Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
(b): As previously disclosed, on December 31, 2020, Arch Therapeutics, Inc. (the
"Company") and Richard Davis, the Company's current Chief Financial Officer,
entered into a transition agreement (the "Transition Agreement"), under which
Mr. Davis agreed to continue in his current role as the Company's Chief
Financial Officer until the earlier of (i) when a successor is named and ready
to perform the daily duties of Chief Financial Officer, and (ii) June 30, 2021
(such date, the "Transition End Date"), upon which date Mr. Davis will retire as
Chief Financial Officer. Under the terms of the Transition Agreement, Mr. Davis
agreed to continue to work as an employee of the Company in a non-executive role
to provide support and ensure a smooth and successful transition for a period of
six months following the Transition End Date (the "Post Executive Period"). On
May 3, 2021, in connection with the appointment of Mr. Abrams as employee of the
Company effective May 3, 2021, and then as the Company's new Chief Financial
Officer effective as of May 10, 2021; (i) the Company and Mr. Davis mutually
agreed to amend the Transition Agreement to provide that the Transition End Date
will occur on June 30, 2021 and the Post Executive Period will commence on July
1, 2021 and end on December 31, 2021 (the "Amendment").
(c) and (e): Also effective May 3, 2021, the Company has appointed Mr. Michael
S. Abrams as an employee and then, effective as of May 10, 2021, as its Chief
Financial Officer and Treasurer. The Company issued a press release announcing
the appointment of Mr. Abrams on May 3, 2021, which is attached hereto as
Exhibit 99.1.
Mr. Abrams, age 51, brings over 25 years of experience as a Chief Financial
Officer to numerous public and private companies, principal investor, investment
banker, merchant banker, strategic advisor, financial advisor, and Board member.
Mr. Abrams' experience and capabilities span a broad range of activities with a
particular expertise in the areas of operational management, complex financial
engineering, financial advisory, capital markets strategy. mergers and
acquisitions and turnarounds primarily for companies in the technology and
healthcare sectors. Mr. Abrams graduated with an MBA with Honors from the Booth
School of Business at the University of Chicago and received his BBA with Honors
from the University of Massachusetts at Amherst as a William F. Field Alumni
scholar given annually to the top finance student in the class.
There are no family relationships between Mr. Abrams and any of the Company's
other officers or directors, and except as expressly described in this report
the Company is not aware of any transaction relating to Mr. Abrams that would
require disclosure under Item 404(a) of Regulation S-K promulgated under the
Securities Act of 1933, as amended.
In connection with Mr. Abrams' appointment, the Company has entered into an
executive employment agreement with Mr. Abrams. The agreement continues until
terminated by the Company or by Mr. Abrams. Pursuant to the terms of the
agreement, (a) Mr. Abrams is entitled to an initial annual base salary of
$325,000, (b) is eligible to receive an annual cash bonus in an amount of up to
30% of Mr. Abrams' then-current annual base salary, to be awarded at the sole
discretion of the Company's Board of Directors, and (c) is eligible for benefits
generally made available to similarly situated executives of the Company,
including participation in equity compensation or other incentive plans subject
to the discretion and approval of the Company's Board of Directors. In addition,
the agreement provides that, on or as soon as practicable after the commencement
date of his employment with the Company, Mr. Abrams will be granted a stock
option award under the Company's 2013 Stock Incentive Plan (the "Plan") to
purchase up to 500,000 shares of the Company's common stock, which award is to
vest over a three-year period with 33.3% of the shares subject to the award to
vest on the one-year anniversary of the start date, and 1/24th of the remaining
unvested shares subject to the initial option shall vest commencing on each of
the next twenty-three (23) monthly anniversaries thereafter, subject to Mr.
Abrams' continued service for the Company through each vesting date. Such stock
option award was approved by the Board of Directors with a date of grant of May
3, 2021 and an exercise price per share equal to the closing price on his first
day of employment.
If the employment agreement is terminated by the Company at any time after June
2, 2021 other than "For Cause" (as defined in the agreement), or if the
employment agreement is terminated by Mr. Abrams at any time for "Good Reason"
(as defined in the agreement), then Mr. Abrams, upon signing a release in favor
of the Company, would be entitled to severance in an amount equal to six (6)
months of Mr. Abrams' then-current annual base salary payable in the form of
salary continuation. In the event of a termination by the Company at any time
after June 2, 2021 other than For Cause, Mr. Abrams will also be entitled to
receive monthly payment of his health, dental and vision benefits coverage
premiums until the earlier of (i) 12 months following the date of such
termination, or (ii) the date Mr. Abrams becomes covered under another
employer's health plan.
The employment agreement provides the following definitions of "For Cause" and
"Good Reason": (a) "For Cause" is the executive's commission of a crime
involving dishonesty, breach of trust, or physical harm to any person, the
executive's willful engagement in conduct that is in bad faith and materially
injurious to the Company, the executive's commission of a material breach of the
employment agreement, the executive's willful refusal to implement or follow a
lawful policy or directive of the Company, or the executive's engagement in
misfeasance or malfeasance demonstrated by a pattern of failure to perform job
duties diligently and professionally; and (b) "Good Reason" is a material and
adverse change in the executive's authority, duties, or responsibilities with
the Company or reporting relationship within the Company.
The foregoing description of the terms of the Amendment and] Mr. Abrams'
employment agreement do not purport to be complete and are qualified in their
entirety by reference to the full text of the applicable agreement, which are
attached hereto as Exhibit 10.1 and Exhibit 10.2, respectively, and are
incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
Exhibit Description
10.1 Amendment No. 1 to Transition Agreement, dated December 31, 2020, by
and between Arch Therapeutics, Inc. and Richard Davis
10.2 Executive Employment Agreement, effective May 3, 2021, by and
between Arch Therapeutics, Inc. and Michael S. Abrams
99.1 Press Release issued by Arch Therapeutics, Inc. on May 3, 2021
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