Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On November 5, 2021, the Board of Directors of KemPharm appointed Richard W. Pascoe as KemPharm’s Executive Chairman. There is no transaction involving Mr. Pascoe that requires disclosure under Item 404(a) of Regulation S-K. Travis C. Mickle will remain as KemPharm’s President and Chief Executive Officer and a member of the Board of Directors.
From January 2019 to November 2021, Mr. Pascoe served as president and chief executive officer of Histogen Inc., a biologics company. His prior experiences include serving as chief executive officer and director of Apricus Biosciences Inc. from March 2013 to January 2019 and Pernix Sleep, Inc. (formerly known as Somaxon Pharmaceutical, Inc.) from August 2008 to March 2013. He held a series of senior management roles which include chief operating officer at ARIAD Pharmaceuticals, Inc. and senior vice president of Neuroscience Division at King Pharmaceuticals, Inc. In addition to serving as a director of KemPharm since January 2014 and KemPharm’s lead independent director since November 2014, he also serves as a member of the board of directors of Seelos Therapeutics, Inc., and the board of directors of the Johnny Mac Soldiers Fund, a charity for military veterans. Mr. Pascoe received his B.S. degree from the United States Military Academy at West Point.
In connection with his appointment as Executive Chairman, on November 5, 2021, KemPharm entered into an employment agreement, or the Agreement, with Mr. Pascoe effective November 10, 2021, which Agreement provides for an at-will employment with an initial base salary of $400,000 and eligibility to receive discretionary annual cash bonuses equal to up to 50% of the base salary. In connection with the appointment, KemPharm’s board of directors also granted Mr. Pascoe an option to purchase 100,000 shares of common stock under KemPharm’s Amended and Restated 2014 Equity Incentive Plan on November 10, 2021. The option has an exercise price equal to the closing price of the common stock as reported on the Nasdaq Global Select Market on the date of grant. Of the shares underlying the option, 50,000 shares will vest in four equal annual installments beginning on November 10, 2022, subject to Mr. Pascoe’s continuous service through each such vesting date, and the remaining 50,000 shares will vest upon the closing of the earlier of (x) a Change in Control (as defined in the Company’s Amended and Restated 2014 Equity Incentive Plan) or (y) a transformative business development transaction, as determined in the discretion of the board of directors; provided that the definitive agreement for the Change in Control or transformative business development transaction is executed on or prior to November 10, 2022, and Mr. Pascoe is, immediately prior to the closing of the Change in Control or transformative business development transaction, as applicable, still serving as Executive Chairman or as another executive officer.
The Agreement provides that if KemPharm terminates Mr. Pascoe’s employment without “cause” (as defined in the Agreement) or Mr. Pascoe resigns for “good reason” (as defined in the Agreement), Mr. Pascoe will be eligible to receive the following severance benefits: (i) all accrued benefits (as defined in the Agreement), (ii) continued payments of 12 months of his annual base salary; (ii) the 100% vesting of all of his stock options or other equity awards that were outstanding as of the effective date of the termination; and (iii) 12 months of continued health insurance coverage.
If such termination or resignation occurs within 60 days before, upon or within 12 months following a change of control, Mr. Pascoe will be eligible to receive all the severance benefits described in the preceding paragraph, except that (i) the KemPharm shall pay Mr. Pascoe an amount equal to one and one half times the sum of his base salary plus his target annual bonus and (ii) the vesting of all of his outstanding stock options and other equity awards that are subject to time-based vesting requirements shall accelerate in full as of the date of termination.
All severance benefits payable to Mr. Pascoe under the Agreement are subject to his signing, not revoking and complying with a release of claims.
The description of the Agreement included herein is not complete and is subject to and qualified in its entirety by reference to the Agreement, a copy of which is attached as Exhibit 10.1 hereto and is incorporated herein by reference.