{"url_path":"/sec/adil/8-k/2026-06-11/item-5-02","section_key":"item-5-02","section_title":"Item 5.02 Departure of Directors","topic":"sec","document":{"doc_type":"8-K","doc_date":"2026-06-11","source_url":"https://www.sec.gov/Archives/edgar/data/1513525/0001213900-26-067711-index.html","accession_number":"0001213900-26-067711","cik":"0001513525","ticker":"ADIL","issuer_name":"ADIAL PHARMACEUTICALS, INC.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1513525/0001213900-26-067711-index.html","primary_entity_key":"0001513525","primary_entity_name":"ADIAL PHARMACEUTICALS, INC."},"word_count":3573,"has_tables":true,"body_markdown":"**Item 5.02 - Departure of Directors\nor Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.**\n\n \n\n**Director Fees**\n\n \n\nOn June 11, 2026, upon closing of the Merger, each director of the Company\nimmediately prior to the First Effective Time will receive cash payment of $30,000.\n\n \n\n**Resignation of Director**\n\n \n\nIn connection with the Merger, effective as of\nthe First Effective Time, Tony Goodman resigned as a Class I Director of the Company. Mr. Goodman did not resign as a result of any disagreements\nwith the Board or the Company.\n\n \n\n6\n\n \n\n \n\n**Appointment of Directors and Chief Development\nOfficer**\n\n \n\nOn June 11, 2026, in connection with the Merger,\neffective immediately after the First Effective Time, Matt Davidson, Ph.D., was appointed to the Board as a Class I Director, to fill\nthe vacancy created by the resignation of Mr. Goodman, with a term expiring at the Company’s 2028 Annual Meeting of Stockholders,\nand Wendy B. Young, Ph. D. was appointed to the Board as a Class III Director, filling a standing vacancy on the Board, with a term expiring\nat the Company’s 2027 Annual Meeting of Stockholders. On June 11, 2026, effective immediately after the First Effective Time, Dr.\nDavidson was also appointed as the Company’s Chief Development Officer. Dr. Davidson and Dr. Young were not appointed as a member\nto any Committee of the Board.\n\n \n\n*Matt Davidson* (age 42) was appointed as\nthe Company’s Chief Development Officer and member of the Board effective as of immediately after the First Effective Time. Prior to\nthe Merger Closing, Dr. Davidson served as the Chief Executive Officer, Co-Founder and Chairman of the Board of Directors of Azora since\nits inception in March 2019. From August 2013 until December 2017, he served as the Chief Executive Officer, Founder and Chairman of\nthe Board of Directors of Verrica Pharmaceuticals, Inc., a Nasdaq-listed company, where he invented and developed the first FDA-approved\ndrug for the skin disease molluscum contagiosum. Dr. Davidson holds a Ph.D. in Immunology from Stanford University School of Medicine\nand a B.A. in Molecular and Cell Biology from the University of California, Berkeley.\n\n \n\n*Wendy P. Young* (age 60) was appointed\nas a member of the Board effective as of immediately after the First Effective Time. Since July 2021 she has served as President of BioPharma\nDiscovery, LLC, where she provides scientific advisory services and expert witness services, and she has also served as a Senior Advisor\nto GV (Google Ventures), focused on life science company creation and investments, since January 2023. Additionally, she has served as\na Senior Advisor to YK Bioventures since 2024 and currently serves as an independent board director of Rapport Therapeutics, Terray Therapeutics,\nShenandoah, Genuiti, BioIntervene, and Think Bioscience. Dr. Young previously served as an Executive Partner at MPM Capital and as interim\nChief Executive Officer and Chief Scientific Officer of a stealth oncology small molecule platform company from September 2021 to September\n2023. Before joining MPM Capital, Dr. Young spent 15 years at Genentech, a member of the Roche group, where she most recently served\nas Senior Vice President, Small Molecule Drug Discovery from January 2018 to September 2021. In that role, she led a department of approximately\n900 internal and external scientists across chemistry, cheminformatics, biochemical pharmacology, drug metabolism and pharmacokinetics,\nand small molecule pharmaceutical sciences, and she served as an executive member of Genentech’s research and development leadership\nteam. Dr. Young earned a Ph.D. in Chemistry from Princeton University in 1993 and a B.A./M.S. in Chemistry, cum laude, from Wake Forest\nUniversity in 1989.\n\n \n\nEach of Dr. Davidson and Dr. Young will receive\nthe standard compensation available to the Company’s current directors. Dr. Young will also receive an option grant to purchase\n25,666 shares of Common Stock on the second trading day after public announcement of the Merger, which shall have an exercise price\nequal to the closing price of the Common Stock on the second trading day after public announcement of the Merger, shall have a term of\nten years from the date of grant, and shall not be exercisable unless and until the Company amends its 2017 Equity Incentive Plan (the\n“2017 Plan”) to increase the number of shares of Common Stock authorized for issuance thereunder by a sufficient number of\nshares to permit the exercise of such grant, at which time the options shall vest as to a number of shares of Common Stock equal to the\nresult obtained by multiplying 25,666 by a fraction the numerator of which is the number of whole months between the date of grant\nand the date of such stockholder approval (the “Pre-Stockholder Approval Months”) and the denominator of which is 36 and\nthereafter the balance of the grant shall vest pro rata on a monthly basis over a number of months equal to the difference between 36\nand the number of Pre-Stockholder Approval Months; provided, however, that in the event that such amendment to the 2017 Plan is not approved\nby the Company’s stockholders one or before the one-year anniversary of such grant, such grant shall be forfeited and cancelled\nin full.\n\n \n\nExcept as described in the Merger Agreement,\nthere are no arrangements or understandings between Dr. Davidson and any other person pursuant to which he was appointed as a director\nof the Company. There are no arrangements or understandings between Dr. Young and any other person pursuant to which she was appointed\nas a director of the Company. Except as described above and below, Dr. Davidson and Dr. Young are not a party to any transaction required\nto be disclosed pursuant to Item 404(a) of Regulation S-K. \n\n \n\n**Indemnification Agreements**\n\n \n\nIn connection with Dr. Davidson’s appointment\nas a director of the Company and as the Company’s Chief Development Officer and Dr. Young’s appointment as a director, on\nJune 11, 2026, the Company and each of Dr. Davidson and Dr. Young entered into the Company’s standard form of indemnification agreement,\na copy of which was filed as Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025\nfiled with the SEC on March 5, 2026.\n\n \n\n7\n\n \n\n \n\n**Executive Officers**\n\n \n\n*Appointment of Dr. Davidson and Execution\nof Davidson Agreement*\n\n \n\nIn accordance with the Merger Agreement, on June 11,\n2026, effective immediately after the First Effective Time, Dr. Davidson was appointed as the Chief Development Officer of the Company.\nIn connection with Dr. Davidson’s appointment as Chief Development Officer, the Company will enter into an employment agreement\nwith Dr. Davidson (the “**Davidson Agreement**”), which shall be effective as of June 11, 2026 and shall remain\nin effect until terminated by either party pursuant to its terms. The Davidson Agreement provides for Dr. Davidson to serve as the Company’s\nChief Development Officer following the closing of the Merger, reporting to the Company’s Chief Executive Officer and Board, and\nprovides for an annual base salary of $609,120, provided that in the event that the Company raises an additional $20 million or similar\nsignificant financing, his annual base salary shall be increased to $648,000. Additionally, upon closing Dr. Davidson will receive a cash\npayment of $312,484.98 as payment for previously deferred salary. Under the Davidson Agreement, Dr. Davidson is eligible to receive an\nannual bonus with a target amount equal to 50% of his base salary, which will be awarded by the Board, in its discretion, based on the\nachievement of performance-based metrics established by the Compensation Committee of the Board (or in its absence, the Board) on an annual\nbasis. Dr. Davidson may also receive, in the discretion of the Compensation Committee (or in its absence, the Board), equity awards under\nthe Company’s then-current equity plan. The Davidson Agreement further provides that the Company will make a one-time inducement\nequity award to Dr. Davidson to be divided equally between restricted stock units (the “**Davidson RSU Inducement Award**”)\nand stock options to purchase Common Stock (the “**Davidson Option Inducement Award**” and together with the Davidson\nRSU Inducement Award, the **“Davidson Inducement Awards**”), to be granted one trading day following the announcement\nby the Company of the consummation of the Merger. The Davidson agreement provides that the aggregate number of shares underlying the Davidson\nInducement Awards will be equal to 1.63% of the Company’s fully diluted shares of Common Stock outstanding following the consummation\nof the Merger, the Initial Closing of the Financing and Note Exchange (collectively, the “Transactions”), plus 1.63% of the\nnumber of shares of Common Stock that may be issued upon exercise of all Milestone Pre-Funded Warrants and Milestone Incentive Warrants\nthat may be issued to the PIPE Investors and the Azora Noteholders in Milestone Closings pursuant to the Purchase Agreement and the Note\nExchange Agreements, respectively. The Davidson Inducement Awards will vest (i) with respect to that number of shares subject to the Davidson\nInducement Awards calculated as of closing of the Transactions, pro rata on a monthly basis over three years commencing on the one month\nanniversary of the effective grant date hereof and (ii) with respect to that number of shares subject to the Davidson Inducement Awards\ncalculated based on the number of Milestone Warrants that may be issued pursuant to the Purchase Agreement and the Note Exchange Agreement,\na pro rata portion of such awards will be subject to the same vesting included in (i) upon issuance by the Company of each Milestone Warrant,\nsubject to catch up vesting for any awards that would have otherwise vested prior to issuance of such Milestone Warrants. The Davidson\nOption Inducement Award will have an exercise price equal to the closing price of the Common Stock on the first trading day after the\npublic announcement of the Merger.\n\n \n\nThe Company may terminate the Davidson Agreement upon\nwritten notice to Dr. Davidson in the event of Disability (as defined in the Davidson Agreement) or for Cause (as defined in the Davidson\nAgreement), in which event the Company would have no further obligations under the Davidson Agreement, except for payment of any Accrued\nObligations (as defined in the Davidson Agreement). Dr. Davidson’s employment automatically terminates upon his death, in which\nevent the Company would have no further obligations under the Davidson Agreement, except for payment of any Accrued Obligations. The Company\nmay terminate the Davidson Agreement without Cause immediately upon written notice of termination to Dr. Davidson, and in such event,\nin addition to payment of any Accrued Obligations due, subject to the Company’s receipt of a release from Dr. Davidson, Dr. Davidson\nis entitled to receive severance payments in an amount equal to Dr. Davidson’s base salary for a period of 12 months after the effective\ndate of the termination and a COBRA subsidy coverage for up to 12 months.\n\n \n\nDr. Davidson may generally terminate his agreement\nby providing 30 days written notice to the Company, provided, that to terminate his agreement for Good Reason (as defined in the Davidson\nAgreement), he must first meet certain procedural requirements set forth in the Davidson Agreement. If Dr. Davidson terminates his employment\nfor Good Reason, Dr. Davidson will be entitled to receive the same payments and benefits on the same terms and conditions as would be\napplicable upon termination by the Company without Cause.\n\n \n\nIf the Davidson Agreement is terminated by Dr. Davidson\nfor Good Reason or by us without Cause (other than on account of Dr. Davidson’s death or Disability), then, in addition to the severance\npayments described above, Dr. Davidson will be afforded an additional 12 months of vesting credit with respect to the Davidson Inducement\nAwards and extension of the post-termination exercise period for all vested stock options until the earliest of (i) the 12-month anniversary\nof the date of termination, (ii) the original expiration date of the applicable option or (iii) the 10th anniversary of the applicable\noption’s grant date.\n\n \n\nIf the Davidson Agreement is terminated by Dr.\nDavidson for Good Reason or by us without Cause (other than on account of Dr. Davidson’s death or Disability) in the three months\nbefore or 12 months following a Change in Control (as defined in the Davidson Agreement), then Dr. Davidson will be entitled to receive\nseverance payments in an amount equal to Dr. Davidson’s base salary for a period of 18 months after the effective date of the termination\n(or the Change in Control, if later), his target annual bonus, a COBRA subsidy for up to 18 months, and acceleration of all incentive\nequity awards, with any performance-based awards deemed earned at the greater of target or actual performance.\n\n \n\nThe Company expects to grant and issue as an inducement to Dr. Davidson’s\nemployment with the Company the Davidson RSU Inducement Award, consisting of 424,446 restricted stock units, and the Davidson Option Inducement\nAward to purchase 424,447 shares of Common Stock on June 12, 2026. The Davidson RSU Inducement Award, and the Davidson Option Inducement\nAward will be granted, outside of, but subject to the terms of, the Company’s 2017 Plan, and pursuant to the terms of the applicable\naward agreements. The Davidson RSU Inducement Award was issued, and the Davidson Option Inducement Award will be issued, without stockholder\napproval pursuant to Nasdaq Listing Rule 5635(c)(4).\n\n \n\n8\n\n \n\n \n\nDr. Davidson has no family relationships with\nany of the executive officers or directors of the Company. Except as otherwise described in the Merger Agreement, there are no arrangements\nor understandings between Dr. Davidson and any other person pursuant to which he was appointed as an executive officer of the Company.\nExcept as described above, Dr. Davidson is not party to any transaction required to be disclosed pursuant to Item 404(a) of Regulation\nS-K. \n\n \n\nThe foregoing description of the Davidson Agreement\ndoes not purport to be complete and is qualified in its entirety by reference to the full text of the Davidson Agreement, a copy of which\nwill be filed as an exhibit to the next periodic report that the Company files with the SEC. Complete copies of the form of stock option\ngrant notice and stock option agreement used for the Davidson Option Inducement Award and the restricted stock unit grant notice and\nrestricted stock unit agreement used as for the Davidson RSU Inducement Award will also be filed as exhibits to the next periodic report\nthat the Company files with the SEC.\n\n \n\n*Amendment and Restatement of Certain Executive\nEmployment Agreements*\n\n \n\nOn June 11, 2026, the Company amended the Amended\nand Restated Employment Agreement previously entered into with Cary J. Claiborne, its President and Chief Executive Officer (the “**Claiborne\nEA Amendment**”), the Employment Agreement previously entered into with Tony Goodman, its Chief Operating Officer (the “**Goodman\nEA Amendment**”), and the Employment Agreement previously entered into with Vinay Shah, its Chief Financial Officer (the\n“**Shah EA Amendment**” and, together with the Claiborne EA Amendment and the Goodman EA Amendment, the “**EA\nAmendments**”). The EA Amendments amended the severance provisions of the respective employment agreements to provide for\nthe payments specified below upon a termination of employment without cause within twenty-four months after an “Execution Trigger”\n(as defined in the EA Amendments) and provide that amounts payable shall include: (i) the annual bonus earned by the executive for the\nimmediately prior fiscal year to the extent unpaid, as if no such termination had occurred; (ii) the executive’s annual bonus target\nfor the year in which the termination date occurs, multiplied by a fraction (A) the numerator of which is the number of days in the fiscal\nyear that have transpired through the termination date and (B) the denominator of which is the number of days in such fiscal year, to\nbe paid in cash on the first payroll date after the effective date of the release required by the EA Amendments to be delivered by the\nexecutives in favor of the Company (with all revocation periods having expired unexercised); (iii) for Mr. Claiborne, a lump sum payment\nequal to two times his base salary and the higher of his target annual bonus opportunity and the annual bonus paid to him with respect\nto the fiscal year immediately preceding the fiscal year in which such termination occurred, to be paid in cash on the first payroll\ndate after the effective date of the release required by the agreement to be delivered by Mr. Claiborne in favor of the Company (with\nall revocation periods having expired unexercised) and in all events no later than 70 days after such termination and continuation of\nmedical coverage for 24 months; and (iv) for Mr. Shah and Mr. Goodman, a lump sum payment equal to the executive’s annual base\nsalary and the higher of executive’s target annual bonus opportunity and the annual bonus paid to executive with respect to the\nfiscal year immediately preceding the fiscal year in which such termination occurred, to be paid in cash on the first payroll date after\nthe effective date of the release required by the agreement to be delivered by the executives in favor of the Company (with all revocation\nperiods having expired unexercised) and in all events no later than 70 days after such termination and continuation of medical coverage\nfor 12 months.\n\n \n\nIn addition, upon closing of the Merger on June\n11, 2026, as compensation for additional duties performed in connection with evaluating the transactions described herein, Mr. Claiborne,\nMr. Shah and Mr. Goodman also received a discretionary bonus equal to $508,820, $327,600 and $156,000, respectively.\n\n \n\nThe foregoing description of the EA Amendments\ndo not purport to be complete and are qualified by reference to the full text of the Claiborne EA Amendment, Goodman EA Amendment and\nShah EA Amendment, copies of which are attached hereto as Exhibits 10.4, 10.5 and 10.6, respectively, and incorporated herein by reference.\n\n \n\n**Employee Inducement Awards**\n\n \n\nOn June 11, 2026, as inducements to entering into employment with the Company,\nthe Board approved sign-on equity awards to an Azora employee who is expected to commence employment with the Company immediately following\nthe Merger (collectively, the “**Employee Inducement Awards**”), in substantially the same form of awards granted\nto Dr. Davidson. The Employee Inducement Awards will consist of a one-time inducement equity award to such employees to be divided equally\nbetween restricted stock units (the “**Employee RSU Inducement Awards**”) and stock options to purchase Common Stock\n(the “**Employee Option Inducement Awards**” and together with the Employee RSU Inducement Awards, the “**Employee\nInducement Awards**”), to be granted one trading day following the announcement by the Company of the consummation of the\nMerger. The aggregate number of shares underlying the Employee Inducement Awards will be equal to 0.51% of the Company’s fully diluted\nshares of Common Stock outstanding following the consummation of Transactions, plus 0.51% of the number of shares of Common Stock that\nmay be issued upon exercise of all Milestone Pre-Funded Warrants and Milestone Incentive Warrants that may be issued to the PIPE Investors\nand the Azora Noteholders in Milestone Closings pursuant to the Purchase Agreement and the Note Exchange Agreements, respectively. The\nEmployee Inducement Awards will vest (i) with respect to that number of shares subject to the Employee Inducement Awards calculated as\nof closing of the Transactions, pro rata on a monthly basis over three years commencing on the one month anniversary of the effective\ngrant date hereof and (ii) with respect to that number of shares subject to the Employee Inducement Awards calculated based on the number\nof Milestone Warrants that may be issued pursuant to the Purchase Agreement and the Note Exchange Agreement, a pro rata portion of such\nawards will be subject to the same vesting included in (i) upon issuance by the Company of each Milestone Warrant, subject to catch up\nvesting for any awards that would have otherwise vested prior to issuance of such Milestone Warrants. The Employee Option Inducement Awards\nwill have an exercise price equal to the closing price of the Common Stock on the second trading day after the public announcement of\nthe Merger.\n\n \n\n9\n\n \n\n \n\nThe Company expects to grant and issue as an inducement\nto the individual’s employment with the Company the Employee RSU Inducement Award, consisting of 132,802 restricted stock units,\nand the Employee Option Inducement Award to purchase 132,802 shares of Common Stock on June 12, 2026. The Employee Inducement Awards will\nbe issued without stockholder approval pursuant to Nasdaq Listing Rule 5635(c)(4). In accordance with Rule 5635(c)(4) of the Nasdaq Listing\nRules, the Employee Inducement Awards will be made only to individuals who are commencing employment with the Company or a subsidiary\nthereof and such grants were made in connection with his or her commencement of employment with the Company or such subsidiary and as\nan inducement material to his or her entering into employment with the Company or such subsidiary.\n\n \n\nA complete copy of the form of stock option grant notice and stock option\nagreement used for the Employee Option Inducement Award and Employee Inducement Award will be filed as an exhibit to the next periodic\nreport that the Company files with the SEC. The Company will issue a press release with the information required by Nasdaq Listing Rule\n5635(c)(4) regarding the Davidson Option Inducement Award and Employee Inducement Awards.\n\n \n\n**Termination of Chief Operating Officer**\n\n \n\nMr. Goodman’s employment with the Company\nis expected to be terminated on or about 60 days following closing of the Merger. Upon such termination, and subject to his execution\nof a release, Mr. Goodman will be entitled to receive the severance payments and benefits set forth above under the Section of this Current\nReport titled “*Amendment and Restatement of Certain Executive Employment Agreements.”*"}