COMMITMENTS |
3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2011 |
Sep. 30, 2011 |
Dec. 31, 2010 |
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| COMMITMENTS |
Retention Agreements
The
Company has entered into retention agreements with each of its
three vice presidents. The agreements provide for the
lump-sum payment of six months’ base salary and benefits to
each such officer following a termination without cause or a
resignation with good reason occurring on or before November 14,
2011. Certain of the agreements provide that if the
executives were employed with the Company as of October 1, 2010,
they would receive a payment of two months’ base salary as a
retention bonus on that date. The retention bonus was paid in
October 2010 and will be deducted from the severance amounts that
may become payable upon a subsequent involuntary
termination. The total remaining amount that may become
payable to the Company’s Named Executive Officers pursuant to
the retention agreements is approximately $86,000 to Christopher
Pazoles.
During
the three months ended March 31, 2011, pursuant to retention
agreements, the Company paid a total of approximately $218,000 in
severance payments to employees terminated during that period,
including $83,000 to Elias Nyberg, the Company’s former vice
president of regulatory, quality and compliance.
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14. COMMITMENTS
Property Lease
On
September 5, 2007, Cellectar entered into a 36-month lease for
office and manufacturing space, commencing September 15,
2007. The lease provides for the option to extend the lease
under its current terms for seven additional two-year terms.
Rent is $8,050 per month for the first year and then escalates by
3% per year for the duration of the term including any lease
extension terms. The lease also requires the payment of
monthly rent of $1,140 for approximately 3,400 square feet of
expansion space. The monthly rent for the expansion space is
fixed until such time as the expansion space is occupied at which
time the rent would increase to the current per square foot rate in
effect under the original lease terms. The Company is
responsible for certain building-related costs such as property
taxes, insurance, and repairs and maintenance. Rent expense
is recognized on a straight-line basis and accordingly the
difference between the recorded rent expense and the actual cash
payments has been recorded as deferred rent as of each balance
sheet dates. Due to the significant value of leasehold
improvements purchased during the initial 3-year lease term and the
economic penalty for not extending the building lease,
straight-line rent expense and the associated deferred rent has
been calculated over 17 years, which represents the full term of
the lease, including all extensions.
The
Company is required to remove certain alterations, additions and
improvements upon termination of the lease that altered a portion
of the rentable space. In no event shall the cost of such
removal, at commercially reasonable rates, paid by the Company
exceed $55,000 (“Capped Amount”) and any amount in
excess of the Capped Amount shall be the obligation of the
landlord. The Company is required to maintain a certificate
of deposit equal to the Capped Amount during the term of the lease,
which amount is shown as restricted cash in the accompanying
balance sheets.
Effective
June 1, 2010, Cellectar entered into a seven-month extension of its
office space and effective December 13, 2010 amended the extension
to increase the lease extension an additional five-months, expiring
May 31, 2011. In connection with the extension, the monthly
rent was adjusted to fifty percent of the rent due immediately
prior to the extension and the Company could terminate the lease at
the end of a month with 10-day written notice. The option was
retained, prior to May 31, 2011, to further extend the lease
through September 14, 2012, in accordance with the original lease
terms provided that it pay the unpaid rent for June 1, 2010 through
March 31, 2011, based on the original terms of the lease, plus
interest at 10% per annum. As of December 31, 2010, $45,000
was accrued in the accompanying balance sheet for the unpaid rent
and accrued interest.
On
April 15, 2011, the Company extended its building lease for the
Madison, WI headquarters through September 14, 2012 according to
the terms in the original lease and paid all unpaid rent and
related accrued interest.
Future
minimum lease payments under this non-cancelable lease are
approximately $196,000 and $124,000 during 2011 and
2012.
As
a result of the Acquisition, the Company assumed the lease
agreement for Novelos’ office space in Newton, MA, which has
a term that is month-to-month and requires monthly rental payments
of $5,300.
Rent
expense was $143,000 and $117,000 for the nine months ended
September 30, 2011 and 2010, respectively, $159,000 and $180,000
for the years ended December 31, 2010 and 2009, respectively and
$945,000 from inception to December 31, 2010.
Capital Lease
Certain
equipment is leased under a capital lease. The lease
agreement requires monthly principal and interest payments of $217
and expires on September 3, 2014. The outstanding obligation
is being amortized using a 7% interest rate based on comparable
borrowing rates.
The
following table provides the estimated future minimum rental
payments under all capital leases together with the present value
of the net minimum lease payments as of December 31,
2010:
The
equipment recorded under capitalized leases is included in fixed
assets as of December 31:
Retention Agreements
Following
the Acquisition, the Company has retention agreements with each of
its four vice presidents, three of such agreements were executed by
Novelos during 2010. The agreements provide for the lump-sum
payment of six months’ base salary and benefits to each such
officer following a termination without cause or a resignation with
good reason occurring on or before November 14, 2011. Certain
of the agreements provide that if the executives were employed with
Novelos as of October 1, 2010, they would receive a payment of two
months’ base salary as a retention bonus on that date. The
retention bonus of $68,000 was paid in October 2010 and will be
deducted from the severance amounts that may become payable upon a
subsequent involuntary termination. The total remaining
amount that may become payable to the Company’s executive
officers pursuant to the retention agreements is approximately
$350,000.
On
May 18, 2011, the Company’s board of directors approved the
entry into a retention agreement with each of 5 individuals that
were employees of Cellectar at the time of the Acquisition.
The agreements provide for the lump-sum payment of six
months’ base salary and benefits following a termination
without cause or a resignation with good reason occurring on or
before November 18, 2011. The agreements expire November 18,
2011.
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10. COMMITMENTS
Property Lease
Effective
September 1, 2010, the Company entered into a six-month extension
to its lease for office space, at a rate of $5,275 per month,
expiring February 28, 2011. Rent expense was $65,000 and $87,000
for the years ended December 31, 2010 and 2009, respectively.
Future minimum lease payments under this non-cancelable lease are
approximately $10,600 during 2011. After February 28,
2011, the lease may be canceled with 30-day notice by either
party.
Royalty Arrangements
The
Company is obligated to a Russian company, ZAO BAM, under a royalty
and technology transfer agreement. Mark Balazovsky, a director of
the Company until November 2006, is the majority shareholder of ZAO
BAM. Pursuant to the royalty and technology transfer agreement
between the Company and ZAO BAM, the Company is required to make
royalty payments of 1.2% of net sales of oxidized glutathione-based
products. The Company is also required to pay ZAO BAM $2 million
for each new oxidized glutathione-based drug within eighteen months
following FDA approval of such drug.
If
a royalty is not being paid to ZAO BAM on net sales of oxidized
glutathione products, then the Company is required to pay ZAO BAM
3% of all license revenues. If license revenues exceed the
Company’s cumulative expenditures including, but not limited
to, preclinical and clinical studies, testing, FDA and other
regulatory agency submission and approval costs, general and
administrative costs, and patent expenses, then the Company would
be required to pay ZAO BAM an additional 9% of the amount by which
license revenues exceed the Company’s cumulative
expenditures.
As
a result of the assignment to Novelos of the exclusive worldwide
intellectual property and marketing rights of oxidized glutathione
(excluding the Russian Territory), Novelos is obligated to the
Oxford Group, Ltd., or its assignees, for future
royalties. Simyon Palmin, a founder of Novelos, a
director until August 12, 2008 and the father of the
Company’s president and chief executive officer, is president
of Oxford Group, Ltd. Mr. Palmin was also an employee of
the Company until September 2008 and performed consulting services
through December 2009. Pursuant to the agreement, as
revised May 26, 2005, Novelos is required to pay Oxford Group,
Ltd., or its assignees, a royalty in the amount of 0.8% of the
Company’s net sales of oxidized glutathione-based
products.
Employment Agreements
The
Company entered into an employment agreement with Harry Palmin
effective January 1, 2006, whereby he agreed to serve as the
Company’s president and chief executive officer for an
initial term of two years. The agreement is
automatically renewed for successive one-year terms unless notice
of termination is provided by either party at least 90 days prior
to the end of such term. The agreement was renewed most
recently for an additional one-year term on January 1, 2011 in
accordance with its terms. The agreement provides for an
initial salary of $225,000 in 2006, participation in standard
benefit programs and an annual cash bonus at the discretion of the
compensation committee. The agreement further provides
that upon resignation for good reason or termination without cause,
both as defined in the agreement, Mr. Palmin will receive his
pro rata share of the average of his annual bonus paid during the
two fiscal years preceding his termination, his base salary and
benefits for 11 months after the date of termination and fifty
percent of his unvested stock options will vest. The
agreement also contains a non-compete provision, which prohibits
Mr. Palmin from competing with the Company for one year after
termination of his employment with the Company.
Retention Agreements
On
May 14, 2010, the Company entered into retention agreements with
each of its four vice-presidents. The agreements provide
for the lump-sum payment of six months’ base salary and
benefits to each such officer following a termination without cause
or a resignation with good reason occurring on or before November
14, 2011. The agreements further provide that if the
executives remain employed with the Company as of October 1, 2010,
they will receive a payment of two months’ base salary as a
retention bonus on that date. The retention bonus, an aggregate of
$140,000, was paid in October 2010 and will be deducted from the
severance amounts that may become payable upon a subsequent
involuntary termination. Elias Nyberg’s employment
was terminated on March 10, 2011, without cause, and he received a
payment of approximately $83,000 pursuant to the executive
retention agreement. The agreements expire November 14,
2011. The total remaining amount that may become payable
to the Company’s Named Executive Officers pursuant to the
retention agreements is approximately $86,000 to Christopher
Pazoles. Concurrently with the execution of the retention
agreements, the employment agreement between the Company and
Christopher Pazoles dated July 15, 2005 was
terminated.
On
May 14, 2010, the Company also entered into retention agreements
with each of its three non-executive employees. The agreements
provide for the lump-sum payment of six months’ base salary
and benefits to each employee following a termination without cause
or a resignation with good reason occurring on or before November
14, 2011. The agreements expire November 14,
2011.
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