Item
5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain
Officers.
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Leadership
Restructuring
On
November 7, 2017, the Board of Directors (the “Board”) of OncoSec Medical Incorporated (the “Company”)
approved (i) the appointment of Mr. Daniel J. O’Connor as the Company’s new Chief Executive Officer, upon Mr. Punit
Dhillon’s voluntary resignation from such position, (ii) the confirmation of Mr. Dhillon to continue to serve in his current
position as the Company’s President, and (iii) entry into an executive employment agreement with each of Mr. O’Connor
and Mr. Dhillon in connection with such appointments and confirmations. Such resignations, appointments and confirmations became
effective on November 7, 2017. Mr. O’Connor and Mr. Dhillon both also serve as directors on the Board.
Mr. O’Connor, 53, has served on the
Board since September 2017. Most recently, Mr. O’Connor served as President, Chief Executive Officer, Director
and in other senior roles at Advaxis, Inc., a cancer immunotherapy company, from January 2013 until his resignation
in July 2017. Prior to that, Mr. O’Connor was Senior Vice President and General Counsel for BRACCO Diagnostics
from 2008 until 2012; Senior Vice President, General Counsel and Secretary for ImClone Systems, a biopharmaceutical company,
from 2002 until 2008; and, General Counsel at PharmaNet (now inVentiv Clinical Health), a clinical research
company from 1998 until 2001. Mr. O’Connor is a 1995 graduate of the Pennsylvania State University’s
Dickinson School of Law in Carlisle, Pennsylvania and currently serves as an Entrepreneur Trusted Advisor to its Dean. He graduated
from the United States Marines Corps Officer Candidate School in 1988 and was commissioned as an officer in the U.S. Marines,
attaining the rank of Captain while serving in Saudi Arabia during Operation Desert Shield. Mr. O’Connor is currently the
Vice Chairman of the Board of the Trustees of BioNJ. In October 2017, Mr. O’Connor was appointed to the New Jersey Biotechnology
Task Force by its Governor and was formerly a New Jersey criminal prosecutor.
In
connection with the appointment of Mr. O’Connor as the Company’s Chief Executive Officer, the Company has entered
into an executive employment agreement with Mr. O’Connor (the “O’Connor Employment Agreement”).
The terms of the O’Connor Employment Agreement generally provide for the following, among other things:
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An
initial term of three years, subject to certain provisions for automatic renewals thereafter;
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An
initial annual base salary of $400,000 in cash; provided that, subject to certain conditions as described in the O’Connor
Employment Agreement, Mr. O’Connor may elect on an annual basis to receive all or a portion of such salary in the form
of shares of the Company’s common stock;
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As
a one-time grant in connection with his appointment as Chief Executive Officer, an appointment stock option award to purchase
up to 2,000,000 shares of the Company’s common stock, which is contingent upon obtaining the approval of the Company’s
stockholders at its next annual meeting, has an exercise price of $1.25 per share, and is subject to vesting as to 1,000,000
of such shares on the date of such stockholder approval and as to the remaining 1,000,000 of such shares in equal monthly
installments over the 24 months following the date of grant;
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A
performance stock option award to purchase up to 500,000 shares of the Company’s common stock, which is contingent upon
obtaining the approval of the Company’s stockholders at its next annual meeting, has an exercise price of $1.25 per
share, and is subject to vesting as to 250,000 of such shares on the date of the Company’s achievement of 100% enrollment
in its PISCES study and as to the remaining 250,000 of such shares in one installment on the one-year anniversary of the date
of achievement of such enrollment;
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Eligibility
to receive an annual performance-based bonus, payable in cash or shares of the Company’s common stock at the Company’s
election, in a target amount of 50% of Mr. O’Conner’s then-current annual base salary;
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Eligibility
to receive additional equity awards at the discretion of the Board or a committee thereof;
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If
Mr. O’Connor is terminated other than for cause, if the Company fails to renew the O’Connor Employment
Agreement after the end of the initial term, or if Mr. O’Connor terminates his employment with the Company for good
cause, then he will be entitled to receive severance compensation from the Company of (i) if such termination occurs at least
six months but less than 12 months after the commencement date of his employment, cash payments equal to ½ of Mr. O’Connor’s
then-current annual base salary and annual performance-based bonus plus six months’ of medical and dental COBRA premiums;
(ii) if such termination occurs at least 12 months but less than 24 months after the commencement date of his employment,
cash payments equal to Mr. O’Connor’s then-current annual base salary and annual performance-based bonus plus
12 months’ of medical and dental COBRA premiums; or (iii) if such termination occurs at least 24 months after the commencement
date of his employment, cash payments equal to twice the amount of Mr. O’Connor’s then-current annual base salary
and annual performance-based bonus plus 24 months’ of medical and dental COBRA premiums;
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A
living allowance of up to $4,500 per month for the 12 months following the commencement date of Mr. O’Connor’s
employment and the Company’s reimbursement of certain of Mr. O’Connor’s travel expenses; and
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Certain
additional benefits, including reimbursement of certain income tax return preparation fees and other benefits customarily
made available to the Company’s other senior employees.
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Mr.
O’Connor will receive compensation for his services as the Company’s Chief Executive Officer pursuant to the terms
of the O’Connor Employment Agreement, and will receive no additional or separate compensation for his services as a director
of the Company. In connection with Mr. O’Connor’s prior appointment as a director of the Company, the Company and
Mr. O’Connor have entered into an indemnification agreement in the same form as the indemnification agreements the Company
has entered into with its other officers and directors, which generally provides that the Company will indemnify Mr. O’Connor
to the fullest extent permitted by law against liabilities that may arise by reason of his service for the Company. Other than
these arrangements, there are no arrangements or understandings between Mr. O’Connor and any other persons pursuant to which
he was selected as an officer of the Company, and Mr. O’Connor is not a party to any transaction that would require disclosure
under Item 404(a) of Regulation S-K promulgated by the Securities and Exchange Commission. There are also no family relationships
between Mr. O’Connor and any of the Company’s other directors or executive officers.
In
addition, the Company and Mr. Dhillon have entered into an amended and restated executive employment agreement (the “Dhillon
Employment Agreement” and together with the O’Connor Employment Agreement, the “Employment Agreements”),
which amends, restates and replaces in its entirety Mr. Dhillon’s prior employment agreement with the Company. The terms
of the Dhillon Employment Agreement generally provide for the following, among other things:
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An
initial term of three years, subject to certain provisions for automatic renewals thereafter;
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An
initial annual base salary of $428,500 in cash; provided that, subject to certain conditions as described in the Dhillon Employment
Agreement, Mr. Dhillon may elect on an annual basis to receive all or a portion of such salary in the form of shares of the
Company’s common stock;
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Eligibility
to receive an annual performance-based bonus, payable in cash or shares of the Company’s common stock at the Company’s
election in a target amount of 40% of Mr. Dhillon’s then-current annual base salary;
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Certain
severance compensation, as follows: (a) if Mr. Dhillon is terminated other than for cause, by death or by disability, or if
Mr. Dhillon terminates his employment with the Company for good cause, then he will be entitled to receive from the Company
(i) cash payments equal to the sum of Mr. Dhillon’s then-current annual base salary for a 24-month period; (ii) cash
payments equal to a pro-rata portion of the amount of the annual performance-based bonus most recently paid to Mr. Dhillon
under the Dhillon Employment Agreement; (iii) cash payments of the monthly cost of health care continuation coverage for Mr.
Dhillon and his dependents for a 24-month period; and (iv) acceleration of vesting with respect to all outstanding equity
awards held by Mr. Dhillon as of the termination date; and (b) if Mr. Dhillon’s employment terminates due to death or
disability, then he will be entitled to receive from the Company a lump-sum cash payment equal to a pro-rata portion of the
amount of the annual performance-based bonus most recently paid to Mr. Dhillon under the Dhillon Employment Agreement; and
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Certain
additional benefits, including reimbursement of certain income tax return preparation fees and other benefits that are customarily
made available to the Company’s other senior employees.
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Any
severance compensation that may be earned under either of the Employment Agreements will be paid as salary continuation over the
applicable period and in accordance with the Company’s standard payroll practices, except as stated otherwise in the descriptions
above. In addition, the Company’s payment of any severance compensation under the Employment Agreements would be subject
to the applicable executive’s execution and non-revocation of a separation and release agreement in favor of the Company.
The Employment Agreements do not include any “gross up” provision for any excise taxes that may be triggered under
Section 280G or 4999 of the Internal Revenue Code, but instead include a “best-net” cutback provision pursuant to
which any compensation earned under the applicable agreement would be reduced to avoid triggering any such excise taxes unless
the after-tax benefit is greater to the executive without the cutback. Additionally, all equity awards described above, including
any shares of the Company’s common stock that may be issued in lieu of cash for Mr. O’Connor’s or Mr. Dhillon’s
annual base salary, have been or will be granted under and pursuant to the terms of the Company’s stock incentive plan and
its standard forms of agreements for awards granted thereunder, except that the appointment and performance stock option awards
described above have been granted outside the terms of the Company’s stock incentive plan pursuant to the terms of stand-alone
stock option award agreements (the “Stock Option Award Agreements”).
Additionally,
under the terms of each of the Employment Agreements:
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The
term “for cause” means (i) commission of a crime involving dishonesty, breach of trust, or physical harm to any
person; (ii) willful engagement in conduct that is in bad faith and materially injurious to the Company, including but not
limited to, misappropriation of trade secrets, fraud or embezzlement; (iii) commission of a material breach of the executive’s
employment agreement, which breach is not cured within 30 days after written notice to the executive from the Company; (iv)
willful refusal to implement or follow a reasonable and lawful policy or directive of the Company, which breach is not cured
within 30 days after written notice to the executive from the Company; or (v) engagement in misfeasance or malfeasance demonstrated
by a pattern of failure to perform job duties diligently and professionally, which misfeasance or malfeasance is not cured
30 days after written notice to the executive from the Company;
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The
term “good cause” means, subject to certain cure periods and written notification of consent by the executive,
the occurrence of any one or more of the following events: (i) a reduction in the amount of the executive’s base compensation
in a manner that disproportionately adversely affects the executive, as compared to other senior Company management; (ii)
a material and adverse change in the executive’s duties, authority or responsibilities with the Company relative to
the duties, authority or responsibilities in effect immediately prior to such reduction; (iii) a material breach by the Company
of any of its obligations under the applicable employment agreement; or (iv) for the O’Connor Employment Agreement only,
a reduction in the amount of the executive’s base compensation by more than 10% from the initial base compensation set
forth in the agreement; and
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The
term “disability” means the executive becoming eligible for the Company’s long-term disability benefits
or, in the sole opinion of the Company, the executive’s inability to carry out the responsibilities and functions of
the position held by the executive by reason of any physical or mental impairment for more than 90 consecutive days or more
than 120 days in any 12-month period.
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The
above description of the Employment Agreements and the Stock Option Award Agreement is intended to be a summary, it does not purport
to be complete and it is qualified in its entirety by reference to the full text of the Employment Agreements and the Stock Option
Award Agreements. Complete copies of the Employment Agreements and the Stock Option Award Agreements are attached as Exhibits
10.1, 10.2, 10.3 and 10.4 to this Current Report on Form 8-K and are incorporated herein by reference.
Cash
Bonuses
On
November 4, 2017, the Compensation Committee of the Board approved one-time, discretionary cash bonus awards to certain of the
Company’s employees and consultants, including the Company’s named executive officers, as follows:
Name
and Position
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Cash
Bonus Award Amount ($)
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Punit Dhillon,
President and former Chief Executive Officer
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171,380
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Richard Slansky,
Chief
Financial Officer
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90,000
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Sheela Mohan-Peterson,
Chief Legal and Compliance Officer
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70,000
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