Item 1.01 Entry into a Material Definitive Agreement.
The disclosure under Item 5.02(e) below is incorporated by reference herein.
Item 2.05 Costs Associated with Exit or Disposal Activities.
On January 8, 2020, the Board of Directors (the “Board”) of Aduro Biotech, Inc. (the “Company” or “we”) approved a reduction in force that is intended to result in the termination of approximately 59% of the Company’s employee workforce, or approximately 51 employees. The reduction in force was approved in connection with the Company’s restructuring plan to further extend the Company’s operating capital and align personnel towards executing its clinical development strategy. The reduction in force is expected to be substantially complete by the end of the third quarter of 2020.
As a result of the reduction of force, the Company estimates that it will incur aggregate charges of approximately $6.1 million, including $2.0 million inone-time severance and employee termination related costs, approximately $3.8 million inone-time employee retention costs and relocation costs of approximately $250,000.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(e) On January 8, 2020, the Board approved the amendment (the “Isaacs Amendment”) of the Executive Employment Agreement between the Company and Stephen T. Isaacs, dated February 26, 2010, as amended July 31, 2014 (the “Isaacs Agreement”). Pursuant to the Isaacs Amendment, if Mr. Isaacs’ employment is terminated by the Company without just cause (as defined in the Isaacs Agreement) and not due to his permanent disability, or if he terminates his employment for good reason (as defined in the Isaacs Agreement), (i) he will receive a lump sum payment equal to 18 months of his base salary, increased from 12 months of base salary, and a lump sum payment equal to 1.5 times his target bonus, increased from apro-rated target bonus payment based on the part of the year served; (ii) the Company will pay all applicable COBRA payments for up to 18 months, increased from 12 months; and (iii) the unvested portion of all of his equity awards will become vested and exercisable on an accelerated basis as if the termination had occurred 12 months after the termination date, provided that in the event such termination occurs within the 18 months following a change in control of the Company, his equity awards will vest in full. Additionally, the Isaacs Agreement previously provided that his equity awards would accelerate in full upon a change in control of the Company, and the Isaacs Amendment modifies such provisions to provide for such acceleration only if his awards are not assumed, substituted or otherwise continued in connection with the change in control. The severance payments and benefits under the Isaacs Amendment are subject to Mr. Isaacs’ timely execution and the effectiveness of a release of claims against the Company. The Company will also pay for attorneys’ fees and costs incurred by Mr. Isaacs in connection with the preparation of the Isaacs Amendment or his separation agreement, up to a maximum amount of $25,000.
On January 8, 2020, the Board also approved the entry into a retention bonus agreement with each of Mr. Isaacs, Blaine Templeman, Dimitry Nuyten, M.D. and Celeste Ferber. The retention bonus agreements provide that the executive is eligible to receive aone-time cash retention bonus of $562,500 in the case of Mr. Isaacs, $305,424 in the case of Mr. Templeman, $264,000 in the case of Dr. Nuyten and $225,000 in the case of Ms. Ferber, in each case, subject to the executive’s continued employment with the Company through September 30, 2020. In the event the executive incurs an involuntary termination (as defined in the Company’s Amended and Restated Severance Plan), or in the case of Mr. Isaacs, in the event Mr. Isaacs is terminated without Just Cause (as defined in the Isaacs Agreement) or resigns for Good Reason (as defined in the Isaacs Agreement), or terminates due to death or disability prior to September 30, 2020, the retention bonus will become payable upon such termination. In addition, under the retention bonus agreements, in the event of termination the executive will have until the earlier of the18-month anniversary of his or her termination date or the expiration date of the stock options to exercise any outstanding stock options (the “Extended Option Exercise Period”). The retention bonus agreements also include a limited release of claims against the Company.
On January 8, 2020, the Board also approved the Extended Option Exercise Period for Andrea van Elsas, Ph.D.
Item 7.01. Regulation FD Disclosure.
A copy of the Company’s press release, dated January 9, 2020, announcing the corporate restructuring is furnished as Exhibit 99.1 hereto and is incorporated by reference herein.
