Item
5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements
of Certain Officers.
On
June 26, 2018, the board of directors of Ritter Pharmaceuticals, Inc. (the “Company”) appointed Andrew J. Ritter as
the Company’s new Chief Executive Officer, effective June 27, 2018, to succeed Michael D. Step, who resigned effective June
27, 2018, as part of a planned transition. Mr. Step will remain on the Company’s board of directors and serve as a consultant
for the Company.
Andrew
J. Ritter, age 35, served as Co-Founder, President and Chief Executive Officer of the Company from its inception in 2004 until
relinquishing the role of Chief Executive Officer to Mr. Step in October 2014. Mr. Ritter has been a member of the board
of directors of the Company since its inception in 2004. As President, he developed the scientific foundation for
the Company and recruited a Medical Board comprised of lactose intolerance and gastrointestinal disease experts. He played a major
role in the Company’s initial public offering (the “IPO”) in 2015 and has led the team in additional, successful
financing rounds both before and subsequent to the IPO. Mr. Ritter received a Master of Business Administration from the Wharton
School of Business. Mr. Ritter is the son of Ira E. Ritter, Executive Chairman, Chief Strategic Officer and Director of the Company.
In
connection with his appointment to the Chief Executive Officer position, the board of directors approved certain changes to Mr.
Ritter’s compensation arrangement with the Company. Effective June 27, 2018, Mr. Ritter’s annual base salary
was increased to $450,000. He will also be eligible to receive a target annual bonus equal to 50% of his base salary, as then
in effect, as determined by the board of directors. The Company intends to enter into an amended and restated offer letter with
Mr. Ritter setting forth these changes, and will file such amended and restated offer letter as an exhibit to the Company’s
quarterly report on Form 10-Q for the quarter ending June 30, 2018.
In
connection with his promotion, Mr. Ritter was also granted a stock option to purchase 150,000 shares of the Company’s common
stock at an exercise price of $2.73 per share, the closing price of the Company’s stock on the date of grant (the “CEO
Option”). The CEO Option will vest and be exercisable in 48 equal monthly installments beginning on July 26, 2018, subject
to his continued employment with the Company, and will be exercisable for a ten year term commencing on the date of grant.
In
connection with his resignation as Chief Executive Officer, on June 30, 2018 (the “Separation Agreement Effective
Date”), the Company and Mr. Step entered into an Agreement and General Release (the “Separation Agreement”)
and a Consulting Agreement (the “Consulting Agreement”).
Under
the terms of the Separation Agreement, the Company will pay Mr. Step $300,000 within 60 days of the Separation Agreement Effective
Date, in exchange for his execution of a general release against the Company. The Separation Agreement also provides for COBRA
continuation coverage under the Company’s medical insurance plan for 12 months, and clarifies that all stock options held
by Mr. Step will continue to vest in accordance with their terms for so long as Mr. Step continues to serve as a consultant to,
director of and/or service provider to the Company.
Pursuant
to the terms of the Consulting Agreement, Mr. Step has agreed to provide consulting services to the Company from time to time,
as requested by the Company, for an initial term of 12 months, which may be extended upon the mutual agreement of the parties
in writing. Under the terms of the Consulting Agreement, Mr. Step will be paid $11,250 per month for his services and will be
reimbursed for his actual expenses. Mr. Step may terminate the Consulting Agreement for any reason by giving the Company at least
14 days’ prior written notice. The Company may terminate the Consulting Agreement for Cause (as defined in the Consulting
Agreement).
The
Separation Agreement and Consulting Agreement each contain confidentiality and non-disparagement restrictions which apply indefinitely.
The Consulting Agreement also contains non-solicitation restrictions that apply during the term of the Consulting Agreement and
for one year after its termination.
The
foregoing description of the Separation Agreement and the Consulting Agreement does not purport to be complete and is qualified
in its entirety by reference to the full text of the Separation Agreement and the Consulting Agreement, which are filed as exhibits
to this Current Report on Form 8-K (this “Report”) as Exhibits 10.1 and 10.2, respectively, and are incorporated
herein by reference.