x | ANNUAL 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) | (IRS Employer Identification No.) |
Title of each class | Name of each exchange on which registered | |
Common Stock, $0.001 par value | The NASDAQ Stock Market, LLC |
Large accelerated filer | x | Accelerated filer | o | ||
Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | o |
Item | Description | Page |
PART I | ||
1. | Business | |
1A. | ||
1B. | ||
2. | ||
3. | ||
4. | Mine Safety Disclosures | |
PART II | ||
5. | Market for Endologix's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | |
6. | ||
7. | ||
7A. | ||
8. | ||
9. | ||
9A. | ||
9B. | Other Information | |
PART III | ||
10. | ||
11. | ||
12. | ||
13. | ||
14. | ||
PART IV | ||
15. | ||
Signatures |
• | continued market acceptance of our products; |
• | 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 successfully commercialize products which incorporate the technology obtained in our acquisition of Nellix, Inc. (“Nellix”); |
• | our ability to effectively develop new or complementary technologies; |
• | our ability to manufacture our endovascular systems to meet demand; |
• | changes to our international operations; |
• | 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 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 and litigation expenses; |
• | reputational damage to our products caused by mis-use or off-label use or government or voluntary product recalls; |
• | our utilization of a 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; and |
• | general macroeconomic and world-wide business conditions. |
Item 1. | Business |
• | Focus exclusively on the aorta for the commercialization of innovative products. |
• | Design and manufacture EVAR and EVAS products that are easy to use and deliver excellent clinical outcomes. |
• | Design EVAR and EVAS products to expand into complex anatomies. |
• | Provide exceptional clinical and technical support to physicians through an experienced and knowledgeable sales and marketing organization. |
• | The 30-day mortality rate of all patients in the study undergoing EVAR was approximately 1.2%, as compared to 4.8% for open surgical repair. |
• | Patients treated by EVAR were three times as likely to be discharged to their homes rather than another rehabilitation facility as compared to patients treated with open repair. |
• | The average hospital stay for patients in the study undergoing EVAR was 3.4 days versus 9.3 days for patients undergoing open surgical repair. |
Neck Length ($ in millions) | Penetrated | Unpenetrated | Total | |||
Infrarenal Over 10mm | 1,300 | 367 | 1,667 | |||
0 to 5mm Neck | 39 | 1,050 | 1,089 | |||
5 to 10mm Neck | 37 | 470 | 507 | |||
Total | 1,376 | 1,887 | 3,263 |
• | Anatomical Fixation. Our EVAR products are unique in that the main body of the device sits on the patient's natural aortoiliac bifurcation. This provides a solid foundation for the long-term stability of the device. Alternative EVAR devices rely on hooks, barbs and radial force to anchor within the aorta (generally referred to as "proximal fixation") near the renal arteries. We have proven in our clinical studies that anatomical fixation inhibits device migration within the aorta due to the inherent foundational support of the patient’s own anatomy. |
• | Unique, Minimally Invasive Delivery System. Our AFX product is the only EVAR device with 17F access on the Ipsilateral side and 9F access on the Contralateral side. Competitive products require between 18F and 22F access on the Ipsilateral side and between 12F and 18F on the Contralateral side. |
• | Preserves Aortic Bifurcation. Our EVAR Stent Grafts allow for future endovascular procedures when continued access across the aortic bifurcation is required. Approximately 30% to 40% of AAA patients also have peripheral arterial disease (“PAD”). Our EVAR Stent Graft is the only one presently available that preserves the physician's ability to go back over the aortic bifurcation for future interventions. This is a meaningful feature of our EVAR Stent Graft, as many AAA patients are today living longer and returning to the hospital for PAD procedures. |
• | PEVAR - Endologix is the only company that has conducted a US IDE randomized clinical trial and obtained FDA approval for a total percutaneous indication for use (“PEVAR”) specific to our EVAR System. We are now able to train physicians on PEVAR, thus enabling physicians to appropriately learn the technique and properly apply it. Unique to our EVAR System, physicians have the option of treating patients with PEVAR, or with a small incision in only one leg (and percutaneous placement of a non-surgical introducer sheath in the leg, 3mm in diameter). |
• | Biostable Polymer provides extended fixation and long-term stability. Currently available devices leave the AAA sac untreated, yet intact, while the EVAS product seals the aneurysm sac. |
• | Predictable Procedure. The device and procedure steps are relatively simple and intuitive, making procedure times predictable. |
• | Potentially reduce endoloeaks and secondary interventions. Our EVAS product seals the entire aneurysm, reducing the likelihood of many causes of secondary intervention in EVAR procedures. This can potentially reduce long-term follow-up requirements. |
• | Low profile introducer. Beneficial for the delivery of the devices in tight access arteries, reducing risk of vascular injuries to the patient. |
• | IntuiTrak. In October 2008, we received FDA approval for IntuiTrak. We received CE Mark approval for IntuiTrak in March 2010, and Japanese Shonin approval in December 2012. IntuiTrak provided an updated delivery system that further simplified the implant procedure for physicians. |
• | AFX. In June 2011 and November 2011, we received FDA approval and CE Mark approval, respectively, for AFX. We believe AFX provides physicians with improved vascular access and sealing, as compared to IntuiTrak. We began a full commercial launch of AFX in the U.S. in August 2011 and in numerous international markets in 2012. |
• | Nellix EVAS System. In February 2013, we received CE Mark approval of the Nellix EVAS System. In February 2013, we commenced a limited market introduction of the Nellix EVAS System in Europe. In December 2013, we received IDE approval in the United States to begin a clinical trial which commenced in January 2014. Based upon current assumptions and timelines, we anticipate receiving FDA premarket approval in 2016. |
• | clinical effectiveness; |
• | product safety, reliability, and durability; |
• | ease of use; |
• | sales force experience and relationships; and |
• | price. |
• | EVAS Forward IDE - Pivotal Clinical trial to evaluate the safety and effectiveness of the Nellix EVAS System. It is approved to enroll 180 patients at up to 30 centers in the U.S., Canada and Europe, of which approximately 25 will be in the U.S. The first patient was treated in January 2014. Expanded indications will be pursued in the future as part of the EVAS Forward clinical programs. |
• | EVAS Forward Global Registry - The study is designed to provide real world clinical results to demonstrate the effectiveness and broad applicability of the Nellix EVAS System. The registry is planned to include 300 patients enrolled in up to 30 international centers and provide real world clinical results to further demonstrate effectiveness and broad applicability of the Nellix technology. The first patient in the registry was treated in October 2013. |
• | Foreign medical reimbursement policies and programs; |
• | Complex data privacy requirements and laws; |
• | Ever-changing country-specific guidelines, transparency requirements and laws; |
• | The Foreign Corrupt Practices Act, which can be used to prosecute companies in the U.S. for arrangements with physicians, or other parties outside the U.S. if the physician or party is a government official of another country and the arrangement violates the law of that country; |
• | Foreign anti-corruption laws, such as the UK Bribery Act; and |
• | Trade protection measures, including import or export restrictions, that may restrict us from doing business in and/or shipping products to certain parts of the world. |
Item 1A. | Risk Factors |
• | greater financial and human resources for product development, sales and marketing and patent litigation; |
• | greater name recognition; |
• | long established relationships with physicians, customers, and third-party payors; |
• | additional lines of products, and the ability to offer rebates or bundle products to offer greater discounts or incentives; |
• | more established sales and marketing programs, and distribution networks; and |
• | greater experience in conducting research and development, manufacturing, clinical trials, preparing regulatory submissions, and obtaining regulatory clearance or approval for products and marketing approved products. |
• | the results of future clinical trials of the Nellix System. |
• | the receipt of further CE Mark approvals of enhanced versions of the Nellix System from our European Union notified body; |
• | the receipt of approval from the FDA to sell the Nellix System in the United States; |
• | obtaining and maintaining patent rights relating to the Nellix technology; and |
• | further developing an effective direct sales and marketing organization in Europe. |
• | difficulties in enforcing or defending intellectual property rights; |
• | pricing pressure that we may experience internationally; |
• | a shortage of high-quality sales people and distributors; |
• | changes in third-party reimbursement policies that may require some of the patients who receive our products to directly absorb medical costs or that may necessitate the reduction of the selling prices of our products; |
• | the imposition of additional United States and foreign governmental controls or regulations; |
• | economic instability; |
• | changes in duties and tariffs, license obligations and other non-tariff barriers to trade; |
• | the imposition of restrictions on the activities of foreign agents, representatives and distributors; |
• | scrutiny of foreign tax authorities which could result in significant fines, penalties and additional taxes being imposed on us; |
• | laws and business practices favoring local companies; |
• | longer payment cycles; |
• | foreign currency translation adjustments; |
• | difficulties in maintaining consistency with our internal guidelines; |
• | difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; |
• | the imposition of costly and lengthy new export licensing requirements; |
• | the imposition of United States or international sanctions against a country, company, person or entity with whom we do business that would restrict or prohibit continued business with the sanctioned country, company, person or entity; and |
• | the imposition of new trade restrictions. |
• | the FDA, institutional review boards or other regulatory authorities do not approve a clinical study protocol, force us to modify a previously approved protocol, or place a clinical study on hold; |
• | patients do not enroll in, or enroll at the expected rate, or complete a clinical study; |
• | patients or investigators do not comply with study protocols; |
• | patients do not return for post-treatment follow-up at the expected rate; |
• | patients experience serious or unexpected adverse side effects for a variety of reasons that may or may |
• | not be related to our products such as the advanced stage of co-morbidities that may exist at the time of treatment, causing a clinical study to be put on hold; |
• | sites participating in an ongoing clinical study may withdraw, requiring us to engage new sites; |
• | difficulties or delays associated with establishing additional clinical sites; |
• | third-party clinical investigators decline to participate in our clinical studies, do not perform the clinical studies on the anticipated schedule, or are inconsistent with the investigator agreement, clinical study protocol, good clinical practices, and other FDA and Institutional Review Board requirements; |
• | third-party organizations do not perform data collection and analysis in a timely or accurate manner; |
• | regulatory inspections of our clinical studies require us to undertake corrective action or suspend or terminate our clinical studies; |
• | changes in federal, state, or foreign governmental statutes, regulations or policies; |
• | interim results are inconclusive or unfavorable as to immediate and long-term safety or efficacy; |
• | the study design is inadequate to demonstrate safety and efficacy; or |
• | do not meet the study endpoints. |
• | failure of our supplier to comply with regulatory requirements; |
• | any strike or work stoppage; |
• | disruptions in shipping; |
• | a natural disaster caused by fire, flood or earthquakes; or |
• | a supply shortage experienced by our single source supplier. |
• | stop selling, making, or using products that use the disputed intellectual property; |
• | obtain a license from the intellectual property owner to continue selling, making, licensing, or using products, which license may not be available on reasonable terms, or at all; |
• | redesign our products, processes or services; or |
• | subject us to significant liabilities to third parties. |
• | John McDermott, our Chief Executive Officer and Chairman of our Board of Directors; |
• | Robert D. Mitchell, our President; and. |
• | Todd Abraham, our Vice President of Operations. |
• | the possibility that we will pay more than the value we derive from the acquisition, which could result in future non-cash impairment charges; |
• | difficulties in integration of the operations, technologies, and products of the acquired companies, which may require significant attention of our management that otherwise would be available for the ongoing development of our business; |
• | the assumption of certain known and unknown liabilities of the acquired companies; and |
• | difficulties in retaining key relationships with employees, customers, partners, and suppliers of the acquired company. |
• | the results of our commercialization efforts for our existing and future products; |
• | the revenues generated by our existing and future products; |
• | the need for additional capital to fund future development programs; |
• | the need to adapt to changing technologies and technical requirements, and the costs related thereto; |
• | the costs involved in obtaining and enforcing patents or any litigation by third parties regarding intellectual property; |
• | the establishment of high volume manufacturing and increased sales and marketing capabilities; and |
• | our success in entering into collaborative relationships with other parties. |
• | properly identify and anticipate physicians and patient needs; |
• | develop and introduce new products or product enhancements in a timely manner; |
• | avoid infringing upon the intellectual property rights of third parties; |
• | demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials; |
• | obtain the necessary regulatory clearances or approvals for new products or product enhancements; |
• | be fully FDA-compliant with marketing of new devices or modified products; |
• | provide adequate training to potential users of our products; |
• | receive adequate coverage and reimbursement for procedures performed with our products; and |
• | develop an effective and FDA-compliant, dedicated marketing and distribution network. |
• | FDA Regulations (Title 21 CFR); |
• | European Union CE mark requirements; |
• | Other international regulatory approval requirements; |
• | Medical Device Quality Management System Requirements (21 CFR 820, ISO 13485:2003, IOS 13485:2012, and other similar international regulations); |
• | Occupational Safety and Health Administration requirements; and |
• | California Department of Health Services requirements. |
• | physician acceptance of our products; |
• | the conduct and results of clinical trials; |
• | the timing and expense of obtaining future regulatory approvals; |
• | fluctuations in our expenses associated with expanding our operations; |
• | the introduction of new products by our competitors; |
• | supplier, manufacturing or quality problems with our devices; |
• | the timing of stocking orders from our distributors; |
• | changes in our pricing policies or in the pricing policies of our competitors or suppliers; and |
• | changes in third-party payors’ reimbursement policies. |
• | announcements by us or our competitors concerning technological innovations; |
• | introductions of new products; |
• | FDA and foreign regulatory actions; |
• | developments or disputes relating to patents or proprietary rights; |
• | failure of our results of operations to meet the expectations of stock market analysts and investors; |
• | changes in stock market analyst recommendations regarding our common stock; |
• | the conversion of some or all of our senior convertible notes and any sales in the public market of shares of our common stock issued upon conversion of such notes; |
• | changes in healthcare policy in the U.S. or other countries; and |
• | general stock market and economic conditions and other factors unrelated to our operating performance. |
Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity |
High | Low | ||||||
Year Ended December 31, 2012 | |||||||
First Quarter | $ | 14.65 | $ | 11.31 | |||
Second Quarter | 15.44 | 13.23 | |||||
Third Quarter | 15.51 | 11.15 | |||||
Fourth Quarter | 14.66 | 12.11 | |||||
Year Ended December 31, 2013 | |||||||
First Quarter | $ | 16.35 | $ | 14.37 | |||
Second Quarter | 15.84 | 12.60 | |||||
Third Quarter | 17.01 | 13.82 | |||||
Fourth Quarter | 18.21 | 16.10 |
Year Ended December 31, | |||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||
Consolidated Statement of Operations Data: | |||||||||||||||||||
Revenue | $ | 132,257 | $ | 105,946 | $ | 83,417 | $ | 67,251 | $ | 52,441 | |||||||||
Cost of goods sold | 32,750 | 25,282 | 18,746 | 15,030 | 13,181 | ||||||||||||||
Gross profit | 99,507 | 80,664 | 64,671 | 52,221 | 39,260 | ||||||||||||||
Operating expenses: | |||||||||||||||||||
Research and development | 16,199 | 16,571 | 16,738 | 8,997 | 4,454 | ||||||||||||||
Clinical and regulatory affairs | 8,679 | 6,343 | 4,439 | 2,169 | 2,115 | ||||||||||||||
Marketing and sales | 63,588 | 53,953 | 44,655 | 31,869 | 26,483 | ||||||||||||||
General and administrative | 21,409 | 20,266 | 15,525 | 13,410 | 8,550 | ||||||||||||||
Contract termination and business acquisition expenses | — | 422 | 1,730 | — | — | ||||||||||||||
Settlement costs | — | 5,000 | — | — | — | ||||||||||||||
Total operating expenses | 109,875 | 102,555 | 83,087 | 56,445 | 41,602 | ||||||||||||||
Loss from operations | (10,368 | ) | (21,891 | ) | (18,416 | ) | (4,224 | ) | (2,342 | ) | |||||||||
Total other expense | $ | (5,710 | ) | $ | (13,352 | ) | $ | (10,400 | ) | $ | (160 | ) | $ | (71 | ) | ||||
Net loss before income tax (expense) benefit | (16,078 | ) | (35,243 | ) | (28,816 | ) | (4,384 | ) | (2,413 | ) | |||||||||
Income tax (expense) benefit | $ | 10 | $ | (531 | ) | $ | 86 | $ | 15,037 | $ | (21 | ) | |||||||
Net income (loss) | $ | (16,068 | ) | $ | (35,774 | ) | $ | (28,730 | ) | $ | 10,653 | $ | (2,434 | ) | |||||
Basic net income (loss) per share | (0.26 | ) | (0.60 | ) | (0.51 | ) | 0.22 | (0.05 | ) | ||||||||||
Diluted net income (loss) per share | (0.26 | ) | (0.60 | ) | (0.51 | ) | 0.21 | (0.05 | ) | ||||||||||
Shares used in computing basic net income (loss) per share | 62,607 | 59,811 | 56,592 | 48,902 | 45,194 | ||||||||||||||
Shares used in computing diluted net income (loss) per share | 62,607 | 59,811 | 56,592 | 50,544 | 45,194 | ||||||||||||||
December 31, | |||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||
Consolidated Balance Sheet Data: | (In thousands) | ||||||||||||||||||
Cash and cash equivalents and marketable securities | $ | 126,465 | $ | 45,118 | $ | 20,035 | $ | 38,191 | $ | 24,065 | |||||||||
Accounts receivable, net | 24,972 | 22,600 | 15,542 | 12,212 | 8,342 | ||||||||||||||
Total assets | $ | 256,197 | $ | 165,103 | $ | 130,255 | $ | 134,375 | $ | 51,292 | |||||||||
Total liabilities | $ | 151,556 | $ | 70,629 | $ | 53,686 | $ | 40,472 | $ | 8,412 | |||||||||
Accumulated deficit | (216,082 | ) | (200,014 | ) | (164,240 | ) | (135,510 | ) | (146,164 | ) | |||||||||
Total stockholders’ equity | $ | 104,641 | $ | 94,474 | $ | 76,569 | $ | 93,903 | $ | (42,880 | ) |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | Company Overview and Mission |
• | Market Overview and Opportunity |
• | Our Products |
• | Manufacturing and Supply |
• | Marketing and Sales |
• | Competition |
• | Product Development and Clinical Trials |
(i) | The risks of ownership must have passed to our customer; |
(ii) | The customer must have made a fixed and written commitment to purchase the EVAR or EVAS product; |
(iii) | The customer must request that the transaction be on a bill and hold basis; |
(iv) | There must be a fixed schedule for delivery of the EVAR or EVAS product. The date for delivery must be reasonable and must be consistent with the customer's business purpose; |
(v) | We have no remaining specific performance obligations and our earnings process is complete; |
(vi) | Our customer's ordered EVAR or EVAS product must be segregated from our inventory and cannot be used to fulfill other customer orders; and |
(vii) | The EVAR or EVAS product must be complete and ready for shipment. |
(i) | The date by which we expect payment, and whether we have modified our normal billing and credit terms for the customer; |
(ii) | Our past experiences with, and pattern of, bill and hold transactions; |
(iii) | Whether the customer has the expected risk of loss in the event of a decline in the market value of the EVAR or EVAS product; |
(iv) | Whether our custodial risks are insurable and insured; and |
(v) | Whether extended procedures are necessary in order to assure that there are no exceptions to the customer's commitment to accept and pay for the EVAR or EVAS product (i.e., that the business reasons for the bill and hold have not introduced a contingency to the customer's commitment). |
Year Ended December 31, | |||||||||||||||||
2013 | 2012 | 2011 | |||||||||||||||
Revenue | $ | 132,257 | 100.0% | $ | 105,946 | 100.0% | $ | 83,417 | 100.0% | ||||||||
Cost of goods sold | 32,750 | 24.8% | 25,282 | 23.9% | 18,746 | 22.5% | |||||||||||
Gross profit | 99,507 | 75.2% | 80,664 | 76.1% | 64,671 | 77.5% | |||||||||||
Operating expenses: | |||||||||||||||||
Research and development | 16,199 | 12.2% | 16,571 | 15.6% | 16,738 | 20.1% | |||||||||||
Clinical and regulatory affairs | 8,679 | 6.6% | 6,343 | 6.0% | 4,439 | 5.3% | |||||||||||
Marketing and sales | 63,588 | 48.1% | 53,953 | 50.9% | 44,655 | 53.5% | |||||||||||
General and administrative | 21,409 | 16.2% | 20,266 | 19.1% | 15,525 | 18.6% | |||||||||||
Contract termination and business acquisition expenses | — | —% | 422 | 0.4% | 1,730 | 2.1% | |||||||||||
Settlement costs | — | —% | 5,000 | 4.7% | — | —% | |||||||||||
Total operating expenses | 109,875 | 83.1% | 102,555 | 96.8% | 83,087 | 99.6% | |||||||||||
Loss from operations | (10,368 | ) | (7.8)% | (21,891 | ) | (20.7)% | (18,416 | ) | (22.1)% | ||||||||
Total other expense | (5,710 | ) | (4.3)% | (13,352 | ) | (12.6)% | (10,400 | ) | (12.5)% | ||||||||
Net loss before income tax | (16,078 | ) | (12.2)% | (35,243 | ) | (33.3)% | (28,816 | ) | (34.5)% | ||||||||
Income tax (expense) benefit | 10 | —% | (531 | ) | (0.5)% | 86 | 0.1% | ||||||||||
Net loss | $ | (16,068 | ) | (12.1)% | $ | (35,774 | ) | (33.8)% | $ | (28,730 | ) | (34.4)% |
Year Ended December 31, | ||||||||||||||
2013 | 2012 | Variance | Percent Change | |||||||||||
(in thousands) | ||||||||||||||
Revenue | $ | 132,257 | $ | 105,946 | $ | 26,311 | 24.8% |
Year Ended December 31, | ||||||||||||||
2013 | 2012 | Variance | Percent Change | |||||||||||
(in thousands) | ||||||||||||||
Cost of goods sold | $ | 32,750 | $ | 25,282 | $ | 7,468 | 29.5% | |||||||
Gross profit | 99,507 | 80,664 | 18,843 | 23.4% | ||||||||||
Gross margin percentage (gross profit as a percent of revenue) | 75.2 | % | 76.1 | % | (0.9 | )% |
Year Ended December 31, | ||||||||||||||
2013 | 2012 | Variance | Percent Change | |||||||||||
(in thousands) | ||||||||||||||
Research and development | $ | 16,199 | $ | 16,571 | $ | (372 | ) | (2.2)% | ||||||
Clinical and regulatory affairs | 8,679 | 6,343 | 2,336 | 36.8% | ||||||||||
Marketing and sales | 63,588 | 53,953 | 9,635 | 17.9% | ||||||||||
General and administrative | 21,409 | 20,266 | 1,143 | 5.6% | ||||||||||
Contract termination and business acquisition expenses | — | 422 | (422 | ) | (100.0)% | |||||||||
Settlement costs | — | 5,000 | (5,000 | ) | 100.0% |
Year Ended December 31, | |||||||||||||
2013 | 2012 | Variance | Percent Change | ||||||||||
(in thousands) | |||||||||||||
Other income (expense), net | $ | (5,710 | ) | $ | (13,352 | ) | 7,642 | (57.2)% |
Year Ended December 31, | ||||||||||||||
2013 | 2012 | Variance | Percent Change | |||||||||||
(in thousands) | ||||||||||||||
Income tax (expense) benefit | $ | 10 | $ | (531 | ) | $ | 541 | (101.9)% |
Year Ended December 31, | |||||||||||
2012 | 2011 | Variance | Percent Change | ||||||||
(in thousands) | |||||||||||
Revenue | 105,946 | 83,417 | 22,529 | 27.0% |
Year Ended December 31, | ||||||||||||||
2012 | 2011 | Variance | Percent Change | |||||||||||
(in thousands) | ||||||||||||||
Cost of goods sold | $ | 25,282 | $ | 18,746 | $ | 6,536 | 34.9% | |||||||
Gross profit | 80,664 | 64,671 | 15,993 | 24.7% | ||||||||||
Gross margin percentage (gross profit as a percent of revenue) | 76.1 | % | 77.5 | % | (1.4 | )% |
Year Ended December 31, | ||||||||||||||
2012 | 2011 | Variance | Percent Change | |||||||||||
(in thousands) | ||||||||||||||
Research and development | $ | 16,571 | $ | 16,738 | $ | (167 | ) | (1.0)% | ||||||
Clinical and regulatory affairs | 6,343 | 4,439 | 1,904 | 42.9% | ||||||||||
Marketing and sales | 53,953 | 44,655 | 9,298 | 20.8% | ||||||||||
General and administrative | 20,266 | 15,525 | 4,741 | 30.5% | ||||||||||
Contract termination and business acquisition expenses | 422 | 1,730 | (1,308 | ) | (75.6)% | |||||||||
Settlement costs | 5,000 | — | 5,000 | 100.0% |
Year Ended December 31, | |||||||||||||
2012 | 2011 | Variance | Percent Change | ||||||||||
(in thousands) | |||||||||||||
Other income (expense), net | $ | (13,352 | ) | $ | (10,400 | ) | (2,952 | ) | 28.4% |
Year Ended December 31, | ||||||||||||||
2012 | 2011 | Variance | Percent Change | |||||||||||
(in thousands) | ||||||||||||||
Income tax (expense) benefit | $ | (531 | ) | $ | 86 | $ | (617 | ) | (100.0)% |
December 31, 2013 | December 31, 2012 | ||
(in thousands, except financial metrics data) | |||
Cash and cash equivalents | $95,152 | $45,118 | |
Marketable securities | $31,313 | $— | |
Accounts receivable, net | $24,972 | $22,600 | |
Total current assets | $173,633 | $87,567 | |
Total current liabilities | $67,335 | $17,194 | |
Working capital surplus (a) | $106,298 | $70,373 | |
Current ratio (b) | 2.6 | 5.1 | |
Days sales outstanding ("DSO") (c) | 65 | 71 | |
Inventory turnover (d) | 1.7 | 1.5 |
• | 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 | Less than 1 Year | 1-3 Years | 3-5 Years | After 5 Years |
Long-term debt obligations | $86,250 | $— | $— | $86,250 | $— |
Interest on debt obligations | 9,730 | 1,968 | 3,881 | 3,881 | — |
Operating lease obligations | 36,407 | 1,010 | 4,060 | 4,308 | 27,029 |
Total | $132,387 | $2,978 | $7,941 | $94,439 | $27,029 |
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Page No. | |
Reports of Independent Registered Public Accounting Firms | |
Consolidated Balance Sheets as of December 31, 2013 and 2012 | |
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2013, 2012, and 2011 | |
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2013, 2012, and 2011 | |
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012, and 2011 | |
Notes to Consolidated Financial Statements | |
Financial Statement Schedule | |
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2013, 2012, and 2011 |
December 31, | ||||||||
2013 | 2012 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 95,152 | $ | 45,118 | ||||
Marketable securities | 31,313 | — | ||||||
Accounts receivable, net of allowance for doubtful accounts of $399 and $472, respectively | 24,972 | 22,600 | ||||||
Other receivables | 310 | 320 | ||||||
Inventories | 19,558 | 18,087 | ||||||
Prepaid expenses and other current assets | 2,328 | 1,442 | ||||||
Total current assets | 173,633 | 87,567 | ||||||
Property and equipment, net | 7,338 | 4,984 | ||||||
Goodwill | 29,103 | 29,022 | ||||||
Intangibles, net | 43,096 | 43,356 | ||||||
Deposits and other assets | 3,027 | 174 | ||||||
Total assets | $ | 256,197 | $ | 165,103 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 6,265 | $ | 6,348 | ||||
Accrued payroll | 11,476 | 7,825 | ||||||
Accrued expenses and other current liabilities | 3,094 | 3,021 | ||||||
Contingently issuable common stock | 46,500 | — | ||||||
Total current liabilities | 67,335 | 17,194 | ||||||
Deferred income taxes | 1,135 | 1,035 | ||||||
Deferred rent | 1,585 | — | ||||||
Contingently issuable common stock | 14,400 | 52,400 | ||||||
Convertible notes | 67,101 | — | ||||||
Total liabilities | 151,556 | 70,629 | ||||||
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; 75,000,000 shares authorized, 63,866,392 and 63,068,463 shares issued, respectively. 63,866,392 and 62,573,763 shares outstanding, respectively. | 64 | 63 | ||||||
Additional paid-in capital | 321,756 | 295,338 | ||||||
Accumulated deficit | (216,082 | ) | (200,014 | ) | ||||
Treasury stock, at cost, 0 and 494,700 shares, respectively. | — | (661 | ) | |||||
Accumulated other comprehensive loss | (1,097 | ) | (252 | ) | ||||
Total stockholders’ equity | 104,641 | 94,474 | ||||||
Total liabilities and stockholders’ equity | $ | 256,197 | $ | 165,103 |
Year Ended December 31, | |||||||||||
2013 | 2012 | 2011 | |||||||||
Revenue | $ | 132,257 | $ | 105,946 | $ | 83,417 | |||||
Cost of goods sold | 32,750 | 25,282 | 18,746 | ||||||||
Gross profit | 99,507 | 80,664 | 64,671 | ||||||||
Operating expenses: | |||||||||||
Research and development | 16,199 | 16,571 | 16,738 | ||||||||
Clinical and regulatory affairs | 8,679 | 6,343 | 4,439 | ||||||||
Marketing and sales | 63,588 | 53,953 | 44,655 | ||||||||
General and administrative | 21,409 | 20,266 | 15,525 | ||||||||
Contract termination and business acquisition expenses | — | 422 | 1,730 | ||||||||
Settlement costs | — | 5,000 | — | ||||||||
Total operating expenses | 109,875 | 102,555 | 83,087 | ||||||||
Loss from operations | (10,368 | ) | (21,891 | ) | (18,416 | ) | |||||
Other income (expense): | |||||||||||
Interest income | 50 | 30 | 23 | ||||||||
Interest expense | (321 | ) | (7 | ) | (32 | ) | |||||
Gain on sale of equipment | — | — | 141 | ||||||||
Other income (expense), net | 3,061 | 325 | (32 | ) | |||||||
Change in fair value of contingent consideration related to acquisition | (8,500 | ) | (13,700 | ) | (10,500 | ) | |||||
Total other expense | (5,710 | ) | (13,352 | ) | (10,400 | ) | |||||
Net loss before income tax (expense) benefit | $ | (16,078 | ) | $ | (35,243 | ) | $ | (28,816 | ) | ||
Income tax (expense) benefit | 10 | (531 | ) | 86 | |||||||
Net loss | $ | (16,068 | ) | $ | (35,774 | ) | $ | (28,730 | ) | ||
Other comprehensive loss (foreign currency translation) | (845 | ) | (222 | ) | (30 | ) | |||||
Comprehensive loss | $ | (16,913 | ) | $ | (35,996 | ) | $ | (28,760 | ) | ||
Basic and diluted net loss per share | $ | (0.26 | ) | $ | (0.60 | ) | $ | (0.51 | ) | ||
Shares used in computing basic and diluted net loss per share | 62,607 | 59,811 | 56,592 |
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Treasury Stock | Accumulated Other Comprehensive Loss | Total Stockholders’ Equity | |||||||||||||||||||||
Issued Shares | $0.001 Par Value | |||||||||||||||||||||||||
Balance at December 31, 2010 | 56,896 | $ | 57 | $ | 230,017 | $ | (135,510 | ) | $ | (661 | ) | $ | — | $ | 93,902 | |||||||||||
Exercise of common stock options | 1,394 | 2 | 5,322 | — | — | — | 5,324 | |||||||||||||||||||
Employee stock purchase plan | 287 | — | 1,965 | — | — | — | 1,965 | |||||||||||||||||||
Stock compensation expense | — | — | 2,851 | — | — | — | 2,851 | |||||||||||||||||||
Restricted stock expense | — | — | 877 | — | — | — | 877 | |||||||||||||||||||
Non-employee restricted stock expense | — | — | 409 | — | — | — | 409 | |||||||||||||||||||
Net loss | — | — | — | (28,730 | ) | — | — | (28,730 | ) | |||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (30 | ) | (30 | ) | |||||||||||||||||
Balance at December 31, 2011 | 58,577 | $ | 59 | $ | 241,441 | $ | (164,240 | ) | $ | (661 | ) | $ | (30 | ) | $ | 76,569 | ||||||||||
Exercise of common stock options | 1,168 | 1 | 4,991 | — | — | — | 4,992 | |||||||||||||||||||
Employee stock purchase plan | 224 | — | 2,369 | — | — | — | 2,369 | |||||||||||||||||||
Sale of common stock | 3,105 | 3 | 40,066 | — | — | — | 40,069 | |||||||||||||||||||
Stock compensation expense | — | — | 3,649 | — | — | — | 3,649 | |||||||||||||||||||
Issuance of restricted stock | 13 | — | — | — | — | — | — | |||||||||||||||||||
Cancellation of restricted stock awards | (18 | ) | — | — | — | — | — | — | ||||||||||||||||||
Restricted stock expense | — | — | 1,906 | — | — | — | 1,906 | |||||||||||||||||||
Non-employee restricted stock expense | — | — | 916 | — | — | — | 916 | |||||||||||||||||||
Net loss | — | — | — | (35,774 | ) | — | — | (35,774 | ) | |||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (222 | ) | (222 | ) | |||||||||||||||||
Balance at December 31, 2012 | 63,069 | 63 | 295,338 | (200,014 | ) | (661 | ) | (252 | ) | $ | 94,474 | |||||||||||||||
Exercise of common stock options | 974 | 1 | 4,874 | — | — | — | 4,875 | |||||||||||||||||||
Employee stock purchase plan | 216 | — | 2,444 | — | — | — | 2,444 | |||||||||||||||||||
Issuance of common stock | 48 | — | 752 | — | — | — | 752 | |||||||||||||||||||
Treasury stock retired | (495 | ) | — | (661 | ) | — | 661 | — | — | |||||||||||||||||
Stock compensation expense | — | — | 4,627 | — | — | — | 4,627 | |||||||||||||||||||
Issuance of restricted stock | 54 | — | — | — | — | — | — | |||||||||||||||||||
Restricted stock expense | — | — | 2,476 | — | — | — | 2,476 | |||||||||||||||||||
Non-employee restricted stock expense | — | — | 819 | — | — | — | 819 | |||||||||||||||||||
Equity conversion option | — | — | 19,324 | — | — | 19,324 | ||||||||||||||||||||
Debt issuance costs allocated to equity | — | — | (819 | ) | — | — | — | (819 | ) | |||||||||||||||||
Capped call | — | — | (7,418 | ) | — | — | — | (7,418 | ) | |||||||||||||||||
Net loss | — | — | — | (16,068 | ) | — | — | (16,068 | ) | |||||||||||||||||
Other comprehensive loss | — | — | — | (845 | ) | (845 | ) | |||||||||||||||||||
Balance at December 31, 2013 | 63,866 | 64 | 321,756 | (216,082 | ) | — | (1,097 | ) | $ | 104,641 |
Year Ended December 31, | |||||||||||
2013 | 2012 | 2011 | |||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | (16,068 | ) | $ | (35,774 | ) | $ | (28,730 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||||
Bad debt expense | 204 | 325 | 62 | ||||||||
Depreciation and amortization | 2,351 | 2,183 | 2,729 | ||||||||
Stock-based compensation | 7,922 | 6,471 | 4,136 | ||||||||
Change in fair value of contingent consideration related to acquisition | 8,500 | 13,700 | 10,500 | ||||||||
Common stock issued for business development | 752 | — | — | ||||||||
Accretion of interest on convertible note | 175 | — | — | ||||||||
Amortization of deferred financing costs | 21 | — | — | ||||||||
Gain on sale of equipment | — | — | (141 | ) | |||||||
Non-cash foreign exchange gain | (1,731 | ) | — | — | |||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable and other receivables | (2,440 | ) | (8,319 | ) | (3,392 | ) | |||||
Inventories | (1,046 | ) | 12 | (9,801 | ) | ||||||
Prepaid expenses and other current assets | (769 | ) | (408 | ) | (153 | ) | |||||
Accounts payable | (196 | ) | 199 | 700 | |||||||
Accrued payroll | 3,546 | 1,255 | 1,597 | ||||||||
Accrued expenses and other current liabilities | 273 | 1,827 | 111 | ||||||||
Net cash provided by (used in) operating activities | $ | 1,494 | $ | (18,529 | ) | $ | (22,382 | ) | |||
Cash flows from investing activities: | |||||||||||
Purchases of marketable securities | (31,313 | ) | — | — | |||||||
Purchases of property and equipment | (2,862 | ) | (2,238 | ) | (3,033 | ) | |||||
Purchases of patent license | — | (100 | ) | — | |||||||
Business acquisition | — | (1,156 | ) | — | |||||||
Net cash used in investing activities | (34,175 | ) | (3,494 | ) | (3,033 | ) | |||||
Cash flows from financing activities: | |||||||||||
Deferred financing costs | (3,657 | ) | — | — | |||||||
Proceeds from sale of common stock under secondary offering, net of expenses | — | 40,069 | — | ||||||||
Proceeds from sale of common stock under employee stock purchase plan | 2,444 | 2,369 | 1,965 | ||||||||
Proceeds from exercise of stock options | 4,875 | 4,992 | 5,324 | ||||||||
Funding of restricted cash account | 5,395 | — | — | ||||||||
Release of restricted cash account | (5,395 | ) | — | — | |||||||
Proceeds from convertible debt | 86,250 | — | — | ||||||||
Purchase of capped call | (7,418 | ) | $ | — | $ | — | |||||
Net cash provided by financing activities | $ | 82,494 | $ | 47,430 | $ | 7,289 | |||||
Effect of exchange rate changes on cash and cash equivalents | 221 | (324 | ) | (30 | ) | ||||||
Net increase (decrease) in cash and cash equivalents | 50,034 | 25,083 | (18,156 | ) | |||||||
Cash and cash equivalents, beginning of year | 45,118 | $ | 20,035 | $ | 38,191 | ||||||
Cash and cash equivalents, end of year | $ | 95,152 | $ | 45,118 | $ | 20,035 | |||||
Supplemental disclosure of cash flow information: | |||||||||||
Cash paid for interest | $ | 16 | $ | 10 | $ | 32 | |||||
Cash paid for income taxes | 171 | 16 | 24 | ||||||||
Non-cash investing and financing activities: | |||||||||||
Landlord funded leasehold improvements | $ | 1,485 | $ | — | $ | — |
(a) | Description of Business |
Useful Life | |
Office furniture | Seven years |
Computer hardware | Three years |
Computer software | Three to eight years |
Production equipment and molds | Three to seven years |
Leasehold improvements | Shorter of expected useful life or remaining term of lease |
Useful Life | |
Goodwill | Indefinite lived |
Trademarks and tradenames | Indefinite lived |
In-process research and development | Indefinite lived until commercial launch of underlying technology |
Developed technology | Thirteen years |
Patents & license | Three to five years |
Customer relationships | Three years |
• | The sales price for the EVAR or EVAS product (including device extensions and accessories) is established with the customer; |
• | The EVAR or EVAS product has been used by the hospital in an EVAR procedure, or the distributor has assumed title with no right of return; and |
(i) | The risks of ownership must have passed to the customer; |
(ii) | The customer must have made a fixed and written commitment to purchase the EVAR or EVAS product; |
(iii) | The customer must request that the transaction be on a bill and hold basis; |
(iv) | There must be a fixed schedule for delivery of the EVAR or EVAS product. The date for delivery must be reasonable and must be consistent with the customer's business purpose; |
(v) | The Company must have no remaining specific performance obligations and its earnings process must be complete; |
(vi) | The customer's ordered EVAR or EVAS product must be segregated from the Company's inventory and cannot be used to fulfill other customer orders; and |
(vii) | The EVAR or EVAS products must be complete and ready for shipment. |
(i) | The date by which payment is expected from the customer, and whether the Company has modified its normal billing and credit terms for the customer; |
(ii) | The Company's past experiences with, and pattern of, bill and hold transactions; |
(iii) | Whether the customer has the expected risk of loss in the event of a decline in the market value of the EVAR or EVAS product; |
(iv) | Whether the Company's custodial risks are insurable and insured; and |
(v) | Whether extended procedures are necessary in order to assure that there are no exceptions to the customer's commitment to accept and pay for the EVAR or EVAS product (i.e., that the business reasons for the bill and hold have not introduced a contingency to the customer's commitment). |
December 31, | |||||||
2013 | 2012 | ||||||
Production equipment, molds, and office furniture | $ | 8,033 | $ | 7,256 | |||
Computer hardware and software | 3,290 | 2,265 | |||||
Leasehold improvements | 3,058 | 2,819 | |||||
Construction in progress (software and related implementation, production equipment, and leasehold improvements) | 2,594 | 556 | |||||
Property and equipment, at cost | 16,975 | 12,896 | |||||
Accumulated depreciation | (9,637 | ) | (7,912 | ) | |||
Property and equipment, net | $ | 7,338 | $ | 4,984 |
December 31, | |||||||
2013 | 2012 | ||||||
Raw materials | $ | 3,793 | $ | 3,901 | |||
Work-in-process | 4,539 | 5,102 | |||||
Finished goods | 11,226 | 9,084 | |||||
Inventories | $ | 19,558 | $ | 18,087 |
December 31, | |||||||
2013 | 2012 | ||||||
Goodwill (1) (3) | $ | 29,103 | $ | 29,022 | |||
Intangible assets: | |||||||
Indefinite lived intangibles | |||||||
In-process research and development (2) | $ | — | $ | 40,100 | |||
Trademarks and trade names | 2,708 | 2,708 | |||||
Total indefinite lived intangibles | $ | 2,708 | $ | 42,808 | |||
Finite lived intangibles | |||||||
Developed technology (2) | $ | 40,100 | $ | — | |||
Accumulated amortization | (48 | ) | — | ||||
Developed technology, net | $ | 40,052 | $ | — | |||
Patent | $ | 100 | $ | 100 | |||
Accumulated amortization | (95 | ) | (75 | ) | |||
Patent, net | $ | 5 | $ | 25 | |||
License | $ | 100 | $ | 100 | |||
Accumulated amortization | (41 | ) | (12 | ) | |||
License, net | $ | 59 | $ | 88 | |||
Customer relationships | $ | 544 | $ | 522 | |||
Accumulated amortization | (272 | ) | (87 | ) | |||
Customer relationships, net | $ | 272 | $ | 435 | |||
Intangible assets (excluding goodwill), net | $ | 43,096 | $ | 43,356 |
Amortization Expense | |||
2014 | $ | 436 | |
2015 | 641 | ||
2016 | 953 | ||
2017 | 2,251 | ||
2018 | 3,867 | ||
2019 and thereafter | 32,240 | ||
Total | 40,388 |
December 31, 2013 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | |||||||||||||
Corporate and other debt securities | $ | 31,313 | $ | 3 | $ | (3 | ) | $ | 31,313 |
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 December 31, 2012 | ||||||||||||||||
Cash and cash equivalents | $ | 45,118 | $ | — | $ | — | $ | 45,118 | ||||||||
Contingently issuable common stock | 52,400 | 52,400 | ||||||||||||||
At December 31, 2013 | ||||||||||||||||
Cash and cash equivalents | $ | 95,152 | $ | — | $ | — | $ | 95,152 | ||||||||
Contingently issuable common stock | — | — | 60,900 | 60,900 |
Year Ended December 31, | |||||||||||
2013 | 2012 | 2011 | |||||||||
Stock-based compensation expense | $ | 750 | $ | 759 | $ | 733 | |||||
Common stock shares purchased by Company employees | 216 | 224 | 287 | ||||||||
Average purchase price per share | $ | 11.48 | $ | 10.59 | $ | 6.84 |
Year Ended December 31, | |||||||||||
2013 | 2012 | 2011 | |||||||||
Cost of goods sold | $ | 680 | $ | 597 | $ | 209 | |||||
Operating expenses: | |||||||||||
Research and development | 486 | 1,336 | 753 | ||||||||
Clinical and regulatory affairs | 1,169 | 320 | 113 | ||||||||
Marketing and sales | 3,117 | 1,558 | 1,097 | ||||||||
General and administrative | 2,470 | 2,641 | 1,740 | ||||||||
Total operating expenses | $ | 7,242 | $ | 5,855 | $ | 3,703 | |||||
Total | $ | 7,922 | $ | 6,452 | $ | 3,912 |
Year Ended December 31, | |||||
2013 | 2012 | 2011 | |||
Average expected option life (in years) (a) | 5.6 | 6.0 | 6.0 | ||
Volatility (b) | 54.0% | 55.8% | 56.6% | ||
Risk-free interest rate (c) | 1.7% | 1.0% | 2.0% | ||
Dividend Yield (d) | —% | —% | —% | ||
Weighted-average grant-date fair value per stock option | $7.41 | $6.90 | $4.55 |
Number of Stock Options | Weighted Average Exercise Price | Weighted- Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | ||||
Outstanding — January 1, 2013 | 4,956,730 | $6.21 | |||||
Granted | 669,246 | 14.56 | |||||
Exercised | (973,587) | 5.01 | (a) | $11,015 | |||
Forfeited | (281,563) | 8.57 | |||||
Expired | — | — | |||||
Outstanding — December 31, 2013 | 4,370,826 | $7.60 | 6.5 | (b) | $43,010 | ||
Vested and Expected to Vest — December 31, 2013 | 3,937,545 | $7.06 | 6.3 | (b) | $40,875 | ||
Vested — December 31, 2013 | 2,329,889 | $5.13 | 5.3 | (b) | $28,690 |
Outstanding | Exercisable | |||||||||||
Range of Exercise Prices | Granted Stock Options Outstanding | Weighted- Average Remaining Contractual Life (Years) | Weighted- Average Exercise Price | Granted Stock Options Exercisable | Weighted- Average Exercise Price | |||||||
$1.64 | — | $3.67 | 1,102,082 | 4.4 | $2.87 | 1,101,874 | $2.87 | |||||
$3.68 | — | $5.71 | 1,106,288 | 5.7 | 4.47 | 558,692 | 4.32 | |||||
$5.72 | — | $7.75 | 323,597 | 5.9 | 6.63 | 166,732 | 6.23 | |||||
$7.76 | — | $9.79 | 444,541 | 7.4 | 8.55 | 258,956 | 8.43 | |||||
$9.80 | — | $11.83 | 248,332 | 7.8 | 11.02 | 94,614 | 11.18 | |||||
$11.84 | — | $13.87 | 308,689 | 8.8 | 13.19 | 56,212 | 13.11 | |||||
$13.88 | — | $15.91 | 708,954 | 8.9 | 14.45 | 92,809 | 14.53 | |||||
$15.92 | — | $17.86 | 128,343 | 9.5 | 16.42 | — | — | |||||
$1.64 | — | $17.86 | 4,370,826 | 6.5 | 7.60 | 2,329,889 | 5.13 |
Number of Restricted Stock Awards | Weighted Average Fair Value per Share at Grant Date | Grant Date Fair Value | Vest Date Fair Value* | |||||||||||
Unvested as of January 1, 2013 | 944,845 | |||||||||||||
Granted | 129,155 | $ | 14.60 | $ | 1,885 | |||||||||
Canceled | (72,360 | ) | ||||||||||||
Vested | (54,046 | ) | $ | 788 | ||||||||||
Unvested as of December 31, 2013 | 947,594 |
Year Ended December 31, | |||||||||||
2013 | 2012 | 2011 | |||||||||
Net loss | $ | (16,068 | ) | $ | (35,774 | ) | $ | (28,730 | ) | ||
Shares used in computing basic and diluted net loss per share | 62,607 | 59,811 | 56,592 | ||||||||
Basic and diluted net loss per share | $ | (0.26 | ) | $ | (0.60 | ) | $ | (0.51 | ) |
Year Ended December 31, | |||||
2013 | 2012 | 2011 | |||
Common stock options | 2,374 | 2,698 | 3,127 | ||
Restricted stock awards | 403 | 405 | 640 | ||
Restricted stock units | 234 | 492 | — | ||
Total | 3,011 | 3,595 | 3,767 |
Year Ended December 31, | |||||
2013 | 2012 | 2011 | |||
Conversion of the Notes | 3,588 | — | — |
Year Ended December 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | ||||||||||||||||||
United States | $ | 102,937 | 77.8 | % | $ | 87,092 | 82.2 | % | $ | 71,695 | 85.9 | % | ||||||||
Europe | $ | 16,101 | 12.2 | % | $ | 8,404 | 7.9 | % | $ | 4,178 | 5.0 | % | ||||||||
Rest of World ("ROW"): | ||||||||||||||||||||
Latin America | $ | 6,118 | 4.6 | % | $ | 4,859 | 4.6 | % | $ | 4,395 | 5.3 | % | ||||||||
Asia/Pacific | 7,062 | 5.3 | % | 5,591 | 5.3 | % | 3,149 | 3.8 | % | |||||||||||
Canada | $ | 39 | — | % | $ | — | — | % | $ | — | — | % | ||||||||
Total ROW | $ | 13,219 | 10.0 | % | $ | 10,450 | 9.9 | % | $ | 7,544 | 9.0 | % | ||||||||
Revenue | $ | 132,257 | 100.0 | % | $ | 105,946 | 100.0 | % | $ | 83,417 | 100.0 | % |
2014 | $ | 1,010 | |
2015 | 2,000 | ||
2016 | 2,060 | ||
2017 | 2,122 | ||
2018 | 2,186 | ||
2019 and thereafter | 27,029 | ||
Total | $ | 36,407 |
Fair Value of Contingently Issuable Common Stock | |||
December 31, 2012 | $ | 52,400 | |
Fair value adjustment of Contingent Payment for year ended December 31, 2013 | 8,500 | ||
December 31, 2013 | $ | 60,900 |
Year Ended December 31, | |||||||||||
2013 | 2012 | 2011 | |||||||||
U.S. | $ | (4,123 | ) | $ | (22,270 | ) | $ | (26,062 | ) | ||
Foreign | (11,955 | ) | (12,973 | ) | (2,754 | ) | |||||
Net income (loss) before income tax | $ | (16,078 | ) | $ | (35,243 | ) | $ | (28,816 | ) |
Year Ended December 31, | |||||||||||
2013 | 2012 | 2011 | |||||||||
Current: | |||||||||||
Federal | $ | 51 | $ | 30 | $ | (148 | ) | ||||
State | 138 | 176 | 27 | ||||||||
Foreign | (300 | ) | 319 | 35 | |||||||
Total current | $ | (111 | ) | $ | 525 | $ | (86 | ) | |||
Deferred: | |||||||||||
Federal | $ | (116 | ) | $ | — | $ | — | ||||
State | (16 | ) | — | — | |||||||
Foreign | 233 | 6 | — | ||||||||
Total deferred | $ | 101 | $ | 6 | $ | — | |||||
Total: | |||||||||||
Federal | $ | (65 | ) | $ | 30 | $ | (148 | ) | |||
State | $ | 122 | $ | 176 | $ | 27 | |||||
Foreign | $ | (67 | ) | $ | 325 | $ | 35 | ||||
Income tax expense (benefit) | $ | (10 | ) | $ | 531 | $ | (86 | ) |
Year Ended December 31, | |||||||||||
2013 | 2012 | 2011 | |||||||||
Income tax benefit at federal statutory rate | $ | (5,467 | ) | $ | (11,983 | ) | $ | (9,797 | ) | ||
State income tax expenses net of federal benefit | 73 | 116 | 18 | ||||||||
Meals and entertainment | 298 | 210 | 264 | ||||||||
Research and development credits | — | — | (342 | ) | |||||||
Stock-based compensation | 546 | 382 | 421 | ||||||||
Contingent consideration | 2,890 | 4,658 | 3,570 | ||||||||
Foreign tax rate differential | 656 | 4,736 | 1,025 | ||||||||
Net change in valuation allowance | 2,417 | 2,244 | 4,097 | ||||||||
Return to provision true-up | (1,347 | ) | — | — | |||||||
Other, net | (76 | ) | 168 | 658 | |||||||
Income tax expense (benefit) | $ | (10 | ) | $ | 531 | $ | (86 | ) |
Year Ended December 31, | |||||||
2013 | 2012 | ||||||
Deferred tax assets: | |||||||
Net operating loss carryforwards | $ | 53,247 | $ | 54,389 | |||
Accrued expenses | 846 | 711 | |||||
Tax credits | 8,590 | 8,400 | |||||
Bad debt | 131 | 183 | |||||
Inventory | 597 | 578 | |||||
Capitalized research and development | 3,740 | — | |||||
Deferred compensation | 3,043 | 2,364 | |||||
Deferred tax assets | 70,194 | 66,625 | |||||
Valuation allowance | (49,793 | ) | (50,866 | ) | |||
Total deferred tax assets | 20,401 | 15,759 | |||||
Deferred tax liabilities: | |||||||
Developed technology and trademark | (14,997 | ) | (15,575 | ) | |||
Trademarks and tradenames | (1,012 | ) | (1,029 | ) | |||
Depreciation and amortization | (1,034 | ) | (101 | ) | |||
Convertible debt | (4,116 | ) | — | ||||
Other | (377 | ) | (89 | ) | |||
Total deferred tax liabilities | (21,536 | ) | (16,794 | ) | |||
Net deferred tax liability | (1,135 | ) | (1,035 | ) |
Year Ended December 31, 2013 | |||
Balance at January 1, 2013 | $ | 152 | |
Additions for tax positions related to prior periods | 4 | ||
Decreases related to prior year tax positions | (126 | ) | |
Lapse of statute of limitations | — | ||
Balance at December 31, 2013 | $ | 30 |
Customer relationships | $ | 500 | |
Total identifiable net assets | $ | 500 | |
Goodwill | 1,867 | ||
Total purchase price allocation | $ | 2,367 |
Three Months Ended: | Revenue | Gross Profit | Operating expenses | Net loss | Basic loss per share | Diluted loss per share | |||||||||||||||||
December 31, 2013 | $ | 35,249 | $ | 26,077 | $ | 27,217 | $ | (3,412 | ) | $ | (0.05 | ) | $ | (0.05 | ) | ||||||||
September 30, 2013 | 33,260 | 25,898 | 28,116 | (8,990 | ) | (0.14 | ) | (0.14 | ) | ||||||||||||||
June 30, 2013 | 33,964 | 25,004 | 27,524 | 5,670 | 0.09 | 0.09 | |||||||||||||||||
March 31, 2013 | 29,784 | 22,528 | 27,018 | (9,335 | ) | (0.16 | ) | (0.16 | ) | ||||||||||||||
Three Months Ended: | |||||||||||||||||||||||
December 31, 2012 (a) | $ | 29,222 | $ | 22,064 | $ | 27,761 | $ | (6,518 | ) | $ | (0.10 | ) | $ | (0.10 | ) | ||||||||
September 30, 2012 | 26,696 | 20,252 | 27,185 | (5,857 | ) | (0.10 | ) | (0.10 | ) | ||||||||||||||
June 30, 2012 | 25,509 | 19,232 | 24,819 | (6,696 | ) | (0.11 | ) | (0.11 | ) | ||||||||||||||
March 31, 2012 | 24,519 | 19,116 | 22,790 | (16,703 | ) | (0.29 | ) | (0.29 | ) |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9B. | Other Information |
Item 10. | Directors, Executive Officers and Corporate Governance |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accountant Fees and Services |
Item 15. | Exhibits and Financial Statement Schedules |
Column A | Column B | Column C | Column D | Column E | |||||||||||||||
Additions (Reductions) | |||||||||||||||||||
Description | Balance at Beginning of Period | Additions to Bad Debt Expense or Deferred Tax Asset | Charged to Other Accounts | Deductions (1) | Balance at End of Period | ||||||||||||||
(In thousands) | |||||||||||||||||||
Year ended December 31, 2013 | |||||||||||||||||||
Allowance for doubtful accounts | $ | 472 | $ | 204 | $ | — | $ | (277 | ) | $ | 399 | ||||||||
Year ended December 31, 2012 | |||||||||||||||||||
Allowance for doubtful accounts | $ | 161 | $ | 325 | $ | — | $ | (14 | ) | $ | 472 | ||||||||
Year ended December 31, 2011 | |||||||||||||||||||
Allowance for doubtful accounts | $ | 118 | $ | 62 | $ | — | $ | (19 | ) | $ | 161 |
(1) | Deductions represent the actual write-off of accounts receivable balances. |
Exhibit Number | Exhibit Description | |||
2.1 | Agreement and Plan of Merger and Reorganization, dated October 27, 2010, by and among Endologix, Inc., Nepal Acquisition Corporation, Nellix, Inc., certain of Nellix, Inc.’s stockholders listed therein and Essex Woodlands Health Ventures, Inc., as representative of Nellix, Inc.’s stockholders (Incorporated by reference to Exhibit 2.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on October 27, 2010). | |||
3.1 | Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on July 28, 2009). | |||
3.2 | Amended and Restated Bylaws, as amended (Incorporated by reference to Exhibit 3.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 14, 2010). | |||
4.1 | Specimen Certificate of Common Stock (Incorporated by reference to Exhibit 4.1 to Amendment No. 2 to Endologix, Inc. Registration Statement on Form S-1, No. 333-04560, filed with the SEC on June 10, 1996). | |||
4.2 | Indenture, dated December 10, 2013, between Endologix, Inc. and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 10, 2013). | |||
4.3 | First Supplemental Indenture, dated December 10, 2013, between Endologix, Inc. and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 10, 2013). | |||
4.4 | Form of 2.25% Convertible Senior Notes due 2018 (Incorporated by reference to Exhibit A to Exhibit 4.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 10, 2013). | |||
10.1 | (1) | 1997 Supplemental Stock Option Plan (Incorporated by reference to Exhibit 99.1 to Endologix, Inc. Registration Statement on Form S-8, No. 333-42161, filed with the SEC on December 12, 1997). | ||
10.2 | (1) | 1996 Stock Option/Stock Issuance Plan (Incorporated by reference to Exhibit 4.1 to Endologix, Inc. Registration Statement on Form S-8, No. 333-122491, filed with the SEC on February 2, 2005). | ||
10.3 | (1) | 2006 Stock Incentive Plan, as amended (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on May 24, 2013). | ||
10.4 | (1) | Form of Stock Option Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 9, 2006). | ||
10.5 | (1) | Form of Restricted Stock Award Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 9, 2006). | ||
10.6 | (1) | Form of Employee Restricted Stock Unit Award Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 1, 2012). | ||
10.7 | (1) | Form of Director Restricted Stock Unit Award Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 1, 2012). | ||
10.8 | (1) | Amended and Restated 2006 Employee Stock Purchase Plan, as amended (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on May 24, 2013). | ||
10.9 | (1) | Offer Letter, dated April 28, 2008, between Endologix, Inc. and John McDermott (Incorporated by reference to Exhibit 10.1 to Endologix, Inc Current Report on Form 8-K, File No. 000-28440, filed with the SEC on May 16, 2008). | ||
10.10 | (1) | Employment Agreement, dated as of December 29, 2008, by and between Endologix, Inc. and John McDermott (Incorporated by reference to Exhibit 10.1 to Endologix, Inc Current Report on Form 8-K, File No. 000-28440, filed with the SEC on January 2, 2009). | ||
10.11 | (1) | Offer Letter, dated January 2, 2013, between Endologix, Inc. and Shelly B. Thunen (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on January 3, 2013). | ||
10.12 | (1) | Employment Agreement, dated January 2, 2013, between Endologix, Inc. and Shelly B. Thunen (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on January 3, 2013). | ||
10.13 | (1) | Employment Agreement, dated as of December 10, 2010, by and between Endologix, Inc. and Robert D. Mitchell (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 14, 2010). | ||
10.14 | (1)(2) | Offer Letter, dated June 8, 2010, between Endologix, Inc. and Todd Abraham. | ||
10.15 | (1)(2) | Employment Agreement, dated July 1, 2010, between Endologix, Inc. and Todd Abraham. | ||
10.16 | (1) | Employment Agreement, dated as of April 13, 2009, by and between Endologix, Inc. and Joseph DeJohn (Incorporated by reference to Exhibit 10.17 to Endologix, Inc. Annual Report on Form 10-K, File No. 000-28440, filed with the SEC on March 5, 2010). | ||
10.17 | (1) | Form of Indemnification Agreement entered into with Endologix, Inc. officers and directors (Incorporated by reference to Exhibit 10.41 to Endologix, Inc Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 13, 2002). | ||
10.18 | (1)(2) | Employment Agreement, dated February 1, 2014, by and between Endologix, Inc. and John McDermott. | ||
10.19 | (1)(2) | Employment Agreement, dated February 1, 2014, by and between Endologix, Inc. and Shelly B. Thunen. | ||
10.20 | (1)(2) | Employment Agreement, dated February 1, 2014, by and between Endologix, Inc. and Robert D. Mitchell. | ||
10.21 | (1)(2) | Employment Agreement, dated February 1, 2014, by and between Endologix, Inc. and Todd Abraham. | ||
10.22 | (1)(2) | Employment Agreement, dated February 1, 2014, by and between Endologix, Inc. and Joseph DeJohn. | ||
10.23 | (1)(2) | Form of Indemnification Agreement entered into with Endologix, Inc. officers and directors. | ||
10.24 | Standard Industrial/Commercial Single-Tenant Lease - Net, dated November 2, 2004, by and between Endologix, Inc. and Del Monico Investments, Inc. (Incorporated by reference to Exhibit 10.46 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on November 24, 2004). | |||
10.24.1 | Addendum No. 2 to Standard Industrial/Commercial Single-Tenant Lease - Net, by and between Endologix, Inc. and Del Monico Investments, Inc., dated June 9, 2009 (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 2, 2009). | |||
10.25 | Standard Industrial/Commercial Multi -Tenant Lease - Net, by and between Endologix, Inc. and Four-In-One Associates, dated August 28, 2009 (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 2, 2009). | |||
10.26 | Standard Industrial/Commercial Multi-Tenant Lease - Net, for 2 Musick, Irvine, California and 35 Hammond, Irvine, dated June 12, 2013, by and between Endologix, Inc. and The Northwestern Mutual Life Insurance Company (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on August 5, 2013). | |||
10.27 | (2) | Credit Agreement, dated October 30, 2009, by and between Endologix, Inc. and Wells Fargo Bank, National Association (Incorporated by reference to Exhibit 10.16 to Endologix, Inc. Annual Report on Form 10-K, File No. 000-28440, filed with the SEC on March 5, 2010). | ||
10.27.1 | † | Third Amendment to Credit Agreement, dated February 20, 2012, by and between Endologix, Inc. and Wells Fargo Bank, National Association. (Incorporated by reference to Exhibit 10.15.1 to Endologix Inc. Annual Report on Form 10-K, File No. 000-28440, filed with the SEC on March 6, 2012). | ||
10.27.2 | Seventh Amendment to Credit Agreement, dated December 3, 2013, by and among Wells Fargo Bank, National Association, Endologix, Inc., and Nellix, Inc. (Incorporated by reference to Exhibit 10.3 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 6, 2013). | |||
10.28 | Securities Purchase Agreement, dated as of October 27, 2010, by and between Endologix, Inc. and Essex Woodlands Health Ventures Fund VII, L.P. (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on October 27, 2010). | |||
10.28.1 | Amendment to Securities Purchase Agreement, dated as of December 9, 2010, by and between Endologix, Inc. and Essex Woodlands Health Ventures Fund VII, L.P. (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 14, 2010). | |||
10.29 | † | Cross License Agreement dated as of October 26, 2011, by and between Endologix, Inc. and Bard Peripheral Vascular, Inc. (Incorporated by reference to Exhibit 10.19 to Endologix Inc. Annual Report on Form 10-K, File No. 000-28440, filed with the SEC on March 6, 2012). | ||
10.30 | † | Settlement Agreement, dated October 16, 2012 by and among Endologix, Inc., Cook Incorporated, Cook Group and Cook Medical, Inc. (Incorporated by reference to Exhibit 10.22 to Endologix, Inc. Annual Report on Form 10-K, File No. 000-28440, filed with the SEC on March 14, 2013). | ||
10.31 | Base Capped Call Confirmation, dated December 4, 2013, between Endologix, Inc. and Bank of America, N.A. (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 6, 2013). | |||
10.32 | Additional Capped Call Confirmation, dated December 5, 2013, between Endologix, Inc. and Bank of America, N.A. (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 6, 2013). | |||
12.1 | (2) | Ratio of earnings to fixed charges. | ||
14 | Code of Ethics for Chief Executive Officer and Principal Financial Officers (Incorporated by reference to Exhibit 14 to Endologix, Inc. Annual Report on Form 10-K, File No. 000-28440, filed with the SEC on March 26, 2004). | |||
16.1 | Letter from PricewaterhouseCoopers LLP to the Securities and Exchange Commission, Dated August 15, 2012 (Incorporated by reference to Exhibit 16.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on August 15, 2012). | |||
21.1 | (2) | List of Subsidiaries. | ||
23.1 | (2) | Consent of Independent Registered Public Accounting Firm (KPMG LLP). | ||
23.2 | (2) | Consent of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP). | ||
24.1 | (2) | Power of Attorney (included on signature page hereto). | ||
31.1 | (2) | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934. | ||
31.2 | (2) | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934. | ||
32.1 | (3) | Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350. | ||
32.2 | (3) | Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350. | ||
101.INS | (2) | XBRL Instance Document | ||
101.SCH | (2) | XBRL Taxonomy Extension Schema Document | ||
101.CAL | (2) | XBRL Taxonomy Extension Calculation Link Base Document | ||
101.DEF | (2) | XBRL Taxonomy Extension Definition Link Base Document | ||
101.LAB | (2) | XBRL Taxonomy Extension Label Link Base Document | ||
101.PRE | (2) | XBRL Taxonomy Extension Presentation Link Base Document |
† | Portions of this exhibit are omitted and were filed separately with the Securities and Exchange Commission pursuant to Endologix application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. |
(1) | These exhibits are identified as management contracts or compensatory plans or arrangements of Endologix pursuant to Item 15(a)(3) of Form 10-K. |
(2) | Filed herewith |
(3) | Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
ENDOLOGIX, INC. | ||
By: | /S/ JOHN MCDERMOTT | |
John McDermott Chief Executive Officer and Chairman of the Board (Principal Executive Officer) |
Signature | Title | Date | ||
/s/ JOHN McDERMOTT | Chief Executive Officer and Chairman of the Board | March 3, 2014 | ||
(John McDermott) | (Principal Executive Officer) | |||
/s/ SHELLEY B. THUNEN | Chief Financial Officer | March 3, 2014 | ||
(Shelley B. Thunen ) | (Principal Financial and Accounting Officer) | |||
/s/ THOMAS F. ZENTY III | Director | March 3, 2014 | ||
(Thomas F. Zenty III) | ||||
/s/ DAN LEMAITRE | Director | March 3, 2014 | ||
(Dan Lemaitre) | ||||
/s/ THOMAS C. WILDER | Director | March 3, 2014 | ||
(Thomas C. Wilder) | ||||
/s/ GUIDO J. NEELS | Director | March 3, 2014 | ||
(Guido J. Neels) | ||||
/s/ GREGORY D. WALLER | Director | March 3, 2014 | ||
(Gregory D. Waller) |
Hire Date: | July 1, 2010 |
Salary: | Beginning August 1, 2010, an annual base salary of Two Hundred Sixty Thousand Dollars ($260,000) paid semi-monthly in the amount of Ten Thousand Eight Hundred Thirty Three Dollars and Thirty Three Cents ($10, 833.33). |
Bonus: | Annual bonus target of 35% of base salary, contingent upon the achievement of company objectives. For 2010, you will be eligible for 50% of the annual bonus target or a minimum of $40,000 payable in January 2011. |
Equity Participation: | Stock Option grant in the amount of 90,000 shares of common stock will be authorized under the Endologix Stock Option Plan. This grant will be priced on the first day of your employment and vest over a four (4) year period. |
Group Benefits: | You will be eligible to participate in the company-sponsored insurance programs. Eligibility for you and your dependants is on the date of hire, following the return of all successfully completed enrollment applications. |
401(k) Plan: | You will be eligible to participate in the Company’s 401(k) plan. Eligibility is on your date of hire, following the return of all successfully completed enrollment applications. You may contribute from 1 to 100% of your salary up to the annual limit of $16,500.00. |
Purchase Plan: | You will be eligible to participate in the ESPP according to the standard provisions of the plan. |
Vacation: | You will be eligible for three weeks per full year accrued at a rate of 10 hours per month with a maximum accrual of 240 hours. |
Formal Review: | A formal review process, including a salary review will occur on an annual basis beginning January 1, 2011. |
Employment: | This offer is good for three working days after receipt of this letter and the terms of this offer are completely confidential in nature and may not be shared with any third party. |
Sincerely, | Agreed and Accepted, |
/s/ John McDermott | /s/ Todd G. Abraham |
If to Executive: | Todd G. Abraham 11 Studebaker Irvine, CA 92618 |
If to the Company: | Endologix, Inc. 11 Studebaker Irvine, CA 92618 Attn: Chief Executive Officer |
“COMPANY” ENDOLOGIX, INC., a Delaware corporation /s/ John McDermott John McDermott President & Chief Executive Officer |
“EXECUTIVE” /s/ Todd G. Abraham Todd G. Abraham |
• | Health Insurance |
• | Dental Insurance |
• | Vision Insurance |
• | Prescription Drug Insurance |
• | Group Life Insurance |
1. | Employment; Term. The Company agrees to continue to employ Executive, and Executive agrees to continue 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 |
(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 securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least 50% of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction; |
(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 including if Executive no longer holds the same position in the ultimate successor corporation following a Change in Control, whether the ultimate successor corporation is a public or private company; |
(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 Executive Officer, initially reporting to the Board of Directors of the Company, 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 Board of Directors 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 $520,000 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 ninety percent (90%) of Executive’s Base Salary but shall be adjusted annually in the sole and absolute discretion of the Board (or Compensation Committee thereof) (the “Target Bonus”). Any bonus amounts payable by the Company pursuant to this Section 4.2 shall be paid to Executive in accordance with the terms and conditions of the applicable cash incentive compensation plan or program. |
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 in effect, plus all other earned or accrued amounts to which Executive is entitled under any compensation plan or practice of the Company at the time of termination (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 18 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 (60th) 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 |
(d) | Executive shall be entitled to receive continuation of group health insurance benefits for a period of 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 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 additional vesting as follows (i) with respect to any outstanding stock option award that vests in installments, such award shall become vested and, if applicable, exercisable by an additional 12 months (the “Additional Vesting Period”), and (ii) with respect to any outstanding equity award that has performance-based (milestone) vesting, such award shall become fully vested and, if applicable, exercisable if the performance-based vesting date occurs during the Additional Vesting Period, in each case, as of the date of Executive’s Involuntary Termination. Outstanding equity awards granted to Executive under the Company’s equity incentive plans following the Effective Date shall not be entitled to any additional vesting as a result of Executive’s Involuntary Termination pursuant to this Agreement. |
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: |
(f) | The Company shall pay to Executive the Accrued Obligations as soon as practicable following the date of Executive’s Involuntary Termination; |
(g) | Executive shall be entitled to receive a cash severance payment in an amount equal to the sum of 24 months of Executive’s Base Salary plus Target Bonus, payable in a lump sum cash payment on the first business day of the calendar month occurring after the sixtieth (60th) 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. |
(h) | 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 (60th) day following the date of Executive’s Separation from Service. |
(i) | Executive shall be entitled to receive continuation of group health insurance benefits for a period of 24 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. |
(j) | 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. |
(k) | 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 |
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 |
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, Executive agrees that Executive 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 Company, any of its affiliates or any of the Company’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 Company, any of its affiliates or any of Company’s or any such affiliates’ business affairs, directors, officers, employees, consultants, agents or representatives, or (c) place the Company, any of its affiliates, or any of the Company’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 the Company and its affiliates 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 determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other jurisdiction within the geographical scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, such covenants as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants. |
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 February 1, 2014 (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 |
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 Executive’s death. Upon the expiration of the applicable six-month period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to this Section 10.2 shall be paid in a lump sum payment to Executive (or Executive’s estate, in the event of Executive’s death). Any remaining payments due under the Agreement shall be paid as otherwise provided herein. |
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 |
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, |
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 modified only with the written consent of Executive and an authorized representative of the Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever. |
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 “ADEA”); the Equal Pay Act, as amended, 29 U.S.C. Section 206(d); regulations of the Office of Federal Contract Compliance, 41 C.F.R. Section 60, et seq.; the Family and Medical Leave Act, as amended, 29 U.S.C. § 2601 et seq.; the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201 et seq.; the Employee Retirement Income Security Act, as amended, 29 U.S.C. § 1001 et seq.; and the California Fair Employment and Housing Act, California Government Code Section 12940, et seq. |
(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, and upon the advice and with the approval of Executive’s legal counsel (if any), and that Executive voluntarily waives any remaining consideration period. |
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. | Employment; Term. The Company agrees to continue to employ Executive, and Executive agrees to continue 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 |
(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 securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least 50% of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction; |
(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 including if Executive no longer holds the same position in the ultimate successor corporation following a Change in Control, whether the ultimate successor corporation is a public or private company; |
(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 Financial Officer, initially reporting to the Chief Executive Officer of the Company, 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 Board of Directors 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 $305,000 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 forty-five percent (45%) of Executive’s Base Salary but shall be adjusted annually in the sole and absolute discretion of the Board (or Compensation Committee thereof) (the “Target Bonus”). Any bonus amounts payable by the Company pursuant to this Section 4.2 shall be paid to Executive in accordance with the terms and conditions of the applicable cash incentive compensation plan or program. |
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 in effect, plus all other earned or accrued amounts to which Executive is entitled under any compensation plan or practice of the Company at the time of termination (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 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 (60th) 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 |
(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 additional vesting as follows (i) with respect to any outstanding stock option award that vests in installments, such award shall become vested and, if applicable, exercisable by an additional six months (the “Additional Vesting Period”), and (ii) with respect to any outstanding equity award that has performance-based (milestone) vesting, such award shall become fully vested and, if applicable, exercisable if the performance-based vesting date occurs during the Additional Vesting Period, in each case, as of the date of Executive’s Involuntary Termination. Outstanding equity awards granted to Executive under the Company’s equity incentive plans following the Effective Date shall not be entitled to any additional vesting as a result of Executive’s Involuntary Termination pursuant to this Agreement. |
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: |
(f) | The Company shall pay to Executive the Accrued Obligations as soon as practicable following the date of Executive’s Involuntary Termination; |
(g) | Executive shall be entitled to receive a cash severance payment in an amount equal to the sum of 18 months of Executive’s Base Salary plus Target Bonus, payable in a lump sum cash payment on the first business day of the calendar month occurring after the sixtieth (60th) 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. |
(h) | 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 (60th) day following the date of Executive’s Separation from Service. |
(i) | Executive shall be entitled to receive continuation of group health insurance benefits for a period of 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. |
(j) | 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. |
(k) | 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 |
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 |
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, Executive agrees that Executive 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 Company, any of its affiliates or any of the Company’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 Company, any of its affiliates or any of Company’s or any such affiliates’ business affairs, directors, officers, employees, consultants, agents or representatives, or (c) place the Company, any of its affiliates, or any of the Company’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 the Company and its affiliates 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 determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other jurisdiction within the geographical scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, such covenants as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants. |
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 February 1, 2014 (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 |
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 Executive’s death. Upon the expiration of the applicable six-month period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to this Section 10.2 shall be paid in a lump sum payment to Executive (or Executive’s estate, in the event of Executive’s death). Any remaining payments due under the Agreement shall be paid as otherwise provided herein. |
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 |
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, |
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 modified only with the written consent of Executive and an authorized representative of the Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever. |
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 “ADEA”); the Equal Pay Act, as amended, 29 U.S.C. Section 206(d); regulations of the Office of Federal Contract Compliance, 41 C.F.R. Section 60, et seq.; the Family and Medical Leave Act, as amended, 29 U.S.C. § 2601 et seq.; the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201 et seq.; the Employee Retirement Income Security Act, as amended, 29 U.S.C. § 1001 et seq.; and the California Fair Employment and Housing Act, California Government Code Section 12940, et seq. |
(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, and upon the advice and with the approval of Executive’s legal counsel (if any), and that Executive voluntarily waives any remaining consideration period. |
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. | Employment; Term. The Company agrees to continue to employ Executive, and Executive agrees to continue 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 |
(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 securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least 50% of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction; |
(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 President, initially reporting to the Chief Executive Officer of the Company, 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 |
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 $380,000 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 sixty percent (60%) of Executive’s Base Salary but shall be adjusted annually in the sole and absolute discretion of the Board (or Compensation Committee thereof) (the “Target Bonus”). Any bonus amounts payable by the Company pursuant to this Section 4.2 shall be paid to Executive in accordance with the terms and conditions of the applicable cash incentive compensation plan or program. |
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 in effect, plus all other earned or accrued amounts to which Executive is entitled under any compensation plan or practice of the Company at the time of termination (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 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 (60th) 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 (60th) 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 additional vesting as follows (i) with respect to any outstanding stock option award that vests in installments, such award shall become vested and, if applicable, exercisable by an additional six months (the “Additional Vesting Period”), and (ii) with respect to any outstanding equity award that has performance-based (milestone) vesting, such award shall become fully vested and, if applicable, exercisable if the performance-based vesting date occurs during the Additional Vesting Period, in each case, as of the date of Executive’s Involuntary Termination. Outstanding equity awards granted to Executive under the Company’s equity incentive plans following the Effective Date shall not be entitled to any additional vesting as a result of Executive’s Involuntary Termination pursuant to this Agreement. |
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: |
(f) | The Company shall pay to Executive the Accrued Obligations as soon as practicable following the date of Executive’s Involuntary Termination; |
(g) | Executive shall be entitled to receive a cash severance payment in an amount equal to the sum of 18 months of Executive’s Base Salary plus Target Bonus, payable in a lump sum cash payment on the first business day of the calendar month occurring after the sixtieth (60th) day following the date of Executive’s Separation from Service; provided, |
(h) | 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 (60th) day following the date of Executive’s Separation from Service. |
(i) | Executive shall be entitled to receive continuation of group health insurance benefits for a period of 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. |
(j) | 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. |
(k) | 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 |
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, Executive agrees that Executive 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 Company, any of its affiliates or any of the Company’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 Company, any of its affiliates or any of Company’s or any such affiliates’ business affairs, directors, officers, employees, consultants, agents or representatives, or (c) place the Company, any of its affiliates, or any of the Company’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 the Company and its affiliates 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 |
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 determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other jurisdiction within the geographical scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, such covenants as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants. |
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 February 1, 2014 (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 |
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 Executive’s death. Upon the expiration of the applicable six-month period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to this Section 10.2 shall be paid in a lump sum payment to Executive (or Executive’s estate, in the event of Executive’s death). Any remaining payments due under the Agreement shall be paid as otherwise provided herein. |
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 |
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 |
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 modified only with the written consent of Executive and an authorized representative of the Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever. |
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 “ADEA”); the Equal Pay Act, as amended, 29 U.S.C. Section 206(d); regulations of the Office of Federal Contract Compliance, 41 C.F.R. Section 60, et seq.; the Family and Medical Leave Act, as amended, 29 U.S.C. § 2601 et seq.; the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201 et seq.; the Employee Retirement Income Security Act, as amended, 29 U.S.C. § 1001 et seq.; and the California Fair Employment and Housing Act, California Government Code Section 12940, et seq. |
(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, and upon the advice and with the approval of Executive’s legal counsel (if any), and that Executive voluntarily waives any remaining consideration period. |
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. | Employment; Term. The Company agrees to continue to employ Executive, and Executive agrees to continue 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 |
(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 securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least 50% of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction; |
(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 Vice President, Operations, initially reporting to the Chief Executive Officer, 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 |
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 $305,000 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 forty percent (40%) of Executive’s Base Salary but shall be adjusted annually in the sole and absolute discretion of the Board (or Compensation Committee thereof) (the “Target Bonus”). In addition, for the year ended December 31, 2014 only, Executive will be eligible for a bonus of $50,000 for successful facility move and no missed surgery cases due to inventory shortages. Any bonus amounts payable by the Company pursuant to this Section 4.2 shall be paid to Executive in accordance with the terms and conditions of the applicable cash incentive compensation plan or program. |
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 |
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 in effect, plus all other earned or accrued amounts to which Executive is entitled under any compensation plan or practice of the Company at the time of termination (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 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 (60th) 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 |
(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 additional vesting as follows (i) with respect to any outstanding stock option award that vests in installments, such award shall become vested and, if applicable, exercisable by an additional six months (the “Additional Vesting Period”), and (ii) with respect to any outstanding equity award that has performance-based (milestone) vesting, such award shall become fully vested and, if applicable, exercisable if the performance-based vesting date occurs during the Additional Vesting Period, in each case, as of the date of Executive’s Involuntary Termination. Outstanding equity awards granted to Executive under the Company’s equity incentive plans following the Effective Date shall not be entitled to any additional vesting as a result of Executive’s Involuntary Termination pursuant to this Agreement. |
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: |
(f) | The Company shall pay to Executive the Accrued Obligations as soon as practicable following the date of Executive’s Involuntary Termination; |
(g) | Executive shall be entitled to receive a cash severance payment in an amount equal to the sum of 18 months of Executive’s Base Salary plus Target Bonus, payable in a lump |
(h) | 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 (60th) day following the date of Executive’s Separation from Service. |
(i) | Executive shall be entitled to receive continuation of group health insurance benefits for a period of 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. |
(j) | 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. |
(k) | 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 |
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 |
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, Executive agrees that Executive 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 Company, any of its affiliates or any of the Company’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 Company, any of its affiliates or any of Company’s or any such affiliates’ business affairs, directors, officers, employees, consultants, agents or representatives, or (c) place the Company, any of its affiliates, or any of the Company’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 the Company and its affiliates 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 determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other jurisdiction within the geographical scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, such covenants as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants. |
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 February 1, 2014 (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 |
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 Executive’s death. Upon the expiration of the applicable six-month period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to this Section 10.2 shall be paid in a lump sum payment to Executive (or Executive’s estate, in the event of Executive’s death). Any remaining payments due under the Agreement shall be paid as otherwise provided herein. |
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 |
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, |
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 modified only with the written consent of Executive and an authorized representative of the Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever. |
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 “ADEA”); the Equal Pay Act, as amended, 29 U.S.C. Section 206(d); regulations of the Office of Federal Contract Compliance, 41 C.F.R. Section 60, et seq.; the Family and Medical Leave Act, as amended, 29 U.S.C. § 2601 et seq.; the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201 et seq.; the Employee Retirement Income Security Act, as amended, 29 U.S.C. § 1001 et seq.; and the California Fair Employment and Housing Act, California Government Code Section 12940, et seq. |
(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, and upon the advice and with the approval of Executive’s legal counsel (if any), and that Executive voluntarily waives any remaining consideration period. |
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. | Employment; Term. The Company agrees to continue to employ Executive, and Executive agrees to continue 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 |
(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 securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least 50% of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction; |
(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 Vice President, Global Sales, initially reporting to the President of the Company, 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 |
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 $305,000 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 “Target Bonus”). Any bonus amounts payable by the Company pursuant to this Section 4.2 shall be paid to Executive in accordance with the terms and conditions of the applicable cash incentive compensation plan or program. |
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 in effect, plus all other earned or accrued amounts to which Executive is entitled under any compensation plan or practice of the Company at the time of termination (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 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 (60th) 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 (60th) 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 additional vesting as follows (i) with respect to any outstanding stock option award that vests in installments, such award shall become vested and, if applicable, exercisable by an additional six months (the “Additional Vesting Period”), and (ii) with respect to any outstanding equity award that has performance-based (milestone) vesting, such award shall become fully vested and, if applicable, exercisable if the performance-based vesting date occurs during the Additional Vesting Period, in each case, as of the date of Executive’s Involuntary Termination. Outstanding equity awards granted to Executive under the Company’s equity incentive plans following the Effective Date shall not be entitled to any additional vesting as a result of Executive’s Involuntary Termination pursuant to this Agreement. |
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: |
(f) | The Company shall pay to Executive the Accrued Obligations as soon as practicable following the date of Executive’s Involuntary Termination; |
(g) | Executive shall be entitled to receive a cash severance payment in an amount equal to the sum of 18 months of Executive’s Base Salary plus Target Bonus, payable in a lump sum cash payment on the first business day of the calendar month occurring after the sixtieth (60th) day following the date of Executive’s Separation from Service; provided, |
(h) | 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 (60th) day following the date of Executive’s Separation from Service. |
(i) | Executive shall be entitled to receive continuation of group health insurance benefits for a period of 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. |
(j) | 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. |
(k) | 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 |
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, Executive agrees that Executive 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 Company, any of its affiliates or any of the Company’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 Company, any of its affiliates or any of Company’s or any such affiliates’ business affairs, directors, officers, employees, consultants, agents or representatives, or (c) place the Company, any of its affiliates, or any of the Company’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 the Company and its affiliates 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 |
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 determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other jurisdiction within the geographical scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, such covenants as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants. |
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 February 1, 2014 (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 |
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 Executive’s death. Upon the expiration of the applicable six-month period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to this Section 10.2 shall be paid in a lump sum payment to Executive (or Executive’s estate, in the event of Executive’s death). Any remaining payments due under the Agreement shall be paid as otherwise provided herein. |
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 |
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 |
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 modified only with the written consent of Executive and an authorized representative of the Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever. |
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 “ADEA”); the Equal Pay Act, as amended, 29 U.S.C. Section 206(d); regulations of the Office of Federal Contract Compliance, 41 C.F.R. Section 60, et seq.; the Family and Medical Leave Act, as amended, 29 U.S.C. § 2601 et seq.; the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201 et seq.; the Employee Retirement Income Security Act, as amended, 29 U.S.C. § 1001 et seq.; and the California Fair Employment and Housing Act, California Government Code Section 12940, et seq. |
(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, and upon the advice and with the approval of Executive’s legal counsel (if any), and that Executive voluntarily waives any remaining consideration period. |
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. |
WELLS FARGO BANK, NATIONAL ASSOCIATION By: /s/ James Ligman Title: Vice President | ||
ENDOLOGIX, INC. By: /s/ Robert J. Krist Title: Chief Financial Officer |
ENDOLOGIX, INC. | |
By: /s/ Robert Krist | |
Title: CFO | |
WELLS FARGO BANK, NATIONAL ASSOCIATION | |
By: /s/ James Ligman | |
Title: Vice President |
ENDOLOGIX, INC. | |
By: /s/ Robert Krist | |
Title:CFO | |
WELLS FARGO BANK, NATIONAL ASSOCIATION | |
By: /s/ Stephen Cordani | |
Title:VP/LTM |
4. | The following is hereby added to the Credit Agreement as Section 7.10: "SECTION 7.10. JOINT AND SEVERAL LIABILITY. |
ENDOLOGIX, INC. | |
By: /s/ Shelley Thunen | |
Title: Chief Financial Officer | |
NELLIX, INC. | |
By: /s/ Shelley Thunen | |
Title: Chief Financial Officer | |
WELLS FARGO BANK, NATIONAL ASSOCIATION | |
By: /s/ Jason Wells | |
Title: Vice President |
ENDOLOGIX, INC. | |
By: /s/ Shelley Thunen | |
Title: Chief Financial Officer | |
NELLIX, INC. | |
By: /s/ Shelley Thunen | |
Title: Chief Financial Officer | |
WELLS FARGO BANK, NATIONAL ASSOCIATION | |
By: /s/ Dennis Kim | |
Title: Vice President |
ENDOLOGIX, INC. | |
By: /s/ Shelley Thunen | |
Title: Chief Financial Officer & Secretary | |
NELLIX, INC. | |
By: /s/ Shelley Thunen | |
Title: Chief Financial Officer & Secretary | |
WELLS FARGO BANK, NATIONAL ASSOCIATION | |
By: /s/ Dennis Kim | |
Title: Vice President |
Endologix, Inc. | ||||||||||||||||||
Computation of Ratios of Earnings to Fixed Charges | ||||||||||||||||||
(in thousands) | ||||||||||||||||||
Twelve Months Ended | Fiscal Years Ended December 31, | |||||||||||||||||
31-Dec-13 | 2012 | 2011 | 2010 | 2009 | 2008 | |||||||||||||
EARNINGS: | ||||||||||||||||||
Loss before income taxes | ($16,078 | ) | ($35,243 | ) | ($28,816 | ) | ($4,384 | ) | ($2,413 | ) | ($11,992 | ) | ||||||
Plus: Fixed charges (see below) | $321 | $7 | $32 | $16 | $192 | $106 | ||||||||||||
Total earnings/(loss) to cover fixed charges | ($15,757 | ) | ($35,236 | ) | ($28,784 | ) | ($4,368 | ) | ($2,221 | ) | ($11,886 | ) | ||||||
FIXED CHARGES: | ||||||||||||||||||
Interest expense | $321 | $7 | $32 | $16 | $192 | $106 | ||||||||||||
Interest portion of rental expense | $0 | $0 | $0 | $0 | $0 | $0 | ||||||||||||
Total Fixed charges | $321 | $7 | $32 | $16 | $192 | $106 | ||||||||||||
Preferred stock dividends | $0 | $0 | $0 | $0 | $0 | $0 | ||||||||||||
Combined fixed charges and preferred stock dividends | $321 | $7 | $32 | $16 | $192 | $106 | ||||||||||||
RATIO OF EARNINGS TO FIXED CHARGES | -- | -- | -- | -- | -- | -- | ||||||||||||
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS | -- | -- | -- | -- | -- | -- | ||||||||||||
DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES | ($16,078 | ) | ($35,243 | ) | ($28,816 | ) | ($4,384 | ) | ($2,413 | ) | ($11,992 | ) | ||||||
DEFICIENCY OF EARNINGS TO COVER COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS | ($16,078 | ) | ($35,243 | ) | ($28,816 | ) | ($4,384 | ) | ($2,413 | ) | ($11,992 | ) |
1. | CVD/RMS Acquisition Corp., a Delaware corporation. |
2. | Nellix, Inc., a Delaware corporation. |
3. | ELGX International Holdings GP, a Cayman Islands company. |
4. | Endologix International Holdings B.V., a Dutch corporation. |
5. | Endologix International B.V., a Dutch corporation. |
6. | Endologix New Zealand Co., a New Zealand unlimited liability company. |
7. | Endologix Bermuda L.P., a Bermuda partnership. |
8. | Endologix International Holdings B.V., a Dutch corporation. |
9. | Endologix Italia S.r.l., an Italian corporation. |
10. | Endologix International B.V., a Dutch corporation. |
1. | I have reviewed this Annual Report on Form 10-K 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 |
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. |
March 3, 2014 | By: | /s/ JOHN MCDERMOTT |
John McDermott | ||
Chief Executive Officer and Chairman of the Board |
1. | I have reviewed this Annual Report on Form 10-K 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 |
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. |
March 3, 2014 | By: | /s/ SHELLEY B. THUNEN |
Shelley B. Thunen | ||
Chief Financial Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ JOHN MCDERMOTT |
John McDermott |
Chief Executive Officer and Chairman of the Board |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ SHELLEY B. THUNEN |
Shelley B. Thunen |
Chief Financial Officer |
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