Commitments and Contingencies

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies

Note 8—Commitments and Contingencies

Commitments

On January 23, 2012, the Company entered into a lease agreement for office space consisting of approximately 48,000 rentable square feet in Bridgewater, NJ, for the Company’s principal offices and corporate headquarters. The Company relocated all of its operations to the new facility in September 2012. The term of the lease is 123 months, and the Company has rights to extend the term for two additional five-year terms at fair market value subject to specified terms and conditions. The aggregate minimum lease commitment over the 123-month term of the new lease is approximately $15.2 million. The Company has arranged for a bank to provide the landlord a letter of credit of $1.6 million, to secure the Company’s obligations under the lease.

The lease agreement includes fixed escalations of minimum annual lease payments and accordingly, the Company records rent expense on a straight-line basis over the lease-term. The Company’s previous corporate headquarters were located in East Brunswick, New Jersey, where it leased approximately 53,000 square feet of office space. The lease term expired on March 31, 2013 and in April 2013, the Company received cash proceeds of $0.7 million for its security deposit relating to this property.

The Company’s future annual minimum lease payments for each of the following calendar years are as follows:

March 31, 2013	(In thousands)
Remainder of 2013		1,053
2014		1,413
2015		1,432
2016		1,456
2017		1,480
Thereafter		7,229
Total minimum payments	$	14,063

Rent expense charged against operations was approximately $0.9 million and $0.7 million for three-month periods ended March 31, 2013 and 2012, respectively.

Contingencies

On April 30, 2012, a creditor derivative action complaint was filed by one of the holders of our 2018 Convertible Notes, Tang Capital Partners, LP, against the Company and certain of its current directors and three former directors in the Court of Chancery of the State of Delaware. On May 21, 2012, Tang Capital amended its complaint to add new claims against the Company and its current and former directors and also to add additional note-holders as plaintiffs. On June 29, 2012, the plaintiffs amended their complaint for a second time to add claims against the Company relating to an alleged event of default under the 2018 Indenture. As with the April 30 and May 21 complaints, the June 29 complaint also alleges, among other things, that the Company is insolvent, and seeks the appointment of a receiver. The Company filed a motion to dismiss the receiver claim in the June 29 complaint on the grounds that the note-holders did not have standing to bring that claim and a motion for summary judgment that an event of default has not occurred under the Company’s convertible notes. On July 23, 2012, the Delaware Court of Chancery issued a memorandum opinion granting both of the Company’s motions. Specifically, the Court determined that the note-holders do not have standing to bring an action to appoint a receiver for the Company and that an event of default has not occurred under the Company’s convertible notes. The Company has moved to dismiss the remaining claims in the June 29 complaint, but that motion has not yet been decided. On June 8, 2012, the Company filed a cross-complaint against Tang Capital, which was subsequently amended on August 31, 2012. The amended complaint alleges a claim for breach of a non-disclosure agreement between the Company and Tang and for tortious interference with the Company’s business and contractual relations. The Company’s amended complaint remains outstanding.

From time to time, the Company is subject to other legal proceedings and claims in the ordinary course of business. Such claims, even if without merit, could result in significant expenditure of the Company’s financial and managerial resources. The Company is not aware of any legal proceedings or claims that it believes will, individually or in the aggregate, materially harm its business, results of operations, financial condition, liquidity or cash flows.