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 in
one-time severance and employee termination related costs, approximately
$3.8 million in one-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 a pro-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 a one-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 the 18-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.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
99.1 Press Release dated January 9, 2020
Special Note on Forward-Looking Statements
This current report on Form 8-K ("Current Report") contains forward-looking
statements for purposes of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include statements
regarding our intentions or current expectations concerning, among other things,
the timing and scope of the reduction in force and the amount of the related
costs. In some cases, you can identify these statements by forward-looking words
such as "may," "will," "continue," "anticipate," "intend," "could," "project,"
"expect" or the negative or plural of these words or similar expressions.
Forward-looking statements are not guarantees of future performance and are
subject to risks and uncertainties that could cause actual results and events to
differ materially from those anticipated, including, but not limited to, early
or preliminary clinical trial results may not be predictive of future results,
our history of net operating losses and uncertainty regarding our ability to
achieve profitability, our ability to develop and commercialize our product
candidates, our ability to use and expand our technologies to build a pipeline
of product candidates, our ability to obtain and maintain regulatory approval of
our product candidates, our ability to operate in a competitive industry and
compete successfully against competitors that have greater resources than we do,
our reliance on third parties, and our ability to obtain and adequately protect
intellectual property rights for our product candidates. We discuss many of
these risks in greater detail under the heading "Risk Factors" contained in our
quarterly report on Form 10-Q for the quarter ended September 30, 2019, which is
on file with the Securities and Exchange Commission. Any forward-looking
statements that we make in this Current Report speak only as of the date of this
Current Report. We assume no obligation to update our forward-looking statements
whether as a result of new information, future events or otherwise, after the
date of this Current Report.
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