Annexon Inc

The Company is currently a smaller reporting company and therefore remains eligible to take advantage of smaller reporting company reporting requirements, including the reduced disclosure obligations regarding executive compensation. The Company has elected to take advantage of the reduced compensation disclosure obligations available to smaller reporting companies.

Under these rules, we are required to provide compensation disclosure for (i) our principal executive officer, (ii) the two most highly compensated executive officers other than our principal executive officer who were serving as executive officers as of December 31, 2023 and (iii) up to two additional individuals who would have been in (ii) above but for the fact that they were not serving as executive officers as of December 31, 2023. For 2023, our named executive officers are:

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Douglas Love, Esq., our President and Chief Executive Officer;

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Ted Yednock, Ph.D., our Executive Vice President and Chief Innovation Officer; and

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Rick Artis, Ph.D., our Executive Vice President and Chief Scientific Officer.

Summary Compensation Table

The following table sets forth information concerning the compensation of our named executive officers for the years ended December 31, 2023 and 2022, as applicable:

(1) The amounts in the “Option Awards” and “Stock Awards” columns reflect the aggregate grant date fair value of stock options and restricted stock units granted during the fiscal year computed in accordance with the provisions of ASC-718. The assumptions that we used to calculate these amounts are discussed in Note 7 of this Annual Report on Form 10-K. These amounts may not reflect the actual economic value that will be realized by the named executive officer upon the exercise of the stock options or the sale of the common stock issued upon such exercise.

(2) Amounts in the “Non-equity Incentive Plan Compensation” column represent amounts earned by our named executive officers under our performance-based cash bonus program based on the achievement of pre-established corporate goals.

(3) Consists of life insurance premiums of $8,660 and 401(K) Matching Contributions of $2,379.

(4) Consists of life insurance premiums.

(5) Dr. Artis served as our Senior Vice President, Chemistry from October 2016 to December 2021. From December 2021 up to commencement of his employment with us effective January 6, 2023 as Chief Scientific Officer, Dr. Artis provided continued service as an outside consultant. His base salary and cash incentive bonus for 2023 are prorated for his time as Chief Scientific Officer with the Company since January 6, 2023. Other amounts reflect all compensation paid to Dr. Artis for services rendered in 2023.

(6) Consists of 401(k) Matching Contributions.

Outstanding Equity Awards as of December 31, 2023

The following table provides information regarding outstanding equity and stock awards held by our named executive officers as of December 31, 2023:

(1) Market value is calculated by multiplying $4.54, the closing trading price per share of our common stock as of December 31, 2023, by the number of unvested RSUs outstanding as of December 31, 2023.

(2) The option is fully vested.

(3) The option vests as to 1/48th of the shares in monthly installments measured from the vesting commencement date, subject to continued service to us through the vesting date.

(4) The RSUs vest in three equal annual installments on each annual anniversary of the grant date, reflected under “vesting commencement date” above, and will vest in full on the third annual anniversary of the grant date, subject to continued service.

(5) Dr. Artis served as our Senior Vice President, Chemistry from October 2016 to December 2021. From December 2021 up to the date of his rehire with us effective January 6, 2023 as Chief Scientific Officer, Dr. Artis served as an outside consultant. Stock and option awards reflected in this table include all outstanding equity awards granted to Dr. Artis throughout his employment or consulting relationship with us.

(6) Twenty-five percent of the shares subject to the option will vest on the first anniversary of the vesting commencement date, and the remainder vests in thirty-six (36) equal monthly installments thereafter, subject to continued service to us through the vesting date.

2023 Base Salaries

Our named executive officers each receive a base salary to compensate them for services rendered to our company. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities.

In February 2023, the base salaries for Mr. Love and Dr. Yednock were increased to $596,591 and $465,130 respectively, reflecting a merit increase of 4.5% over their respective 2022 annual base salary. Dr. Artis’s 2023 base salary was set at $450,000 in connection with his commencement of employment in January 2023.

2023 Annual Performance Based Cash Bonus

We maintain an annual performance-based cash bonus program in which each of our named executive officers participated in 2023. Each of our named executive officers’ target bonus is expressed as a percentage of base salary which can be achieved by meeting corporate goals at target level. The 2023 annual bonuses for Mr. Love, Dr. Yednock and Dr. Artis were targeted at 55%, 40% and 40% of their respective base salaries.

For 2023, our named executive officers were eligible to earn annual cash bonuses based on the achievement of certain corporate goals reviewed by the Compensation Committee and approved by the Board. For 2023, the Board set corporate performance goals focused on research, clinical development and business enabling activities. Each goal was defined by specific performance objectives and carried a corresponding weighting, such that the corporate goals could be achieved at up to 140% of target. In the case of our named executive officers other than our CEO, annual bonuses were also based on individual achievement, with corporate achievement weighted 80% and individual achievement weighted 20%.

In February 2024, the Compensation Committee reviewed and the Board approved the achievement of our 2023 corporate goals at 114.5% and individual achievement of 100% for each of Dr. Yednock and Dr. Artis. The actual annual cash bonuses earned by each named executive officer based on 2023 corporate and individual performance are set forth above in the Summary Compensation Table in the column titled “Non-equity Incentive Plan Compensation.”

2023 Equity Compensation

In February 2023, we granted Mr. Love and Dr. Yednock an option to purchase 345,000 and 77,050 shares of our common stock, respectively, which vests in forty-eight (48) equal monthly installments from the grant date, subject to continued service. In addition, we granted Dr. Yednock an award of 18,975 shares of RSUs, which vest in three equal annual installments on each annual anniversary of the grant date and will vest in full on the third annual anniversary of the grant date, subject to continued service.

In connection with the commencement of his employment, in January 2023, we granted to Dr. Artis an option to purchase 210,000 shares of our common stock, which vests as to 25% of the shares subject to the option on January 6, 2024 and as to 1/48th of the shares subject to the option on each monthly anniversary thereafter, subject to continued service.

Other Elements of Compensation

We maintain a 401(k) retirement savings plan for our employees, including our named executive officers, who satisfy certain eligibility requirements. Our named executive officers are eligible to participate in the 401(k) plan on the same terms as other full-time employees. In 2023, we matched 50% of contributions made by participants in the 401(k) plan, up to an annual maximum of $4,000. We believe that providing a vehicle for tax-deferred retirement savings through our 401(k) plan adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our named executive officers, in accordance with our compensation policies. All of our full-time employees, including our named executive officers, are eligible to participate in our health and welfare plans, including medical, dental and vision benefits; basic and supplemental life and accidental death and dismemberment insurance; and medical and dependent care flexible spending accounts.

Executive Compensation Arrangements

In connection with our initial public offering in July 2020, we entered into new employment agreements with each of Mr. Love and Dr. Yednock, which superseded the terms of their prior offer letters. We entered into an employment agreement with Dr. Artis in connection with his commencement of employment with us in January 2023. The employment agreements generally provide for initial base salary, target bonus, initial stock option grants and certain severance benefits as described in more detail below.

Employment Agreements

Pursuant to the employment agreements with each of our named executive officers, in the event the executive is terminated by us without Cause or resigns for Good Reason (each, as defined in the employment agreements), in each case, other than during the period commencing three months prior to and ending twelve (12) months following a change in control, the executive will receive (i) a lump sum cash payment equal to nine months of base salary, in the case of our executive vice presidents, or twelve (12) months of base salary, in the case of our CEO and (ii) payment or reimbursement of COBRA premiums for nine months, in the case of our executive vice presidents, or twelve (12) months, in the case of our CEO. In the event the executive is terminated without Cause or resigns for Good Reason, in each case, during the period commencing three months prior to and ending twelve (12) months following a change in control, the executive will receive (i) a lump sum cash payment equal to twelve (12) months of base salary plus the executive’s target annual bonus, in the case of our executive vice presidents, or eighteen (18) months of base salary plus 1.5 times the executive’s target annual bonus, in the case of our CEO, (ii) payment or reimbursement of COBRA premiums for twelve (12) months, in the case of our executive vice presidents, or eighteen (18) months, in the case of our CEO and (iii) and full acceleration of all unvested equity awards. The foregoing severance payments and benefits are subject to the executive’s execution of a release of claims in favor of us.

For purposes of our named executive officers’ offer letters and employment agreements:

“Cause” means (i) the executive’s failure to perform the executive’s assigned duties or responsibilities as an officer of us (other than a failure resulting from the executive’s disability) after notice thereof from us describing the executive’s failure to perform such duties or responsibilities, (ii) the executive’s engaging in any act of dishonesty, fraud or misrepresentation, (iii) the executive’s violation of any federal or state law or regulation applicable to our business or our affiliates, (iv) the executive’s breach of any confidentiality agreement or invention assignment agreement between the executive and us (or any affiliate of us) or (v) the executive’s commission of, or entering a plea of nolo contendere to, any crime or committing any act of moral turpitude; and

“Good Reason” for the executive to terminate the executive’s employment shall mean the occurrence of any of the following events without the executive’s consent: (i) a material reduction in the executive’s salary or benefits (excluding the substitution of substantially equivalent compensation and benefits), other than as a result of a reduction in compensation affecting our employees, or our successor entity, generally, (ii) a material diminution in the executive’s duties or responsibilities, provided however, that, a mere change in title or reporting relationship alone shall not constitute “Good Reason” and (iii) relocation of the executive’s place of employment to a location more than fifty (50) miles from our office location. If any of the events set forth above shall occur, the executive shall give prompt written notice of such event to us, or our successor entity, upon becoming aware of such event, and if such event is not cured within thirty (30) days from such notice the executive may exercise his or her rights to resign for Good Reason, provided that if the executive has not exercised such right within forty-five (45) days of the date of the expiration of such cure period, the executive shall be deemed to have agreed to the occurrence of such event.

Equity Compensation Plan Information

The following table provides certain information with respect to all of the Company’s equity compensation plans in effect as of December 31, 2023:

(1) Consists of the 2011 Equity Incentive Plan (the “2011 Plan”), the 2020 Incentive Award Plan (the “2020 Plan”), and the Employee Stock Purchase Plan (the “ESPP”).

(2) Consists of the 2022 Employment Inducement Plan (the “2022 Inducement Plan”). The 2022 Inducement Plan was adopted by the Board without stockholder approval pursuant to Nasdaq Marketplace Rule 5635(c)(4), or Rule 5635(c)(4). In accordance with Rule 5635(c)(4), awards made under the 2022 Inducement Plan may only be granted to newly hired employees as an inducement material to the employees entering into employment with the Company. Awards granted under the 2022 Inducement Plan expire no later than ten years from the date of grant. An aggregate of 2,000,000 shares of common stock were reserved for issuance under the 2022 Inducement Plan.

(3) Consists of 2,068,635 shares of common stock underlying outstanding options under the 2011 Plan, 5,898,419 shares of common stock underlying outstanding options under the 2020 Plan, and 495,579 shares of common stock underlying unvested RSUs under the 2020 Plan. Does not include approximately 16,916 shares that may be issued with respect to the purchase period in effect as of December 31, 2023 under the ESPP, which purchase period ends on May 15, 2024, based on enrollment as of December 31, 2023 and assuming a purchase price of $5.49 (which was the closing price of our common stock as of March 1, 2024).

(4) Represents the weighted-average exercise price of outstanding options. Because RSUs do not have an exercise price, the weighted-average exercise price does not take into account outstanding RSUs.

(5) Includes 1,988,340 shares of common stock available for issuance under the 2020 Plan, and 1,338,381 shares available for issuance under the ESPP as of December 31, 2023. In connection with the effectiveness of the 2020 Plan in July 2020, no further grants are made under the 2011 Plan.

The number of shares of common stock reserved for issuance pursuant to equity awards under the 2020 Plan will automatically increase January 1 of each year for a period of up to ten years, commencing on January 1, 2021 and continuing through and including January 1, 2030 by the lesser of (i) the amount equal to 4% of the number of shares issued and outstanding on December 31 immediately prior to the date of increase or (ii) such lower number of shares as may be determined by the Board, provided that no more than 21,605,212 shares may be issued pursuant to the exercise of incentive stock options.

The number of shares of common stock reserved for issuance under the ESPP will increase January 1 of each year for a period of up to ten years commencing January 1, 2021 and continuing through and including January 1, 2030 by the lesser of (i) a number of shares equal to 1% of the total number of outstanding shares of common stock on December 31 immediately prior to the date of increase or (ii) such number of shares as may be determined by the Board, provided that no more than 3,960,955 shares may be issued under the ESPP.

Non-Employee Director Compensation

The following table sets forth information concerning compensation earned by the non-employee members of our Board during the year ended December 31, 2023. Mr. Love, our President and CEO, is also a director but does not receive any additional compensation for his services as a director. Information concerning the compensation earned by Mr. Love is set forth in the Summary Compensation Table above.

(1) The amounts in the “Option Awards” column reflect the aggregate grant date fair value of stock options granted during the calendar year computed in accordance with the provisions of ASC 718, Compensation—Stock Compensation. The assumptions that we used to calculate these amounts are discussed in Note 7 of this Annual Report on Form 10-K. These amounts may not reflect the actual economic value that will be realized by the non-employee director upon the exercise of the stock options, or the sale of the common stock acquired upon such exercise.

The following tables set forth options awards held as of December 31, 2023 by each non-employee director. None of our non-employee directors held any stock awards as of December 31, 2023.

Our Board adopted our Non-Employee Director Compensation Program for our non-employee directors, as amended in June 2023 (the “Director Compensation Program”) pursuant to which non-employee directors are compensated as follows:

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Each non-employee director receives an annual cash retainer in the amount of $40,000 per year.

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The non-executive chair receives an additional annual cash retainer in the amount of $32,500 per year.

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The chair of the Audit Committee receives additional annual cash compensation in the amount of $15,000 per year for such chair’s service on the Audit Committee. Each non-chair member of the Audit Committee receives additional annual cash compensation in the amount of $7,500 per year for such member’s service on the Audit Committee.

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The chair of the Compensation Committee receives additional annual cash compensation in the amount of $12,000 per year for such chair’s service on the Compensation Committee. Each non-chair member of the Compensation Committee receives additional annual cash compensation in the amount of $6,000 per year for such member’s service on the Compensation Committee.

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The chair of the Nominating and Corporate Governance Committee receives additional annual cash compensation in the amount of $10,000 per year for such chair’s service on the Nominating and Corporate Governance Committee. Each non-chair member of the Nominating and Corporate Governance Committee receives additional annual cash compensation in the amount of $5,000 per year for such member’s service on the Nominating and Corporate Governance Committee.

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The chair of the Science and Technology Committee receives additional annual cash compensation in the amount of $10,000 per year for such chair’s service on the Science and Technology Committee. Each non-chair member of the Science and Technology Committee receives additional annual cash compensation in the amount of $5,000 per year for such member’s service on the Science and Technology Committee.

Under the Director Compensation Program, each non-employee director is automatically granted an option to purchase 53,000 shares of our common stock upon the director’s initial appointment or election to our Board, referred to as the Initial Grant, and an option to purchase 26,500 shares of our common stock automatically on the date of each annual stockholder’s meeting thereafter, referred to as the Annual Grant. The Initial Grant vests in substantially equal monthly installments for three years from the date of grant, subject to continued service through each applicable vesting date. The Annual Grant vests on the earlier of the first anniversary of the date of grant or the date of the next annual stockholder’s meeting to the extent unvested as of such date, subject to continued service through each applicable vesting date. Each Initial Grant and Annual Grant vests in full in the event of a change in control.

Compensation Committee Interlocks and Insider Participation

For the year ended December 31, 2023, our Compensation Committee consisted of Dr. Carson, Ms. Choi and Mr. Wiggans. None of our directors who serve as a member of our Compensation Committee is, or has at any time during the past year been, one of our officers or employees. None of our executive officers currently serve, or has served during the last completed fiscal year, on the Compensation Committee or board of directors of any other entity that has one or more executive officers serving as a member of our board of directors or Compensation Committee.

Please refer to the section of this Annual Report on Form 10-K entitled “Certain Relationships and Related Transactions, and Director Independence” for information concerning certain transactions involving members of the Compensation Committee.

Clawback Policy

In November 2023, our Board adopted a written compensation recovery policy in accordance with applicable Nasdaq rules, a copy of which is filed as an exhibit to this Annual Report on Form 10-K. The policy provides that we will seek to recover any incentive-based compensation erroneously awarded to any current or former executive officer due to the material noncompliance with any financial reporting requirement under the securities laws during the three completed fiscal years immediately preceding the date we determine that an accounting restatement is required.