16. Commitments

Lease Commitments

The Company has three primary operating locations which are occupied under long‑term leasing arrangements. In October 2010, Kadmon Corporation, LLC entered into a corporate headquarters and laboratory lease in New York, New York, expiring in February 2021 and opened a secured letter of credit with a third party financial institution in lieu of a security deposit for $2.0 million. As of December 31, 2016, there were four amendments to this lease agreement, which altered office and laboratory capacity and extended the lease term through October 2024. On August 11, 2017, the Company entered into the fifth and sixth amendments for the corporate headquarters and laboratory lease in New York, New York. Pursuant to the terms of the amendments, the Company surrendered a portion of its laboratory space, made a surrender payment of approximately $1.1 million which equated to the Company’s deferred rent liability for the surrendered space, extended the term of the lease for an additional year through October 28, 2025, and received approximately $1.1 million in rent abatement beginning on September 1, 2017, which will be recognized straight-line over the remaining term of the lease. All other material terms of the lease remain intact. Rental expense for this lease amounted to $5.7 million, $6.4 million and $6.2 million for each of the years ended December 31, 2017, 2016 and 2015. During future years, the base rent amount associated with these premises will increase 3.5% annually. The Company has the ability to extend portions of the lease on the same terms and conditions as the current lease, except that the base rent will be adjusted to the fair market rental rate for the building based on the rental rate for comparable space in the building at the time of extension.

The Company is party to an operating lease in Warrendale, Pennsylvania (the Company’s specialty-focused commercial operation), which expires on September 30, 2019, with a five‑year renewal option. Rental payments under the renewal period will be at market rates determined from the average rentals of similar tenants in the same industrial park. Rental expense for this lease was $0.6 million for each of the years ended December 31, 2017, 2016 and 2015, respectively.

In August 2015, the Company entered into an office lease agreement in Cambridge, Massachusetts (the Company’s new clinical office) effective January 2016 and expiring in April 2023. The Company opened a secured letter of credit with a third party financial institution in lieu of a security deposit for $91,000. Rental expense for this lease was $0.3 million in each of the years ended December 31, 2017 and 2016. No rental expense was incurred for this lease during the year ended December 31, 2015.

Future minimum rental payments under noncancellable leases are as follows (in thousands) at December 31, 2017:



Year ending December 31,	Amount
2018	$	4,579
2019		4,517
2020		4,049
2021		4,148
2022		4,286
Thereafter		11,884
Total	$	33,463

Licensing Commitments

The Company has entered into several license agreements for products currently under development (Note 12). The Company may be obligated in future periods to make additional payments, which would become due and payable only upon the achievement of certain research and development, regulatory, and approval milestones. The specific timing of such milestones cannot be predicted and depends upon future discretionary clinical developments as well as regulatory agency actions which cannot be predicted with certainty (including action which may never occur). These additional contingent milestone payments aggregate to $400.4 million at December 31, 2017. Any payments made prior to FDA approval will be expensed as research and development. Payments made after FDA approval will be capitalized.

Further, under the terms of certain licensing agreements, the Company may be obligated to pay commercial milestones contingent upon the realization of sales revenues and sublicense revenues. Due to the long‑range nature of such commercial milestones, they are neither probable at this time nor predictable, and consequently are not included in the additional contingent milestone payment amount.

Employment Agreements

Two former employees of the Company received $1.25 million each upon the consummation of the IPO, which the Company settled through the issuance of an aggregate of 208,334 shares of its common stock on August 1, 2016. The amount of compensation due to another former employee as a result of this event is contingent upon the valuation of the Company at the time of the transaction, which was not achieved upon consummation of the IPO on August 1, 2016. Certain employment agreements also provide for routine severance compensation. The Company has recorded a liability for such agreements of $1.2 million and $2.9 million at December 31, 2017 and 2016, respectively, which is primarily attributable to the severance expense recognized in connection with the resignation of Dr. Samuel D. Waksal (Note 14).