Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers.
As previously disclosed, on April 15, 2019, Achaogen, Inc. (the ‘Company’) filed a voluntary petition for bankruptcy protection under Chapter 11 of Title 11 of the United States Bankruptcy Code. The filing was made in the United States Bankruptcy Court for the District of Delaware (the ‘Court’) (Case No. 19-10844).
Key Employee Incentive Plan
On May 8, 2019, the Court approved the implementation of the Company’s Key Employee Incentive Plan (the ‘KEIP’) which was designed to maximize the value of the Company’s estate. The KEIP provides incentive payments to four KEIP participants based on the achievement of certain performance goals. The four KEIP Participants are Blake Wise, Chief Executive Officer; Janet Dorling, Chief Product Officer; Liz Bhatt, Chief Operating Officer; and Gary Loeb, General Counsel (collectively, the ‘KEIP Participants’).
Pursuant to the terms of the KEIP, a KEIP payout (‘KEIP Payout’) may be paid in connection with the sale of the Company’s assets based on a percentage of the proceeds from the asset sale (whether in one or a series of asset sales) net of any applicable bid protections approved by the Court and investment banker fees (the ‘Asset Sale Proceeds’) as outlined below. Each KEIP Participant will receive a one-time KEIP payment if Asset Sale Proceeds equal or exceed $35 million. For Asset Sale Proceeds between $35 million and $55 million, the KEIP Payout will be $450,000 plus 3% of Asset Sale Proceeds exceeding $35 million. For Asset Sale Proceeds over $55 million, the KEIP Payout will be $1,050,000 plus 5% of Asset Sale Proceeds exceeding $55 million until such time that Asset Sale Proceeds reach $136,516,000. No KEIP Payout will be made on account of Asset Sale Proceeds exceeding $136,516,000. The KEIP Payout will be distributed upon the consummation of a sale of the Company’s assets and receipt by the Company of the Asset Sale Proceeds. The KEIP Payout will be split among the KEIP Participants pro rata based on their base salaries.
In the event of the involuntary termination of employment of a KEIP Participant by the Company for cause or voluntary resignation by a KEIP Participant prior to the consummation of a sale of the Company’s assets, the KEIP Participant will forfeit any right to a KEIP payment.
|
Asset Sale Proceeds
|
KEIP Payout
|
|
< $35,000,000
|
$0
|
|
$35,000,000
|
$450,000
|
|
$40,000,000
|
$600,000
|
|
$45,000,000
|
$750,000
|
|
$50,000,000
|
$900,000
|
|
$55,000,000
|
$1,050,000
|
Key Employee Retention Plan
On May 8, 2019, the Court also approved the implementation of the Company’s Key Employee Retention Plan (‘KERP’) which was designed to retain key employees in their current roles over the near term while providing them with financial stability. The KERP covers the 26 non-insider employees of the Company as of May 8, 2019 (the ‘KERP Participants’) and awards each KERP Participant a payment equal to 20% to 42% of his or her base salary, not to exceed $1,356,455 in the aggregate, unless he or she voluntary resigns or is terminated by the Company for cause prior to the consummation of the sale of the Company’s assets. If Asset Sale Proceeds are ultimately sufficient to result in a 75% recovery to all holders of allowed general unsecured claims, the KERP Participants will receive an additional $250,000 in the aggregate to be allocated pro rata among all KERP Participants and paid ahead of all remaining general unsecured claims. KERP payments will be distributed upon the consummation of a sale of the Company’s assets.
Cautionary Statements Regarding Trading in the Company’s Securities
The Company’s securityholders are cautioned that trading in the Company’s securities is highly speculative and poses substantial risks during the pendency of the Chapter 11 case. Trading prices for the Company’s securities
may bear little or no relationshi
p to the actual recovery, if any, by holders thereof in the Company’s Chapter 11 case. Accordingly, the Company urges extreme caution with respect to existing and future investments in its securities.
Additional Information Regarding the Chapter 11 Case
Additional information about the Chapter 11 case and sale process is available through the Company’s claims agent Kurtzman Carson Consultants LLC at www.kccllc.net/achaogen. Information contained on, or that can be accessed through, such web site or the Court’s web site is not part of this Current Report.