Item
5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
Resignations
In
accordance with the Merger Agreement, and effective upon the closing of the Merger, Andrew Ritter, Noah Doyle, Matthew Foehr,
Paul Maier and William Merino resigned from the Company’s board of directors. In addition, in accordance with the Merger
Agreement, and effective upon the closing of the Merger, all of the Company’s officers (Andrew Ritter, Ira Ritter and John
Beck) resigned from their officer and employee positions. These director and officer resignations were not the result of any disagreements
with the Company relating to the Company’s operations, policies or practices.
Directors
The
Merger Agreement provided that upon the closing of the Merger, the board of directors of the Company would consist of seven directors
with six directors to be designated by Qualigen, and the seventh director to be designated by the pre-Merger Company board of
directors, subject to the reasonable approval and consent of the members of the post-Merger Company board of directors who were
designated by Qualigen. Ira E. Ritter was designated by the pre-merger Company board of directors, and was approved and consented
to by the members of the post-merger Company board of directors who were designated by Qualigen. Qualigen designated for the Ritter
Board three incumbent directors of Qualigen and Matthew E. Korenberg, and intends to designate two additional directors (besides
Ira E. Ritter), at least one of whom will be, as contemplated by California law applicable to California public companies, a qualified
female director.
Thus,
in accordance with the Merger Agreement, the Company’s board of directors was reconstituted to include the following directors
as of May 22, 2020:
|
Michael
S. Poirier
|
|
64
|
|
Chairman
|
|
Kurt
H. Kruger
|
|
64
|
|
Director
|
|
Richard
A. David, MD FACS
|
|
60
|
|
Director
|
|
Matthew
E. Korenberg
|
|
45
|
|
Director
|
|
Ira
E. Ritter
|
|
71
|
|
Director
|
The
following information is provided with respect to these persons:
Michael
S. Poirier | Chairman, President & CEO. Michael Poirier founded Qualigen in 1996 and is its Chairman, President and Chief
Executive Officer. Before founding Qualigen, Mr. Poirier had relevant operating, marketing and sales positions with Ashirus Technologies,
Inc., EnSys, Inc., Sanofi Pasteur and Abbott Laboratories, Inc. Before working at Abbott, Mr. Poirier served as an officer in
the United States Navy, assigned to the US Atlantic Fleet. Mr. Poirier holds a B.A. from Providence College and attended the University
of Zürich, Switzerland, School of Law.
Kurt H. Kruger. Mr. Kruger has enjoyed
a 30-year career in medical technology. His deep involvement in the field has ranged from product design and development
as a biomedical engineer to raising capital for, and following, publicly traded medical product companies as an equities research
analyst. As a marketing manager at Guidant, now a part of Boston Scientific, he developed the launch plans for the first-ever
implantable defibrillator. As a securities analyst he showed perspicuity leading Hambrecht & Quist in providing venture funds
for, and then taking public, Ventritex, which was later acquired by St. Jude Medical. After Hambrecht & Quist, Mr. Kruger
worked as an analyst for Montgomery Securities and Bank of America. Across 20 years of research work, Mr. Kruger has
overseen the IPOs of over 30 medical products companies, including leadership of the Life Sciences banking effort for WR Hambrecht
& Co. Mr. Kruger received a Sc.B. degree in Biomedical Engineering from Brown University; a Master’s degree in Bioengineering
from the University of Michigan; and a business degree (S.M.) from the Sloan School at the Massachusetts Institute of Technology
(MIT). He also completed the premedical post-baccalaureate program at Columbia University.
Richard
A. David, MD FACS. Dr. Richard David serves as Chief Medical Officer for Skyline Urology, the largest Urology group in Los
Angeles. He also serves as medical director for Skyline’s Advanced Prostate Cancer Center of Excellence. In addition, Dr.
David serves as Associate Clinical Professor of Urology for the David Geffen School of Medicine at UCLA. Dr. David obtained his
undergraduate education at Stanford University and his medical degree at Thomas Jefferson University in Philadelphia. He also
holds a Master’s Degree in Medical Management (MMM) from the Marshall School of Business at the University of Southern California.
He trained in general surgery and completed his urology residency at UCLA Medical Center in Los Angeles. Dr. David is a fellow
of the American College of Surgeons.
Matthew
E. Korenberg. Mr. Korenberg has served as Executive Vice President, Finance and Chief Financial Officer of Ligand Pharmaceuticals
Incorporated, a biopharmaceutical company focused on developing or acquiring technologies that help pharmaceutical companies discover
and develop medicines, since January 2018 and before that as Vice President, Finance and Chief Financial Officer of Ligand Pharmaceuticals
Incorporated since August 2015. Before joining Ligand, commencing in September 2013, Mr. Korenberg was the founder, Chief Executive
Officer and a director of NeuroCircuit Therapeutics, a company focused on developing drugs to treat genetic disorders of the brain
with an initial focus on Down syndrome. Before founding NeuroCircuit Therapeutics, Mr. Korenberg was a Managing Director and member
of the healthcare investment banking team at Goldman Sachs from July 1999 through August 2013. During his 14 year tenure at Goldman
Sachs, Mr. Korenberg was focused on advising and financing companies in the biotechnology and pharmaceutical sectors and was based
in New York, London and San Francisco. Before Goldman Sachs, Mr. Korenberg was a healthcare investment banker at Dillon, Read
& Co. Inc. where he spent two years working with healthcare companies in the biotechnology and pharmaceutical sectors and
industrial companies. Mr. Korenberg holds a B.B.A. in Finance and Accounting from The University of Michigan.
Ira
E. Ritter. Mr. Ritter served as Co-Founder, Chief Strategic Officer and Executive Chairman of Ritter’s predecessor from
its inception in 2004 through the formation of the Company in 2008 and he has served in those positions with the Company from
2008 until the Merger. Mr. Ritter has extensive experience creating and building diverse business enterprises and has provided
corporate management, strategic planning and financial consulting for a wide range of market segments including; health product
related national distribution and private label production, television and publishing. He assisted taking the Company public on
Nasdaq and Martin Lawrence Art Galleries public on the New York Stock Exchange. Since 2010, Mr. Ritter has also acted as a managing
partner of Stonehenge Partners, LLC. Mr. Ritter has a long history of public service that includes appointments by three Governors
to several State of California Commissions including eight years as Commissioner on the California Prison Industry Authority.
He has guest lectured at University of Southern California Marshall School of Business and Pepperdine University Graziadio School
of Business, where he also serves as an advisory board member to Pepperdine’s Graduate School of Education and Psychology,
Social Entrepreneurship and Change Program. He previously served on the boards of directors for Vitavis Laboratories and SCWorx.
Independence
of the Board of Directors
Under
the Nasdaq listing standards, a majority of the members of the Company’s board of directors must qualify as “independent,”
as affirmatively determined by the board of directors. The board of directors has affirmatively determined that each of the five
persons serving on the Company’s board of directors as of immediately after the Merger, except for Mr. Poirier and Mr. Ritter,
is independent within the meaning of the applicable Nasdaq listing standards.
Each
of the Company’s directors is a party to an indemnification agreement with the Company or with Qualigen.
Committees
of the Company’s Board of Directors
The
Company’s board of directors has established an audit committee, a compensation committee and a nominating and corporate
governance committee. The composition and responsibilities of each committee are described below. Members will serve on these
committees until their resignations or until otherwise determined by the board of directors. The audit committee, compensation
committee and nominating and corporate governance committee each operate under a written charter adopted by the board of directors,
all of which are available on the Company’s website.
Audit
Committee
The
Company’s audit committee is comprised of three members. Mr. Kruger is the chairperson of the audit committee, and Mr. David
and Mr. Korenberg are the other members of the committee. Each member of the audit committee meets the requirements for independence
under current Nasdaq listing standards and applicable SEC rules and regulations and is financially literate as required by Nasdaq
listing standards. In addition, the board of directors has determined that Mr. Kruger is an “audit committee financial expert”
as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act. This designation does not impose any
duties, obligations or liabilities that are greater than those generally imposed on members of the audit committee and the board
of directors. Other members of the audit committee may also possess the qualifications of an audit committee financial expert.
Among
other functions, the Company’s audit committee will evaluate the performance of and assesses the qualifications of the independent
registered public accounting firm; engage the independent registered public accounting firm; determine whether to retain or terminate
the existing independent registered public accounting firm or to appoint and engage a new independent registered public accounting
firm; confer with senior management and the independent registered public accounting firm regarding the adequacy and effectiveness
of internal control over financial reporting; establish procedures, as required under applicable law, for the receipt, retention
and treatment of complaints received regarding accounting, internal accounting controls or auditing matters and the confidential
and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; review and approve the
retention of the independent registered public accounting firm to perform any proposed permissible non-audit services; monitor
the rotation of partners of the independent registered public accounting firm on the audit engagement team as required by law;
review annually the audit committee’s written charter and the committee’s performance; review the financial statements
to be included in the Annual Report on Form 10-K; and discuss with management and the independent registered public accounting
firm the results of the annual audit and the results in the quarterly financial statements. The audit committee will have the
authority to retain special legal, accounting or other advisors or consultants as it deems necessary or appropriate to carry out
its duties.
Compensation
Committee
The
Company’s compensation committee is comprised of three members. Mr. David is the chairperson of the compensation committee,
and Mr. Kruger and Mr. Korenberg are the other members of the committee. The composition of the compensation committee meets the
requirements for independence under current Nasdaq listing standards and applicable SEC rules and regulations.
The
Company’s compensation committee will oversee the overall compensation strategy and related policies, plans and programs.
Among other functions, the compensation committee will determine and approve the compensation and other terms of employment of
the Chief Executive Officer; determine and approve the compensation and other terms of employment of the other executive officers,
as appropriate; review and recommend to the board of directors the type and amount of compensation to be paid to board members;
administer the Ritter 2020 Plan; and review and establish appropriate insurance coverage for the directors and executive officers.
The compensation committee will have the authority to retain special legal, accounting or other advisors or consultants as it
deems necessary or appropriate to carry out its duties.
Nominating
and Corporate Governance Committee
The
Company’s nominating and corporate governance committee is comprised of two members. Mr. David is the chairperson of the
nominating and corporate governance committee, and Mr. Kruger is the other member of the committee. The composition of the nominating
and corporate governance committee meets the requirements for independence under current Nasdaq listing standards.
Executive
Officers
The
Company’s board of directors elected the following persons to comprise the executive officers of the Company as of immediately
after the closing of the Merger:
|
Name
|
|
Age
|
|
Position
|
|
Michael
S. Poirier
|
|
64
|
|
Chief
Executive Officer and President
|
|
Christopher
L. Lotz
|
|
55
|
|
Vice
President of Finance, Chief Financial Officer
|
|
Shishir
K. Sinha
|
|
53
|
|
Vice
President of Operations
|
|
Wajdi
Abdul-Ahad, PhD
|
|
67
|
|
Vice
President, Research & Development, Chief Scientific Officer
|
The
following information is provided with respect to these persons:
Michael
S. Poirier | Chief Executive Officer and President – see above.
Christopher
L. Lotz | Vice President of Finance, Chief Financial Officer. Mr. Lotz joined Qualigen as Director of Finance in 2002 and
was appointed Vice President and Chief Financial Officer in 2003. Before joining Qualigen, Mr. Lotz held financial positions with
Bexcom, California Furniture Collections, Inc. and Group Publishing, Inc. Mr. Lotz holds a B.S. in Business Administration from
Colorado State University.
Shishir
K. Sinha | Vice President of Operations. Mr. Sinha joined Qualigen as Vice President, Operations & QA/QC in 2006. Before
joining Qualigen, Mr. Sinha held manufacturing and related positions with Nanogen, Celera Diagnostics, Sequenom, Sandoz Pharmaceutics
(Novartis) and Microgenics Corp. Mr. Sinha holds an MBEE in Biotechnology Enterprise from Johns Hopkins University and a B.A.
in Genetics from the University of California, Berkeley.
Wajdi
Abdul-Ahad, PhD | Vice President, Research & Development, Chief Scientific Officer. Dr. Abdul-Ahad is Qualigen’s
Vice President of Research and Development and Chief Scientific Officer. Since joining Qualigen in 2006, he has successfully developed
and commercialized numerous complex immunoassays on both the FastPack and FastPack IP Systems. In addition, Dr. Abdul-Ahad is
responsible for all surface coating, nanotechnology and reagent manufacturing, as well as integration of new drug manufacturing
systems and processes. Before joining Qualigen, Dr. Abdul-Ahad led multifunctional design teams at Beckman Coulter that developed
and commercialized over 15 assays on their industry leading Access and Synchron automated systems. From 1988 to 1990, Dr. Abdul-Ahad
held various management positions with the (Ireland) National Diagnostics Center and Noctech, Inc., both located in Galway, Ireland.
Dr. Abdul-Ahad holds a PhD in Biochemistry from National University of Ireland, Galway; an MS in Clinical Chemistry from the University
of Surrey, England; an MBA from the University of La Verne, California and a BS in Pharmacy from the University of Baghdad, Iraq.
He also holds certifications and licenses from the American Board of Clinical Chemistry, State of California (Registered Pharmacist),
National Registry of Clinical Chemistry and the National Academy for Clinical Biochemistry. Dr. Abdul-Ahad is also the author
or co-author of numerous scientific publications.
By
virtue of their prior ownership of Qualigen securities, the Company’s new executive officers received the following Company
securities in the Merger (on the same basis as all other Company securityholders received Company securities in the Merger):
|
|
-
|
Mr.
Poirier received 169,200 shares of Common Stock in exchange for his shares of Qualigen stock and his warrants to purchase
shares of Qualigen Series C Preferred Stock became warrants to purchase 88,568 shares of Common Stock;
|
|
|
|
|
|
|
-
|
Mr. Lotz received
9,841 shares of Common Stock in exchange for his shares of Qualigen common stock and his warrants to purchase shares of Qualigen
Series C Preferred Stock became warrants to purchase 77,674 shares of Common Stock;
|
|
|
-
|
Mr.
Sinha’s warrants to purchase shares of Qualigen Series C Preferred Stock became warrants to purchase 35,427 shares of
Common Stock; and
|
|
|
|
|
|
|
-
|
Mr. Abdul-Ahad’s
warrants to purchase shares of Qualigen Series C Preferred Stock became warrants to purchase 16,828 shares of Common Stock.
|
Each
of Mr. Poirier, Mr. Lotz and Mr. Sinha is party to a respective Executive Employment Agreement with Qualigen dated February 1,
2017, as amended January 9, 2018 (the “Employment Agreements”). Each of the Employment Agreements had an initial three-year
term and is now automatically renewed for successive one-year periods unless either party gives notice of nonrenewal at least
90 days before the end of such a one-year period.
Under
the terms of Mr. Poirier’s Employment Agreement, Mr. Poirier is entitled to an annual base salary of at least $315,000,
is eligible for Qualigen’s bonus plans, benefit programs and medical benefits, is eligible for certain event-based bonuses
(including for “Liquidity Event” acquisition transactions), and is entitled to four weeks of vacation per year. If
Mr. Poirier’s employment is terminated without Cause or he resigns for Good Reason, and he provides a general release to
Qualigen, he is entitled to one year of salary continuation plus the cost of COBRA coverage continuation for such one year period.
Under
the terms of Mr. Lotz’s Employment Agreement, Mr. Lotz is entitled to an annual base salary of at least $225,000, is eligible
for Qualigen’s bonus plans, benefit programs and medical benefits, is eligible for certain event-based bonuses (including
for “Liquidity Event” acquisition transactions), and is entitled to four weeks of vacation per year. If Mr. Lotz’s
employment is terminated without Cause or he resigns for Good Reason, and he provides a general release to Qualigen, he is entitled
to 180 days of salary continuation plus the cost of COBRA coverage continuation for such 180 day period.
Under
the terms of Mr. Sinha’s Employment Agreement, Mr. Sinha is entitled to an annual base salary of at least $220,000,
is eligible for Qualigen’s bonus plans, benefit programs and medical benefits, is eligible for certain event-based bonuses
(including for “Liquidity Event” acquisition transactions), and is entitled to four weeks of vacation per year. If
Mr. Sinha’s employment is terminated without Cause or he resigns for Good Reason, and he provides a general release to Qualigen,
he is entitled to 180 days of salary continuation plus the cost of COBRA coverage continuation for such 180 day period.
Each
of Mr. Poirier, Mr. Lotz and Mr. Sinha has agreed that Merger and the Merger-related transactions do not constitute a “Liquidity
Event” as defined in his respective Employment Agreement and that accordingly they do not entitle him to a contractual Liquidity
Event bonus.
The
following definitions are used in each of the Employment Agreements:
“Cause”
means any of the following: (i) a material breach by the employee of any of the trade secret/proprietary information, confidential
information of intellectual property ownership sections of the Employment Agreement; (ii) a material breach by the employee of
any other provision of the Employment Agreement, if such material breach (if susceptible to cure) has continued uncured for a
period of at least 15 days following delivery by Qualigen to the employee of written notice of such material breach; (iii) fraud,
dishonesty or other breach of trust whereby the employee obtains personal gain or benefit at the expense of or to the detriment
of Qualigen or any of Qualigen’s subsidiaries or affiliates; (iv) a conviction of or plea of nolo contendere or similar
plea by the employee of any felony; (v) a conviction of or plea of nolo contendere or similar plea by of any other crime involving
theft, misappropriation of property, dishonesty or moral turpitude; (vi) a willful and material violation of applicable law by
the employee in connection with the performance of his duties under the Employment Agreement; (vii) chronic or repeated substance
abuse by the employee, or any other use by the employee of alcohol, drugs or illegal substances in such a manner as to interfere
with the performance of his material duties hereunder; or (viii) failure to comply with the lawful directions of Qualigen’s
board of directors which are otherwise consistent with the terms of this Agreement, which failure has continued for a period of
at least 10 days after delivery by Qualigen to the employee of written demand by Qualigen’s board of directors.
“Good
Reason” means the occurrence of any of the following circumstances, without the employee’s express consent: the employee
resigns due to (i) a material reduction of the employee’s title or authority, (ii) a material reduction in the employee’s
salary or benefits (other than a reduction that generally applies to the officers at the employee’s level in Qualigen or,
as applicable, after a transaction in which Qualigen or substantially all its assets is acquired, in the successor entity at that
time), (iii) any material breach of this Agreement by Qualigen which is not cured within 30 days after written notice by the employee;
or (iv) a change of the principal non-temporary location in which the employee is required to perform the employee’s services
to any location exceeding 35 miles from Carlsbad, California. In no event shall a resignation be considered to be with Good Reason
unless the resignation occurs after but within 30 days after the initiation of the item of Good Reason.
The
foregoing description of the Employment Agreements does not purport to be complete and is qualified in its entirety by reference
to the Employment Agreements, which are attached hereto as Exhibits 10.1, 10.2 and 10.3 and are incorporated herein by reference.
Compensation
Arrangements for Pre-Merger Directors and Officers
Pursuant
to previously-disclosed plans and arrangements, on May 18, 2020 the Company granted options under the Company’s 2015 Equity
Incentive Plan to purchase a total of 1,166,136 shares of pre-Reverse Stock Split common stock of the Company (equating to 46,646
shares of post-Reverse Stock Split common stock of the Company) to Andrew Ritter, the Company’s Chief Executive Officer,
President and director before the Merger (583,068 pre-Reverse Stock Split options, equating to 23,323 post-Reverse Stock Split
options); Ira Ritter, the Company’s Chairman and Chief Strategic Officer before the Merger (361,502 pre-Reverse Stock Split
options, equating to 14,460 post-Reverse Stock Split options); and John Beck, the Company’s Chief Financial Officer before
the Merger (221,566 pre-Reverse Stock Split options, equating to 8,863 post-Reverse Stock Split options). All these stock options
had an exercise price of $0.64 per pre-Reverse Stock Split share/ $16.00 per post-Reverse Stock Split share, with a scheduled
expiration date of May 22, 2024. If the optionholder ceases to be a service provider to the Company, the options will remain exercisable
only until the earlier of the scheduled expiration date or the second anniversary of the date the optionholder ceases to be a
service provider to the Company.
The
Company also amended all of its other outstanding stock options in favor of the persons who, as of immediately before the Merger,
were directors or officers of the Company such that the options would (if they had had a scheduled expiration date of later than
May 22, 2024) have a revised scheduled expiration date of May 22, 2024 and such that the options will remain exercisable only
until the earlier of the scheduled expiration date (as revised, if applicable) or the second anniversary of the date the optionholder
ceases to be a service provider to the Company. These amendments were applicable to 1,171,294 pre-Reverse Stock Split options
(equating to 46,852 post-Reverse Stock Split options) held by such persons.
On
the closing date of the Merger, the Company made cash payments for severance, deferred salary, bonus, vacation pay and healthcare
benefits to Andrew Ritter ($810,280 – including $468,000 severance and $234,000 bonus), Ira Ritter ($602,668– including
$358,800 severance and $143,520 bonus) and John Beck ($354,188 – including $165,000 severance and $132,000 bonus).
Effective
immediately after the Merger, the Company entered into Consulting Agreements with Andrew Ritter, Stonehenge Partners, LLC (an
affiliate of Andrew Ritter) and CFB Financial, Inc. (an affiliate of John Beck).
The
Consulting Agreement with Andrew Ritter is for consulting services as the “CVR Consultant” contemplated by the CVR
Agreement, as outlined in Section 2.6 of the CVR Agreement related to “Legacy Monetization” activities. Such Section
2.6 provides that during the Consultant Term, the CVR Consultant shall (subject to the limitations provided in the CVR Agreement)
have discretion and decision making authority (a) over any continued operation of, development of or investment in the Company’s
pre-Merger gut microbiome modulation intellectual property and (b) over when (if ever) and whether to pursue, or enter into, a
Legacy Monetization in any particular manner, and upon what terms and conditions. “Legacy Monetization” means the
sale, license, transfer, spin-off or other monetizing event, before May 22, 2023, of all or any part of the Company’s pre-Merger
gut microbiome modulation intellectual property. Mr. Ritter will bill the Company at a rate of $275 an hour for any hours providing
these services to the Company in good faith; Mr. Ritter will provide documentation for his billings. The Consulting Agreement
is for the length of the Consultant Term, which is defined in the CVR Agreement to mean until August 20, 2020; provided, however,
that the CVR Consultant (Mr. Ritter) may, in his sole discretion, extend or reduce the Consultant Term to support Legacy Monetization
efforts (although there can be no such extension to a date beyond May 22, 2023 or, if sooner, the date the Company’s obligatory
ongoing CVR Agreement funding support toward Legacy Monetizations is exhausted).
The
Consulting Agreement with Stonehenge Partners, LLC is for consulting services to the Company’s Chief Executive Officer as
reasonably requested; consulting services may include, but are not limited to, helping support public market activities such as
investor relations, strategy, messaging and contacts, assisting in financing strategy, and introductions to bankers, analysts
and others. Stonehenge Partners, LLC committed to at least 10 hours of work per week and will be paid a flat fee of $11,000 a
month for this 10 hours of work per week. Stonehenge Partners, LLC will bill the Company at a rate of $275 per hour for any hours
providing services to the Company above and beyond this 10 hours per week, but only to the extent such additional hours have been
expressly requested in writing by the Company. The Consulting Agreement is for a six-month term, subject to extension by mutual
agreement of the parties; provided, that Stonehenge Partners, LLC has the right to terminate the Consulting Agreement at any time.
The
Consulting Agreement with CFB Financial, Inc. is for consulting services to the Company’s Chief Executive Officer and Chief
Financial Officer as reasonably requested; financial consulting services may include, but are not limited to, financial and reporting
matters, Nasdaq, SEC, and audits, and the establishment of structures and best practices in managing the internal workings of
the Company in order for it to follow good governance and other public market expectations. CFB Financial, Inc. committed to at
least 10 hours of work per week and will be paid a flat fee of $8,000 a month for this 10 hours of work per week. CFB Financial,
Inc. will bill the Company at a rate of $200 per hour for any hours providing services to the Company above and beyond this 10
hours per week, but only to the extent such additional hours have been expressly requested in writing by the Company. The Consulting
Agreement is for a six-month term, subject to extension by mutual agreement of the parties; provided, that CFB Financial, Inc.
has the right to terminate the Consulting Agreement at any time.