|
RESTRUCTURING COSTS AND OTHER CORPORATE CHANGES
|
12 Months Ended | |
|---|---|---|
|
Dec. 31, 2013
|
||
| Restructuring and Related Activities [Abstract] | ||
| Restructuring and Related Activities Disclosure [Text Block] |
16. RESTRUCTURING COSTS AND OTHER CORPORATE CHANGES
Management Restructuring and Exit Costs During 2013 the Company had several changes to its board composition and our executive management, as summarized below.
Changes in Management and Relocation of Executive Offices
On October 4, 2013, the employment of our President and Chief Executive Officer, Harry Palmin was terminated without cause in accordance with his employment agreement, as amended, and Mr. Palmin resigned as a director of the Company. Dr. Simon Pedder was appointed as Acting Chief Executive Officer to succeed Mr. Palmin, and elected as a director. In connection with Mr. Palmin’s termination and pursuant to his employment agreement as amended, he received a payment of severance and cash in lieu of notice totaling $175,000 and continuation of health and dental benefits for six months following the termination date. In addition, he received $75,000 upon the completion of specified milestones. All of Mr. Palmin’s unvested options were vested on his termination date and the exercise period for his outstanding options was extended for an additional 18 months. In connection with this modification of options, the Company recorded stock-based compensation expense of $665,327.
On November 8, 2013, the board of directors approved the relocation of the Company’s principal executive offices from Newton, Massachusetts to its corporate headquarters in Madison, Wisconsin. In connection with the relocation, the employment of Christopher Pazoles, Vice President of Research and Development, was terminated effective November 30, 2013 and the responsibilities of Joanne Protano, Vice President of Finance, Chief Financial Officer and Treasurer, will be transitioned to Madison, Wisconsin during the first half of 2014. In connection with Dr. Pazoles’ termination, he received payments totaling $132,600 and his outstanding stock options were modified to accelerate the vesting by an additional six months and extend the exercise period until 18 months following termination. In connection with this modification of options, the Company recorded stock-based compensation expense of $40,191.
The Company has entered into a retention agreement with Ms. Protano that provides for the payment of a retention bonus equal to thirty percent of her salary if she remained employed with the Company as of December 31, 2013. This payment of $67,427 was made in January 2014 and was recorded as expense in the twelve months ended December 31, 2013. The agreement also provides for a lump-sum payment of $112,379, equal to six months base salary, and continuation of benefits for six months following a termination without cause or resignation with good reason on or before June 30, 2014. Upon such a termination, all unvested options held by her shall be credited with an additional six months vesting and the vested options held by her shall be exercisable for eighteen months following termination. It is anticipated that Ms. Protano’s employment will be terminated prior to June 30, 2014 following the transition of her role to Madison, WI.
The costs totaling $1,097,000 associated with these actions are not considered part of ongoing operations and therefore have been reflected separately as restructuring costs on the accompanying consolidated statement of operations for the year ended December 31, 2013. This amount consists of approximately $386,000 of severance and retention expense, approximately $706,000 of stock-based compensation expense related to the modification of options, and approximately $5,000 of other administrative expense. The Company estimates that approximately an additional $200,000 in cash payments will be incurred for exit costs, consisting principally of severance in the first half of 2014. In addition, the Company will also record incremental stock-based compensation associated with the modification of options upon the termination of employees. The amount of such incremental stock-based compensation can’t be estimated at this time.
Restructuring of Board of Directors
On November 7, 2013, Michael F. Tweedle, resigned from the Company’s board of directors and from his committee appointments, and Paul L. Berns was appointed as a director to fill the resulting vacancy. Effective November 8, 2013, Thomas Rockwell Mackie, James S. Manuso, John E. Niederhuber and Howard M. Schneider resigned from the Company’s board of directors and from their respective committee appointments. Thereafter, the board set the number of directors constituting the whole board at five. In connection with their resignations, the options held by the departing directors were modified such that all unvested shares became fully vested and the exercise period for all outstanding options was extended to three years from the date of resignation. In connection with this modification of options, the Company recorded stock-based compensation of approximately $274,000 in the year ended December 31, 2013 (see Note 9). This amount is included as a component of general and administrative costs on the accompanying statement of operations for the year ended December 31, 2013.
|