Pulmatrix Inc

Executive Summary

This section discusses the material components of our executive compensation program. We comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act, which require compensation disclosure for (i) our principal executive officer; (ii) the two most highly compensated executive officers other than our principal executive officer; and (iii) up to two additional individuals for whom disclosure would have been provided pursuant to clause (ii) but for the fact that the individual was not serving as an executive officer at the end of 2023. These current officers are referred to as our Named Executive Officers.

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.

Narrative Disclosure to Summary Compensation Table

Executive Employment Agreements

We have entered into executive employment agreements with each of our Named Executive Officers. The executive employment agreements provide for “at will” employment and set forth the terms and conditions of employment, including annual base salary, discretionary bonus opportunities, benefits and eligibility to participate in our employee benefit plans and programs. As a condition of their employment, our Named Executive Officers were each required to execute our standard proprietary information, inventions, and non-competition agreement. The material terms of these executive employment agreements are summarized below.

Retirement Plans

As part of our overall compensation program, we provide all full-time employees, including our named executive officers, with the opportunity to participate in a defined contribution 401(k) plan. Our 401(k) plan is intended to qualify under Section 401 of the Internal Revenue Code so that employee pre-tax contributions and income earned on such contributions are not taxable to employees until withdrawn. Employees may elect to defer up to 100 percent of their eligible compensation (not to exceed the statutorily prescribed annual limit) in the form of elective deferral contributions to our 401(k) plan. Our 401(k) plan also has a “catch-up contribution” feature for employees aged 50 or older (including those who qualify as “highly compensated” employees) who can defer amounts over the statutory limit that applies to all other employees.

Employee Benefits and Perquisites

During their employment, Mr. Raad, Ms. Siegert, and Dr. Wasilewski are eligible to participate in our health and welfare plans, including medical and dental benefits, short-term and long-term disability insurance, and life insurance.

No Tax Gross-Ups

We do not make gross-up payments to cover our executives’ personal income taxes that may pertain to any of the compensation or perquisites paid or provided by us.

Mr. Raad

On May 16, 2019, the Board appointed Mr. Raad to serve as Chief Executive Officer and a Class II director. Prior to Mr. Raad’s appointment as the Chief Executive Officer, Mr. Raad served as our Chief Business Officer pursuant to an employment agreement, dated April 28, 2017. On June 28, 2019, we and Mr. Raad entered into an amended and restated employment agreement (the “Raad Agreement”), with Mr. Raad to serve as our President and Chief Executive Officer. Mr. Raad’s employment with us is “at-will,” and the Raad Agreement does not include a specified term. As consideration for his services as Chief Executive Officer, the Raad Agreement provided that Mr. Raad would receive (i) an annual base salary of $450,000 and (ii) a target annual cash bonus equal to 45% of his base salary. Both Mr. Raad’s salary and bonus are subject to review and adjustment by the Board or an appropriate committee thereof. The actual bonus amount is based on both our and Mr. Raad’s individual performance during the year. Effective as of January 1, 2022, after taking into consideration previous increases, Mr. Raad’s base salary was increased to $525,272 and the target annual cash bonus equaled 50% of the base salary. Effective as of January 1, 2023, Mr. Raad’s base salary was increased to $567,294 and the target annual cash bonus remained at 50% of the base salary. No incentive bonus was paid to Mr. Raad for the year ended December 31, 2023. Effective January 6, 2024, Mr. Raad was granted a Retention Bonus (defined below) totaling $340,000 payable in two equal installments following each of the first two calendar quarters in 2024.

We initially agreed in the Raad Agreement to grant Mr. Raad an option to purchase 6,831 shares of our common stock, subject to the terms and conditions of the Amended and Restated 2013 Employee, Director and Consultant Equity Incentive Plan (the “Incentive Plan”) and our standard form of stock option agreement, as soon as practicable upon execution of the Raad Agreement. On January 9, 2020, after taking into consideration the results of a compensation survey, the Compensation Committee of the Board made various compensation adjustments, which included a grant to Mr. Raad, in lieu of the option to purchase 6,831 shares of our commons stock, of (i) an option to purchase 23,572 shares, of which 3,437 optioned shares were fully vested and exercisable as of January 9, 2020, and the remaining optioned shares to vest and become exercisable in 41 equal monthly installments on the 16th day of each of the 41 calendar months following January 2020, and (ii) an option to purchase 39,089 shares of common stock, 1/48th of the optioned shares to vest and become exercisable on each of the 48 monthly anniversaries of January 9, 2020. On April 2, 2020, Mr. Raad was granted an option to purchase 499 shares of common stock, 1/48th of the optioned shares to vest and become exercisable on each of the 48 monthly anniversaries of April 2, 2020.

On January 28, 2021, Mr. Raad was granted an option to purchase 28,274 shares of common stock, with 2.08333% of the optioned shares to vest and become exercisable on each of the 48 monthly anniversaries of grant date. On January 27, 2022, Mr. Raad was granted an option to purchase 37,500 shares of common stock, with 2.08333% of the optioned shares to vest and become exercisable on each of the 48 monthly anniversaries of grant date. On January 26, 2023, Mr. Raad was granted an option to purchase 34,900 shares of common stock, with 2.08333% of the optioned shares to vest and become exercisable on each of the 48 monthly anniversaries of grant date.

Termination Benefits

Pursuant to the Raad Agreement, if Mr. Raad’s employment is terminated (i) by us without Cause (as defined in the Raad Agreement) or (ii) by Mr. Raad for good reason, then we must pay Mr. Raad, in addition to any then-accrued and unpaid obligations owed to him, (a) twelve (12) months of his then-current base salary, (b) a pro-rated bonus in an amount equal to the target annual performance bonus to which Mr. Raad may have been entitled for the year in which the termination occurs, (c) a separation bonus equal to one hundred percent (100%) of the target annual performance bonus to which Mr. Raad may have been entitled for the year in which the termination occurs, and (d) up to twelve (12) months of COBRA health insurance premiums at our then-normal rate of contribution. In addition, all unvested equity awards held by Mr. Raad that would have vested during the twelve (12) months following the termination date will immediately vest and become exercisable. If Mr. Raad’s employment is terminated (i) by us without Cause or (ii) by Mr. Raad for good reason, within twelve (12) months following a change in control, then Mr. Raad shall be entitled to receive, in addition to any then-accrued and unpaid obligations owed to him, (a) a lump sum payment equal to eighteen (18) months of his then-current base salary, (b) a pro-rated bonus in an amount equal to the target annual performance bonus to which Mr. Raad may have been entitled for the year in which the termination occurs, (c) a separation bonus equal to one hundred percent (100%) of the target annual performance bonus to which Mr. Raad may have been entitled for the year in which the termination occurs, and (d) up to twelve (12) months of COBRA health insurance premiums at our then-normal rate of contribution. In addition, in that case, all unvested equity awards will immediately vest and become exercisable. Receipt of Mr. Raad’s severance and other termination benefits is subject to his execution of a release of claims and his compliance with the restrictive covenants contained in his agreements with the Company.

Under Mr. Raad’s employment agreement, “good reason” is defined as (i) relocation of Mr. Raad’s principal business location to a location more than fifty (50) miles from his then-current business location; (ii) a material diminution in Mr. Raad’s duties, authority, responsibilities, or reporting lines in a manner whereby Mr. Raad no longer reports to the Board; or (iii) a material reduction in Mr. Raad’s base salary; provided that (A) Mr. Raad provides the Company with written notice that he intends to terminate his employment for good reason within thirty (30) days of such circumstance occurring, (B) if such circumstance is capable of being cured, we have failed to cure such circumstance within a period of thirty (30) days from the date of such written notice, and (C) Mr. Raad terminates his employment within sixty five (65) days from the date that good reason first occurs.

Retention Bonus and Letter Agreement

On January 6, 2024, we and Mr. Raad entered into a letter agreement (the “Letter Agreement”), pursuant to which Mr. Raad shall be granted a retention bonus of $170,000 per quarter, for each of the full calendar quarters ending March 31, 2024 and June 30, 2024, respectively, less applicable payroll and other tax withholdings (such bonus, the “Retention Bonus”). Pursuant to the Letter Agreement, Mr. Raad must be employed by us on the last day of such applicable calendar quarter unless Mr. Raad’s employment is terminated on the closing date of a potential acquisition of us by an unrelated third party, merger by us with or into an unrelated third party or other liquidation event (such closing date, the “Retention Date”), in which case, Mr. Raad shall receive the full Retention Bonus for the calendar quarter in which the Retention Date occurs.

Notwithstanding the foregoing, if Mr. Raad’s employment with us is terminated by us without Cause prior to the Retention Date, or due to death or disability, then we shall pay to Mr. Raad the full Retention Bonus with respect to the calendar quarter of such termination, subject to the receipt of a release of claims by us (the “Release”). We shall not be obligated to pay the Retention Bonus if (i) Mr. Raad terminates his employment with us prior to the Retention Date, (ii) we terminate Mr. Raad’s employment prior to the Retention Date for Cause, or (iii) Mr. Raad’s employment is terminated due to his death, disability or by us without Cause, and a Release has not been received.

Mr. Ludlum

On April 14, 2022, we appointed Peter Ludlum as Interim Chief Financial Officer, effective as of April 18, 2022. Since December 2021, Mr. Ludlum has served as a consultant with Danforth Advisors, LLC (“Danforth”), a provider of strategic and operational finance and accounting for life science companies, and, since December 2021, Mr. Ludlum has served as our Strategic Advisor – Finance pursuant to a November 30, 2021 consulting agreement (the “Consulting Agreement”) between the Company and Danforth.

Pursuant to the Consulting Agreement, Danforth will receive cash compensation at a rate of $400 per hour for Mr. Ludlum’s services. Each month we and Danforth shall evaluate jointly the current fee structure and scope of Services. Danforth reserves the right to an annual increase in consultant rates of up to 4%, effective January 1 of each year. Upon termination of the Consulting Agreement, no compensation or benefits of any kind shall be payable or issuable to Danforth after the effective date of such termination. In addition, we will reimburse Danforth for reasonable out-of-pocket business expenses, including but not limited to travel and parking, incurred by Danforth in performing the services, upon submission by Danforth of supporting documentation reasonably acceptable to us. Any such accrued expenses in any given three (3) month period that exceed $1,000 shall be submitted to us for our prior written approval.

Pursuant to the Consulting Agreement, Mr. Ludlum will provide services to us under the Consulting Agreement as an independent contractor and employee of Danforth. The term of the Consulting Agreement will continue until such time as either party has given notice of termination. The Consulting Agreement may be terminated by either party hereto: (a) with cause (as defined in the Consulting Agreement) upon written notice to the other party; or (b) without cause upon 30 days prior written notice to the other party.

Dr. Wasilewski

On March 1, 2022, we appointed Dr. Wasilewski to serve as Chief Medical Officer. Dr. Wasilewski’s employment with us is “at-will,” pursuant to an employment agreement (the “Wasilewski Agreement”). As consideration for her services as Chief Medical Officer, the Wasilewski Agreement provided that Dr. Wasilewski would receive (i) an annual base salary of $442,000 and (ii) a target annual cash bonus equal to 40% of her base salary. Both Dr. Wasilewski’s salary and bonus are subject to review and adjustment by the Board or an appropriate committee thereof. The actual bonus amount is based on both our and Dr. Wasilewski’s individual performance during the year.

Pursuant to the Wasilewski Agreement, we agreed to grant Dr. Wasilewski an option to purchase 21,060 shares of our common stock, subject to the terms and conditions of the Incentive Plan and our standard form of stock option agreement, as soon as practicable upon execution of the Wasilewski Agreement. Effective January 1, 2023, Dr. Wasilewski’s base salary was increased to $461,890 and the target annual cash bonus remained at 40% of the base salary. No incentive bonus was paid to Dr. Wasilewski for the year ended December 31, 2023. On March 7, 2024, the Board approved the termination of Dr. Wasilewski. Termination benefits to be provided to Dr. Wasilewski are described below.

Termination Benefits

Pursuant to the Wasilewski Agreement, if Dr. Wasilewski’s employment is terminated (i) by us other than cause or (ii) by Dr. Wasilewski for good reason, then we must pay Dr. Wasilewski, in addition to any then-accrued and unpaid obligations owed to her, the following (i) severance in the amount equal to six (6) months of her base salary, less all customary and required taxes and employment-related deductions, paid in equal installments commencing on the first payroll date following the date on which the release of claims referenced above becomes effective and non-revocable, provided that, if the release consideration period plus the revocation period spans two taxable years, payments will commence in the later taxable year; (ii) payment for any approved, but unpaid bonus for the year immediately preceding the year her employment terminates, less all customary and required taxes and employment-related deductions; (iii) payment of a pro-rated bonus in an amount equal to her target bonus to which she may have been entitled for the year in which her employment terminates, less all customary and required taxes and employment-related deductions; (iv) up to twelve (12) months of COBRA health insurance premiums at our then-normal rate of contribution. and (v) she shall become fully vested in any and all equity awards outstanding as of the date of her termination.

In the event that a change of control occurs and within a period of one (1) year following the change of control, either her employment is terminated by us other than for cause or she terminates her employment for good reason, in exchange for her execution and non-revocation of a release of claims, she shall receive the payments and benefits set forth above, provided that the severance shall be for twelve (12) months (rather than six (6) months).

Ms. Siegert

Ms. Siegert was terminated effective July 31, 2023. Previously, on November 13, 2019, the Board had appointed Ms. Siegert to serve as Vice President, Finance, and as our Principal Accounting Officer and the Principal Financial Officer, effective as of November 16, 2019. As of April 18, 2022, Ms. Siegert no longer served as the Principal Accounting Officer and the Principal Financial Officer. Ms. Siegert’s employment with us was “at-will” with no specified term, subject to an offer letter dated November 7, 2019 (the “Offer Letter”). As consideration for her services as Vice President, Finance, the Offer Letter provided that Ms. Siegert would receive (i) an annual base salary of $240,000 and (ii) a target annual cash bonus equal to 25% of her base salary, to be determined by the Chief Executive Officer at his or her sole discretion. Both Ms. Siegert’s salary and bonus are subject to review and adjustment by the Board or an appropriate committee thereof. The actual bonus amount is based on both our and Ms. Siegert’s individual performance during the year. Effective January 1, 2022, after taking into consideration previous increases, Ms. Siegert’s base salary was increased to $299,700 and the target annual cash bonus equaled 30% of the base salary.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information concerning the outstanding equity awards that have been previously awarded to each of our Named Executive Officers and which remain outstanding as of December 31, 2023:

Compensation Recovery Policy

In November 2023, our board of directors approved a Compensation Recovery Policy, which states that in the event we are required to prepare an accounting restatement, then we are directed, to the fullest extent permitted by governing law, to recover from each executive officer the amount, if any, of previously awarded compensation that has been determined to be erroneously awarded. This policy applies to incentive-based compensation received by executive officers on or after October 2, 2023.

Director Compensation

We have entered into a director’s agreement with each of our non-employee directors. In 2023, under these agreements, non-employee directors were paid cash compensation payable in four quarterly payments as set forth in the table below.

The agreements also provide that such directors will be reimbursed for reasonable out-of-pocket expenses incurred in connection with the attendance of board and committee meetings.

Director Compensation Table

The following table presents the total compensation for each person who served as a member of our Board during 2023. Other than as set forth in the table and described more fully below, we did not pay any compensation, reimburse any expense of, make any equity awards or non-equity awards to, or pay any other compensation to any of the other members of our Board in such period. Mr. Raad receives no additional compensation for his service as a director, and, consequently, is not included in this table. The compensation received by Mr. Raad as our President and Chief Executive Officer for 2023 is set forth in the “Summary Compensation Table” under the section “Executive Compensation”.