OCX Oncocyte Corporation

Item 11. Executive Compensation

Director Compensation

Directors and members of committees of our Board of Directors who are salaried employees of Oncocyte are entitled to receive compensation as employees but are not compensated for serving as directors or attending meetings of our Board of Directors or committees of our Board of Directors. All directors are entitled to reimbursements for their out-of-pocket expenses incurred in attending meetings of our Board of Directors or committees of our Board of Directors.

In 2022, non-employee directors, other than the Chairman of our Board of Directors, received an annual fee of $73,500 in cash for their service on our Board of Directors for the full year. Directors who served a partial year received a pro-rated fee based on their actual length of service. Our Chairman received an annual cash fee of $83,500 for his service as Chairman of the Board of Directors and for his service on our Board of Directors. In addition to cash fees, non-employee directors who were directors as of August 15, 2022, received options to purchase 45,000 shares of common stock under our 2018 Equity Incentive Plan (as amended, the “Incentive Plan”) and 10,000 restricted stock units under the Incentive Plan during 2022. Non-employee directors who joined our Board of Directors after August 15, 2022 received a pro-rated equity award.

The annual fee of cash was paid in quarterly installments, and the stock options and restricted stock units will vest one year from the date of grant, subject to the non-employee director’s continued service as a director of Oncocyte or a subsidiary from the date of grant until the vesting date or, if earlier, until the next annual meeting of shareholders. The options will expire if not exercised ten years from the date of grant.

The following table summarizes certain information concerning the compensation paid during the past fiscal year to each of the persons who served as directors during the year ended December 31, 2022 and who were not our employees on the date the compensation was earned.

Stock awards consist entirely of restricted stock units (“RSUs”) and are valued in the table at the aggregate grant date fair value based on the closing price of Oncocyte common stock as quoted on the applicable trading market as if the stock awards were fully vested. Beginning on February 7, 2023, our common stock began trading on The Nasdaq Capital Market under the symbol “OCX.” Previously, our common stock traded under the same symbol on The Nasdaq Global Market since March 8, 2021, and prior to that, on the NYSE American.

The following table summarizes the aggregate number of shares subject to outstanding equity awards held by our non-employee directors as of December 31, 2022:

Executive Compensation

Smaller Reporting Company

We are a “smaller reporting company” as defined in the rules and regulations of the SEC. As a smaller reporting company we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable, in general, to public companies that are not smaller reporting companies. Accordingly, this Report includes reduced disclosure about our executive compensation arrangements.

Summary Compensation Table

The following tables show certain information relating to the compensation of our President and Chief Executive Officer and the two highest paid individuals other than our President and Chief Executive Officer who were serving as executive officers at year end and whose total individual compensation exceeded $100,000 during 2022. We refer to such executive officers as our “Named Executive Officers”.

Executive Employment Agreements, Deferral Agreements, and Change of Control Provisions

Employment Agreements and Arrangements

Joshua Riggs

We have entered into an employment agreement with our current President and Chief Executive Officer Joshua Riggs. We also previously entered into an employment agreement and subsequently a separation agreement with each of our former President and Chief Executive Officer Ronald Andrews and our former Chief Scientific Officer Douglas Ross.

Pursuant to his employment agreement, dated December 2, 2022, the annual salary of Mr. Riggs was set at $300,000. Mr. Riggs is also eligible to receive an annual bonus, with a target bonus opportunity equal to 50% of base salary. Mr. Riggs’ bonus for 2022, was subject to the achievement of the parameters and objectives used to determine the amount of the annual bonus immediately prior to December 2, 2022, assessed and determined by the Board or Compensation Committee. Mr. Riggs’ bonus, if any, for 2023, will be based on and subject to the achievement of Company and/or individual performance objectives established (in consultation with Mr. Riggs), approved, assessed and determined by the Board (or a committee thereof). 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”.

Pursuant to his employment agreement, Mr. Riggs received 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 one year later, 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 exercise price of the stock options was the fair market value of a share of Oncocyte common stock on the date of grant, determined in accordance with the Incentive Plan.

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 Mr. Riggs’ CIC Agreement (as defined below) in addition to any benefits provided pursuant to Mr. Riggs’ CIC 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”).

Ronald Andrews

During 2022, the annual salary of our former President and Chief Executive Officer Ronald Andrews, was $500,000. Pursuant to his employment agreement, dated June 4, 2019, Mr. Andrews was also eligible to receive annual bonuses, to the extent approved by the Board of Directors in its discretion, based on the achievement of predetermined company and individual objectives set by our Board of Directors or its Compensation Committee from time to time.

Pursuant to his employment agreement, Mr. Andrews received the following equity awards under the Incentive Plan: (i) options to purchase 950,000 shares of Oncocyte common stock effective on the date his employment commenced (the “Initial Grant”); (ii) options to purchase 50,000 shares of common stock, effective on upon his completion of one year of continuous service as an employee (the “Second Grant”); and (iii) RSUs with respect to 65,000 shares of common stock, effective upon his completion of one year of continuous service as an employee. The exercise price of the options in the Initial Grant and Second Grant was the fair market value of a share of Oncocyte common stock on the applicable effective date of grant, determined in accordance with the Incentive Plan.

The vesting schedule of the options in the Initial Grant pursuant to which the options became or were to become exercisable was as follows: twenty-five percent of the options vested upon Mr. Andrew’s completion of one year of continuous service as an employee, and the balance of the options began to vest in 36 equal monthly installments, commencing on the first anniversary of the effective date of the Initial Grant, subject to his continued service as an employee on the applicable vesting date.

The options in the Second Grant vested upon Mr. Andrew’s completion of one year of continuous service as an employee from the effective date of the Second Grant. The 65,000 RSUs vested on July 1, 2021.

Douglas Ross

During 2022, the annual salary of Douglas Ross, our Chief Scientific Officer, was $375,000. Pursuant to his employment agreement, dated March 23, 2020, he is eligible to receive annual cash incentive bonus awards determined by our Board of Directors, with a target bonus of not less than 50% of his base salary, based on the achievement of specific, objectively determinable, individual and company performance goals at target levels for the year.

Gisela Paulsen

During 2022, the annual salary of Ms. Paulsen, our former President and Chief Operating Officer was $390,000 prior to August 8, 2022 and $415,000 after August 8, 2022. Ms. Paulsen was eligible to receive discretionary annual bonuses based on achievement of personal and corporate performance goals established by our Board of Directors, with a target bonus equal to 60% of her annual base salary.

Anish John

During 2022, the annual salary of Mr. John, our Chief Financial Officer was $250,000 prior to June 1, 2022, $275,000 between June 1, 2022 and August 8, 2022, and $330,000 after August 8, 2022. Mr. John is eligible to receive discretionary annual bonuses based on achievement of personal and corporate performance goals established by our Board of Directors, with a target bonus equal to 50% of his annual base salary.

James Liu

During 2022, the annual salary of Mr. Liu, our Controller & Principal Accounting Officer was $129,375 prior to July 4, 2022, $150,000 between July 4, 2022 and September 20, 2022 and $175,000 after September 20, 2022. Mr. Liu is eligible to receive discretionary annual bonuses based on achievement of personal and corporate performance goals established by our Board of Directors, with a target bonus equal to 30% of his annual base salary.

Change in Control and Severance Plan

We have adopted the Oncocyte Corporation Change in Control and Severance Plan (the “CIC Plan”) which provides change in control and other severance benefits, with varying terms, to a select group of our management or highly compensated employees, including certain of our executive officers, who have executed a Change in Control and Severance Agreement (“CIC Agreement”) and who otherwise satisfy the conditions set forth in their CIC Agreement and the provisions of the CIC Plan. Pursuant to the CIC Plan, we have entered into a CIC Agreement with each of our President and Chief Executive Officer Joshua Riggs and our Chief Financial Officer Anish John.

Pursuant to his CIC Agreement, 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 CIC 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 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 months prior to or twelve months following a Change of Control (as defined in the CIC 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 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 months following termination of his employment.

Pursuant to his CIC Agreement, if Mr. John’s employment is terminated without Cause or he resigns for Good Reason (each as defined in the CIC Agreement) at any time, subject to the execution of a release and certain other conditions, he will be entitled to receive: (i) twelve months base salary, (ii) a lump sum payment of twelve months 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 months prior to or twelve months following a Change of Control (as defined in the CIC 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 twelve 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 months following termination of his employment.

Separation Payments

Separation Payments to Mr. Andrews

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 “Andrews Separation Agreement”). The Andrews Separation Agreement provided 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 250,000 performance-based restricted stock units.

In addition, to ensure a smooth transition, the Company and Mr. Andrews entered into a consulting agreement, dated as of December 1, 2022 (the “Andrews Consulting Agreement”), pursuant to which Mr. Andrews provided non-employee consulting and advisory services to the Company, on a non-exclusive basis, from December 2, 2022 until February 28, 2023. Pursuant to the Andrews Consulting Agreement, Mr. Andrews received a grant of stock options to purchase 50,000 shares of the Company’s common stock, issued in accordance with the Incentive Plan, which options vested in three equal monthly installments over the consulting term.

Separation Payments to Ms. Paulsen

In connection with Ms. Paulsen’s departure, the Company and Ms. Paulsen entered into a separation agreement and general release of all claims dated December 16, 2022 (the “Paulsen Separation Agreement”). The Paulsen Separation Agreement provides that Ms. Paulsen will receive benefits consisting of: (i) a cash severance amount of $207,500.02, which is payable over six (6) months in substantially equal installments following December 16, 2022 (the “Paulsen Effective Date”), (iii) accelerated vesting of Ms. Paulsen’s 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 Paulsen Effective Date, (iv) accelerated vesting of 175,000 performance-based restricted stock units, and (v) the extension of the deadline to exercise vested stock options to the earlier to occur of the one-year anniversary of the Paulsen Effective Date and on the maximum term under the applicable stock option award agreement.

Separation Payments to Dr. Ross

In connection with Dr. Ross’ separation, the Company and Dr. Ross entered into a separation agreement and general release of all claims dated December 16, 2022 (the “Ross Separation Agreement”). The Ross Separation Agreement provides that Dr. Ross will receive benefits, consisting of: (i) a cash severance amount of $281,250.06, which is payable over nine (9) months in substantially equal installments following December 16, 2022 (the “Ross Effective Date”), and (ii) a payment of nine (9) months of premium costs of group health plan continuation coverage in the total amount of $20,799, which is payable over nine (9) months in substantially equal installments following the Ross Effective Date.

In addition, to ensure a smooth transition, the Company and Dr. Ross entered into a consulting agreement, dated as of December 16, 2022 (the “Ross Consulting Agreement”), pursuant to which Dr. Ross will provide non-employee consulting and advisory services to the Company, on a non-exclusive basis, from December 17, 2022 until March 31, 2023. Pursuant to the Ross Consulting Agreement, Dr. Ross received a grant of restricted stock pursuant to the Company’s 2018 Equity Incentive Plan, as amended from time to time (the “Plan”), with a grant date fair market value of $56,250 (as determined in accordance with the Plan), which vested in three equal monthly installments (with the first installment vesting January on 31, 2023) over the consulting term.

The Incentive Plan

The following summary of the Incentive Plan is a summary only and does not purport to include all of the terms of the Incentive Plan, and is qualified by the full terms of the Incentive Plan.

We have adopted the Incentive Plan that permits us to grant awards, or Awards, consisting of stock options, the grant or sale of restricted stock (“Restricted Stock”), the grant of stock appreciation rights (“SARs”), and the grant of hypothetical units issued with reference to our common stock (“Restricted Stock Units” or “RSUs”), for up to 21,000,000 shares of our common stock. The Incentive Plan also permits Oncocyte to issue such other securities as our Board of Directors or the Compensation Committee administering the Incentive Plan may determine. Awards of stock options, Restricted Stock, SARs, and RSUs (“Awards”) may be granted under the Incentive Plan to Oncocyte employees, directors, and consultants.

Awards may vest and thereby become exercisable or have restrictions on forfeiture lapse on the date of grant or in periodic installments or upon the attainment of performance goals, or upon the occurrence of specified events. Awards may not vest, in whole or in part, earlier than one year from the date of grant. Vesting of an Award after the date of grant may be accelerated only in the limited circumstances specified in the Incentive Plan. In the case of the acceleration of vesting of any performance-based Award, acceleration of vesting shall be limited to actual performance achieved, pro rata achievement of the performance goal(s) on the basis for the elapsed portion of the performance period, or a combination of actual and pro rata achievement of performance goals.

No person shall be granted, during any one-year period, options to purchase, or SARs with respect to, more than 1,000,000 shares in the aggregate, or any Awards of Restricted Stock or RSUs with respect to more than 500,000 shares in the aggregate. If an Award is to be settled in cash, the number of shares on which the Award is based shall not count toward the individual share limit.

No Awards may be granted under the Incentive Plan more than ten years after the date upon which the Incentive Plan was adopted by our Board of Directors, and no options or SARs granted under the Incentive Plan may be exercised after the expiration of ten years from the date of grant.

Stock Options

Options granted under the Incentive Plan may be either “incentive stock options” within the meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended, or “non-qualified” stock options that do not qualify incentive stock options. Incentive stock options may be granted only to Oncocyte employees and employees of subsidiaries. The exercise price of stock options granted under the Incentive Plan must be equal to the fair market of our common stock on the date the option is granted. In the case of an optionee who, at the time of grant, owns more than 10% of the combined voting power of all classes of Oncocyte stock, the exercise price of any incentive stock option must be at least 110% of the fair market value of the common stock on the grant date, and the term of the option may be no longer than five years. The aggregate fair market value of common stock (determined as of the grant date of the option) with respect to which incentive stock options become exercisable for the first time by an optionee in any calendar year may not exceed $100,000.

The exercise price of an option may be payable in cash or in common stock having a fair market value equal to the exercise price, or in a combination of cash and common stock, or other legal consideration for the issuance of stock as our Board of Directors or Compensation Committee may approve.

Generally, options will be exercisable only while the optionee remains an employee, director or consultant, or during a specific period thereafter, but in the case of the termination of an employee, director, or consultant’s services due to death or disability, the period for exercising a vested option shall be extended to the earlier of 12 months after termination or the expiration date of the option.

Restricted Stock and Restricted Stock Units

In lieu of granting options, we may enter into purchase agreements with employees under which they may purchase or otherwise acquire Restricted Stock or RSUs subject to such vesting, transfer, and repurchase terms, and other restrictions. The price at which Restricted Stock may be issued or sold will be not less than 100% of fair market value. Employees or consultants, but not executive officers or directors, who purchase Restricted Stock may be permitted to pay for their shares by delivering a promissory note or an installment payment agreement that may be secured by a pledge of their Restricted Stock. Restricted Stock may also be issued for services actually performed by the recipient prior to the issuance of the Restricted Stock. Unvested Restricted Stock for which we have not received payment may be forfeited, or we may have the right to repurchase unvested shares upon the occurrence of specified events, such as termination of employment.

Subject to the restrictions set with respect to the particular Award, a recipient of Restricted Stock generally shall have the rights and privileges of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the Restricted Stock shall be withheld for the recipient’s account, and interest may be credited on the amount of the cash dividends withheld. The cash dividends or stock dividends so withheld and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the recipient in cash or, at the discretion of our Board of Directors or Compensation Committee, in shares of common stock having a fair market value equal to the amount of such dividends, if applicable, upon the release of restrictions on the Restricted Stock and, if the Restricted Stock is forfeited, the recipient shall have no right to the dividends.

The terms and conditions of a grant of RSUs shall be determined by our Board of Directors or Compensation Committee. No shares of common stock shall be issued at the time a RSU is granted. A recipient of Restricted Stock Units shall have no voting rights with respect to the RSUs. Upon the expiration of the restrictions applicable to a RSU, we will either issue to the recipient, without charge, one share of common stock per RSU or cash in an amount equal to the fair market value of one share of common stock.

At the discretion of our Board of Directors or Compensation Committee, each RSU (representing one share of common stock) may be credited with cash and stock dividends paid in respect of one share (“Dividend Equivalents”). Dividend Equivalents shall be withheld for the recipient’s account, and interest may be credited on the amount of cash Dividend Equivalents withheld. Dividend Equivalents credited to a recipient’s account and attributable to any particular RSU (and earnings thereon, if applicable) shall be distributed in cash or in shares of common stock having a fair market value equal to the amount of the Dividend Equivalents and earnings, if applicable, upon settlement of the RSU. If a RSU is forfeited, the recipient shall have no right to the related Dividend Equivalents.

SARs

An SAR is the right to receive, upon exercise, an amount payable in cash or shares, or a combination of shares and cash, equal to the number of shares subject to the SAR that is being exercised, multiplied by the excess of (a) the fair market value of a common share on the date the SAR is exercised, over (b) the exercise price specified in the SAR Award agreement. SARs may be granted either as free-standing SARs or in tandem with options. No SAR may be exercised later than 10 years after the date of grant.

The exercise price of an SAR shall not be less than 100% of the fair market value of one share of common stock on the date of grant. An SAR granted in conjunction with an option shall have the same exercise price as the related option, shall be transferable only upon the same terms and conditions as the related option, and shall be exercisable only to the same extent as the related option; provided, however, that the SAR by its terms shall be exercisable only when the fair market value per share exceeds the exercise price per share of the SAR or related option. Upon any exercise of an SAR granted in tandem with an option, the number of shares for which the related option shall be exercisable shall be reduced by the number of shares for which the SAR has been exercised. The number of shares for which an SAR issued in tandem with an option shall be exercisable shall be reduced by the number of shares for which the related option has been exercised.

Repricing Prohibition

The Incentive Plan prohibits any modification of the purchase price or exercise price of an outstanding option or other Award if the change would effect a “repricing’ without shareholder approval. As defined in the Incentive Plan, “repricing” means a reduction in the exercise price of an outstanding option or SAR or cancellation of an “underwater” or “out-of-the-money” Award in exchange for other Awards or cash. An “underwater” or “out-of-the-money” Award is defined to mean an Award for which the exercise price is less than the “fair market value” of Oncocyte common stock. The fair market value is generally determined by the closing price of Oncocyte common stock on Nasdaq or any other national securities exchange or inter-dealer quotation system on which Oncocyte common stock is traded.

Limitation on Share Recycling

Shares subject to an Award shall not again be made available for issuance or delivery under the Incentive Plan if those shares are (a) shares tendered in payment of an option, (b) shares delivered or withheld by us to satisfy any tax withholding obligation, (c) shares covered by a stock-settled SAR or other Award that were not issued upon the settlement of the Award, or (d) shares repurchased by us using the proceeds from option exercises. Only shares subject to an Award that is cancelled or forfeited or expires prior to exercise or realization may be regranted under the Incentive Plan.

Other Compensation Plans

We do not have any pension plans, defined benefit plans, or non-qualified deferred compensation plans other than those described above. We do make contributions to 401(k) plans for participating executive officers and other employees.