Item
5.02 - Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements
of Certain Officers.
We
have appointed Gisela Paulsen as Chief Operating Officer effective October 4, 2021. Ms. Paulsen, age 55, has previously served as the
General Manager, Precision Oncology of Exact Sciences Corporation from April 2020 to April 2021. Prior to joining Exact Sciences, Ms.
Paulsen served in various management roles at F. Hoffmann-La Roche Ltd. and Genentech, Inc since November 2005. She served as Roche and
Genentech’s Senior Vice President, Global Head, Product Development, Clinical Operations from January 2018 to April 2020, as Roche
and Genentech’s Vice President, Global Head, Product Development, Global Product Strategy & Late-Stage Portfolio Finance beginning
from March 2017 to February 2018, and as Genentech’s Vice President, Access Solutions from September 2014 to February 2017. Ms.
Paulsen received a B.S. in pharmacy and an M.S. in pharmaceutics and drug delivery from Uppsala University in Sweden.
Ms.
Paulsen will receive an annual salary of $390,000 and will be eligible to receive discretionary annual bonuses based on achievement of
personal and corporate performance goals established by Oncocyte, with a target bonus equal to 50% of her annual base salary.
We
granted Ms. Paulsen a one-time “sign-on” award of 375,000 stock options under the Oncocyte 2018 Equity Incentive Plan (the
“Plan”). The options will vest and thereby become exercisable as follows: twenty-five percent of the options will vest upon
completion of one year of continuous service as an employee, and the balance of the options will vest in 36 equal monthly installments,
commencing on the first anniversary of the effective date of the grant, subject to continued service as an employee on the applicable
vesting date. The exercise price of the stock options will be the fair market value of Oncocyte common stock determined in accordance
with the Plan. The options will expire if not exercised within ten years from the date of grant, subject to earlier termination in the
event of the termination of her employment. The options will be incentive stock options pursuant to Section 422 of the Internal Revenue
Code, to the extent permitted by the Code.
The
options will be subject to the terms and conditions of a stock option agreement, the Plan and Ms. Paulsen’s Severance Agreement
(as defined below).
Ms.
Paulsen will also be eligible to participate in various Oncocyte employee benefit programs and plans.
In
connection with Ms. Paulsen’s employment, we entered into a Change in Control and Executive Severance Plan Agreement (the “Severance
Agreement”), pursuant to which, if Ms. Paulsen’s employment is terminated for any reason, she will be entitled to receive
payment for all accrued but unpaid salary or bonuses actually earned, vacation or paid time off accrued, business expenses incurred in
accordance with our expense reimbursement policy and any other unpaid amounts arising under any employee benefit plans payable as of
the date of termination of her employment (the “Accrued Obligations”).
If
we terminate Ms. Paulsen’s employment without “cause” after six months of employment, or if she resigns for “good
reason” at any time, in addition to the Accrued Obligations, she will be entitled to receive (a) twelve months base salary; (b)
payment of her pro-rated target cash bonus for the year in which her employment terminates; (c) payment, for a period of twelve months
that she is not employed by another company which offers comparable health insurance, of any health insurance benefits that she was receiving
at the time of termination of her employment under an employee health insurance plan subject to COBRA; (d) her unvested stock options
that were scheduled to vest based on the passage of time during the twelve months following the date of termination of her employment
shall vest; and (e) an extended deadline to exercise any vested stock options by the earlier of (i) the one year anniversary of her termination
date and (ii) the maximum term of her applicable stock option grant.
If
we (or a successor in interest that has assumed our obligations under Ms. Paulsen’s Severance Agreement) terminate Ms. Paulsen’s
employment without “cause” or if she resigns for “good reason” within three months prior to or twelve months
following a change of control as defined in the Severance Agreement, she will be entitled to the benefits that apply for termination
without cause or resignation for good reason, except that she will receive an additional payment of 12 months of her target cash bonus
(which is in addition to the pro-rated target cash bonus), and all of her unvested stock options will vest rather than just those that
would were scheduled to vest during the twelve months following termination of her employment.
There
have been no transactions with Oncocyte and there are currently no proposed transactions with Oncocyte, in which the amount involved
exceeds $120,000 and in which Ms. Paulsen had or will have a direct or indirect material interest within the meaning of Item 404(a) of
Regulation S-K, since the beginning of the Company’s last fiscal year through the present. No arrangement or understanding exists
between Ms. Paulsen and any other person pursuant to which she was selected as an officer of the Company. No “family relationship,”
as that term is defined in Item 401(d) of Regulation S-K, exists between Ms. Paulsen, on the one hand, and any of our directors or executive
officers, on the other hand.
The
foregoing description of Ms. Paulsen’s Severance Agreement is only a summary, does not purport to be complete, and is qualified
in its entirety by the full text of the Severance Agreement, which has been filed as Exhibit 10.1 to this Report and is incorporated
by reference herein.