Former Arcturus CEO Prevails in Lawsuit, Board Members Who Fired Him are Replaced

Settlement

Shares of Arcturus Therapeutics are up nearly 10 percent this morning after the company announced it reached a settlement with its former chief executive officer and replaced four members of its board of directors with four new ones.

This morning the San Diego-based Arcturus announced the settlement, which should bring the dramatic firing of CEO Joseph E. Payne to a close. Payne, who co-founded Arcturus, was shown the door as CEO of the RNA-focused therapeutics company in February. His ouster was at the hands of four board members who he claimed conspired against him. In a letter filed with the U.S. Securities and Exchange Commission in February just days after he was fired, Payne said the board members -- Stuart Collinson, the executive chairman of the board; Craig Willett; Daniel Geffken, managing director of Danforth Advisors, as well as a former board member of Alcobra Ltd., the company Arcturus merged with last year; and David Shapiro, the chief medical officer of Intercept Pharmaceuticals -- formed a committee that was not legal under the company rules to have him removed from his position.

Payne, who remained a member of the company board of directors, said he was not informed of the formation of any committee and was excluded from any talks about his position. Additionally, he noted that Pad Chivukula, who is both Arcturus’ chief scientific officer and chief operating officer as well as a member of the board of directors, was also excluded from any such meeting.

This morning the four members of the board who Payne alleged conspired against him have resigned from the Arcturus board of directors, the company announced. They have been replaced by Peter Farrell, the CEO and Chairman of ResMed; Andrew Sassine; James Barlow; and Magda Marquet, the co-founder and co-CEO of Alma Life Sciences.

The settlement agreement was approved on May 28. The company said terms of the agreement include mutual releases of all parties, as well as an agreement by Arcturus and Payne to terminate all pending litigation. There was no indication if Payne was restored to his role as CEO – something he was clearly seeking following his February letter.

The fight between Payne and the company has not been a pleasant one. In March the company alleged that Payne was ousted due to “misconduct, poor judgment and bad decisions during his tenure.” A lawsuit filed in March also details Payne’s “self-dealing and inappropriate business conflicts of interest.” In April Arcturus filed another lawsuit against Payne for violations of federal securities laws. The lawsuit against Payne and some of his colleagues, dubbed “The Payne Group,” alleging he was trying to gain control of the company board of directors, as well as disrupt plans the board was undertaking.

But, as of the Monday agreement, all lawsuits have been dropped.

"We are pleased to have come together to reach this very positive outcome that allows Arcturus to move forward, focused on creating substantial value for all shareholders," Payne said in a statement. "We warmly appreciate the continued support from our shareholders, and the encouragement to reach an amicable resolution through this agreement. The company has accomplished a great deal in the last five years, and I'm confident that with the strong leadership of the board and management team, the best days are ahead for Arcturus."

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