| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
| (e) | Compensatory Arrangements of Certain Officers |
Employment Agreement with Brian Davis
In connection with his appointment as the Company’s Chief Financial Officer, Brian Davis and Verrica Pharmaceuticals Inc. (the “Company”) entered into an employment agreement, effective as of October 18, 2019 (the “Employment Agreement”).
Under the terms of the Employment Agreement, Mr. Davis is entitled to receive an annual base salary of $375,000 and an annual performance bonus with a target amount equal to 40% of his annual base salary based upon our Board of Directors’ assessment of Mr. Davis’ and the Company’s attainment of goals as set by the Board of Directors in its sole discretion. In accordance with the agreement, Mr. Davis was also awarded an option to purchase 125,000 shares of our common stock at an exercise price of $14.65 per share under the Company’s 2013 Equity Incentive Plan (the “Plan”). 25% of the shares subject to the option shall vest on October 18, 2020 (the first anniversary of Mr. Davis’ commencement of employment) and the remaining shares vest in 36 equal monthly installments thereafter, subject to Mr. Davis’ continued service and subject to full acceleration in the event of a Change in Control (as defined in the Plan). Pursuant to his agreement, Mr. Davis also entered into a confidentiality, inventions assignment,non-competition andnon-solicitation agreement with us.
Pursuant to the terms of his employment agreement, Mr. Davis’ employment is at will and may be terminated at any time by us or Mr. Davis. If Mr. Davis’ employment is terminated by us without cause or by Mr. Davis for good reason, then Mr. Davis would be eligible to receive severance benefits. The length of severance benefits that Mr. Davis would receive depends on (i) when his employment is terminated and (ii) whether or not he is terminated in connection with a change in control.
If his employment is terminated by the Company without Cause (as defined in the Employment Agreement) or if Mr. Davis resigns with Good Reason (as defined in the Employment Agreement) (an “Involuntary Termination”) on or before October 18, 2020, then he would be entitled to zero months of severance benefits. If an Involuntary Termination occurs after October 18, 2020 and on or before October 18, 2021, then Mr. Davis would be entitled to 6 months of severance benefits. If an Involuntary Termination occurs after October 18, 2021, then Mr. Davis would be entitled to 12 months of severance benefits. During the applicable severance period, Mr. Davis would receive the following severance benefits, less applicable tax withholding:
| | • | | payment of his then-current base salary in accordance with normal payroll procedures for the applicable severance period; and |
| | • | | payment or reimbursement of continued health coverage for Mr. Davis and his dependents under COBRA for the applicable severance period. |
If his employment is terminated by the Company without cause or if Mr. Davis resigns with Good Reason, in either case within 12 months following or 1 month prior to the effective date of a Change in Control, then Mr. Davis would be entitled to the following severance benefits, less applicable tax withholding:
| | • | | payment of his then-current base salary in accordance with normal payroll procedures for 12 months; |
| | • | | payment of a cash severance benefit equal to Mr. Davis’ annual bonus at the target percentage for the year in which the termination occurs; |
| | • | | payment or reimbursement of continued health coverage for Mr. Davis and his dependents under COBRA for 12 months; and |
| | • | | all equity awards owned by Mr. Davis will automatically vest. |
The foregoing description of the Employment Agreement is not complete and is qualified in its entirety by reference to the Employment Agreement, which will be filed as an exhibit to the Company’s Annual Report onForm 10-K for the year ending December 31, 2019.
