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Item 5.02.
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Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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Appointment of President and Chief Executive Officer
On June 1, 2016, we entered into an
employment agreement with Maria Fardis, Ph.D., under which Dr. Fardis will serve as our President and Chief Executive
Officer. Dr. Fardis succeeds Elma Hawkins, Ph.D., who previously served as President and Chief Executive Officer of our
company as discussed further below.
In her employment agreement, we have agreed
to pay Dr. Fardis an annual base salary of $500,000 and a signing bonus of $150,000. In addition, on June 1, 2016, we granted to
Dr. Fardis under our 2014 Equity Incentive Plan stock options to purchase an aggregate of 500,000 shares of our common stock. On
June 3, 2016, we also entered into a restricted stock unit agreement with Dr. Fardis pursuant to which we granted her 550,000 non-transferrable
restricted stock units as an inducement of employment pursuant to the exception to The NASDAQ Global Market rules that generally
require stockholder approval of equity incentive plans. Dr. Fardis’s stock options have an exercise price per share of $5.87,
the fair market value of our common stock at the close of trading on June 1, 2016, and will vest in installments as follows: (i)
137,500 restricted stock units will vest upon the first anniversary of the effective date of her employment agreement; (ii) 275,000
restricted stock units will vest upon the satisfaction of certain clinical trial milestones; and (iii) 137,500 restricted stock
units will vest in equal monthly installments over the 36-month period following the first anniversary of the effective date of
her employment, in each case, provided that Dr. Fardis has been continuously employed with us as of such vesting dates. Dr. Fardis
will also be eligible to participate in our annual incentive compensation program as approved by our board of directors, with target
potential annual incentive compensation of 50% of her base annual salary.
If we terminate Dr. Fardis’s employment
agreement without “cause,” (as defined in the employment agreement) during the first six months of her employment,
Dr. Fardis will be entitled to receive her base salary through the date of termination, and any incentive compensation that was
earned to the date of termination, plus two months’ base salary for each full month between the effective date and the date
of termination of her employment. If we terminate Dr. Fardis’ employment without “cause,” or she terminates her
employment for “good reason” after the initial six months of her employment, in addition to aforementioned payments,
there will be a twelve-month acceleration of her unvested stock options and unvested time-based restricted stock units, and she
will have twelve months from the date of termination within which to exercise her vested options. In that event, Dr. Fardis also
will be entitled to receive a severance payment equal to twelve months’ base annual salary and a full year’s incentive
compensation.
In the event of a “change of control”
(as defined in the employment agreement) of the company, all of Dr. Fardis’s unvested time-based stock options and all unvested
restricted stock units will vest immediately, whether or not her employment is terminated. If, either before or after a change
in control, Dr. Fardis’s employment is terminated by us for any reason other than “cause” or she were to terminate
her employment for “good reason,” Dr. Fardis will be entitled to receive all of the cash payments she would be entitled
to receive in the event we were to terminate her employment without “cause.”
Dr. Fardis served as the Chief Operating
Officer of Acerta Pharma, LLC, a clinical-stage biopharmaceutical company, from January 2015 to March 2016. From 2011 to 2014,
she worked at Pharmacyclics, Inc., which she joined as Senior Director of Global Project Management, and was promoted to
Vice
President, Alliance and Global Project Management in December 2011, was appointed Executive Vice President, Alliances and Operations
in September 2012 and was appointed Chief of Oncology Operations and Alliances in March 2013. Prior to joining the Pharmacyclics,
from August 2001 to April 2012, Dr. Fardis held increasingly senior positions in Medicinal Chemistry and the project and portfolio
management department at Gilead Sciences, Inc., most recently serving as Associate Director, Project and Portfolio Management.
Dr. Fardis received her Ph.D. in Organic Chemistry from University of California Berkeley and her B.S. from the University
of Illinois, Urbana-Champaign. Dr. Fardis holds an MBA from Golden Gate University.
Dr. Fardis’ employment agreement will
be filed by either as an amendment to this Form 8-K or in our next periodic filing.
Separation Agreement
In connection with Dr. Hawkins’ amicable
separation from the company, we have agreed to pay Dr. Hawkins $188,462 representing all salary, accrued and unused and unpaid
vacation, a prorated portion of her annual incentive compensation through June 5, 2016 and, as required by her employment agreement,
$500,000 as a severance payment. Dr. Hawkins will, however, continue to provide advisory services to our board of directors for
at least three months. Dr. Hawkins will be paid $10,000 per month for her advisory services.
In connection with Dr. Hawkins’ separation,
we and Dr. Hawkins have agreed to cancel option grants made to her in 2014 to purchase 225,000 shares of our common stock at exercise
prices of $5.60 and $6.70, respectively, per share, and to grant her two-year options to purchase 125,000 shares of our common
stock at an exercise price of $6.70 and an option to purchase 91,061 shares of the Company’s stock at an exercise price of
$5.87 a share. Dr. Hawkins also agreed to cancel options to purchase 8,939 shares in exchange for $38,000.
A
copy of Dr. Hawkins’ severance agreement and board advisers agreement are attached hereto as Exhibits 10.3 and 10.4 and are
incorporated herein by reference. The foregoing description of Dr. Hawkins’ severance agreement is qualified in its entirety
by reference to the full text of Dr. Hawkins’ severance and adviser agreements attached as exhibits hereto.
Appointment of Directors
Effective June 1, 2016, Dr. Fardis also
was appointed to our board of directors in accordance with her employment agreement to fill the vacancy created by Dr. Hawkins’
departure.
On June 1, 2016, we increased the authorized
number of our directors from five to seven and agreed to appoint Mr. Rothbaum to serve as the Interim Chairman of the board of
directors as of the closing under the Purchase Agreement. We also agreed to appoint Dr. Dukes to serve as a director beginning
as of a specified future date. Messrs. Rothbaum and Dukes will be appointed pursuant to the understandings set forth in the Purchase
Agreement described in Item 1.01, above, which description is incorporated herein by reference.
Mr. Rothbaum is currently the President
of Quogue Capital LLC, a life sciences investment fund he founded in 2001. Beginning in 2012, Mr. Rothbaum served as the co-founder
and largest investor of Acerta Pharma, B.V., a Dutch biotech focused on developing selective, covalent small molecules to treat
cancer and inflammation. Acerta Pharma was sold to Astra Zeneca in February 2016. From February 2013 until its sale in February
2016, Mr. Rothbaum served as the executive chairman of Acerta Pharma. From 1993 until 2001, Mr. Rothbaum led the biotechnology
practice at the strategic consulting firm The Carson Group. Mr. Rothbaum graduated Phi Beta Kappa from Binghamton University in
1990 with a dual major in political science and psychology and received his Master’s degree in international economics from
The George Washington University.
Our board of directors believes that Mr.
Rothbaum is highly qualified to serve as a director on the basis of his business background and education, his investment experience
as the manager of an investment fund focused on the life sciences industry, and his experience serving in a leadership capacity
with other biotechnology companies.
Dr. Dukes previously served as Senior Vice-President
and Head of Business Development and Licensing for Merck Research Laboratories through May 2016. He joined Merck in August 2013.
Prior to joining Merck, Dr. Dukes was Vice-President of External Research & Development at Amgen, from August 2010 to August
2013. From 2007 to 2010, Dr. Dukes was the President and Chief Executive Officer, and a member of the board of directors, of Essentialis
Therapeutics, a clinical stage biotechnology company focused on the development of breakthrough medicines for the treatment of
rare metabolic diseases. From 2000 to 2007, Dr. Dukes was Vice President of Scientific and Tecnology Licensing at GlaxoSmithKline,
and prior to that, from 1990 to 1999, he held various positions at Glaxo Wellcome, including Head of Exploratory Development for
Metabolic and Urogenital Diseases and Head of Ion Channel Drug Discovery Group. Dr. Dukes holds Master of Jurisprudence and Doctorate
of Philosophy degrees from the University of Oxford, a Master of Science degree in Cardiovascular Studies from the University of
Leeds and a Bachelor of Science degree in Pharmacology from the University of Bath.
Because of his extensive experience in the
pharmaceutical industry, including in senior management roles, Dr. Dukes is exceptionally well-qualified to serve on our board
of directors.
Retention Plan
On June 1, 2016, our board of directors
authorized and approved a form of retention bonus agreement to be entered into between us and selected officers and employees.
The retention bonus agreement will provide for the payment of cash bonuses in two installments if the officer or employee remains
employed with us through December 31, 2016 and June 30, 2017, respectively. Further, a participating officer or employee whose
employment is terminated by us without cause prior to the specified retention dates will be entitled to such retention bonus as
if he or she remained employed with us through such dates. Additionally, in the event of a “change in control” (as
defined in the bonus agreement) of the company, the officer or employee will be entitled to receive his or her full retention bonuses
less any portion previously paid. The following indicates our named executive officers who will participate in the retention bonus
arrangement:
Named Executive Officer
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Bonus Payable as of
December 31, 2016
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Bonus Payable as of
June 30, 2017
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Molly Henderson
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$100,000
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$100,000
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Michael Lotze
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$100,000
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$100,000
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Steven Fischkoff
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$100,000
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$100,000
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The foregoing description of the form of
retention bonus agreement is a summary and is qualified in its entirety by reference to the full text of the form of retention
bonus agreement, a copy of which is filed as Exhibit 10.5 hereto and is incorporated herein by reference.
Amendment to Chief Financial Officer’s Employment
Agreement
On June 1, 2016, we agreed to amend the
employment agreement of Molly Henderson, our Chief Financial Officer, to (i) increase her annual base salary to $350,000, (ii)
grant her an additional stock option for the purchase of up to 150,000 shares of common stock, and (iii) increase her target potential
annual incentive compensation to 40% of her base annual salary. The stock options have an exercise price of $5.87 per share, the
fair market value of the common stock on June 1, 2016. Provided that Ms. Henderson is still employed with us on the following dates,
the foregoing stock options will vest as follows: Options for the purchase of 50,000 shares shall vest on June 1, 2017; and thereafter
the remaining shares shall vest in equal quarterly installments over the next two years.
The foregoing amendment to Ms. Henderson’s
employment agreement will be filed by either as an amendment to this Form 8-K or in our next periodic filing.