Item
5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
Phantom
Stock Awards Pursuant to the Cortex Pharmaceuticals, Inc. 2014 Equity, Equity-Linked and Equity Derivative Incentive Plan (now the RespireRx
Pharmaceuticals Inc. 2014 Equity, Equity-Linked and Equity Derivative Incentive Plan after the Company’s name
change on December 16, 2015)
By
unanimous written consent, all of the directors of RespireRx Pharmaceuticals Inc., (the “Company”), on June 7, 2023,
consented to the taking of certain actions and the adoption of the certain resolutions without a meeting in accordance with the procedures
established pursuant to Section 141(f) of the Delaware General Corporation Law.
The
Board of Directors (“Board”) had taken the opportunity to review and discuss the Cortex Pharmaceuticals, Inc. 2014
Equity, Equity-Linked and Equity Derivative Incentive Plan (now the RespireRx Pharmaceuticals Inc. 2014 Equity, Equity-Linked and Equity
Derivative Incentive Plan after the Company’s name change on December 16, 2015) which plan was approved by the Company’s
shareholders on March 14, 2014 and is Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on March 24, 2014 and is referred
to herein as the “Company’s 2014 Equity Plan”, which was reviewed with respect to Stock Appreciation Rights,
Phantom Stock, Fair Market Value and other provisions and the Board determined to make certain phantom stock awards (“Phantom
Stock Award(s)”) to certain executive officers who are also directors and certain advisors, vendors, consultants, as well as one
independent director.
The
two executive officers who are also directors immediately transferred their phantom stock (“Phantom Stock”) and related Phantom
Stock Awards to family inter vivos trusts as permitted by the Company’s 2014 Equity Plan. Those two officers were Arnold S. Lippa,
the Company’s Interim President and Interim Chief Executive Officer and the Company’s Chief Scientific Officer, and a director
who was awarded 70,000,000 shares of Phantom Stock and Jeff Eliot Margolis, the Company’s Senior Vice President, Chief Financial
Officer, Treasurer and Secretary and a director who was awarded 120,000,000 shares of Phantom Stock. The independent director, Joseph
R. Siegelbaum was awarded 20,000,000 shares of Phantom Stock. The remaining 96,000,000 of shares of Phantom Stock awarded were awarded
to five vendors, consultants, advisors or their designees. A total of 306,000,000 shares of Phantom Stock were awarded on June
7, 2023.
The
awards are to be governed by a separate Phantom Stock Award Agreement (“Phantom Stock Award Agreement”) for each recipient
awarded Phantom Stock, a template of a form of such Phantom Stock Award Agreement is Exhibit 99.1 to this Current Report on Form 8-K.
The
Phantom Stock Award Agreements describe that the shares of Phantom Stock that were awarded are non-forfeitable but unvested on the
Award Date and vest as to the economic value of 50% of the shares of Phantom Stock awarded on the First Event Payment
Date and as to the economic value of 50% of the shares of Phantom Stock awarded on the Second Event Payment Date. The Phantom
Stock Award Agreements terminate on the earlier to the payment to the participant (“Participant”) as a result of the
second event or the 15th anniversary of the Phantom Stock Award Agreement.
Shares
of Phantom Stock are not convertible, exercisable or exchangeable into the Company’s Common Stock, par value $0.001 (“Common
Stock”).
Upon
the occurrence of a Payment Event as defined in the Phantom Stock Award Agreement, the Company will incur a liability to
each Participant that is to be remitted as a cash payment (“Payment”), subject to certain limitations as described
below, equal to: (x) the number of vested shares of Phantom Stock held by such Participant, multiplied by (y) the fair market value
as defined. The “Fair Market Value” on any given day is the value of one share of Common Stock determined as follows:
(i) if the Common Stock is then listed or admitted to trading on a Nasdaq stock exchange or other stock exchange which reports closing
sale prices, the Fair Market Value shall be the closing sale price on the date of valuation on such Nasdaq stock exchange or other principal
stock exchange on which the Common Stock is then listed or admitted to trading, or, if no closing sale price is quoted on such day, then
the Fair Market Value shall be the closing sale price of the Common Stock on such Nasdaq stock exchange or such other exchange on the
next preceding day on which a closing sale price is reported, (ii) if the Common Stock is not then listed or admitted to trading on a
Nasdaq stock market or other stock exchange which reports closing sale prices, the Fair Market Value shall be the average of the closing
bid and asked prices of the Common Stock in the over-the-counter market on the date of valuation, (iii) if neither (i) nor (ii) is applicable
as of the date of valuation, then the Fair Market Value shall be determined by the administrator of the Company’s 2014 Equity Plan
in good faith.
The Payment, subject to any limitations, shall be made within thirty (30) days after receipt of funds
by the Company as a result of the Payment Event, and all of such Participant’s shares of Phantom stock that vested as a result
of the Payment Date Event shall terminate and be cancelled upon the payment, and the Participant shall have no further rights in respect
of that portion of Participant’s shares of Phantom Stock other than rights to receive any unpaid portion of the Payment that was
limited to any limitations described below. Any Payment due to a Participant is subject to the execution and non-revocation of general
release of claims, in a form provided by the Company, and continuous compliance with any restrictive covenant agreement, confidentiality
agreement or other agreement entered into between the Participant and the Company or its subsidiaries and affiliates.
A
Payment Event is a monetization event with an unrelated, unaffiliated third party, such as a sale of all or substantially all of an asset,
the entering into a joint venture, license or sublicense or a similar transaction structure, that is not an equity or similar or debt
investment in the Company or a subsidiary unless such equity or similar investment results in a unrelated, unaffiliated third party or
group of parties acting together, resulting in such party or parties owning more than a 50% voting interest in the Company or a subsidiary
of the Company and resulting in payments aggregating at least $25,000,000 within a twelve month period to the Company. The Payment Event
Date, as defined in the Phantom Stock Award Agreement is the first date within twelve months of receipt by the Company of cash
resulting from a Payment Event, on which the Company has received, in the aggregate, at least $25,000,000. The First Payment Event Date
shall occur when the first Payment Event has achieved a Payment Event Date at which time a payment is due to the Participant. Similarly,
the Second Payment Event Date occurs when the second Payment Event has reached a Payment Event Date at which time a payment is due to
the Participant. If two or more of the Company’s assets or platforms or subsidiaries are the subject of a single transaction or
series of related transactions, such transactions or series of transactions shall be deemed to represent two Payment Events and the payments
to the Company within a twelve-month period as described above would be required to aggregate at least $50,000,000.
If
the calculation of the payment based on the definition of Fair Market Value, exceeds 50% the amount of cash of received by the Company
with respect to a Payment Event, an initial payment shall be limited to 50% of the cash received by the Company with respect to the Payment
Event and the unpaid balance shall be carried as a liability due to the Participant to be added to the payment amount of the Second
Payment Event, subject to the same limitation. Any remaining liability resulting from the payment amount limitation described in this
section after the Second Payment Event shall be reduced to that amount agreed in good faith by the Participant and the Company and if
no amount can be agreed within ninety (90) days, shall be determined by mediation.
Other
than adjustments for stock splits, reverse stock splits, stock dividends and similar recapitalizations, the Phantom Stock Award Agreements
do not provide for distributions or anti-dilution protections.
By
accepting the shares of Phantom Stock, the Participants agreed that such awards were special incentive compensation are not to be taken
into account, in any manner, as salary or compensation or performance bonus in determining the amount of any payment under any pension,
retirement, life insurance, disability, severance or other employee benefit plan of the Company and its subsidiaries and affiliates.
In addition, each beneficiary of the Participant shall be deemed to have agreed that such award shall not affect the amount of any life
insurance coverage, if any, provided by any person on the life of the Participant which is payable to such beneficiary under any life
insurance plan covering employees and shall not affect any matching obligation that the Company may otherwise have with respect to 401(k)
or other retirement plans or health plans. Nothing contained in the Phantom Stock Award Agreements or the Company’s 2014
Equity Plan shall prevent the Company from adopting or continuing in effect other compensation arrangements.
The
above is a summary of what the Company believes are key the provisions of the Phantom Stock Award Agreements. A copy of the Template
of Form of Phantom Stock Award Agreement is filed as Exhibit 99.1 to this Current Report on Form 8-K. The above summary is qualified
in its entirety by the Current Report on Form 8-K including the copy of the Template of Form of Phantom Stock Award Agreement filed as
Exhibit 99.1 to such report. A complete copy of the Company’s 2014 Equity Plan was filed as Exhibit 10.2 to the Company’s
Current Report on Form 8-K filed on March 24, 2014.