Item
5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
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On
August 18, 2021, the Board of Directors (the “Board”) of PolarityTE, Inc. (the “Company”) approved written employment
agreements for Richard Hague, Chief Operating Officer and President, Jacob Patterson, Interim Chief Operating Officer, and Cameron Hoyler,
Executive Vice President Corporate Development & Strategy, General Counsel, and Secretary. Each of the employment agreements are
the same, except for titles and duties, person or group to which each reports, and compensation amounts. The following description of
the employment agreements is not complete and is qualified in its entirety by reference to the full text of the employment agreements,
copies of which are filed as exhibits to this Current Report on Form 8-K and are incorporated by reference herein.
Richard
Hague’s titles and duties remain unchanged. Cameron Hoyler retained the titles listed above and also took on the title and duties
of Chief Compliance Officer. Jacob Patterson’s title of “Interim Chief Financial Officer” was re-classified as “Chief
Financial Officer.” The employment agreements provide that the Company shall indemnify and hold the executives harmless to the
fullest extent applicable to any other officer or director of the Company for acts and omissions in the executive’s capacity as
an officer, director, or employee of the Company or its primary operating subsidiary.
Under
the employment agreements, base salary may be increased any time, but can be decreased only on July 1 of each year. Each executive is
eligible for an annual cash bonus with a target equal to a percentage of base salary, which is 60% of base salary for Messrs. Hague,
Hoyler, and Patterson. An annual bonus may be based, in whole, in part, or not at all, on the executive’s performance or the performance
of the Company, the Board has the discretion to award a bonus that is higher or lower than the target amount or award no bonus at all,
an annual bonus awarded for one year is paid on or about February 1 of the following year, and an annual bonus is not deemed earned until
paid. Each executive is eligible to participate in any equity incentive or equity purchase plan established by the Company, as determined
by the Board in its sole discretion. Each executive is also entitled to fringe benefits and perquisites commensurate with those provided
to similarly situated executives of the Company. Each executive is entitled to 20 days paid vacation each calendar year and is entitled
to participate in all Company employee benefit plans, practices, and programs generally applicable to Company employees. The employment
agreement includes a “clawback” right with respect to compensation based on achieving results or stock prices if there is
a restatement of financial results with respect to which the determination of compensation is made.
The
employment agreement states each executive is employed at-will and may be terminated at any time. If termination is due to death or disability,
the executive (or heirs) is entitled to receive the then base salary for six months and reimbursement of the cost of health care benefits
for six months to the extent an election is made to continue benefits under the Consolidated Budget Reconciliation Act of 1985, as amended
(“COBRA”).
If
the executive is terminated for cause or the executive resigns without good reason, the executive is not entitled to payment of any additional
compensation post termination. However, if the executive resigns due to retirement after age 65, the executive is entitled to receive
a lump sum severance payment equal to three months of base salary.
If
the executive is terminated without cause or the executive resigns for good reason, the executive is entitled to payment of additional
compensation post termination, which is 12 months of base salary for Messrs. Hague and Hoyler and six months of base salary for Mr. Patterson,
a lump sum payment equal to a portion of the executive’s annual bonus at target (100% for Messrs. Hague and Hoyler and 50% for
Mr. Patterson), and reimbursement of the cost of health care benefits to the extent the executive has elected to continue benefits under
COBRA (12 months for Messrs. Hague and Hoyler and six months for Mr. Patterson).
If
the Company participates in a “fundamental transaction” and the executive’s employment is terminated by the Company
without cause during the 12-month period beginning six months prior to the date of the closing of the fundamental transaction, the executive
resigns for good reason during the six-month period preceding the date of the closing of the fundamental transaction, or the executive
resigns with or without good reason during the six-month period following the closing of the fundamental transaction, the executive is
entitled to payment of additional compensation after the closing of the fundamental transaction, which is 24 months of base salary for
Messrs. Hague, Hoyler, and Patterson, a lump sum payment equal to 100% of annual bonus at target for Messrs. Hague, Hoyler, and Patterson,
and reimbursement of the cost of health care benefits to the extent the executive has elected to continue benefits under COBRA (12 months
for Messrs. Hague and Hoyler and six months for Mr. Patterson).
The
employment agreement defines “cause”, “good reason”, and “fundamental transaction”, as follows:
“Cause”
means: (i) Executive’s willful and continued failure to substantially perform the material duties and obligations under the agreement,
which failure, if curable within the discretion of the Company, is not cured to the reasonable satisfaction of the Company within 30
days after receipt of written notice from the Company of such failure; (ii) executive’s failure or refusal to comply with the policies,
standards and regulations established by the Company from time to time that could reasonably be expected to result in a material loss,
damage, or injury to the Company, and if curable in the discretion of the Company, is not cured to the reasonable satisfaction of the
Company within 30 days after receipt of written notice of such failure from the Company; (iii) any act of personal dishonesty, fraud,
embezzlement, misrepresentation, or other unlawful act; (iv) executive’s violation of a federal or state law or regulation applicable
to the Company’s business; (v) executive’s violation of, or a plea of nolo contender or guilty to, a felony under
the laws of the United States or any state; or (vi) executive’s material breach of the terms of the agreement.
“Good
reason” means: (i) a material diminution of executive’s duties, position or responsibilities; (ii) a material diminution
in executive’s base salary (other than a reduction of not more than 10% that is applicable to similarly situated executives of
the Company); (iii) any other action or inaction that constitutes a material breach of this Agreement by the Company; or (iv) a material
change in the geographic location of Executive’s primary work facility or location, provided, that a relocation of less than 50
miles from executive’s then present location will not be considered a material change in geographic location.
“Fundamental
transaction” means: (i) the sale of 50 percent or more of the consolidated assets of the Company and its affiliated companies to
an unrelated person, (ii) the sale (including sale of the capital stock of a subsidiary holding intellectual property rights) or licensing
to an unrelated person of 50 percent or more (based on fair value) of the intellectual property rights held by the Company and its affiliated
companies; (iii) a merger, reorganization, or consolidation pursuant to which the holders of the Company’s outstanding voting power
and outstanding stock immediately prior to such transaction do not own a majority of the outstanding voting power and outstanding stock
or other equity interests of the resulting or successor entity immediately upon completion of such transaction, (iv) the acquisition
of all of the outstanding capital stock of the Company or its primary operating subsidiary by an unrelated person, or (v) any other transaction
in which the owners of the outstanding voting power of the Company or its primary operating subsidiary immediately prior to such transaction
do not own at least a majority of the outstanding voting power immediately upon completion of the transaction.
On
August 6, 2019, the Board adopted a change in control compensation plan for named executive officers and other senior executives. On
August 10, 2021, the Board terminated that plan in its entirety.