Pyxis Oncology Inc

Director Compensation

The Board engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”), an independent compensation consultant, to provide advice on non-employee director compensation. Based on such review, the Board approved the non-employee director compensation program set forth below for 2023. This program did not change as compared to the 2022 program except with respect to the introduction of cash retainers for the Research and Development Committee.

In addition, our non-employee directors are eligible to receive an annual equity award and an equity award at the time the director joins the Board. The annual equity award for 2023 had a grant date fair value equal to $307,975, while the sign-on equity award had a grant date fair value equal to $505,650.

The vesting schedules for the non-employee director equity awards are as follows;

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The annual equity award will vest in full on the first anniversary of the grant date, subject to the director’s continued service through the applicable vesting date; and

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The sign-on equity award vest in three equal installments beginning on the first anniversary of the vest commencement date, subject to the director’s continued service through the applicable vesting date.

We also reimburse our directors for reasonable travel and other related expenses incurred in connection with their service on the Board.

2023 Summary Director Compensation Table

The following table sets forth information for the fiscal year ended December 31, 2023 regarding the compensation awarded to, earned by or paid to each of our non-employee directors serving during 2023. Dr. Sullivan also serves as a member of the Board, but does not receive any additional compensation for her service on the Board. Please see the “2023 Summary Compensation Table” within “Executive Compensation” for a summary of the compensation Dr. Sullivan received for her service as our President and Chief Executive Officer during 2023. As Dr. Palani was appointed to the Board in March 2024, he has been excluded from the compensation table below.

Director Outstanding Equity Awards at Fiscal Year-End 2023

The following table summarizes the equity awards that were outstanding as of December 31, 2023 for each of our non-employee directors serving during 2023:

The following is a discussion and analysis of compensation arrangements of our named executive officers. As an “emerging growth company” as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled disclosure requirements applicable to emerging growth companies.

Our current executive compensation program is intended to align executive compensation with our business objectives and to enable us to attract, retain and reward executive officers who contribute to our long-term success. The compensation paid or awarded to our executive officers is generally based on the assessment of each individual’s performance compared against the business objectives established for the fiscal year as well as our historical compensation practices. In the case of newly hired executive officers, their compensation is primarily determined based on the negotiations of the parties as well as our historical compensation practices. For 2023, the material elements of our executive compensation program were base salary, annual cash bonuses and equity-based compensation. Our board of directors engaged Pearl Meyer to assist with the evaluation of our executive compensation program.

This section provides a discussion of the compensation paid or awarded to our President and Chief Executive Officer and our two other most highly compensated executive officers as of December 31, 2023 and one former executive officer of the Company. We refer to these individuals as our “named executive officers”. For 2023, our named executive officers were:

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Lara Sullivan, M.D., President and Chief Executive Officer;

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Pamela Connealy, Chief Financial Officer and Chief Operating Officer;

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Ken Kobayashi, M.D., Chief Medical Officer; and

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Jay Feingold, M.D., Ph.D., Former Chief Medical Officer.

Compensation of Named Executive Officers

Base Salary. Base salaries are intended to provide a level of compensation sufficient to attract and retain an effective management team, when considered in combination with the other components of our executive compensation program. The relative levels of base salary for our named executive officers are designed to reflect each executive officer’s functional specialty and scope of responsibility and accountability with us. The Compensation Committee periodically reviews the base salaries of our executive officers, including our named executive officers, and adjusts (or, in the case of our Chief Executive Officer, may recommend adjustments for approval by the Board) as necessary to reflect changes in the scope of the executive officer’s performance, contributions, responsibilities, prior salary level, position and market conditions. The annual base salary for each of Dr. Sullivan, Ms. Connealy, Dr. Kobayashi and Dr. Feingold for the fiscal year ended December 31, 2023 was $625,000, $473,000, $500,000 and $500,000 respectively. Please see the “Salary” column in the “2023 Summary Compensation Table” for the base salary amounts earned by the named executive officers in 2023.

Annual Cash Bonuses. Historically, we have provided our senior leadership team with short-term incentive compensation through our annual cash bonus plan. Annual bonus compensation holds executives accountable, rewards the executives based on actual business results and motivates our executive officers to achieve annual corporate and individual performance objectives. Our annual cash bonus plan provides cash incentive award opportunities for the achievement of annual performance goals established by the Board at the beginning of each fiscal year. Dr. Sullivan does not have individual performance objectives as she is viewed as more directly responsible for the achievement of our corporate objectives.

Each of our named executive officers are eligible to receive an annual performance cash bonus based on the achievement of pre-established corporate and, in the case of Ms. Connealy and Dr. Kobayashi, individual objectives as determined by the Board and our Compensation Committee, in consultation with the Pearl Myer and upon review of the recommendations of Dr. Sullivan for our other named executive officers. The payment of awards under the 2023 annual cash bonus plan applicable to the named executive officers was subject to the attainment of corporate goals for our President and Chief Executive Officer and a combination of corporate and individual goals, weighted 80% and 20%, respectively, for our other named executive officers. The corporate component of the annual cash bonus plan was determined based on a number of goals relating to (i) clinical development of our product pipeline, weighted 80%, (ii) preclinical support for our lead product candidates, weighted 10% and (iii) investor and business operations, weighted 10%. The individual goals for Ms. Connealy and Dr. Kobayashi were pre-established goals determined based on their functional areas of responsibility.

At the beginning of the performance year, each officer is assigned a target bonus opportunity expressed as a percentage of his or her base salary. Actual bonus payments may be higher or lower than the target bonus amount, as determined by the Board and the Compensation Committee, based on the achievement of the pre-established corporate and, if applicable, individual objectives. The target bonus opportunities, as a percentage of base salary, in 2023 for Dr. Sullivan, Ms. Connealy, Dr. Kobayashi and Dr. Feingold were 60%, 45%, 40% and 40%, respectively. Based on our 2023 performance, the Compensation Committee awarded payouts under our annual cash bonus program in a total payout of 100% of the target bonus opportunity.

In determining the amount of the annual cash bonuses, the Compensation Committee determines the level of achievement of the corporate goals and, if applicable, individual goals for the year. In determining the level of achievement for our named executive officers other than Dr. Sullivan, the Compensation Committee also reviews and considers the recommendations of Dr. Sullivan. These achievement levels are used to determine each named executive officer’s bonus. Based on our 2023 performance, our Compensation Committee awarded payouts under our annual cash bonus program in a total payout of 100% of the target bonus opportunity for each of the continuing named executive officers. Dr. Feingold terminated employment with us prior to December 31, 2023 and, as such, did not receive an annual bonus for 2023.

Actual bonus amounts paid are reflected in the “Non-Equity Incentive Plan Compensation” column of the "2023 Summary Compensation Table" below.

Other Bonuses. From time to time the board of directors or the compensation committee or board may approve discretionary cash bonuses for our named executive officers based on individual performance, company performance or as otherwise determined appropriate. In April 2022, the Compensation Committee and the Board awarded Dr. Sullivan a one-time cash bonus of $200,000 subject to her continued employment for one year, which was paid in April 2023.

Equity Awards. To further align the interests of our executive officers with the interests of our stockholders and to further focus our executive officers on our long-term performance, we grant equity compensation to our named executive officers. In 2023, our named executive officers received equity grants in the form of RSUs with a combination of one-year and four-year vesting schedules. In connection with his appointment to Chief Medical Officer in November 2023, we also granted Dr. Kobayashi stock options that will vest upon the achievement of certain clinical milestones related to data disclosure for PYX-201. In addition, during 2023, the Compensation Committee granted RSUs to Dr. Sullivan and Ms. Connealy on September 7, 2023, with the RSUs vested as of the grant date.

Please see the “Outstanding Equity Awards at Fiscal 2023 Year-End” table for further information regarding the outstanding equity awards held by each of the named executive officers.

On March 24, 2023 and in accordance with the terms of the Pyxis Oncology, Inc. 2019 Equity and Incentive Plan (the “2019 Plan”), the Board approved a stock option repricing (the “Repricing”) where the exercise price of each outstanding stock option issued to our current employees prior to our IPO was reduced to $2.21 per share, the closing stock price on the date of approval by the Board. The Board believes that the Repricing was in the best interests of the Company, as the amended stock options provide added incentives to retain and motivate key contributors to the Company without incurring the stock dilution resulting from significant additional equity grants or significant additional cash expenditures resulting from additional cash compensation. The Board also believed that the Repricing better aligned the interests of the key contributors with our goals.

As a result of the Repricing, the exercise prices for the following options held by each of the named executive officers were adjusted to $2.21 per share: Dr. Sullivan, 1,052,286 stock options; Ms. Connealy, 332,569 stock options; and Dr. Feingold, 174,774 stock options (of which 126,765 were forfeited upon Dr. Feingold’s resignation). Except for the reduction in the exercise prices, all outstanding stock options will continue to remain outstanding in accordance with their current terms and conditions as set forth in the 2019 Plan and the applicable award agreements.

Upon Dr. Feingold’s registration, all unvested options and RSUs granted to Dr. Feingold were canceled on his termination date. Additionally, all vested and unexercised options were subsequently forfeited 90 days after his termination date, in accordance with our equity incentive plans.

Clawback Policy

To comply with the Dodd-Frank Act and Nasdaq listing standards, we have adopted an incentive compensation recoupment policy, or “clawback” policy, which applies to our current and former executive officers, within the meaning of Section 10D of the Exchange Act and Rule 10D-1 promulgated thereunder, who were employed by us or a subsidiary of us during the applicable recovery period. Under the policy, in the event that the financial results upon which a cash or equity-based incentive award was predicated become the subject of a financial restatement that is required because of material non-compliance with financial reporting requirements, the Compensation Committee will conduct a review of awards covered by the policy and recoup any erroneously awarded incentive-based compensation to ensure that the ultimate payout gives retroactive effect to the financial results as restated. The policy covers any cash or equity-based incentive compensation award that was paid, earned or granted to a covered officer during the last completed three fiscal years immediately preceding the date on which we are required to prepare the accounting restatement.

2023 Summary Compensation Table

The following table shows information regarding the compensation of our named executive officers for services performed in the year ended December 31, 2023:

Outstanding Equity Awards at 2023 Fiscal Year-End

The following table presents information regarding the outstanding equity awards held by each of the named executive officers as of December 31, 2023. As Dr. Feingold had no awards outstanding as of December 31, 2023, he is excluded from the “Outstanding Equity Awards at 2023 Fiscal Year-End” table below.

Employment Agreements, Severance and Change in Control Agreements

Lara Sullivan, M.D.

We entered into an employment letter agreement with Dr. Sullivan in October 2019, which was subsequently amended in connection with our IPO and again in October 2022. Under the terms of the amended letter agreement, in the event that Dr. Sullivan is terminated by us for any reason other than for “cause” or she terminates her employment for “good reason”, she will be entitled to receive, upon execution and effectiveness of a release of claims, base salary for a period of twelve (12) months and up to twelve (12) months of continued health insurance coverage at the Company’s expense. In addition, in the event of termination by us for any reason other than for “cause” or due to “good reason” within three (3) months before or twelve (12) months following a change of control of Pyxis Oncology, subject to the execution and non-revocation of a release of claims, (i) Dr. Sullivan will receive a cash payment in an amount equal to the sum of eighteen (18) months’ base salary and Dr. Sullivan’s target annual bonus, payable in a lump sum on the 60th day following such termination of employment, unless required to be paid in installments to comply with Section 409A of the Code, (ii) up to twelve (12) months of continued health insurance coverage at our expense and (iii) any unvested portions of the option awards granted to Dr. Sullivan will immediately vest in full on the date of termination. Dr. Sullivan’s amended letter agreement also provides for any unvested portion of stock options and stock awards granted to fully vest in the event of a change in control in which neither Pyxis Oncology nor its successor entity (if applicable) assumes, substitutes or continues the unvested portion of such award. In the event that we terminate Dr. Sullivan with “cause” or she resigns without “good reason”, then she will not be entitled to receive severance benefits. Dr. Sullivan’s letter agreement also contains IP assignment obligations.

Pamela Connealy

We entered into an employment letter agreement with Ms. Connealy in June 2021, which was subsequently amended in connection with our IPO and again in November 2022. Under the terms of the amended letter agreement, in the event that Ms. Connealy is terminated by us without “cause” or due to disability or she terminates her employment for “good reason”, she will be entitled to receive, upon execution and effectiveness of a release of claims, base salary for a period of nine (9) months and up to nine (9) months of COBRA premiums. In addition, in the event of termination by us for any reason other than for “cause” or Ms. Connealy’s resignation due to “good reason” within three (3) months before or twelve (12) months following a change of control of Pyxis Oncology, Ms. Connealy will receive a lump sum payment equal to twelve (12) months of base salary plus Ms. Connealy’s target annual bonus, payable in a single lump sum on the 60th day following such termination of employment, and up to twelve (12) months of COBRA premiums. Ms. Connealy’s amended letter agreement also provides for any unvested portion of stock options and stock awards granted to fully vest in the event of a change in control in which neither Pyxis Oncology nor its successor entity (if applicable) assumes, substitutes or continues the unvested portion of such award. Under the terms of the amended letter agreement, if the payments and benefits to Ms. Connealy under the amended letter agreement or another plan, arrangement or agreement would subject her to the excise tax imposed by Section 4999 of the Internal Revenue Code, then such payments will be reduced by the minimum amount necessary to avoid such excise tax, but only if such reduction will result in Ms. Connealy receiving a higher net after-tax amount.

Ken Kobayashi, M.D.

We entered into an employment letter agreement with Dr. Kobayashi in November 2023, in connection with his appointment to the position of Chief Medical Officer. Under the terms of the employment letter agreement, in the event that Dr. Kobayashi is terminated by us without “cause” or due to disability or he terminates his employment for “good reason”, he will be entitled to receive, upon execution and effectiveness of a release of claims, base salary for a period of nine (9) months and up to nine (9) months of continued health insurance coverage at our expense. In addition, in the event of termination by us for any reason other than for “cause” or Dr. Kobayashi’s resignation due to “good reason” within three (3) months before or twelve (12) months following a change of control of Pyxis Oncology, Dr. Kobayashi will receive a lump sum payment equal to twelve (12) months of base salary plus Dr. Kobayashi’s target annual bonus, payable in a single lump sum on the 60th day following such termination of employment, and up to twelve (12) months of continued health insurance coverage at our expense. Dr. Kobayashi’s employment letter agreement also provides for any unvested portion of stock options and stock awards granted to fully vest in the event of a change in control in which neither Pyxis Oncology nor its successor entity (if applicable) assumes, substitutes or continues the unvested portion of such award. Under the terms of the amended letter agreement, if the payments and benefits to Dr. Kobayashi under the employment letter agreement or another plan, arrangement or agreement would subject him to the excise tax imposed by Section 4999 of the Code, then such payments will be reduced by the minimum amount necessary to avoid such excise tax, but only if such reduction will result in Dr. Kobayashi receiving a higher net after-tax amount.

Jay Feingold, M.D., Ph.D.

Dr. Feingold resigned as Chief Medical Officer in June 2023. In connection with Dr. Feingold’s termination, pursuant to his employment letter agreement with us, Dr. Feingold received a separation payment of $270,833 and COBRA premiums with a value of $5,455.

Retirement Plan

We maintain the Pyxis Oncology 401(k) Plan (the “401(k) Plan”), a qualified 401(k) savings plan that provides participants with an opportunity to save for retirement on a tax advantaged basis. Eligible employees, including our named executive officers, are able to contribute 100% of his or her eligible compensation up to the maximum amount allowed under Internal Revenue Service guidelines. Currently, we match 50% of each eligible employee's contributions up to 6% of total eligible compensation. Contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. The 401(k) Plan currently does not offer the ability to invest in our securities. Employees are immediately and fully vested in their contributions.

Employee Stock Purchase Plan

We maintain an employee stock purchase plan (the “ESPP”), which is designed to allow our eligible employees to purchase shares of our common stock at designated intervals at a discounted price of 15% through payroll deductions or other contributions. Employees who are United States tax residents may benefit from favorable tax treatment as the ESPP is intended to quality as an employee stock purchase plan under Section 432 of the Code.

Compensation Risk Assessment

We conducted an assessment of the risks associated with our compensation practices and policies, and determined that risks arising from such policies and practices are not reasonably likely to have a material adverse effect on us. In conducting the assessment, we undertook a review of our compensation philosophies, our compensation governance structure and the design and oversight of our compensation programs. Overall, we believe that our programs include an appropriate mix of fixed and variable features, and short- and long-term incentives with compensation-based goals aligning with corporate goals.