Exhibit 10.7

DIADEXUS, INC.

CHANGE IN CONTROL AND SEVERANCE AGREEMENT

This Change in Control and Severance Agreement (the “Agreement”) is made and
entered into by and between R. Michael Richey (“Executive”) and diaDexus, Inc.
(the “Company”), effective as of the latest date set forth by the signatures of
the parties hereto below (the “Effective Date”).

RECITALS

A.         It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change in control. The
Compensation Committee (the “Compensation Committee”) of the Board of Directors
of the Company (the “Board”) recognizes that such consideration as well as the
possibility of an involuntary termination can be a distraction to Executive and
can cause Executive to consider alternative employment opportunities. The
Compensation Committee has determined that it is in the best interests of the
Company and its stockholders to assure that the Company will have the continued
dedication and objectivity of Executive, notwithstanding the possibility, threat
or occurrence of such an event.

B.         The Compensation Committee believes that it is in the best interests
of the Company and its stockholders to provide Executive with an incentive to
continue Executive’s employment and to motivate Executive to maximize the value
of the Company upon a Change in Control (as defined below) for the benefit of
its stockholders.

C.         The Board believes that it is imperative to provide Executive with
severance benefits upon certain terminations of Executive’s service to the
Company that enhance Executive’s financial security and provide incentive and
encouragement to Executive to remain with the Company notwithstanding the
possibility of such an event.

D.         Certain capitalized terms used in this Agreement are defined in
Section 7 below.

The parties hereto agree as follows:

1.         Term of Agreement. This Agreement shall become effective as of the
Effective Date and terminate upon the date that all obligations of the parties
hereto with respect to this Agreement have been satisfied.

2.         At-Will Employment. The Company and Executive acknowledge that
Executive’s employment is and shall continue to be “at-will,” as defined under
applicable law. If Executive’s employment terminates for any reason, Executive
shall not be entitled to any payments, benefits, damages, awards or compensation
other than as provided by this Agreement.

3.         Termination without Cause Outside of a Change in Control Period. If,
on or after the first anniversary of Executive’s commencement of employment with
the Company, the Executive’s employment with the Company is terminated by the
Company other than for Cause and such

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termination occurs outside of a Change in Control Period, then, subject to
Executive executing a general release of all claims against the Company and its
affiliates in a form acceptable to the Company (a “Release of Claims”) and such
Release of Claims becoming effective and irrevocable within sixty (60) days
following such termination of employment, then in addition to any accrued but
unpaid salary, bonus, vacation and expense reimbursement payable in accordance
with applicable law (“Accrued Obligations”), the Company shall provide Executive
with the following:

(a)         Severance. Executive shall be entitled to receive an amount equal to
six (6) months of Executive’s base salary at the rate in effect immediately
prior to Executive’s termination of employment payable in substantially equal
installments in accordance with the Company’s standard payroll policies, less
applicable withholdings, with such payments to commence on the payroll date that
immediately follows the date the Release of Claims is effective and irrevocable.

(b)         Continued Healthcare. If Executive elects to receive continued
healthcare coverage pursuant to the provisions of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall
directly pay, or reimburse Executive for, the COBRA premium for Executive and
Executive’ s covered dependents through the earlier of (i) the six (6) month
anniversary of the date of Executive’s termination of employment and (ii) the
date Executive and Executive’s covered dependents, if any, become eligible for
healthcare coverage under another employer’s plan(s). After the Company ceases
to pay or reimburse premiums pursuant to the preceding sentence, Executive may,
if eligible, elect to continue healthcare coverage at Executive’s expense in
accordance with the provisions of COBRA.

4.         Certain Terminations During a Change in Control Period. If, on or
after the first anniversary of Executive’s commencement of employment with the
Company, the Executive’s employment with the Company is terminated by the
Company for other than Cause or by Executive for Good Reason and such
termination occurs during a Change in Control Period, then, subject to Executive
executing a Release of Claims and such Release of Claims becoming effective and
irrevocable within sixty (60) days following such termination of employment, in
addition to the Accrued Obligations, the Company shall provide Executive with
the following:

(a)         Severance. Executive shall be entitled to receive an amount equal to
six (6) months of Executive’s base salary at the rate in effect immediately
prior to Executive’s termination of employment payable in substantially equal
installments in accordance with the Company’s standard payroll policies, less
applicable withholdings, with such payments to commence on the payroll date that
immediately follows the date the Release of Claims is effective and irrevocable.

(b)         Continued Healthcare. If Executive elects to receive continued
healthcare coverage pursuant to the provisions of COBRA, the Company shall
directly pay, or reimburse Executive for, the COBRA premium for Executive and
Executive’ s covered dependents through the earlier of (i) the six (6) month
anniversary of the date of Executive’s termination of employment and (ii) the
date Executive and Executive’s covered dependents, if any, become eligible for
healthcare coverage under another employer’s plan(s). After the Company ceases
to pay premiums pursuant to the preceding sentence, Executive may, if eligible,
elect to continue healthcare coverage at Executive’s expense in accordance with
the provisions of COBRA.

 

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(c)         Equity Awards. Effective immediately prior to such termination, the
Executive’s options to purchase shares of the common stock of the Company shall
become vested and exercisable and/or the restrictions applicable to unvested or
restricted shares of the common stock of the Company held by Executive shall
lapse, in each case, with respect to that number of shares which would have
become vested had Executive remained in continuous service with the Company for
an additional six months following the date of Executive’s termination of
employment.

5.         Other Termination. If Executive’s employment with the Company is
terminated by the Company for Cause or by Executive for any or no reason other
than Good Reason within a Change in Control Period or if Executive fails to
execute a Release of Claims or such Release of Claims fails to become effective
and irrevocable within sixty (60) days following Executive’s termination of
employment, then Executive shall not be entitled to any benefits hereunder other
than to receive Executive’s Accrued Obligations and to elect any continued
healthcare coverage as may be required under COBRA or similar state law.

6.         Limitation on Payments.

(a)         Parachute Payments. Any provision of this Agreement to the contrary
notwithstanding, if any payment or benefit Executive would receive from the
Company pursuant to this Agreement or otherwise (“Payment”) would (i) constitute
a “parachute payment” within the meaning of Section 280G of the Code, and
(ii) but for this sentence, be subject to the excise tax imposed by Section 4999
of the Code (the “Excise Tax”), then such Payment will be equal to the Reduced
Amount (as defined below). The “Reduced Amount” will be either (1) the largest
portion of the Payment that would result in no portion of the Payment (after
reduction) being subject to the Excise Tax or (2) the entire Payment, whichever
amount after taking into account all applicable federal, state and local
employment taxes, income taxes, and the Excise Tax (all computed at the highest
applicable marginal rate, net of the maximum reduction in federal income taxes
which could be obtained from a deduction of such state and local taxes), results
in Executive’ s receipt, on an after-tax basis, of the greatest amount of the
Payment. If a reduction in the Payment is to be made so that the Payment equals
the Reduced Amount, (x) the Payment will be paid only to the extent permitted
under the Reduced Amount alternative, and Executive will have no rights to any
additional payments and/or benefits constituting the Payment, and (y) reduction
in payments and/or benefits will occur in the following order: (1) reduction of
cash payments; (2) cancellation of accelerated vesting of equity awards other
than stock options; (3) cancellation of accelerated vesting of stock options;
and (4) reduction of other benefits paid to Executive. In the event that
acceleration of vesting of equity award compensation is to be reduced, such
acceleration of vesting will be cancelled in the reverse order of the date of
grant of Executive’s equity awards.

(b)         Accounting Firm. The accounting firm engaged by the Company for
general tax purposes as of the day prior to the Change in Control will perform
the calculations set forth in Section 6(a). If the firm so engaged by the
Company is serving as accountant or auditor for the acquiring company, the
Company will appoint a nationally recognized accounting firm to make the
determinations required hereunder. The Company will bear all expenses with
respect to the determinations by such firm required to be made hereunder. The
accounting firm engaged to make the determinations hereunder will provide its
calculations, together with detailed supporting documentation, to the Company
within fifteen (15) days before the consummation of a Change in

 

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Control (if requested at that time by the Company) or such other time as
requested by the Company. If the accounting firm determines that no Excise Tax
is payable with respect to a Payment, either before or after the application of
the Reduced Amount, it will furnish the Company with documentation reasonably
acceptable to the Company that no Excise Tax will be imposed with respect to
such Payment. Any good faith determinations of the accounting firm made
hereunder will be final, binding and conclusive upon the Company and Executive.

7.         Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:

(a)         Cause. “Cause” means (i) Executive’s willful failure to
substantially perform Executive’s duties for the Company (other than any such
failure resulting from Executive’s total and permanent disability);
(ii) Executive’s willful failure to carry out, or comply with, in any material
respect any lawful directive of the Board; (iii) Executive’s commission at any
time of any act or omission that results in, or may reasonably be expected to
result in, a conviction, plea of no contest, plea of nolo contendere, or
imposition of unadjudicated probation for any felony or crime involving moral
turpitude; (iv) Executive’s unlawful use (including being under the influence)
or possession of illegal drugs on the Company’s premises or while performing
Executive’s duties and responsibilities for the Company; (v) Executive’s
commission at any time of any act of fraud, embezzlement, misappropriation,
misconduct, conversion of assets of the Company, or breach of fiduciary duty
against the Company (or any predecessor thereto or successor thereof); or
(vi) Executive’s material breach of any agreement with the Company (including,
without limitation, any breach of the restrictive covenants of any such
agreement); and which, in the case of clauses (i), (ii) and (vi), continues
beyond thirty (30) days after the Company has provided Executive written notice
of such failure or breach (to the extent that, in the reasonable judgment of the
Board, such failure or breach can be cured by Executive). Whether or not an
event giving rise to “Cause” occurs will be determined by the Board in its sole
discretion.

(b)         Change in Control. “Change in Control” means (i) the acquisition of
the Company by another entity, or entities acting as a group, by means of any
transaction or series of related transactions (including, without limitation,
any reorganization, merger or consolidation) that results in such entity or
entities holding more than fifty percent (50%) of the outstanding voting power
of the Company (other than a bona fide equity financing transaction or transfers
between affiliated funds) or (ii) a sale or other disposition by the Company of
all or substantially all of the assets of the Company.

(c)         Change in Control Period. “Change in Control Period” means that
period of time commencing on the consummation of a Change in Control and ending
on the first anniversary of such Change in Control.

(d)         Good Reason. “Good Reason” means Executive’s resignation from
employment with the Company after the occurrence, without Executive’s written
consent, of any of the following on or after a Change in Control: one or more of
the following conditions occurs on or following a Change in Control without
Executive’s written consent: (i) a material diminution in Executive’s authority,
duties, or responsibilities as in effect as of immediately prior to a Change in
Control; (ii) a material reduction in Executive’s Annual Base Salary as in
effect as of immediately

 

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prior to a Change in Control (other than a reduction that affects all senior
executives of the Company to a similar degree); or (iii) a material change in
the geographic location of the principal offices at which Executive must perform
Executive’s services as of immediately prior to a Change in Control (which shall
in no event include a relocation of Executive’s principal office of less than
sixty (60) miles from South San Francisco, CA). Notwithstanding the foregoing,
in no event shall Executive have Good Reason to terminate Executive’s employment
unless Executive provides to the Company written notice of the condition giving
rise to Good Reason within sixty (60) days after the initial occurrence of such
condition, such condition continues beyond thirty (30) days after the Company
receives such notice (the “Cure Period”) and Executive’s resignation for Good
Reason is effective within thirty (30) days after the end of the Cure Period.

8.         Successors.

(a)         Company’s Successors. Any successor to the Company (whether direct
or indirect and whether by purchase, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company’s business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. For all purposes under this Agreement, the term “Company” shall
include any successor to the Company’s business and/or assets.

(b)         Executive’s Successors. The terms of this Agreement and all rights
of Executive hereunder shall inure to the benefit of, and be enforceable by,
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.

9.         Notices. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or one day following mailing via Federal Express or similar
overnight courier service. In the case of Executive, mailed notices shall be
addressed to Executive at Executive’s home address that the Company has on file
for Executive. In the case of the Company, mailed notices shall be addressed to
its corporate headquarters, and all notices shall be directed to the attention
of its Chief Executive Officer.

10.         Restrictive Covenants.

(a)         Proprietary Information Agreement. Executive shall remain bound by
Executive’s obligations under the Company’s standard Proprietary Information and
Inventions Assignment Agreement (the “Proprietary Information Agreement”).

(b)         Proprietary Information. Without limiting the Proprietary
Information Agreement, except as Executive reasonably and in good faith
determines to be required in the faithful performance of Executive’s duties to
the Company, Executive shall at all times before and after Executive’s
termination of employment maintain in confidence and shall not directly or
indirectly, use, disseminate, disclose or publish, for Executive’s benefit or
the benefit of any other person or entity, any confidential or proprietary
information or trade secrets of or relating to the Company, including, without
limitation, information with respect to the Company’s operations, processes,
protocols, products, inventions, business practices, finances, principals,
vendors,

 

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suppliers, customers, potential customers, marketing methods, costs, prices,
contractual relationships, regulatory status, compensation paid to employees or
other terms of employment (“Proprietary Information”), or deliver to any person
or entity, any document, record, notebook, computer program or similar
repository of or containing any such Proprietary Information. Executive’s
obligation to maintain and not use, disseminate, disclose or publish, or use for
Executive’s benefit or the benefit of any other person or entity, any
Proprietary Information after the date Executive terminates employment will
continue so long as such Proprietary Information is not, or has not by
legitimate means become, generally known and in the public domain (other than by
means of Executive’s direct or indirect disclosure of such Proprietary
Information) and continues to be maintained as Proprietary Information by the
Company. The parties hereby stipulate and agree that as between them, the
Proprietary Information identified herein is important, material and affects the
successful conduct of the businesses of the Company (and any successor or
assignee of the Company).

(c)         Nonsolicitation. Without limiting the Proprietary Information
Agreement, Executive hereby agrees that Executive shall not while employed or
otherwise providing services to the Company and with respect to subsection
(ii) below, within the one year period immediately following the termination of
Executive’s employment or other service to the Company, directly or indirectly,
either for Executive or on behalf of any other person or entity, (i) recruit or
otherwise solicit or induce any employee, customer or supplier of the Company to
terminate its employment or arrangement with the Company, or otherwise change
its relationship with the Company, or (ii) hire, or cause to be hired, any
person who was employed by the Company at any time during the twelve (12)-month
period immediately prior to the date Executive terminates employment with the
Company or who thereafter becomes employed by the Company.

(d)         Return of Materials. Upon termination of Executive’s employment with
the Company for any reason, Executive will promptly deliver to the Company
(i) all correspondence, drawings, manuals, letters, notes, notebooks, reports,
programs, plans, proposals, financial documents, or any other documents that are
Proprietary Information, including all physical and digital copies thereof, and
(ii) all other Company property (including, without limitation, any personal
computer or wireless device and related accessories, keys, credit cards and
other similar items) which is in Executive’s possession, custody or control.

(e)         Exception to Restrictive Covenants. Notwithstanding anything in this
Section 10 to the contrary, Executive may respond to a lawful and valid subpoena
or other legal process but shall give the Company the earliest possible notice
thereof, and shall, as much in advance of the return date as possible, make
available to the Company and its counsel the documents and other information
sought, and shall assist such counsel in resisting or otherwise responding to
such process.

(f)         Nondisparagement. Executive agrees not to disparage the Company, any
of its products or practices, or any of its directors, officers, agents,
representatives, partners, members, equity holders or affiliates, either orally
or in writing, at any time, provided, that Executive may confer in confidence
with Executive’s legal representatives and make truthful statements as required
by law.

 

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(g)         Subsequent Employment. Prior to accepting other employment or any
other service relationship prior to the first anniversary of Executive’s
termination of employment, Executive shall provide a copy of this Section 10 to
any recruiter who assists Executive in obtaining other employment or any other
service relationship and to any employer or other person or entity with which
Executive discusses potential employment or any other service relationship.

(h)         Enforceability. In the event the terms of this Section 10 shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too great a period of time or over too great a geographical
area or by reason of its being too extensive in any other respect, it will be
interpreted to extend only over the maximum period of time for which it may be
enforceable, over the maximum geographical area as to which it may be
enforceable, or to the maximum extent in all other respects as to which it may
be enforceable, all as determined by such court in such action. Any breach or
violation by Executive of the provisions of this Section 10 shall toll the
running of any time periods set forth in this Section 10 for the duration of any
such breach or violation.

(i)         Affiliates. As used in this Section 6, the term “Company” shall
include the Company and any parent, affiliated, related and/or direct or
indirect subsidiary entity thereof.

11. Dispute Resolution. To ensure the timely and economical resolution of
disputes that arise in connection with this Agreement, Executive and the Company
agree that any and all controversies, claims and disputes arising out of or
relating to this Agreement, including without limitation any alleged violation
of its terms, shall be resolved by final and binding arbitration before a single
neutral arbitrator in San Mateo County, California, in accordance with the
Employment Dispute Resolution Rules of the American Arbitration Association
(“AAA”). The arbitration shall be commenced by filing a demand for arbitration
with the AAA within fourteen (14) days after the filing party has given notice
of such breach to the other party. The arbitrator shall award the prevailing
party attorneys’ fees and expert fees, if any. Notwithstanding the foregoing, it
is acknowledged that it will be impossible to measure in money the damages that
would be suffered if the parties fail to comply with any of the obligations
imposed on them under Section 10 hereof, and that in the event of any such
failure, an aggrieved person will be irreparably damaged and will not have an
adequate remedy at law. Any such person shall, therefore, be entitled to
injunctive relief, including specific performance, to enforce such obligations,
and if any action shall be brought in equity to enforce any of the provisions of
Section 10 of this Agreement, none of the parties hereto shall raise the defense
that there is an adequate remedy at law.

12.         Miscellaneous Provisions.

(a)         Section 409A.

(i)         Separation from Service. Notwithstanding any provision to the
contrary in this Agreement, no amount deemed deferred compensation subject to
Section 409A of the Code shall be payable pursuant to Sections 3 or 4 unless
Executive’s termination of employment constitutes a “separation from service”
with the Company within the meaning of Section 409A of the Code and the
Department of Treasury regulations and other guidance promulgated thereunder (a
“Separation from Service”) and, except as provided under Section 12(a)(ii) of
this Agreement, any

 

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such amount shall be paid, or in the case of installments commencement payment,
on the sixtieth (60th) day following Executive’s Separation from Service.

(ii)         Specified Employee. Notwithstanding any provision to the contrary
in this Agreement, if Executive is deemed at the time of Executive’s Separation
from Service to be a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any
portion of the benefits to which Executive is entitled under this Agreement is
required in order to avoid a prohibited distribution under
Section 409A(a)(2)(B)(i) of the Code, such portion of Executive’s benefits shall
not be provided to Executive until the earlier of (a) the expiration of the six
(6)-month period measured from the date of Executive’s Separation from Service
or (b) the date of Executive’s death. Upon the first business day following the
expiration of the applicable Code Section 409A(a)(2)(B)(i) period, all payments
deferred pursuant to this Section 12(a)(ii) shall be paid in a lump sum to
Executive, and any remaining payments due under this Agreement shall be paid as
otherwise provided herein.

(iii)         Expense Reimbursements. To the extent that any reimbursements
payable pursuant to this Agreement are subject to the provisions of Section 409A
of the Code, any such reimbursements payable to Executive pursuant to this
Agreement shall be paid to Executive no later than December 31 of the year
following the year in which the expense was incurred, the amount of expenses
reimbursed in one year shall not affect the amount eligible for reimbursement in
any subsequent year, and Executive’s right to reimbursement under this Agreement
will not be subject to liquidation or exchange for another benefit.

(iv)         Installments. For purposes of Section 409A of the Code, Executive’s
right to receive installment payments pursuant to Sections 3 and 4 shall be
treated as a right to receive a series of separate and distinct payments.

(b)         Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by Executive and by an authorized officer of the Company (other than
Executive). No waiver by either party of any breach of, or of compliance with,
any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.

(c)         Whole Agreement. This Agreement and the Proprietary Information
Agreement represent the entire understanding of the parties hereto with respect
to the subject matter hereof and supersede all prior arrangements and
understandings regarding same including, without limitation, any severance
provisions of any offer letter agreement or employment agreement between
Executive and the Company.

(d)         Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California.

(e)         Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.

 

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(f) Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together will constitute one and
the same instrument.

(Signature page follows)

 

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the day and year set forth
below.

 

 

DIADEXUS, INC. By:   /s/ Brian E. Ward Title:   C.O.O. Date:   9/23/11 EXECUTIVE
/s/ R. Michael Richey R. Michael Richey Date:   9/20/11

 

Signature Page to Change in Control and Severance Agreement