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Executive Officer Agreements
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12 Months Ended | |
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Dec. 31, 2013
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| Executive Officer Agreements Abstract [Abstract] | ||
| Executive Officer Agreements |
15. Executive Officer Agreements
Harlan F. Weisman
On December 28, 2012, the Company’s board of directors appointed Dr. Harlan F. Weisman Chairman and Chief Executive Officer. On January 7, 2013, the Company entered into an employment agreement with Dr. Weisman, pursuant to which the Company granted Dr. Weisman an option to purchase 1,686,590 shares of common stock at an exercise price of $5.57 per share. One-third of the shares underlying the option were to vest on December 28, 2013 and each annual anniversary thereafter, subject to Dr. Weisman’s continued employment with the Company.
On December 19, 2013, Dr. Weisman resigned his position as Chairman and Chief Executive Officer and as a director of the Company and the Company entered into a separation and release agreement. The Company will pay him $900,000 in severance. In addition, the Company will reimburse Dr. Weisman for the cost of his COBRA premiums for 12 months and pay Dr. Weisman $3,450 per month until December 2014 for his living expenses. In accordance with the terms of his employment agreement, an additional one-third of each of Dr. Weisman’s outstanding stock awards became automatically vested. On December 19, 2013, the Company extended the exercise period of his vested options from 90 days to two years. The charge related to the modification was approximately $318,000.
Lindsay A. Rosenwald
On December 19, 2013, the Company’s board of directors appointed current director Dr. Lindsay A. Rosenwald, as the Company’s new Chairman, President and Chief Executive Officer. The Company does not intend to enter into any employment contract with Dr. Rosenwald addressing his officer positions with the Company. However, in connection with his appointment as President and Chief Executive Officer, the Company will pay Dr. Rosenwald an annual base salary of $28,275. Dr. Rosenwald will also be eligible for a discretionary bonus based on his achievement of performance goals and objectives as established by our board of directors. In addition, on December 19, 2013, the Company issued Dr. Rosenwald 1,979,346 shares of restricted stock for services to be rendered to the Company. Such shares shall vest based upon both predefined market conditions and continued employment with or service on the Company’s Board.
Michael S. Weiss
On December 19, 2013, the Company appointed Mr. Michael S. Weiss to the board of directors to serve as the Co-Vice Chairman. In connection with this appointment the Company issued Mr. Weiss 1,979,346 shares of restricted stock for services to be rendered. In February 2014, Mr. Weiss was appointed Executive Vice Chairman, Strategic Development (see Note 17).
Noah D. Beerman, Karin M. Hehenberger and Dale Ritter
On November 5, 2013, the Company terminated certain personnel, including Noah D. Beerman (Executive Vice President and Chief Operating Officer), Dr. Karin M. Hehenberger (Executive Vice President of Scientific Affairs) and Dale Ritter (Senior Vice President, Finance and Chief Accounting Officer), in connection with the Company’s effort to lower operating expenses and realign the organization to work more efficiently given the results of the Phase 2 TRUST-I clinical trial for TSO in CD. In connection with these terminations, the Company recorded a severance charge of $479,000 in 2013 and had paid $143,000 of the severance obligation as of December 31, 2013. In addition, in accordance with the terms of their employment agreements, an additional one-third of each of Mr. Beerman, Dr. Hehenberger and Mr. Ritter’s outstanding stock awards became automatically vested. The charge related to the accelerated vesting of these awards was approximately $390,000.
Kevin Horgan
On November 5, 2013, the Company entered into an executive employment agreement with Dr. Kevin Horgan, the Chief Medical Officer. Pursuant to the employment agreement, the Company will pay Dr. Horgan an annual base salary of $340,000. At the discretion of our board of directors, he also will be eligible for an annual cash bonus of up to forty percent of his base salary then in effect depending on the attainment of financial, clinical development and/or business milestones to be established by our Board or Compensation Committee. In connection with the execution of the employment agreement, the Company also granted Dr. Horgan an option to purchase 200,000 shares of our common stock with an exercise price of $1.71. One-third of the shares underlying the option will vest on each annual anniversary of the grant date, subject to Dr. Horgan’s continued employment with our company (see Note 17).
Glenn L. Cooper
On December 28, 2012, the Company’s Executive Chairman, Dr. Glenn L. Cooper, resigned from his position as Executive Chairman and as a director of the Company, effective immediately and the Company entered into a separation and release agreement and a one-year consulting agreement with Dr. Cooper, pursuant to which Dr. Cooper was paid $25,000 per month for 12 months as well as his COBRA premiums for 12 months. The Company also paid him $30,000 in severance. Dr. Cooper’s current options outstanding at the time of separation continued to vest during the term of his consulting agreement and became fully vested as of December 31, 2013. On December 28, 2012, the Company also granted Dr. Cooper an option to purchase 25,000 shares of common stock at an exercise price of $4.75 per share. The options vested on December 28, 2013. Upon the execution of the separation and release and consulting agreements, the employment agreement between the Company and Dr. Cooper dated April 1, 2011 was terminated.
The Company assessed under Accounting Standards Codification 718 Compensation Stock Compensation, the substance of Dr. Cooper’s consulting agreement and concluded that the agreement would be accounted for as a severance arrangement as the agreement does not provide any specific deliverables, projects or contain a minimum work requirement. As a result, all related compensation cost was recognized immediately on December 28, 2012. During 2012, the modification of Dr. Cooper’s existing stock options to allow for continued vesting through December 31, 2013 resulted in incremental cost and charge to operations of approximately $470,000 and the grant-date fair value of Dr. Cooper’s option to purchase 25,000 shares of common stock resulted in a charge to operations of $63,000. In addition, the Company recognized a liability and related charge to operations of $354,000 related to Dr. Cooper’s cash severance, consulting agreement cash compensation and COBRA premiums in 2012. Such liability was paid in full as of December 31, 2013.
Bobby W. Sandage
In addition, on December 28, 2012, Dr. Bobby W. Sandage, Jr. became President of the Company. Dr. Sandage’s change in status from Chief Executive Officer and President to President entitled him to terminate his employment agreement for good reason, in which case the Company would be obligated to pay Dr. Sandage his salary for 12 months. In addition, under the terms of his employment agreement, any options that will vest on the next anniversary date of their respective grant date would automatically vest. Effective December 28, 2012, the Company entered into an amendment to Dr. Sandage’s employment agreement pursuant to which he will retain until June 28, 2013, the right to terminate his employment for good reason, be paid his severance allowance equal to his salary for 12 months and have any unvested options vest in full. Also, the amended employment agreement provided that in the event Dr. Sandage terminated his employment for good reason; he will have two years from such termination to exercise his options. In addition, if Dr. Sandage terminates his employment, the Company will be required to pay his COBRA premiums for 12 months after his termination. On April 22, 2013, Dr. Sandage, resigned as president and director of the Company. In accordance with Dr. Sandage’s employment agreement, as amended, Dr. Sandage is entitled to receive his salary and COBRA benefits for twelve months from the date of his resignation. The Company recorded a severance liability of $445,000 for these obligations in 2013 and had paid $286,000 of the severance obligation as of December 31, 2013.
The change to Dr. Sandage’s existing stock options that provided for full vesting of all unvested options in the event he terminated employment prior to June 28, 2013 as well as the extension of time to exercise his options after termination of employment constitutes a modification for accounting purposes. The Company assessed the probability that Dr. Sandage’s existing unvested options would vest under their original terms and concluded that it was probable that his unvested options would vest under their original terms. Since Dr. Sandage can choose to terminate his employment as of December 28, 2012 and have all options vest as a result, the Company determined that Dr. Sandage has no future service requirement or requisite service period for the stock options. As a result, all stock-based compensation cost was recognized immediately on December 28, 2012 and the Company recorded a charge to operations of approximately $135,000 representing the remaining unrecognized expense of the original fair value of the options. During 2012, the Company recognized a liability and charge to operations of $200,000 for Dr. Sandage’s 2012 performance bonus, all of which was paid as of December 31, 2013.
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