XFOWW X4 Pharmaceuticals Inc (PK)

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table shows the total compensation paid or accrued during the fiscal years ended December 31, 2018 and December 31, 2019 to (1) the individuals who served as our Chief Executive Officer during the fiscal year ended December 31, 2019 and (2) our two next most highly compensated executive officers who earned more than $100,000 during the fiscal year ended December 31, 2019 and were serving as executive officers as of such date. We refer to these individuals in this Proxy Statement as our Named Executive Officers.

Our Named Executive Officers for 2019 who appear in the Summary Compensation Table are:

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table shows for the fiscal year ended December 31, 2019, certain information regarding outstanding equity awards at fiscal year end for the Named Executive Officers.

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NARRATIVE TO SUMMARY COMPENSATION TABLE

The material terms of the elements of our executive compensation program are described below.

Base Salary

Each Named Executive Officer’s base salary is a fixed component of annual compensation for performing specific duties and functions, and has been established by our Board taking into account each individual’s role, responsibilities, skills, and experience.

Non-Equity Incentive Plan Compensation

Our annual bonus program is intended to reward our Named Executive Officers for meeting objective or subjective individual and/or company-wide performance goals for a fiscal year. For 2019 and 2018, our Named Executive Officers, other than Mr. Gray, received incentive compensation based upon the Board or Compensation Committee’s determination of their respective achievement of and performance with respect to corporate objectives.

Long-Term Equity Incentives

Our equity grant program is intended to align the interests of our Named Executive Officers with those of our stockholders and to motivate them to make important contributions to our performance.

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Employment and Change in Control Arrangements

Paula Ragan, Ph.D.

On June 23, 2015, Private X4 entered into an executive employment agreement with Dr. Ragan. Pursuant to the executive employment agreement, Dr. Ragan’s compensation consisted of base salary, annual bonus as determined by the Private X4 board of directors, equity grants as determined by the Private X4 board of directors, fringe benefits, vacation and reimbursement of ordinary and reasonable out-of-pocket expenses. In March 2018, Dr. Ragan’s base salary was increased to $380,000. Dr. Ragan had an annual target bonus for 2018 set at 35% of base salary.

On March 13, 2019, in connection with the closing of the Merger, we entered into an amended and restated executive employment agreement with Dr. Ragan, pursuant to which Dr. Ragan agreed to continue serving as our Chief Executive Officer. Pursuant to the agreement, Dr. Ragan’s compensation consists of base salary at an annual rate approved by our Board or an appropriate committee thereof, a bonus as determined by our Board (provided that the target for such bonus shall be not less than 25% of Dr. Ragan’s annual base salary), fringe benefits, vacation, reimbursement of ordinary and reasonable out-of-pocket expenses and coverage under our Directors’ and Officers’, or D&O, insurance policies, subject to the terms and conditions of such policies. Dr. Ragan’s 2019 base salary was $520,000, with an annual target bonus set at 50% of her annual base salary, subject to review and adjustment each year by the board of directors.

In June 2019, the Board granted Dr. Ragan two equity awards at the time the Board made annual grants to its employees, including its executive officers.

In February 2020, the Compensation Committee of the Board of Directors determined that Dr. Ragan had earned 110% of her target bonus for 2019, equal to a bonus of $286,000. At the same time, the Compensation Committee increased Dr. Ragan’s base salary for 2020 to $543,400.

Pursuant to her amended and restated executive employment agreement, as amended in February 2020, if Dr. Ragan’s employment is terminated for any reason, Dr. Ragan will be entitled to receive her accrued but unpaid salary, accrued but unused vacation days, the amount of any properly incurred expenses prior to termination not yet reimbursed and other benefits. In addition to the foregoing, if Dr. Ragan’s employment is terminated by us without cause or if Dr. Ragan resigns for good reason, each term as defined in the agreement, Dr. Ragan will be entitled to the following: (a) a continuation of base salary for 12 months, (b) a pro-rated portion of her at-target annual bonus for the calendar year in which the termination occurs, (c) so long as Dr. Ragan is eligible for coverage under our health insurance plan, elects coverage, was covered prior to termination, and elects to exercise her rights under COBRA to continue participation in such plan, we will pay the normal share of costs we pay for current employees under such plan until the earlier of 12 months from the date of Dr. Ragan’s termination, or the date Dr. Ragan is eligible to receive health benefits through another employer, and (d) Dr. Ragan will become vested in the additional number of outstanding time-based equity awards granted to Dr. Ragan by us that would have otherwise vested had Dr. Ragan remained employed for an additional 12 months after her termination date. In addition, if Dr. Ragan’s employment is terminated without cause or if Dr. Ragan resigns for good reason within the one-year period following a change of control, as that term is defined in the agreement, Dr. Ragan will be entitled to the following: (a) a continuation of base salary for 18 months, (b) her full annual bonus for the calendar year in which the termination occurs, (c) so long as Dr. Ragan is eligible for coverage under our health insurance plan, elects coverage, was covered prior to termination, and elects to exercise her rights under COBRA to continue participation in such plan, we will pay

the normal share of costs we pay for current employees under such plan until the earlier of 12 months from the date of Dr. Ragan’s termination, or the date Dr. Ragan is eligible to receive health benefits through another employer, and (d) automatic vesting in all outstanding time-based equity awards granted to Dr. Ragan by us, subject to the terms and conditions of the agreement. As a condition to receiving the foregoing severance benefits, Dr. Ragan must execute and not revoke a separation agreement in a form acceptable to us and which will include a complete release of claims and terms related to non-disparagement, non-competition, confidentiality and cooperation.

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In connection with the execution of her amended and restated employment agreement, Dr. Ragan also agreed to continue to abide by the terms of her non-competition, non-solicitation, non-disclosure and intellectual property agreement.

Michael P. Gray, M.B.A., C.P.A.

In connection with the appointment of Michael P. Gray as Arsanis’ President and Chief Executive Officer on November 26, 2018, Arsanis entered into an amended and restated employment agreement with Mr. Gray, which agreement became effective as of November 27, 2018 and replaced his October 10, 2017 amended and restated letter agreement (the “Gray 2018 Agreement”). Under the Gray 2018 Agreement, Mr. Gray’s base salary was $450,000 per annum and he was entitled to participate in Arsanis’ medical and other benefits programs, and he was entitled to receive an annual bonus based on his individual performance and the company’s performance during the applicable year, all as determined by Arsanis’ Board of Directors in its sole discretion, at a target bonus rate of 55% of his annualized base salary.

On March 13, 2019, immediately prior to and effective upon the closing of the Merger, Mr. Gray resigned for good reason for purposes of the Gray 2018 Agreement. In accordance with the terms of the Gray 2018 Agreement, in connection with such resignation, Mr. Gray became entitled to the following severance benefits: (i) an amount equal to the sum of (x) 1.5 times his then-current base salary and (y) 1.5 times his target bonus for 2019, and (ii) COBRA premium benefits for up to 12 months. In addition, pursuant to the terms of the Gray 2018 Agreement, Mr. Gray’s outstanding equity awards vested in full, and the option award granted to Mr. Gray in June 2017 may be exercised for up to two years following his separation date.

Adam S. Mostafa

On July 23, 2018, Private X4 entered into an executive employment agreement with Mr. Mostafa, pursuant to which Mr. Mostafa agreed to serve as Private X4’s Chief Financial Officer effective as of September 5, 2018. Pursuant to the executive employment agreement, Mr. Mostafa’s compensation consisted of base salary, potential annual bonus as determined by the Private X4 board of directors, a potential equity grant subject to approval by the Private X4 board of directors, fringe benefits, vacation and reimbursement of ordinary and reasonable out-of-pocket expenses. Mr. Mostafa’s initial base salary, which was subject to review and adjustment, was $340,000. The agreement provided for Private X4 to pay annual bonuses at Private X4’s sole discretion, as determined by the Private X4 board of directors, with an annual target bonus set at 35% of annual base salary. Private X4 also agreed to grant Mr. Mostafa an option to purchase 659,067 shares of Private X4 common stock, subject to approval by the X4 board of directors and subject to certain vesting conditions, which option was granted on October 19, 2018. In connection with the Merger, this option became an option to purchase 62,633 shares of our common stock.

On March 13, 2019, in connection with the closing of the Merger, we entered into an amended and restated executive employment agreement with Mr. Mostafa, pursuant to which Mr. Mostafa agreed to continue serving as our Chief Financial Officer. Pursuant to the agreement, Mr. Mostafa’s compensation consists of base salary at an annual rate approved by our Board or an appropriate committee thereof, an annual bonus as determined by our Board (provided that the target for such bonus shall not be less than 25% of Mr. Mostafa’s annual base salary), fringe benefits, vacation, reimbursement of ordinary and reasonable out-of-pocket expenses and coverage under our D&O insurance policies, subject to the terms and conditions of such policies. Mr. Mostafa’s base salary in 2019 was $380,000, with an annual target bonus set at 40% of his annual base salary, subject to review and adjustment each year by the Board of Directors.

In June 2019, the Board of Directors granted Mr. Mostafa two equity awards at the time the Board made annual grants to its employees, including its executive officers.

In February 2020, the Compensation Committee of the Board of Directors determined that Mr. Mostafa had earned 111% of his target bonus for 2019, equal to a bonus of $168,341. At the same time, the Compensation Committee increased Mr. Mostafa’s base salary for 2020 to $400,000.

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Pursuant to his amended and restated executive employment agreement, as amended in February 2020, if Mr. Mostafa’s employment is terminated for any reason, Mr. Mostafa is entitled to receive his accrued but unpaid salary, accrued but unused vacation days, the amount of any properly incurred expenses prior to termination not yet reimbursed and other benefits. In addition to the foregoing, if Mr. Mostafa’s employment is terminated by us without cause or if Mr. Mostafa resigns for good reason, each term as defined in the agreement, Mr. Mostafa will be entitled to the following: (a) a continuation of base salary for six months, (b) a pro-rated portion of Mr. Mostafa’s at-target annual bonus for the calendar year in which the termination occurs based on the period worked by Mr. Mostafa during such calendar year prior to termination, (c) so long as Mr. Mostafa is eligible for coverage under our health insurance plan, elects coverage, was covered prior to termination, and elects to exercise his rights under COBRA to continue participation in such plan, we will pay the normal share of costs we pay for current employees under such plan until the earlier of six months from the date of Mr. Mostafa’s termination or the date Mr. Mostafa is eligible to receive health benefits through another employer, and (d) Mr. Mostafa will become vested in the additional number of outstanding time-based equity awards granted to Mr. Mostafa by us that would have otherwise vested had Mr. Mostafa remained employed for an additional six months after his termination date. In addition, if Mr. Mostafa’s employment is terminated without cause or if Mr. Mostafa resigns for good reason within the one-year period following a change of control, as that term is defined in the agreement, Mr. Mostafa will be entitled to the following: (a) a continuation of base salary for 12 months, (b) Mr. Mostafa’s full annual bonus for the calendar year in which the termination occurs, (c) so long as Mr. Mostafa is eligible for coverage under our health insurance plan, elects coverage, was covered prior to termination, and elects to exercise his rights under COBRA to continue participation in such plan, we will pay the normal share of costs we pay for current employees under such plan until the earlier of six months from the date of Mr. Mostafa’s termination or the date Mr. Mostafa is eligible to receive health benefits through another employer, and (d) automatic vesting in all outstanding time-based equity awards granted to Mr. Mostafa by us, subject to the terms and conditions of the agreement. As a condition to receiving the foregoing severance benefits, Mr. Mostafa must execute and not revoke a separation agreement in a form acceptable to us and which will include a complete release of claims and terms related to non-disparagement, non-competition, confidentiality and cooperation.

In connection with the execution of his amended and restated employment agreement, Mr. Mostafa agreed to continue to abide by the terms of his non-competition, non-solicitation, non-disclosure and intellectual property agreement.

E. Lynne Kelley, M.D.

On April 22, 2019, we entered into an executive employment agreement with E. Lynne Kelley, M.D., pursuant to which Dr. Kelley agreed to serve as our Chief Medical Officer commencing on April 24, 2019. Pursuant to the executive employment agreement, Dr. Kelley’s compensation consists of base salary, potential annual bonus as determined by the Board, a potential equity grant subject to approval by the Board, fringe benefits, vacation and reimbursement of ordinary and reasonable out-of-pocket expenses. Dr. Kelley’s initial base salary, which is subject to review and adjustment, was $410,000. The agreement provides for the payment of annual bonuses of up to 40% of her annual base salary, as determined at our sole discretion. We also agreed to grant Dr. Kelley an option to purchase 37,170 shares of common stock, subject to approval by the Board and subject to certain vesting conditions, which option was granted on April 24, 2019. In February 2020, the Compensation Committee of the Board determined that Dr. Kelley had earned 29.5% of her target bonus for 2019, equal to a bonus of $121,005. At the same time, the Compensation Committee increased Dr. Kelley’s base salary for 2020 to $418,200.

Dr. Kelley resigned as our Chief Medical Officer effective April 3, 2020. In connection with Dr. Kelley’s resignation, we and Dr. Kelley entered into a Resignation Agreement and Release (the “Kelley Separation Agreement”). Under the terms of the Kelley Separation Agreement, we will pay Dr. Kelley severance in the amount of $34,850.10 per month, less applicable withholdings, for twelve (12) months from the first regular payroll date following April 3, 2020. We also agreed to vest options to purchase 9,292 shares of our common

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stock previously granted to Dr. Kelley to vest as of April 2, 2020, with such stock options to be exercisable until April 3, 2021. Under the terms of the Kelley Separation Agreement, Dr. Kelley is entitled to payment of her accrued and unpaid base salary through the April 3, 2020, any unreimbursed expenses, any accrued but unused vacation pay and all other payments to which she is entitled under any applicable Company employee benefit plan. We also agreed to pay up to 12 months of continued medical, dental or vision coverage for Dr. Kelley pursuant to COBRA, if she elects such coverage. As consideration for the severance benefits, Dr. Kelley has agreed to customary non-disclosure and non-solicitation provisions and to a general release of all claims against X4 and its affiliates. We and Dr. Kelley have also agreed to a mutual customary non-disparagement provision.

401(k) Plan

We maintain a defined contribution retirement plan that provides eligible U.S. employees with an opportunity to save for retirement on a tax-advantaged basis. Eligible employees may defer eligible compensation on a pre-tax basis, up to the statutorily prescribed annual limits on contributions under the Code. Contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. Employees are immediately and fully vested in their contributions. The 401(k) plan is intended to be qualified under Section 401(a) of the Code with the 401(k) plan’s related trust intended to be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan.

Health and Welfare Benefits

All of our full-time employees and certain of our part-time employees are eligible to participate in our health and welfare benefit plans, including our medical, dental, life and long-term disability insurance plans. Our health and welfare benefit plans do not discriminate in scope, terms or operation in favor of our executive officers.

NARRATIVE TO DIRECTOR COMPENSATION TABLE

Current Non-Employee Director Compensation Policy

On March 13, 2019, following the Merger, we adopted a director compensation policy based on the Arsanis director compensation policy. We subsequently amended the director compensation policy to alter the equity grants we make to our directors. The cash fees payable to our non-employee directors were not changed from those described above. We grant to new non-employee directors, upon their initial election to the board of directors, an option to purchase 6,854 shares of our common stock at an exercise price equal to the closing price of our common stock on the date of grant. Each of these options has a term of 10 years from the date of the award and vests as to 33.3333% of the shares of common stock underlying such option on the first anniversary of the date of grant, with the remainder vesting in equal monthly installments of 2.7777% of the shares of common stock underlying such option until the 36-month anniversary of the date of grant, subject to the non-employee director’s continued service as a director. This vesting accelerates as to 100% of the shares upon a change in control of the Company.

Further, on the dates of each of our annual meetings of stockholders, each non-employee director that has served on our board of directors for at least six months will automatically receive an option to purchase 3,427 shares of our common stock at an exercise price equal to the closing price of our common stock on the date of the grant. Each of these options has a term of 10 years from the date of the award and vests in equal monthly installments of 8.333% of the shares of our common stock underlying such option until the 12-month anniversary of the date of grant (or, if earlier, the date of our next annual meeting of stockholders following the date of grant) unless otherwise provided at the time of grant, subject to the non-employee director’s continued service as a director, with 100% acceleration of vesting upon a change in control of the Company.

Former Arsanis Non-Employee Director Compensation Program

Under Arsanis’ director compensation program in effect until the closing of the Merger on March 13, 2019, Arsanis paid its non-employee directors a cash retainer for service on the Board of Directors and for service on each committee on which the director was a member. The Chairman of the Board, the Lead Independent Director and the Chair of each committee received higher retainers for such service. These fees were payable in arrears in four equal quarterly installments on the last day of each quarter, provided that the amount of such payment would be prorated for any portion of such quarter that the director was not serving on the Board of Directors, on such committee or in such position. The fees paid to non-employee directors for service on the Board of Directors, for

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service as a Lead Independent Director and for service on each committee of the Board of Directors on which the director was a member were as follows.

Arsanis also reimbursed its non-employee directors for reasonable travel and other expenses incurred in connection with attending meetings of the Board of Directors and any committee of the Board of Directors on which they served.

In addition, under Arsanis’ director compensation program, Arsanis granted the directors who were in office at the time of the closing of Arsanis’ initial public offering, and would grant to new non-employee directors upon their initial election to the board of directors, an option to purchase 4,166 shares of common stock. Each of these options would vest as to 33.3333% of the shares of common stock underlying such option on the first anniversary of the date of grant, with the remainder vesting in equal monthly installments until the third anniversary of the date of grant, subject to the non-employee director’s continued service as a director. Further, on the dates of each of Arsanis’ annual meetings of stockholders, each non-employee director that had served on the board of directors for at least six months would automatically receive, under the 2017 Plan, an option to purchase 1,666 shares of common stock. Each of these options would vest in equal monthly installments until the first anniversary of the date of grant (or, if earlier, the date of Arsanis’ next annual meeting of stockholders following the date of grant) unless otherwise provided at the time of grant, subject to the non-employee director’s continued service as a director, with full acceleration of vesting upon a change in control of the company. All options issued to non-employee directors under the director compensation program were issued at exercise prices equal to the closing price of the common stock on the date of grant.

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TRANSACTIONS WITH RELATED PERSONS AND INDEMNIFICATION

RELATED-PERSON TRANSACTIONS POLICY AND PROCEDURES

Our Board of Directors has adopted a written related person transaction policy to set forth policies and procedures for the review of any transaction, arrangement or relationship in which our company is a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% stockholders, or their immediate family members, each of whom we refer to as a “related person,” has a direct or indirect material interest.

If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related party transaction,” the related person must report the proposed related person transaction to our Chief Financial officer. The policy calls for the proposed related person transaction to be reviewed and approved by our Audit Committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, Audit Committee will review and, in its discretion, may ratify the related person transaction. The policy also permits the Chair of the Audit Committee to review and, if deemed appropriate, approve proposed related person transactions that arise between Audit Committee meetings, subject to ratification by the Audit Committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.

A related person transaction reviewed under this policy will be considered approved or ratified if it is authorized by the Audit Committee in accordance with the standards set forth in the policy after full disclosure of the related person’s interests in the transaction. As appropriate for the circumstances, the policy provides that the Audit Committee will review and consider:

The Audit Committee may approve or ratify the related person transaction only if the Audit Committee determines that, under all of the circumstances, the transaction is in our best interests. The Audit Committee may impose any conditions on the related person transaction as it deems appropriate. The policy also provides that transactions involving compensation of executive officers will be reviewed and approved by our Compensation Committee in the manner specified in its charter.

For purposes of the policy, we refer to certain related-party transactions below in which (a) we were a participant, (b) the amount involved exceeded or will exceed $120,000 or, during such time as we qualify as a “smaller reporting company,” the lesser of (1) $120,000 or (2) 1% of the average of our total assets for the last two completed fiscal years, and (c) one or more related persons had a direct or indirect material interest. Transactions involving compensation for services provided to us by an employee, director, consultant or individual performing in a similar capacity by a related person are not covered by this policy.

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CERTAIN RELATED-PERSON TRANSACTIONS

Since January 1, 2018, we, Arsanis and Private X4 have engaged in, or currently propose to engage in, the following related-party transactions. We believe that all of these transactions were on terms comparable to terms that could have been obtained from unrelated third parties.

Arsanis Related-Person Transactions

Services and Facilities Agreement with EveliQure Biotechnologies GmbH

Arsanis’ subsidiary, Arsanis Biosciences GmbH (now our subsidiary X4 Pharmaceuticals (Austria) GmbH), leased approximately 1,500 square meters of office and lab space from Marxbox Bauprojekt GmbH & Co. OG. In February 2015, Arsanis Biosciences GmbH entered into a services and facilities agreement with EveliQure Biotechnologies GmbH, or EveliQure, under which Arsanis provided certain laboratory services and sublet approximately 150 square meters of office and lab space. Tamás Henics, the husband of Eszter Nagy, Arsanis’s former Chief Scientific Officer and director, served as Chief Scientific Officer at EveliQure.

On June 28, 2018 and in accordance with the terms of this agreement with EveliQure, Arsanis provided EveliQure with written notice that the services and facilities agreement will terminate and EveliQure will vacate the sublet space no later than December 31, 2018. As of December 31, 2018, EviliQure had vacated the office and lab space and its services and facilities agreement with Arsanis was terminated.

During the year ended December 31, 2018, Arsanis received payments from EveliQure under the agreement of $0.2 million, respectively. As of December 31, 2018, amounts due from EveliQure totaled less than $0.1 million. These amounts included rental charges as well as amounts attributable to facilities and laboratory services.

Agreements with Adimab, LLC

Arsanis entered into two agreements with Adimab, LLC, or Adimab, the Adimab Collaboration Agreement and the Adimab Option Agreement, under which Arsanis was granted exclusive options to obtain ownership or exclusive worldwide licenses under specified patents relating to the development and commercialization of monoclonal antibodies. Tillman U. Gerngross, Ph.D., the former chairman of Arsanis’s board of directors, is a co-founder of Adimab and currently serves as its chief executive officer. The following descriptions of the agreements with Adimab are summaries and are qualified by reference to the underlying agreements. As Dr. Gerngross is no longer a member of our Board or management team, Adimab is no longer a related party.

Adimab Collaboration Agreement

In May 2011, Arsanis entered into a collaboration agreement with Adimab, which, as amended, and together with certain applicable option exercise letters Arsanis sent to Adimab, we refer to as the Adimab Collaboration Agreement. Under the Adimab Collaboration Agreement, Adimab and Arsanis were required to use reasonable efforts to conduct certain research, which Arsanis funded, to discover and optimize antibodies directed against targets selected by Arsanis. Prior to Arsanis’s exercise of an option, (1) Arsanis and Adimab each grant the other a non-exclusive license to the relevant intellectual property Arsanis owns to allow each party to carry out its rights and obligations in connection with the research, and (2) except for Adimab’s retained right to continue using and licensing its own libraries, each party agrees not to practice or license the patents arising out of the research that it owns for any purpose other than to carry out its rights and obligations in connection with the research.

With respect to each target that was the subject of the research, Arsanis had an exclusive option to obtain, with respect to a specified number of antibodies directed against such target and discovered or optimized by Adimab, (1) ownership of certain patent rights relating to such antibodies and (2) exclusive and non-exclusive

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licenses, with the right to grant sublicenses, in all human therapeutic, prophylactic and diagnostic areas, which we refer to as the licensed field, under certain patent rights and know-how, to research, develop, make, have made, use, sell, offer to sell, import and export such antibodies and products based on such antibodies (but not for antibody discovery purposes). In addition, upon exercise of each option, certain contractual restrictions on Arsanis’s ability to prosecute, practice and license certain patents owned by Arsanis that arose out of the research were eliminated. All of Arsanis’s options under the Adimab Collaboration Agreement have expired, or, with respect to multiple targets and hundreds of antibodies, have already been exercised.

Under the Adimab Collaboration Agreement, for each target for which Arsanis has exercised an option, we are required to use commercially reasonable efforts to develop and commercialize at least one product in major markets. If we do not fulfill these diligence obligations, Adimab may consider it a material breach, allowing Adimab to terminate the agreement with respect to such target and all associated products. We are obligated to pay Adimab royalties at a mid-single-digit percentage of net sales, made by us or our affiliates, of products based on antibodies for which Arsanis exercised its option, or products that use or are based on any antibody discovered or optimized under the agreement, any derivative or modified version of any such antibody, or any sequence information as to any such antibody.

If Arsanis (or one of its affiliates with rights under the agreement) underwent a change in control and, at the time of such change in control, Arsanis had not sold or licensed to third parties all of its rights in antibodies for which we are obligated to pay Adimab royalties under the agreement (which rights we refer to as undesignated rights), then we are obligated to either pay Adimab a percentage, in the mid double digits of the payments we receive from that change in control that are reasonably attributable to those undesignated rights and certain patents arising from the collaboration, or require our acquirer and all of its future third party collaborators to pay to Adimab the royalties described above with respect to net sales of all products based on those undesignated rights. As a result of the Merger, this royalty election was made by Arsanis. If we grant rights to a third party under certain patents that are not directed to the antibodies for which we are obligated to pay Adimab royalties, we are also obligated to pay Adimab, in place of royalties or a percentage of payments received from the third party, a lump sum in the high six digits.

If we sell or license to any third party, or otherwise grant rights to any third party to, any of the products for which we are obligated to pay Adimab royalties, either alone or as part of a package including specified patents not directed to these antibodies, we are obligated to pay Adimab either the same royalties on net sales of such products by such third party, or a percentage, ranging from the low double digits to a maximum of less than 30%, of the payments we receive from such third parties that are attributable to such grant of rights. In April 2017, Arsanis entered into a letter agreement with the Gates Foundation (described below), pursuant to which Arsanis licensed to the Gates Foundation certain rights under its ASN100 program.

Notwithstanding the payment obligations described above, we have no payment obligations under the Adimab Collaboration Agreement with respect to sales of certain antibody products if they are sold at cost in developing countries under Arsanis’ April 2017 letter agreement with the Bill & Melinda Gates Foundation. However, if such products are sold in developing countries for an amount that exceeds cost, then the amount of such excess over cost will be subject to the royalty payment obligations.

The Adimab Collaboration Agreement will expire on a country-by-country basis twelve years after the first commercial sale in such country of the last product for which we are obligated to pay Adimab royalties in such country under the agreement. We have the right to terminate the agreement for any reason by providing Adimab with a specified amount of prior written notice. Adimab has the right to terminate the agreement if we materially breach the agreement. If Adimab terminates the agreement for our breach, or if we terminate the agreement for our convenience, then we must transfer or license to Adimab certain rights and assets relating to targets and antibodies for which Arsanis exercised its option. Adimab is then obligated to make payments to us with respect to these targets and antibodies that are similar to the payments we were required to make to Adimab during the term of the agreement. Certain of our payment obligations relating to specified products and patents arising from

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the agreement survive expiration or termination of the agreement. Under the Adimab Collaboration Agreement, as of December 31, 2018, Arsanis had paid Adimab approximately $4.3 million in the aggregate, consisting of upfront payments and reimbursement for research conducted by Adimab. No fees were paid under the Adimab Collaboration Agreement in 2019.

Adimab Option and License Agreement

In February 2017, Arsanis entered into an option and license agreement with Adimab, which we refer to as the Adimab Option Agreement. Under the Adimab Option Agreement, Adimab has provided to us certain proprietary antibodies against respiratory syncytial virus, or RSV, which we refer to as the initial RSV antibodies, for our evaluation during a specified option period and has granted us an exclusive, non-sublicensable license under certain Adimab patent rights and know-how during the option period to create, research, optimize, make, have made and use the initial RSV antibodies and modified or derivative forms of the initial RSV antibodies.

Under the Adimab Option Agreement, we were provided with an exclusive option, exercisable during the option period upon payment of an option fee to Adimab, to require Adimab to assign to us all rights in up to a specified number of RSV antibodies selected by us, which we refer to as the selected RSV antibodies, and certain patent rights owned by Adimab that cover these antibodies, and to obtain from Adimab a non-exclusive license, with the right to grant sublicenses, under certain other patent rights and know-how owned by Adimab, to research, develop, have developed, make, have made, use, sell, offer to sell, import and export products based on the selected RSV antibodies and modified or derivative forms of the selected RSV antibodies, for all indications and uses except for certain diagnostic uses. If we exercise our option under the agreement, we would be required to use commercially reasonable efforts to develop and commercialize at least one product based on a licensed RSV antibody in major markets.

In July 2019, we exercised our option under the Adimab Option Agreement and paid Adimab an option fee of $0.3 million. In July 2019, as further described in note 16 to the consolidated financial statements in our Annual Report on Form 10-K filed with the SEC on March 12, 2020, we transferred the intellectual property related to the AS-500 program, which includes the rights in the Adimab Option Agreement, to an unrelated third party through an exclusive, worldwide license. We remain obligated to make payments to Adimab based on future clinical and regulatory milestones of up to approximately $25.0 million, as well as royalty payments on a product-by-product and country-by-country basis of a mid-single-digit percentage based on net sales of products based on certain RSV antibodies during the applicable term for such product in that country. The third party is required to fund any future payments that become due to Adimab.

During the years ended December 31, 2019 and 2018, we and Arsanis made payments to Adimab of $0.3 million and $0.1 million, respectively, under the Adimab Option Agreement.

Agreements with Bill & Melinda Gates Foundation

February 2017 Grant Agreement and August 2018 Amended and Restated Gates Foundation Grant Agreement

In February 2017, Arsanis entered into a grant agreement with the Gates Foundation, which was a 5% stockholder of Arsanis, pursuant to which the Gates Foundation granted Arsanis up to $9.3 million to conduct preclinical development of monoclonal antibodies for the prevention of RSV infection in newborns, which we refer to as the RSV project. In return, Arsanis agreed to conduct the RSV project in a manner that ensures that the knowledge and information gained from the project will be promptly and broadly disseminated, and that the products, technologies, materials, processes and other intellectual property resulting from the RSV project (which Arsanis collectively refers to as the funded developments) will be made available and accessible at an affordable price to people most in need within developing countries. These obligations survive any expiration or termination of the grant agreement.

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To this end, Arsanis granted the Gates Foundation a non-exclusive, perpetual, royalty-free, fully paid up, sublicensable license to make, use, sell, offer to sell, import, distribute, copy, modify, create derivative works, publicly perform and display the funded developments and, to the extent incorporated into a funded development or required to use a funded development, any other technology created outside of the RSV project that was used as part of the RSV project, for the benefit of people in developing countries. Arsanis also agreed to seek prompt publication of data and results developed under the RSV project under “open access” terms and conditions. This license and these publication obligations survive any expiration or termination of the grant agreement.

In August 2018, Arsanis amended and restated the February 2017 grant agreement. The amended and restated grant agreement includes amendments to conform to current Gates Foundation audit, reporting, and other administrative requirements, as well as to make the perpetual Gates Foundation license grant described above irrevocable. The grant agreement, as amended, expired on October 31, 2019. Any grant funds that have not been used for, or committed to, the RSV project upon the expiration or termination of the agreement must be returned to the Gates Foundation or otherwise used as directed by the Gates Foundation.

During the years ended December 31, 2019 and 2018, we and Arsanis recognized grant income of $0 and $0, respectively, under the grant agreement with the Gates Foundation upon incurring qualifying expenses. As of December 31, 2019 and 2018, there were no amounts recorded as unearned income under the grant agreement with the Gates Foundation.

August 2018 Gates Foundation Grant Agreement

In August 2018, Arsanis entered into an additional grant agreement with the Gates Foundation pursuant to which the Gates Foundation granted to Arsanis up to $1.1 million to conduct preclinical development activities for the RSV project that were not included in the February 2017 grant agreement, as amended and restated in August 2018. In return, Arsanis agreed to conduct the RSV project in a manner that ensures that the knowledge and information gained from the project will be promptly and broadly disseminated, and that the products, technologies, materials, processes and other intellectual property resulting from the RSV project (collectively referred to as the funded developments) will be made available and accessible at an affordable price to people most in need within developing countries. These obligations survive any expiration or termination of the grant agreement.

To this end, Arsanis granted to the Gates Foundation a non-exclusive, perpetual, irrevocable, royalty-free, fully paid up, sublicensable license to make, use, sell, offer to sell, import, distribute, copy, modify, create derivative works, publicly perform and display the funded developments and, to the extent incorporated into a funded development or required to use a funded development, any other technology created outside of the RSV project that was used as part of the RSV project, for the benefit of people in developing countries. Arsanis also agreed to seek prompt publication of data and results developed under the RSV project under “open access” terms and conditions. This license and these publication obligations survive any expiration or termination of the grant agreements.

During the year ended December 31, 2018, Arsanis recognized grant income of $1.1 million under the August 2018 grant agreement with the Gates Foundation upon incurring qualifying expenses. Accordingly, unearned income under the August 2018 grant agreement with the Gates Foundation was $0 as of December 31, 2018. The August 2018 grant agreement expired during the year ended December 31, 2018.

Gates Foundation Letter Agreement and Investment

In April 2017, Arsanis entered into a letter agreement with the Gates Foundation. In connection with the letter agreement, the Gates Foundation purchased 2,464,799 shares of Arsanis’s Series D redeemable convertible

preferred stock (the “Series D preferred stock”), which converted into 120,363 shares of Arsanis’s common stock in connection with Arsanis’s initial public offering after giving effect to a one-for-3.4130 reverse stock split and the Reverse Stock Split. Arsanis committed to use the proceeds of $8.0 million from the investment by the Gates Foundation solely to advance the development of a specified monoclonal antibody program that

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involved the monoclonal antibodies ASN-1, ASN-2 and ASN-3 and Arsanis’s product candidate, ASN100. Under the letter agreement, in addition to the initial project funded by the Gates Foundation with its initial investment, Arsanis also agreed to conduct up to four additional projects to be proposed and to be funded by the Gates Foundation.

The letter agreement contains certain global access obligations as well as requirements relating to Arsanis’s use of the funds received from the Gates Foundation investment. In the event that we fail to comply with these obligations or requirements or any related U.S. legal obligations set forth in the letter agreement, the Gates Foundation will have the right, after expiration of a specified cure period, to require us to redeem all of the shares owned by the Gates Foundation or to locate a third party that will purchase such shares. For any redemption or purchase resulting from such default, the shares of our stock held by the Gates Foundation will be redeemed at an amount equal to the greater of the original purchase price (plus specified interest) or the fair market value of such stock on the date of such redemption. The term of the letter agreement continues in perpetuity.

In connection with this letter agreement, Arsanis granted to the Gates Foundation and/or Gates Foundation-supported entities certain licenses, including a non-exclusive, non-terminable, royalty-free (except as required under the Adimab Collaboration Agreement), sublicensable license to products, technologies, materials, processes and other intellectual property developed using funds provided by the Gates Foundation or a Gates Foundation-supported entity, or developed in connection with Arsanis’s conduct of any funded project or additional funded project, as well as all of Arsanis’s background intellectual property, to utilize and exploit products and services directed at pathogens or other targets subject to any funded project or additional funded project.

During the years ended December 31, 2019 and 2018, Arsanis incurred qualifying expenses of $0 and $0 million, respectively, under the letter agreement with the Gates Foundation.

Private X4 Related-Person Transactions

Series B Preferred Stock Financing

Since November 2017, Private X4 issued an aggregate of 18,616,569 shares of Private X4 Series B preferred stock at $1.88 per share and warrants to purchase an aggregate of 3,504,906 shares of Private X4 Series B preferred stock for an aggregate purchase price of approximately $35.0 million, which is referred to as the Series B preferred stock financing. Each share of Private X4 Series B preferred stock converted automatically into the right to receive shares of our common stock based on the exchange ratio immediately prior to the Merger.

The following table summarizes the Series B preferred stock and warrants to purchase Series B preferred stock purchased by Private X4’s directors, executive officers and then-principal stockholders at the time of the Series B preferred stock financing.

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Private X4 also paid Maxim Partners LLC, or Maxim, fees and reimbursement of expenses of approximately $2.8 million as placement agent for the Series B preferred stock financing, pursuant to a letter agreement between Private X4 and Maxim, dated as of July 6, 2017, as amended on February 13, 2018. As additional compensation, Private X4 issued warrants to purchase shares of Private X4 Series B preferred stock to Maxim. The first warrant was issued on December 28, 2017, was exercisable for 1,219,815 shares of Private X4 Series B preferred stock, had an exercise price of $1.88 per share, and expires on December 28, 2027. The second warrant was issued on September 12, 2018, was exercisable for 212,765 shares of Private X4 Series B preferred stock, had an exercise price of $1.88 per share, and expires on September 12, 2028. The letter agreement was terminated, effective as of May 16, 2018. In connection with the termination of the letter agreement, Private X4 agreed to pay Maxim a fee of $25,000 for expenses incurred after December 31, 2017. In addition, Private X4 and Maxim agreed that if, within 12 months of termination of the letter agreement, we complete a private financing or capital raising activity with certain other qualified investors, Private X4 would be required to pay Maxim certain agreed upon fee amounts. In connection with the Merger, the warrants exercisable for Private X4 Series B preferred stock became warrants exercisable for our common stock at an agreed upon exchange ratio. The exercise price was also adjusted according to the exchange ratio.

Series Seed Preferred Stock Repurchase

In October 2017, Private X4 entered into a stock repurchase agreement with the Estate of Henri Termeer (the “Termeer Estate”), a founder of Private X4, pursuant to which Private X4 agreed to repurchase 598,975 shares of Private X4 Series Seed preferred stock from the Termeer Estate at an aggregate repurchase price of $1,126,073. Alan E. Walts, Ph.D., a former director of Private X4 elected by the holders of Private X4 Series Seed preferred stock, serves as a business advisor to the Termeer Estate and receives a monthly consulting fee for such services. Dr. Walts does not have any voting or investment control over the securities held by the Termeer Estate and recused himself from the discussions with respect to this repurchase. The repurchase was settled in January 2018.

Investors’ Rights, Voting and Co-sale Agreements

In connection with Private X4’s preferred stock financings, Private X4 entered into investors’ rights, voting and right of first refusal and co-sale agreements containing registration rights, information rights, voting rights and rights of first refusal, among other things, with certain holders of Private X4 preferred stock and certain holders of Private X4 common stock. In accordance with and pursuant to the terms of the Merger Agreement, these stockholder agreements terminated upon the closing of the Merger.

Agreements with Private X4 Directors

Gary J. Bridger, Ph.D.

On November 14, 2017, X4 entered into an independent contractor agreement with Gary J. Bridger, Ph.D. pursuant to which Dr. Bridger agreed to provide X4 with strategic advice in support of our research and development programs in oncology and WHIM syndrome. The agreement provided for an initial term of six months, which was renewed in accordance with its terms for an additional six months and expired in November 2018. The independent contractor agreement included standard assignment of invention, confidentiality and indemnification provisions. In consideration for the provision of consulting services pursuant to the agreement, Dr. Bridger was paid approximately $105,000.

On October 4, 2018, Private X4 entered into a letter agreement with Dr. Bridger, pursuant to which Dr. Bridger agreed to serve as a member of the board of directors of Private X4. This letter agreement superseded

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the independent contractor agreement described above. Pursuant to the letter agreement, Private X4 granted Dr. Bridger an option to purchase 226,983 shares of Private X4 common stock to vest pursuant to the terms of 2015 Plan and a separate non-qualified stock option agreement. The letter agreement also specified that Dr. Bridger would be entitled to receive an annual grant of an option to purchase shares of Private X4 common stock at the level set for independent directors by the board of directors, if any. Private X4 also agreed to reimburse Dr. Bridger for expenses for which he received prior approval. Either Private X4 or Dr. Bridger may terminate the letter agreement at any time, for any reason, by giving the other 30 days’ prior written notice. In connection with the Merger, the option to purchase shares of Private X4 common stock became an option to purchase 21,570 shares of our common stock.

Alan E. Walts, Ph.D.

On November 27, 2016, Private X4 entered into a letter agreement with its former director Alan E. Walts, Ph.D. to outline the applicable terms of his role as a member of the Private X4 board of directors. Pursuant to the letter agreement, Private X4 and Dr. Walts acknowledged that Private X4 had previously granted Dr. Walts an option to purchase 70,000 shares of Private X4 common stock, at an exercise price of $0.65 per share, to vest pursuant to the terms of the 2015 Plan and a separate non-qualified stock option agreement previously entered into by and between Private X4 and Dr. Walts. In connection with the Merger, this option became an option to acquire 6,652 shares of our common stock at an exercise price of $6.84 and was exercisable until December 31, 2019. The letter agreement also specified that Dr. Walts would be entitled to receive an annual grant of an option to purchase shares of Private X4 common stock at the level set for independent directors by the Private X4 board of directors, if any. Private X4 also agreed to reimburse Dr. Walts for expenses for which he received prior approval from Private X4. The letter agreement included standard assignment of invention and confidentiality provisions. Either Private X4 or Dr. Walts was entitled to terminate the letter agreement at any time, for any reason, by giving the other 30 days’ prior written notice. Dr. Walts resigned as a director of Private X4 upon the completion of the Merger.

Michael Gilman, Ph.D.

On November 27, 2016, Private X4 entered into a letter agreement with its former director Michael Gilman to outline the applicable terms of his role as a member of the Private X4 board of directors. Pursuant to the letter agreement, X4 and Dr. Gilman acknowledged that Private X4 had previously granted Dr. Gilman options to purchase 70,000 and 8,000 shares of Private X4 common stock, at an exercise price of $0.65 per share, to vest pursuant to the terms of the 2015 Plan and a separate non-qualified stock option agreement previously entered into by and between Private X4 and Dr. Gilman. In connection with the Merger, these options became options to acquire 6,652 and 760 shares, respectively, of our common stock at an exercise price of $6.84, and were exercisable until December 31, 2019. The letter agreement also specified that Dr. Gilman would be entitled to receive an annual grant of an option to purchase shares of Private X4 common stock at the level set for independent directors by the Private X4 board of directors, if any. Private X4 also agreed to reimburse Dr. Gilman for expenses for which he receives prior approval from Private X4. The letter agreement included standard assignment of invention, confidentiality and indemnification provisions. Either Private X4 or Dr. Gilman was entitled to terminate the letter agreement at any time, for any reason, by giving the other 30 days’ prior written notice. Dr. Gilman resigned as a director of Private X4 upon the completion of the Merger.

Nancy Lurker

On September 20, 2016, Private X4 entered into a letter agreement with its former director Nancy Lurker pursuant to which Ms. Lurker agreed to serve as Chairwoman of the Private X4 board of directors. Pursuant to the letter agreement, Private X4 granted Ms. Lurker an option to purchase 175,000 shares of Private X4 common stock to vest pursuant to the terms of the 2015 Plan and a separate non-qualified stock option agreement previously entered into by and between Private X4 and Ms. Lurker. The letter agreement also specified that Ms. Lurker would be entitled to receive an annual grant of an option to purchase shares of Private X4 common

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stock at the level set for independent directors by the Private X4 board of directors, if any. Private X4 also agreed to reimburse Ms. Lurker for expenses for which she received prior approval from X4. The letter agreement included standard assignment of invention, confidentiality and indemnification provisions. Either Private X4 or Ms. Lurker was entitled to terminate the letter agreement at any time, for any reason, by giving the other 30 days’ prior written notice. Ms. Lurker resigned from the Private X4 board of directors as of January 21, 2018.

Shares of Our Common Stock Issued in the Merger

On March 13, 2019, we completed the Merger and effected the Reverse Stock Split. In connection with the Merger, Paula Ragan, Ph.D., our President and Chief Executive Officer, received 181,366 shares of common stock in exchange for 1,870,000 shares of Private X4 common stock and 38,451 shares of Private X4 Series Seed preferred stock, as adjusted for the Reverse Stock Split. In addition, the following table sets forth the options to purchase Private X4 common stock held by our directors and executive officers that became exercisable for our common stock in connection with the Merger:

INDEMNIFICATION

We provide indemnification for its directors and executive officers so that they will be free from undue concern about personal liability in connection with their service to us. Under our Bylaws, we are required to indemnify our directors and executive officers to the extent not prohibited under Delaware or other applicable law. We has also entered into indemnity agreements with certain officers and directors. These agreements provide, among other things, that we will indemnify the officer or director, under the circumstances and to the extent provided for in the agreement, for expenses, damages, judgments, fines and settlements he or she may be required to pay in actions or proceedings which he or she is or may be made a party by reason of his or her position as a director, officer or other agent of the Company, and otherwise to the fullest extent permitted under Delaware law and our Bylaws.

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HOUSEHOLDING OF PROXY MATERIALS

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Notices of Internet Availability of Proxy Materials or other Annual Meeting materials with respect to two or more stockholders sharing the same address by delivering a single Notice of Internet Availability of Proxy Materials or other Annual Meeting materials addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.

This year, a number of brokers with account holders who are X4 stockholders will be “householding” the Company’s proxy materials. A single Notice of Internet Availability of Proxy Materials will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate Notice of Internet Availability of Proxy Materials, please notify your broker or X4. Direct your written request to X4 Pharmaceuticals, Inc., Attn: Corporate Secretary, 955 Massachusetts Avenue, Cambridge, MA 02139 or contact the Corporate Secretary at (857) 529-8300. Stockholders who currently receive multiple copies of the Notices of Internet Availability of Proxy Materials at their addresses and would like to request “householding” of their communications should contact their brokers.

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