Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
Stock Option Exchange
On August 1, 2019, Conatus Pharmaceuticals Inc. (“Conatus”) agreed to allow seven of its current employees, including Steven J.
Mento, Ph.D., Keith W. Marshall, Ph.D., Alfred P. Spada, Ph.D. and Michelle Vandertie, to exchange all or a portion of their existing options to purchase shares of Conatus common stock granted under the Conatus Pharmaceuticals Inc. 2013 Incentive
Award Plan (the “Equity Plan”) or granted as an employment inducement award pursuant to NASDAQ Listing Rule 5635(c)(4) for a lesser number of new restricted stock units, as described below, provided that options were not eligible for
exchange if the grant of the new restricted stock units would have resulted in a violation of the annual award limits under the Equity Plan. All of the existing stock options that were surrendered by the employees had exercise prices significantly
above the recent trading prices of Conatus’ common stock.
Employees received one new restricted stock unit for every two eligible
options surrendered. This “exchange ratio”
(1-for-2)
was applied on a
grant-by-grant
basis. As a result, 3,200,375 stock options were exchanged for 1,600,186 replacement restricted stock units.
Each new restricted stock unit issued to the employees has a grant date of August 1, 2019. The restricted stock units will vest on the
first anniversary of the grant date. In addition, the restricted stock units will vest upon a Change of Control, as defined in the Equity Plan, or an employee’s termination without Cause, as defined in the Equity Plan, or resignation for Good
Reason, as defined in the Equity Plan. Upon any other termination of service of the employee, unvested restricted stock units will be forfeited.
The other terms and conditions of the new options will be governed by the terms and conditions of the Equity Plan and the restricted stock
unit agreements to be entered into thereunder. The Equity Plan has been previously filed by Conatus with the Securities and Exchange Commission and the form of restricted stock unit agreement, which is filed as Exhibit 10.1 hereto and which is
incorporated herein by reference.
Amendment to Employment Agreement with Steven J. Mento, Ph.D.
On July 31, 2019, Conatus entered into an amendment to the employment agreement with Steven J. Mento, Ph.D., its President and Chief
Executive Officer (the “Amendment to Employment Agreement”). The Amendment to Employment Agreement increases the severance benefits upon a termination without cause or resignation for good reason (i) from 12 months’ salary to 18
months’ salary and (ii) from 12 months to 18 months for the period for which Conatus shall pay for and provide healthcare benefits. In addition, pursuant to the Amendment to Employment Agreement, Conatus and Dr. Mento agree that a
geographic relocation of his primary place of work by more than 25 miles will be a material relocation for purposes of determining whether Dr. Mento has “Good Reason” under the agreement. All other material terms and conditions of
Dr. Mento’s existing employment agreement will continue in full force and effect.
The foregoing description of the amendment to
Dr. Mento’s employment agreement is qualified in its entirety by the Amendment to Employment Agreement, by and between Conatus and Dr. Mento, dated July 31, 2019, which is filed as Exhibit 10.2 and which is incorporated herein by
reference.
Also on July 31, 2019, Conatus entered into an amendment to the employment agreement with each of Keith W. Marshall,
Ph.D., Alfred P. Spada, Ph.D. and Michelle Vandertie to agree that a geographic relocation of his or her primary place of work by more than 25 miles will be a material relocation for purposes of determining whether he or she has “Good
Reason” under the agreement. All other material terms and conditions of their existing employment agreements will continue in full force and effect.
The foregoing description of the amendment to the employment agreements with Dr. Marshall, Dr. Spada and Ms. Vandertie is
qualified in its entirety by the amendments to the employment agreements with such individuals which will be filed by Conatus with the Securities and Exchange Commission with its Quarterly Report on Form
10-Q
for the quarter ending September 30, 2019.