Carisma Therapeutics Inc. appointed Steven Kelly as new CEO

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. 


Directors


In accordance with the Merger Agreement, effective as of the closing of the Merger, Thomas R. Cannell, Jay S. Duker, M.D., Peter K Honig, M.D., Michael A.S. Jewett, M.D., Jason A. Keyes and Carrie L. Bourdow resigned from the Board and committees of the Board on which they respectively served, which resignations were not the result of any disagreements with the Company relating to the Company's operations, policies or practices.


In accordance with the Merger Agreement, effective as of the effective time of the Merger, the size of the Board was increased to seven members and the Board and its committees were reconstituted, consisting of six directors designated by Carisma, who are Steven Kelly, Regina Hodits, Ph.D., Briggs Morrison, M.D., Björn Odlander, M.D., Ph.D., Chidozie Ugwumba and Sanford Zweifach, and one director designated by the Company, who is Michael Torok.


Regina Hodits, Ph.D. and Björn Odlander, M.D., Ph.D. were appointed as Class III directors, whose terms expire at the Company's 2023 annual meeting, Michael Torok and Chidozie Ugwumba were appointed as Class I directors, whose terms expire at the Company's 2024 annual meeting, and Steven Kelly, Briggs Morrison, M.D. and Sanford Zweifach were appointed as Class II directors, whose terms expire at the Company's 2025 annual meeting. Sanford Zweifach was appointed as the Chair of the Board.


In addition, Chidozie Ugwumba, Regina Hodits, Ph.D., and Sanford Zweifach were appointed to the Audit Committee, and Chidozie Ugwumba was appointed the Chair of the Audit Committee. Briggs Morrison, M.D., and Sanford Zweifach were appointed to the Compensation Committee of the Board (the "Compensation Committee"), and Briggs Morrison was appointed the Chair of the Compensation Committee. Björn Odlander, M.D., Ph.D. and Sanford Zweifach were appointed to the Nominating and Corporate Governance Committee of the Board (the "NCG Committee"), and Björn Odlander, M.D., Ph.D. was appointed the Chair of the NCG Committee. Regina Hodits, Ph.D. and Briggs Morrison, M.D. were appointed to the Science Committee of the Board (the "Science Committee"), and Regina Hodits, Ph.D. was appointed the Chair of the Science Committee.


In connection with the execution of the Second Amendment to the Merger Agreement, which amendment included Michael Torok as the Company's designee to the Board in place of Dr. Thomas R. Cannell, D.V.M., on February 13, 2023, the Company and Carisma entered into a voting and support agreement (the "Voting and Support Agreement") with Bradley L. Radoff and Michael Torok (together with their affiliates, the "Investor Group"), pursuant to which the Investor Group agreed to vote their shares of Company common stock in favor of the adoption and approval of the Merger Agreement and the transactions contemplated thereby and all related proposals.


Other than pursuant to the Merger Agreement and the Voting and Support Agreement, there were no arrangements or understandings between the Company's newly appointed directors and any person pursuant to which they were elected. None of the Company's newly appointed directors has a direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.


Biographical information for each of the above named directors is set forth below.


Steven Kelly, age 57, served as Carisma's President and Chief Executive Officer and as a member of the Carisma board of directors since February 2018. Prior to joining Carisma, Mr. Kelly served as Chief Executive Officer of Pinteon Therapeutics, a biotechnology company, from April 2014 to July 2015 and as the Chief Executive Officer of Theracrine, Inc., a biopharmaceutical company, from June 2011 to August 2012. Mr. Kelly currently serves on the board of directors of Artelo Biosciences, Inc. (Nasdaq: ARTL). Mr. Kelly received a B.S. from the University of Oregon and an M.B.A. from Cornell University. The Company believes Mr. Kelly is qualified to serve as a member of the Board because of his extensive knowledge of the Company based on his current role as its President and Chief Executive Officer, as well as his significant biopharmaceutical industry and management experience.


Regina Hodits, Ph.D. served as a member of the Carisma board of directors since June 2018. Dr. Hodits has served as a Managing Partner at Wellington Partners, a venture capital firm investing in companies mainly in areas of technology, life sciences and digital media, since 2010. Prior to that, Dr. Hodits served as Partner of Atlas Ventures from 2004 to 2010. She currently serves on the board of directors of Onward Medical. Dr. Hodits received a Master's degree in Chemical Engineering and a Ph.D. in biochemistry from Technical University of Vienna, Austria. The Company believes Dr. Hodits is qualified to serve as a member of the Board because of her scientific background and training in biochemistry, extensive experience with biopharmaceutical companies and service on the boards of other biopharmaceutical companies.


Briggs Morrison, M.D. served as a member of the Carisma board of directors since July 2020. Dr. Morrison has served as President, Head of Research and Development of Syndax Pharmaceuticals Inc., a biopharmaceutical company, since February 2022; he was previously Chief Executive Officer of Syndax Pharmaceuticals Inc. from June 2015. Dr. Morrison currently serves on the boards of directors of Repare Therapeutics Inc. (Nasdaq: RPTX), Werewolf Therapeutics Inc. (Nasdaq: HOWL), Arvinas, Inc. (Nasdaq: ARVN) and Syndax Pharmaceuticals Inc. (Nasdaq: SNDX). Dr. Morrison received an M.D. from the University of Connecticut and a B.S. in Biology from Georgetown University. The Company believes Dr. Morrison is qualified to serve as a member of the Board due to his extensive executive leadership experience, medical background and training, and extensive service on the boards of other public and private biopharmaceutical companies.


Björn Odlander, M.D., Ph.D. served as a member of the Carisma board of directors since February 2022. Dr. Odlander is a co-founder of HealthCap, a family of venture capital funds investing globally in life sciences, where he has been a Managing Partner since 1996. Dr. Odlander received a M.D. and Ph.D. from Karolinska Institute. The Company believes Dr. Odlander is qualified to serve as a member of the Board with his medical background and training, industry background and extensive experience of investments in the life-science sector.


Michael Torok currently serves as the co-founder and managing director of JEC Capital Partners, LLC, an investment company with offices in the United States and Germany, since 2008, and Manager of JEC II Associates, LLC, an investment company, since 2008. Prior to that, he served as Chief Financial Officer for Integrated Dynamics Engineering Inc, a semiconductor equipment technology company that was acquired by Aalberts Industries (AMS: AALB). Earlier in his career, Mr. Torok served in various positions for PricewaterhouseCoopers LLP, a multinational professional services network of firms. Mr. Torok currently serves on the board of directors of Liberated Syndication, Inc. (formerly NASDAQ: LSYN), a podcasting platform for creators and advertisers, since December 2022. He previously served on the board of directors of Photon Control Inc. (formerly TSX: PHO), which designs, manufactures and distributes a wide range of optical sensors and systems to measure temperature and position, from 2016 to May 2018, and Symbility Solutions Inc., a software company focused on the insurance industry, from 2015 to January 2018. Mr. Torok received a B.S. in Finance and a Master in Finance from Boston College. The Company believes that Mr. Torok is qualified to serve as a member of the Board due to his executive leadership experience and extensive service on the boards of other public and private companies.


Chidozie Ugwumba served as a member of the Carisma board of directors since December 2020. Mr. Ugwumba has served as Managing Partner of SymBiosis, a venture capital firm focused on investments in biotherapeutics, since August 2021. Prior to SymBiosis, Mr. Ugwumba served as a Managing Director and the Co-Head of the Direct and Impact Investment Group of WIT, LLC, an investment management entity affiliated with Walton Enterprises, from 2018 to 2021 and on the Private Credit and Infrastructure teams at Partners Group, a global private investment manager, from 2015 to 2018. Mr. Ugwumba currently serves on the board of directors of Clene, Inc. (Nasdaq: CLNN). Mr. Ugwumba received an M.B.A. from Cornell University and a B.A. in Political Science from Amherst College. The Company believes Mr. Ugwumba is qualified to serve as a member of the Board because of his significant experience and expertise in biopharmaceutical investments and his overall industry knowledge.


Sanford Zweifach served as a member and Chair of the Carisma board of directors since November 2021. Mr. Zweifach has served as the Founder and President of Pelican Consulting Group, a biotechnology consulting firm, since December 2019. Mr. Zweifach founded and served as Chief Executive Officer of Nuvelution Pharma, Inc., a pharmaceutical company, from June 2015 to November 2019. Mr. Zweifach currently serves on the boards of directors of Essa Pharma Inc. (Nasdaq: EPIX) and Compugen Ltd. (Nasdaq: CGEN). Mr. Zweifach received a B.A. in Biology from University of California San Diego and a M.S. in Human Physiology from University of California Davis. The Company believes Mr. Zweifach is qualified to serve as Chair of the Board because of his extensive experience in the biopharmaceutical industry and service on the boards of other public and private biopharmaceutical companies.


Executive Officers


Effective as of the effective time of the Merger, the Board appointed Steven Kelly as the Company's President and Chief Executive Officer and principal executive officer, Richard Morris as the Company's Chief Financial Officer, Chief Compliance Officer and Treasurer, principal financial officer and principal accounting officer and Michael Klichinsky, Pharm.D., Ph.D. as Chief Scientific Officer, each to serve at the discretion of the Board.


There are no family relationships among any of the Company's newly appointed principal officers. None of the Company's newly appointed principal officers has a direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.


Biographical information for each of the above-named officers is set forth below.


Steven Kelly's biographical information is disclosed in the section above under the heading "Directors."


The Company has entered into an employment agreement with Mr. Kelly (the "Kelly Employment Agreement"), effective as of March 7, 2023, pursuant to which Mr. Kelly will serve as the Company's President and Chief Executive Officer. The employment agreement provides for Mr. Kelly's at-will employment and an annual base salary of $560,000, an annual bonus with a target amount equal to 55% of his base salary, as well as his ability to participate in the Company's employee benefit plans generally on the same basis as other similarly-situated employees. The Kelly Employment Agreement also provides that if his employment is terminated either (i) by the Company without Cause or (ii) by him with Good Reason (each as defined in the Kelly Employment Agreement), in either case within the period beginning three months before and ending twelve months after a Change in Control (as defined in the Kelly Employment Agreement) (the "Change in Control Period"), then Mr. Kelly will be entitled to receive, subject to his execution and nonrevocation of a release of claims in favor of the Company and compliance with all post-employment obligations under law or any restrictive covenant agreement with the Company, (a) a lump sum payment of (x) eighteen months of base salary and (y) an amount equal to 150% of his target bonus for the year of termination (or, if higher, his target bonus immediately prior to the Change in Control), (b) a lump sum payment equal to 100% of his target bonus for the year of termination (or, if higher, based on the target bonus immediately prior to the Change in Control) pro-rated based on the number of days he was employed during the calendar year in which his termination occurs, (c) COBRA health continuation for up to eighteen months and (d) 100% acceleration of all outstanding and unvested stock-based awards subject to time-based vesting. The Kelly Employment Agreement also provides that if his employment is terminated either (i) by the Company without Cause or (ii) by him with Good Reason, in either case outside the Change in Control Period, then Mr. Kelly will be entitled to receive, subject to his execution and nonrevocation of a release of claims in favor of the Company and compliance with all post-employment obligations under law or any restrictive covenant agreement with the Company, (a) twelve months of base salary payable over a period of twelve months following such termination, (b) a lump sum payment equal to 100% of his target bonus for the year of termination, pro-rated based on the number of days he was employed during the calendar year in which his termination occurs, and (c) COBRA health continuation for up to twelve months. The Kelly Employment Agreement contains a Section 280G limited cutback, in which Mr. Kelly is entitled to receive the greater of (a) the best net after-tax amount of any payments that are subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), calculated in a manner consistent with Section 280G of the Code, and (b) the amount of parachute payments he would be entitled to receive if they were reduced to an amount equal to one dollar less than the amount at which Mr. Kelly becomes subject to excise tax imposed by Section 4999 of the Code.


Richard Morris, age 49, served as Carisma's Chief Financial Officer since June 2021. Prior to joining Carisma, Mr. Morris served as Chief Financial Officer of Passage Bio, Inc., a genetic medicines company, from October 2019 to May 2021 and as Executive Vice President and Chief Financial Officer of Context Therapeutics, LLC, a biopharmaceutical company, or Context, from November 2017 to July 2019. Prior to Context, Mr. Morris served as Chief Financial Officer of Vitae Pharmaceuticals Incorporated, a biopharmaceutical company, from 2014 to October 2016, and held several senior financial roles over 12 years at ViroPharma Incorporated, a biopharmaceutical company, including Chief Accounting Officer and Vice President, Financial and Strategic Planning. Mr. Morris received a B.S. in Accounting from Saint Joseph's University and has been a CPA since 1999.


The Company entered into an employment agreement with Mr. Morris (the "Morris Employment Agreement"), effective as of March 7, 2023, pursuant to which Mr. Morris will serve as the Company's Chief Financial Officer. The employment agreement provides for Mr. Morris' at-will employment and an annual base salary of $467,000, an annual bonus with a target amount equal to 40% of his base salary, as well as his ability to participate in the Company's employee benefit plans generally on the same basis as other similarly-situated employees. The Morris Employment Agreement also provides that if his employment is terminated either (i) by the Company without Cause or (ii) by him with Good Reason (each as defined in the Morris Employment Agreement), in either case within Change in Control Period, then Mr. Morris will be entitled to receive, subject to his execution and nonrevocation of a release of claims in favor of the Company and compliance with all post-employment obligations under law or any restrictive covenant agreement with the Company, (a) a lump sum payment of (x) twelve months of base salary and (y) an amount equal to 100% of his target bonus for the year of termination (or, if higher, his target bonus immediately prior to the Change in Control), (b) a lump sum payment equal to 100% of his target bonus for the year of termination (or, if higher, based on the target bonus immediately prior to the Change in Control) pro-rated based on the number of days he was employed during the calendar year in which his termination occurs, (c) COBRA health continuation for up to twelve months and (d) 100% acceleration of all outstanding and unvested stock-based awards subject to time-based vesting. The Morris Employment Agreement also provides that if his employment is terminated either (i) by the Company without Cause or (ii) by him with Good Reason, in either case outside the Change in Control Period, then Mr. Morris will be entitled to receive, subject to his execution and nonrevocation of a release of claims in favor of the Company and compliance with all post-employment obligations under law or any restrictive covenant agreement with the Company, (a) twelve months of base salary payable over a period of twelve months following such termination, (b) a lump sum payment equal to 100% of his target bonus for the year of termination, pro-rated based on the number of days he was employed during the calendar year in which his termination occurs, and (c) COBRA health continuation for up to twelve months. The Morris Employment Agreement contains a Section 280G limited cutback, in which Mr. Morris is entitled to receive the greater of (a) the best net after-tax amount of any payments that are subject to the excise tax imposed by Section 4999 of the Code, calculated in a manner consistent with Section 280G of the Code, and (b) the amount of parachute payments he would be entitled to receive if they were reduced to an amount equal to one dollar less than the amount at which Mr. Morris becomes subject to excise tax imposed by Section 4999 of the Code.


Michael Klichinsky, Pharm.D., Ph.D., age 33, served as Carisma's Chief Scientific Officer since April 2022. He co-founded Carisma in 2016 and served as Vice President of Discovery of Carisma from October 2018 to April 2021 and as Senior Vice President of Research of Carisma from April 2021 to April 2022. Dr. Klichinsky received a Doctor of Pharmacy from the University of Sciences in Philadelphia and a Ph.D. in Pharmacology from the University of Pennsylvania.


The Company entered into an employment agreement with Mr. Klichinsky (the "Klichinsky Employment Agreement"), effective as of March 7, 2023, pursuant to which Mr. Klichinsky will serve as the Company's Chief Scientific Officer. The employment agreement provides for Mr. Klichinsky's at-will employment and an annual base salary of $420,000, an annual bonus with a target amount equal to 40% of his base salary, as well as his ability to participate in the Company's employee benefit plans generally on the same basis as other similarly-situated employees. The Klichinsky Employment Agreement also provides that if his employment is terminated either (i) by the Company without Cause or (ii) by him with Good Reason (each as defined in the Klichinsky Employment Agreement), in either case within the Change in Control Period, then Mr. Klichinsky will be entitled to receive, subject to his execution and nonrevocation of a release of claims in favor of the Company and compliance with all post-employment obligations under law or any restrictive covenant agreement with the Company, (a) a lump sum payment of (x) twelve months of base salary and (y) an amount equal to 100% of his target bonus for the year of termination (or, if higher, his target bonus immediately prior to the Change in Control), (b) a lump sum payment equal to 100% of his target bonus for the year of termination (or, if higher, based on the target bonus immediately prior to the Change in Control) pro-rated based on the number of days he was employed during the calendar year in which his termination occurs, (c) COBRA health continuation for up to twelve months and (d) 100% acceleration of all outstanding and unvested stock-based awards subject to time-based vesting. The Klichinsky Employment Agreement also provides that if his employment is terminated either (i) by the Company without Cause or (ii) by him with Good Reason, in either case outside the Change in Control Period, then Mr. Klichinsky will be entitled to receive, subject to his execution and nonrevocation of a release of claims in favor of the Company and compliance with all post-employment obligations under law or any restrictive covenant agreement with the Company, (a) twelve months of base salary payable over a period of twelve months following such termination, (b) a lump sum payment equal to 100% of his target bonus for the year of termination, pro-rated based on the number of days he was employed during the calendar year in which his termination occurs, and (c) COBRA health continuation for up to twelve months. The Klichinsky Employment Agreement contains a Section 280G limited cutback, in which Mr. Klichinsky is entitled to receive the greater of (a) the best net after-tax amount of any payments that are subject to the excise tax imposed by Section 4999 of the Code, calculated in a manner consistent with Section 280G of the Code, and (b) the amount of parachute payments he would be entitled to receive if they were reduced to an amount equal to one dollar less than the amount at which Mr. Klichinsky becomes subject to excise tax imposed by Section 4999 of the Code.


The foregoing descriptions of the Kelly Employment Agreement, Morris Employment Agreement and Klichinsky Employment Agreement do not purport to be complete and are qualified in their entirety by the full text of the Kelly Employment Agreement, Morris Employment Agreement and Klichinsky Employment Agreement, which are filed herewith as Exhibits 10.7, 10.8 and 10.9, respectively, and incorporated herein by reference.


Compensatory Plans


At the effective time of the Merger and in accordance with the Merger Agreement, the Company assumed the Carisma 2017 Plan and each Carisma option outstanding thereunder in accordance with the terms of the Carisma 2017 Plan and the terms of the nonstatutory stock option agreement or incentive stock option agreement by which such Carisma option is evidenced (the "2017 Plan Award Agreements").


Effective immediately after the effective time of the Merger, the Company (i) amended and restated the Sesen Bio, Inc. Amended and Restated 2014 Stock Incentive Plan to change the name of the plan to the "Carisma Therapeutics Inc. 2014 Amended and Restated Stock Incentive Plan" and to reflect the effect of the Reverse Stock Split (the "A&R 2014 Plan"), (ii) adopted a new form of Stock Option Agreement and a new form of Restricted Stock Unit Agreement for the grant of options and restricted stock units under the A&R 2014 Plan from and after the effective time of the Merger (together, the "2014 Plan Award Agreements"), and (iii) amended and restated the Sesen Bio, Inc. 2014 Employee Stock Purchase Plan, as amended, to change the name of the plan to the "Carisma Therapeutics Inc. 2014 Employee Stock Purchase Plan" and to restate and integrate all prior amendments thereto (as amended, the "ESPP").


The foregoing descriptions of the Carisma 2017 Plan, the forms of 2017 Plan Award Agreements, the A&R 2014 Plan, the forms of 2014 Plan Award Agreements and the ESPP do not purport to be complete and are qualified in their entirety by the full text of the Carisma 2017 Plan, the forms of 2017 Plan Award Agreements, the A&R 2014 Plan, the forms of 2014 Plan Award Agreements and the ESPP, which are filed herewith as Exhibits 10.10, 10.11, 10.12, 10.13, 10.14, 10.15 and 10.16, respectively, and incorporated herein by reference.


Departure of Officers


On March 7, 2023, effective as of the effective time of the Merger, Thomas R. Cannell, D.V.M., the Company's President and Chief Executive Officer Monica Forbes, the Company's Chief Financial Officer and Treasurer, and Mark Sullivan, the Company's General Counsel, Chief Compliance Officer and Corporate Secretary, resigned as officers of the Company.


In connection with their termination of employment, Dr. Cannell, Ms. Forbes and Mr. Sullivan are entitled to certain severance payments and benefits, in each case, as described in their respective employment agreements. For additional information regarding these payments and benefits, please refer to the Company's proxy statement/prospectus dated January 19, 2023, as supplemented on February 16, 2023, which is incorporated by reference in all respects.


In accordance with the Merger Agreement, prior to the effective time of the Merger, the Board adopted appropriate resolutions and took all other actions necessary and appropriate to (i) provide that each outstanding restricted stock unit and option, to the extent unvested, was accelerated in full and (ii) provide that the outstanding non-qualified stock options (the "NQSOs") held by the directors and officers, including Dr. Cannell, Ms. Forbes and Mr. Sullivan, were amended to extend the post-termination exercise period of each such NQSO to up to 210 days following such individual's termination of employment or other service relationship with the Company.