
|
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Other receivables
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2,915
|
|
|
2,133
|
|
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Inventories
|
4,520
|
|
|
5,715
|
|
||
Prepaid expenses and other assets
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4,769
|
|
|
10,067
|
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Total current assets
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309,520
|
|
|
277,746
|
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Property and equipment, net of accumulated depreciation
|
523
|
|
|
589
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Intangible assets, net of accumulated amortization
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123,214
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137,159
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Goodwill
|
18,106
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18,162
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Other assets
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13,159
|
|
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53,783
|
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Total assets
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$
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464,522
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|
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$
|
487,439
|
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LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable and other accrued liabilities
|
$
|
49,886
|
|
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$
|
58,117
|
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Accrued payroll and benefits
|
4,946
|
|
|
9,261
|
|
||
Deferred revenue
|
—
|
|
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3,872
|
|
||
FOLOTYN development liability
|
211
|
|
|
275
|
|
||
Convertible senior notes
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39,427
|
|
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38,224
|
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Total current liabilities
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94,470
|
|
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109,749
|
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FOLOTYN development liability, less current portion
|
11,980
|
|
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12,111
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Deferred revenue, less current portion
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—
|
|
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315
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|
||
Acquisition-related contingent obligations
|
6,755
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|
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6,272
|
|
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Deferred tax liabilities
|
1,447
|
|
|
1,438
|
|
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Other long-term liabilities
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5,751
|
|
|
6,215
|
|
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Total liabilities
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120,403
|
|
|
136,100
|
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Commitments and contingencies
|
|
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Stockholders’ equity:
|
|
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|
||||
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares issued and outstanding
|
—
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—
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Common stock, $0.001 par value; 300,000,000 shares authorized; 105,130,603 and 100,742,735 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively
|
103
|
|
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100
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Additional paid-in capital
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829,052
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837,347
|
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Accumulated other comprehensive (loss) income
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(3,088
|
)
|
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15,999
|
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Accumulated deficit
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(481,948
|
)
|
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(502,107
|
)
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Total stockholders’ equity
|
344,119
|
|
|
351,339
|
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Total liabilities and stockholders’ equity
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$
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464,522
|
|
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$
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487,439
|
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Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
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2018
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2017
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2018
|
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2017
|
||||||||
Revenues:
|
|
|
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|
|
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||||||||
Product sales, net
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$
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23,753
|
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$
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31,156
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|
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$
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51,863
|
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$
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57,001
|
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License fees and service revenue
|
415
|
|
|
3,145
|
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2,799
|
|
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6,401
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|
||||
Total revenues
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$
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24,168
|
|
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$
|
34,301
|
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$
|
54,662
|
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$
|
63,402
|
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Operating costs and expenses:
|
|
|
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|
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||||||||
Cost of sales (excludes amortization of intangible assets)
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6,606
|
|
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11,303
|
|
|
13,420
|
|
|
19,439
|
|
||||
Cost of service revenue
|
—
|
|
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2,118
|
|
|
—
|
|
|
4,221
|
|
||||
Selling, general and administrative
|
23,451
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|
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17,421
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|
|
47,556
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|
|
36,525
|
|
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Research and development
|
21,488
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|
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15,167
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|
|
39,382
|
|
|
29,945
|
|
||||
Amortization of intangible assets
|
6,934
|
|
|
6,901
|
|
|
13,880
|
|
|
13,790
|
|
||||
Total operating costs and expenses
|
58,479
|
|
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52,910
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|
|
114,238
|
|
|
103,920
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|
||||
Loss from operations
|
(34,311
|
)
|
|
(18,609
|
)
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(59,576
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)
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(40,518
|
)
|
||||
Other income (expense):
|
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|
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||||||||
Interest expense, net
|
(242
|
)
|
|
(2,131
|
)
|
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(472
|
)
|
|
(4,182
|
)
|
||||
Change in fair value of contingent consideration related to acquisitions
|
(192
|
)
|
|
(97
|
)
|
|
(483
|
)
|
|
(294
|
)
|
||||
Other income, net
|
48,492
|
|
|
240
|
|
|
58,463
|
|
|
650
|
|
||||
Total other income (expense)
|
48,058
|
|
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(1,988
|
)
|
|
57,508
|
|
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(3,826
|
)
|
||||
Income (loss) before income taxes
|
13,747
|
|
|
(20,597
|
)
|
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(2,068
|
)
|
|
(44,344
|
)
|
||||
Provision for income taxes
|
(3
|
)
|
|
(255
|
)
|
|
(6
|
)
|
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(54
|
)
|
||||
Net income (loss)
|
$
|
13,744
|
|
|
$
|
(20,852
|
)
|
|
$
|
(2,074
|
)
|
|
$
|
(44,398
|
)
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.13
|
|
|
$
|
(0.27
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.57
|
)
|
Diluted
(Note 7)
|
$
|
0.13
|
|
|
$
|
(0.27
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.57
|
)
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
102,597,059
|
|
|
78,576,260
|
|
|
101,747,416
|
|
|
78,366,610
|
|
||||
Diluted
|
112,617,150
|
|
|
78,576,260
|
|
|
101,747,416
|
|
|
78,366,610
|
|
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Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net income (loss)
|
$
|
13,744
|
|
|
$
|
(20,852
|
)
|
|
$
|
(2,074
|
)
|
|
$
|
(44,398
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
Unrealized loss on available-for-sale securities, net of income tax benefit of $960, and $0 for the three and six months ended June 30, 2017
|
—
|
|
|
(2,951
|
)
|
|
—
|
|
|
(1,144
|
)
|
||||
Cumulative effect of
ASU 2016-01
adoption on January 1, 2018 for unrealized gains on equity securities, net of income tax; recorded as a reclassification to "accumulated deficit" (see
Note 3(a)
)
|
—
|
|
|
—
|
|
|
(17,211
|
)
|
|
—
|
|
||||
Foreign currency translation adjustments
|
(2,269
|
)
|
|
792
|
|
|
(1,876
|
)
|
|
944
|
|
||||
Other comprehensive loss
|
(2,269
|
)
|
|
(2,159
|
)
|
|
(19,087
|
)
|
|
(200
|
)
|
||||
Total comprehensive income (loss)
|
$
|
11,475
|
|
|
$
|
(23,011
|
)
|
|
$
|
(21,161
|
)
|
|
$
|
(44,598
|
)
|
|
Six Months Ended
June 30, |
||||||
|
2018
|
|
2017
|
||||
Cash Flows From Operating Activities:
|
|
|
|
||||
Net loss
|
$
|
(2,074
|
)
|
|
$
|
(44,398
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
13,993
|
|
|
13,961
|
|
||
Stock-based compensation
|
9,211
|
|
|
7,207
|
|
||
Accretion of debt discount on 2018 Convertible Notes, recorded to interest expense
(Note 13)
|
1,079
|
|
|
2,794
|
|
||
Amortization of deferred financing costs on 2018 Convertible Notes, recorded to interest expense (
Note 13
)
|
124
|
|
|
321
|
|
||
Unrealized gains from transactions denominated in foreign currency
|
10
|
|
|
(15
|
)
|
||
Change in cash surrender value of corporate-owned life insurance policy
|
(5
|
)
|
|
(153
|
)
|
||
Deferred tax liabilities
|
9
|
|
|
127
|
|
||
Income tax recognition on unrealized gain for available-for-sale securities
|
—
|
|
|
—
|
|
||
Unrealized gains on marketable securities (
Note 3(a)
)
|
(58,634
|
)
|
|
—
|
|
||
Change in fair value of contingent consideration related to the Talon and EVOMELA acquisitions (
Note 9
)
|
483
|
|
|
294
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
5,087
|
|
|
(2,105
|
)
|
||
Other receivables
|
(781
|
)
|
|
1,299
|
|
||
Inventories
|
816
|
|
|
428
|
|
||
Prepaid expenses
|
1,167
|
|
|
(439
|
)
|
||
Other assets
|
3,451
|
|
|
863
|
|
||
Accounts payable and other accrued obligations
|
(8,210
|
)
|
|
3,519
|
|
||
Accrued payroll and benefits
|
(4,314
|
)
|
|
(2,737
|
)
|
||
FOLOTYN development liability
|
(195
|
)
|
|
(567
|
)
|
||
Deferred revenue
|
—
|
|
|
(700
|
)
|
||
Other long-term liabilities
|
(464
|
)
|
|
847
|
|
||
Net cash used in operating activities
|
(39,247
|
)
|
|
(19,454
|
)
|
||
Cash Flows From Investing Activities:
|
|
|
|
||||
Proceeds from redemption of corporate-owned life insurance policy
|
4,130
|
|
|
—
|
|
||
Payment for corporate-owned life insurance premiums
|
—
|
|
|
(601
|
)
|
||
Redemption of mutual funds
|
—
|
|
|
(1
|
)
|
||
Purchases of property and equipment
|
(46
|
)
|
|
(167
|
)
|
||
Net cash provided by (used in) investing activities
|
4,084
|
|
|
(769
|
)
|
||
Cash Flows From Financing Activities:
|
|
|
|
||||
Proceeds from employees for exercises of stock options
|
4,804
|
|
|
1,010
|
|
||
Proceeds from sale of stock under employee stock purchase plan
|
734
|
|
|
406
|
|
||
Proceeds from employees, for our remittance to tax authorities, related to employee vesting of restricted stock and stock option exercises
|
4,645
|
|
|
—
|
|
||
Payments to tax authorities related to employee surrender of vested restricted stock and stock option exercises
|
(27,686
|
)
|
|
(1,284
|
)
|
||
Net cash (used in) provided by financing activities
|
(17,503
|
)
|
|
132
|
|
||
Effect of exchange rates on cash and equivalents
|
(286
|
)
|
|
182
|
|
||
Net decrease in cash and cash equivalents
|
(52,952
|
)
|
|
(19,909
|
)
|
||
Cash and cash equivalents—beginning of period
|
227,323
|
|
|
158,222
|
|
||
Cash and cash equivalents—end of period
|
$
|
174,371
|
|
|
$
|
138,313
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for income taxes
|
$
|
27
|
|
|
$
|
10
|
|
Cash paid for interest
|
$
|
558
|
|
|
$
|
1,513
|
|
•
|
poziotinib, a novel pan-HER inhibitor used in the treatment of patients with a variety of solid tumors, including breast and lung cancer;
|
•
|
ROLONTIS for chemotherapy-induced neutropenia; and
|
•
|
QAPZOLA for immediate intravesical instillation in post-transurethral resection of bladder tumors in patients with non-muscle invasive bladder cancer (“NMIBC”).
|
(1)
|
we ensure that we have an executed contract(s) with our customer that we believe is legally enforceable;
|
(2)
|
we identify the “performance obligations” in the respective contract;
|
(3)
|
we determine the “transaction price” for each performance obligation in the respective contract;
|
(4)
|
we allocate the transaction price to each performance obligation; and
|
(5)
|
we recognize revenue only when we satisfy each performance obligation.
|
•
|
When our licensee is responsible for the achievement of the regulatory milestone, we recognize revenue in full (for the contractual amount due from our licensee) in the period that the approval occurs (i.e., when the “performance obligation” is satisfied by our customer) under the “most likely amount” method. This revenue recognition remains “constrained” (i.e., not recognized) until regulatory approval occurs, given its inherent uncertainty and the requirement of a significant revenue reversal not being probable if achievement does not occur. At each reporting period, we re-evaluate the probability of milestone achievement and the associated revenue constraint; any resulting adjustments would be recorded on a cumulative catch-up basis, thus reflected in our financial statements in the period of adjustment.
|
•
|
When we are responsible for the achievement of a regulatory milestone, the “relative selling price method” is applied for purposes of allocating the transaction price to our performance obligations. In such case, we consider (i) the extent of our effort to achieve the milestone and/or the enhancement of the value of the delivered item(s) as a result of milestone achievement and (ii) if the milestone payment is reasonable relative to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement. We have historically assessed the contractual value of these milestones upon their achievement to be identical to the allocation of value of our performance obligations and thus representing the “transaction price” for each milestone at contract inception. We recognize this revenue in the period that the regulatory approval occurs (i.e., when we complete the “performance obligation”) under the “most likely amount” method, and revenue recognition is otherwise “constrained” until regulatory approval occurs, given its inherent uncertainty and the requirement of a significant revenue reversal not being probable if achievement does not occur. At each reporting period, we re-evaluate the probability of milestone achievement and the associated revenue constraint; any resulting adjustments would be recorded on a cumulative catch-up basis, thus reflected in our financial statements in the period of adjustment.
|
(a)
|
a significant decrease in the market value of an asset;
|
(b)
|
a significant adverse change in the extent or manner in which an asset is used; or
|
(c)
|
an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Cost
|
|
Foreign Currency Translation
|
|
Gross
Unrealized Gains* |
|
Gross
Unrealized Losses |
|
Estimated
Fair Value |
|
Cash and Cash
Equivalents |
|
Marketable Securities
|
||||||||||||||
June 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Equity securities* (see
Note 3(g) and Note 10
)
|
$
|
8,710
|
|
|
$
|
(1,747
|
)
|
|
$
|
88,075
|
|
|
$
|
—
|
|
|
$
|
95,038
|
|
|
$
|
—
|
|
|
$
|
95,038
|
|
Bank deposits
|
10,769
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,769
|
|
|
10,769
|
|
|
—
|
|
|||||||
Money market funds
|
163,602
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
163,602
|
|
|
163,602
|
|
|
—
|
|
|||||||
Bank certificates of deposits
|
249
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
249
|
|
|
—
|
|
|
249
|
|
|||||||
Total cash and cash equivalents and marketable securities
|
$
|
183,330
|
|
|
$
|
(1,747
|
)
|
|
$
|
88,075
|
|
|
$
|
—
|
|
|
$
|
269,658
|
|
|
$
|
174,371
|
|
|
$
|
95,287
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Bank deposits
|
$
|
10,965
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,965
|
|
|
$
|
10,965
|
|
|
$
|
—
|
|
Money market funds
|
216,358
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
216,358
|
|
|
216,358
|
|
|
—
|
|
|||||||
Bank certificates of deposits
|
248
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
248
|
|
|
—
|
|
|
248
|
|
|||||||
Total cash and cash equivalents and marketable securities
|
$
|
227,571
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
227,571
|
|
|
$
|
227,323
|
|
|
$
|
248
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Computer hardware and software
|
$
|
3,080
|
|
|
$
|
2,994
|
|
Laboratory equipment
|
635
|
|
|
630
|
|
||
Office furniture
|
212
|
|
|
218
|
|
||
Leasehold improvements
|
2,938
|
|
|
2,938
|
|
||
Property and equipment, at cost
|
6,865
|
|
|
6,780
|
|
||
(Less): Accumulated depreciation
|
(6,342
|
)
|
|
(6,191
|
)
|
||
Property and equipment, net of accumulated depreciation
|
$
|
523
|
|
|
$
|
589
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Raw materials
|
$
|
2,149
|
|
|
$
|
1,077
|
|
Work-in-process
|
3,204
|
|
|
2,551
|
|
||
Finished goods
|
2,647
|
|
|
5,187
|
|
||
(Less:) Non-current portion of inventories included within "other assets" *
|
(3,480
|
)
|
|
(3,100
|
)
|
||
Inventories
|
$
|
4,520
|
|
|
$
|
5,715
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Other miscellaneous prepaid operating expenses
|
$
|
3,900
|
|
|
$
|
3,389
|
|
Prepaid insurance
|
761
|
|
|
645
|
|
||
Research and development supplies
|
108
|
|
|
1,883
|
|
||
Key employee life insurance - cash surrender value
|
—
|
|
|
4,150
|
|
||
Prepaid expenses and other assets
|
$
|
4,769
|
|
|
$
|
10,067
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Other miscellaneous receivables*
|
$
|
968
|
|
|
$
|
1,152
|
|
Income tax receivable
|
638
|
|
|
665
|
|
||
Insurance receivable
|
1,130
|
|
|
53
|
|
||
Reimbursements due from development partners for incurred research and development expenses
|
179
|
|
|
263
|
|
||
Other receivables
|
$
|
2,915
|
|
|
$
|
2,133
|
|
|
|
|
June 30, 2018
|
||||||||||||||||||||
|
Historical
Cost |
|
Accumulated
Amortization |
|
Foreign
Currency Translation |
|
Impairment
|
|
Net Amount
|
|
Full
Amortization Period (months) |
|
Remaining
Amortization Period (months) |
||||||||||
MARQIBO IPR&D (NHL and other novel indications)
|
$
|
17,600
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17,600
|
|
|
n/a
|
|
n/a
|
EVOMELA distribution rights
|
7,700
|
|
|
(1,333
|
)
|
|
—
|
|
|
—
|
|
|
6,367
|
|
|
156
|
|
129
|
|||||
BELEODAQ distribution rights
|
25,000
|
|
|
(7,500
|
)
|
|
—
|
|
|
—
|
|
|
17,500
|
|
|
160
|
|
112
|
|||||
MARQIBO distribution rights
|
26,900
|
|
|
(19,342
|
)
|
|
—
|
|
|
—
|
|
|
7,558
|
|
|
81
|
|
21
|
|||||
FOLOTYN distribution rights
(1)
|
118,400
|
|
|
(60,649
|
)
|
|
—
|
|
|
—
|
|
|
57,751
|
|
|
152
|
|
53
|
|||||
ZEVALIN distribution rights – U.S.
|
41,900
|
|
|
(39,294
|
)
|
|
—
|
|
|
—
|
|
|
2,606
|
|
|
123
|
|
9
|
|||||
ZEVALIN distribution rights – ex-U.S.
|
23,490
|
|
|
(17,624
|
)
|
|
(2,994
|
)
|
|
—
|
|
|
2,872
|
|
|
96
|
|
21
|
|||||
FUSILEV distribution rights
(2)
|
16,778
|
|
|
(9,618
|
)
|
|
—
|
|
|
(7,160
|
)
|
|
—
|
|
|
56
|
|
0
|
|||||
FOLOTYN out-license
(3)
|
27,900
|
|
|
(15,917
|
)
|
|
—
|
|
|
(1,023
|
)
|
|
10,960
|
|
|
110
|
|
49
|
|||||
Total intangible assets
|
$
|
305,668
|
|
|
$
|
(171,277
|
)
|
|
$
|
(2,994
|
)
|
|
$
|
(8,183
|
)
|
|
$
|
123,214
|
|
|
|
|
|
(1)
|
Beginning June 2016, we adjusted the amortization period of our FOLOTYN distribution rights to November 2022 from March 2025, representing the period through which we expect to have patent protection from generic competition (see
Note 16(g)
).
|
(2)
|
On February 20, 2015, the United States District Court for the District of Nevada found the patent covering FUSILEV to be invalid, which was upheld on appeal. On April 24, 2015, Sandoz began to commercialize a generic version of FUSILEV. This represented a “triggering event” under applicable GAAP in evaluating the value of our FUSILEV distribution rights as of March 31, 2015, resulting in a
$7.2 million
impairment charge (non-cash) in the first quarter of 2015. We accelerated amortization expense recognition in 2015 for the then remaining net book value of FUSILEV distribution rights.
|
(3)
|
On May 29, 2013, we amended our FOLOTYN collaboration agreement with Mundipharma. As a result of the amendment, Europe and Turkey were excluded from Mundipharma’s commercialization territory, and their royalty rates and milestone payments to us were modified. This constituted a change under which we originally valued the FOLOTYN out-license as part of business combination accounting, resulting in an impairment charge (non-cash) of
$1.0 million
in the second quarter of 2013.
|
|
|
|
December 31, 2017
|
||||||||||||||||
|
Historical
Cost |
|
Accumulated
Amortization |
|
Foreign
Currency Translation |
|
Impairment
|
|
Net Amount
|
||||||||||
MARQIBO IPR&D (NHL and other novel indications)
|
$
|
17,600
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17,600
|
|
EVOMELA distribution rights
|
7,700
|
|
|
(1,037
|
)
|
|
—
|
|
|
—
|
|
|
6,663
|
|
|||||
BELEODAQ distribution rights
|
25,000
|
|
|
(6,563
|
)
|
|
—
|
|
|
—
|
|
|
18,437
|
|
|||||
MARQIBO distribution rights
|
26,900
|
|
|
(17,182
|
)
|
|
—
|
|
|
—
|
|
|
9,718
|
|
|||||
FOLOTYN distribution rights
|
118,400
|
|
|
(54,111
|
)
|
|
—
|
|
|
—
|
|
|
64,289
|
|
|||||
ZEVALIN distribution rights – U.S.
|
41,900
|
|
|
(37,557
|
)
|
|
—
|
|
|
—
|
|
|
4,343
|
|
|||||
ZEVALIN distribution rights – Ex-U.S.
|
23,490
|
|
|
(17,232
|
)
|
|
(2,471
|
)
|
|
—
|
|
|
3,787
|
|
|||||
FUSILEV distribution rights
|
16,778
|
|
|
(9,618
|
)
|
|
—
|
|
|
(7,160
|
)
|
|
—
|
|
|||||
FOLOTYN out-license
|
27,900
|
|
|
(14,555
|
)
|
|
—
|
|
|
(1,023
|
)
|
|
12,322
|
|
|||||
Total intangible assets
|
$
|
305,668
|
|
|
$
|
(157,855
|
)
|
|
$
|
(2,471
|
)
|
|
$
|
(8,183
|
)
|
|
$
|
137,159
|
|
Years Ending December 31,
|
|
||
Remainder of 2018
|
$
|
13,850
|
|
2019
|
25,095
|
|
|
2020
|
19,756
|
|
|
2021
|
18,266
|
|
|
2022
|
15,882
|
|
|
2023
|
2,467
|
|
|
2024 and thereafter
|
10,298
|
|
|
|
$
|
105,614
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Acquisition of Talon (MARQIBO rights)
|
$
|
10,526
|
|
|
$
|
10,526
|
|
Acquisition of ZEVALIN Ex-U.S. distribution rights
|
2,525
|
|
|
2,525
|
|
||
Acquisition of Allos (FOLOTYN rights)
|
5,346
|
|
|
5,346
|
|
||
Foreign currency exchange translation effects
|
(291
|
)
|
|
(235
|
)
|
||
Goodwill
|
$
|
18,106
|
|
|
$
|
18,162
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Equity securities (see
Note 10
)*
|
$
|
—
|
|
|
$
|
37,530
|
|
Key employee life insurance – cash surrender value
|
6,123
|
|
|
10,737
|
|
||
Inventories - non-current portion
|
3,480
|
|
|
3,100
|
|
||
Promissory note receivable - long term (see
Note 10
)
|
1,521
|
|
|
1,517
|
|
||
Income tax receivable**
|
668
|
|
|
668
|
|
||
Research & development supplies and other
|
1,367
|
|
|
231
|
|
||
Other assets
|
$
|
13,159
|
|
|
$
|
53,783
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Trade accounts payable and other accrued liabilities
|
$
|
29,370
|
|
|
$
|
33,648
|
|
Accrued rebates
|
6,904
|
|
|
7,990
|
|
||
Accrued product royalty
|
3,427
|
|
|
4,339
|
|
||
Allowance for returns
|
4,378
|
|
|
4,045
|
|
||
Accrued data and distribution fees
|
3,036
|
|
|
4,305
|
|
||
Accrued GPO administrative fees
|
230
|
|
|
296
|
|
||
Accrued inventory management fee
|
799
|
|
|
1,126
|
|
||
Allowance for chargebacks
|
1,742
|
|
|
2,368
|
|
||
Accounts payable and other accrued liabilities
|
$
|
49,886
|
|
|
$
|
58,117
|
|
|
Commercial/Medicaid Rebates and Government Chargebacks
|
|
Distribution, Data, Inventory and
GPO Administrative Fees |
|
Product Return Allowances
|
||||||
Balance as of December 31, 2016
|
$
|
9,817
|
|
|
$
|
5,146
|
|
|
$
|
2,309
|
|
Add: provisions
|
106,647
|
|
|
20,104
|
|
|
2,807
|
|
|||
(Less): credits or actual allowances
|
(106,106
|
)
|
|
(19,523
|
)
|
|
(1,071
|
)
|
|||
Balance as of December 31, 2017
|
10,358
|
|
|
5,727
|
|
|
4,045
|
|
|||
Add: provisions
|
33,083
|
|
|
7,094
|
|
|
898
|
|
|||
(Less): credits or actual allowances
|
(34,795
|
)
|
|
(8,756
|
)
|
|
(565
|
)
|
|||
Balance as of June 30, 2018
|
$
|
8,646
|
|
|
$
|
4,065
|
|
|
$
|
4,378
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
EVOMELA deferred revenue
|
$
|
—
|
|
|
$
|
3,819
|
|
ZEVALIN out-license in India territory (see
Note 15(b)(iii)
)
|
—
|
|
|
368
|
|
||
Deferred revenue*
|
$
|
—
|
|
|
$
|
4,187
|
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Accrued executive deferred compensation
|
$
|
5,212
|
|
|
$
|
5,928
|
|
Deferred rent (non-current portion)
|
1
|
|
|
52
|
|
||
Clinical study holdback fees, non-current
|
62
|
|
|
59
|
|
||
Other tax liabilities
|
176
|
|
|
176
|
|
||
Royalty liability
|
300
|
|
|
—
|
|
||
Other long-term liabilities
|
$
|
5,751
|
|
|
$
|
6,215
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Gross product sales
|
$
|
44,062
|
|
|
$
|
67,709
|
|
|
$
|
93,651
|
|
|
$
|
125,926
|
|
Commercial rebates and government chargebacks
|
(16,053
|
)
|
|
(30,001
|
)
|
|
(33,083
|
)
|
|
(57,324
|
)
|
||||
Data and distribution fees, GPO fees, and inventory management fees
|
(3,584
|
)
|
|
(5,176
|
)
|
|
(7,094
|
)
|
|
(9,640
|
)
|
||||
Prompt pay discounts
|
(323
|
)
|
|
(419
|
)
|
|
(713
|
)
|
|
(688
|
)
|
||||
Product returns
|
(349
|
)
|
|
(957
|
)
|
|
(898
|
)
|
|
(1,273
|
)
|
||||
Product sales, net
|
$
|
23,753
|
|
|
$
|
31,156
|
|
|
$
|
51,863
|
|
|
$
|
57,001
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||||||||
United States
|
$
|
21,347
|
|
|
89.9
|
%
|
|
$
|
29,064
|
|
|
93.3
|
%
|
|
$
|
44,545
|
|
|
85.9
|
%
|
|
$
|
52,865
|
|
|
92.7
|
%
|
International:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Europe/Canada
|
2,406
|
|
|
10.1
|
%
|
|
2,092
|
|
|
6.7
|
%
|
|
5,894
|
|
|
11.4
|
%
|
|
4,136
|
|
|
7.3
|
%
|
||||
Asia Pacific
|
—
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
1,424
|
|
|
2.7
|
%
|
|
—
|
|
|
—
|
%
|
||||
Total International
|
2,406
|
|
|
10.1
|
%
|
|
2,092
|
|
|
6.7
|
%
|
|
7,318
|
|
|
14.1
|
%
|
|
4,136
|
|
|
7.3
|
%
|
||||
Product sales, net
|
$
|
23,753
|
|
|
100.0
|
%
|
|
$
|
31,156
|
|
|
100.0
|
%
|
|
$
|
51,863
|
|
|
100.0
|
%
|
|
$
|
57,001
|
|
|
100.0
|
%
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||||||||
FOLOTYN
|
$
|
11,680
|
|
|
49.2
|
%
|
|
$
|
11,181
|
|
|
35.9
|
%
|
|
$
|
24,402
|
|
|
47.1
|
%
|
|
$
|
20,455
|
|
|
35.9
|
%
|
EVOMELA
|
5,779
|
|
|
24.3
|
%
|
|
10,058
|
|
|
32.3
|
%
|
|
13,913
|
|
|
26.8
|
%
|
|
16,359
|
|
|
28.7
|
%
|
||||
BELEODAQ
|
2,703
|
|
|
11.4
|
%
|
|
3,396
|
|
|
10.9
|
%
|
|
5,416
|
|
|
10.4
|
%
|
|
6,267
|
|
|
11.0
|
%
|
||||
ZEVALIN
|
1,638
|
|
|
6.9
|
%
|
|
2,297
|
|
|
7.4
|
%
|
|
4,661
|
|
|
9.0
|
%
|
|
5,144
|
|
|
9.0
|
%
|
||||
MARQIBO
|
1,149
|
|
|
4.8
|
%
|
|
2,163
|
|
|
6.9
|
%
|
|
2,043
|
|
|
3.9
|
%
|
|
4,142
|
|
|
7.3
|
%
|
||||
FUSILEV
|
804
|
|
|
3.4
|
%
|
|
2,061
|
|
|
6.6
|
%
|
|
1,428
|
|
|
2.8
|
%
|
|
4,634
|
|
|
8.1
|
%
|
||||
Product sales, net
|
$
|
23,753
|
|
|
100.0
|
%
|
|
$
|
31,156
|
|
|
100.0
|
%
|
|
$
|
51,863
|
|
|
100.0
|
%
|
|
$
|
57,001
|
|
|
100.0
|
%
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||||||||
Out-license of FOLOTYN in all countries except the United States, Canada, Europe, and Turkey: royalties (
Note 14
)
|
$
|
415
|
|
|
100.0
|
%
|
|
$
|
119
|
|
|
3.8
|
%
|
|
792
|
|
|
28.3
|
%
|
|
382
|
|
|
6.0
|
%
|
||
Out-license of ZEVALIN: recognition of milestone achievement, upfront cash receipt and subsequent royalties for Asia and certain other territories, excluding China (
Note 11
)
|
—
|
|
|
—
|
%
|
|
630
|
|
|
20.0
|
%
|
|
2,001
|
|
|
71.5
|
%
|
|
1,245
|
|
|
19.5
|
%
|
||||
Out-license of ZEVALIN: amortization of upfront cash receipt related to India territory (
Note 15(b)(iii)
) and other
|
—
|
|
|
—
|
%
|
|
12
|
|
|
0.4
|
%
|
|
6
|
|
|
0.2
|
%
|
|
24
|
|
|
0.4
|
%
|
||||
Out-license of ZEVALIN, FOLOTYN, BELEODAQ, MARQIBO: upfront cash receipt and subsequent royalties for the Canada territory (
Note 15(b)(xiv)
)
|
—
|
|
|
—
|
%
|
|
3
|
|
|
0.1
|
%
|
|
—
|
|
|
—
|
%
|
|
3
|
|
|
—
|
%
|
||||
Sales and marketing contracted services (
Note 12
)
|
—
|
|
|
—
|
%
|
|
2,381
|
|
|
75.7
|
%
|
|
|
|
|
—
|
%
|
|
4,747
|
|
|
74.2
|
%
|
||||
License fees and service revenues
|
$
|
415
|
|
|
100.0
|
%
|
|
$
|
3,145
|
|
|
100.0
|
%
|
|
$
|
2,799
|
|
|
100.0
|
%
|
|
$
|
6,401
|
|
|
100.0
|
%
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Cost of sales
|
$
|
80
|
|
|
$
|
51
|
|
|
$
|
146
|
|
|
$
|
81
|
|
Selling, general and administrative
|
3,832
|
|
|
2,888
|
|
|
7,522
|
|
|
6,126
|
|
||||
Research and development
|
822
|
|
|
548
|
|
|
1,543
|
|
|
1,000
|
|
||||
Total stock-based compensation
|
$
|
4,734
|
|
|
$
|
3,487
|
|
|
$
|
9,211
|
|
|
$
|
7,207
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Basic weighted average shares outstanding
|
102,597,059
|
|
|
78,576,260
|
|
|
101,747,416
|
|
|
78,366,610
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
2018 Convertible Notes
|
3,854,959
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Common stock options
|
3,870,462
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Restricted stock awards
|
1,797,089
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Restricted stock units
|
245,214
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Common stock warrants
|
252,368
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Diluted average shares outstanding
|
112,617,151
|
|
|
78,576,260
|
|
|
101,747,416
|
|
|
78,366,610
|
|
||||
Net income (loss) as reported
|
$
|
13,744
|
|
|
$
|
(20,852
|
)
|
|
$
|
(2,074
|
)
|
|
$
|
(44,398
|
)
|
Interest attributable to 2018 Convertible Notes
|
886
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net income (loss) for diluted earnings per share
|
$
|
14,630
|
|
|
$
|
(20,852
|
)
|
|
$
|
(2,074
|
)
|
|
$
|
(44,398
|
)
|
Net income (loss) per share – basic
|
$
|
0.13
|
|
|
$
|
(0.27
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.57
|
)
|
Net income (loss) per share – diluted
|
$
|
0.13
|
|
|
$
|
(0.27
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.57
|
)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
2018 Convertible Notes
|
—
|
|
|
10,454,799
|
|
|
3,854,959
|
|
|
10,454,799
|
|
Common stock options
|
—
|
|
|
1,271,207
|
|
|
4,396,587
|
|
|
1,110,474
|
|
Restricted stock awards
|
—
|
|
|
2,166,299
|
|
|
1,797,089
|
|
|
2,166,299
|
|
Restricted stock units
|
—
|
|
|
217,206
|
|
|
245,214
|
|
|
217,206
|
|
Common stock warrants
|
—
|
|
|
13,337
|
|
|
257,039
|
|
|
1,813
|
|
Total
|
—
|
|
|
14,122,848
|
|
|
10,550,888
|
|
|
13,950,591
|
|
|
June 30, 2018
Fair Value Measurements |
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Bank certificates of deposits
|
$
|
—
|
|
|
$
|
249
|
|
|
$
|
—
|
|
|
$
|
249
|
|
|
Money market funds
|
—
|
|
|
163,602
|
|
|
—
|
|
|
163,602
|
|
|
||||
Equity securities (
Note 3(a)
)
|
95,038
|
|
|
—
|
|
|
—
|
|
|
95,038
|
|
|
||||
Mutual funds
|
—
|
|
|
101
|
|
|
—
|
|
|
101
|
|
|
||||
Deferred compensation investments (life insurance cash surrender value -
Note 3(g)
)
|
—
|
|
|
6,123
|
|
|
—
|
|
|
6,123
|
|
*
|
||||
|
$
|
95,038
|
|
|
$
|
170,075
|
|
|
$
|
—
|
|
|
$
|
265,113
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Deferred executive compensation liability (
Note 15(f)
)
|
$
|
—
|
|
|
$
|
5,973
|
|
|
$
|
—
|
|
|
$
|
5,973
|
|
*
|
Drug development liability (
Note 14
)
|
—
|
|
|
—
|
|
|
12,191
|
|
|
12,191
|
|
|
||||
Talon CVR (
Note 9(a)
)
|
—
|
|
|
—
|
|
|
6,693
|
|
|
6,693
|
|
|
||||
Corixa Liability (
Note 15(b)(i)
)
|
—
|
|
|
—
|
|
|
62
|
|
|
62
|
|
|
||||
|
$
|
—
|
|
|
$
|
5,973
|
|
|
$
|
18,946
|
|
|
$
|
24,919
|
|
|
|
December 31, 2017
Fair Value Measurements |
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Bank certificates of deposits
|
$
|
—
|
|
|
$
|
248
|
|
|
$
|
—
|
|
|
$
|
248
|
|
|
Money market funds
|
—
|
|
|
216,358
|
|
|
—
|
|
|
216,358
|
|
|
||||
Equity securities (
Note 10
)
|
37,530
|
|
|
—
|
|
|
—
|
|
|
37,530
|
|
|
||||
Mutual funds
|
—
|
|
|
59
|
|
|
—
|
|
|
59
|
|
|
||||
Deferred compensation investments (life insurance cash surrender value)
|
—
|
|
|
14,887
|
|
|
—
|
|
|
14,887
|
|
*
|
||||
|
$
|
37,530
|
|
|
$
|
231,552
|
|
|
$
|
—
|
|
|
$
|
269,082
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Deferred executive compensation liability (
Note 15(f)
)
|
$
|
—
|
|
|
$
|
11,038
|
|
|
$
|
—
|
|
|
$
|
11,038
|
|
*
|
Drug development liability (
Note 14
)
|
—
|
|
|
—
|
|
|
12,386
|
|
|
12,386
|
|
|
||||
Talon CVR (
Note 9(a)
)
|
—
|
|
|
—
|
|
|
6,210
|
|
|
6,210
|
|
|
||||
Corixa Liability (
Note 15(b)(i)
)
|
—
|
|
|
—
|
|
|
62
|
|
|
62
|
|
|
||||
|
$
|
—
|
|
|
$
|
11,038
|
|
|
$
|
18,658
|
|
|
$
|
29,696
|
|
|
|
Fair Value Measurements of
Unobservable Inputs (Level 3) |
||
Balance as of December 31, 2016
|
$
|
14,445
|
|
FOLOTYN development liability (see
Note 14
)
|
(744
|
)
|
|
Talon CVR fair value adjustment - MARQIBO (see
Note 9(a)
)
|
4,957
|
|
|
Balance as of December 31, 2017
|
18,658
|
|
|
FOLOTYN development liability (see
Note 14
)
|
(195
|
)
|
|
Talon CVR fair value adjustment - MARQIBO (see
Note 9(a)
)
|
483
|
|
|
Balance as of June 30, 2018
|
$
|
18,946
|
|
•
|
$5 million
upon the achievement of net sales of MARQIBO in excess of
$30 million
in any calendar year
|
•
|
$10 million
upon the achievement of net sales of MARQIBO in excess of
$60 million
in any calendar year
|
•
|
$25 million
upon the achievement of net sales of MARQIBO in excess of
$100 million
in any calendar year
|
•
|
$50 million
upon the achievement of net sales of MARQIBO in excess of
$200 million
in any calendar year
|
•
|
$100 million
upon the achievement of net sales of MARQIBO in excess of
$400 million
in any calendar year; and
|
•
|
$5 million
upon receipt of marketing authorization from the FDA regarding Menadione Topical Lotion
|
|
Fair Value
of Talon CVR |
||
December 31, 2017
|
$
|
6,210
|
|
Fair value adjustment for the six months ended June 30, 2018
|
483
|
|
|
June 30, 2018
|
$
|
6,693
|
|
|
|
||
Cash consideration
|
$
|
3,000
|
|
Ligand contingent consideration
|
4,700
|
|
|
Total purchase consideration
|
$
|
7,700
|
|
EVOMELA IPR&D rights
|
$
|
7,700
|
|
CASI common stock (5.4 million shares)
|
$
|
8,649
|
|
(a)
|
CASI secured promissory note, net of fair value discount ($1.5 million face value and 0.5% annual coupon)
|
1,310
|
|
(b)
|
|
Total consideration received, net of fair value discount
|
$
|
9,959
|
|
(c)
|
(a)
|
Value determined based on the September 17, 2014 closing price of
5.4 million
shares of CASI common stock on the NASDAQ Capital Market of
$1.60
per share.
|
(b)
|
Value estimated using the terms of the
$1.5 million
promissory note, the application of a synthetic debt rating based on CASI’s publicly-available financial information, and the prevailing interest yields on similar public debt securities as of September 17, 2014. This full balance was reclassified beginning December 31, 2017 to “other assets” (presented within non-current assets on the accompanying Condensed Consolidated Balance Sheets) from “other receivables” (presented within current assets) due to an amended maturity date of September 17, 2019.
|
(c)
|
Presented within “license fees and service revenue” in the Consolidated Statements of Operations for the year ended December 31, 2015 (see below).
|
|
June 30, 2018
|
|
December 31, 2017
|
||||
Principal amount
|
$
|
40,565
|
|
|
$
|
40,565
|
|
(Less): Unamortized debt discount (amortized through December 2018)
|
(1,022
|
)
|
|
(2,101
|
)
|
||
(Less): Debt issuance costs
|
(116
|
)
|
|
(240
|
)
|
||
Carrying value
|
$
|
39,427
|
|
|
$
|
38,224
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
||||||||||||
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Contractual coupon interest expense
|
$
|
279
|
|
|
$
|
757
|
|
|
$
|
558
|
|
|
$
|
1,513
|
|
Amortization of debt issuance costs
|
62
|
|
|
155
|
|
|
124
|
|
|
321
|
|
||||
Accretion of debt discount
|
545
|
|
|
1,412
|
|
|
1,079
|
|
|
2,794
|
|
||||
Total
|
$
|
886
|
|
|
$
|
2,324
|
|
|
$
|
1,761
|
|
|
$
|
4,628
|
|
Effective interest rate
|
8.41
|
%
|
|
8.65
|
%
|
|
8.41
|
%
|
|
8.65
|
%
|
|
FOLOTYN
Development Liability, Current |
|
FOLOTYN
Development Liability, Long Term |
|
FOLOTYN
Development Liability, Total |
||||||
Balance as of December 31, 2017
|
$
|
275
|
|
|
$
|
12,111
|
|
|
$
|
12,386
|
|
Transfer from long-term to current in 2018
|
131
|
|
|
(131
|
)
|
|
—
|
|
|||
(Less): Expenses incurred in 2018
|
(195
|
)
|
|
—
|
|
|
(195
|
)
|
|||
Balance as of June 30, 2018
|
$
|
211
|
|
|
$
|
11,980
|
|
|
$
|
12,191
|
|
Description of Financing Transaction
|
|
No. of Common Shares Issued
|
|
Proceeds Received (Net of Broker Commissions and Fees )
|
|||
Common shares issued pursuant to the December 2015 ATM Agreement during the year ended December 31, 2016
|
|
10,890,915
|
|
|
$
|
73,869
|
|
Common shares issued pursuant to the December 2015 ATM Agreement between July 1, 2017 and July 31, 2017
|
|
3,243,882
|
|
|
$
|
23,745
|
|
Common shares issued pursuant to the August 2017 ATM Agreement between August 1, 2017 and December 31, 2017
|
|
10,314,250
|
|
|
$
|
104,527
|
|
|
|
Three Months Ended June 30, 2017
|
|
Six Months Ended June 30, 2017
|
||||||||||||
|
|
As Previously Reported
|
|
As Restated
|
|
As Previously Reported
|
|
As Restated
|
||||||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative
|
|
$
|
17,107
|
|
|
$
|
17,421
|
|
|
$
|
35,715
|
|
|
$
|
36,525
|
|
Research and development
|
|
15,097
|
|
|
15,167
|
|
|
29,792
|
|
|
29,945
|
|
||||
Total operating costs and expenses
|
|
52,526
|
|
|
52,910
|
|
|
102,957
|
|
|
103,920
|
|
||||
Loss from operations
|
|
(18,225
|
)
|
|
(18,609
|
)
|
|
(39,555
|
)
|
|
(40,518
|
)
|
||||
Loss before income taxes
|
|
(20,213
|
)
|
|
(20,597
|
)
|
|
(43,381
|
)
|
|
(44,344
|
)
|
||||
Net loss
|
|
$
|
(20,468
|
)
|
|
$
|
(20,852
|
)
|
|
$
|
(43,435
|
)
|
|
$
|
(44,398
|
)
|
Net loss per share:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
(0.26
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.55
|
)
|
|
$
|
(0.57
|
)
|
Diluted
|
|
$
|
(0.26
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.55
|
)
|
|
$
|
(0.57
|
)
|
|
|
Three Months Ended June 30, 2017
|
|
Six Months Ended June 30, 2017
|
||||||||||||
|
|
As Previously Reported
|
|
As Restated
|
|
As Previously Reported
|
|
As Restated
|
||||||||
Net loss
|
|
$
|
(20,468
|
)
|
|
$
|
(20,852
|
)
|
|
$
|
(43,435
|
)
|
|
$
|
(44,398
|
)
|
Total comprehensive loss
|
|
$
|
(22,627
|
)
|
|
$
|
(23,011
|
)
|
|
$
|
(43,635
|
)
|
|
$
|
(44,598
|
)
|
|
|
Three Months Ended June 30, 2018
|
||||||||||
|
|
As Reported Under Topic 606
|
|
Adjustments
|
|
If Reported Under Topic 605
|
||||||
Revenue:
|
|
|
|
|
|
|
||||||
Product sales, net
|
|
$
|
23,753
|
|
|
$
|
1,165
|
|
|
$
|
24,918
|
|
License fees and service revenue
|
|
415
|
|
|
(56
|
)
|
|
359
|
|
|||
Total revenues
|
|
$
|
24,168
|
|
|
$
|
1,109
|
|
|
$
|
25,277
|
|
Loss from operations
|
|
(34,311
|
)
|
|
1,109
|
|
|
(33,202
|
)
|
|||
Loss before income taxes
|
|
13,747
|
|
|
1,109
|
|
|
14,856
|
|
|||
Net income
|
|
$
|
13,744
|
|
|
$
|
1,109
|
|
|
$
|
14,853
|
|
Net income per share:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
0.13
|
|
|
$
|
0.01
|
|
|
$
|
0.14
|
|
Diluted
|
|
$
|
0.13
|
|
|
$
|
0.01
|
|
|
$
|
0.14
|
|
|
|
Six Months Ended June 30, 2018
|
||||||||||
|
|
As Reported Under Topic 606
|
|
Adjustments
|
|
If Reported Under Topic 605
|
||||||
Revenue:
|
|
|
|
|
|
|
||||||
Product sales, net
|
|
51,863
|
|
|
1,562
|
|
|
53,425
|
|
|||
License fees and service revenue
|
|
2,799
|
|
|
64
|
|
|
2,863
|
|
|||
Total revenues
|
|
54,662
|
|
|
1,626
|
|
|
56,288
|
|
|||
Loss from operations
|
|
(59,576
|
)
|
|
1,626
|
|
|
(57,950
|
)
|
|||
Loss before income taxes
|
|
(2,068
|
)
|
|
1,626
|
|
|
(442
|
)
|
|||
Net loss
|
|
(2,074
|
)
|
|
1,626
|
|
|
(448
|
)
|
|||
Net loss per share:
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
(0.02
|
)
|
|
$
|
0.02
|
|
|
$
|
0.00
|
|
Diluted
|
|
$
|
(0.02
|
)
|
|
$
|
0.02
|
|
|
$
|
0.00
|
|
|
|
June 30, 2018
|
||||||||||
|
|
As Reported Under Topic 606
|
|
Adjustments
|
|
If Reported Under Topic 605
|
||||||
Current assets:
|
|
|
|
|
|
|
||||||
Accounts receivable, net of allowance for doubtful accounts
|
|
27,658
|
|
|
38
|
|
|
27,696
|
|
|||
Total current assets
|
|
$
|
309,520
|
|
|
$
|
38
|
|
|
$
|
309,558
|
|
Total assets
|
|
$
|
464,522
|
|
|
$
|
38
|
|
|
$
|
464,560
|
|
|
|
|
|
|
|
|
||||||
Current liabilities:
|
|
|
|
|
|
|
||||||
Deferred revenue
|
|
—
|
|
|
2,308
|
|
|
2,308
|
|
|||
Total current liabilities
|
|
$
|
94,470
|
|
|
$
|
2,308
|
|
|
$
|
96,778
|
|
|
|
|
|
|
|
|
||||||
Deferred revenue, less current portion
|
|
—
|
|
|
282
|
|
|
282
|
|
|||
Total liabilities
|
|
$
|
120,403
|
|
|
$
|
2,590
|
|
|
$
|
122,993
|
|
|
|
|
|
|
|
|
||||||
Stockholders’ equity:
|
|
|
|
|
|
|
||||||
Accumulated deficit
|
|
(481,948
|
)
|
|
(2,552
|
)
|
|
(484,500
|
)
|
|||
Total stockholders’ equity
|
|
344,119
|
|
|
(2,552
|
)
|
|
341,567
|
|
|||
Total liabilities and stockholders’ equity
|
|
$
|
464,522
|
|
|
$
|
38
|
|
|
$
|
464,560
|
|
|
|
Six Months Ended June 30, 2018
|
||||||||||
|
|
As Reported Under Topic 606
|
|
Adjustments
|
|
If Reported Under Topic 605
|
||||||
Net loss
|
|
$
|
(2,074
|
)
|
|
$
|
1,626
|
|
|
$
|
(448
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
||||||
Accounts receivable, net
|
|
5,087
|
|
|
(38
|
)
|
|
5,049
|
|
|||
Deferred revenue
|
|
—
|
|
|
1,588
|
|
|
1,588
|
|
•
|
our ability to successfully develop, obtain regulatory approval for and market our products;
|
•
|
our ability to continue to grow sales revenue of our marketed products;
|
•
|
risks associated with doing business internationally;
|
•
|
our ability to generate and maintain sufficient cash resources to fund our business;
|
•
|
our ability to enter into strategic alliances with partners for manufacturing, development and commercialization;
|
•
|
efforts of our development partners;
|
•
|
the ability of our manufacturing partners to meet our timelines;
|
•
|
the ability to timely deliver product supplies to our customers;
|
•
|
our ability to identify new product candidates and to successfully integrate those product candidates into our operations;
|
•
|
the timing and/or results of pending or future clinical trials, and our reliance on contract research organizations;
|
•
|
reports of adverse events or safety concerns involving each of our products;
|
•
|
our ability to protect our intellectual property rights;
|
•
|
competition in the marketplace for our drugs;
|
•
|
delay in approval of our products or new indications for our products by the U.S. Food and Drug Administration (the “FDA”);
|
•
|
the impact of legislative or regulatory reform on the pricing for pharmaceutical products;
|
•
|
actions by the FDA and other regulatory agencies, including international agencies;
|
•
|
securing positive reimbursement for our products;
|
•
|
the impact of any product liability, or other litigation to which we are, or may become a party;
|
•
|
the impact of legislative or regulatory reform of the healthcare industry and the impact of recently enacted healthcare reform legislation;
|
•
|
the availability and price of acceptable raw materials and components from third-party suppliers, and their ability to meet our demands;
|
•
|
our ability, and that of our suppliers, development partners, and manufacturing partners, to comply with laws, regulations and standards, and the application and interpretation of those laws, regulations and standards, that govern or affect the pharmaceutical and biotechnology industries, the non-compliance with which may delay or prevent the development, manufacturing, regulatory approvals and sale of our products;
|
•
|
defending against claims relating to improper handling, storage or disposal of hazardous chemical, radioactive or biological materials which could be time consuming and expensive;
|
•
|
our ability to maintain the services of our key executives and technical and sales and marketing personnel;
|
•
|
the difficulty in predicting the timing or outcome of product development efforts and regulatory approvals; and
|
•
|
demand and market acceptance for our approved products.
|
•
|
Poziotinib, a novel pan-HER inhibitor used in the treatment of patients with a variety of solid tumors, including breast and lung cancer;
|
•
|
ROLONTIS for chemotherapy-induced neutropenia; and
|
•
|
QAPZOLA for immediate intravesical instillation in post-transurethral resection of bladder tumors in patients with non-muscle invasive bladder cancer, or NMIBC.
|
•
|
Company Overview
|
•
|
Cancer Background and Market Size
|
•
|
Product Portfolio
|
•
|
Manufacturing
|
•
|
Sales and Marketing
|
•
|
Customers
|
•
|
Competition
|
•
|
Research and Development
|
•
|
poziotinib, an irreversible tyrosine kinase inhibitor:
|
•
|
ROLONTIS, a novel long-acting G-CSF:
|
•
|
QAPZOLA, a potent tumor-activated drug being investigated for NMIBC:
|
•
|
Revenue recognition (see
Note 2(i)
to our accompanying Condensed Consolidated Financial Statements for discussion regarding our January 1, 2018 adoption of the new revenue recognition standard)
|
•
|
Inventories – lower of cost or market
|
•
|
Fair value of acquired assets and assumed liabilities
|
•
|
Goodwill and intangible assets – impairment evaluations
|
•
|
Income taxes
|
•
|
Stock-based compensation
|
•
|
Litigation accruals (as required)
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||||||||||||||
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||||||||||||||
|
|
($ in thousands)
|
|
($ in thousands)
|
||||||||||||||||||||||||
Total revenues
|
|
$
|
24,168
|
|
|
100.0
|
%
|
|
$
|
34,301
|
|
|
100.0
|
%
|
|
$
|
54,662
|
|
|
100.0
|
%
|
|
$
|
63,402
|
|
|
100.0
|
%
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of sales (excludes amortization of intangible assets)
|
|
6,606
|
|
|
27.3
|
%
|
|
11,303
|
|
|
33.0
|
%
|
|
13,420
|
|
|
24.6
|
%
|
|
19,439
|
|
|
30.7
|
%
|
||||
Cost of service revenue
|
|
—
|
|
|
—
|
%
|
|
2,118
|
|
|
6.2
|
%
|
|
—
|
|
|
—
|
%
|
|
4,221
|
|
|
6.7
|
%
|
||||
Selling, general and administrative
|
|
23,451
|
|
|
97.0
|
%
|
|
17,421
|
|
|
50.8
|
%
|
|
47,556
|
|
|
87.0
|
%
|
|
36,525
|
|
|
57.6
|
%
|
||||
Research and development
|
|
21,488
|
|
|
88.9
|
%
|
|
15,167
|
|
|
44.2
|
%
|
|
39,382
|
|
|
72.0
|
%
|
|
29,945
|
|
|
47.2
|
%
|
||||
Amortization of intangible assets
|
|
6,934
|
|
|
28.7
|
%
|
|
6,901
|
|
|
20.1
|
%
|
|
13,880
|
|
|
25.4
|
%
|
|
13,790
|
|
|
21.8
|
%
|
||||
Total operating costs and expenses
|
|
58,479
|
|
|
242.0
|
%
|
|
52,910
|
|
|
154.3
|
%
|
|
114,238
|
|
|
209.0
|
%
|
|
103,920
|
|
|
163.9
|
%
|
||||
Loss from operations
|
|
(34,311
|
)
|
|
(142.0
|
)%
|
|
(18,609
|
)
|
|
(54.3
|
)%
|
|
(59,576
|
)
|
|
(109.0
|
)%
|
|
(40,518
|
)
|
|
(63.9
|
)%
|
||||
Interest expense, net
|
|
(242
|
)
|
|
(1.0
|
)%
|
|
(2,131
|
)
|
|
(6.2
|
)%
|
|
(472
|
)
|
|
(0.9
|
)%
|
|
(4,182
|
)
|
|
(6.6
|
)%
|
||||
Change in fair value of contingent consideration related to acquisitions
|
|
(192
|
)
|
|
(0.8
|
)%
|
|
(97
|
)
|
|
(0.3
|
)%
|
|
(483
|
)
|
|
(0.9
|
)%
|
|
(294
|
)
|
|
(0.5
|
)%
|
||||
Other income, net
|
|
48,492
|
|
|
200.6
|
%
|
|
240
|
|
|
0.7
|
%
|
|
58,463
|
|
|
107.0
|
%
|
|
650
|
|
|
1.0
|
%
|
||||
Income (loss) before income taxes
|
|
13,747
|
|
|
56.9
|
%
|
|
(20,597
|
)
|
|
(60.0
|
)%
|
|
(2,068
|
)
|
|
(3.8
|
)%
|
|
(44,344
|
)
|
|
(69.9
|
)%
|
||||
Provision for income taxes
|
|
(3
|
)
|
|
—
|
%
|
|
(255
|
)
|
|
(0.7
|
)%
|
|
(6
|
)
|
|
—
|
%
|
|
(54
|
)
|
|
(0.1
|
)%
|
||||
Net income (loss)
|
|
$
|
13,744
|
|
|
56.9
|
%
|
|
$
|
(20,852
|
)
|
|
(60.8
|
)%
|
|
$
|
(2,074
|
)
|
|
(3.8
|
)%
|
|
$
|
(44,398
|
)
|
|
(70.0
|
)%
|
|
|
Three Months Ended June 30, 2018
|
|
|
|
|
|||||||||
|
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
|||||||
|
|
($ in millions)
|
|
|
|
|
|||||||||
Product sales, net:
|
|
|
|
|
|
|
|
|
|||||||
FOLOTYN
|
|
$
|
11.7
|
|
|
$
|
11.2
|
|
|
$
|
0.5
|
|
|
4.5
|
%
|
EVOMELA
|
|
5.8
|
|
|
10.1
|
|
|
(4.3
|
)
|
|
(42.6
|
)%
|
|||
BELEODAQ
|
|
2.7
|
|
|
3.4
|
|
|
(0.7
|
)
|
|
(20.6
|
)%
|
|||
ZEVALIN
|
|
1.6
|
|
|
2.3
|
|
|
(0.7
|
)
|
|
(30.4
|
)%
|
|||
MARQIBO
|
|
1.1
|
|
|
2.2
|
|
|
(1.1
|
)
|
|
(50.0
|
)%
|
|||
FUSILEV
|
|
0.8
|
|
|
2.1
|
|
|
(1.3
|
)
|
|
(61.9
|
)%
|
|||
Total Product sales, net
|
|
$
|
23.7
|
|
*
|
$
|
31.3
|
|
*
|
$
|
(7.6
|
)
|
|
(24.3
|
)%
|
License fees and service revenue
|
|
0.4
|
|
|
3.1
|
|
|
(2.7
|
)
|
|
(87.1
|
)%
|
|||
Total revenues
|
|
$
|
24.1
|
|
*
|
$
|
34.4
|
|
*
|
$
|
(10.3
|
)
|
|
(29.9
|
)%
|
|
|
Three Months Ended June 30, 2018
|
|
|
|
|
|||||||||
|
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
|||||||
|
|
($ in millions)
|
|
|
|
|
|||||||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|||||||
Cost of sales (excludes amortization of intangible assets)
|
|
$
|
6.6
|
|
|
$
|
11.3
|
|
|
$
|
(4.7
|
)
|
|
(41.6
|
)%
|
Cost of service revenue
|
|
—
|
|
|
2.1
|
|
|
(2.1
|
)
|
|
(100.0
|
)%
|
|||
Selling, general and administrative
|
|
23.5
|
|
|
17.4
|
|
|
6.1
|
|
|
35.1
|
%
|
|||
Research and development
|
|
21.5
|
|
|
15.2
|
|
|
6.3
|
|
|
41.4
|
%
|
|||
Amortization of intangible assets
|
|
6.9
|
|
|
6.9
|
|
|
—
|
|
|
—
|
%
|
|||
Total operating costs and expenses
|
|
$
|
58.5
|
|
|
$
|
52.9
|
|
|
$
|
5.6
|
|
|
10.6
|
%
|
|
|
Three Months Ended June 30, 2018
|
|
|
|
|
|||||||||
|
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
|||||||
|
|
($ in millions)
|
|
|
|
|
|||||||||
Total other income (expense)
|
|
$
|
48.1
|
|
|
$
|
(2.0
|
)
|
|
$
|
50.1
|
|
|
2,505.0
|
%
|
|
|
Three months ended June 30,
|
|
|
|
|
|||||||||
|
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
|||||||
|
|
($ in millions)
|
|
|
|
|
|||||||||
Provision for income taxes
|
|
$
|
—
|
|
|
$
|
(0.3
|
)
|
|
$
|
0.3
|
|
|
(100.0
|
)%
|
|
|
Six months ended June 30,
|
|
|
|
|
|||||||||
|
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
|||||||
|
|
($ in millions)
|
|
|
|
|
|||||||||
Product sales, net:
|
|
|
|
|
|
|
|
|
|||||||
FOLOTYN
|
|
24.4
|
|
|
20.5
|
|
|
$
|
3.9
|
|
|
19.0
|
%
|
||
EVOMELA
|
|
13.9
|
|
|
16.4
|
|
|
$
|
(2.5
|
)
|
|
(15.2
|
)%
|
||
BELEODAQ
|
|
5.4
|
|
|
6.3
|
|
|
$
|
(0.9
|
)
|
|
(14.3
|
)%
|
||
ZEVALIN
|
|
4.7
|
|
|
5.1
|
|
|
$
|
(0.4
|
)
|
|
(7.8
|
)%
|
||
MARQIBO
|
|
2.0
|
|
|
4.1
|
|
|
$
|
(2.1
|
)
|
|
(51.2
|
)%
|
||
FUSILEV
|
|
$
|
1.4
|
|
|
$
|
4.6
|
|
|
$
|
(3.2
|
)
|
|
(69.6
|
)%
|
Total Product sales, net
|
|
$
|
51.8
|
|
*
|
$
|
57.0
|
|
|
$
|
(5.2
|
)
|
|
(9.1
|
)%
|
License fees and service revenue
|
|
2.8
|
|
|
6.4
|
|
|
(3.6
|
)
|
|
(56.3
|
)%
|
|||
Total revenues
|
|
$
|
54.6
|
|
*
|
$
|
63.4
|
|
|
$
|
(8.8
|
)
|
|
(13.9
|
)%
|
|
|
Six months ended June 30,
|
|
|
|
|
|||||||||
|
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
|||||||
|
|
($ in millions)
|
|
|
|
|
|||||||||
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|||||||
Cost of sales (excludes amortization of intangible assets)
|
|
$
|
13.4
|
|
|
$
|
19.4
|
|
|
$
|
(6.0
|
)
|
|
(30.9
|
)%
|
Cost of service revenue
|
|
—
|
|
|
4.2
|
|
|
(4.2
|
)
|
|
(100.0
|
)%
|
|||
Selling, general and administrative
|
|
47.6
|
|
|
36.5
|
|
|
11.1
|
|
|
30.4
|
%
|
|||
Research and development
|
|
39.4
|
|
|
29.9
|
|
|
9.5
|
|
|
31.8
|
%
|
|||
Amortization of intangible assets
|
|
13.9
|
|
|
13.8
|
|
|
0.1
|
|
|
0.7
|
%
|
|||
Total operating costs and expenses
|
|
$
|
114.3
|
|
|
$
|
103.8
|
|
|
$
|
10.5
|
|
|
10.1
|
%
|
|
|
Six months ended June 30,
|
|
|
|
|
|||||||||
|
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
|||||||
|
|
($ in millions)
|
|
|
|
|
|||||||||
Total other income (expense)
|
|
$
|
57.5
|
|
|
$
|
(3.8
|
)
|
|
$
|
61.3
|
|
|
1,613.2
|
%
|
|
|
Six months ended June 30,
|
|
|
|
|
|||||||||
|
|
2018
|
|
2017
|
|
$ Change
|
|
% Change
|
|||||||
|
|
($ in millions)
|
|
|
|
|
|||||||||
Provision for income taxes
|
|
$
|
—
|
|
|
$
|
(0.1
|
)
|
|
$
|
0.1
|
|
|
100.0
|
%
|
|
June 30, 2018
|
|
December 31, 2017
|
|
June 30, 2017
|
||||||
|
(in thousands, except financial metrics data)
|
||||||||||
Cash, cash equivalents, and marketable securities*
|
$
|
269,658
|
|
|
$
|
227,571
|
|
|
$
|
138,561
|
|
Accounts receivable, net
|
$
|
27,658
|
|
|
$
|
32,260
|
|
|
$
|
41,977
|
|
Total current assets
|
$
|
309,520
|
|
|
$
|
277,746
|
|
|
$
|
199,014
|
|
Total current liabilities
|
$
|
94,470
|
|
|
$
|
109,749
|
|
|
$
|
64,565
|
|
Working capital surplus (a)
|
$
|
215,050
|
|
|
$
|
167,997
|
|
|
$
|
134,449
|
|
Current ratio (b)
|
3.3
|
|
|
2.5
|
|
|
3.1
|
|
(a)
|
Total current assets at period end
minus
total current liabilities at period end.
|
(b)
|
Total current assets at period end
divided by
total current liabilities at period end.
|
•
|
the need for additional capital to fund future development programs;
|
•
|
the need for additional capital to fund strategic acquisitions;
|
•
|
the need for additional capital to fund licensing arrangements;
|
•
|
our requirement for additional information technology infrastructure and systems; and
|
•
|
adverse outcomes from potential litigation and the cost to defend such litigation.
|
|
|
|
Incorporated by Reference
|
||||
Exhibit
Number
|
Description
|
Form
|
File No.
|
Exhibit
|
Filing Date
|
Filed Herewith
|
|
3.1
|
8-K
|
001-35006
|
3.1
|
6/18/18
|
|
||
3.2
|
8-K
|
001-35006
|
3.2
|
3/29/18
|
|
||
10.1
|
8-K
|
001-35006
|
10.1
|
6/18/18
|
|
||
10.2
|
8-K
|
001-35006
|
10.2
|
6/18/18
|
|
||
10.3
|
8-K
|
001-35006
|
10.3
|
6/18/18
|
|
||
10.4
|
8-K
|
001-35006
|
10.4
|
6/18/18
|
|
||
10.5
|
8-K
|
001-35006
|
10.5
|
6/18/18
|
|
||
10.6
|
|
|
|
|
X
|
||
10.7
|
|
|
|
|
X
|
||
10.8
|
|
|
|
|
X
|
||
10.9
|
|
|
|
|
X
|
||
31.1
|
|
|
|
|
X
|
||
31.2
|
|
|
|
|
X
|
||
32.1
|
|
|
|
|
X
|
||
32.2
|
|
|
|
|
X
|
||
101.INS
|
XBRL Instance Document.
|
|
|
|
|
X
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document.
|
|
|
|
|
X
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
|
X
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
|
X
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
|
X
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
|
X
|
|
|
SPECTRUM PHARMACEUTICALS, INC.
|
|
|
|
|
|
Date:
|
August 9, 2018
|
By:
|
/s/ Kurt A. Gustafson
|
|
|
|
Kurt A. Gustafson
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
(Authorized Signatory and Principal Financial and Accounting Officer)
|
1.
|
EMPLOYMENT/TERM
. The Company hereby employs Executive to perform the duties and responsibilities set forth below under Section 2 of this Agreement, and Executive hereby accepts such employment, in each case on the terms and conditions set forth in this Agreement. This Agreement shall have a term commencing on April 10, 2018, (the “Effective Date”) and ending on the five-year anniversary of the Effective Date, (the “Term”), unless earlier terminated pursuant to Section 4 of this Agreement.
|
2.
|
POSITION AND DUTIES
.
|
a.
|
Description of Executive’s Position, Duties, Authorities, and Responsibilities
. Executive shall serve as the Chief Financial Officer of the Company, subject to the direction of the Chief Executive Officer. In such capacity, Executive shall (i) report to the Chief Executive Officer, (ii) devote his full professional time and attention, best efforts, energy and skills to the services required of him as an employee of the Company, except for paid time off taken in accordance with the Company’s policies and practices, and subject to the Company’s policies pertaining to reasonable periods of absence due to sickness, personal injury or other disability; (iii) use his best efforts to promote the interests of the Company; (iv) comply with all applicable governmental laws, rules and regulations and with all of the Company’s policies, rules and regulations applicable to employees of the
|
b.
|
Performance of Duties
. Executive hereby accepts such employment and agrees to render the services described above in the manner described above. It is understood and agreed that Executive may not engage in other business activities during the Term, whether or not for profit or other pecuniary advantage; provided, however, that Executive may (i) make financial investments which do not involve his active participation, (ii) participate in charitable, educational, religious, civic, or other similar organizations and activities, and (iii) with the prior written consent of the Board of Directors of the Company (the “
Board
”), serve as an outside director on the board of directors of other corporations that are not affiliates or competitors of the Company or any of its affiliates, in any case to the extent that such activities collectively do not hinder or interfere with the performance of his duties under this Agreement, conflict with the policies of the Company concerning conflicts of interest or conflict with the businesses of the Company or any of its affiliates in any material way.
|
3.
|
COMPENSATION AND BENEFITS
.
|
a.
|
Base Salary
. As of the Effective Date, Executive’s base salary (the “
Base Salary
”) shall be $525,000 USD per year payable in periodic installments in accordance with the Company’s regular payroll practices as in effect from time to time. The Board or a duly authorized committee thereof will review the Base Salary on an annual basis and may increase, but never decrease, the Base Salary from time to time based on merit or such other considerations as the Board or a duly authorized committee thereof may deem appropriate; provided, however, the Company makes no assurances that the Base Salary will be increased during the Term. “Base Salary” shall mean the initial base salary or the then-current base salary as later approved by the Board.
|
b.
|
Bonus
. Executive shall be eligible to receive an annual cash bonus in an amount up to 50% of Executive’s Base Salary for the fiscal year for which the annual cash bonus is being paid, as determined in the discretion of the Board or a duly authorized committee
|
c.
|
Pro Rata Bonus.
Notwithstanding any other provision in this Agreement to the contrary, should Executive’s employment be terminated by the Company without Cause (as defined below) or by Executive for Good Reason (as defined below), prior to the end of a calendar year, then the Board shall determine the amount of the target bonus for such calendar year, and the Company shall pay Executive the pro rata amount of such target bonus based on the number of days Executive was employed by the Company during the calendar year divided by 365 days (the “
Pro Rata Bonus
”). Such Pro Rata Bonus shall be paid when bonuses are paid to other senior executives of the Company and within two and one-half months following the end of the calendar year in which Executive is terminated.
|
d.
|
Benefits and Vacation
. Executive shall be eligible to participate in and receive the benefits under any deferred compensation plan, health, life, accident and disability insurance plans or programs, and any other employee benefit or fringe benefit plans or arrangements that the Company makes available generally to other senior executives of the Company, pursuant to the provisions of such plans, programs or arrangements as in effect from time to time. Executive shall be entitled to vacation and sick days in accordance with the policies of the Company for its employees generally, as in effect from time to time. The benefits described in this Section 3.d. are hereinafter referred to as the “
Benefits
”.
|
e.
|
Equity Incentive Compensation
. Executive shall be eligible to receive grants, at the discretion of the Board or a duly authorized committee thereof, under any long-term equity-based incentive compensation plans established or maintained by the Company for its senior executive officers, in each case subject to the terms and conditions of the
|
f.
|
Expenses
. The Company shall pay or reimburse Executive for all reasonable, ordinary and necessary business expenses incurred or paid by Executive during the Term in the performance of Executive’s services under this Agreement in accordance with the applicable policies and procedures of the Company as in effect from time to time, upon the presentation of proper expense statements or such other supporting documentation as the Company may reasonably require.
|
g.
|
Auto Allowance.
Company shall pay an automotive allowance of $1,150 per month to cover costs of business travel in a personal vehicle.
|
4.
|
TERMINATION, OTHER THAN FOLLOWING A CHANGE OF CONTROL
.
|
a.
|
General
. Executive’s employment may be terminated by either party at any time and for any reason; and upon termination of Executive’s employment, the Term shall end.
|
b.
|
Resignation without Good Reason
. Executive shall be required to give the Company at least 60 days’ advance written notice (the “
Resignation Notice Period
”) of any voluntary resignation of Executive’s employment hereunder (other than resignation for Good Reason (as defined below), in which event the procedures under Section 5.c. shall apply). During the Resignation Notice Period, the Company in its sole discretion may elect to accelerate Executive’s date of termination of employment, it being understood that any such termination shall still be treated as a voluntary resignation without Good Reason (as defined below) for purposes of this Agreement. Even if Executive’s date of termination is accelerated, Executive shall be paid his Base Salary, and shall receive Benefits capable of being provided to persons who are not actively employed by the Company, as if he had worked through the end of the Resignation Notice Period. The Company reserves the right to require Executive not to be in the offices of the Company or any of its affiliates and/or not to undertake all or any of Executive’s duties and/or not to contact clients, colleagues or advisors of the Company or any of its affiliates during all or part of the Resignation Notice Period. During the Resignation Notice Period, Executive’s terms and conditions of service and duties of loyalty and confidentiality to the Company shall
|
c.
|
Death
. Executive’s employment hereunder shall terminate automatically on the date of his death.
|
d.
|
Disability
. At the option of the Company, Executive’s employment hereunder may be terminated immediately upon Disability (as defined below) of Executive. For purposes of this Agreement, “
Disability
” means any physical or mental illness, impairment or incapacity which, in the good faith determination of the Board, has prevented Executive from performing the essential functions of his position hereunder for a period of 90 or more consecutive days (or for shorter periods totaling 120 days) during any period of 12 consecutive months.
|
e.
|
Termination for Cause
. Notwithstanding any other provision of this Agreement, the Company may, at any time, immediately terminate Executive’s employment for Cause (as defined below). For purposes of this Agreement, “
Cause
” means the occurrence of any of the following by Executive: (i) fraud, misappropriation, embezzlement or acts of similar dishonesty, (ii) conviction of, or plea of
nolo contendere
to, a felony, (iii) excessive use of alcohol or illegal use of drugs in the workplace, (iv) gross negligence or intentional or willful misconduct by Executive in the performance of his duties, (v) breach of Executive’s duty of loyalty to the Company or diversion or usurpation of corporate opportunities properly belonging to the Company, (vi) the knowing breach of any Company confidentiality agreement to which Executive is a party, (vii) willful disregard of the Company’s policies and procedures, (viii) insubordination, (ix) willful failure to satisfactorily perform the duties of Executive’s position, (x) act or omission that would materially and adversely impact the business or reputation of the Company, or (xi) violation of any material provision of this Agreement or any other material provision of any other agreement between Executive and the Company; in each case, as determined by the Company in its sole discretion. The Company’s lack of immediate action with
|
f.
|
Termination Without Cause
. The Company may, at any time, immediately terminate Executive’s employment without Cause.
|
5.
|
COMPENSATION UPON TERMINATION
. Following any termination of Executive’s employment (the date of such termination, “
Termination Date
”), the obligations of the Company to pay or provide Executive with compensation and benefits under Section 3 shall immediately cease, and the Company shall have no further obligations to Executive under this Agreement, except as otherwise required by law or provided for under this Section 5.
|
a.
|
Death or Disability
. If, during the Term, Executive’s employment is terminated (i) by reason of Executive’s death or (ii) by the Company for Disability of Executive, the Company shall pay to Executive (or to his estate or designated beneficiary in the event of Executive’s death) (A) any unpaid Base Salary accrued through the Termination Date, (B) any unpaid Benefits accrued through the Termination Date to which Executive is entitled under any plans, programs or arrangements applicable to terminated employees in which Executive participates, and (C) a lump sum amount equal to two years of Executive’s Base Salary in effect as of the Termination Date; provided that, in the event Executive is terminated by the Company for Disability during the Change of Control Tail Period, such amount shall be paid monthly over a period of 24 months following such termination. Executive shall also immediately vest in all options, restricted stock and other Equity Incentive Compensation (as defined below), all of which shall be immediately available to exercise during the periods provided in the applicable plans and award documents granted to Executive. All payments under clause (C) of this Section 5.a. are conditioned upon Executive executing and delivering (and not revoking) within 90 days of the Termination Date a general waiver and release agreement in the form of Exhibit A, attached, or in a form and with substance satisfactory to the Company, that is no longer subject to revocation. If Executive is unable to execute and deliver such waiver and release agreement due to death or Disability, then the waiver and release agreement shall
|
b.
|
For Cause or Without Good Reason (not During the Change of Control Tail Period)
. If, during the Term (other than during the Change of Control Tail Period (as defined below)), Executive’s employment is terminated (i) by the Company for Cause or (ii) by Executive for any reason other than for Good Reason (as defined below), the Company shall pay to Executive (A) any unpaid Base Salary accrued through the Termination Date and (B) any unpaid Benefits accrued through the Termination Date to which Executive is entitled under any plans, programs or arrangements applicable to terminated employees in which Executive participates. The payments described in clause (A) above shall be made within 90 days (or by such earlier date as may be required by applicable law) following the Termination Date, and the payments described in clause (B) above shall be made in accordance with the provisions of the applicable plans, programs and arrangements maintained by the Company with respect to such payments or as otherwise required by applicable law.
|
c.
|
Without Cause or for Good Reason (not During the Change of Control Tail Period)
. If, during the Term (other than during the Change of Control Tail Period), Executive’s employment is terminated (i) by the Company without Cause or (ii) by Executive for Good Reason (as defined below), the Company shall pay to Executive (A) any unpaid Base Salary accrued through the Termination Date, (B) any unpaid Benefits accrued through the Termination Date to which Executive is entitled under any plans, programs or arrangements applicable to terminated employees in which Executive participates, and (C) the following severance benefits (the “
Without Cause/For Good Reason Severance Benefits
”): (a) two years of Executive’s Base Salary in effect as of the Termination Date
|
d.
|
Termination During Change of Control Tail Period
. In the event that Executive’s employment is terminated by the Company or by Executive during the Change of Control Tail Period for any reason other than a termination by reason of Executive’s death or by the Company for Disability of Executive, this Section 5 shall not apply, and the terms and conditions of Section 6 shall govern with respect to any compensation payable to Executive as a result of such termination. For purposes of this Agreement, the “
Change of Control Tail Period
” shall mean the 12 month period following the occurrence of a Change of Control (as defined below). In no event shall Executive be entitled to compensation both under this Section 5 and under Section 6.
|
e.
|
Equity Incentive Compensation
. Except in circumstances where termination is (i) by reason of Executive’s death or by the Company for Disability, (ii) by the Company without Cause, (iii) by Executive for Good Reason, or (iv) during the Change of Control Tail Period and subject to Section 6, upon termination of Executive’s employment during the Term, the Equity Incentive Compensation awarded to Executive shall forfeit or vest in accordance with the terms of the applicable plans and award documents with respect to such Equity Incentive Compensation, and shall be subject to such other terms and conditions of such plans and award documents that may apply as a result of such termination.
|
f.
|
Benefits
. Notwithstanding anything in this Section 5 to the contrary, the Benefits to which Executive is entitled upon or by reason of the termination of his employment with the Company (including during the Change of Control Tail Period) shall be subject to,
|
g.
|
Expiration of Term
. Notwithstanding anything in this Section 5 to the contrary, the expiration of the Term by itself shall not entitle Executive to receipt of any payments under this Section 5.
|
6.
|
CHANGE OF CONTROL.
|
a.
|
Definition
. “
Change of Control
” shall have the meaning prescribed to such phrase (or, if applicable, the phrase, “Change in Control”) in the 2009 Incentive Award Plan of the Company, or the latest equity incentive award plan of the Company in effect from time to time. The Board shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change of Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change of Control and any incidental matters relating thereto.
|
b.
|
Executive’s Rights Upon a Change of Control.
If there should occur a Change of Control of the Company (or any successor) and Executive’s employment is terminated by the Company without Cause or Executive terminates employment with, Good Reason during the Change of Control Tail Period, Executive shall receive the Without Cause/For Good Reason Severance Benefits, as if he had been terminated without Cause or had terminated for Good Reason under Section 5.c. of this Agreement; provided, that the two years of Executive’s Base Salary in effect as of the Termination Date, payable as part of the Without Cause/For Good Reason Severance Benefits, shall be paid monthly over a period of 24 months following such termination; provided further that all equity awards that would have been eligible to vest under Section 5.c. shall vest immediately upon consummation of a Change of Control; and provided further that Executive shall vest in all Performance-Based Awards as part of the Without Cause/For Good Reason Severance Benefits upon consummation of a Change of Control pro rata based on the Executive’s target award for such Performance-Based Awards (irrespective of actual performance) and based on the number of days Executive was employed by the Company before the Change of Control during the applicable performance period for such Performance-Based
|
7.
|
COOPERATION
. Upon the receipt of reasonable notice from the Company (including outside counsel), Executive agrees that while employed by the Company and thereafter, Executive will respond and provide information with regard to matters in which Executive has knowledge as a result of Executive’s employment with the Company, and will provide reasonable assistance to the Company, its affiliates and their respective representatives in defense of all claims that may be made against the Company or its affiliates, and will assist the Company and its affiliates in the prosecution of all claims that may be made by the Company or its affiliates, to the extent that such claims may relate to the period of Executive’s employment with the Company. Executive agrees to promptly inform the Company if Executive becomes aware of any lawsuit involving such claims that may be filed or threatened against the Company or its affiliates. Executive also agrees to promptly inform the Company (to the extent that Executive is legally permitted to do so) if Executive is asked to assist in any investigation of the Company or its affiliates (or their actions), regardless of whether a lawsuit or other proceeding has then been filed against the Company or its affiliates with respect to such investigation, and shall not provide such assistance unless legally required. Upon presentation of appropriate documentation, the Company shall pay or reimburse Executive for all reasonable out-of-pocket travel, duplicating or telephonic expenses incurred by Executive in complying with this Section 7. For the first five hours of cooperation in any calendar month during the period of Cooperation, Executive shall provide the specified Cooperation services without hourly reimbursement. For each hour of Cooperation or part thereof after five hours, in any calendar month, Company shall reimburse Executive at the hourly rate determined by this fraction: (final Base Salary / 2,080 hours).
|
8.
|
ARBITRATION
. The parties hereby agree to submit all disputes, claims and controversies (“
Claims
”) between the parties or related to or arising out of their employment relationship (except to the extent otherwise provided in that certain Employee Obligations Agreement, dated as of May 23, 2013, by and between the Company and Executive (the “
Employee Obligations Agreement
”), or that certain Indemnification Agreement, dated as of December 10, 2014, by and
|
a.
|
Statute of Limitations
. The statutory limitations period applicable to a Claim asserted in a civil action shall apply to any such Claim asserted in any arbitration proceeding under this Section 8. Arbitration is commenced for limitations purposes by submitting the matter to the arbitral forum.
|
b.
|
Individual Basis
. All Claims that are subject to arbitration under this Section 8 must and will take place on an individual basis only.
|
c.
|
Venue
. Binding arbitration under this Section 8 shall be conducted in California, unless required by law to be conducted elsewhere, in which case it shall be conducted where required by law.
|
d.
|
Applicable Rules
. The arbitration proceeding, including discovery, shall be conducted in accordance with the Federal Arbitration Act, the JAMS Policy on Employment Arbitration Minimum Standards and the JAMS Employment Arbitration Rules and Procedures then in effect (the “
JAMS Rules
”). Executive understands that if he wishes to receive a copy of the JAMS Rules currently in effect, he may inform the Company in writing, and the Company will provide them to him before he executes this Agreement. Executive also understand that JAMS Rules are available online at http://www.jamsadr.com/rules-employment-arbitration/.
|
e.
|
Arbitrator Selection
. The arbitration shall be conducted before a neutral arbitrator selected by all parties in accordance with JAMS Rules. The parties may also agree on an arbitrator.
|
f.
|
Cost Allocation
. If required by applicable law, the Company shall pay all additional costs peculiar to the arbitration to the extent such costs would not otherwise be incurred in a court proceeding (for instance, the Company shall pay the arbitrator’s fees, and the JAMS administration and filing fees, to the extent such fees exceed court filing fees).
|
g.
|
Attorneys’ Fees and Costs
. Each party shall pay his or its own costs and attorneys’ fees except that the arbitrator shall award costs and attorneys’ fees to the prevailing party.
|
h.
|
Written Decision
. The arbitrator shall follow applicable substantive law and, within 30 days after the conclusion of the arbitration, issue a written opinion setting forth the factual and legal bases for his or her decision.
|
i.
|
Acknowledgement
. EXECUTIVE UNDERSTANDS HE IS GIVING UP HIS RIGHT TO A JURY TRIAL BY ENTERING INTO THIS AGREEMENT. EXECUTIVE UNDERSTANDS HE IS GIVING UP HIS RIGHT TO COMMENCE OR PARTICIPATE IN A CLASS OR COLLECTIVE ACTION AND INSTEAD AGREES TO ARBITRATE ANY EMPLOYMENT-RELATED DISPUTE ON AN INDIVIDUAL BASIS ONLY TO THE MAXIMUM EXTENT PERMITTED BY LAW.
|
9.
|
CODE SECTION 409A
.
|
a.
|
This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“
Section 409A
”), including the exceptions thereto, and shall be construed and administered in accordance with such intent. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each separate payment or installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement in connection with a termination of employment shall only be made if such termination of employment constitutes a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by Executive on account of non-compliance with Section 409A.
|
b.
|
Notwithstanding any other provision of this Agreement, if at the time of Executive’s termination of employment, he is a “specified employee,” determined in accordance with Section 409A, any payments and benefits provided under this Agreement that constitute “nonqualified deferred compensation” subject to Section 409A that are provided to Executive on account of his separation from service shall not be paid until the first payroll date to occur following the six-month anniversary of Executive’s termination date (“
Specified Employee Payment Date
”). The aggregate amount of any payments that would otherwise have been made during such six-month period shall be paid in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule. If Executive dies before the Specified Employee Payment Date, any delayed payments shall be paid to Executive’s estate in a lump sum within one week of Executive’s death.
|
c.
|
To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following: (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; (ii) any reimbursement of an eligible expense shall be paid to Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (iii) any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit. Any tax gross-up payments provided under this Agreement shall be paid to Executive on or before December 31 of the calendar year immediately following the calendar year in which Executive remits the related taxes.
|
d.
|
Whenever in this Agreement a payment or benefit is conditioned on Executive’s execution of a release of claims, such release must be executed and all revocation periods shall have expired within 90 days after the Termination Date; failing which such payment or benefit shall be forfeited. If such payment or benefit constitutes “nonqualified deferred compensation” subject to Section 409A, and if such 90-day period begins in one calendar year and ends in the next calendar year, the payment or benefit shall not be made
|
10.
|
GENERAL PROVISIONS
.
|
a.
|
Notices
. All notices, requests, demands, statements, reports and other communications provided for by this Agreement shall be in writing (email being sufficient) and shall be sent by (i) certified mail, return receipt requested, postage prepaid, (ii) nationally recognized overnight delivery service, (iii) personal delivery or (iv) email. A notice shall be deemed to be given (x) if notice is delivered by certified mail or nationally recognized overnight delivery service, on the business day following the date of its mailing, (y) if such notice is delivered personally, upon delivery, or (z) if such notice is sent by email, upon sending. Each party may change his or its address for notices by giving notice in accordance herewith. All notices shall be addressed and mailed or delivered to the following addresses:
|
b.
|
Entire Agreement
. This Agreement, the Employee Obligations Agreement, and the Indemnification Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and supersede all prior agreements, representations and understandings (whether written or oral) of the parties with respect to the subject matter hereof and thereof, including that certain Change in Control Severance Agreement, dated as of March 28, 2014, by and between the Company and Executive, and any other agreement between Executive and the Company or any of its affiliates and subsidiaries. The above-referenced Change in Control Severance Agreement and any amendments thereto, by and between Executive and the Company, are terminated, canceled, and of no further force or effect as of the Effective Date hereof.
|
c.
|
Modification and Waiver
. No amendment or variation of the terms of this Agreement shall be valid unless made in writing and signed by Executive and a duly authorized representative of the Company (other than Executive). A waiver of any term or condition of this Agreement shall not be construed as a general waiver by the Company. If one or more provisions of this Agreement are held to be illegal or unenforceable under applicable law, such illegal or unenforceable provision(s) shall be limited or excluded from this Agreement to the minimum extent required so that this Agreement shall otherwise remain in full force and effect and enforceable in accordance with its terms.
|
d.
|
Governing Law
. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its conflict of law principles, and any dispute in the meaning, effect or validity of this Agreement shall be resolved in accordance with the laws of the State of California.
|
e.
|
Assignment; Binding Effect
. This Agreement is fully assignable and transferable by the Company, but any purported assignment or transfer by Executive is void. It is hereby agreed that Executive’s rights and obligations under this Agreement are personal and not assignable by Executive. This Agreement shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and permitted assigns of the parties.
EXECUTIVE HAS READ THIS AGREEMENT CAREFULLY AND UNDERSTANDS AND ACCEPTS THE OBLIGATIONS WHICH IT IMPOSES UPON EXECUTIVE WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO EXECUTIVE TO INDUCE EXECUTIVE TO SIGN THIS AGREEMENT. EXECUTIVE SIGNS THIS AGREEMENT VOLUNTARILY AND FREELY, IN DUPLICATE, WITH THE UNDERSTANDING THAT THE COMPANY WILL RETAIN ONE COUNTERPART AND THE OTHER COUNTERPART WILL BE RETAINED BY EXECUTIVE.
|
f.
|
Injunctive Relief
. Executive agrees that any breach of this Agreement will cause irreparable harm to the Company for which damages would not be an adequate remedy, and, therefore, to the fullest extent permitted by applicable law, the Company will be
|
g.
|
Survival
. This Agreement shall terminate upon the expiration of the Term; provided that the provisions of Sections 5 through 10 shall survive termination of this Agreement and termination of Executive’s employment regardless of the reason for such termination.
|
h.
|
Withholding
. The Company may withhold from any and all amounts payable under this Agreement or otherwise such federal, state and local taxes as may be required to be withheld pursuant to applicable law.
|
1.
|
EMPLOYMENT/TERM
. The Company hereby employs Executive to perform the duties and responsibilities set forth below under Section 2 of this Agreement, and Executive hereby accepts such employment, in each case on the terms and conditions set forth in this Agreement. This Agreement shall have a term commencing on April 10, 2018, (the “Effective Date”) and ending on the five-year anniversary of the Effective Date, (the “Term”), unless earlier terminated pursuant to Section 4 of this Agreement.
|
2.
|
POSITION AND DUTIES
.
|
a.
|
Description of Executive’s Position, Duties, Authorities, and Responsibilities
. Executive shall serve as the Chief Operating Officer and Chief Commercial Officer of the Company, subject to the direction of the Chief Executive Officer. In such capacity, Executive shall (i) report to the Chief Executive Officer, (ii) devote his full professional time and attention, best efforts, energy and skills to the services required of him as an employee of the Company, except for paid time off taken in accordance with the Company’s policies and practices, and subject to the Company’s policies pertaining to reasonable periods of absence due to sickness, personal injury or other disability; (iii) use his best efforts to promote the interests of the Company; (iv) comply with all applicable governmental
|
b.
|
Performance of Duties
. Executive hereby accepts such employment and agrees to render the services described above in the manner described above. It is understood and agreed that Executive may not engage in other business activities during the Term, whether or not for profit or other pecuniary advantage; provided, however, that Executive may (i) make financial investments which do not involve his active participation, (ii) participate in charitable, educational, religious, civic, or other similar organizations and activities, and (iii) with the prior written consent of the Board of Directors of the Company (the “
Board
”), serve as an outside director on the board of directors of other corporations that are not affiliates or competitors of the Company or any of its affiliates, in any case to the extent that such activities collectively do not hinder or interfere with the performance of his duties under this Agreement, conflict with the policies of the Company concerning conflicts of interest or conflict with the businesses of the Company or any of its affiliates in any material way.
|
3.
|
COMPENSATION AND BENEFITS
.
|
a.
|
Base Salary
. As of the Effective Date, Executive’s base salary (the “
Base Salary
”) shall be $500,000 USD per year payable in periodic installments in accordance with the Company’s regular payroll practices as in effect from time to time. The Board or a duly authorized committee thereof will review the Base Salary on an annual basis and may increase, but never decrease, the Base Salary from time to time based on merit or such other considerations as the Board or a duly authorized committee thereof may deem appropriate; provided, however, the Company makes no assurances that the Base Salary will be increased during the Term. “Base Salary” shall mean the initial base salary or the then-current base salary as later approved by the Board.
|
b.
|
Bonus
. Executive shall be eligible to receive an annual cash bonus in an amount up to 50% of Executive’s Base Salary for the fiscal year for which the annual cash bonus is
|
c.
|
Pro Rata Bonus.
Notwithstanding any other provision in this Agreement to the contrary, should Executive’s employment be terminated by the Company without Cause (as defined below) or by Executive for Good Reason (as defined below), prior to the end of a calendar year, then the Board shall determine the amount of the target bonus for such calendar year, and the Company shall pay Executive the pro rata amount of such target bonus based on the number of days Executive was employed by the Company during the calendar year divided by 365 days (the “
Pro Rata Bonus
”). Such Pro Rata Bonus shall be paid when bonuses are paid to other senior executives of the Company and within two and one-half months following the end of the calendar year in which Executive is terminated.
|
d.
|
Benefits and Vacation
. Executive shall be eligible to participate in and receive the benefits under any deferred compensation plan, health, life, accident and disability insurance plans or programs, and any other employee benefit or fringe benefit plans or arrangements that the Company makes available generally to other senior executives of the Company, pursuant to the provisions of such plans, programs or arrangements as in effect from time to time. Executive shall be entitled to vacation and sick days in accordance with the policies of the Company for its employees generally, as in effect from time to time. The benefits described in this Section 3.d. are hereinafter referred to as the “
Benefits
”.
|
e.
|
Equity Incentive Compensation
. Executive shall be eligible to receive grants, at the discretion of the Board or a duly authorized committee thereof, under any long-term equity-based incentive compensation plans established or maintained by the Company for
|
f.
|
Expenses
. The Company shall pay or reimburse Executive for all reasonable, ordinary and necessary business expenses incurred or paid by Executive during the Term in the performance of Executive’s services under this Agreement in accordance with the applicable policies and procedures of the Company as in effect from time to time, upon the presentation of proper expense statements or such other supporting documentation as the Company may reasonably require.
|
g.
|
Auto Allowance.
Company shall pay an automotive allowance of $1,150 per month to cover costs of business travel in a personal vehicle.
|
h.
|
Relocation Allowance.
In the event Executive relocates to Southern California at the request of the Company within the first two and one-half years of the Term, the Company shall pay or reimburse Executive for all reasonable relocation expenses, in accordance with IRS guidelines, in connection with his and his family’s relocation, including, but not limited to, short-term hotel costs or apartment rental, not to exceed three months, travel by Executive’s spouse for house-hunting, and moving all household goods. Payment or reimbursement of usual house-selling costs may be included. The total costs of all such amounts will not exceed $200,000.
|
4.
|
TERMINATION, OTHER THAN FOLLOWING A CHANGE OF CONTROL
.
|
a.
|
General
. Executive’s employment may be terminated by either party at any time and for any reason; and upon termination of Executive’s employment, the Term shall end.
|
b.
|
Resignation without Good Reason
. Executive shall be required to give the Company at least 60 days’ advance written notice (the “
Resignation Notice Period
”) of any voluntary resignation of Executive’s employment hereunder (other than resignation for Good Reason (as defined below), in which event the procedures under Section 5.c. shall apply). During the Resignation Notice Period, the Company in its sole discretion may elect to accelerate Executive’s date of termination of employment, it being understood that any
|
c.
|
Death
. Executive’s employment hereunder shall terminate automatically on the date of his death.
|
d.
|
Disability
. At the option of the Company, Executive’s employment hereunder may be terminated immediately upon Disability (as defined below) of Executive. For purposes of this Agreement, “
Disability
” means any physical or mental illness, impairment or incapacity which, in the good faith determination of the Board, has prevented Executive from performing the essential functions of his position hereunder for a period of 90 or more consecutive days (or for shorter periods totaling 120 days) during any period of 12 consecutive months.
|
e.
|
Termination for Cause
. Notwithstanding any other provision of this Agreement, the Company may, at any time, immediately terminate Executive’s employment for Cause (as defined below). For purposes of this Agreement, “
Cause
” means the occurrence of any of the following by Executive: (i) fraud, misappropriation, embezzlement or acts of similar dishonesty, (ii) conviction of, or plea of
nolo contendere
to, a felony, (iii) excessive use of alcohol or illegal use of drugs in the workplace, (iv) gross negligence or intentional or
|
f.
|
Termination Without Cause
. The Company may, at any time, immediately terminate Executive’s employment without Cause.
|
5.
|
COMPENSATION UPON TERMINATION
. Following any termination of Executive’s employment (the date of such termination, “
Termination Date
”), the obligations of the Company to pay or provide Executive with compensation and benefits under Section 3 shall immediately cease, and the Company shall have no further obligations to Executive under this Agreement, except as otherwise required by law or provided for under this Section 5.
|
a.
|
Death or Disability
. If, during the Term, Executive’s employment is terminated (i) by reason of Executive’s death or (ii) by the Company for Disability of Executive, the Company shall pay to Executive (or to his estate or designated beneficiary in the event of Executive’s death) (A) any unpaid Base Salary accrued through the Termination Date, (B) any unpaid Benefits accrued through the Termination Date to which Executive is entitled under any plans, programs or arrangements applicable to terminated employees in which Executive participates, and (C) a lump sum amount equal to two years of Executive’s Base Salary in effect as of the Termination Date; provided that, in the event Executive is terminated by the Company for Disability during the Change of Control Tail Period, such
|
b.
|
For Cause or Without Good Reason (not During the Change of Control Tail Period)
. If, during the Term (other than during the Change of Control Tail Period (as defined below)), Executive’s employment is terminated (i) by the Company for Cause or (ii) by Executive for any reason other than for Good Reason (as defined below), the Company shall pay to Executive (A) any unpaid Base Salary accrued through the Termination Date and (B) any unpaid Benefits accrued through the Termination Date to which Executive is entitled under any plans, programs or arrangements applicable to terminated employees in which Executive participates. The payments described in clause (A) above shall be made within 90 days (or by such earlier date as may be required by applicable law) following the Termination Date, and the payments described in clause (B) above shall be made in accordance with the provisions of the applicable plans, programs and arrangements maintained by the Company with respect to such payments or as otherwise required by applicable law.
|
c.
|
Without Cause or for Good Reason (not During the Change of Control Tail Period)
. If, during the Term (other than during the Change of Control Tail Period), Executive’s employment is terminated (i) by the Company without Cause or (ii) by Executive for Good Reason (as defined below), the Company shall pay to Executive (A) any unpaid Base Salary accrued through the Termination Date, (B) any unpaid Benefits accrued through the Termination Date to which Executive is entitled under any plans, programs or arrangements applicable to terminated employees in which Executive participates, and (C) the following severance benefits (the “
Without Cause/For Good Reason Severance Benefits
”): (a) two years of Executive’s Base Salary in effect as of the Termination Date and two times (2x) the previous year’s Bonus, in each case paid as a lump sum (b) 18 months of Company-paid continued coverage (COBRA) for Executive and his eligible dependents under the Company’s existing health and benefit plans. As part of the Without Cause/For Good Reason Severance Benefits, Executive shall also immediately vest in all options, restricted stock and other Equity Incentive Compensation (as defined below), all of which shall be immediately available to exercise during the periods provided in the applicable plans and award documents granted to Executive; provided, that, notwithstanding the foregoing, with respect to any options, restricted stock or other Equity Incentive Compensation that vest based on performance-based criteria (“
Performance-Based Awards
”), Executive shall vest in such Performance-Based Awards as part of the Without Cause/For Good Reason Severance Benefits pro rata based on the Executive’s target award for such Performance-Based Awards (irrespective of actual performance) and based on the number of days Executive was employed by the Company during the applicable performance period for such Performance-Based Awards divided by the total number of days in such performance period. All payments under clause (C) of this Section 5.c. are conditioned upon Executive executing and delivering (and not revoking) within 90 days of the Termination Date a general waiver and release agreement in the form of Exhibit A, attached, or in a form and with substance satisfactory to the Company, that is no longer subject to revocation; provided, further, that in order for Executive to terminate his employment for Good Reason (as defined below), (x) Executive must furnish written notice to the Company setting forth the facts and
|
d.
|
Termination During Change of Control Tail Period
. In the event that Executive’s employment is terminated by the Company or by Executive during the Change of Control Tail Period for any reason other than a termination by reason of Executive’s death or by the Company for Disability of Executive, this Section 5 shall not apply, and the terms and conditions of Section 6 shall govern with respect to any compensation payable to Executive as a result of such termination. For purposes of this Agreement, the “
Change of Control Tail Period
” shall mean the 12 month period following the occurrence of a Change of Control (as defined below). In no event shall Executive be entitled to compensation both under this Section 5 and under Section 6.
|
e.
|
Equity Incentive Compensation
. Except in circumstances where termination is (i) by reason of Executive’s death or by the Company for Disability, (ii) by the Company without Cause, (iii) by Executive for Good Reason, or (iv) during the Change of Control Tail Period and subject to Section 6, upon termination of Executive’s employment during the Term, the Equity Incentive Compensation awarded to Executive shall forfeit or vest in accordance with the terms of the applicable plans and award documents with respect to such Equity Incentive Compensation, and shall be subject to such other terms and conditions of such plans and award documents that may apply as a result of such termination.
|
f.
|
Benefits
. Notwithstanding anything in this Section 5 to the contrary, the Benefits to which Executive is entitled upon or by reason of the termination of his employment with the Company (including during the Change of Control Tail Period) shall be subject to, and shall be governed by, the terms and conditions of the applicable plans, programs and arrangements maintained by the Company with respect to such Benefits.
|
g.
|
Expiration of Term
. Notwithstanding anything in this Section 5 to the contrary, the expiration of the Term by itself shall not entitle Executive to receipt of any payments under this Section 5.
|
6.
|
CHANGE OF CONTROL.
|
a.
|
Definition
. “
Change of Control
” shall have the meaning prescribed to such phrase (or, if applicable, the phrase, “Change in Control”) in the 2009 Incentive Award Plan of the Company, or the latest equity incentive award plan of the Company in effect from time to time. The Board shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change of Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change of Control and any incidental matters relating thereto.
|
b.
|
Executive’s Rights Upon a Change of Control.
If there should occur a Change of Control of the Company (or any successor) and Executive’s employment is terminated by the Company without Cause or Executive terminates employment with, Good Reason during the Change of Control Tail Period, Executive shall receive the Without Cause/For Good
|
7.
|
COOPERATION
. Upon the receipt of reasonable notice from the Company (including outside counsel), Executive agrees that while employed by the Company and thereafter, Executive will respond and provide information with regard to matters in which Executive has knowledge as a result of Executive’s employment with the Company, and will provide reasonable assistance to the Company, its affiliates and their respective representatives in defense of all claims that may be made against the Company or its affiliates, and will assist the Company and its affiliates in the prosecution of all claims that may be made by the Company or its affiliates, to the extent that such claims may relate to the period of Executive’s employment with the Company. Executive agrees to promptly inform the Company if Executive becomes aware of any lawsuit involving such claims that may be filed or threatened against the Company or its affiliates. Executive also agrees to promptly inform the Company (to the extent that Executive is legally permitted to do so) if Executive is asked to assist in any investigation of the Company or its affiliates (or their actions), regardless of whether a lawsuit or other proceeding has then been filed against the Company or its affiliates with respect to such investigation, and shall not provide such assistance unless legally required. Upon presentation of appropriate documentation, the Company shall pay
|
8.
|
ARBITRATION
. The parties hereby agree to submit all disputes, claims and controversies (“
Claims
”) between the parties or related to or arising out of their employment relationship (except to the extent otherwise provided in that certain Employee Obligations Agreement, dated as of July 11, 2013, by and between the Company and Executive (the “
Employee Obligations Agreement
”), or that certain Indemnification Agreement, dated as of December 10, 2014, by and between the Company and Executive (the “
Indemnification Agreement
”)) to final, binding arbitration to the fullest extent permitted by law. The Federal Arbitration Act., 9 U.S.C. § 1
et seq.
, shall govern the interpretation and enforcement of this Section 8. The court and not the arbitrator will determine matters of enforceability of this Section 8.
|
a.
|
Statute of Limitations
. The statutory limitations period applicable to a Claim asserted in a civil action shall apply to any such Claim asserted in any arbitration proceeding under this Section 8. Arbitration is commenced for limitations purposes by submitting the matter to the arbitral forum.
|
b.
|
Individual Basis
. All Claims that are subject to arbitration under this Section 8 must and will take place on an individual basis only.
|
c.
|
Venue
. Binding arbitration under this Section 8 shall be conducted in Nevada, unless required by law to be conducted elsewhere, in which case it shall be conducted where required by law.
|
d.
|
Applicable Rules
. The arbitration proceeding, including discovery, shall be conducted in accordance with the Federal Arbitration Act, the JAMS Policy on Employment Arbitration Minimum Standards and the JAMS Employment Arbitration Rules and Procedures then in effect (the “
JAMS Rules
”). Executive understands that if he wishes to receive a copy of the JAMS Rules currently in effect, he may inform the Company in
|
e.
|
Arbitrator Selection
. The arbitration shall be conducted before a neutral arbitrator selected by all parties in accordance with JAMS Rules. The parties may also agree on an arbitrator.
|
f.
|
Cost Allocation
. If required by applicable law, the Company shall pay all additional costs peculiar to the arbitration to the extent such costs would not otherwise be incurred in a court proceeding (for instance, the Company shall pay the arbitrator’s fees, and the JAMS administration and filing fees, to the extent such fees exceed court filing fees).
|
g.
|
Attorneys’ Fees and Costs
. Each party shall pay his or its own costs and attorneys’ fees except that the arbitrator shall award costs and attorneys’ fees to the prevailing party.
|
h.
|
Written Decision
. The arbitrator shall follow applicable substantive law and, within 30 days after the conclusion of the arbitration, issue a written opinion setting forth the factual and legal bases for his or her decision.
|
i.
|
Acknowledgement
. EXECUTIVE UNDERSTANDS HE IS GIVING UP HIS RIGHT TO A JURY TRIAL BY ENTERING INTO THIS AGREEMENT. EXECUTIVE UNDERSTANDS HE IS GIVING UP HIS RIGHT TO COMMENCE OR PARTICIPATE IN A CLASS OR COLLECTIVE ACTION AND INSTEAD AGREES TO ARBITRATE ANY EMPLOYMENT-RELATED DISPUTE ON AN INDIVIDUAL BASIS ONLY TO THE MAXIMUM EXTENT PERMITTED BY LAW.
|
9.
|
CODE SECTION 409A
.
|
a.
|
This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“
Section 409A
”), including the exceptions thereto, and shall be construed and administered in accordance with such intent. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be
|
b.
|
Notwithstanding any other provision of this Agreement, if at the time of Executive’s termination of employment, he is a “specified employee,” determined in accordance with Section 409A, any payments and benefits provided under this Agreement that constitute “nonqualified deferred compensation” subject to Section 409A that are provided to Executive on account of his separation from service shall not be paid until the first payroll date to occur following the six-month anniversary of Executive’s termination date (“
Specified Employee Payment Date
”). The aggregate amount of any payments that would otherwise have been made during such six-month period shall be paid in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule. If Executive dies before the Specified Employee Payment Date, any delayed payments shall be paid to Executive’s estate in a lump sum within one week of Executive’s death.
|
c.
|
To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following: (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; (ii) any reimbursement of an eligible expense shall be paid to Executive on or before the last day of the calendar year following the
|
d.
|
Whenever in this Agreement a payment or benefit is conditioned on Executive’s execution of a release of claims, such release must be executed and all revocation periods shall have expired within 90 days after the Termination Date; failing which such payment or benefit shall be forfeited. If such payment or benefit constitutes “nonqualified deferred compensation” subject to Section 409A, and if such 90-day period begins in one calendar year and ends in the next calendar year, the payment or benefit shall not be made or commence before the second such calendar year, even if the release becomes irrevocable in the first such calendar year.
|
10.
|
GENERAL PROVISIONS
.
|
a.
|
Notices
. All notices, requests, demands, statements, reports and other communications provided for by this Agreement shall be in writing (email being sufficient) and shall be sent by (i) certified mail, return receipt requested, postage prepaid, (ii) nationally recognized overnight delivery service, (iii) personal delivery or (iv) email. A notice shall be deemed to be given (x) if notice is delivered by certified mail or nationally recognized overnight delivery service, on the business day following the date of its mailing, (y) if such notice is delivered personally, upon delivery, or (z) if such notice is sent by email, upon sending. Each party may change his or its address for notices by giving notice in accordance herewith. All notices shall be addressed and mailed or delivered to the following addresses:
|
b.
|
Entire Agreement
. This Agreement, the Employee Obligations Agreement, and the Indemnification Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and supersede all prior agreements, representations and understandings (whether written or oral) of the parties with respect to the subject matter hereof and thereof, including that certain Change in Control Severance Agreement, dated as of May 4, 2015, by and between the Company and Executive, and any other agreement between Executive and the Company or any of its affiliates and subsidiaries. The above-referenced Change in Control Severance Agreement and any amendments thereto, by and between Executive and the Company, are terminated, canceled, and of no further force or effect as of the Effective Date hereof.
|
c.
|
Modification and Waiver
. No amendment or variation of the terms of this Agreement shall be valid unless made in writing and signed by Executive and a duly authorized representative of the Company (other than Executive). A waiver of any term or condition of this Agreement shall not be construed as a general waiver by the Company. If one or more provisions of this Agreement are held to be illegal or unenforceable under applicable law, such illegal or unenforceable provision(s) shall be limited or excluded from this Agreement to the minimum extent required so that this Agreement shall otherwise remain in full force and effect and enforceable in accordance with its terms.
|
d.
|
Governing Law
. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada, without giving effect to its conflict of law principles, and any dispute in the meaning, effect or validity of this Agreement shall be resolved in accordance with the laws of the State of Nevada.
|
e.
|
Assignment; Binding Effect
. This Agreement is fully assignable and transferable by the Company, but any purported assignment or transfer by Executive is void. It is hereby agreed that Executive’s rights and obligations under this Agreement are personal and not assignable by Executive. This Agreement shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and permitted assigns of the parties.
EXECUTIVE HAS READ THIS AGREEMENT CAREFULLY AND UNDERSTANDS AND ACCEPTS THE OBLIGATIONS WHICH IT IMPOSES
|
f.
|
Injunctive Relief
. Executive agrees that any breach of this Agreement will cause irreparable harm to the Company for which damages would not be an adequate remedy, and, therefore, to the fullest extent permitted by applicable law, the Company will be entitled to injunctive relief with respect thereto in addition to any other remedies and without any requirement to post bond.
|
g.
|
Survival
. This Agreement shall terminate upon the expiration of the Term; provided that the provisions of Sections 5 through 10 shall survive termination of this Agreement and termination of Executive’s employment regardless of the reason for such termination.
|
h.
|
Withholding
. The Company may withhold from any and all amounts payable under this Agreement or otherwise such federal, state and local taxes as may be required to be withheld pursuant to applicable law.
|
1.
|
EMPLOYMENT/TERM
. The Company hereby employs Executive to perform the duties and responsibilities set forth below under Section 2 of this Agreement, and Executive hereby accepts such employment, in each case on the terms and conditions set forth in this Agreement. This Agreement shall have a term commencing on April 10, 2018, (the “Effective Date”) and ending on the five-year anniversary of the Effective Date, (the “Term”), unless earlier terminated pursuant to Section 4 of this Agreement.
|
2.
|
POSITION AND DUTIES
.
|
a.
|
Description of Executive’s Position, Duties, Authorities, and Responsibilities
. Executive shall serve as the President and Chief Executive Officer of the Company, subject to the direction of the Board of Directors of the Company (the “
Board
”). In such capacity, Executive shall (i) report to the Board, (ii) devote his full professional time and attention, best efforts, energy and skills to the services required of him as an employee of the Company, except for paid time off taken in accordance with the Company’s policies and practices, and subject to the Company’s policies pertaining to reasonable periods of absence due to sickness, personal injury or other disability; (iii) use his best efforts to promote the interests of the Company; (iv) comply with all applicable governmental
|
b.
|
Performance of Duties
. Executive hereby accepts such employment and agrees to render the services described above in the manner described above. It is understood and agreed that Executive may not engage in other business activities during the Term, whether or not for profit or other pecuniary advantage; provided, however, that Executive may (i) make financial investments which do not involve his active participation, (ii) participate in charitable, educational, religious, civic, or other similar organizations and activities, and (iii) with the prior written consent of the Board, serve as an outside director on the board of directors of other corporations that are not affiliates or competitors of the Company or any of its affiliates, in any case to the extent that such activities collectively do not hinder or interfere with the performance of his duties under this Agreement, conflict with the policies of the Company concerning conflicts of interest or conflict with the businesses of the Company or any of its affiliates in any material way.
|
3.
|
COMPENSATION AND BENEFITS
.
|
a.
|
Base Salary
. As of the Effective Date, Executive’s base salary (the “
Base Salary
”) shall be $750,000 USD per year payable in periodic installments in accordance with the Company’s regular payroll practices as in effect from time to time. The Board or a duly authorized committee thereof will review the Base Salary on an annual basis and may increase, but never decrease, the Base Salary from time to time based on merit or such other considerations as the Board or a duly authorized committee thereof may deem appropriate; provided, however, the Company makes no assurances that the Base Salary will be increased during the Term. “Base Salary” shall mean the initial base salary or the then-current base salary as later approved by the Board.
|
b.
|
Bonus
. Executive shall be eligible to receive an annual cash bonus in an amount up to 70% of Executive’s Base Salary for the fiscal year for which the annual cash bonus is being paid, as determined in the discretion of the Board or a duly authorized committee
|
c.
|
Pro Rata Bonus.
Notwithstanding any other provision in this Agreement to the contrary, should Executive’s employment be terminated by the Company without Cause (as defined below) or by Executive for Good Reason (as defined below), prior to the end of a calendar year, then the Board shall determine the amount of the target bonus for such calendar year, and the Company shall pay Executive the pro rata amount of such target bonus based on the number of days Executive was employed by the Company during the calendar year divided by 365 days (the “
Pro Rata Bonus
”). Such Pro Rata Bonus shall be paid when bonuses are paid to other senior executives of the Company and within two and one-half months following the end of the calendar year in which Executive is terminated.
|
d.
|
Benefits and Vacation
. Executive shall be eligible to participate in and receive the benefits under any deferred compensation plan, health, life, accident and disability insurance plans or programs, and any other employee benefit or fringe benefit plans or arrangements that the Company makes available generally to other senior executives of the Company, pursuant to the provisions of such plans, programs or arrangements as in effect from time to time. Executive shall be entitled to vacation and sick days in accordance with the policies of the Company for its employees generally, as in effect from time to time. The benefits described in this Section 3.d. are hereinafter referred to as the “
Benefits
”.
|
e.
|
Equity Incentive Compensation
. Executive shall be eligible to receive grants, at the discretion of the Board or a duly authorized committee thereof, under any long-term equity-based incentive compensation plans established or maintained by the Company for its senior executive officers, in each case subject to the terms and conditions of the
|
f.
|
Expenses
. The Company shall pay or reimburse Executive for all reasonable, ordinary and necessary business expenses incurred or paid by Executive during the Term in the performance of Executive’s services under this Agreement in accordance with the applicable policies and procedures of the Company as in effect from time to time, upon the presentation of proper expense statements or such other supporting documentation as the Company may reasonably require.
|
g.
|
Auto Allowance.
Company shall pay an automotive allowance of $1,150 per month to cover costs of business travel in a personal vehicle.
|
h.
|
Relocation Allowance.
In the event Executive relocates to Southern California at the request of the Company within the first two and one-half years of the Term, the Company shall pay or reimburse Executive for all reasonable relocation expenses, in accordance with IRS guidelines, in connection with his and his family’s relocation, including, but not limited to, short-term hotel costs or apartment rental, not to exceed three months, travel by Executive’s spouse for house-hunting, and moving all household goods. Payment or reimbursement of usual house-selling costs may be included. The total costs of all such amounts will not exceed $200,000.
|
4.
|
TERMINATION, OTHER THAN FOLLOWING A CHANGE OF CONTROL
.
|
a.
|
General
. Executive’s employment may be terminated by either party at any time and for any reason; and upon termination of Executive’s employment, the Term shall end.
|
b.
|
Resignation without Good Reason
. Executive shall be required to give the Company at least 60 days’ advance written notice (the “
Resignation Notice Period
”) of any voluntary resignation of Executive’s employment hereunder (other than resignation for Good Reason (as defined below), in which event the procedures under Section 5.c. shall apply). During the Resignation Notice Period, the Company in its sole discretion may elect to accelerate Executive’s date of termination of employment, it being understood that any such termination shall still be treated as a voluntary resignation without Good Reason (as
|
c.
|
Death
. Executive’s employment hereunder shall terminate automatically on the date of his death.
|
d.
|
Disability
. At the option of the Company, Executive’s employment hereunder may be terminated immediately upon Disability (as defined below) of Executive. For purposes of this Agreement, “
Disability
” means any physical or mental illness, impairment or incapacity which, in the good faith determination of the Board, has prevented Executive from performing the essential functions of his position hereunder for a period of 90 or more consecutive days (or for shorter periods totaling 120 days) during any period of 12 consecutive months.
|
e.
|
Termination for Cause
. Notwithstanding any other provision of this Agreement, the Company may, at any time, immediately terminate Executive’s employment for Cause (as defined below). For purposes of this Agreement, “
Cause
” means the occurrence of any of the following by Executive: (i) fraud, misappropriation, embezzlement or acts of similar dishonesty, (ii) conviction of, or plea of
nolo contendere
to, a felony, (iii) excessive use of alcohol or illegal use of drugs in the workplace, (iv) gross negligence or intentional or willful misconduct by Executive in the performance of his duties, (v) breach of
|
f.
|
Termination Without Cause
. The Company may, at any time, immediately terminate Executive’s employment without Cause.
|
5.
|
COMPENSATION UPON TERMINATION
. Following any termination of Executive’s employment (the date of such termination, “
Termination Date
”), the obligations of the Company to pay or provide Executive with compensation and benefits under Section 3 shall immediately cease, and the Company shall have no further obligations to Executive under this Agreement, except as otherwise required by law or provided for under this Section 5.
|
a.
|
Death or Disability
. If, during the Term, Executive’s employment is terminated (i) by reason of Executive’s death or (ii) by the Company for Disability of Executive, the Company shall pay to Executive (or to his estate or designated beneficiary in the event of Executive’s death) (A) any unpaid Base Salary accrued through the Termination Date, (B) any unpaid Benefits accrued through the Termination Date to which Executive is entitled under any plans, programs or arrangements applicable to terminated employees in which Executive participates, and (C) a lump sum amount equal to two years of Executive’s Base Salary in effect as of the Termination Date; provided that, in the event Executive is terminated by the Company for Disability during the Change of Control Tail Period, such
|
b.
|
For Cause or Without Good Reason (not During the Change of Control Tail Period)
. If, during the Term (other than during the Change of Control Tail Period (as defined below)), Executive’s employment is terminated (i) by the Company for Cause or (ii) by Executive for any reason other than for Good Reason (as defined below), the Company shall pay to Executive (A) any unpaid Base Salary accrued through the Termination Date and (B) any unpaid Benefits accrued through the Termination Date to which Executive is entitled under any plans, programs or arrangements applicable to terminated employees in which Executive participates. The payments described in clause (A) above shall be made within 90 days (or by such earlier date as may be required by applicable law) following the Termination Date, and the payments described in clause (B) above shall be made in accordance with the provisions of the applicable plans, programs and arrangements maintained by the Company with respect to such payments or as otherwise required by applicable law.
|
c.
|
Without Cause or for Good Reason (not During the Change of Control Tail Period)
. If, during the Term (other than during the Change of Control Tail Period), Executive’s employment is terminated (i) by the Company without Cause or (ii) by Executive for Good Reason (as defined below), the Company shall pay to Executive (A) any unpaid Base Salary accrued through the Termination Date, (B) any unpaid Benefits accrued through the Termination Date to which Executive is entitled under any plans, programs or arrangements applicable to terminated employees in which Executive participates, and (C) the following severance benefits (the “
Without Cause/For Good Reason Severance Benefits
”): (a) two years of Executive’s Base Salary in effect as of the Termination Date and two times (2x) the previous year’s Bonus, in each case paid as a lump sum (b) 18 months of Company-paid continued coverage (COBRA) for Executive and his eligible dependents under the Company’s existing health and benefit plans. As part of the Without Cause/For Good Reason Severance Benefits, Executive shall also immediately vest in all options, restricted stock and other Equity Incentive Compensation (as defined below), all of which shall be immediately available to exercise during the periods provided in the applicable plans and award documents granted to Executive; provided, that, notwithstanding the foregoing, with respect to any options, restricted stock or other Equity Incentive Compensation that vest based on performance-based criteria (“
Performance-Based Awards
”), Executive shall vest in such Performance-Based Awards as part of the Without Cause/For Good Reason Severance Benefits pro rata based on the Executive’s target award for such Performance-Based Awards (irrespective of actual performance) and based on the number of days Executive was employed by the Company during the applicable performance period for such Performance-Based Awards divided by the total number of days in such performance period. All payments under clause (C) of this Section 5.c. are conditioned upon Executive executing and delivering (and not revoking) within 90 days of the Termination Date a general waiver and release agreement in the form of Exhibit A, attached, or in a form and with substance satisfactory to the Company, that is no longer subject to revocation; provided, further, that in order for Executive to terminate his employment for Good Reason (as defined below), (x) Executive must furnish written notice to the Company setting forth the facts and
|
d.
|
Termination During Change of Control Tail Period
. In the event that Executive’s employment is terminated by the Company or by Executive during the Change of Control Tail Period for any reason other than a termination by reason of Executive’s death or by the Company for Disability of Executive, this Section 5 shall not apply, and the terms and conditions of Section 6 shall govern with respect to any compensation payable to Executive as a result of such termination. For purposes of this Agreement, the “
Change of Control Tail Period
” shall mean the 12-month period following the occurrence of a Change of Control (as defined below). In no event shall Executive be entitled to compensation both under this Section 5 and under Section 6.
|
e.
|
Equity Incentive Compensation
. Except in circumstances where termination is (i) by reason of Executive’s death or by the Company for Disability, (ii) by the Company without Cause, (iii) by Executive for Good Reason, or (iv) during the Change of Control Tail Period and subject to Section 6, upon termination of Executive’s employment during
|
f.
|
Benefits
. Notwithstanding anything in this Section 5 to the contrary, the Benefits to which Executive is entitled upon or by reason of the termination of his employment with the Company (including during the Change of Control Tail Period) shall be subject to, and shall be governed by, the terms and conditions of the applicable plans, programs and arrangements maintained by the Company with respect to such Benefits.
|
g.
|
Expiration of Term
. Notwithstanding anything in this Section 5 to the contrary, the expiration of the Term by itself shall not entitle Executive to receipt of any payments under this Section 5.
|
6.
|
CHANGE OF CONTROL.
|
a.
|
Definition
. “
Change of Control
” shall have the meaning prescribed to such phrase (or, if applicable, the phrase, “Change in Control”) in the 2009 Incentive Award Plan of the Company, or the latest equity incentive award plan of the Company in effect from time to time. The Board shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change of Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change of Control and any incidental matters relating thereto.
|
b.
|
Executive’s Rights Upon a Change of Control.
If there should occur a Change of Control of the Company (or any successor) and Executive’s employment is terminated by the Company without Cause or Executive terminates employment with, Good Reason during the Change of Control Tail Period, Executive shall receive the Without Cause/For Good Reason Severance Benefits, as if he had been terminated without Cause or had terminated for Good Reason under Section 5.c. of this Agreement; provided, that the two years of Executive’s Base Salary in effect as of the Termination Date, payable as part of the Without Cause/For Good Reason Severance Benefits, shall be paid monthly over a period
|
7.
|
COOPERATION
. Upon the receipt of reasonable notice from the Company (including outside counsel), Executive agrees that while employed by the Company and thereafter, Executive will respond and provide information with regard to matters in which Executive has knowledge as a result of Executive’s employment with the Company, and will provide reasonable assistance to the Company, its affiliates and their respective representatives in defense of all claims that may be made against the Company or its affiliates, and will assist the Company and its affiliates in the prosecution of all claims that may be made by the Company or its affiliates, to the extent that such claims may relate to the period of Executive’s employment with the Company. Executive agrees to promptly inform the Company if Executive becomes aware of any lawsuit involving such claims that may be filed or threatened against the Company or its affiliates. Executive also agrees to promptly inform the Company (to the extent that Executive is legally permitted to do so) if Executive is asked to assist in any investigation of the Company or its affiliates (or their actions), regardless of whether a lawsuit or other proceeding has then been filed against the Company or its affiliates with respect to such investigation, and shall not provide such assistance unless legally required. Upon presentation of appropriate documentation, the Company shall pay or reimburse Executive for all reasonable out-of-pocket travel, duplicating or telephonic expenses incurred by Executive in complying with this Section 7. For the first five hours of cooperation in any calendar month during the period of Cooperation, Executive shall provide the specified Cooperation services without hourly reimbursement. For each hour of Cooperation or
|
8.
|
ARBITRATION
. The parties hereby agree to submit all disputes, claims and controversies (“
Claims
”) between the parties or related to or arising out of their employment relationship (except to the extent otherwise provided in that certain Employee Obligations Agreement, dated as of December 21, 2012, by and between the Company and Executive (the “
Employee Obligations Agreement
”), or that certain Indemnification Agreement, dated as of December 10, 2014, by and between the Company and Executive (the “
Indemnification Agreement
”)) to final, binding arbitration to the fullest extent permitted by law. The Federal Arbitration Act., 9 U.S.C. § 1
et seq.
, shall govern the interpretation and enforcement of this Section 8. The court and not the arbitrator will determine matters of enforceability of this Section 8.
|
a.
|
Statute of Limitations
. The statutory limitations period applicable to a Claim asserted in a civil action shall apply to any such Claim asserted in any arbitration proceeding under this Section 8. Arbitration is commenced for limitations purposes by submitting the matter to the arbitral forum.
|
b.
|
Individual Basis
. All Claims that are subject to arbitration under this Section 8 must and will take place on an individual basis only.
|
c.
|
Venue
. Binding arbitration under this Section 8 shall be conducted in California, unless required by law to be conducted elsewhere, in which case it shall be conducted where required by law.
|
d.
|
Applicable Rules
. The arbitration proceeding, including discovery, shall be conducted in accordance with the Federal Arbitration Act, the JAMS Policy on Employment Arbitration Minimum Standards and the JAMS Employment Arbitration Rules and Procedures then in effect (the “
JAMS Rules
”). Executive understands that if he wishes to receive a copy of the JAMS Rules currently in effect, he may inform the Company in writing, and the Company will provide them to him before he executes this Agreement. Executive also understand that JAMS Rules are available online at http://www.jamsadr.com/rules-employment-arbitration/.
|
e.
|
Arbitrator Selection
. The arbitration shall be conducted before a neutral arbitrator selected by all parties in accordance with JAMS Rules. The parties may also agree on an arbitrator.
|
f.
|
Cost Allocation
. If required by applicable law, the Company shall pay all additional costs peculiar to the arbitration to the extent such costs would not otherwise be incurred in a court proceeding (for instance, the Company shall pay the arbitrator’s fees, and the JAMS administration and filing fees, to the extent such fees exceed court filing fees).
|
g.
|
Attorneys’ Fees and Costs
. Each party shall pay his or its own costs and attorneys’ fees except that the arbitrator shall award costs and attorneys’ fees to the prevailing party.
|
h.
|
Written Decision
. The arbitrator shall follow applicable substantive law and, within 30 days after the conclusion of the arbitration, issue a written opinion setting forth the factual and legal bases for his or her decision.
|
i.
|
Acknowledgement
. EXECUTIVE UNDERSTANDS HE IS GIVING UP HIS RIGHT TO A JURY TRIAL BY ENTERING INTO THIS AGREEMENT. EXECUTIVE UNDERSTANDS HE IS GIVING UP HIS RIGHT TO COMMENCE OR PARTICIPATE IN A CLASS OR COLLECTIVE ACTION AND INSTEAD AGREES TO ARBITRATE ANY EMPLOYMENT-RELATED DISPUTE ON AN INDIVIDUAL BASIS ONLY TO THE MAXIMUM EXTENT PERMITTED BY LAW.
|
9.
|
CODE SECTION 409A
.
|
a.
|
This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“
Section 409A
”), including the exceptions thereto, and shall be construed and administered in accordance with such intent. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each separate payment or
|
b.
|
Notwithstanding any other provision of this Agreement, if at the time of Executive’s termination of employment, he is a “specified employee,” determined in accordance with Section 409A, any payments and benefits provided under this Agreement that constitute “nonqualified deferred compensation” subject to Section 409A that are provided to Executive on account of his separation from service shall not be paid until the first payroll date to occur following the six-month anniversary of Executive’s termination date (“
Specified Employee Payment Date
”). The aggregate amount of any payments that would otherwise have been made during such six-month period shall be paid in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule. If Executive dies before the Specified Employee Payment Date, any delayed payments shall be paid to Executive’s estate in a lump sum within one week of Executive’s death.
|
c.
|
To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following: (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; (ii) any reimbursement of an eligible expense shall be paid to Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (iii) any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit. Any tax gross-up payments provided under this Agreement shall be paid
|
d.
|
Whenever in this Agreement a payment or benefit is conditioned on Executive’s execution of a release of claims, such release must be executed and all revocation periods shall have expired within 90 days after the Termination Date; failing which such payment or benefit shall be forfeited. If such payment or benefit constitutes “nonqualified deferred compensation” subject to Section 409A, and if such 90-day period begins in one calendar year and ends in the next calendar year, the payment or benefit shall not be made or commence before the second such calendar year, even if the release becomes irrevocable in the first such calendar year.
|
10.
|
GENERAL PROVISIONS
.
|
a.
|
Notices
. All notices, requests, demands, statements, reports and other communications provided for by this Agreement shall be in writing (email being sufficient) and shall be sent by (i) certified mail, return receipt requested, postage prepaid, (ii) nationally recognized overnight delivery service, (iii) personal delivery or (iv) email. A notice shall be deemed to be given (x) if notice is delivered by certified mail or nationally recognized overnight delivery service, on the business day following the date of its mailing, (y) if such notice is delivered personally, upon delivery, or (z) if such notice is sent by email, upon sending. Each party may change his or its address for notices by giving notice in accordance herewith. All notices shall be addressed and mailed or delivered to the following addresses:
|
b.
|
Entire Agreement
. This Agreement, the Employee Obligations Agreement, and the Indemnification Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and supersede all prior agreements,
|
c.
|
Modification and Waiver
. No amendment or variation of the terms of this Agreement shall be valid unless made in writing and signed by Executive and a duly authorized representative of the Company (other than Executive). A waiver of any term or condition of this Agreement shall not be construed as a general waiver by the Company. If one or more provisions of this Agreement are held to be illegal or unenforceable under applicable law, such illegal or unenforceable provision(s) shall be limited or excluded from this Agreement to the minimum extent required so that this Agreement shall otherwise remain in full force and effect and enforceable in accordance with its terms.
|
d.
|
Governing Law
. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada, without giving effect to its conflict of law principles, and any dispute in the meaning, effect or validity of this Agreement shall be resolved in accordance with the laws of the State of Nevada.
|
e.
|
Assignment; Binding Effect
. This Agreement is fully assignable and transferable by the Company, but any purported assignment or transfer by Executive is void. It is hereby agreed that Executive’s rights and obligations under this Agreement are personal and not assignable by Executive. This Agreement shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and permitted assigns of the parties.
EXECUTIVE HAS READ THIS AGREEMENT CAREFULLY AND UNDERSTANDS AND ACCEPTS THE OBLIGATIONS WHICH IT IMPOSES UPON EXECUTIVE WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO EXECUTIVE TO INDUCE EXECUTIVE TO SIGN THIS AGREEMENT. EXECUTIVE SIGNS THIS
|
f.
|
Injunctive Relief
. Executive agrees that any breach of this Agreement will cause irreparable harm to the Company for which damages would not be an adequate remedy, and, therefore, to the fullest extent permitted by applicable law, the Company will be entitled to injunctive relief with respect thereto in addition to any other remedies and without any requirement to post bond.
|
g.
|
Survival
. This Agreement shall terminate upon the expiration of the Term; provided that the provisions of Sections 5 through 10 shall survive termination of this Agreement and termination of Executive’s employment regardless of the reason for such termination.
|
h.
|
Withholding
. The Company may withhold from any and all amounts payable under this Agreement or otherwise such federal, state and local taxes as may be required to be withheld pursuant to applicable law.
|
1.
|
EMPLOYMENT/TERM
. The Company hereby employs Executive to perform the duties and responsibilities set forth below under Section 2 of this Agreement, and Executive hereby accepts such employment, in each case on the terms and conditions set forth in this Agreement. This Agreement shall have a term commencing on June 18, 2018, (the “Effective Date”) and ending on the five-year anniversary of the Effective Date, (the “Term”), unless earlier terminated pursuant to Section 4 of this Agreement.
|
2.
|
POSITION AND DUTIES
.
|
a.
|
Description of Executive’s Position, Duties, Authorities, and Responsibilities
. Executive shall serve as the Chief Legal Officer of the Company, subject to the direction of the Chief Executive Officer. In such capacity, Executive shall (i) report to the Chief Executive Officer, (ii) devote his full professional time and attention, best efforts, energy and skills to the services required of him as an employee of the Company, except for paid time off taken in accordance with the Company’s policies and practices, and subject to the Company’s policies pertaining to reasonable periods of absence due to sickness, personal injury or other disability; (iii) use his best efforts to promote the interests of the Company; (iv) comply with all applicable governmental laws, rules and regulations and with all of the Company’s policies, rules and regulations applicable to employees of the Company; and (v) discharge his responsibilities in a diligent and faithful manner,
|
b.
|
Performance of Duties
. Executive hereby accepts such employment and agrees to render the services described above in the manner described above. It is understood and agreed that Executive may not engage in other business activities during the Term, whether or not for profit or other pecuniary advantage; provided, however, that Executive may (i) make financial investments which do not involve his active participation, (ii) participate in charitable, educational, religious, civic, or other similar organizations and activities, and (iii) with the prior written consent of the Board of Directors of the Company (the “
Board
”), serve as an outside director on the board of directors of other corporations that are not affiliates or competitors of the Company or any of its affiliates, in any case to the extent that such activities collectively do not hinder or interfere with the performance of his duties under this Agreement, conflict with the policies of the Company concerning conflicts of interest or conflict with the businesses of the Company or any of its affiliates in any material way.
|
3.
|
COMPENSATION AND BENEFITS
.
|
a.
|
Base Salary
. As of the Effective Date, Executive’s base salary (the “
Base Salary
”) shall be $470,000 USD per year payable in periodic installments in accordance with the Company’s regular payroll practices as in effect from time to time. The Board or a duly authorized committee thereof will review the Base Salary on an annual basis and may increase, but never decrease, the Base Salary from time to time based on merit or such other considerations as the Board or a duly authorized committee thereof may deem appropriate; provided, however, the Company makes no assurances that the Base Salary will be increased during the Term. “Base Salary” shall mean the initial base salary or the then-current base salary as later approved by the Board.
|
b.
|
Bonus
. Executive shall be eligible to receive an annual cash bonus in an amount up to 50% of Executive’s Base Salary for the fiscal year for which the annual cash bonus is being paid, as determined in the discretion of the Board or a duly authorized committee thereof, based on the performance of the Company and Executive relative to performance
|
c.
|
Pro Rata Bonus.
Notwithstanding any other provision in this Agreement to the contrary, should Executive’s employment be terminated by the Company without Cause (as defined below) or by Executive for Good Reason (as defined below), prior to the end of a calendar year, then the Board shall determine the amount of the target bonus for such calendar year, and the Company shall pay Executive the pro rata amount of such target bonus based on the number of days Executive was employed by the Company during the calendar year divided by 365 days (the “
Pro Rata Bonus
”). Such Pro Rata Bonus shall be paid when bonuses are paid to other senior executives of the Company and within two and one-half months following the end of the calendar year in which Executive is terminated.
|
d.
|
Benefits and Vacation
. Executive shall be eligible to participate in and receive the benefits under any deferred compensation plan, health, life, accident and disability insurance plans or programs, and any other employee benefit or fringe benefit plans or arrangements that the Company makes available generally to other senior executives of the Company, pursuant to the provisions of such plans, programs or arrangements as in effect from time to time. Executive shall be entitled to vacation and sick days in accordance with the policies of the Company for its employees generally, as in effect from time to time. The benefits described in this Section 3.d. are hereinafter referred to as the “
Benefits
”.
|
e.
|
Equity Incentive Compensation
. Executive shall be eligible to receive grants, at the discretion of the Board or a duly authorized committee thereof, under any long-term equity-based incentive compensation plans established or maintained by the Company for its senior executive officers, in each case subject to the terms and conditions of the
|
f.
|
Expenses
. The Company shall pay or reimburse Executive for all reasonable, ordinary and necessary business expenses incurred or paid by Executive during the Term in the performance of Executive’s services under this Agreement in accordance with the applicable policies and procedures of the Company as in effect from time to time, upon the presentation of proper expense statements or such other supporting documentation as the Company may reasonably require.
|
g.
|
Auto Allowance.
Company shall pay an automotive allowance of $1,150 per month to cover costs of business travel in a personal vehicle.
|
4.
|
TERMINATION, OTHER THAN FOLLOWING A CHANGE OF CONTROL
.
|
a.
|
General
. Executive’s employment may be terminated by either party at any time and for any reason; and upon termination of Executive’s employment, the Term shall end.
|
b.
|
Resignation without Good Reason
. Executive shall be required to give the Company at least 60 days’ advance written notice (the “
Resignation Notice Period
”) of any voluntary resignation of Executive’s employment hereunder (other than resignation for Good Reason (as defined below), in which event the procedures under Section 5.c. shall apply). During the Resignation Notice Period, the Company in its sole discretion may elect to accelerate Executive’s date of termination of employment, it being understood that any such termination shall still be treated as a voluntary resignation without Good Reason (as defined below) for purposes of this Agreement. Even if Executive’s date of termination is accelerated, Executive shall be paid his Base Salary, and shall receive Benefits capable of being provided to persons who are not actively employed by the Company, as if he had worked through the end of the Resignation Notice Period. The Company reserves the right to require Executive not to be in the offices of the Company or any of its affiliates and/or not to undertake all or any of Executive’s duties and/or not to contact clients, colleagues or advisors of the Company or any of its affiliates during all or part of the Resignation Notice Period. During the Resignation Notice Period, Executive’s terms and conditions of service and duties of loyalty and confidentiality to the Company shall
|
c.
|
Death
. Executive’s employment hereunder shall terminate automatically on the date of his death.
|
d.
|
Disability
. At the option of the Company, Executive’s employment hereunder may be terminated immediately upon Disability (as defined below) of Executive. For purposes of this Agreement, “
Disability
” means any physical or mental illness, impairment or incapacity which, in the good faith determination of the Board, has prevented Executive from performing the essential functions of his position hereunder for a period of 90 or more consecutive days (or for shorter periods totaling 120 days) during any period of 12 consecutive months.
|
e.
|
Termination for Cause
. Notwithstanding any other provision of this Agreement, the Company may, at any time, immediately terminate Executive’s employment for Cause (as defined below). For purposes of this Agreement, “
Cause
” means the occurrence of any of the following by Executive: (i) fraud, misappropriation, embezzlement or acts of similar dishonesty, (ii) conviction of, or plea of
nolo contendere
to, a felony, (iii) excessive use of alcohol or illegal use of drugs in the workplace, (iv) gross negligence or intentional or willful misconduct by Executive in the performance of his duties, (v) breach of Executive’s duty of loyalty to the Company or diversion or usurpation of corporate opportunities properly belonging to the Company, (vi) the knowing breach of any Company confidentiality agreement to which Executive is a party, (vii) willful disregard of the Company’s policies and procedures, (viii) insubordination, (ix) willful failure to satisfactorily perform the duties of Executive’s position, (x) act or omission that would materially and adversely impact the business or reputation of the Company, or (xi) violation of any material provision of this Agreement or any other material provision of any other agreement between Executive and the Company; in each case, as determined by the Company in its sole discretion. The Company’s lack of immediate action with
|
f.
|
Termination Without Cause
. The Company may, at any time, immediately terminate Executive’s employment without Cause.
|
5.
|
COMPENSATION UPON TERMINATION
. Following any termination of Executive’s employment (the date of such termination, “
Termination Date
”), the obligations of the Company to pay or provide Executive with compensation and benefits under Section 3 shall immediately cease, and the Company shall have no further obligations to Executive under this Agreement, except as otherwise required by law or provided for under this Section 5.
|
a.
|
Death or Disability
. If, during the Term, Executive’s employment is terminated (i) by reason of Executive’s death or (ii) by the Company for Disability of Executive, the Company shall pay to Executive (or to his estate or designated beneficiary in the event of Executive’s death) (A) any unpaid Base Salary accrued through the Termination Date, (B) any unpaid Benefits accrued through the Termination Date to which Executive is entitled under any plans, programs or arrangements applicable to terminated employees in which Executive participates, and (C) a lump sum amount equal to two years of Executive’s Base Salary in effect as of the Termination Date; provided that, in the event Executive is terminated by the Company for Disability during the Change of Control Tail Period, such amount shall be paid monthly over a period of 24 months following such termination. Executive shall also immediately vest in all options, restricted stock and other Equity Incentive Compensation (as defined below), all of which shall be immediately available to exercise during the periods provided in the applicable plans and award documents granted to Executive. All payments under clause (C) of this Section 5.a. are conditioned upon Executive executing and delivering (and not revoking) within 90 days of the Termination Date a general waiver and release agreement in the form of Exhibit A, attached, or in a form and with substance satisfactory to the Company, that is no longer subject to revocation. If Executive is unable to execute and deliver such waiver and release agreement due to death or Disability, then the waiver and release agreement shall
|
b.
|
For Cause or Without Good Reason (not During the Change of Control Tail Period)
. If, during the Term (other than during the Change of Control Tail Period (as defined below)), Executive’s employment is terminated (i) by the Company for Cause or (ii) by Executive for any reason other than for Good Reason (as defined below), the Company shall pay to Executive (A) any unpaid Base Salary accrued through the Termination Date and (B) any unpaid Benefits accrued through the Termination Date to which Executive is entitled under any plans, programs or arrangements applicable to terminated employees in which Executive participates. The payments described in clause (A) above shall be made within 90 days (or by such earlier date as may be required by applicable law) following the Termination Date, and the payments described in clause (B) above shall be made in accordance with the provisions of the applicable plans, programs and arrangements maintained by the Company with respect to such payments or as otherwise required by applicable law.
|
c.
|
Without Cause or for Good Reason (not During the Change of Control Tail Period)
. If, during the Term (other than during the Change of Control Tail Period), Executive’s employment is terminated (i) by the Company without Cause or (ii) by Executive for Good Reason (as defined below), the Company shall pay to Executive (A) any unpaid Base Salary accrued through the Termination Date, (B) any unpaid Benefits accrued through the Termination Date to which Executive is entitled under any plans, programs or arrangements applicable to terminated employees in which Executive participates, and (C) the following severance benefits (the “
Without Cause/For Good Reason Severance Benefits
”): (a) two years of Executive’s Base Salary in effect as of the Termination Date
|
d.
|
Termination During Change of Control Tail Period
. In the event that Executive’s employment is terminated by the Company or by Executive during the Change of Control Tail Period for any reason other than a termination by reason of Executive’s death or by the Company for Disability of Executive, this Section 5 shall not apply, and the terms and conditions of Section 6 shall govern with respect to any compensation payable to Executive as a result of such termination. For purposes of this Agreement, the “
Change of Control Tail Period
” shall mean the 12 month period following the occurrence of a Change of Control (as defined below). In no event shall Executive be entitled to compensation both under this Section 5 and under Section 6.
|
e.
|
Equity Incentive Compensation
. Except in circumstances where termination is (i) by reason of Executive’s death or by the Company for Disability, (ii) by the Company without Cause, (iii) by Executive for Good Reason, or (iv) during the Change of Control Tail Period and subject to Section 6, upon termination of Executive’s employment during the Term, the Equity Incentive Compensation awarded to Executive shall forfeit or vest in accordance with the terms of the applicable plans and award documents with respect to such Equity Incentive Compensation, and shall be subject to such other terms and conditions of such plans and award documents that may apply as a result of such termination.
|
f.
|
Benefits
. Notwithstanding anything in this Section 5 to the contrary, the Benefits to which Executive is entitled upon or by reason of the termination of his employment with the Company (including during the Change of Control Tail Period) shall be subject to,
|
g.
|
Expiration of Term
. Notwithstanding anything in this Section 5 to the contrary, the expiration of the Term by itself shall not entitle Executive to receipt of any payments under this Section 5.
|
6.
|
CHANGE OF CONTROL.
|
a.
|
Definition
. “
Change of Control
” shall have the meaning prescribed to such phrase (or, if applicable, the phrase, “Change in Control”) in the 2009 Incentive Award Plan of the Company, or the latest equity incentive award plan of the Company in effect from time to time. The Board shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change of Control of the Company has occurred pursuant to the above definition, and the date of the occurrence of such Change of Control and any incidental matters relating thereto.
|
b.
|
Executive’s Rights Upon a Change of Control.
If there should occur a Change of Control of the Company (or any successor) and Executive’s employment is terminated by the Company without Cause or Executive terminates employment with, Good Reason during the Change of Control Tail Period, Executive shall receive the Without Cause/For Good Reason Severance Benefits, as if he had been terminated without Cause or had terminated for Good Reason under Section 5.c. of this Agreement; provided, that the two years of Executive’s Base Salary in effect as of the Termination Date, payable as part of the Without Cause/For Good Reason Severance Benefits, shall be paid monthly over a period of 24 months following such termination; provided further that all equity awards that would have been eligible to vest under Section 5.c. shall vest immediately upon consummation of a Change of Control; and provided further that Executive shall vest in all Performance-Based Awards as part of the Without Cause/For Good Reason Severance Benefits upon consummation of a Change of Control pro rata based on the Executive’s target award for such Performance-Based Awards (irrespective of actual performance) and based on the number of days Executive was employed by the Company before the Change of Control during the applicable performance period for such Performance-Based
|
7.
|
COOPERATION
. Upon the receipt of reasonable notice from the Company (including outside counsel), Executive agrees that while employed by the Company and thereafter, Executive will respond and provide information with regard to matters in which Executive has knowledge as a result of Executive’s employment with the Company, and will provide reasonable assistance to the Company, its affiliates and their respective representatives in defense of all claims that may be made against the Company or its affiliates, and will assist the Company and its affiliates in the prosecution of all claims that may be made by the Company or its affiliates, to the extent that such claims may relate to the period of Executive’s employment with the Company. Executive agrees to promptly inform the Company if Executive becomes aware of any lawsuit involving such claims that may be filed or threatened against the Company or its affiliates. Executive also agrees to promptly inform the Company (to the extent that Executive is legally permitted to do so) if Executive is asked to assist in any investigation of the Company or its affiliates (or their actions), regardless of whether a lawsuit or other proceeding has then been filed against the Company or its affiliates with respect to such investigation, and shall not provide such assistance unless legally required. Upon presentation of appropriate documentation, the Company shall pay or reimburse Executive for all reasonable out-of-pocket travel, duplicating or telephonic expenses incurred by Executive in complying with this Section 7. For the first five hours of cooperation in any calendar month during the period of Cooperation, Executive shall provide the specified Cooperation services without hourly reimbursement. For each hour of Cooperation or part thereof after five hours, in any calendar month, Company shall reimburse Executive at the hourly rate determined by this fraction: (final Base Salary / 2,080 hours).
|
8.
|
ARBITRATION
. The parties hereby agree to submit all disputes, claims and controversies (“
Claims
”) between the parties or related to or arising out of their employment relationship (except to the extent otherwise provided in that certain Employee Obligations Agreement, dated as of May 23, 2013, by and between the Company and Executive (the “
Employee Obligations Agreement
”), or that certain Indemnification Agreement, dated as of December 10, 2014, by and
|
a.
|
Statute of Limitations
. The statutory limitations period applicable to a Claim asserted in a civil action shall apply to any such Claim asserted in any arbitration proceeding under this Section 8. Arbitration is commenced for limitations purposes by submitting the matter to the arbitral forum.
|
b.
|
Individual Basis
. All Claims that are subject to arbitration under this Section 8 must and will take place on an individual basis only.
|
c.
|
Venue
. Binding arbitration under this Section 8 shall be conducted in California, unless required by law to be conducted elsewhere, in which case it shall be conducted where required by law.
|
d.
|
Applicable Rules
. The arbitration proceeding, including discovery, shall be conducted in accordance with the Federal Arbitration Act, the JAMS Policy on Employment Arbitration Minimum Standards and the JAMS Employment Arbitration Rules and Procedures then in effect (the “
JAMS Rules
”). Executive understands that if he wishes to receive a copy of the JAMS Rules currently in effect, he may inform the Company in writing, and the Company will provide them to him before he executes this Agreement. Executive also understand that JAMS Rules are available online at http://www.jamsadr.com/rules-employment-arbitration/.
|
e.
|
Arbitrator Selection
. The arbitration shall be conducted before a neutral arbitrator selected by all parties in accordance with JAMS Rules. The parties may also agree on an arbitrator.
|
f.
|
Cost Allocation
. If required by applicable law, the Company shall pay all additional costs peculiar to the arbitration to the extent such costs would not otherwise be incurred in a court proceeding (for instance, the Company shall pay the arbitrator’s fees, and the JAMS administration and filing fees, to the extent such fees exceed court filing fees).
|
g.
|
Attorneys’ Fees and Costs
. Each party shall pay his or its own costs and attorneys’ fees except that the arbitrator shall award costs and attorneys’ fees to the prevailing party.
|
h.
|
Written Decision
. The arbitrator shall follow applicable substantive law and, within 30 days after the conclusion of the arbitration, issue a written opinion setting forth the factual and legal bases for his or her decision.
|
i.
|
Acknowledgement
. EXECUTIVE UNDERSTANDS HE IS GIVING UP HIS RIGHT TO A JURY TRIAL BY ENTERING INTO THIS AGREEMENT. EXECUTIVE UNDERSTANDS HE IS GIVING UP HIS RIGHT TO COMMENCE OR PARTICIPATE IN A CLASS OR COLLECTIVE ACTION AND INSTEAD AGREES TO ARBITRATE ANY EMPLOYMENT-RELATED DISPUTE ON AN INDIVIDUAL BASIS ONLY TO THE MAXIMUM EXTENT PERMITTED BY LAW.
|
9.
|
CODE SECTION 409A
.
|
a.
|
This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (“
Section 409A
”), including the exceptions thereto, and shall be construed and administered in accordance with such intent. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each separate payment or installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement in connection with a termination of employment shall only be made if such termination of employment constitutes a “separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by Executive on account of non-compliance with Section 409A.
|
b.
|
Notwithstanding any other provision of this Agreement, if at the time of Executive’s termination of employment, he is a “specified employee,” determined in accordance with Section 409A, any payments and benefits provided under this Agreement that constitute “nonqualified deferred compensation” subject to Section 409A that are provided to Executive on account of his separation from service shall not be paid until the first payroll date to occur following the six-month anniversary of Executive’s termination date (“
Specified Employee Payment Date
”). The aggregate amount of any payments that would otherwise have been made during such six-month period shall be paid in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule. If Executive dies before the Specified Employee Payment Date, any delayed payments shall be paid to Executive’s estate in a lump sum within one week of Executive’s death.
|
c.
|
To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following: (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; (ii) any reimbursement of an eligible expense shall be paid to Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (iii) any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit. Any tax gross-up payments provided under this Agreement shall be paid to Executive on or before December 31 of the calendar year immediately following the calendar year in which Executive remits the related taxes.
|
d.
|
Whenever in this Agreement a payment or benefit is conditioned on Executive’s execution of a release of claims, such release must be executed and all revocation periods shall have expired within 90 days after the Termination Date; failing which such payment or benefit shall be forfeited. If such payment or benefit constitutes “nonqualified deferred compensation” subject to Section 409A, and if such 90-day period begins in one calendar year and ends in the next calendar year, the payment or benefit shall not be made
|
10.
|
GENERAL PROVISIONS
.
|
a.
|
Notices
. All notices, requests, demands, statements, reports and other communications provided for by this Agreement shall be in writing (email being sufficient) and shall be sent by (i) certified mail, return receipt requested, postage prepaid, (ii) nationally recognized overnight delivery service, (iii) personal delivery or (iv) email. A notice shall be deemed to be given (x) if notice is delivered by certified mail or nationally recognized overnight delivery service, on the business day following the date of its mailing, (y) if such notice is delivered personally, upon delivery, or (z) if such notice is sent by email, upon sending. Each party may change his or its address for notices by giving notice in accordance herewith. All notices shall be addressed and mailed or delivered to the following addresses:
|
b.
|
Entire Agreement
. This Agreement, the Employee Obligations Agreement, and the Indemnification Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and supersede all prior agreements, representations and understandings (whether written or oral) of the parties with respect to the subject matter hereof and thereof, including that certain Change in Control Severance Agreement, dated as of January 11, 2018, by and between the Company and Executive, and any other agreement between Executive and the Company or any of its affiliates and subsidiaries. The above-referenced Change in Control Severance Agreement and any amendments thereto, by and between Executive and the Company, are terminated, canceled, and of no further force or effect as of the Effective Date hereof.
|
c.
|
Modification and Waiver
. No amendment or variation of the terms of this Agreement shall be valid unless made in writing and signed by Executive and a duly authorized representative of the Company (other than Executive). A waiver of any term or condition of this Agreement shall not be construed as a general waiver by the Company. If one or more provisions of this Agreement are held to be illegal or unenforceable under applicable law, such illegal or unenforceable provision(s) shall be limited or excluded from this Agreement to the minimum extent required so that this Agreement shall otherwise remain in full force and effect and enforceable in accordance with its terms.
|
d.
|
Governing Law
. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its conflict of law principles, and any dispute in the meaning, effect or validity of this Agreement shall be resolved in accordance with the laws of the State of California.
|
e.
|
Assignment; Binding Effect
. This Agreement is fully assignable and transferable by the Company, but any purported assignment or transfer by Executive is void. It is hereby agreed that Executive’s rights and obligations under this Agreement are personal and not assignable by Executive. This Agreement shall be binding upon and inure to the benefit of the heirs, legal representatives, successors and permitted assigns of the parties.
EXECUTIVE HAS READ THIS AGREEMENT CAREFULLY AND UNDERSTANDS AND ACCEPTS THE OBLIGATIONS WHICH IT IMPOSES UPON EXECUTIVE WITHOUT RESERVATION. NO PROMISES OR REPRESENTATIONS HAVE BEEN MADE TO EXECUTIVE TO INDUCE EXECUTIVE TO SIGN THIS AGREEMENT. EXECUTIVE SIGNS THIS AGREEMENT VOLUNTARILY AND FREELY, IN DUPLICATE, WITH THE UNDERSTANDING THAT THE COMPANY WILL RETAIN ONE COUNTERPART AND THE OTHER COUNTERPART WILL BE RETAINED BY EXECUTIVE.
|
f.
|
Injunctive Relief
. Executive agrees that any breach of this Agreement will cause irreparable harm to the Company for which damages would not be an adequate remedy, and, therefore, to the fullest extent permitted by applicable law, the Company will be
|
g.
|
Survival
. This Agreement shall terminate upon the expiration of the Term; provided that the provisions of Sections 5 through 10 shall survive termination of this Agreement and termination of Executive’s employment regardless of the reason for such termination.
|
h.
|
Withholding
. The Company may withhold from any and all amounts payable under this Agreement or otherwise such federal, state and local taxes as may be required to be withheld pursuant to applicable law.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Spectrum Pharmaceuticals, 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, including its consolidated subsidiaries, 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 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 the 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.
|
August 9, 2018
|
/s/ JOSEPH W. TURGEON
|
|
Joseph W. Turgeon
|
|
President and Chief Executive Officer
|
|
(Chief Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Spectrum Pharmaceuticals, 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, including its consolidated subsidiaries, 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 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 the 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.
|
August 9, 2018
|
/s/ Kurt A. Gustafson
|
|
Kurt A. Gustafson
|
|
Executive Vice President and Chief Financial Officer
|
|
(Principal Financial Officer)
|
Date:
|
August 9, 2018
|
By:
|
|
/s/ JOSEPH W. TURGEON
|
|
|
Name:
|
|
Joseph W. Turgeon
|
|
|
Title:
|
|
Chief Executive Officer and President
|
Date:
|
August 9, 2018
|
By:
|
|
/s/ Kurt A. Gustafson
|
|
|
Name:
|
|
Kurt A. Gustafson
|
|
|
Title:
|
|
Executive Vice President and Chief Financial Officer
|