Item
5.02 - Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements
of Certain Officers.
Executive
Leadership Changes
On
November 30, 2022, Oncocyte Corporation (the “Company”) issued a press release announcing that Ronald Andrews will step down
from his role as President and Chief Executive Officer and director of the Board of Directors of the Company (the “Board”),
effective as of December 1, 2022, and the appointment of Joshua Riggs as Interim Chief Executive Officer of the Company, effective as
of December 2, 2022. A copy of the press release is filed as Exhibit 99.1 hereto and incorporated herein by reference.
CEO
Separation and Release Agreement
In
connection with Mr. Andrews’ departure, the Company and Mr. Andrews entered into a separation agreement and general release of
all claims, dated December 1, 2022 (the “Separation Agreement”). The Separation Agreement provides that Mr. Andrews will
receive benefits, consisting of (i) a cash severance amount of $500,000, which is payable over twelve (12) months in substantially equal
installments following December 1, 2022 (the “Andrews Effective Date”), (ii) a payment of twelve (12) months of premium costs
of group health plan continuation coverage in the total amount of $40,128, which is payable in a lump sum payment on the thirtieth
day following the Andrews Effective Date, (iii) accelerated vesting of Mr. Andrews’ unvested time-based stock options and restricted
stock unit awards that were scheduled to vest based solely on the passage of time during the twelve (12) month period following the Andrews
Effective Date, and (iv) accelerated vesting of 481,250 performance-based stock options and 200,000 performance-based restricted stock
units.
As
part of the Separation Agreement, Mr. Andrews agreed to a general release of all claims against the Company and certain related entities.
The Separation Agreement confirms that (x) certain provisions contained in Mr. Andrews’ employment agreement with the Company,
dated June 4, 2019, and change in control and severance plan agreement, effective as of March 1, 2020, including a twelve (12) month
post-Andrews Effective Date non-solicit covenant, and (y) Mr. Andrews’ employee confidential information and inventions assignment
agreement with the Company, effective July 1, 2019, in each case, shall remain in full force and effect. The Separation Agreement also
contains customary terms applicable to the departure of an executive of the Company, including mutual non-disparagement.
In
addition, to ensure a smooth transition, the Company and Mr. Andrews entered into a consulting agreement, dated as of December 1, 2022
(the “Consulting Agreement”), pursuant to which Mr. Andrews will provide non-employee consulting and advisory services to
the Company, on a non-exclusive basis, from December 2, 2022 until February 28, 2023. The Consulting Agreement provides that in consideration
of the services, on the third business day following December 2, 2022, Mr. Andrews will receive a grant of stock options to purchase
50,000 shares of the Company’s common stock, issued in accordance with the Company’s 2018 Equity Incentive Plan, as amended
from time to time (the “Plan”), which options shall vest in three equal monthly installments over the consulting term, subject
to Mr. Andrews’ continued compliance with any restrictive covenants by which he may be bound and continued provision of services
on each applicable vesting date; provided, that if the if the Company terminates the Consulting Agreement prior to February 28, 2023,
any unvested options will vest. Either party may terminate the Consulting Agreement for any reason upon ten (10) days’ written
notice
The
Consulting Options will be granted at an exercise price per share equal to [the closing market price of the Company’s common stock
on the day preceding the grant date]. Except to the extent that provisions of the Plan relating to termination of continuous service
as a service provider apply to the termination of options, to the extent not exercised, the options will expire ten years from the effective
date of grant. The Consulting Options will be subject to the terms and conditions of a stock option agreement and the Plan.
Interim
CEO Appointment and Agreement
Mr.
Riggs, age 40, has served as the Company’s General Manager, Transplant since July 2022 and was the Company’s Senior Director
Business Development from August 2020 until September 2022. From January 2015 to August 2020, Mr. Riggs was the founder and principal
of Intelliger Consulting, an organization devoted to consumer driven healthcare, and from January 2016 to July 2020, he was a principal
at Bethesda Group, LLC, a boutique consulting group focused on helping small and mid-stage diagnostic companies and investment groups
move emerging diagnostic content and platforms to market.
In
connection with Mr. Riggs’ appointment, the Company entered into an employment agreement (the “Employment Agreement”)
with Mr. Riggs effective as of December 2, 2022 (the “Riggs Effective Date”), relating to his services with the Company.
The Employment Agreement has a one-year term (the “Term”), unless terminated earlier. After the Term, Mr. Riggs’ employment
with the Company will be considered “at-will”. During the Term, the Employment Agreement provides for (i) a base salary of
$300,000 per annum, (ii) a target bonus opportunity equal to fifty percent (50%) of Mr. Riggs’ base salary, and (iii) a one-time
equity grant of stock options to purchase 250,000 shares of the Company’s common stock, issued in accordance with the Plan, which
will vest on the one-year anniversary of the Riggs Effective Date, subject to Mr. Riggs’ continued compliance with any restrictive
covenants by which he may be bound and continued employment with the Company through such date (the “Equity Grant”). Mr.
Riggs will also be eligible to participate in employee benefit programs and plans offered by the Company.
The
Equity Grant will be granted on the third business day following the Riggs Effective Date, at an exercise price per share equal to the
fair market value of a share of the Company’s common stock on the applicable effective date of grant, determined in accordance
with the Plan. Except to the extent that provisions of the Plan relating to termination of continuous service as an employee apply to
the termination of options, to the extent not exercised, the options will expire ten years from the effective date of grant. The options
will be incentive stock options to the extent permitted by Section 422 of the Internal Revenue Code. The Equity Grant will be subject
to the terms and conditions of a stock option agreement, the Plan, and Mr. Riggs’ Severance Agreement (as defined below).
In
the event Mr. Riggs’ employment is terminated during the Term by the Company without Cause (excluding due to death or disability)
or by Mr. Riggs for Good Reason (as each such term is defined in the Severance Agreement), in addition to any benefits provided pursuant
to Mr. Riggs’ Severance Agreement, subject to the execution of a release of claims and Mr. Riggs’ continued compliance with
any restrictive covenants by which he may be bound, Mr. Riggs will be entitled to receive a pro-rated annual bonus for the year of termination
(the “Pro-Rated Bonus”). The Employment Agreement also contains customary restrictive covenants, including restrictions related
to non-solicitation, competitive activities, non-publicity, non-disparagement and cooperation. In addition, in connection with entering
into the Employment Agreement, effective as of December 2, 2022, Mr. Riggs also entered into an employee confidential information and
inventions assignment agreement, the form of which is attached as Exhibit B to the Employment Agreement.
The
Company also entered into an amended and restated change in control and executive severance plan agreement, effective as of December
2, 2022 (the “Severance Agreement”) pursuant to which, if Mr. Riggs’ employment is terminated for any reason, he will
be entitled to receive (i) payment for all accrued but unpaid salary or bonuses actually earned, (ii) vacation or paid time off accrued,
(iii) business expenses incurred in accordance with the Company’s expense reimbursement policy and (iv) any other unpaid amounts
arising under any employee benefit plans payable as of the date of termination of his employment (the “Accrued Obligations”).
If the Company terminates Mr. Riggs’ employment without Cause or he resigns for Good Reason (each as defined in the Severance Agreement)
at any time, subject to the execution of a release and certain other conditions, in addition to the Accrued Obligations and Pro-Rated
Bonus pursuant to the terms and conditions of the Employment Agreement, he will be entitled to receive (i) six months base salary, (ii)
a lump sum payment up to six (6) months, the specific number of months to be determined by the Company in its discretion, of the premium
costs of any health insurance benefits that he was receiving at the time of termination of his employment under an employee health insurance
plan subject to the Consolidated Omnibus Budget Reconciliation Act of 1985, and (iii) his unvested equity awards that were scheduled
to vest based on the passage of time during the twelve months following the date of termination of his employment shall vest. If the
Company terminates Ms. Riggs’ employment without Cause or if he resigns for Good Reason within three (3) months prior to or twelve
(12) months following a Change of Control (as defined in the Severance Agreement), he will be entitled to the benefits that apply for
termination without Cause or resignation for Good Reason, except that he will receive an additional payment of six (6) months of his
target cash bonus, and all of his unvested equity awards will vest rather than just those that would were scheduled to vest during the
twelve (12) months following termination of his employment.
The
foregoing descriptions of the Separation Agreement, the Consulting Agreement, the Employment Agreement, and the Severance Agreement are
not intended to be complete and are qualified in their entirety by the Separation Agreement, the Employment Agreement and the Severance
Agreement filed herewith as Exhibits 10.1, 10.2, 10.3, and 10.4 to this Current Report on Form 8-K and incorporated herein by reference.
Appointment
of Board Director
On
November 30, 2022, Company issued a press release announcing the appointment of Louis E. Sullivan as a member of the Board. A copy of
the press release is filed as Exhibit 99.2 hereto and incorporated herein by reference.
Effective
November 30, 2022, the Board appointed Louis E. Silverman, age 63, to serve as a director on the Board with a term that expires at the
Annual Meeting of Shareholders of the Company to be held in 2023 or until his earlier resignation or removal. The Board has approved
Mr. Silverman’s appointment as a member of the Compensation Committee and the Nominating and Corporate Governance Committee.
Since
February 2014, Mr. Silverman has served as the Chairperson and Chief Executive Officer of privately held Hicuity Health, Inc. (formerly
known as Advanced ICU Care, Inc.), a health care services company providing remote patient monitoring services to hospitals. From 2014
to 2022, Mr. Silverman served as a director on the board of directors of STAAR Surgical Company, which designs, develops, manufactures,
and sells implantable lenses for the eye and companion delivery systems used to deliver the lenses into the eye. From June 2012 through
February 2014, Mr. Silverman served as a consultant and board advisor for private equity investors and others regarding health care technology
and health care technology service companies, and health care services portfolio investments. From September 2009 through June 2012,
Mr. Silverman was Chief Executive Officer of Marina Medical Billing Services, Inc., a revenue cycle management company serving ER physicians
nationally. From September 2008 through August 2009, Mr. Silverman served as President and Chief Executive Officer of Qualcomm-backed
health care start-up LifeComm. From August 2000 through August 2008, Mr. Silverman served as the President and Chief Executive officer
of Quality Systems, Inc., a publicly traded developer of medical and dental practice management and patient records software. From 1993
through 2000, he served in multiple positions, including Chief Operations Officer, of CorVel Corporation, a publicly traded national
managed care services/technology company. Mr. Silverman earned a B.A. from Amherst College and an M.B.A. from Harvard Business School.
In
Mr. Silverman’s role as director and member of the Compensation Committee and Nominating and Corporate Governance Committee, he
will be eligible to participate in the director compensation plans and arrangements available to the Company’s other independent
directors. The Company’s director compensation program is described under the caption “Director Compensation” in the
Company’s proxy statement for its 2022 Annual Meeting of Shareholders filed with the Securities and Exchange Commission on June
8, 2022.
Other
than the aforementioned items, there are no arrangements or understandings between Mr. Silverman and any other person pursuant to which
Mr. Silverman was elected as a director. There are no family relationships between Mr. Silverman and any director or executive officer
of the Company, and Mr. Silverman has no direct or indirect material interest in any “related party” transaction required
to be disclosed pursuant to Item 404(a) of Regulation S-K.