Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers: Compensatory Arrangements of Certain Officers.
Revised Employment Agreement with Richard W. Pascoe
On August 30, 2018, Apricus Biosciences, Inc. (the “Company”) entered into an amended and restated employment agreement with Richard W. Pascoe, the Company’s current Chief Executive Officer and Secretary (the “Amended and Restated Employment Agreement”). Under the terms of the Amended and Restated Employment Agreement, Mr. Pascoe’s employment will be involuntarily terminated by the Company effective at the closing of the transactions contemplated by that certain Agreement and Plan of Merger and Reorganization dated as of July 30, 2018 (the “Merger Agreement”), by and among the Company, Arch Merger Sub, Inc., a wholly-owned subsidiary of the Company, and Seelos Therapeutics, Inc. (the “Merger”), and Mr. Pascoe will be entitled to receive the severance payments and benefits set forth in the Amended and Restated Employment Agreement for an involuntary termination within 12 months following a change of control as a result of such termination, which include:
• A lump sum payment in an amount equal to 18 months’ base salary, plus 100% of his target bonus for the year in which the date of his involuntary termination occurs.
• Full acceleration of the vesting of all equity awards held by Mr. Pascoe at the time of the termination, including any options, restricted stock, RSUs or other awards.
• Reimbursement for the cost of continuation of health insurance benefits provided to him immediately prior to the termination pursuant to the terms of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) or other applicable law for a period continuing until the earlier of 18 months following the termination or the date upon which he is no longer eligible for such COBRA or other benefits under applicable law.
In the event the payment of the cash severance to Mr. Pascoe consisting of 18 months of his base salary and his target annual bonus (the “Base and Bonus Severance Obligation”) in cash (and assuming that all other Company employees are terminated at the closing of the Merger and become entitled to severance pursuant to their employment arrangements) would cause the “Apricus Net Cash” (as defined in the Merger Agreement) to be less than $0, then Mr. Pascoe’s severance shall be paid as follows:
• Such portion of the Base and Bonus Severance Obligation payable to Mr. Pascoe under his employment agreement as would cause the Apricus Net Cash to be less than $0 (but in no event more than 40% of the Base and Bonus Severance Obligation) (the “Equity-Settled Severance Portion”) shall be paid as follows:
• At the closing of the Merger, Mr. Pascoe will be granted a restricted stock unit under the 2012 Stock Long Term Incentive Plan, as amended from time to time (the “2012 Plan”), denominated with a dollar value equal to 120% of the Equity-Settled Severance Portion (the “Pascoe Closing RSU”).
• The Pascoe Closing RSU will vest in two equal installments on each of March 1, 2019 and March 1, 2020, subject to Mr. Pascoe’s continued service to the Company on the applicable vesting date, subject to accelerated vesting in the event of (1) a change of control of the Company (following the closing of the Merger), or (2) the failure of Mr. Pascoe to be nominated for reelection to the Company board of directors or Mr. Pascoe’s failure to be reelected to the Company’s board of directors at any meeting of the Company’s stockholders (or any failure to be reelected by a written consent of the Company’s stockholders) or any other involuntary termination of Mr. Pascoe’s status as a member of the board of directors of the Company, or (3) Mr. Pascoe’s death or disability.
• The Pascoe Closing RSU will provide for settlement within 10 days of vesting in either (1) shares of the Company's common stock with an aggregate value equal to the denominated dollar value vesting on the applicable vesting date (which value shall be converted into the Company’s shares based on the average closing price of the Company common stock over the 20 trading days preceding the settlement date) or (2) in the event any shares cannot be issued under the terms of the 2012 Plan for any reason, including as a result of there being insufficient shares available for issuance thereunder or the issuance of shares causing any individual award limit under the plan to be exceeded, in cash with respect to such shares. In addition, the Company may elect to settle the Pascoe Closing RSU in cash, in its discretion. If the settlement of the Pascoe Closing RSU would not be possible as of the grant date as a result of there being insufficient shares available for issuance under the 2012 Plan, or the issuance of such shares causing the award to exceed any individual award limits contained in the 2012 Plan, the Pascoe Closing RSU will still be granted but any share settlement
