|
|
|
|
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
68-0328265
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
Large accelerated filer
|
|
x
|
Accelerated filer
|
|
o
|
Non-accelerated filer
|
|
o
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
|
o
|
|
|
|
Emerging growth company
|
|
o
|
|
|
|
|
|
Item
|
Description
|
Page
|
|
|
|
|
||
Item 1.
|
|
|
|
Condensed Consolidated Balance Sheets at
September 30, 2017 and December 31, 2016
|
|
|
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and
nine months ended September 30, 2017 and 2016
|
|
|
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 2017 and 2016
|
|
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
|
|
||
Item 1.
|
||
Item 1A.
|
||
Item 6.
|
||
|
|
September 30,
|
|
December 31,
|
||||
|
2017
|
|
2016
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
|
|||
Cash and cash equivalents
|
$
|
74,619
|
|
|
$
|
26,120
|
|
Restricted cash
|
2,369
|
|
|
2,001
|
|
||
Marketable securities
|
—
|
|
|
20,988
|
|
||
Accounts receivable, net allowance for doubtful accounts of $1,015 and $1,037, respectively.
|
33,979
|
|
|
34,430
|
|
||
Other receivables
|
439
|
|
|
1,787
|
|
||
Inventories
|
42,686
|
|
|
41,160
|
|
||
Prepaid expenses and other current assets
|
3,784
|
|
|
3,359
|
|
||
Total current assets
|
$
|
157,876
|
|
|
$
|
129,845
|
|
Property and equipment, net
|
20,207
|
|
|
23,265
|
|
||
Goodwill
|
120,903
|
|
|
120,711
|
|
||
Intangibles, net
|
81,502
|
|
|
84,511
|
|
||
Deposits and other assets
|
1,486
|
|
|
1,352
|
|
||
Total assets
|
$
|
381,974
|
|
|
$
|
359,684
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
10,878
|
|
|
$
|
13,237
|
|
Accrued payroll
|
16,998
|
|
|
19,997
|
|
||
Accrued expenses and other current liabilities
|
11,157
|
|
|
11,668
|
|
||
Revolving line of credit
|
15,441
|
|
|
—
|
|
||
Total current liabilities
|
$
|
54,474
|
|
|
$
|
44,902
|
|
Deferred income taxes
|
879
|
|
|
879
|
|
||
Deferred rent
|
7,786
|
|
|
7,949
|
|
||
Other liabilities
|
1,719
|
|
|
3,783
|
|
||
Contingently issuable common stock
|
8,800
|
|
|
12,200
|
|
||
Debt
|
222,957
|
|
|
177,178
|
|
||
Total liabilities
|
$
|
296,615
|
|
|
$
|
246,891
|
|
Commitments and contingencies
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Convertible preferred stock, $0.001 par value; 5,000,000 shares authorized. No shares issued and outstanding.
|
—
|
|
|
—
|
|
||
Common stock, $0.001 par value; 135,000,000 shares authorized. 83,646,895 and 82,986,244
shares issued, respectively. 83,434,656 and 82,774,005
shares outstanding, respectively.
|
84
|
|
|
83
|
|
||
Treasury stock, at cost, 212,239 shares.
|
(2,942
|
)
|
|
(2,942
|
)
|
||
Additional paid-in capital
|
590,840
|
|
|
567,765
|
|
||
Accumulated deficit
|
(505,480
|
)
|
|
(453,601
|
)
|
||
Accumulated other comprehensive income
|
2,857
|
|
|
1,488
|
|
||
Total stockholders’ equity
|
$
|
85,359
|
|
|
$
|
112,793
|
|
Total liabilities and stockholders’ equity
|
$
|
381,974
|
|
|
$
|
359,684
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenue
|
$
|
45,986
|
|
|
$
|
52,122
|
|
|
$
|
137,154
|
|
|
$
|
145,462
|
|
Cost of goods sold
|
16,879
|
|
|
15,191
|
|
|
47,181
|
|
|
51,131
|
|
||||
Gross profit
|
29,107
|
|
|
36,931
|
|
|
89,973
|
|
|
94,331
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Research and development
|
5,277
|
|
|
8,236
|
|
|
16,541
|
|
|
23,796
|
|
||||
Clinical and regulatory affairs
|
3,211
|
|
|
3,759
|
|
|
9,786
|
|
|
11,664
|
|
||||
Marketing and sales
|
21,536
|
|
|
26,007
|
|
|
71,217
|
|
|
82,749
|
|
||||
General and administrative
|
8,332
|
|
|
9,714
|
|
|
25,109
|
|
|
29,869
|
|
||||
Restructuring costs
|
98
|
|
|
498
|
|
|
235
|
|
|
8,612
|
|
||||
Settlement costs
|
—
|
|
|
—
|
|
|
—
|
|
|
4,650
|
|
||||
Contract termination and business acquisition expenses
|
—
|
|
|
(49
|
)
|
|
—
|
|
|
5,856
|
|
||||
Total operating expenses
|
38,454
|
|
|
48,165
|
|
|
122,888
|
|
|
167,196
|
|
||||
Loss from operations
|
(9,347
|
)
|
|
(11,234
|
)
|
|
(32,915
|
)
|
|
(72,865
|
)
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest income
|
8
|
|
|
58
|
|
|
80
|
|
|
168
|
|
||||
Interest expense
|
(6,021
|
)
|
|
(4,084
|
)
|
|
(16,119
|
)
|
|
(11,681
|
)
|
||||
Other income (expense), net
|
349
|
|
|
189
|
|
|
525
|
|
|
(723
|
)
|
||||
Change in fair value of contingent consideration related to acquisition
|
800
|
|
|
—
|
|
|
3,400
|
|
|
(100
|
)
|
||||
Loss on debt extinguishment
|
—
|
|
|
—
|
|
|
(6,512
|
)
|
|
—
|
|
||||
Change in fair value of derivative liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(43,831
|
)
|
||||
Total other income (expense)
|
(4,864
|
)
|
|
(3,837
|
)
|
|
(18,626
|
)
|
|
(56,167
|
)
|
||||
Net loss before income tax expense
|
(14,211
|
)
|
|
(15,071
|
)
|
|
(51,541
|
)
|
|
(129,032
|
)
|
||||
Income tax expense
|
(62
|
)
|
|
(174
|
)
|
|
(338
|
)
|
|
(720
|
)
|
||||
Net loss
|
$
|
(14,273
|
)
|
|
$
|
(15,245
|
)
|
|
$
|
(51,879
|
)
|
|
$
|
(129,752
|
)
|
Other comprehensive income (loss) foreign currency translation
|
232
|
|
|
153
|
|
|
1,369
|
|
|
1,067
|
|
||||
Comprehensive loss
|
$
|
(14,041
|
)
|
|
$
|
(15,092
|
)
|
|
$
|
(50,510
|
)
|
|
$
|
(128,685
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted net loss per share
|
$
|
(0.17
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.62
|
)
|
|
$
|
(1.61
|
)
|
Shares used in computing basic and diluted net loss per share
|
83,496
|
|
|
82,446
|
|
|
83,225
|
|
|
80,402
|
|
|
Nine Months Ended September 30,
|
||||||
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(51,879
|
)
|
|
$
|
(129,752
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Bad debt expense
|
(97
|
)
|
|
383
|
|
||
Depreciation and amortization
|
6,933
|
|
|
6,566
|
|
||
Stock-based compensation
|
8,800
|
|
|
9,641
|
|
||
Change in fair value of derivative liabilities
|
—
|
|
|
43,831
|
|
||
Change in fair value of contingent consideration related to acquisition
|
(3,400
|
)
|
|
100
|
|
||
Accretion of interest & amortization of deferred financing costs on debt
|
7,558
|
|
|
7,037
|
|
||
Non-cash foreign exchange (gain) loss
|
(560
|
)
|
|
838
|
|
||
Non-cash loss on debt extinguishment
|
3,997
|
|
|
—
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||
Restricted cash
|
(368
|
)
|
|
(2,001
|
)
|
||
Accounts receivable and other receivables
|
2,859
|
|
|
(3,883
|
)
|
||
Inventories
|
(1,048
|
)
|
|
2,083
|
|
||
Prepaid expenses and other current assets
|
(237
|
)
|
|
535
|
|
||
Accounts payable
|
(3,447
|
)
|
|
(6,607
|
)
|
||
Accrued payroll
|
(3,225
|
)
|
|
7,660
|
|
||
Accrued expenses and other liabilities
|
(2,509
|
)
|
|
3,498
|
|
||
Net cash used in operating activities
|
$
|
(36,623
|
)
|
|
$
|
(60,071
|
)
|
Cash flows from investing activities:
|
|
|
|
|
|
||
Purchases of marketable securities
|
—
|
|
|
(20,976
|
)
|
||
Maturities of marketable securities
|
21,000
|
|
|
37,850
|
|
||
Purchases of property and equipment
|
(876
|
)
|
|
(2,051
|
)
|
||
Acquisition of business, net of cash acquired of $0 and $24,012, respectively
|
—
|
|
|
(60,622
|
)
|
||
Net cash provided by (used in) investing activities
|
$
|
20,124
|
|
|
$
|
(45,799
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
||
Net proceeds from revolving line of credit
|
15,441
|
|
|
—
|
|
||
Deferred financing costs
|
(6,755
|
)
|
|
(917
|
)
|
||
Proceeds from sale of common stock under employee stock purchase plan
|
1,681
|
|
|
2,520
|
|
||
Proceeds from exercise of stock options
|
482
|
|
|
1,777
|
|
||
Proceeds from issuance of debt
|
120,000
|
|
|
—
|
|
||
Repayment of debt
|
(66,613
|
)
|
|
—
|
|
||
Minimum tax withholding paid on behalf of employees for restricted stock units
|
—
|
|
|
(134
|
)
|
||
Net cash provided by financing activities
|
$
|
64,236
|
|
|
$
|
3,246
|
|
Effect of exchange rate changes on cash and cash equivalents
|
762
|
|
|
93
|
|
||
Net increase (decrease) in cash and cash equivalents
|
$
|
48,499
|
|
|
$
|
(102,531
|
)
|
Cash and cash equivalents, beginning of period
|
26,120
|
|
|
124,553
|
|
||
Cash and cash equivalents, end of period
|
$
|
74,619
|
|
|
$
|
22,022
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for interest
|
$
|
7,447
|
|
|
$
|
3,088
|
|
Cash paid for income taxes
|
$
|
672
|
|
|
$
|
214
|
|
Non-cash investing and financing activities:
|
|
|
|
||||
Acquisition of property and equipment included in accounts payable
|
$
|
176
|
|
|
$
|
64
|
|
Fair value of common stock issued for business acquisition
|
$
|
—
|
|
|
$
|
100,812
|
|
Fair value of warrants issued for business acquisition
|
$
|
—
|
|
|
$
|
44
|
|
Fair value of warrants issued in connection with the Facility Agreement
|
$
|
14,704
|
|
|
$
|
—
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Production equipment, molds, and office furniture
|
$
|
12,177
|
|
|
$
|
11,714
|
|
Computer hardware and software
|
8,726
|
|
|
8,162
|
|
||
Leasehold improvements
|
15,495
|
|
|
15,495
|
|
||
Construction in progress (software and related implementation, production equipment, and leasehold improvements)
|
687
|
|
|
839
|
|
||
Property and equipment, at cost
|
$
|
37,085
|
|
|
$
|
36,210
|
|
Accumulated depreciation
|
(16,878
|
)
|
|
(12,945
|
)
|
||
Property and equipment, net
|
$
|
20,207
|
|
|
$
|
23,265
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Raw materials
|
$
|
11,358
|
|
|
$
|
13,133
|
|
Work-in-process
|
7,713
|
|
|
10,139
|
|
||
Finished goods
|
23,615
|
|
|
17,888
|
|
||
Total Inventories
|
$
|
42,686
|
|
|
$
|
41,160
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Goodwill
|
$
|
120,903
|
|
|
$
|
120,711
|
|
|
|
|
|
|
|
||
Intangible assets:
|
|
|
|
|
|
||
Indefinite lived intangibles
|
|
|
|
|
|
||
Trademarks and trade names
|
$
|
2,708
|
|
|
$
|
2,708
|
|
In-process research and development
|
11,200
|
|
|
11,200
|
|
||
|
|
|
|
||||
Finite lived intangibles
|
|
|
|
|
|
||
Developed technology
|
$
|
67,600
|
|
|
$
|
67,600
|
|
Accumulated amortization
|
(6,256
|
)
|
|
(3,810
|
)
|
||
Developed technology, net
|
$
|
61,344
|
|
|
$
|
63,790
|
|
|
|
|
|
|
|
||
Customer relationships
|
$
|
7,500
|
|
|
$
|
7,500
|
|
Accumulated amortization
|
(1,250
|
)
|
|
(687
|
)
|
||
Customer relationships, net
|
$
|
6,250
|
|
|
$
|
6,813
|
|
|
|
|
|
|
|
||
Intangible assets (excluding goodwill), net
|
$
|
81,502
|
|
|
$
|
84,511
|
|
Balance at January 1, 2017
|
120,711
|
|
|
Foreign currency translation adjustment
|
191
|
|
|
Balance at September 30, 2017
|
$
|
120,903
|
|
Remainder of 2017
|
$
|
959
|
|
2018
|
4,342
|
|
|
2019
|
4,639
|
|
|
2020
|
5,311
|
|
|
2021
|
7,181
|
|
|
2022 & Thereafter
|
45,162
|
|
|
Total
|
$
|
67,594
|
|
|
December 31, 2016
|
||||||||||||||
|
Amortized
Cost |
|
Gross
Unrealized Gain |
|
Gross
Unrealized Loss |
|
Fair Value
|
||||||||
Agency bonds
|
$
|
6,488
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
6,490
|
|
Corporate bonds
|
10,513
|
|
|
—
|
|
|
(21
|
)
|
|
10,492
|
|
||||
Commercial paper
|
3,987
|
|
|
—
|
|
|
—
|
|
|
3,987
|
|
||||
Total
|
$
|
20,988
|
|
|
$
|
2
|
|
|
$
|
(21
|
)
|
|
$
|
20,969
|
|
|
Fair value measurement at reporting date using:
|
||||||||||||||
|
Quoted prices in
active markets for identical assets (Level 1) |
|
Significant other
observable inputs (Level 2) |
|
Significant
unobservable inputs (Level 3) |
|
Total
|
||||||||
At September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
$
|
74,619
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
74,619
|
|
Restricted cash
|
$
|
2,369
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,369
|
|
Contingently issuable common stock
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,800
|
|
|
$
|
8,800
|
|
At December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and cash equivalents
|
$
|
26,120
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
26,120
|
|
Restricted cash
|
$
|
2,001
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,001
|
|
Contingently issuable common stock
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
12,200
|
|
|
$
|
12,200
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Cost of goods sold
|
$
|
169
|
|
|
$
|
200
|
|
|
$
|
642
|
|
|
$
|
730
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development
|
328
|
|
|
389
|
|
|
911
|
|
|
1,187
|
|
||||
Clinical and regulatory affairs
|
107
|
|
|
290
|
|
|
527
|
|
|
782
|
|
||||
Marketing and sales
|
874
|
|
|
1,004
|
|
|
3,215
|
|
|
3,395
|
|
||||
General and administrative
|
1,135
|
|
|
992
|
|
|
3,506
|
|
|
3,547
|
|
||||
Total operating expenses
|
$
|
2,444
|
|
|
$
|
2,675
|
|
|
$
|
8,159
|
|
|
$
|
8,911
|
|
Total
|
$
|
2,613
|
|
|
$
|
2,875
|
|
|
$
|
8,801
|
|
|
$
|
9,641
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net loss
|
$
|
(14,273
|
)
|
|
$
|
(15,245
|
)
|
|
$
|
(51,879
|
)
|
|
$
|
(129,752
|
)
|
Shares used in computing basic and diluted net loss per share
|
83,496
|
|
|
82,446
|
|
|
83,225
|
|
|
80,402
|
|
||||
Basic and diluted net loss per share
|
$
|
(0.17
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.62
|
)
|
|
$
|
(1.61
|
)
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||
|
September 30,
|
|
September 30,
|
||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Common stock options
|
338
|
|
|
2,006
|
|
|
543
|
|
|
1,384
|
|
Restricted stock awards
|
117
|
|
|
138
|
|
|
119
|
|
|
133
|
|
Restricted stock units
|
98
|
|
|
465
|
|
|
205
|
|
|
358
|
|
Total
|
553
|
|
|
2,609
|
|
|
867
|
|
|
1,875
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||
|
September 30,
|
|
September 30,
|
||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Conversion of the Notes
|
11,939
|
|
|
14,767
|
|
|
11,939
|
|
|
14,767
|
|
Deerfield Warrants
|
6,470
|
|
|
—
|
|
|
6,470
|
|
|
—
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||
United States
|
$
|
30,877
|
|
|
67.1%
|
|
$
|
36,305
|
|
|
69.7%
|
|
$
|
93,672
|
|
|
68.3%
|
|
$
|
102,457
|
|
|
70.4%
|
Total International
|
$
|
15,109
|
|
|
32.9%
|
|
$
|
15,817
|
|
|
30.3%
|
|
$
|
43,482
|
|
|
31.7%
|
|
$
|
43,005
|
|
|
29.6%
|
Revenue
|
$
|
45,986
|
|
|
100.0%
|
|
$
|
52,122
|
|
|
100.0%
|
|
$
|
137,154
|
|
|
100.0%
|
|
$
|
145,462
|
|
|
100.0%
|
Remainder of 2017
|
$
|
938
|
|
2018
|
3,370
|
|
|
2019
|
3,484
|
|
|
2020
|
3,694
|
|
|
2021
|
3,692
|
|
|
2022 and thereafter
|
21,821
|
|
|
Total
|
$
|
36,999
|
|
|
Fair Value of Contingently Issuable Common Stock
|
||
December 31, 2016
|
$
|
12,200
|
|
Fair Value Adjustment of Contingent Payment for the nine months ended September 30, 2017
|
(3,400
|
)
|
|
September 30, 2017
|
$
|
8,800
|
|
|
One-time Termination Benefits
|
||
Accrual balance as of December 31, 2016
|
$
|
2,754
|
|
Restructuring charges
|
235
|
|
|
Utilization
|
(2,666
|
)
|
|
Accrual balance as of September 30, 2017
|
$
|
323
|
|
Cash consideration
|
$
|
84,634
|
|
Common stock consideration
|
100,812
|
||
Fair value of assumed TriVascular stock warrants
|
44
|
||
Total purchase consideration
|
$
|
185,490
|
|
Cash and cash equivalents
|
$
|
24,012
|
|
Short-term investments
|
3,008
|
|
|
Accounts receivable
|
5,780
|
|
|
Inventories
|
17,765
|
|
|
Prepaid expenses and other current assets
|
1,895
|
|
|
Property and equipment
|
3,152
|
|
|
Intangible assets
|
46,200
|
|
|
Other assets
|
317
|
|
|
Accounts payable
|
(2,214
|
)
|
|
Accrued liabilities and other
|
(6,450
|
)
|
|
Notes payable
|
(61
|
)
|
|
Net assets acquired
|
$
|
93,404
|
|
Goodwill
|
$
|
92,086
|
|
Total purchase consideration
|
$
|
185,490
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
|
September 30, 2016
|
|
September 30, 2016
|
||||
Combined net sales
|
$
|
52,122
|
|
|
$
|
148,133
|
|
Combined net loss from continuing operations
|
(14,129
|
)
|
|
(124,859
|
)
|
||
Combined basic and diluted net loss per share
|
$
|
(0.17
|
)
|
|
$
|
(1.52
|
)
|
Item 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
risks associated with our merger with TriVascular Technologies, Inc. (“TriVascular”);
|
•
|
failure to realize the anticipated benefits from previous business combination transactions, including our acquisition
|
•
|
continued market acceptance, use and endorsement of our products;
|
•
|
quality problems with our products;
|
•
|
consolidation in the health care industry;
|
•
|
the success of our clinical trials relating to products under development;
|
•
|
our ability to maintain strong relationships with certain key physicians;
|
•
|
continued growth in the number of patients qualifying for treatment of abdominal aortic aneurysms through our products;
|
•
|
our ability to effectively compete with the products offered by our competitors;
|
•
|
the level and availability of third party payor reimbursement for our products;
|
•
|
our ability to effectively develop new or complementary products and technologies;
|
•
|
our ability to manufacture our endovascular systems to meet demand;
|
•
|
our ability to grow product revenues;
|
•
|
changes to our international operations including currency exchange rate fluctuations;
|
•
|
our ability to effectively manage our business and keep pace with our anticipated growth;
|
•
|
our ability to develop and retain a direct sales force in the United States and select European countries;
|
•
|
the nature of and any changes to domestic and foreign legislative, regulatory and other legal requirements that apply to us, our products, our suppliers and our competitors;
|
•
|
the timing of and our ability to obtain and maintain any required regulatory clearances and approvals;
|
•
|
our ability to protect our intellectual property rights and proprietary technologies;
|
•
|
our ability to operate our business without infringing the intellectual property rights and proprietary technology of third parties;
|
•
|
product liability claims;
|
•
|
pending and future litigation;
|
•
|
reputational damage to our products caused by the use, mis-use or off-label use of our products or government or voluntary recalls of our products;
|
•
|
our utilization of single source supplier for specialized components of our product lines;
|
•
|
our ability to attract, retain, and motivate qualified personnel;
|
•
|
our ability to make future acquisitions and successfully integrate any such future-acquired businesses;
|
•
|
our ability to maintain adequate liquidity to fund our operational needs and research and developments expenses;
|
•
|
our ability to identify and manage risks; and
|
•
|
general macroeconomic and world-wide business conditions.
|
•
|
Market Overview and Opportunity
|
•
|
Our Products
|
•
|
Manufacturing and Supply
|
•
|
Marketing and Sales
|
•
|
Competition
|
•
|
Product Developments and Clinical Trials
|
•
|
EVAS2 IDE
- In October 2017, we announced that we have received Investigational Device Exemption ("IDE") approval from the United States Food and Drug Administration ("FDA") to commence a confirmatory clinical study to evaluate the safety and effectiveness of the Nellix EVAS System for the endovascular treatment of infrarenal AAA. The EVAS2 IDE Multicenter Safety and Effectiveness Confirmatory Study ("EVAS2") will prospectively evaluate the refined Indications for Use (“IFU”) and the Nellix Gen2 EVAS System. The study is approved to enroll up to 90 primary patients, with one-year follow-up data required for the Premarket Approval (“PMA”) application. We anticipate beginning patient enrollment in EVAS2 in the fourth quarter of 2017 or in early 2018, with PMA approval estimated to occur in 2020.
|
•
|
In September 2017, we announced CE Mark approval for the Nellix EVAS System with the refined IFU. The Nellix EVAS System is being studied in the U.S. under an IDE. Following a thorough review of supporting clinical data, the Company's Notified Body in the European Union, together with an independent clinical reviewer, has determined that the Nellix
|
•
|
EVAS FORWARD
Global Registry - The objective of this registry was to assess the clinical outcomes of the Nellix EVAS System for the endovascular repair of infrarenal AAA in an ‘all-comers,’ real world patient population. The first phase of the registry included 300 patients enrolled in 18 international centers. The first patient in the registry was treated in October 2013. In September 2014, we announced completion of patient enrollment in the EVAS FORWARD Global Registry. In November 2016, we announced updated data on 300 patients with a mean follow-up of 25 months. In November 2016, we also announced positive 2-year results from the Nellix EVAS FORWARD Global Registry. The following outcomes were presented at the annual VEITH meeting:
|
•
|
EVAS FORWARD IDE
- We developed this pivotal clinical trial to evaluate the safety and effectiveness of the Nellix EVAS System. This study is a prospective single arm study which enrolled 179 patients at 29 centers in the United States and Europe. In November 2014, we completed enrollment in the EVAS FORWARD IDE, and we submitted the one year results to the FDA in March 2016. In May 2016, we announced the results of the one year clinical data from the EVAS FORWARD IDE study that demonstrate that the Nellix EVAS System met the study primary endpoints for major adverse events at 30 days (safety) and treatment success at one year (effectiveness).
|
•
|
Freedom from all endoleaks (95%), all-cause mortality (92%), device-related reintervention (96%), AAA Sac growth (98%), migration (98%), and cardiovascular mortality (98%), among all patients.
|
•
|
Highest freedom of type II endoleaks, of 96%, ever reported at two years, among all patients.
|
•
|
ASCEND
Registry - In April 2016, we announced the first data presentation with one-year outcomes from the ASCEND Registry (Aneurysm Study for Complex AAA: Evaluation of Nellix Durability), a physician-initiated registry of the Nellix EVAS System used with aortic branch stent grafts for the treatment of patients with complex AAAs.
|
•
|
99% freedom from aneurysm-related mortality;
|
•
|
99% freedom from migration, rupture, and conversion;
|
•
|
97% freedom from Type I/III endoleak; and
|
•
|
Excellent freedom from secondary intervention for occlusion (97%), Type I endoleak (97%) and Type II endoleak 95%.
|
•
|
Low major adverse event (MAE) rate of 0.4%;
|
•
|
No ruptures, conversion, or secondary interventions;
|
•
|
99% and 100% freedom from type I and type III endoleak;
|
•
|
Fast-Track completed in 216 (87%) patients, with positive results compared to non-Fast-Track patients;
|
•
|
Procedure time of 84 minutes vs. 110 minutes;
|
•
|
General anesthesia use 0% vs. 18%;
|
•
|
ICU stay 0% vs. 32%; and
|
•
|
Mean hospital stay 1.2 vs. 1.9 days.
|
•
|
At least 28% greater EVAR eligibility for women with AAA
|
•
|
1.3% major adverse events, the lowest rate reported for EVAR, compared to other contemporary, prospective, post-market registries
|
•
|
No deaths
|
•
|
No proximal endoleaks
|
•
|
No limb occlusion
|
•
|
Low readmission rate of 3.9%
|
•
|
100% procedural success
|
•
|
Broad patient applicability, with 40% of the patients treated outside the labeled indications of other EVAR devices;
|
•
|
Stable aortic neck diameters with an average expansion of 0.1%, compared to 25% as reported with other EVAR devices;
|
•
|
Lowest reported MAE rate across EVAR investigational device exemption (“IDE”) trials;
|
•
|
97% Freedom from secondary interventions related to type I endoleak; and
|
•
|
No migration, type III endoleaks or conversions.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||||||
Revenue
|
$
|
45,986
|
|
|
100.0%
|
|
$
|
52,122
|
|
|
100.0%
|
|
$
|
137,154
|
|
|
100.0%
|
|
$
|
145,462
|
|
|
100.0%
|
Cost of goods sold
|
16,879
|
|
|
36.7%
|
|
15,191
|
|
|
29.1%
|
|
47,181
|
|
|
34.4%
|
|
51,131
|
|
|
35.2%
|
||||
Gross profit
|
29,107
|
|
|
63.3%
|
|
36,931
|
|
|
70.9%
|
|
89,973
|
|
|
65.6%
|
|
94,331
|
|
|
64.8%
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Research and development
|
5,277
|
|
|
11.5%
|
|
8,236
|
|
|
15.8%
|
|
16,541
|
|
|
12.1%
|
|
23,796
|
|
|
16.4%
|
||||
Clinical and regulatory affairs
|
3,211
|
|
|
7.0%
|
|
3,759
|
|
|
7.2%
|
|
9,786
|
|
|
7.1%
|
|
11,664
|
|
|
8.0%
|
||||
Marketing and sales
|
21,536
|
|
|
46.8%
|
|
26,007
|
|
|
49.9%
|
|
71,217
|
|
|
51.9%
|
|
82,749
|
|
|
56.9%
|
||||
General and administrative
|
8,332
|
|
|
18.1%
|
|
9,714
|
|
|
18.6%
|
|
25,109
|
|
|
18.3%
|
|
29,869
|
|
|
20.5%
|
||||
Restructuring costs
|
98
|
|
|
0.2%
|
|
498
|
|
|
1.0%
|
|
235
|
|
|
0.2%
|
|
8,612
|
|
|
5.9%
|
||||
Settlement costs
|
—
|
|
|
—%
|
|
—
|
|
|
—%
|
|
—
|
|
|
—%
|
|
4,650
|
|
|
3.2%
|
||||
Contract termination and business acquisition expenses
|
—
|
|
|
—%
|
|
(49
|
)
|
|
(0.1)%
|
|
—
|
|
|
—%
|
|
5,856
|
|
|
4.0%
|
||||
Total operating expenses
|
38,454
|
|
|
83.6%
|
|
48,165
|
|
|
92.4%
|
|
122,888
|
|
|
89.6%
|
|
167,196
|
|
|
114.9%
|
||||
Loss from operations
|
(9,347
|
)
|
|
(20.3)%
|
|
(11,234
|
)
|
|
(21.6)%
|
|
(32,915
|
)
|
|
(24.0)%
|
|
(72,865
|
)
|
|
(50.1)%
|
||||
Total other income (expense)
|
(4,864
|
)
|
|
(10.6)%
|
|
(3,837
|
)
|
|
(7.4)%
|
|
(18,626
|
)
|
|
(13.6)%
|
|
(56,167
|
)
|
|
(38.6)%
|
||||
Net loss before income tax expense
|
(14,211
|
)
|
|
(30.9)%
|
|
(15,071
|
)
|
|
(28.9)%
|
|
(51,541
|
)
|
|
(37.6)%
|
|
(129,032
|
)
|
|
(88.7)%
|
||||
Income tax expense
|
(62
|
)
|
|
(0.1)%
|
|
(174
|
)
|
|
(0.3)%
|
|
(338
|
)
|
|
(0.2)%
|
|
(720
|
)
|
|
(0.5)%
|
||||
Net loss
|
$
|
(14,273
|
)
|
|
(31.0)%
|
|
$
|
(15,245
|
)
|
|
(29.2)%
|
|
$
|
(51,879
|
)
|
|
(37.8)%
|
|
$
|
(129,752
|
)
|
|
(89.2)%
|
|
Three Months Ended September 30,
|
|
|
|
|
||||||||
|
2017
|
|
2016
|
|
Variance
|
|
Percent Change
|
||||||
|
(in thousands)
|
|
|
|
|
||||||||
Revenue
|
$
|
45,986
|
|
|
$
|
52,122
|
|
|
$
|
(6,136
|
)
|
|
(11.8)%
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||
|
2017
|
|
2016
|
|
Variance
|
|
Percent Change
|
|||||||
|
(in thousands)
|
|
|
|
|
|||||||||
Cost of goods sold
|
$
|
16,879
|
|
|
$
|
15,191
|
|
|
$
|
1,688
|
|
|
11.1
|
%
|
Gross profit
|
29,107
|
|
|
36,931
|
|
|
(7,824
|
)
|
|
(21.2
|
)%
|
|||
Gross margin percentage (gross profit as a percent of revenue)
|
63.3
|
%
|
|
70.9
|
%
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
||||||||
|
2017
|
|
2016
|
|
Variance
|
|
Percent Change
|
||||||
|
(in thousands)
|
|
|
|
|
||||||||
Research and development
|
$
|
5,277
|
|
|
$
|
8,236
|
|
|
$
|
(2,959
|
)
|
|
(35.9)%
|
Clinical and regulatory affairs
|
3,211
|
|
|
3,759
|
|
|
(548
|
)
|
|
(14.6)%
|
|||
Marketing and sales
|
21,536
|
|
|
26,007
|
|
|
(4,471
|
)
|
|
(17.2)%
|
|||
General and administrative
|
8,332
|
|
|
9,714
|
|
|
(1,382
|
)
|
|
(14.2)%
|
|||
Restructuring costs
|
98
|
|
|
498
|
|
|
(400
|
)
|
|
(80.3)%
|
|||
Contract termination and business acquisition expenses
|
—
|
|
|
(49
|
)
|
|
49
|
|
|
(100.0)%
|
|
Three Months Ended September 30,
|
|
|
|
|
||||||||
|
2017
|
|
2016
|
|
Variance
|
|
Percent Change
|
||||||
|
(in thousands)
|
|
|
|
|
||||||||
Other income (expense), net
|
$
|
(4,864
|
)
|
|
$
|
(3,837
|
)
|
|
$
|
(1,027
|
)
|
|
26.8%
|
|
Three Months Ended September 30,
|
|
|
|
|
||||||||
|
2017
|
|
2016
|
|
Variance
|
|
Percent Change
|
||||||
|
(in thousands)
|
|
|
|
|
||||||||
Income tax expense
|
$
|
(62
|
)
|
|
$
|
(174
|
)
|
|
$
|
112
|
|
|
(64.4)%
|
|
Nine Months Ended September 30,
|
|
|
|
|
||||||||
|
2017
|
|
2016
|
|
Variance
|
|
Percent Change
|
||||||
|
(in thousands)
|
|
|
|
|
||||||||
Revenue
|
$
|
137,154
|
|
|
$
|
145,462
|
|
|
$
|
(8,308
|
)
|
|
(5.7)%
|
|
Nine Months Ended September 30,
|
|
|
|
|
||||||||
|
2017
|
|
2016
|
|
Variance
|
|
Percent Change
|
||||||
|
(in thousands)
|
|
|
|
|
||||||||
Cost of goods sold
|
$
|
47,181
|
|
|
$
|
51,131
|
|
|
$
|
(3,950
|
)
|
|
(7.7)%
|
Gross profit
|
89,973
|
|
|
94,331
|
|
|
(4,358
|
)
|
|
(4.6)%
|
|||
Gross margin percentage (gross profit as a percent of revenue)
|
65.6
|
%
|
|
64.8
|
%
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
||||||||
|
2017
|
|
2016
|
|
Variance
|
|
Percent Change
|
||||||
|
(in thousands)
|
|
|
|
|
||||||||
Research and development
|
$
|
16,541
|
|
|
$
|
23,796
|
|
|
$
|
(7,255
|
)
|
|
(30.5)%
|
Clinical and regulatory affairs
|
9,786
|
|
|
11,664
|
|
|
(1,878
|
)
|
|
(16.1)%
|
|||
Marketing and sales
|
71,217
|
|
|
82,749
|
|
|
(11,532
|
)
|
|
(13.9)%
|
|||
General and administrative
|
25,109
|
|
|
29,869
|
|
|
(4,760
|
)
|
|
(15.9)%
|
|||
Restructuring costs
|
235
|
|
|
8,612
|
|
|
(8,377
|
)
|
|
(97.3)%
|
|||
Settlement costs
|
—
|
|
|
4,650
|
|
|
(4,650
|
)
|
|
(100.0)%
|
|||
Contract termination and business acquisition expenses
|
—
|
|
|
5,856
|
|
|
(5,856
|
)
|
|
(100.0)%
|
|
Nine Months Ended September 30,
|
|
|
|
|
||||||||
|
2017
|
|
2016
|
|
Variance
|
|
Percent Change
|
||||||
|
(in thousands)
|
|
|
|
|
||||||||
Other income (expense), net
|
$
|
(18,626
|
)
|
|
$
|
(56,167
|
)
|
|
$
|
37,541
|
|
|
(66.8)%
|
|
Nine Months Ended September 30,
|
|
|
|
|
||||||||
|
2017
|
|
2016
|
|
Variance
|
|
Percent Change
|
||||||
|
(in thousands)
|
|
|
|
|
||||||||
Income tax (expense) benefit
|
$
|
(338
|
)
|
|
$
|
(720
|
)
|
|
$
|
382
|
|
|
(53.1)%
|
|
September 30, 2017
|
|
December 31, 2016
|
|
September 30, 2016
|
||||||
|
(in thousands, except financial metrics data)
|
||||||||||
Cash and cash equivalents
|
$
|
74,619
|
|
|
$
|
26,120
|
|
|
$
|
22,022
|
|
Marketable securities
|
$
|
—
|
|
|
$
|
20,988
|
|
|
$
|
38,974
|
|
Accounts receivable, net
|
$
|
33,979
|
|
|
$
|
34,430
|
|
|
$
|
37,356
|
|
Total current assets
|
$
|
157,876
|
|
|
$
|
129,845
|
|
|
$
|
148,463
|
|
Total current liabilities
|
$
|
54,474
|
|
|
$
|
44,902
|
|
|
$
|
60,087
|
|
Working capital surplus (a)
|
$
|
103,402
|
|
|
$
|
84,943
|
|
|
$
|
88,376
|
|
Current ratio (b)
|
2.9
|
|
|
2.9
|
|
|
2.5
|
|
|||
Days sales outstanding ("DSO") (c)
|
68
|
|
|
67
|
|
|
66
|
|
|||
Inventory turnover (d)
|
1.6
|
|
|
2.0
|
|
|
1.4
|
|
•
|
the need for working capital to support our sales growth;
|
•
|
the need for additional capital to fund future development programs;
|
•
|
the need for additional capital to fund our sales force expansion;
|
•
|
the need for additional capital to fund strategic acquisitions;
|
•
|
our requirements for additional facility space or manufacturing capacity;
|
•
|
our requirements for additional information technology infrastructure and systems; and
|
•
|
adverse outcomes from potential litigation and the cost to defend such litigation.
|
|
Payments due by period
|
|
|
||||||||||||||||||
Contractual Obligations
|
Total
|
Remainder of 2017
|
2018
|
2019
|
2020
|
2021
|
2022 and thereafter
|
||||||||||||||
Long-term debt obligations
|
$
|
263,278
|
|
$
|
—
|
|
$
|
18,278
|
|
$
|
—
|
|
$
|
125,000
|
|
$
|
40,000
|
|
$
|
80,000
|
|
Interest on Senior Notes and Term Loan
|
54,586
|
|
4,344
|
|
12,832
|
|
12,421
|
|
12,455
|
|
6,962
|
|
5,572
|
|
|||||||
Operating lease obligations
|
36,999
|
|
938
|
|
3,370
|
|
3,484
|
|
3,694
|
|
3,692
|
|
21,821
|
|
|||||||
Total
|
$
|
354,863
|
|
$
|
5,282
|
|
$
|
34,480
|
|
$
|
15,905
|
|
$
|
141,149
|
|
$
|
50,654
|
|
$
|
107,393
|
|
Item 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
Item 4.
|
CONTROLS AND PROCEDURES.
|
Item 1.
|
Legal Proceedings.
|
Item 1A.
|
Risk Factors.
|
Item 6.
|
Exhibit Index.
|
|
|
|
|
Incorporated by Reference
|
|
|
||||||
Exhibit Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
Filed Herewith
|
|
Employment Agreement, dated as of October 30, 2017, by and between Endologix, Inc. and John Onopchenko.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
X
|
101.INS
|
|
XBRL Instance Document.
|
|
|
|
|
|
|
|
|
|
X
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
|
|
|
|
|
|
|
|
X
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
|
|
|
|
|
|
|
|
X
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
|
|
|
|
|
|
|
|
|
X
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Link Base Document
|
|
|
|
|
|
|
|
|
|
X
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
|
|
|
|
|
|
|
|
X
|
*
|
The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, shall not be deemed “filed” by the registrant for purposes of Section 18 of the Exchange Act and are not to be incorporated by reference into any of the registrant’s filings under the Securities Act or the Exchange Act, irrespective of any general incorporation language contained in any such filing.
|
|
|
ENDOLOGIX, INC.
|
|
|
|
Date:
|
November 7, 2017
|
/s/ John McDermott
|
|
|
Chief Executive Officer
(Principal Executive Officer) |
|
|
|
|
|
|
Date:
|
November 7, 2017
|
/s/ Vaseem Mahboob
|
|
|
Chief Financial Officer (Principal Financial and Accounting Officer)
|
|
|
|
1.
|
Employment; Term
. The Company agrees to continue to employ Executive, and Executive agrees to be employed by the Company, upon the terms and conditions set forth herein. This Agreement shall be for an initial term that continues in effect through the third anniversary of the Effective Date, which shall be extended automatically for one or more additional terms of one (1) year each, as of each anniversary of the Effective Date (such initial term or additional term referred to herein as the “
Term
”). The Agreement may be terminated by either party for any reason or no reason by providing the other party with at least thirty (30) days’ prior written notice.
|
2.
|
Definitions
. For purposes of this Agreement, the following terms shall have the following meanings:
|
2.1
|
“
Board
” shall mean the Board of Directors of the Company.
|
2.2
|
“
Cause
” shall mean any of the following: (i) any act of fraud by Executive in connection with Executive’s responsibilities to the Company that is materially injurious to the Company; (ii) Executive’s conviction of a felony; (iii) a willful act by Executive that constitutes gross misconduct and is materially injurious to the Company; or (iv) Executive’s willful and material breach of a material obligation or material duty under this Agreement or the Company’s policies, which breach in the case of (iii) or (iv) is not cured within thirty (30) days after written notice thereof is received by Executive. Executive shall be afforded an opportunity to explain and defend such actions before the Board.
|
2.3
|
“
Change in Control
” includes each of the following events with respect to the Company:
|
(a)
|
The acquisition, directly or indirectly, in one transaction or a series of related transactions, by any person or group (within the meaning of Section 13(d)(3) of the Exchange Act) of the beneficial ownership of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of all outstanding securities of the Company;
|
(b)
|
The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) the acquisition of assets or stock of another entity, in each case, other than a transaction which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting
|
(c)
|
The sale, transfer or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company, except for a transaction in which the holders of the outstanding voting securities of the Company immediately prior to such transaction(s) receive as a distribution with respect to securities of the Company, in the aggregate, securities possessing more than fifty percent (50%) of the total combined voting power of all outstanding voting securities of the acquiring entity immediately after such transaction(s); or
|
(d)
|
The approval by the stockholders of a plan or proposal for the liquidation or dissolution of the Company;
|
2.4
|
“
Code
” means the Internal Revenue Code of 1986, as amended.
|
2.5
|
“
Disability
” means the inability of Executive to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than six (6) months, as determined by a competent physician selected by the Board and reasonably agreed to by Executive following such six-month period.
|
2.6
|
“
Good Reason
” shall mean the occurrence of any of the following events or conditions without Executive’s written consent:
|
(a)
|
a material reduction in Executive’s authority, duties or responsibilities;
|
(b)
|
a material diminution in the authority, duties, or responsibilities of the supervisor to whom Executive is required to report;
|
(c)
|
a material diminution in Executive’s Base Salary (as defined herein);
|
(d)
|
a material change in the geographic location at which Executive must perform Executive’s duties, except for reasonably required travel by the Company; or
|
(e)
|
any other action or inaction that constitutes a material breach by the Company of its obligations to Executive under this Agreement, including, without limitation, as specifically set forth herein.
|
2.7
|
“
Involuntary Termination
” means Executive’s Separation from Service by reason of
a (i) termination of Executive’s employment by the Company other than for Cause, death or Disability or (ii) Executive’s resignation for Good Reason.
|
2.8
|
“
Separation from Service,
” with respect to Executive, means Executive’s “separation from service,” as defined in Treasury Regulation Section 1.409A-1(h).
|
2.9
|
“
Specified Employee
” means a “specified employee,” as defined in Treasury Regulation Section 1.409A-1(i).
|
3.
|
Duties
.
|
3.1
|
Position
. Executive shall be employed as Chief Operating Officer, initially reporting to the Chairman & CEO, and shall have the duties and responsibilities customarily associated with such position and as may be reasonably assigned from time to time. Executive shall perform faithfully and diligently all functions associated with Executive’s position and all duties assigned to Executive.
|
3.2
|
Exclusive Services
. Executive shall devote such time as is reasonably necessary for Executive to fulfill Executive’s duties. This shall not preclude Executive from (a) devoting time to personal and family endeavors or investments, (b) serving on community and civic boards, (c) participating in industry or trade associations, or (d) serving on a board of a public or private company that does not directly compete with the Company;
provided
, that (x) such activities do not materially interfere with Executive’s duties to the Company, and (y) the Chief Executive Officer shall approve Executive’s service on any board of directors.
|
3.3
|
Policies and Procedures
. Executive agrees to comply with the Company’s policies and procedures as such may be modified from time to time.
|
4.
|
Compensation and Benefits
. The Company shall pay or provide, as the case may be, to Executive the compensation and other benefits and rights set forth in this Section 4.
|
4.1
|
Base Salary
. The Company shall pay to Executive an annual base salary of $400,000 per year (the “
Base Salary
”), payable in accordance with the Company’s usual payroll practices (and in any event no less frequently than monthly). Executive’s Base Salary shall be subject to an annual review by the Board following the Effective Date. In the event of an adjustment to the Base Salary, the term “Base Salary” shall refer to the adjusted amount.
|
4.2
|
Bonus
. Executive shall be eligible to participate in such cash incentive compensation plan or program as may be approved by the Board (or committee thereof) from time to time for senior executives of the Company. Executive’s target bonus award under such plan(s) initially shall be fifty percent (50%) of Executive’s Base Salary but shall be adjusted annually in the sole and absolute discretion of the Board (or Compensation Committee thereof) (the
|
4.3
|
Benefits
. Executive shall be entitled to participate in all customary and usual benefits available to senior executive officers under the Company’s benefit plans and arrangements, including, without limitation, health, dental, vision and life insurance, premiums for which shall be paid by the Company and Executive, and any other employee benefit plan or arrangement made available in the future by the Company to its senior executives, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. The Company shall have the right to amend or delete any such benefit plan or arrangement made available by the Company to its senior executives and not otherwise specifically provided for herein.
|
4.4
|
Expenses; Travel
. The Company shall reimburse Executive for all reasonable out-of-pocket business and travel expenses incurred in connection with the performance of Executive’s duties or professional activities on behalf of the Company in accordance with the Company’s reimbursement policies.
|
4.5
|
Vacation
. Executive shall be entitled to such periods of paid vacation each calendar year as provided from time to time under the Company’s vacation policy and consistent with vacation as afforded to the Company’s senior officers and commensurate with Executive’s position with the Company.
|
5.
|
Acceleration of Equity Awards in the Event of a Change in Control
. Upon a Change in Control, solely as a result of the Change in Control and without regard to Executive’s termination of employment (if any), all outstanding unvested equity awards held by Executive shall become fully vested and, if applicable, exercisable as to all shares of the Company’s common stock covered thereby, in each case as of the date of the Change in Control. In the event the Company’s equity incentive plan(s), the award agreements evidencing Executive’s outstanding equity awards, the definitive agreement effecting the Change in Control or any action by the Board or committee thereof provide for more favorable treatment to the Executive, Executive shall be entitled to the more favorable treatment. This provision shall apply notwithstanding anything to the contrary in any other written agreement between Executive and the Company (including any equity award agreement), which shall be deemed superseded to the extent necessary to give effect to this provision.
|
6.
|
Termination of Employment and Severance
. Executive shall be entitled to receive benefits upon termination of Executive’s employment by the Company other than for Cause, death or disability or by Executive for Good Reason as set forth in this Section 6.
|
6.1
|
Involuntary Termination Prior to a Change in Control
. In the event of Executive’s Involuntary Termination prior to a Change in Control, Executive shall be entitled to receive the benefits provided in this Section 6.1, subject to Executive’s compliance with Section 6.5:
|
(a)
|
The Company shall pay to Executive any fully earned but unpaid Base Salary, earned and accrued but unpaid bonus amounts for any calendar year prior to the calendar year in which Executive’s termination of employment occurs, unused and accrued vacation and unreimbursed business expenses through the date of termination at the rate then
|
(b)
|
Executive shall be entitled to receive a cash severance payment in an amount equal to six months of Executive’s Base Salary, payable in a lump sum cash payment on the first business day of the calendar month occurring after the sixtieth (60
th
) day following the date of Executive’s Separation from Service;
provided, however
, that if Executive is a Specified Employee of the date of Executive’s Separation from Service, such payment shall be made in accordance with Section 10.2 hereof.
|
(c)
|
Executive shall be entitled to receive a cash payment equal to the annual bonus for the year in which Executive’s Separation from Service occurs (as determined by the Company in its discretion based on estimated performance for such year as of the date of Executive’s Separation from Service), prorated for the number of calendar days worked in such calendar year, which shall be paid in a lump sum on the first business day of the calendar month occurring after the sixtieth (60
th
) day following the date of Executive’s Separation from Service.
|
(d)
|
Executive shall be entitled to receive continuation of group health insurance benefits for a period of six months, with the Company to continue to pay the same portion of the monthly premium for Executive and Executive’s eligible dependents as the Company paid immediately prior to Executive’s Involuntary Termination,
provided,
that Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“
COBRA
”), for Executive and Executive’s eligible dependents who were covered under the Company’s health plans as of the date of Executive’s Involuntary Termination.
|
(e)
|
Executive shall be entitled to receive reasonable outplacement services, on an in-kind basis, from a firm selected by the Company, suitable to Executive’s position and directly related to Executive’s Involuntary Termination, for a period of twelve (12) months following the date of the Involuntary Termination, in an aggregate amount of cost to the Company not to exceed $10,000. Notwithstanding the foregoing, Executive shall cease to receive outplacement services on the date Executive accepts employment with a subsequent employer.
|
(f)
|
Outstanding equity awards granted to Executive under the Company’s equity incentive plans on or prior to the Effective Date, to the extent unvested and unexercised (if applicable), shall receive no additional vesting following the date of the Executive’s Involuntary Termination.
|
6.2
|
Involuntary Termination Upon or Following Change in Control
. In the event of Executive’s Involuntary Termination upon or within twenty-four (24) months following a Change in Control, Executive shall be entitled to receive, in lieu of any severance benefits to which Executive may otherwise be entitled under Section 6.1 hereof, the benefits provided in this Section 6.2, subject to Executive’s compliance with Section 6.5:
|
(a)
|
The Company shall pay to Executive the Accrued Obligations as soon as practicable following the date of Executive’s Involuntary Termination;
|
(b)
|
Executive shall be entitled to receive a cash severance payment in an amount equal to 1.5 times Executive’s Base Salary (i.e., 18 months of salary) plus Target Bonus, payable in a lump sum cash payment on the first business day of the calendar month occurring after the sixtieth (60
th
) day following the date of Executive’s Separation from Service;
provided, however
, that if Executive is a Specified Employee of the date of Executive’s Separation from Service, such payment shall be made in accordance with Section 10.2 hereof.
|
(c)
|
Executive shall be entitled to receive a cash payment equal to the Target Bonus for the year in which Executive’s Separation from Service occurs, which shall be paid in a lump sum on the first business day of the calendar month occurring after the sixtieth (60
th
) day following the date of Executive’s Separation from Service.
|
(d)
|
Executive shall be entitled to receive continuation of group health insurance benefits for a period of eighteen (18) months, with the Company to continue to pay the same portion of the monthly premium for Executive and Executive’s eligible dependents as the Company paid immediately prior to Executive’s Involuntary Termination,
provided,
that Executive elects continuation coverage pursuant to COBRA for Executive and Executive’s eligible dependents who were covered under the Company’s health plans as of the date of Executive’s Involuntary Termination.
|
(e)
|
Executive shall be entitled to receive reasonable outplacement services, on an in-kind basis, from a firm selected by the Company, suitable to Executive’s position and directly related to Executive’s Involuntary Termination, for a period of twelve (12) months following the date of the Involuntary Termination, in an aggregate amount of cost to the Company not to exceed $10,000. Notwithstanding the foregoing, Executive shall cease to receive outplacement services on the date Executive accepts employment with a subsequent employer.
|
(f)
|
All outstanding equity awards granted under the Company’s equity incentive plans held by Executive, to the extent unvested and unexercised, shall become fully vested and, if applicable, exercisable, in each case as of the date of Executive’s Involuntary Termination. This provision shall apply notwithstanding anything to the contrary in any other written agreement between Executive and the Company (including any equity award agreement), which shall be deemed superseded to the extent necessary to give effect to this provision.
|
6.3
|
Termination of Employment due to Executive’s Death or Disability
. If Executive’s employment is terminated by the Company due to Executive’s death or Disability, the Company shall pay to Executive (or Executive’s estate or legal representative, if applicable) the Accrued Obligations as soon as practicable following the date of Executive’s termination of employment.
|
6.4
|
Other Terminations
. If Executive’s employment is terminated at any time by the Company other than without Cause or due to Executive’s death or Disability (including a non-renewal of this Agreement) or by Executive without Good Reason, the Company shall not have any other or further obligations to Executive under this Agreement (including any financial obligations) except that Executive shall be entitled to receive the Accrued Obligations and
|
6.5
|
Release
. As a condition to Executive’s receipt of any post-termination benefits pursuant to Section 6.1 or Section 6.2 hereof, Executive shall execute and deliver within fifty (50) days following the date of Executive’s Involuntary Termination, and not revoke within any revocation period required by law, a general release of all claims in favor of the Company (the “
Release
”) in the form attached hereto as
Exhibit A
.
|
6.6
|
Exclusive Remedy
. Except as otherwise expressly required by law (
e.g.
, COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other amounts hereunder (if any) accruing at the termination of Executive’s employment shall cease upon such termination.
|
6.7
|
No Mitigation
. Except as otherwise set forth in Section 8, Executive shall not be required to mitigate the amount of any payment provided for in this Section 6 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 6 be reduced by any compensation earned by Executive as the result of employment by another employer or self-employment or by retirement benefits.
|
6.8
|
Payments in Lieu of COBRA Continuation
. Notwithstanding Section 6.1(d) and Section 6.2(d), with regard to such COBRA continuation coverage, if the Company determines in its sole discretion that it cannot provide such coverage without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to Executive a taxable monthly payment in an amount equal to the monthly COBRA premium (which amount shall be based on the premiums for the first month of COBRA coverage).
|
7.
|
Limitation on Payments
.
|
7.1
|
Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by Executive (including any payment or benefit received in connection with a Change in Control or the termination of Executive’s employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payments and benefits, including the payments and benefits under Section 5 and Section 6 of this Agreement, being hereinafter referred to as the “
Total Payments
”) would be subject (in whole or part), to the excise tax imposed under Section 4999 of the Code (the “
Excise Tax
”), then, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, the cash severance payments shall first be reduced, and the non-cash severance payments shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and
|
7.2
|
For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of an accounting firm or compensation consulting firm with nationally recognized standing and substantial expertise and experience on Section 280G matters (“
Independent Advisors
”) selected by the Company, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of Independent Advisors, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the Base Amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
|
8.
|
Certain Restrictive Covenants
.
|
8.1
|
Confidential Information
. During the Term and thereafter, Executive shall continue to be bound by the restrictions in the Proprietary Information and Inventions Agreement with the Company (the “
Proprietary Rights Agreement
”).
|
8.2
|
Cooperation
. During the Term and thereafter, Executive agrees to cooperate with the Company and its agents, accountants and attorneys concerning any matter with which Executive was involved during Executive’s employment. Such cooperation shall include, but not be limited to, providing information to, meeting with and reviewing documents provided by the Company and its agents, accountants and attorneys during normal business hours or other mutually agreeable hours upon reasonable notice and being available for depositions and hearings, if necessary and upon reasonable notice. If Executive’s cooperation is required after the termination of Executive’s employment, the Company shall reimburse Executive for any reasonable out of pocket expenses incurred in performing Executive’s obligations hereunder.
|
8.3
|
Return of the Company’s Property
. Upon the termination of Executive’s employment in any manner, as a condition to Executive’s receipt of any post-termination benefits described in Section 6.1 or 6.2 of this Agreement, Executive shall immediately surrender to the Company all lists, books and records of, or in connection with, the Company’s business, and all other property belonging to the Company.
|
8.4
|
Non-Disparage
. As an additional inducement for the Company to enter into this Agreement, each party agrees that it shall refrain throughout the Term and for a period of one (1) year following the date of Executive’s termination of employment from publishing any oral or written statements about the other party, any of the other party’s affiliates or any of the other party’s or such affiliates’ directors, officers, employees, consultants, agents or representatives that (a) are slanderous, libelous or defamatory, (b) disclose private information about or confidential information of the other party, any of its affiliates or any of the other party’s or any such affiliates’ business affairs, directors, officers, employees, consultants, agents or representatives (provided that in no event shall the Company be prohibited from disclosing any such information as may be required under applicable law or as required by governmental authorities or pursuant to court order), or (c) place the other party, any of its affiliates, or any of the other party’s or any such affiliates’ directors, officers, employees, consultants, agents or representatives in a false light before the public. A violation or threatened violation of this prohibition may be enjoined by the courts. The rights afforded under this provision are in addition to any and all rights and remedies otherwise afforded by law.
|
8.5
|
Non-Solicitation
. As an additional inducement for the Company to enter into this Agreement, Executive agrees that for a period of one (1) year following the date of Executive’s termination of employment, Executive shall not, directly or indirectly knowingly induce any person in the employment of the Company to (A) terminate such employment, or (B) accept employment, or enter into any consulting arrangement, with anyone other than the Company.
|
8.6
|
Rights and Remedies Upon Breach
. If Executive breaches or threatens to commit a breach of any of the provisions of this Section 8 (the “
Restrictive Covenants
”), the Company shall have any rights and remedies available to the Company under law or in equity.
|
8.7
|
Severability of Covenants/Blue Penciling
. If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions. If any court determines that any of the Restrictive Covenants, or any part thereof, are unenforceable because of the duration of such provision or the area covered thereby, such court shall have the power to reduce the duration or area of such provision and, in its reduced form, such provision shall then be enforceable and shall be enforced. Executive hereby waives any and all right to attack the validity of the Restrictive Covenants on the grounds of the breadth of their geographic scope or the length of their term.
|
8.8
|
Enforceability in Jurisdictions
. The Company and Executive intend to and do hereby confer jurisdiction to enforce the Restrictive Covenants upon the courts of any jurisdiction within the geographical scope of such covenants. If the courts of any one or more of such jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the Company and Executive that such
|
9.
|
Indemnification
. Executive shall be entitled to indemnification as an officer of the Company as provided in the Indemnification Agreement entered into with the Company dated January 23, 2017 (the “
Indemnification Agreement
”), along with the applicable provisions of the Company’s director and officer liability insurance (if any), bylaws and Delaware law, without regard to any future changes in Executive’s assignment or position.
|
10.
|
Section 409A of the Code
.
|
10.1
|
Compliance with Section 409A
. To the maximum extent permissible by applicable law, the payments and benefits payable under this Agreement shall be interpreted to be exempt from Section 409A of the Code, including, without limitation, the exemptions pursuant to Treasury Regulation Sections 1.409A-1(b)(4) and 1.409A-1(b)(9). To the extent the payments and benefits under this Agreement are subject to Section 409A of the Code, this Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A(a)(2), (3) and (4) of the Code and the Treasury Regulations thereunder. If the Company and Executive determine that any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and (4) of the Code do not comply with Section 409A of the Code, the Company and Executive agree to amend this Agreement, or take such other actions as the Company and Executive deem reasonably necessary or appropriate, to comply with the requirements of Section 409A of the Code, while preserving the economic agreement of the parties. In the case of any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and (4) of the Code, if any provision of the Agreement would cause such compensation, benefits or other payments to fail to so comply, such provision shall not be effective and shall be null and void with respect to such compensation, benefits or other payments, and such provision shall otherwise remain in full force and effect. The Executive’s right to receive installment payments of any severance payments or benefits under this Agreement shall be treated as a right to receive a series of separate payments, and accordingly, each installment payment shall at all times be considered a separate and distinct payment. To the extent any reimbursement of expenses under this Agreement is subject to Section 409A of the Code, the reimbursements shall be paid in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and be paid on or before the last day of Executive’s taxable year following the taxable year in which Executive incurred the expenses.
|
10.2
|
Delayed Distribution under Section 409A
. If Executive is a Specified Employee on the date of Executive’s Separation from Service, any payments made under Section 6.1 or Section 6.2 and any other payments or benefits (or portion thereof) under this Agreement that are subject to Section 409A of the Code and payable upon Executive’s Separation from Service shall be delayed in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, and such payments or benefits shall be paid or distributed to Executive during the thirty (30) day period commencing on the earlier of (a) the expiration of the six-month period measured from the date of Executive’s Separation from Service or (b) the date of
|
11.
|
General Provisions
.
|
11.1
|
Successors and Assigns
. The rights of the Company under this Agreement may, without the consent of Executive, be assigned by the Company, in its sole and unfettered discretion, to any person, firm, corporation or other business entity that at any time, whether by purchase, merger or otherwise, directly or indirectly, acquires all or substantially all of the assets or business of the Company. The Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and to agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place;
provided, however
, that no such assumption shall relieve the Company of its obligations hereunder. As used in this Agreement, the “
Company
” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise. Executive shall not be entitled to assign any of Executive’s rights or obligations under this Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amount is at such time payable to Executive hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee, or other designee or, if there be no such designee, to Executive’s estate.
|
11.2
|
Waiver
. Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement.
|
11.3
|
Attorneys’ Fees
. Each side will bear its own attorneys’ fees in any dispute unless a statutory section at issue, if any, authorizes the award of attorneys’ fees to the prevailing party;
provided
, that in the event Executive’s employment is terminated by the Company without Cause or due to Executive’s death or Disability, or by Executive for Good Reason, in each case following a Change in Control, the Company shall pay the Executive’s attorneys’ fees, unless the arbitrator or court, as applicable, finds the claim to be frivolous, in bad faith or without merit.
|
11.4
|
Severability
. In the event any provision of this Agreement is found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby.
|
11.5
|
Interpretation; Construction
. The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing the Company, but Executive has participated in the negotiation of its terms. Furthermore, Executive acknowledges that Executive has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired, and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.
|
11.6
|
Governing Law
. This Agreement will be governed by and construed in accordance with the laws of the United States and the State of California applicable to contracts made and to be performed wholly within such State, and without regard to the conflicts of laws principles thereof.
|
11.7
|
Arbitration
. In the event of any controversy, claim or dispute between the parties hereto arising out of or relating to this Agreement, the matter shall be determined by arbitration, which shall take place in Orange County, California, under the rules of the American Arbitration Association. The arbitrator shall be a retired Superior Court judge mutually agreeable to the parties and if the parties cannot agree such person shall be chosen in accordance with the rules of the American Arbitration Association. The arbitrator shall be bound by applicable legal precedent in reaching his or her decision. Any judgment upon such award may be entered in any court having jurisdiction thereof. Any decision or award of such arbitrator shall be final and binding upon the parties and shall not be appealable. The parties hereby consent to the jurisdiction of such arbitrator and of any court having jurisdiction to enter judgment upon and enforce any action taken by such arbitrator. The fees payable to the American Arbitration Association and the arbitrator shall be paid by the Company.
|
11.8
|
Notices
. Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (a) by personal delivery when delivered personally; (b) by overnight courier upon written verification of receipt; (c) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to Executive at the last available address in the Company’s records and to the Company at its principal place of business, or such other address as either party may specify in writing.
|
11.9
|
Survival
. Sections 2 (“Definitions”), 5 (“Termination and Severance”), 6 (“Acceleration of Equity Awards in the Event of a Change in Control”), 7 (“Limitation on Payment”), 8 (“Certain Restrictive Covenants”), 9 (“Indemnification”), and 11 (“General Provisions”) of this Agreement shall survive termination of Executive’s employment by the Company.
|
11.10
|
Entire Agreement
. This Agreement, the Proprietary Rights Agreement, the Indemnification Agreement and any Company equity incentive plan and related award agreements evidencing outstanding equity awards held by Executive together constitute the entire agreement between the parties relating to this subject matter and supersede all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral, including the Prior Agreement;
provided
, that this Agreement shall supersede any other written agreement (including any equity award agreement) between Executive and the Company as expressly provided in Section 6.2(f). This Agreement may be amended or
|
11.11
|
Counterparts
. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
|
1.
|
General Release of Claims by Executive
.
|
1.1
|
Executive, on behalf of himself or herself and his or her executors, heirs, administrators, representatives and assigns, hereby agrees to release and forever discharge the Company and all predecessors, successors and their respective parent corporations, affiliates, related, and/or subsidiary entities, and all of their past and present investors, directors, shareholders, officers, general or limited partners, employees, attorneys, agents and representatives, and the employee benefit plans in which Executive is or has been a participant by virtue of his or her employment with or service to the Company (collectively, the “
Company Releasees
”), from any and all claims, debts, demands, accounts, judgments, rights, causes of action, equitable relief, damages, costs, charges, complaints, obligations, promises, agreements, controversies, suits, expenses, compensation, responsibility and liability of every kind and character whatsoever (including attorneys’ fees and costs), whether in law or equity, known or unknown, asserted or unasserted, suspected or unsuspected (collectively, “
Claims
”), that Executive has or may have had against such entities based on any events or circumstances arising or occurring on or prior to the date hereof or on or prior to the date hereof, arising directly or indirectly out of, relating to, or in any other way involving in any manner whatsoever Executive’s employment by or service to the Company or the termination thereof, including any and all claims arising under federal, state, or local laws relating to employment, including without limitation claims of wrongful discharge, breach of express or implied contract, fraud, misrepresentation, defamation, or liability in tort, and claims of any kind that may be brought in any court or administrative agency including, without limitation, claims under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000,
et
seq
.; the Americans with Disabilities Act, as amended, 42 U.S.C. § 12101
et
seq
.; the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 701
et
seq
.; the Civil Rights Act of 1866, and the Civil Rights Act of 1991; 42 U.S.C. Section 1981,
et
seq
.; the Age Discrimination in Employment Act, as amended, 29 U.S.C. Section 621,
et
seq
. (the
|
(a)
|
Claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law;
|
(b)
|
Claims for workers’ compensation insurance benefits under the terms of any worker’s compensation insurance policy or fund of the Company;
|
(c)
|
Claims pursuant to the terms and conditions of the federal law known as COBRA;
|
(d)
|
Claims for indemnity under the bylaws of the Company, as provided for by Delaware law or under any applicable insurance policy with respect to Executive’s liability as an employee, director or officer of the Company;
|
(e)
|
Claims based on any right Executive may have to enforce the Company’s executory obligations under the Agreement; and
|
(f)
|
Claims Executive may have to vested or earned compensation and benefits.
|
1.2
|
EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS BEEN ADVISED OF AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:
|
1.3
|
Executive acknowledges that this Release was presented to him or her on the date indicated above and that Executive is entitled to have 21 days’ time in which to consider it. Executive further acknowledges that the Company has advised Executive that Executive is waiving his or her rights under the ADEA, and that Executive may obtain advice concerning this Release from an attorney of his or her choice, and Executive has had sufficient time to consider the terms of this Release. Executive represents and acknowledges that if Executive executes this Release before 21 days have elapsed, Executive does so knowingly, voluntarily,
|
1.4
|
Executive understands that after executing this Release, Executive has the right to revoke it within seven days after his or her execution of it. Executive understands that this Release will not become effective and enforceable unless the seven-day revocation period passes and Executive does not revoke the Release in writing. Executive understands that this Release may not be revoked after the seven-day revocation period has passed. Executive also understands that any revocation of this Release must be made in writing and delivered to the Company at its principal place of business within the seven-day period.
|
1.5
|
Executive understands that this Release shall become effective, irrevocable, and binding upon Executive on the eighth day after my execution of it, so long as Executive has not revoked it within the time period and in the manner specified in clause (d) above. Executive further understands that Executive will not be given any severance benefits under the Agreement until the effective date of this Release.
|
2.
|
No Assignment
. Executive represents and warrants to the Company Releasees that there has been no assignment or other transfer of any interest in any Claim that Executive may have against the Company Releasees, or any of them. Executive agrees to indemnify and hold harmless the Company Releasees from any liability, claims, demands, damages, costs, expenses and attorneys’ fees incurred as a result of any such assignment or transfer from Executive.
|
3.
|
Paragraph Headings
. The headings of the several paragraphs in this Release are inserted solely for the convenience of the Parties and are not a part of and are not intended to govern, limit or aid in the construction of any term or provision hereof.
|
4.
|
Severability
. The invalidity or unenforceability of any provision of this Release shall not affect the validity or enforceability of any other provision of this Release, which shall remain in full force and effect.
|
5.
|
Governing Law
. This Release will be governed by and construed in accordance with the laws of the United States and the State of California applicable to contracts made and to be performed wholly within such State, and without regard to the conflicts of laws principles thereof.
|
6.
|
Counterparts
. This Release may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
|
7.
|
Construction
. The language in all parts of this Release shall in all cases be construed simply, according to its fair meaning, and not strictly for or against any of the parties hereto. Without limitation, there shall be no presumption against any party on the ground that such party was responsible for drafting this Release or any part thereof.
|
8.
|
Entire Agreement
. This Release and the Agreement set forth the entire agreement of the Parties in respect of the subject matter contained herein and therein and supersede all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto, and any prior agreement of the Parties in respect of the subject matter contained herein.
|
9.
|
Amendment
. No provision of this Release may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and such officer of the Company as may be specifically designated by the Board.
|
10.
|
Understanding and Authority
. The Parties understand and agree that all terms of this Release are contractual and are not a mere recital, and represent and warrant that they are competent to covenant and agree as herein provided. The Parties have carefully read this Release in its entirety; fully understand and agree to its terms and provisions; and intend and agree that it is final and binding on all Parties.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Endologix, 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 we 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 reporting purposes in accordance with generally accepted accounting principals;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b)
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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.
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Date:
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November 7, 2017
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By:
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/s/ John McDermott
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|
|
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John McDermott
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|
|
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Chief Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of Endologix, Inc.;
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2.
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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;
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3.
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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;
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4.
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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 we have:
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a)
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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;
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b)
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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 reporting purposes in accordance with generally accepted accounting principals;
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c)
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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
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d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
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a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
November 7, 2017
|
By:
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/s/ Vaseem Mahboob
|
|
|
|
Vaseem Mahboob
|
|
|
|
Chief Financial Officer (Principal Financial and Accounting Officer)
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(1)
|
The Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2017
(the “Quarterly Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 780(d)); and
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(2)
|
The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
|
November 7, 2017
|
By:
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/s/ John McDermott
|
|
|
|
John McDermott
|
|
|
|
Chief Executive Officer
|
(1)
|
The Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2017
(the “Quarterly Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 780(d)); and
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(2)
|
The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
November 7, 2017
|
By:
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/s/ Vaseem Mahboob
|
|
|
|
Vaseem Mahboob
|
|
|
|
Chief Financial Officer (Principal Financial and Accounting Officer)
|