Oruka Therapeutics Inc

This section provides information regarding the compensation of our principal executive officer (Dr. Klein), and our two other highest paid executive officers who were serving as executive officers on December 31, 2024 (Dr. Goncalves and Mr. Quinlan). This section also includes compensation information for certain former executives of the Company (then known as ARCA). The individuals listed below are collectively referred to herein as the “NEOs” or “Named Executive Officers.”

A Year of Transition

2024 was a year of transition for the Company as we completed the Merger, shifted our drug candidate pipeline to focus on novel biologics designed to set a new standard for the treatment of chronic skin diseases and transformed our management team. Our mission is to offer patients suffering from chronic skin diseases like plaque psoriasis the greatest possible freedom from their condition by achieving high rates of complete disease clearance with dosing as infrequently as once or twice per year. The compensation described below reflects both compensatory decisions necessary to engage a new leadership team that is critical to lead the advancement of the Company’s pipeline of novel biologics and improve the standard of care for the treatment of chronic skin diseases and compensatory decisions made by ARCA prior to the consummation of the Merger with respect to the former executive officers.

2024 Summary Compensation Table

The following table shows information regarding the compensation earned by the NEOs during the fiscal years ending December 31, 2024 and 2023, by our named executive officers.

Narrative Disclosure to Summary Compensation Table

In December 2024, our Compensation Committee adopted a compensation philosophy to frame future compensation decisions for the Company. Under this philosophy, compensation positioning is used to attract and retain key employees for the Company’s continued success and growth. While market data is helpful to the Compensation Committee in setting compensation framework and guiding decisions, other factors such as Company strategy, stockholder feedback, tenure, performance and criticality are also considered. The compensation philosophy serves as the foundation to reinforce the Company’s business strategy and desired culture, while balancing internal and external alignment.

Peer Group

In July 2024, Pre-Merger Oruka, in consultation with Alpine, the Compensation Committee’s independent compensation consultant, established a peer group that focuses on U.S.-based, pre-clinical or early clinical biopharma companies (with priority placed on companies with a similar therapeutic focus) with a market capitalization ranging from $250 million to $2 billion and less than 100 employees. The peer group, which was used in making compensation decisions in connection with establishing post-Merger executive compensation for 2024, includes the following companies (the “Peer Group”):

Elements of Compensation

Base Salaries

Our Compensation Committee recognizes the importance of base salary as an element of compensation to provide our executive officers with steady cash flow during the year that is not contingent on short-term variations in our corporate performance. The setting of base salaries also includes an evaluation of each individual’s job duties, responsibilities, performance and experience, as well as internal pay equity among the executive officer team. The Compensation Committee reviews base salaries at least annually and may recommend adjustment from time to time based on the results of that review. The Compensation Committee determines salary increases using a combination of relevant competitive market data, scope of responsibilities and assessment of individual performance.

For 2024, the annual base salaries of Drs. Klein and Goncalves and Mr. Quinlan were established in connection with the consummation of their employment with Pre-Merger Oruka as a result of negotiations in the context of a competitive recruitment process. The annual base salaries as of December 31, 2024 for each of our continuing NEOs were as follows: $600,000 for Dr. Klein and $460,000 for each of Dr. Goncalves and Mr. Quinlan.

Annual Bonus Program

We have an annual cash incentive plan under which cash incentives may be paid to each of our employees, including our executive officers, after the end of each calendar year. The Compensation Committee generally determines target bonuses based on Peer Group practices and each individual’s job duties. For 2024, the target bonuses for each NEO (excluding the former ARCA executive officers), which were established by Pre-Merger Oruka in connection with the consummation of their employment with Pre-Merger Oruka, were as follows: 50% of base salary for Dr. Klein and 40% of base salary for each of Dr. Goncalves and Mr. Quinlan, in each case, pro-rated based on their respective start dates with Pre-Merger Oruka.

Pre-Merger Oruka established the corporate goals and targets for the 2024 bonus program, which were heavily weighted towards the preclinical development of ORKA-001 and ORKA-002, progress towards the commencement of their respective Phase 1 clinical studies and regulatory progress. In addition, the corporate goals included measures designed to ensure adequate funding for the Company.

The Board, upon the recommendation of the Compensation Committee, reviewed our achievement against our 2024 corporate goals and determined the achievement to have been 125% of target, based on the achievement of substantially all the goals, with overperformance on several of the goals.

Based on our corporate performance, the 2024 annual bonuses awarded to our continuing NEOs were as follows: $317,623 for Dr. Klein, $162,132 for Dr. Goncalves and $154,591 for Mr. Quinlan.

Long-Term Incentives

We intend our equity incentive program to reward longer-term performance and to align the interests of our executive officers with those of our stockholders. We also believe that our equity incentive program, which currently consists predominantly of time-based stock options (or, for certain grants by Pre-Merger Oruka, time-based compensatory warrants), is an important retention tool for our employees, including our NEOs. The Compensation Committee believes that stock options, which require increased stock price performance for value realization, create a key connection between the interests of the NEOs and stockholders. Each of the grants described below are presented after giving effect to the share conversion completed in the Merger and the subsequent 1-for-12 reverse stock split.

In connection with his appointment as Chief Executive Officer of Pre-Merger Oruka, Dr. Klein purchased 852,338 shares of restricted stock at fair market value, which vests as to 25% on February 26, 2025 and in equal monthly installments thereafter through February 26, 2028. In accordance with the anti-dilution provisions of his offer letter, as described in more detail below, on July 15, 2024, Dr. Klein received a compensatory warrant to purchase 1,628,513 shares of our common stock, which vests as to 25% on April 3, 2025 and in equal monthly installments thereafter through April 3, 2028.

In connection with her appointment as Chief Medical Officer of Pre-Merger Oruka, Dr. Goncalves was granted stock options to purchase 228,563 shares of our common stock, which vests as to 25% on April 18, 2025 and in equal monthly installments thereafter through April 18, 2028. On July 15, 2024, Dr. Goncalves was granted a compensatory warrant to purchase 199,992 shares of our common stock, which vests on the same schedule as her initial stock option grant.

In connection with his appointment as General Counsel of Pre-Merger Oruka, Mr. Quinlan was granted stock options to purchase 228,563 shares of our common stock, which vests as to 25% on April 30, 2025 and in equal monthly installments thereafter through April 30, 2028. On July 15, 2024, Mr. Quinlan was granted a compensatory warrant to purchase 99,996 shares of our common stock, which vests on the same schedule as his initial stock option grant.

None of the former ARCA executive officers received grants of equity incentive awards during 2024.

Offer Letters

In connection with their appointments, we entered into offer letters with each of Dr. Klein, Dr. Goncalves and Mr. Quinlan, each of which was amended and restated as of October 3, 2024 (for Dr. Klein) or October 1, 2024 (for Dr. Goncalves and Mr. Quinlan) following the Merger (collectively, the “Offer Letters”). The Offer Letters provided for each NEO’s initial base salary, target annual bonus and initial equity incentive award. The Offer Letter with Dr. Klein also provided for periodic grants of stock options sufficient to maintain Dr. Klein’s ownership at approximately 5% on a fully-diluted basis until Oruka raised an aggregate of $200 million in financing, which obligations were fully satisfied prior to the consummation of the Merger through the warrant issued on July 15, 2024. The Offer Letter with Dr. Goncalves also provided for a sign-on bonus of $100,000, which is subject to repayment in the event of a termination for cause or resignation without good reason prior to April 18, 2025.

Under the Offer Letters, the NEOs are eligible for certain payments or benefits upon certain terminations of employment, as described under “Additional Narrative Disclosure—Potential Payments Upon Termination or Change in Control” below. Each of Dr. Klein, Dr. Goncalves and Mr. Quinlan is also party to our standard employee invention assignment, confidentiality and non-competition agreement, which, among other things, provides standard protections regarding our ownership of intellectual property, the confidentiality of our proprietary information, non-competition and non-solicitation.

ARCA Arrangements

Michael Bristow, M.D. Dr. Bristow served as the Company’s President and Chief Executive Officer through April 3, 2024. In connection with his separation, the Company (then known as ARCA) and Dr. Bristow entered into a separation agreement pursuant to which Dr. Bristow provided a release of claims in favor of the Company and the Company paid Dr. Bristow a lump sum severance payment of $370,000.

The Company and Dr. Bristow also entered into a consulting agreement, effective April 3, 2024, pursuant to which Dr. Bristow provided certain consulting services to the Company through the Merger. Under the consulting agreement, Dr. Bristow continued to vest in his outstanding equity awards during the consulting term.

Thomas A. Keuer and C. Jeffrey Dekker. Mr. Keuer served as the Company’s President and Chief Operating Officer and Mr. Dekker served as the Company’s Chief Financial Officer, in each case, through the consummation of the Merger. Pursuant to retention bonus letters approved by the ARCA Compensation Committee prior to the Merger, each of Messrs. Keuer and Dekker were paid a retention bonus upon consummation of the Merger of $165,000.

As a result of the Merger and the accompanying termination of their employment, the Company and each of Mr. Keuer and Mr. Dekker entered into a separation agreement, pursuant to which Mr. Keuer and Mr. Dekker each provided a release of claims in favor of the Company and the Company provided the following severance payments and benefits, in accordance with the terms of their employment agreement: (i) a lump sum cash severance payment equal to 12 months of their respective annual base salary ($340,000 and $270,000, respectively) and (ii) a lump sum cash payment of $69,715 in lieu of 12 months of group health plan continuation premiums.

Treatment of ARCA Equity Awards. In connection with the Merger, all outstanding ARCA stock options held by the NEOs were accelerated and cashed out for an amount equal to the difference between $3.9489 and the applicable per share exercise price; however, any ARCA stock options having an exercise price in excess of $3.9489 were cancelled for no consideration.

Outstanding Equity Awards at Fiscal Year End

The following table presents information regarding outstanding stock options, compensatory warrants and restricted stock held by each NEO as of December 31, 2024. The equity awards reflected below give effect to the share conversion completed in the Merger and the subsequent 1-for-12 reverse stock split. None of the former ARCA executive officers held any outstanding equity awards as of December 31, 2024.

Additional Narrative Disclosures

Employee Benefits and Perquisites

Our NEOs are eligible to participate in our employee benefit plans, including our health and welfare plans, term life insurance, disability insurance and a 401(k) plan, in each case on the same basis as all our other employees. During 2024, following the Merger, we did not provide any Company contributions under the 401(k) plan; however, in 2025, the Company will make matching contributions of 100% of the first 3% of eligible compensation deferred by participants, subject to legal maximum contributions.

Following the Merger, we generally do not provide perquisites or personal benefits to our NEOs, except in limited circumstances.

Potential Payments Upon Termination or Change in Control

Pursuant to the terms of the Offer Letters, in the event each NEO that is a current executive officer is terminated by the Company without “cause” or as a result of a resignation for “good reason” (collectively, an “Involuntary Termination”), such NEO will, subject to the execution of a release in favor of the Company, receive: (i) severance payments equal to 12 months of base salary; (ii) Company-paid continuation coverage under the Company’s group health plans for up to 12 months; and (iii) in the case of Dr. Klein, accelerated vesting of 30% of any outstanding time-based equity. However, if the Involuntary Termination is within three months before or 12 months after a change in control of the Company, the NEO will instead receive: (A) severance payments equal to 1.0 times (or, for Dr. Klein, 1.5x times) the sum of the NEO’s base salary and target bonus; (B) Company-paid continuation coverage under the Company’s group health plans for up to 12 months (or, for Dr. Klein, up to 18 months); and (C) full acceleration of all equity awards. In addition, upon severance due to the death or disability of the named executive officer, the officer’s equity awards shall accelerate in full.

As used in the Offer Letters:

“Cause” generally means the NEO’s (i) dishonest statements or acts with respect to the Company or any affiliate of the Company, or any current or prospective customers, suppliers, vendors or other third parties with which such entity does business that results in or is reasonably anticipated to result in material harm to the Company; (ii) conviction or plea of no contest to a felony or misdemeanor involving moral turpitude, deceit, dishonesty or fraud; (iii) failure to perform his or her duties or responsibilities, subject to a 30-day cure period; (iv) gross negligence, willful misconduct that results in or is reasonably anticipated to result in material harm to the Company; or (v) violation of any material provision of any agreement with the Company or any written Company policies.

“Good reason” generally means (i) a material diminution in the named executive officer’s base salary or target bonus (excluding across-the-board reductions of less than 10%); (ii) a material geographic relocation or requirement to change the named executive officer’s remote work location; (iii) a material reduction in the named executive officer’s duties, authority or responsibilities; (iv) the failure of the Company to obtain the assumption of the Offer Letter by a successor; or (v) the material breach of any agreement between the NEO and the Company, in each case, subject to standard notice and cure periods.

Clawback Policy

We maintain a Compensation Recoupment (Clawback) Policy, which is intended to comply with the requirements of Nasdaq Listing Standard 5608 implementing Rule 10D-1 under the Exchange Act. In the event the Company is required to prepare an accounting restatement of the Company’s financial statements due to material non-compliance with any financial reporting requirement under the federal securities laws, the Company will recover, on a reasonably prompt basis, the excess incentive-based compensation received by any covered executive, including the NEOs, during the prior three fiscal years that exceeds the amount that the executive otherwise would have received had the incentive-based compensation been determined based on the restated financial statements.

Equity Grant Practices

Following the Merger, we generally grant annual equity awards, including stock options, in January of each year. We also grant stock options as new hire awards as of their date of employment commencement. Employees, including the NEOs, may enroll to purchase shares under the terms of our 2024 Employee Stock Purchase Plan, as amended (the “ESPP”), with purchase dates generally occurring during open trading windows in June and December of each year using payroll deductions accumulated during the prior six-month period. During 2024, the Compensation Committee did not take material nonpublic information into account when determining the timing and terms of stock options, and the Company did not time the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.

Director Compensation

The following table provides information for the year ended December 31, 2024 regarding all compensation awarded to, earned by or paid to each person who served as a non-employee director for some portion of 2024. Employees who served on our Board during 2024 did not receive additional compensation for such service:

Non-Employee Director Compensation Program

Non-employee members of the Board are eligible to receive cash and equity compensation in accordance with our non-employee director compensation program. This program provides for the following annual cash retainers:

In connection with the Company’s annual meeting of stockholders, each member of the Board will receive an annual grant of stock options to purchase 17,500 shares of common stock, which will vest in equal monthly installments over 12 months so long as such director joined the Board prior to January 1 of the year in which such annual meeting occurs. Prior to the Merger, the annual grant of stock options was for 6,000 shares of common stock.

In addition, in connection with a non-employee director’s initial appointment to the Board, they will receive an initial grant of stock options to purchase 35,000 shares of common stock, which will vest in equal monthly installments over 36 months. Prior to the Merger, the initial grant of stock options was for 12,000 shares of common stock.

All members of the Board are also reimbursed for reasonable and documented out-of-pocket travel and lodging expenses incurred in connection with attending meetings and activities of the Board and its committees.