Item 5.02 Departure of
Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(b) In accordance with the Merger Agreement, on the Closing Date, immediately prior to the effective time of the Merger, each of Sanford J.
Hillsberg, William L. Ashton, Richard Chin, M.D., Irving M. Einhorn, Stephen S. Galliker, Mary Ann Gray, Ph.D. and Rudolph Nisi, M.D. (together, the Prior Directors) resigned from the Registrants board of directors and any
respective committees of the Registrants board of directors on which they served, which resignations were not the result of any disagreements with the Registrant relating to the Registrants operations, policies or practices.
Also, pursuant to the Merger Agreement, on the Closing Date, prior to the effective time of the Merger, Stephen F. Ghiglieri, the
Registrants interim chief executive officer and chief financial officer, resigned from such position. In addition, on the Closing Date, the Registrants other executive officers, other than John T. Burns, the Registrants vice
president, finance and corporate controller, resigned from their positions effective as of the effective time of the Merger, namely: Thomas J. Knapp, the Registrants interim general counsel and secretary and Bijan Nejadnik, M.D., the
Registrants chief medical officer.
(c) Pursuant to the Merger Agreement, the Prior Directors appointed, effective as of the
effective time of the Merger, the following individuals to serve as the executive officers of the Registrant: Angelos M. Stergiou, M.D., Sc.D. h.c., as the Registrants president and chief executive officer (principal executive officer),
Aleksey N. Krylov, M.B.A., as the Registrants interim chief financial officer and treasurer (principal financial officer), Nicholas J. Sarlis, M.D., Ph.D., FACP, as the Registrants chief medical officer and senior vice president
(SVP), and Gregory M. Torre, Ph.D., J.D., as the Registrants chief regulatory officer and SVP. There are no family relationships among any of the Registrants newly appointed directors and executive officers.
Angelos M. Stergiou, M.D., Sc.D. h.c.
In September 2016, Private SELLAS entered into an employment agreement with Dr. Stergiou, the Registrants newly appointed chief
executive officer, which continues to govern Dr. Stergious employment with the Registrant following the Merger. Under this employment agreement, Dr. Stergiou is entitled to an annual base salary of $400,000 (subject to review and
adjustment in the discretion of the board of directors or its compensation committee) and a discretionary annual cash bonus, with a target amount no less than 30% of Dr. Stergious then
effective base salary (subject to continued employment and the achievement of certain performance objectives established by the employers board of directors or compensation
committee). This employment agreement also provides that Dr. Stergiou will receive a monthly housing allowance of $10,000 and may be eligible to receive an additional discretionary bonus as determined by the employer in its sole
discretion.
Dr. Stergious employment agreement also provides for additional bonuses in the event of an initial public offering
(IPO) or trade sale by Private SELLAS, in each case that meets certain terms. The Merger is not considered an IPO or trade sale for purposes of Dr. Stergious employment agreement, and Dr. Stergiou is not eligible to
receive the IPO bonuses or a trade sale bonus in connection with the Merger.
In connection with Dr. Stergiou entering into his
employment agreement, and pursuant to the terms thereof, Private SELLAS issued to Dr. Stergiou 827 Private SELLAS restricted stock units (RSUs) on November 22, 2016. Dr. Stergious Private SELLAS RSUs were scheduled
to vest on November 22, 2017 and were subject to accelerated vesting upon a change in control of Private SELLAS and certain terminations of employment; however, on August 7, 2017, the board of directors accelerated the vesting of such
Private SELLAS RSUs in full and Private SELLAS shares were issued to Dr. Stergiou upon settlement of the Private SELLAS RSUs.
Dr. Stergious employment agreement does not have a specified term and either party may terminate Dr. Stergious
employment agreement by providing written notice at any time, with or without cause. If the employer terminates Dr. Stergious employment without cause or Dr. Stergiou resigns for good reason, Dr. Stergiou will be eligible to
receive
a lump-sum payment
equal to two years of his annual base salary. In addition, if such termination or resignation occurs within one month prior to or twelve months following a change in
control, Dr. Stergiou will be eligible to receive full vesting of his then outstanding stock awards and any options held by Dr. Stergiou may be exercised during the 12 month period following termination, or if earlier, the expiration date
of the options. The employer must provide Dr. Stergiou with six months notice prior to a termination without cause and may elect to place Dr. Stergiou on garden leave (with base salary and other benefits) during such period. Upon
termination of his employment due to death or disability, Dr. Stergiou is eligible for
a pro-rated bonus
for the year in which terminated.
The following definitions have been adopted in Dr. Stergious employment agreement:
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cause means a termination determination by the employers board of directors on account of (a) Dr. Stergious conviction of (or pleas of guilty or nolo contendere to) a crime constituting
a misdemeanor involving dishonesty or moral turpitude or any crime constituting a felony; (b) Dr. Stergious misappropriation or embezzlement of the property of the employer (whether or not a misdemeanor or felony); (c)
Dr. Stergious commission of a material act of dishonesty or he otherwise engages in or is guilty of gross negligence or willful misconduct in the performance of his duties having the effect of materially injuring (whether financially or
otherwise) the business or reputation of the employer; (d) Dr. Stergious material breach of the provisions of any written
non-competition,
non-disclosure
or
non-solicitation
agreement, or any other agreement in effect with the employer, including without limitation the restrictive covenants of the employment agreement or the employers applicable written
code of business conduct and compliance policies; or (e) Dr. Stergious neglect, refusal or failure to perform his material duties under the employment agreement, other than a failure resulting from Dr. Stergious incapacity
due to physical or mental illness; provided, however, Dr. Stergiou shall have 30 days following the employers written notification specifying a condition under clause (c), (d) or (e) constituting cause to cure such
condition (to the extent the condition is curable as reasonably determined by the board of directors).
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good reason means the occurrence, without Dr. Stergious consent, of any one or more of the following: (i) a material diminution by the employer of Dr. Stergious authority, duties
or responsibilities, other than a diminution of authority, duties or responsibilities during a
30-day
cure period following the employers written notification of a condition constituting
cause, temporarily while Dr. Stergiou is physically or mentally incapacitated, or otherwise as required by applicable law; (ii) a material diminution in Dr. Stergious base salary which is not the result of an across
the board reduction in base salaries of other senior executives of the employer; or (iii) any action or inaction that constitutes a material breach by the employer of the employment agreement, including the failure of the employer to pay any
amounts due or the failure of the employer to obtain the express assumption of the employment agreement by a successor.
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Dr. Stergiou must provide written notice of a termination for good reason within 90 days of the event constituting good reason. The
employer has a period of 30 days to correct the act or failure to act that constitutes good reason. If the employer fails to cure, Dr. Stergiou must provide a second notice of termination at least 30 and no more than 90 days after the first
notice.
The description of Dr. Stergious employment agreement included herein is not complete
and is subject to and qualified in its entirety by reference to his employment agreement, a copy of which is attached as Exhibit 10.1 hereto and is incorporated herein by reference.
Nicholas J. Sarlis, M.D., Ph.D., FACP & Gregory M. Torre, Ph.D., J.D.
In September 2016, Private SELLAS entered into employment agreements with Dr. Sarlis, the Registrants chief medical officer and SVP,
and Dr. Torre, the Registrants chief regulatory officer and SVP, which agreements continue to govern Drs. Sarlis and Torres respective employment with the Registrant following the Merger. The employment agreements each provide for a
four-year term, unless terminated by either party for any reason, with or without cause, by providing written notice, and establish an annual base salary of $345,000. According to the terms of his agreement, Dr. Torre was also eligible to
receive a $75,000 signing bonus payable in three installments on October 31, 2016, December 31, 2016 and January 31, 2017, subject to his continued employment on each such date. The employment agreements provide that the executives
are eligible to receive a discretionary annual cash bonus of up to 25% of their base salary (subject to continued employment and the achievement of certain performance objectives established by the employers board of directors or compensation
committee). The executives are also eligible to receive an additional discretionary bonus as determined by the employer.
In connection
with entering into the employment agreements, and pursuant to the terms thereof, Private SELLAS issued options to purchase common shares of Private SELLAS to each of Drs. Sarlis and Torre. The option awards were scheduled to vest in three equal
annual installments beginning on January 1, 2018, and were subject to accelerated vesting upon a change in control of Private SELLAS and certain terminations of employment; however, such option awards were terminated by the board of directors
on August 7, 2017, prior to any vesting thereof in exchange for a payment of $1,000 to each of Drs. Sarlis and Torre.
If the
employer terminates one of the employment agreements without cause, the employer must provide the executive with written notice prior to the date of such termination (5 days notice for Dr. Torre and 1 days notice for
Dr. Sarlis). In addition, the agreements provide that if SELLAS terminates an executives employment without cause or an executive resigns for good reason, the executive will be eligible to receive the following severance benefits:
(i) an amount equal to 12 months of his annual base salary, payable in twelve substantially equal monthly
installments; (ii) pro-rated target
annual bonus to the extent earned and
accrued for the year in which the termination occurs; (iii) reimbursement of COBRA premiums for 12 months following termination, or if earlier, upon the date the executive fails to pay the COBRA cost of continuation coverage or the date
the executive is eligible for substantially similar coverage from a subsequent employer; and (iv) accelerated vesting of any outstanding equity awards. Although, if such termination or resignation occurs within 12 months following a sale
(as defined in Dr. Torres employment agreement), Dr. Torres severance benefit will be enhanced to 15 months of his annual base salary payable in two equal installments at six and twelve months following the date of
termination. The following definitions have been adopted in Dr. Sarlis and Dr. Torres employment agreements:
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cause means a termination determination by the employers board of directors on account of (a) Dr. Sarlis or Dr. Torres, as applicable, conviction of (or pleas of guilty or
nolo contendere to) a crime constituting a misdemeanor involving dishonesty or moral turpitude or any crime constituting a felony; (b) Dr. Sarlis or Dr. Torres, as applicable, neglect, refusal or failure to perform his
material duties under the employment agreement (excluding a failure due to Dr. Sarlis or Dr. Torres, as applicable, incapacity due to physical or mental illness); (c) Dr. Sarlis or Dr. Torres, as
applicable, commission of a material act of dishonesty, or he otherwise engages in or is guilty of gross negligence or willful misconduct in the performance of his duties; (d) Dr. Sarlis or Dr. Torres, as applicable,
material breach of the provisions of any
written non-competition,
non-disclosure or non-solicitation agreement,
including without limitation the restrictive covenants of the employment agreement or the employers
applicable written code of business conduct and compliance policies.
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good reason means the occurrence, without Dr. Sarlis or Dr. Torres, as applicable, consent, of any one or more of the following: (i) a material diminution by the employer of
Dr. Sarlis or Dr. Torres, as applicable, authority, duties or responsibilities, other than a diminution of authority, duties or responsibilities during
the 15-day cure
period
following the employers written notification of a condition constituting cause, temporarily while Dr. Sarlis or Dr. Torre, as applicable is physically or mentally incapacitated, or otherwise as required by applicable law;
(ii) a material diminution in Dr. Sarlis or Dr. Torres, as applicable, base salary which is not the result of an across the board reduction in base salaries of other senior executives of the employer; (iii) any action
or inaction that constitutes a material breach by the employer of the employment agreement, including the failure of the employer to pay any amounts due or the failure of the employer to obtain the express assumption of the employment agreement by a
successor; or (iv) a change in the principal place of employment.
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Dr. Sarlis or Dr. Torre, as applicable, must provide written notice of a termination
for good reason within 60 days of the event constituting good reason. the employer has a period of 30 days to correct the act or failure to act that constitutes good reason. If the employer fails to cure, Dr. Sarlis or Dr. Torre,
as applicable, must provide a second notice of termination at least 30 and no more than 90 days after the first notice.
The
description of Drs. Sarlis and Torres employment agreements included herein is not complete and is subject to and qualified in its entirety by reference to their respective employment agreements, copies of which are attached as Exhibit 10.2
and Exhibit 10.3 hereto, respectively, and are incorporated herein by reference.
Aleksey N. Krylov, M.B.A.
In October 2017, Private SELLAS entered into an employment agreement with Mr. Krylov, the Registrants interim chief financial
officer, which continues to govern Mr. Krylovs employment with the Registrant following the Merger. Under this employment agreement, Mr. Krylov is entitled to an annual base salary of $270,000 (subject to review and adjustment in the
discretion of the employers board of directors or a duly constituted committee thereof). Mr. Krylovs employment agreement is
at-will,
and provides that the Registrant may terminate
Mr. Krylovs employment at any time for any reason. Mr. Krylov may resign from his employment for any reason by giving the Registrant sixty days written notice.
The description of Mr. Krylovs employment agreement included herein is not complete and is subject to and qualified in its entirety
by reference to his employment agreement, a copy of which is attached as Exhibit 10.4 hereto and is incorporated herein by reference.
Stephen F.
Ghiglieri
As previously disclosed by the Registrant, on November 3, 2016, Mr. Ghiglieri and the Registrant entered into
an employment agreement dated November 1, 2016, pursuant to which Mr. Ghiglieri was engaged to serve as Galenas as executive vice president and chief financial officer, effective November 1, 2016 on
an at-will basis,
which agreement was amended in connection with his appointment as interim chief executive officer, effective February 21, 2017 and contained certain double
trigger severance provisions.
As previously disclosed by the Registrant, on March 21, 2017, Mr. Ghiglieri and the
Registrant executed a retention agreement effective February 1, 2017, whereby the Registrant would pay Mr. Ghiglieri a retention payment of $225,000, 50% of which was paid on June 30, 2017. Under such retention agreement, if the
Registrant terminated Mr. Ghiglieris employment other than for cause after June 30, 2017 and prior to December 31, 2017, he would be entitled to the remaining half of the total $225,000 retention payment.
The Merger constituted a change of control for purposes of Mr. Ghiglieris amended employment agreement, and the termination of his
employment occurred prior to December 31, 2017. Accordingly, upon the termination of his employment with the Registrant, notwithstanding his appointment to the Registrants board of directors, Mr. Ghiglieri became entitled to,
(i) pursuant to the terms of his amended employment agreement, his annual base salary of $450,000 for a period of twelve months following the date of termination together with payment of any unused vacation time, and (ii) pursuant to the
terms of his retention agreement, the remaining half of the total $225,000 retention payment. A lump sum of $824,395 was paid to Mr. Ghiglieri on the Closing Date in satisfaction of these obligations.
John T. Burns, CPA
As previously
disclosed by the Registrant, on August 22, 2016, Galena and Mr. Burns, vice president, finance and corporate controller, entered into a severance agreement pursuant to which, if there was a change of control of the Registrant during the
term of Mr. Burns employment agreement and (x) his compensation, benefits, title or duties are reduced or (y) he must relocate more than 50 miles from his current residence, Mr. Burns would be entitled to a severance
payment equal to nine months of his base salary of $225,750 per year, or $169,313, following the date of termination.
As previously
disclosed by the Registrant, on March 13, 2017, Mr. Burns and Galena executed a retention agreement effective February 1, 2017, whereby Galena would pay Mr. Burns a retention payment of $112,875, 50% of which was paid on
June 30, 2017 and 50% to be paid on December 31, 2017, if he remained employed through December 31, 2017 and subject to certain other terms and conditions.
The Merger constituted a change of control for purposes of Mr. Burns severance agreement and, while Mr. Burns will continue to
be employed by the Registrant, Mr. Burns will be relocating from California to New York
and his responsibilities with the Registrant will be reduced. As such, Mr. Burns became entitled to, (i) pursuant to the terms of his severance agreement, a severance payment of
$169,313, and (ii) pursuant to his retention agreement, the remaining half of the total $112,875 retention payment. A lump sum of $319,826 was paid to Mr. Burns on the Closing Date in satisfaction of these obligations.
(d) On the Closing Date, the Prior Directors appointed, effective as of the effective time of the Merger, (i) Fabio López and
David A. Scheinberg, M.D., Ph.D. as Class II directors of the Registrant, whose terms expire at the Registrants next annual meeting of stockholders; (ii) Stephen F. Ghiglieri and Angelos M. Stergiou, M.D., Sc.D. h.c. as
Class III directors of the Registrant, whose terms expire at the Registrants 2019 annual meeting of stockholders; and (iii) John Varian, Robert L. Van Nostrand and Jane Wasman as Class I directors of the Registrant, whose terms
expire at the Registrants 2020 annual meeting of stockholders (together the New Directors). On the Closing Date, following the appointment of the New Directors, the Registrants board of directors determined that each of
Stephen F. Ghiglieri, John Varian, Robert L. Van Nostrand and Jane Wasman met the independence requirements set forth in Nasdaq Listing Rule 5605(a)(2) and as otherwise set forth in the listing standards of The Nasdaq Stock Market LLC. On the
Closing Date, Jane Wasman was elected chair of the Registrants board of directors.
Audit Committee
At the effective time of the Merger, John Varian, Stephen F. Ghiglieri and Robert L. Van Nostrand were appointed to the audit committee of the
Registrants board of directors, and Mr. Varian was appointed as the chair of the audit committee.
Compensation Committee
At the effective time of the Merger, Robert L. Van Nostrand, Stephen F. Ghiglieri and Jane Wasman, were appointed to the compensation committee
of the Registrants board of directors, and Mr. Van Nostrand was appointed as the chair of the compensation committee.
Nominating and
Corporate Governance Committee
At the effective time of the Merger, Jane Wasman, Robert L. Van Nostrand and John Varian, were
appointed to the nominating and corporate governance committee of the Registrants board of directors, and Ms. Wasman was appointed as the chair of the nominating and corporate governance committee.
Affiliations with Equilibria Capital Management Limited
Fabio López is the chief executive officer and an indirect owner of Equilibria, which, together with its affiliates, holds more than 5%
of the Registrants outstanding capital stock. As a result of the Merger, Equilibria and its affiliates received, in the aggregate, approximately 2.74 million shares of the Registrants common stock in exchange for common shares of
Private SELLAS held immediately prior to the Merger, representing approximately 47% of the Registrants common stock.
Management and Strategic
Collaboration Agreement
In June 2016, Private SELLAS and Equilibria entered into a Management & Strategic Collaboration
Agreement (the Equilibria Collaboration Agreement), pursuant to which Equilibria provided certain strategic, management and capital raising advice to Private SELLAS in exchange for certain fees including payment of incurred
expenses. In addition, Private SELLAS agreed to pay Equilibria an incentive fee equal to 2% of the gross value paid by a purchaser if Private SELLAS were sold as part of a strategic transaction.
In February 2017, Private SELLAS and Equilibria amended the Equilibria Collaboration Agreement to expand the definition of strategic
transactions to include a reverse merger, such as the Merger. In such a situation, the incentive fee to Equilibria would be 2% of the post-merger fully diluted market value of Private SELLAS immediately after closing the merger, payable in a
combination of cash and common shares of Private SELLAS. The cash payment would be based on the per share price equaling the intrinsic value of Private SELLAS shares in the reverse merger transaction. The share-based component of the incentive
fee would be based on the post-closing fully diluted number of shares outstanding.
In August 2017 and October 2017, the parties further
amended the Equilibria Collaboration Agreement to determine the equity compensation payable to Equilibria in connection with the completion of the Merger. Accordingly, Private SELLAS made a cash payment of $85,000 to Equilibria and issued to
Equilibria 2,720 common shares of Private SELLAS immediately prior to completion of the Merger. Such common shares of Private
SELLAS converted into shares of the Registrants common stock at the effective time of the Merger and, together with the aforementioned cash payment, constituted payment in full of the
incentive fee due Equilibria in connection with the Equilibria Collaboration Agreement.
May 2015 $5.0 Million Convertible Note
In May 2015, Private SELLAS issued EQC Private Markets SAC Fund LtdEQC Biotech Sely I Fund (Sely I), an affiliate of
Equilibria, a $5.0 million convertible note, which note bore interest at a rate of 8%, and was originally to have matured in May 2017 (the 2015 Sely Note). In April 2017, Sely I elected to extend the maturity date of the 2015 Sely
Note to May 2019.
As originally issued, this note was mandatorily convertible upon a qualified initial public offering, as defined
therein (QIPO), and contemplated the issuance of a
5-year
warrant to purchase up to 50% of the number of common shares of Private SELLAS into which the note converted at 105% of the QIPO price per
share. The conversion rate was fixed at the lesser of the price per share determined by applying a
pre-money
valuation of $37.5 million to Private SELLAS immediately prior to the QIPO or a 30% discount to
the QIPO price per share. In February 2017, the parties clarified the terms of the note to expand the situations in which the 2015 Sely Note would automatically convert to include merger or reverse-merger transactions entered into by Private SELLAS,
such as the Merger.
In August 2017, Sely I and SELLAS further amended the note to agree upon the number of securities issuable upon
consummation of the Merger. Accordingly, effective immediately prior to completion of the Merger, Private SELLAS issued to Sely I 14,372 common shares of Private SELLAS and
5-year
warrants to purchase 7,186
common shares of Private SELLAS at a post-Merger price per share equal to 105% of the volume weighted average price of the Registrants common stock for the 30 calendar days following the closing date of the Merger, in full satisfaction of this
$5.0 million convertible note. The common shares of Private SELLAS issued pursuant to the 2015 Sely Note converted into shares of the Registrants common stock at the effective time of the Merger along with all other then outstanding
common shares of Private SELLAS.
Immediately prior to the closing of the Merger, pursuant to the 2015 Sely Note, Private SELLAS issued to
Sely I a warrant to purchase 7,186 common shares of Private SELLAS at a price per share equal to 105% of the volume weighted average price of the Registrants common stock for the 30 calendar days following the closing of the Merger. The
warrant was converted into warrants to purchase the number of shares of the Registrants common stock as determined pursuant to the Exchange Ratio and was assumed by the Registrant in accordance with its terms. A copy of the warrant is attached
as Exhibit 10.5 hereto and incorporated herein by reference.
June 2017 Bridge Financing
Equilibria participated in the June 2017 bridge financing described below and converted $0.1 million of advisory fees and expenses accrued
from March 1 to June 30, 2017 under the Equilibria Collaboration Agreement into 684 common shares of Private SELLAS. Affiliates of Equilibria also participated in the June 2017 bridge financing and subscribed for an aggregate of 34,680
common shares of Private SELLAS for an aggregate cash purchase price of $6.0 million.
August 2017 RSU Termination Agreement
In August 2017, Private SELLAS and an Equilibria affiliate entered into an agreement to terminate certain RSUs that had been granted in April
2017 to such affiliate under the Private SELLAS Plan. Equilibria was issued 1,323 common shares of Private SELLAS as consideration for the termination of the RSU grant.
June 2017 Bridge Financing
In
June 2017, Private SELLAS completed a $7.3 million bridge financing with its existing shareholders, pursuant to which it issued an aggregate of 42,395 common shares of Private SELLAS in exchange for $6.0 million of cash and conversion of $1.3
million of principal and accrued interest relating to certain outstanding convertible term notes. Under the same valuation terms as the bridge financing, Private SELLAS issued an additional 2,197 of its common shares
in cancellation of
$0.4 million of payables to certain of its related parties as follows, including 684 SELLAS Shares
to Equilibria in cancellation of a $0.1 million of management fee payable and 642 common shares of Private SELLAS
to Dr.
Stergiou in cancellation of net compensation payable of $0.1 million. Equilibria and certain of its affiliates participated in the bridge financing, as did Dr. Stergiou.
The table below sets forth the number of common shares of Private SELLAS issued to each of the (i) newly appointed directors and
executive officers of the Registrant and (ii) holders of more than 5% of capital stock of the Registrant and their affiliates in the June 2017 bridge financing and related conversion of payables, along with the aggregate purchase price
therefor.
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Name of Purchaser
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Shares of
Common
Stock
(#)
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Purchase
Price
($)
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Equilibria and affiliates
(1)
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35,364
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$
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6,090,728
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Angelos M. Stergiou, M.D., Sc.D.
h.c.
(2)
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2,694
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$
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463,975
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(1)
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Includes (i) 684 common shares of Private SELLAS issued upon conversion of advisory fees and expenses accrued from March 1 to June 30, 2017 under the Equilibria Collaboration Agreement, (ii) 34,590 common
shares of Private SELLAS issued to EQC Private Markets SAC Fund II LtdEQC Biotech Sely S Fund, an Equilibria affiliate, in exchange for cash, (iii) 45 common shares of Private SELLAS issued to Varibobi Financial Holdings Ltd. (an indirect
owner of Equilibria and an entity affiliated with Mr. López) in exchange for cash and (iv) 45 common shares of Private SELLAS issued to Daniel Tafur, Equilibrias chief investment officer, in exchange for cash.
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(2)
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Includes 2,052 common shares of Private SELLAS issued upon conversion of $353,338 of principal and accrued interest of a convertible term note held by Dr. Stergiou and 642 common shares of Private SELLAS issued
upon conversion of $110,637 of net compensation payable.
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Memorial Sloan Kettering Cancer Center
In connection with Private SELLAS entry into a license agreement with Memorial Sloan Kettering Cancer Center (MSK), Private
SELLAS agreed to issue 300 of its common shares to MSK, which was satisfied by the transfer of 150 common shares of Private SELLAS from each of Dr. Stergiou and Private SELLAS other
co-founder
to
MSK, for which they received no cash payment. In connection with the May 2017 amendment and restatement of the license agreement with MSK, Dr. Stergiou further assigned 350 of his SELLAS Shares to MSK, for which Dr. Stergiou received no
cash payment.
Private SELLAS Retention Agreements
In late July and early August 2017, Private SELLAS entered into retention agreements with Dr. Sarlis and Dr. Torre, which went into
effect upon the closing of the Merger, pursuant to which each executive is eligible to receive a retention bonus upon the consummation of a strategic transaction following the Merger. Each of Drs. Sarlis and Torre is eligible for such a retention
bonus if he remains employed in good standing on a full-time basis through the consummation of a strategic transaction, and the strategic transaction is consummated within the 18 months following the effective date of the agreement. Each executive
must sign a general release of claims to be eligible to receive the retention bonus.
The retention bonuses are payable in a lump sum
(less required payroll withholding and deductions) within 30 days following the date of consummation of such strategic transaction as follows:
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Aggregate Consideration
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Potential Retention Bonus
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Nicholas J.
Sarlis
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Gregory
M. Torre
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$0-$50
Million
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$
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250,000
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$
|
200,000
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$51-$100
Million
|
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$
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500,000
|
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$
|
300,000
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$101-$150
Million
|
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$
|
750,000
|
|
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$
|
400,000
|
|
$151-$200
Million
|
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$
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1 Million
|
|
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$
|
550,000
|
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$201-$250
Million
|
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$
|
1.5 Million
|
|
|
$
|
750,000
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> $251 Million
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$
|
1.75 Million
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$
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750,000
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In the event any contingent consideration is actually paid to the company and/or its securityholders with
respect to the strategic transaction, if including such contingent consideration as part of the aggregate consideration would have resulted in the payment of a higher retention bonus and if the payment of any retention bonus upon receipt of such
contingent payment would be deemed to be subject to a substantial risk of forfeiture for purposes of Section 409A of the Internal Revenue Code, the executive will be eligible to receive an additional retention bonus equal to the difference
between the retention bonus that would have been paid if the contingent consideration was included and the amount already paid upon consummation of the strategic transaction.
In addition, if either Drs. Sarlis or Torre make the first introduction of a strategic transaction counterparty to the company (as determined
in good faith by the companys board of directors), the amounts payable to such executive pursuant to the chart above will be doubled, provided the executive remains employed by the company through the date of the strategic transaction.
Each of Dr. Sarlis and Torres agreements will terminate on the earlier of the
18-month
anniversary of the date of the agreement and the date their employment is terminated.
For the
purposes of the retention agreements, a strategic transaction generally means any transaction or series of related transactions entered into by the company and any counterparty whereby, directly or indirectly, the company and any
counterparty effect a business combination involving more than 50% of the capital stock of the company and/or all or substantially all of its consolidate assets. Aggregate consideration means, with respect to a strategic transaction, an
amount equal to the aggregate value of cash and/or property paid or payable to the company and/or its securityholders in connection with the strategic transaction, subject to adjustment as set forth in the agreements. Contingent
consideration means any amounts payable to the company and/or its securityholders in connection with a strategic transaction that is payable following the closing of a strategic transaction and is contingent upon the performance of the company
or its assets and/or attainment of financial targets or other performance metrics following the consummation of the strategic transaction.
The foregoing description of the retention agreements does not purport to be complete and is qualified in its entirety by reference to the
full text of Dr. Sarlis and Dr. Torres retention agreements, copies of which are attached hereto as Exhibit 10.6 and Exhibit 10.7, respectively, and incorporated herein by reference.
Indemnity Agreements
On the
Closing Date, the Registrants board of directors approved a standard form of indemnity agreement for use with directors and executive officers, a copy of which is attached as Exhibit 10.8 hereto and incorporated herein by reference. Each of
the New Directors and the Registrants newly appointed executive officers has entered into, or is expected to enter into, the Registrants standard form of indemnity agreement with the Registrant.
Merger
As a result of the Merger,
(i) New Directors and newly appointed officers who held common shares of Private SELLAS immediately prior to the merger received the number of shares of the Registrants common stock equal to the Exchange Ratio multiplied by each common
share of Private SELLAS held by such New Director immediately prior to the Merger and (ii) and outstanding Private SELLAS RSUs held by New Directors were assumed by the Registrant and will be settled in the number of shares determined by
multiplying the Exchange Ratio by the number of common shares of Private SELLAS underlying such Private SELLAS RSUs. In addition, Mr. Ghiglieri received certain payments under his employment and retention agreements and Mr. Burns received
certain payments under his severance and retention agreements, each as described above.
Non-employee
director compensation policy
New Directors will be eligible to participate in the Registrants
non-employee
director compensation policy.
(e) On the Closing Date, pursuant to the Merger
Agreement, the Registrant assumed the Private SELLAS Plan. Additionally, the Registrants 2017 Equity Incentive Plan and 2017 Employee Stock Purchase Plan were each effective upon the effective time of the Merger on the Closing Date. Please see
the section of the Proxy Statement/Prospectus/Consent Solicitation Statement entitled Management Following the MergerEquity Benefit Plans for information regarding the Private SELLAS Plan, the Registrants 2017 Equity
Incentive Plan and the Registrants 2017 Employee Stock Purchase Plan, which such information is incorporated herein by reference.
The foregoing description of the Private SELLAS Plan, the Registrants 2017 Equity Incentive Plan and the Registrants 2017 Employee
Stock Purchase Plan does not purport to be complete and is qualified in its entirety by reference to the full text of the Private SELLAS Plan, the Registrants 2017 Equity Incentive Plan and the Registrants 2017 Employee Stock Purchase
Plan, copies of which are attached hereto as Exhibit 10.9, Exhibit 10.10 and Exhibit 10.11, respectively, and incorporated herein by reference.
On January 2, 2018, the Registrant entered into a consulting agreement with Thomas J. Knapp, the Registrants former interim general
counsel and secretary (the Consulting Agreement). Pursuant to the Consulting Agreement, Mr. Knapp shall serve in an advisory capacity rendering legal transition services related to the Merger, and shall receive a consulting fee in the
amount of $22,500.00 per month, payable on the last business day of each month beginning January 31, 2018. The Consulting Agreement will terminate by its terms on February 28, 2018 unless extended by mutual written agreement of the
parties.
The foregoing description of the Consulting Agreement does not purport to be complete and is qualified in its entirety by
reference to the full text of the Consulting Agreement, a copy of which is attached hereto as Exhibit 10.12 and incorporated by reference.
Item 5.07 Submission of Matters to a Vote of Security Holders.
As previously disclosed, the Special Meeting was held on December 29, 2017. There were 32,345,462 shares of common stock (on a
pre-Reverse
Stock Split basis) present in person or represented by proxy at the Special Meeting, at which the stockholders were asked to vote on ten proposals, each of which is described in more detail in the Proxy
Statement/Prospectus/Consent Solicitation Statement. Set forth below are the matters acted upon by the stockholders, and the final voting results of each such proposal, each presented on a
pre-Reverse
Stock
Split basis.
Proposal No. 1: Approval of the issuance of shares of the Registrants common stock to Private SELLAS securityholders pursuant
to the terms of the Merger Agreement
Proposal No. 1, as set forth in the Proxy Statement/Prospectus/Consent Solicitation
Statement, received the following votes:
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Broker
Non-Votes
|
18,324,534
|
|
2,124,453
|
|
104,456
|
|
11,792,009
|
Based on the votes set forth above, the Registrants stockholders approved Proposal No. 1, as set
forth in the Proxy Statement/Prospectus/Consent Solicitation Statement.
Proposal No. 2: Approval of the change of control of the Registrant
resulting from the Merger contemplated by the Merger Agreement and the Bermuda Merger Agreement
Proposal No. 2, as set forth in
the Proxy Statement/Prospectus/Consent Solicitation Statement, received the following votes:
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Broker
Non-Votes
|
18,469,965
|
|
1,977,609
|
|
105,879
|
|
11,792,009
|
Based on the votes set forth above, the Registrants stockholders approved Proposal No. 2, as set
forth in the Proxy Statement/Prospectus/Consent Solicitation Statement.
Proposal No. 3: Approval of an amendment to the Registrants Amended
and Restated Certificate of Incorporation, as amended to date, to effect a reverse stock split of the outstanding shares of the Registrants common stock, at a ratio of not less
than 1-for-10
and not greater
than 1-for-30, with
the exact ratio and
effective time of the reverse stock split to be determined by the Registrants board of directors and agreed upon by Private SELLAS and publicly announced by press release
Proposal No. 3, as set forth in the Proxy Statement/Prospectus/Consent Solicitation Statement, received the following votes:
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Broker
Non-Votes
|
27,409,364
|
|
4,718,634
|
|
217,464
|
|
0
|
Based on the votes set forth above, the Registrants stockholders approved Proposal
No. 3, as set forth in the Proxy Statement/Prospectus/Consent Solicitation Statement.
Proposal No. 4: Approval of the issuance of securities
in one or more
non-public
offerings where the maximum discount at which securities will be offered will be equivalent to a discount of 50% below the market price of the common stock of the Registrant, as
required by and in accordance with NASDAQ Listing Rule 5635(d)
Proposal No. 4, as set forth in the Proxy
Statement/Prospectus/Consent Solicitation Statement, received the following votes:
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Broker
Non-Votes
|
10,332,435
|
|
7,707,855
|
|
2,513,163
|
|
11,792,009
|
Based on the votes set forth above, the Registrants stockholders approved Proposal No. 4, as set
forth in the Proxy Statement/Prospectus/Consent Solicitation Statement.
Proposal No.
5: Approval of the Registrants 2017
Equity Incentive Plan
Proposal No. 5, as set forth in the Proxy Statement/Prospectus/Consent Solicitation Statement, received
the following votes:
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Broker
Non-Votes
|
10,981,847
|
|
7,223,539
|
|
2,348,067
|
|
11,792,009
|
Based on the votes set forth above, the Registrants stockholders approved Proposal No. 5, as set
forth in the Proxy Statement/Prospectus/Consent Solicitation Statement.
Proposal No.
6: Approval of the Registrants 2017
Employee Stock Purchase Plan
Proposal No. 6, as set forth in the Proxy Statement/Prospectus/Consent Solicitation Statement,
received the following votes:
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Broker
Non-Votes
|
11,316,532
|
|
6,981,711
|
|
2,255,210
|
|
11,792,009
|
Based on the votes set forth above, the Registrants stockholders approved Proposal No. 6, as set
forth in the Proxy Statement/Prospectus/Consent Solicitation Statement.
Proposal No. 7: Approval of the amendment and restatement of
Galenas bylaws as described in the Proxy Statement/Prospectus/Consent Solicitation Statement
Proposal No. 7, as set forth
in the Proxy Statement/Prospectus/Consent Solicitation Statement, received the following votes:
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Broker
Non-Votes
|
12,402,038
|
|
5,622,893
|
|
2,528,522
|
|
11,792,009
|
Based on the votes set forth above, the Registrants stockholders approved Proposal No. 7, as set
forth in the Proxy Statement/Prospectus/Consent Solicitation Statement.
Proposal No. 8: Approval of an amendment to the Galena Certificate of
Incorporation to allow the Galena Board to approve amendments to Galenas bylaws
Proposal No. 8, as set forth in the Proxy
Statement/Prospectus/Consent Solicitation Statement, received the following votes:
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Broker
Non-Votes
|
12,185,850
|
|
5,854,770
|
|
2,512,833
|
|
11,792,009
|
Based on the votes set forth above, the Registrants stockholders did not approve Proposal No. 8, as
set forth in the Proxy Statement/Prospectus/Consent Solicitation Statement.
Proposal No. 9: Approval, on
a non-binding, advisory
basis, of the compensation that may be paid or become payable to Galenas named executive officers in connection with the completion of the Merger, including the agreements and understandings pursuant to which such compensation may be paid or
become payable
Proposal No. 9, as set forth in the Proxy Statement/Prospectus/Consent Solicitation Statement, received the
following votes:
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Broker
Non-Votes
|
14,697,243
|
|
3,532,464
|
|
2,323,746
|
|
11,792,009
|
Based on the votes set forth above, the Registrants stockholders approved Proposal No. 9, as set
forth in the Proxy Statement/Prospectus/Consent Solicitation Statement.
Proposal No. 10: Approval of an adjournment of the Special Meeting, if
necessary, to solicit additional proxies if there are not sufficient votes in favor of Proposals No. 1 through Proposal No. 9.
Proposal No. 10, as set forth in the Proxy Statement/Prospectus/Consent Solicitation Statement, received the following votes:
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Broker
Non-Votes
|
12,420,907
|
|
5,918,842
|
|
2,213,704
|
|
11,792,009
|
Based on the votes set forth above, the Registrants stockholders approved Proposal No. 10, as set
forth in the Proxy Statement/Prospectus/Consent Solicitation Statement.