Robert A. Bradway
Chairman of the Board,
President and Chief Executive Officer and President
Amgen Inc.
One Amgen Center Drive
Thousand Oaks, CA 91320-1799
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amgen Inc.AMGEN INC.
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Robert A. Bradway | ||
Chairman of the Board,
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Amgen Inc. One Amgen Center Drive Thousand Oaks, CA 91320-1799 |
April 8, 20132, 2015
DEAR STOCKHOLDER:Dear Stockholder:
You are invited to attend the 20132015 Annual Meeting of Stockholders, or Annual Meeting, of Amgen Inc. to be held on Wednesday,Thursday, May 22, 2013,14, 2015, at 11:00 A.M., local time, at the Four Seasons Hotel Westlake Village, Two Dole Drive, Westlake Village, California 91362.
At this year’s Annual Meeting you will be asked to: (i) elect thirteen13 directors to serve for the ensuing year; (ii) ratify the selection of our independent registered public accountants; (iii) hold an advisory vote to approve our executive compensation; (iv) approveconsider one stockholder proposal, if properly presented at the proposed Amgen Inc. Amended and Restated 2009 Equity Incentive Plan, which amends our existing plan to, in part, increase the authorized number of shares issuable under the plan to 104,280,107 shares and which approval will satisfy the stockholder approval requirements for performance-based awards under Section 162(m) of the Internal Revenue CodeAnnual Meeting and (v) transact such other business as may properly come before the Annual Meeting or any continuation, postponement or adjournment thereof. The accompanying Notice of Annual Meeting of Stockholders and proxy statement describe these matters. We urge you to read this information carefully.
The Board of Directors unanimously believes that the election of its nominees for directors, the ratification of its selection of independent registered public accountants and the advisory vote to approve our executive compensation and the approval of the proposed Amgen Inc. Amended and Restated 2009 Equity Incentive Plan are advisable and in the best interests of Amgen and our stockholders. Accordingly, the Board of Directors recommends a vote FOR the election of the thirteen13 nominees for directors, FOR the ratification of the selection of Ernst & Young LLP as our independent registered public accountants and FOR the advisory vote to approve our executive compensationcompensation. The Board of Directors unanimously believes that the stockholder proposal is not in the best interests of Amgen and FOR approval ofits stockholders, and, accordingly, recommends a vote AGAINST the proposed Amgen Inc. Amended and Restated 2009 Equity Incentive Plan.stockholder proposal. In addition to the business to be transacted as described above, management will speak on our developments of the past year and respond to comments and questions of general interest to stockholders.
If you plan to attend the Annual Meeting, you will need an admittance ticket orand proof of ownership of our Common Stock as of the close of business on March 25, 2013.16, 2015. Please read “INFORMATION CONCERNING VOTING AND SOLICITATION—Attendance at the Annual Meeting” in the accompanying proxy statement.
It is important that your shares be represented and voted whether or not you plan to attend the Annual Meeting in person. We are pleased to use the Securities and Exchange Commission rule that permits companies to furnish proxy materials to certain of our stockholders over the Internet. If you are viewing the proxy statement on the Internet, you may submit your proxy electronically via the Internet by following the instructions on the Notice Regarding the Availability of Proxy Materials previously mailed to you and the instructions listed on the Internet site. If you have received a paper copy of the proxy statement and proxy card, you may submit your proxy by completing and mailing the proxy card enclosed with the proxy statement, or you may submit your proxy electronically via the Internet or by telephone by following the instructions on the proxy card. If your shares are held in “street name,” which means shares held of record by a broker, bank, trust or other nominee, you should review the Notice Regarding the Availability of Proxy Materials or proxy statement and voting instruction form used by that firm to determine whether and how you will be able to submit your proxy by telephone or over the Internet. Submitting a proxy over the Internet, by telephone or by mailing a proxy card, will ensure your shares are represented at the Annual Meeting. Your vote is important, regardless of the number of shares that you own.
On behalf of the Board of Directors, I thank you for your participation. We look forward to seeing you on May 22.14.
Sincerely,
Robert A. Bradway
Chairman of the Board,
President and Chief Executive Officer and President
AMGEN INC.Amgen Inc.
One Amgen Center Drive
Thousand Oaks, California 91320-1799
Notice of Annual Meeting of Stockholders
To be Held on May 14, 2015
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 2013
TO THE STOCKHOLDERS OF AMGEN INC.To the Stockholders of Amgen Inc.:
NOTICE IS HEREBY GIVEN that the 20132015 Annual Meeting of Stockholders, or Annual Meeting, of Amgen Inc., a Delaware corporation, will be held on Wednesday,Thursday, May 22, 2013,14, 2015, at 11:00 A.M., local time, at the Four Seasons Hotel Westlake Village, Two Dole Drive, Westlake Village, California 91362, for the following purposes:
| 1. | To elect |
| 2. | To ratify the selection of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending December 31, |
| 3. | To hold an advisory vote to approve our executive compensation; |
| 4. | To |
| 5. | To transact such other business as may properly come before the Annual Meeting or any continuation, postponement or adjournment thereof. |
The foregoing items of business are more fully described in the proxy statement accompanying this Notice of Annual Meeting of Stockholders.
The Board of Directors has fixed the close of business on March 25, 201316, 2015 as the record date for the determination of stockholders entitled to notice of, and to vote at, this Annual Meeting and any continuation, postponement or adjournment thereof. Whether or not you plan on attending the Annual Meeting, we encourage you to submit your proxy as soon as possible using one of three convenient methods: (i) by accessing the Internet site described in these voting materials or voting instruction form provided to you; (ii) by calling the toll-free number in the voting instruction form provided to you or (iii) by signing, dating and returning any proxy card or instruction form provided to you. By submitting your proxy promptly, you will save the Company the expense of further proxy solicitation.
By Order of the Board of Directors
David J. Scott
Secretary
Thousand Oaks, California
April 8, 20132, 2015
| TABLE OF CONTENTS |
TABLE OF CONTENTSTable of Contents
ï 2015 Proxy Statement
| PROXY STATEMENT SUMMARY |
PROXY STATEMENT SUMMARYProxy Statement Summary
This summary contains highlights about our Company and the upcoming 20132015 Annual Meeting of Stockholders.Stockholders, or Annual Meeting. This summary does not contain all of the information that you should consider in advance of the meeting and we encourage you to read the entire proxy statement before voting.
20132015 Annual Meeting of Stockholders
Date and | Thursday, May | |
Location: | Four Seasons Hotel Westlake Village, Two Dole Drive, Westlake Village, California 91362 | |
Record | March | |
Mail | We intend to mail the Notice Regarding the Availability of Proxy Materials, or the proxy statement and proxy card, as applicable, on or about April | |
Voting Matters and Board Recommendations
| Matter | Our Board Vote Recommendation | |
Election of | FOR each Director Nominee | |
Ratification of Selection of Independent Registered Public Accountants (page 17) | FOR | |
Advisory Vote to Approve Our Executive Compensation (page 18) | FOR | |
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Corporate Governance2014 Performance Highlights
The independent members of our Board of Directors, or Board, elected Vance D. Coffman, as our lead independent director with specific and significant duties. We have active participation by all directors, including the twelve independent director nominees. We believe that the current structure of our Board best positions us to benefit from the respective strengths of our Chief Executive Officer and lead independent director. (page 41)
Twelve of our thirteen director nominees (all directors except our CEO) meet the criteria for independence of The NASDAQ Stock Market, or NASDAQ, listing standards and the requirements of the Securities and Exchange Commission, or SEC. Additionally, all members of the Audit Committee, Compensation and Management Development Committee, Corporate Responsibility and Compliance Committee and Governance and Nominating Committee are independent. (page 41)
Our independent directors meet privately on a regular basis.
The Amended and Restated Bylaws of Amgen Inc. provide for a majority voting standard for uncontested director elections.
We hold an annual advisory vote to approve our executive compensation. (page 18)
We have significant stock ownership requirements (increased in 2012 such that our CEO is required to own six times his annual salary).
2012 Financial Highlights
Our stock price increased from $64.21$114.08 to $86.20$159.29 per share during 2012,2014, reflecting appreciation of 40% with a one-year total shareholder return, or TSR, of 36%42%, including our dividends, and a three-year TSR of 56%157%.
We returned $4.7 billion to our stockholders through stock repurchases equal to approximately 8% of our Common Stock outstanding as of December 31, 2012 and $1.1$1.9 billion of cash to our stockholders through dividends.
dividends in 2014, with an increase in quarterly dividend to $0.61 per share in 2014 from $0.47 per share in 2013. Since the initiation of our first dividend in July 2011 through 2014, we have raised the dividend twicethree times over the previous quarterly amount by an average of 30%. and returned a total of $4.9 billion of cash to our stockholders through dividends.
We repurchased 0.9 million shares of our Common Stock in 2014.
We grew revenues by 11%7% over 20112013 to $17.3$20.1 billion in 2012.2014.
| • | We grew adjusted operating income 22% to $8.5 billion(1)in 2014. |
| • | We grew adjusted net income by |
| • | Our year-over-year adjusted earnings per share |
We effectively advanced our pipeline, the highlights of which include that six of our medicines generated positive registration-enabling data and four were submitted for regulatory approval. In December 2014, the Food and Drug Administration approved BLINCYTO™ (blinatumomab) less than three months after submission.
| (1) | Adjusted operating income, adjusted net income and adjusted earnings per share are reported and reconciled in our Form 8-K dated as of January 27, 2015. |
ï 2015 Proxy Statement1
| PROXY STATEMENT SUMMARY |
Executive Compensation Highlights (page 51)
We executed on a successful succession plan in 2012, including Robert A. Bradway, our former Chief Operating Officer and President, succeeding Kevin W. Sharer as our Chief Executive Officer, or CEO, in May 2012.
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As a result, the current CEO’s total target compensation is reduced by 28% from the previous total target compensation of our former CEO.
Our long-term incentive, or LTI, equity award pay mix is primarily performance-based with 80% performance units and 20% time-vested restricted stock units.
The three-yearPerformance units under our LTI performance units granted in 2012award program are earned exclusivelyand paid in shares based strictly on our TSR performance as compared to our comparator group (beginning with the average of the TSRs of our peer group.2013-2015 performance
period, the Standard & Poor’s 500) over a three-year performance period. |
Annual cash incentive award payments for 20122014 were earned based on our financial and operational performance against targets. Financial goals of revenues and adjusted net income were each weighted 30%, and various operational goals relating to “Deliver the Best Pipeline” and “Reach More Patients Through Growth Opportunities”“Deliver Annual Priorities” were each weighted 20%25% and 15%, respectively.
Corporate Governance Highlights
The independent members of our Board of Directors, or Board, re-elected Vance D. Coffman as our lead independent director with specific and significant duties. We have active participation by all directors, including the 12 independent director nominees. We believe that the current structure of our Board best positions us to benefit from the respective strengths of our Chief Executive Officer, or CEO, and lead independent director. (page 30)
12 of our 13 director nominees (all directors except our CEO), and all members of the Audit, Compensation and Management Development, Corporate Responsibility and Compliance and Governance and Nominating Committees meet the criteria for independence under The NASDAQ Stock Market listing standards and the requirements of the Securities and Exchange Commission. (pages 30 and 33)
All directors meet our Board of Directors Guidelines for Director Qualifications and Evaluations included in this proxy statement asAppendix A.
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Our independent directors meet privately on a regular basis. (page 30)
AMGEN INC.Our Amended and Restated Bylaws provide for a majority voting standard for uncontested director elections. (page 28)
One Amgen Center DriveWe hold an annual advisory vote to approve our executive compensation. (page 18)
Thousand Oaks, California 91320-1799
We have significant stock ownership requirements for our directors and for vice presidents and above. (pages 61 and 86)
We have a Company-wide Enterprise Risk Management Program to identify, assess, manage, report and monitor enterprise risk and areas that may affect our ability to achieve our objectives. This includes an annual detailed compensation risk analysis performed with the assistance of the Compensation and Management Development Committee’s independent consultant. (page 31)
Our staff members and the Board are prohibited from engaging in short sales, purchasing Common Stock on margin, pledging Common Stock, or entering into any hedging, derivative or similar transactions. (page 62)
Our Board maintains a Corporate Responsibility and Compliance Committee that is responsible for overseeing our compliance program and reviewing our programs in a number of areas governing ethical conduct. (page 37)
PROXY STATEMENT2 ï 2015 Proxy Statement
Amgen Inc.
One Amgen Center Drive
Thousand Oaks, California 91320-1799
Proxy Statement
Information Concerning Voting and Solicitation
General
The enclosed proxy is solicited on behalf of the Board of Directors, or Board, of Amgen Inc., a Delaware corporation, for use at our 20132015 Annual Meeting of Stockholders, or Annual Meeting, to be held on Wednesday,Thursday, May 22, 2013,14, 2015, at 11:00 A.M., local time, or at any continuation, postponement or adjournment thereof, for the purposes discussed in this proxy statement and in the accompanying Notice of Annual Meeting of Stockholders and any business properly brought before the Annual Meeting. Amgen Inc. may also be referred to as Amgen, the Company, we, us or our in this proxy statement. Proxies are solicited to give all stockholders of record an opportunity to vote on matters properly presented at the Annual Meeting. The Annual Meeting will be held at the Four Seasons Hotel Westlake Village, Two Dole Drive, Westlake Village, California 91362.
Pursuant to the rules adopted by the Securities and Exchange Commission, or SEC, we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice Regarding the Availability of Proxy Materials, or Notice, to certain of our stockholders of record, and we are sending a paper copy of the proxy materials and proxy card to other stockholders of record who we believe would prefer receiving such materials in paper form. Brokers and other nominees who hold shares on behalf of beneficial owners will be sending their own similar Notice. Stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to request a printed copy by mail or electronically may be found on the Notice and on the website referred to in the Notice, including an option to request paper copies on an ongoing basis. We intend to make this proxy statement available on the Internet and to mail the Notice, or to mail the proxy statement and proxy card, as applicable, on or about April 8, 20132, 2015 to all stockholders entitled to notice of and to vote at the Annual Meeting.
Important Notice Regarding the Availability of Proxy Materials for the 20132015 Stockholder Meeting to Be Held on May 22, 2013.14, 2015.
This proxy statement, our 20122014 annual report and our other proxy materials are available at:www.amstock.com/ProxyServices/www.astproxyportal.com/ast/Amgen. At this website, you will find a complete set of the following proxy materials: notice of 20132015 annual meeting of stockholders; proxy statement; 20122014 annual report and form proxy card. You are encouraged to access and review all of the important information contained in the proxy materials before submitting a proxy or voting at the meeting.
What Are You Voting On?
You will be entitled to vote on the following proposals at the Annual Meeting:
The election of thirteen13 directors to serve on our Board for a term of office expiring at the 20142016 annual meeting of stockholders;
The ratification of the selection of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending December 31, 2013;2015;
The advisory vote to approve our executive compensation;
The approval of the proposed Amgen Inc. AmendedOne stockholder proposal, if properly presented; and Restated 2009 Equity Incentive Plan, or Amended Plan, which amends our existing 2009 Equity Incentive Plan to, in part, increase the
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Any other business as may properly come before the Annual Meeting.
Who Can Vote
The Board has set March 25, 201316, 2015 as the record date for the Annual Meeting. You are entitled to notice and to vote if you were a stockholder of record of our common stock,Common Stock, $.0001
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| INFORMATION CONCERNING VOTING AND SOLICITATION |
par value per share, or Common Stock, as of the close of business on March 25, 2013.16, 2015. You are entitled to one vote on each proposal for each share of Common Stock you held on the record date. Your shares may be voted at the Annual Meeting only if you are present in person or your shares are represented by a valid proxy.
Difference Between a Stockholder of Record and a “Street Name” Holder
If your shares are registered directly in your name, you are considered the stockholder of record with respect to those shares.
If your shares are held in a stock brokerage account or by a bank, trust or other nominee, then the broker, bank, trust or other nominee is considered to be the stockholder of record with respect to those shares. However, you are still considered to be the beneficial owner of those shares, and your shares are said to be held in “street name.” Street name holders generally cannot submit a proxy or vote their shares directly and must instead instruct the broker, bank, trust or other nominee how to vote their shares using the methods described below.
Shares Outstanding and Quorum
At the close of business on March 25, 2013,16, 2015, there were 749,321,909757,913,499 shares of our Common Stock outstanding and entitled to vote at the Annual Meeting. The presence of the holders of a majority of the outstanding shares of our Common Stock entitled to vote constitutes a quorum, which is required to hold and conduct business at the Annual Meeting. Shares are counted as present at the Annual Meeting if:
you are present in person at the Annual Meeting; or
your shares are represented by a properly authorized and submitted proxy (submitted by mail, by telephone or over the Internet).
If you are a record holder and you submit your proxy, regardless of whether you abstain from voting on one or more matters, your shares will be counted as present at the Annual Meeting for the purpose of determining a quorum. If your shares are held in “street name,” your shares are counted as present for purposes of determining a quorum if your broker, bank, trust or other nominee submits a proxy covering your shares. Your broker, bank, trust or other nominee is entitled to submit a proxy covering your shares as
to certain “routine” matters, even if you have not instructed your broker, bank, trust or other nominee on how to vote on those matters. Please see the subsection “If You Do Not Specify How You Want Your Shares Voted” below. In the absence of a quorum, the Annual Meeting may be adjourned, from time to time, by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting.
Voting Your Shares
You may vote by attending the Annual Meeting and voting in person or by submitting a proxy. The method of voting by proxy differs (1) depending on whether you are viewing this proxy statement on the Internet or receiving a paper copy and (2) for shares held as a record holder and shares held in “street name.”
Shares Held as a Record Holder.If you hold your shares of Common Stock as a record holder and you are viewing this proxy statement on the Internet, you may submit a proxy over the Internet by following the instructions on the website referred to in the Notice previously mailed to you. You may request paper copies of
the proxy statement and proxy card by following the instructions on the Notice. If you hold your shares of Common Stock as a record holder and you are reviewing a paper copy of this proxy statement, you may submit a proxy over the Internet or by telephone by following the instructions on the proxy card, or by completing, dating and signing the proxy card that was included with the proxy statement and promptly returning it in the pre-addressed, postage-paid envelope provided to you.
Shares Held in Street Name.If you hold your shares of Common Stock in street name, you will receive a Notice from your broker, bank, trust or other nominee that includes instructions on how to vote your shares. Your broker, bank, trust or other nominee may allow you to deliver your voting instructions over the Internet and may also permit you to submit your voting instructions by telephone. In addition, you may request paper copies of the proxy statement and proxy card from your broker by following the instructions on the Notice provided by your broker, bank, trust or other nominee.
The Internet and telephone voting facilities will close at 11:59 P.M., Eastern Time, on May 21, 2013.13, 2015. Stockholders who submit a proxy through the Internet or telephone should be aware that they may incur costs to access the Internet or telephone, such as usage charges from telephone companies or Internet service providers and that these costs must be
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| INFORMATION CONCERNING VOTING AND SOLICITATION |
borne by the stockholder. Stockholders who submit a proxy by Internet or telephone need not return a proxy card or the form forwarded by your broker, bank, trust or other holder of record by mail.
YOUR VOTE IS VERY IMPORTANT. You should submit your proxy even if you plan to attend the Annual Meeting.
Voting in Person
If you plan to attend the Annual Meeting and wish to vote in person, you may request a ballot at the Annual Meeting. Please note that if your shares are held of record by a broker, bank, trust or other nominee, and you decide to attend and vote at the Annual Meeting, your vote in person at the Annual Meeting will not be effective unless you present a legal proxy, issued in your name from the record holder (your broker, bank, trust or other nominee). Even if you intend to attend the Annual Meeting, we encourage you to submit your proxy in advance of the Annual Meeting. Please see the important instructions and requirements below regarding “Attendance at the Annual Meeting.”
Changing Your Vote
As a stockholder of record, if you submit a proxy, you may revoke that proxy at any time before it is voted at the Annual Meeting. Stockholders of record may revoke a proxy prior to the Annual Meeting by (i) delivering a written notice of revocation to the attention of the Secretary of the Company at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799, Mail Stop 38-5-A, (ii) duly submitting a later-dated proxy over the Internet, by mail or by telephone or (iii) attending the Annual Meeting in person and voting in person. Attendance at the Annual Meeting will not, by itself, revoke a proxy.
If your shares are held in the name of a broker, bank, trust or other nominee, you may change your voting instructions by following the instructions of your broker, bank, trust or other nominee.
If You Receive More Than One Proxy Card or Notice
If you receive more than one proxy card or Notice, it means you hold shares that are registered in more than one account. To ensure that all of your shares are voted, sign and return each proxy card or, if you submit a proxy by telephone or the Internet, submit one proxy for each proxy card or Notice you receive.
How Will Your Shares Be Voted
Stockholders of record as of the close of business on March 25, 201316, 2015 are entitled to one vote for each share of our Common Stock held on all matters to be voted upon at the Annual Meeting. All shares entitled to vote and
represented by properly submitted proxies received before the polls are closed at the Annual Meeting, and not revoked or superseded, will be voted at the Annual Meeting in accordance with the instructions indicated on those proxies.YOUR VOTE IS VERY IMPORTANT.
If You Do Not Specify How You Want Your Shares Voted
As a stockholder of record, if you submit a signed proxy card or submit your proxy by telephone or Internet and do not specify how you want your shares voted, the proxy holder will vote your shares:
FOR the election of the thirteen13 nominees listed in this proxy statement to serve on our Board for a term of office expiring at the 20142016 annual meeting of stockholders;
FOR the ratification of the selection of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending December 31, 2013;2015;
FOR the advisory vote to approve our executive compensation; and
FORAGAINST the proposed Amgen Inc. Amended and Restated 2009 Equity Incentive Plan.one stockholder proposal, if properly presented.
A “broker non-vote” occurs when a nominee holding shares for a beneficial owner has not received voting instructions from the beneficial owner and the nominee does not have discretionary authority to vote the shares. If you hold your shares in street name and do not provide voting instructions to your broker or other nominee, your shares will be considered to be broker non-votes and will not be voted on any proposal on which your broker or other nominee does not have discretionary authority to vote. Shares that constitute broker non-votes will be counted as present at the Annual Meeting for the purpose of determining a quorum, but will not be considered entitled to vote on the proposal in question. Brokers generally have discretionary authority to vote on the ratification of the selection of Ernst & Young LLP as our independent registered public accountants. Brokers, however, do not have discretionary authority to vote on the election of directors to serve on our Board, the advisory vote to approve our executive compensation or the approval of our proposed Amended Plan.on any stockholder proposals.
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| INFORMATION CONCERNING VOTING AND SOLICITATION |
In their discretion, the proxy holders named in the proxy are authorized to vote on any other matters that may properly come before the Annual Meeting and at any continuation, postponement or adjournment thereof. The Board knows of no other items of business that will be presented for consideration at the Annual Meeting other than those described in this proxy statement. In addition, other than the stockholder proposal described in this proxy statement, no other stockholder proposal or nomination was received on a timely basis, so no such matters may be brought to a vote at the Annual Meeting.
Inspector of Election and Counting of Votes
All votes will be tabulated as required by Delaware law, the state of our incorporation, by the inspector of election appointed for the Annual Meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes. Shares held by persons attending the Annual Meeting but not voting, shares represented by proxies that reflect abstentions as to one or more proposals and broker non-votes will be counted as present for purposes of determining a quorum.
Election of Directors.We have a majority voting standard for the election of directors in an uncontested election, which is generally defined as an election in which the number of nominees does not exceed the number of directors to be elected at the meeting. In the election of directors, you may either vote “for,” “against” or “abstain” for each nominee. Cumulative voting is not permitted. Under our majority voting standard, in uncontested elections of directors, such as this election, each director must be elected by the affirmative vote of a majority of the votes cast by the shares present in person or represented by proxy and entitled to vote.proxy. A “majority of the votes cast” means that the number of votes cast “for” a director nominee exceeds the number of votes cast “against” the nominee. For these purposes, abstentions will not count as a vote “for” or “against” a nominee’s election and thus will have no effect in determining whether a director nominee has received a majority of the votes cast. Brokers do not have discretionary authority to vote on this proposal. Broker non-votes will have no effect on the election of directors as brokers are not entitled to vote for or against a nominee without instruction from the beneficial owner. If a director nominee is an incumbent director and does not receive a
majority of the votes cast in an uncontested election, that director will
continue to serve on the Board as a “holdover” director, but must tender his or her resignation to the Board promptly after certification of the election results of the stockholder vote. The Governance and Nominating Committee of the Board will then recommend to the Board whether to accept the resignation or whether other action should be taken. The Board will act on the tendered resignation, taking into account the recommendation of the Governance and Nominating Committee, and the Board’s decision will be publicly disclosed within 90 days after certification of the election results of the stockholder vote. A director who tenders his or her resignation after failing to receive a majority of the votes cast will not participate in the recommendation of the Governance and Nominating Committee or the decision of the Board with respect to his or her resignation.
Ratification of Auditors.The ratification of the selection of Ernst & Young LLP requires the affirmative vote of the holders of a majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote on the matter. Abstentions will have the same effect as votes “against” the ratification. Because brokers have discretionary authority to vote on the ratification, we do not expect any broker non-votes in connection with the ratification.
Advisory Vote on Executive Compensation.The approval of the advisory vote on our executive compensation requires the affirmative vote of the holders of a majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote on the matter. Abstentions will have the same effect as votes “against” the proposal. Brokers do not have discretionary authority to vote on this proposal. Broker non-votes, however, will have no effect on the proposal as brokers are not entitled to vote on such proposal in the absence of voting instructions from the beneficial owner.
Amgen Inc. Amended and Restated 2009 Equity Incentive Plan. Stockholder Proposal.The approval of our proposed Amended Planthe stockholder proposal, if properly presented at the Annual Meeting, requires the affirmative vote of the holders of a majority of the votes castshares present or represented by proxy at the Annual Meeting and entitled to vote on the proposal. A “majority ofmatter. Abstentions will have the same effect as votes cast” means that the number of votes “for” the approval of our proposed Amended Plan exceeds the number of votes cast “against” the proposed Amended Plan.such proposal. Brokers do not have discretionary authority to vote on thisthe proposal. Abstentions and brokerBroker non-votes, will not be counted as “for” or “against” the approval of our proposed Amended Plan and thustherefore, will have no effect on the proposal.stockholder proposal as brokers are not entitled to vote on such proposal in the absence of voting instructions from the beneficial owner.
6 ï 2015 Proxy Statement
Solicitation of Proxies We will bear the entire cost of solicitation of proxies, including preparation, assembly and mailing of this proxy statement, the proxy, the Notice and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding shares of our Common Stock in their names that are beneficially owned by others to forward to those beneficial owners. We may reimburse persons representing beneficial owners for their costs of forwarding the solicitation materials to the beneficial owners. Original solicitation of proxies may be supplemented by telephone, facsimile, electronic mail or personal solicitation by our directors, officers or staff members. No additional compensation will be paid to our directors, officers or staff members for such services. In addition, we have retained Attendance at the Annual Meeting To attend the Annual Meeting, you will need an admittance ticket and proof of ownership of our Common Stock as of the close of business on March You must bring certain documents with you to be admitted to the Annual Meeting. The purpose of this requirement is to help us verify that you are actually a stockholder of the Company. Please read the following rules carefully, because they specify the documents that you must bring with you to the Annual Meeting to be admitted. The items that you must bring with you differ depending upon whether or not you were a record holder of If a broker, bank, trust or other nominee was the record holder of your shares of Common Stock as of the close of business on March Proof that you owned shares of our Common Stock as of the close of business on March If you intend to vote at the Annual Meeting, the executed proxy naming you as the proxy holder, signed by the broker, bank, trust or other nominee who was the record holder of your shares of Common Stock as of the close of business on March 16, 2015. Examples of proof of ownership include the following: (1) an original or a copy of the voting information form from your bank or broker with your name on it; (2) a letter from your bank or broker stating that you owned shares of our Common Stock as of the close of business on March If you are a proxy holder for a stockholder of the Company who owned shares of our Common Stock as of the close of business on March The executed proxy naming you as the proxy holder, signed by a stockholder of the Company who owned shares of our Common Stock as of the close of business on March Inspector of ElectionINFORMATION CONCERNING VOTING AND SOLICITATION All votes will be tabulated by the inspector of election appointed for the Annual Meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes.AST Phoenix AdvisorsD.F. King & Co. to assist in the solicitation of proxies for a fee of approximately $150,000 plus distribution costs and other costs and expenses. A list of stockholders entitled to vote at the Annual Meeting will be available for examination by any stockholder for any purpose germane to the Annual Meeting during ordinary business hours at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California, 91320-1799 for the ten days prior to the Annual Meeting and also at the Annual Meeting.25, 2013.16, 2015. If you have received a paper copy of the proxy statement, to receive an admittance ticket you will need to complete and return the postage-paid reply card attached to this proxy statement. If you received electronic delivery of this proxy statement, you will receive an e-mail with instructions for obtaining an admittance ticket. If you are viewing the proxy statement over the Internet, please follow the instructions indicated on the website referred to in the Notice. Each stockholder is entitled to one admittance ticket. Directions to attend the Annual Meeting will be sent with your admittance ticket and are available at the website referred to in the Notice andwww.amstock.com/ProxyServices/Amgen.www.astproxyportal.com/ast/Amgen.the Company’sour Common Stock as of the close of business on March 25, 2013.16, 2015. A “record holder” of stock is someone whose shares of stock are registered in his or her name in the records of the Company’s transfer agent. Many stockholders are not record holders because their shares of stock are registered in the name of their broker, bank, trust or other nominee, and the broker, bank, trust or other nominee is the record holder instead.All persons must bring a valid personal photo identification (such as a driver’s license or passport). If you are a record holder, at the Annual Meeting, we will check your name for verification purposes against our list of record holders as of the close of business on March 25, 2013.16, 2015.25, 2013,16, 2015, then you must also bring to the Annual Meeting:25, 2013.16, 2015.25, 201316, 2015 or (3) a brokerage account statement indicating that you owned shares of our Common Stock as of the close of business on March 25, 2013.16, 2015.25, 2013,16, 2015, then you must also bring to the Annual Meeting:25, 2013.16, 2015.
ï 2015 Proxy Statement7
| ITEM 1 — ELECTION OF DIRECTORS |
ELECTION OF DIRECTORSElection of Directors
Under the Amgen Inc. Restated Certificate of Incorporation and the Amended and Restated Bylaws of Amgen Inc.,our governing documents, the Board of Directors, or Board, has the power to set the number of directors from time to time by resolution. On December 31, 2012, Kevin W. Sharer retired from serviceWe currently have 13 authorized directors and 13 directors serving on our Board, and on December 13, 2012, Robert A. EckertBoard. On October 17, 2014, R. Sanders Williams was appointed to serve on our Board. Admiral J. Paul Reason will notThe Board has fixed the authorized number of directors at 13 to continue to be standing for re-election toeffective as of the Board at the 20132015 Annual Meeting of Stockholders, or Annual Meeting. Effective as of the Annual Meeting, the Board will fix the authorized number of directors at thirteen. Effective January 1, 2013, theThe independent members of our Board electedre-elected Vance D. Coffman to serve for another term as our lead independent
director with specific and significant duties as discussed under “Corporate Governance” in this proxy statement.Governance.” Based upon the recommendation of our Governance and Nominating Committee, the Board has nominated each of the current directors set forth below to stand for re-election, or in the case of Mr. Eckert,Dr. Williams to stand for initial election by our stockholders, in each case for a one-year term expiring at our 20142016 annual meeting of stockholders and until his or her successor is elected and qualified, or until his or her earlier retirement, resignation, disqualification, removal or death.
Nominee | Age | Director Since | Audit | Governance and Nominating | Executive | Compensation and Management Development | Equity Award | Corporate Responsibility and Compliance | ||||||||||||||||||||||||
Dr. David Baltimore | 75 | 1999 | X | X | ||||||||||||||||||||||||||||
Mr. Frank J. Biondi, Jr. | 68 | 2002 | C | X | X | |||||||||||||||||||||||||||
Mr. Robert A. Bradway | 50 | 2011 | C | X | ||||||||||||||||||||||||||||
Mr. François de Carbonnel | 66 | 2008 | X | X | ||||||||||||||||||||||||||||
Dr. Vance D. Coffman | 69 | 2007 | C | X | X | X | ||||||||||||||||||||||||||
Mr. Robert A. Eckert | 58 | 2012 | X | X | ||||||||||||||||||||||||||||
Dr. Rebecca M. Henderson | 52 | 2009 | X | X | ||||||||||||||||||||||||||||
Mr. Frank C. Herringer | 70 | 2004 | X | X | C | C | ||||||||||||||||||||||||||
Dr. Tyler Jacks | 52 | 2012 | X | X | ||||||||||||||||||||||||||||
Dr. Gilbert S. Omenn | 71 | 1987 | X | X | ||||||||||||||||||||||||||||
Ms. Judith C. Pelham | 67 | 1995 | X | X | ||||||||||||||||||||||||||||
Mr. Leonard D. Schaeffer | 67 | 2004 | X | X | C | |||||||||||||||||||||||||||
Dr. Ronald D. Sugar | 64 | 2010 | X | X | ||||||||||||||||||||||||||||
| Nominee | Age | Director Since | Audit | Governance and Nominating | Executive | Compensation and Management Development | Equity Award | Corporate Responsibility and Compliance | ||||||||||||
David Baltimore | 77 | 1999 | X | X | ||||||||||||||||
Frank J. Biondi, Jr. | 70 | 2002 | C | X | X | |||||||||||||||
Robert A. Bradway | 52 | 2011 | C | X | ||||||||||||||||
François de Carbonnel | 68 | 2008 | X | X | ||||||||||||||||
Vance D. Coffman | 71 | 2007 | C | X | X | X | ||||||||||||||
Robert A. Eckert | 60 | 2012 | X | X | ||||||||||||||||
Greg C. Garland | 57 | 2013 | X | X | ||||||||||||||||
Rebecca M. Henderson | 54 | 2009 | X | X | ||||||||||||||||
Frank C. Herringer | 72 | 2004 | X | X | C | C | ||||||||||||||
Tyler Jacks | 54 | 2012 | X | X | ||||||||||||||||
Judith C. Pelham | 69 | 1995 | X | X | ||||||||||||||||
Ronald D. Sugar | 66 | 2010 | X | X | C | |||||||||||||||
R. Sanders Williams | 66 | 2014 | X | X | ||||||||||||||||
| “C” |
|
Vacancies on the Board (including any vacancy created by an increase in the size of the Board) may be filled only by a majority of the directors remaining in office, even though less than a quorum of the Board. A director elected by the Board to fill a vacancy (including a vacancy created by an increase in the size of the Board) will serve until the next annual meeting of stockholders and until such director’s successor is elected and qualified, or until such director’s earlier retirement, resignation, disqualification, removal or death.
If any nominee should become unavailable for election prior to the Annual Meeting, an event that currently is not anticipated by the Board, the proxies will be voted in favor of the election of a substitute nominee or nominees proposed by the Board or the number of directors may be reduced accordingly. Each nominee has agreed to serve if elected and the Board has no reason to believe that any nominee will be unable to serve.
8 ï 2015 Proxy Statement
| ITEM 1 — ELECTION OF DIRECTORS |
THE BOARD RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES NAMED BELOW. PROXIES WILL BE VOTED “FOR” THE ELECTION OF THE NOMINEES UNLESS OTHERWISE SPECIFIED.
Set forth below is biographical information for each nominee and a summary of the specific qualifications, attributes, skills and experiences which led our Board to conclude that each nominee should serve on the Board at
this time. All of our directors meet the qualifications and skills of our Amgen Inc. Board of Directors Guidelines
for Director Qualifications and Evaluations inAppendix BA. There are no family relationships among any of our directors or among any of our directors and our executive officers.
David Baltimore
DAVID BALTIMORE
Dr.
David Baltimore is President Emeritus and Robert Andrews Millikan Professor of Biology at the California Institute of Technology, or Caltech. He received the Nobel Prize in Medicine as a co-recipient in 1975. Dr. Baltimore has been a director of Regulus Therapeutics Inc., a biopharmaceutical company, since 2008,2007, serving on its Compensation Committee and chairing its Nominating and Governance Committee. Dr. Baltimore has also been a member of the board of directors of Immune Design Corp. (formerly Vaccsys), a vaccine company, since 2008, chairing its Nominating and Governance Committee. He was a director of BB Biotech, AG, a Swiss investment company, from 20041994 to March 2011 and served as a director of MedImmune, Inc., a privately-held antibody formulation company, from 2003 to 2007. He has also been a member of the board of directors of Immune Design Corp. (formerly Vaccsys), a privately-held vaccine company of which he is a founder, since 2008. Also inIn 2008, heDr. Baltimore became a founder of Calimmune, Inc., a privately-held company developing a stem-cell HIV/AIDS therapy, and serves as Chairman of the board of directors.
Dr. Baltimore was President of Caltech from 1997 to 2006. Prior to this, he was a professor at the Massachusetts Institute of Technology, or MIT, and at The Rockefeller University where he also served as the President. During this time he was also the Chairman of the National Institutes of
Health AIDS Vaccine Research Committee, a director and member of the Whitehead Institute for Biomedical Research, and a professor of microbiology and research professor of the American Cancer Society. He was a postdoctoral fellow at MIT and Albert Einstein College of Medicine and on the staff of The Salk Institute for Biological Studies. Dr. Baltimore has been awarded honorary degrees from numerous institutions, including Harvard, Yale and Columbia.
Dr. Baltimore holds leadership roles in a number of scientific and philanthropic non-profit organizations, currently serving as a director and member of the Board of Scientific Counselors of the Broad Institute of MIT and Harvard, a director of the Foundation for Biomedical Research, a member of the Human Genome Organisation and a member of the scientific advisory board of Immune Design Corp.
The Board concluded that Dr. Baltimore should serve on the Board because Dr. Baltimore has spent his career in scientific academia at a number of well-known and highly regarded institutions. This experience provides Dr. Baltimore with extensive scientific knowledge and a deep understanding of our industry and of the research and development activities and operations of our Company.
FRANK J. BIONDIï 2015 Proxy Statement9
Mr.
| ITEM 1 — ELECTION OF DIRECTORS |
Frank J. Biondi
Frank J. Biondi, Jr. has served as Senior Managing Director of WaterView Advisors LLC, an investment advisor organization, since 1999. Prior to WaterView Advisors, Mr. Biondi was the Chairman and Chief Executive Officer of Universal Studios, Inc. from 1996 to 1998, the President and Chief Executive Officer of Viacom, Inc. from 1987 to 1996, Executive Vice President of Entertainment Business Sector of The Coca-Cola Company and Chairman and Chief Executive Officer of Coca-Cola Television from 1985 to 1987, Chairman and Chief Executive Officer of Time Inc.’s subsidiary Home Box Office, Inc. from 1982 to 1984, Vice President of Time Inc. from 1978 to 1984 and Chairman and Chief Executive Officer of its subsidiary Home Box Office, Inc. from 1982 to 1984 and Assistant Treasurer of the Children’s Television Workshop from 1974 to 1978.
Mr. Biondi has been a director of Cablevision Systems Corp., a telecommunications, media and entertainment company, since 2005, Hasbro, Inc., a toy and games company, since 1999,2005; Seagate Technology plc, a manufacturer of hard disk drives, since 2005, serving on its Compensation Committee and chairing its Finance Committee; and RealD Inc., a global licensor of three-dimensional technologies, since July 2010. He serves2010, serving as its lead director and on theits Audit Committee and chairing its Compensation Committee. Mr. Biondi has been a director of Hasbro, Inc., a toy and games company, since 2002, serving on its Compensation and Nominating, Governance and Governance Committees ofSocial Responsibility Committees. Hasbro on the Compensation and Finance and Strategic and Financial Transactions Committees of Seagate Technology and on the Compensation and Audit Committees of RealD.has announced that Mr. Biondi serves as the lead directorwill not stand for election at Hasbro’s annual meeting of RealD. stockholders in May 2015.
From 2008 until May 2010, Mr. Biondi was a director of Yahoo! Inc., a provider of Internet services, serving on its Compensation Committee. From 2002 to 2008, he was a director of Harrahs Entertainment, Inc., a gaming corporation, serving on its Compensation and Governance Committees, and from 1995 to 2008 he was a director of The Bank of New York Mellon Corporation, an asset management and securities services company, serving
on its Compensation and Risk Committees. He has also been a director of Vail Resorts, Inc., a mountain resort operator, and The Seagram Company, a liquor and spirits company. Mr. Biondi received an undergraduate degree from Princeton University and a master’s degree from Harvard Business School.
The Board concluded that Mr. Biondi should serve on the Board due to Mr. Biondi’s experience as chief executive officer of many large, public companies and his current role with WaterView Advisors which provide valuable management and leadership skills, as well as an understanding of the operations and financial results and prospects of our Company. Given his financial and leadership experience, Mr. Biondi has been determined to be an Audit Committee financial expert by our Board.
ROBERTRobert A. BRADWAYBradway
Mr.
Robert A. Bradway has served as our director since October 2011 and Chairman of the Board since January 1, 2013. Mr. Bradway has been our President since May 2010 and Chief Executive Officer since May 2012. From May 2010 to May 2012, Mr. Bradway served as our Chief Operating Officer. Mr. Bradway joined Amgen in 2006 as Vice President, Operations Strategy and served as Executive Vice President and Chief Financial Officer from April 2007 to May 2010. Prior to joining Amgen, he was a Managing Director and Head of International Banking at Morgan Stanley in London since 2001 where he had responsibility for the firm’s banking department and corporate finance activities in Europe and focused on healthcare.
Mr. Bradway has been a director of Norfolk Southern Corporation, a transportation company, since July 2011,
serving on its Audit and FinanceGovernance and Nominating Committees. He has served on the board of trustees of the University of Southern California since April 2014.
The Board concluded that Mr. Bradway should serve on the Board due to Mr. Bradway’s knowledge of all aspects of our business, combined with his leadership and management skills having served as our President and Chief Operating Officer and formerly our Chief Financial Officer. During this time, Mr. Bradway provided strong leadership through a variety of challenges and this positions him well to serve as a director and provides the Board with a knowledgeable perspective with regard to the Company’s products and operations.
10 FRANÇOIS DE CARBONNELï 2015 Proxy Statement
Mr.
| ITEM 1 — ELECTION OF DIRECTORS |
François de Carbonnel
François de Carbonnel is a director of corporations and corporate advisor. Mr. de Carbonnel has been a director of Solocal Group (formerly known as Pages Jaunes S.A.), a French company which offers online content, advertising solutions and transactional services, since 2004 and serves as chairman of the Remuneration and Appointments Committee. Mr. de Carbonnel has been a supervisory board member of Mazars Group, a privately-held international organization specializing in audit, accountancy, tax, legal and advisory services since December 2011.
From 2004 until October 2013, Mr. de Carbonnel was a director of a number of funds managed by Ecofin, a privately-held investment management firm. Mr. de Carbonnel was a director of Thomson S.A., a French multimedia corporation, from 2007 to January 2010, serving as Chairman of the Audit Committee throughout his tenure, as a director, and as non-executive Chairman of the Board from April 2008 to April 2009. He has also been a director and President of the Remuneration and Nominating Committee of Pages Jaunes S.A., a French company which publishes directories and internet band advertising, since 2004. Mr. de Carbonnel has been a director of a number of funds managed by Ecofin, a privately-held investment management firm that provides discretionary fund management services and advice to institutions, utilities and infrastructure industries since 2004 and of Mazars Group, a privately-held international organization specializing in audit, accountancy, tax, legal and advisory services since December 2011, where he also serves as chair of the Audit Committee. Mr. de Carbonnel has been a director of Groupe Foncier de L’ile de France (GFI), a privately-held French real estate company since 1995. Mr. de Carbonnel became the Chairman of Woodside Holdings Investment Management Pte. Ltd., a non-listed Singapore-based fund management company, in 2012. Mr. de Carbonnel was a director of Quilvest S.A., a Luxembourg company which provides wealth management and private equity services, from 2006 to 2012.2013.
Mr. de Carbonnel was thea Senior Advisor of the Global Corporate and Investment Bank of Citigroup from 2004 to
2006, and itsa Managing Director from 1999 to 2004. He was the Chairman and Chief Executive Officer of Midial S.A., a French listed company, from 1994 to 1998, Chairman of General Electric Capital SNC from 1996 to 1998. He was a corporate Vice President of General Electric Company and President of General Electric Capital-Europe from 1990 to 1992, President of Strategic Planning Associates, an international consulting company, from 1981 to 1990 and Vice President of Boston Consulting Group from 1971 to 1981. He has beenis a member emeritus of the business boardBusiness Board of advisorsAdvisors of the Carnegie Mellon Tepper School of Business since 1984.Business. Mr. de Carbonnel is a French citizen and resides in Europe.
The Board concluded that Mr. de Carbonnel should serve on the Board because Mr. de Carbonnel has acquired knowledge, skills and brings a strong vantage point through his international career as an executive officer of well-known consulting companiesfirms as well as a number of public companies. This perspective is important as the Company undertakes further global expansion plans. Given his experience in the financial industry, Mr. de Carbonnel has been determined to be an Audit Committee financial expert by our Board.
VANCE D. COFFMANï 2015 Proxy Statement11
Dr.
| ITEM 1 — ELECTION OF DIRECTORS |
Vance D. Coffman
Vance D. Coffman is our lead independent director. Dr. Coffman has been a director of 3M Company, a consumer and office products and services company, since 2002 and he has been a director of Deere & Company, a farm and construction machinery company, since 2004. He serves on the Nominating and GovernanceCompensation Committee and chairs the CompensationFinance Committee of 3M Company and serves on the Corporate Governance and Executive Committees and chairs the Compensation Committee of Deere & Company. Dr. Coffman was also director of Bristol-Myers Squibb Company, a pharmaceutical company, and a member of its Audit Governance and ComplianceGovernance Committees, from 1998 to 2007.
Dr. Coffman was the Chairman of the Board and Chief Executive Officer of Lockheed Martin Corporation, an aerospace and defense company, from 1998 to 2005, and was ex officio member of all board committees. From 1997 to 1998, he was Vice Chairman of the Board and Chief
Executive Officer of Lockheed Martin. He is currently on the Board of Trustees of the Naval Postgraduate School Foundation, the Stanford Engineering Advisory BoardCouncil of Stanford University and the Board of Governors of the Iowa State University Foundation. Dr. Coffman has been a Member of the National Academy of Engineering since 1997 and a Fellow of the American Institute of Aeronautics and Astronautics and the American Astronautical Society since 1989 and 1997, respectively. Dr. Coffman received an undergraduate degree from Iowa State University and a doctorate from Stanford University.
The Board concluded that Dr. Coffman should serve on the Board as during his service as Chairman of the Board and Chief Executive Officer of Lockheed Martin, Dr. Coffman acquired important leadership and management skills that provide insight into the operations of our Company and the challenges of managing a complex organization.
ROBERTRobert A. ECKERTEckert
Mr.
Robert A. Eckert has served asbeen an Operating Partner at Friedman Fleischer & Lowe, a director of our Companyprivate equity firm, since December 2012. Mr. Eckert was first identified to the Governance and Nominating Committee as a potential director candidate by Kevin W. Sharer.September 2014. Mr. Eckert was the Chief Executive Officer of Mattel, Inc., a toy design, manufacture and marketing company, having held this position from 2000 through December 2011.2011, and its Chairman of the Board from 2000 through 2012. He was President and Chief Executive Officer of Kraft Foods Inc., a consumer packaged food and beverage company, from 1997 to 2000, Group Vice President from 1995 to 1997, President of the Oscar Mayer Foods Division from 1993 to 1995 and held various other senior executive and other positions from 1977 to 1992.
Mr. Eckert was Chairman of the Board of Mattel, Inc., a toy design, manufacture and marketing company, from 2000 through December 31, 2012. He has been a director of McDonald’s Corporation, a company which franchises and operates McDonald’s restaurants in the global restaurant industry, since 2003, serving as the Chair of the Compensation Committee and a member of the Executive and Governance Committees. Mr. Eckert was a director of Smart & Final Stores, Inc., a
warehouse store, from May 2013 until July 2014 prior to it becoming a publicly-traded company. Mr. Eckert also has served as a director of Levi Strauss & Co., a privately-held jeans and casual wear manufacturer, since 2010. He was appointed director of Eyemart Express Holdings LLC, a privately-held eyewear retailer and portfolio company of Friedman Fleischer & Lowe, in 2015. Mr. Eckert is on the Dean’sGlobal Advisory Board of the Kellogg Graduate School of Management and serves on the Eller College National Board of Advisors at the University of Arizona.
The Board concluded that Mr. Eckert should serve on our Board because of Mr. Eckert’s recent and long-tenured experience as a Chief Executive Officer of large public companies, his broad international experience in marketing and business development and his valuable leadership experience. Given his financial and leadership experience, Mr. Eckert has been determined to be an Audit Committee financial expert by our Board.
12 REBECCA M. HENDERSONï 2015 Proxy Statement
Dr.
| ITEM 1 — ELECTION OF DIRECTORS |
Greg C. Garland
Greg C. Garland is the Chairman, President and Chief Executive Officer of Phillips 66, an energy manufacturing and logistics company with midstream, chemical, refining and marketing and specialties businesses created through the repositioning of ConocoPhillips, having held this position since April 2012. Mr. Garland chairs the Executive Committee of Phillips 66. Prior to Phillips 66, Mr. Garland served as Senior Vice President, Exploration and Production, Americas of ConocoPhillips from 2010 to April 2012. He was President and Chief Executive Officer of Chevron Phillips Chemical Company (now a joint venture between Phillips 66 and Chevron) from 2008 to 2010 and Senior Vice President,
Planning and Specialty Chemicals from 2000 to 2008. Mr. Garland served in various positions at Phillips Petroleum Company from 1980 to 2000. Mr. Garland is a member of the Engineering Advisory Board for Texas A&M University.
The Board concluded that Mr. Garland should serve on our Board because of Mr. Garland’s experience as a Chief Executive Officer and his over 30 years of international experience in a highly regulated industry. Given his financial and leadership experience, Mr. Garland has been determined to be an Audit Committee financial expert by our Board.
Rebecca M. Henderson
Rebecca M. Henderson has been the John and Natty McArthur University Professor at Harvard University since September 2011 and has been onis the facultyCo-Director of the Business and Environment Initiative at Harvard Business School servingSchool. From 2009 to 2011, Dr. Henderson served as the
Senator John Heinz Professor of Environmental Management since July 2009.at Harvard Business School. Prior to this, she was a professor of management at the Massachusetts Institute of Technology, or MIT, for 21 years, having been the Eastman Kodak LFM Professor of Management since 1999. Since 1995, she has also been a Research Associate at the National Bureau of Economic Research. She specializes in technology strategy and the broader strategic problems faced by companies in high technology industries. Dr. Henderson has been a director of IDEXX Laboratories, Inc., a company which develops and commercializes technology-based products and services for veterinary, food and water applications, since 2003, serving on its Finance Committee and chairing its Nominating and Governance Committee.
Dr. Henderson has also served as a director of the Ember Corporation, a privately-held semiconductor chip
manufacturer, and was on its Compensation Committee, from 2001 to July 2009. She has further been a director of Linbeck Construction Corporation, a privately-held facility solutions company.company, from 2000 until 2004. In May 2011, Dr. Henderson was appointed to the U.S. Department of Commerce Innovation Advisory Board which was established as a result of the America COMPETES Reauthorization Act of 2010 signed into law by President Obama on January 4, 2011 and which guided a study of U.S. economic competitiveness and innovation to help inform national policies at the heart of U.S. job creation and global competitiveness. Dr. Henderson has published articles, papers and reviews in a range of scholarly journals, and sits on the editorial board ofResearch Policy, a multi-disciplinary journal.journals. Dr. Henderson received an undergraduate degree from the Massachusetts Institute of TechnologyMIT and a doctorate from Harvard University.
The Board concluded that Dr. Henderson should serve on the Board because Dr. Henderson’s study of the complex strategy issues faced by high technology companies provides unique insight into the Company’s strategic and technology issues.
FRANK C. HERRINGERï 2015 Proxy Statement13
Mr.
| ITEM 1 — ELECTION OF DIRECTORS |
Frank C. Herringer
Frank C. Herringer has been Chairman of the Board of Transamerica Corporation, a financial services company, since 1995. Mr. Herringer was an executive with Transamerica for 20 years, including its Chief Executive Officer from 1991 until its acquisition by Aegon N.V., a life insurance, pensions and asset management company, in 1999, subsequently serving on Aegon’s Executive Board for one year and he is currently a director of Aegon U.S. Holding Corporation, a position he has held since 1999. Mr. Herringer has been a director of The Charles Schwab Corporation, a brokerage and banking company, since 1996, serving on its Compensation, Nominating and Corporate Governance Committees, and a director of Cardax, Inc., a biotechnology company, since 2014, serving on its Compensation Committee and chairing its Governance and Nominating Committee, and has been a director of its parent company, Cardax Pharmaceuticals, Inc., since 2006. Mr. Herringer is a member of the Board of Trustees of the California Pacific Medical Center Foundation, a not-for-profit organization which develops philanthropic resources for the California
Pacific Medical Center, a privately-held, not-for-profit academic medical center, since 2013. Mr. Herringer was a director of Safeway Inc., a food and drug retailer, sincefrom 2008 until January 2015, serving on its Executive Compensation and Executive Committees and chairing its Nominating and Corporate Governance Committee. He is also currently a director of Cardax Pharmaceuticals, Inc., a privately-held biotechnology company, and sat on the Board of Trustees of the California Pacific Medical Center, a privately-held not-for-profit academic medical center, from 1983 until 2009. From 2002 to 2005, Mr. Herringer was a director of AT&T Corporation, and a member of its Audit and Compensation Committees. In 2004, Mr. Herringer was named an Outstanding Director of the Year by the Outstanding Director’sDirectors Exchange. Mr. Herringer received an undergraduate degree and master of business administration from Dartmouth College.
The Board concluded that Mr. Herringer should serve on the Board due to Mr. Herringer’s career as Transamerica’s Chief Executive Officer and Chairman of the Board which developed Mr. Herringer’s management and leadership skills and provides an informed perspective on our financial performance, prospects and strategy.
TYLER JACKSTyler Jacks
Dr.
Tyler Jacks joined the faculty of Massachusetts Institute of Technology, or MIT, in 1992 and is currently the David H. Koch Professor of Biology and director of the David H. Koch Institute for Integrative Cancer Research, which brings together biologists and engineers to improve detection, diagnosis and treatment of cancer.cancer, a position he has held since 2007. Dr. Jacks has been an investigator with the Howard Hughes Medical Institute, a nonprofit medical research organization, since 2002.1994. Dr. Jacks has been a director of Thermo Fisher Scientific, Inc., a life sciences supply company, since May 2009, and serves on its Strategy and Finance Committee Science and Technology Committee and scientific advisory board. Dr. Jacks was a founder ofIn 2006, he co-founded T2 Biosystems, Inc., a privately-held biotechnology company, since 2006.and served on its scientific advisory board until 2013. Dr. Jacks serves on numeroushas been a consultant scientific advisory boards includingadvisor to Epizyme, Inc., a privately-held
biopharmaceutical company, since 2007 and2007. Dr. Jacks served on the scientific advisory board of Aveo Pharmaceuticals Inc., a cancer therapeutics company, since 2001. Dr. Jacksfrom 2001 until 2013. He was appointed to the National Cancer Advisory Board, which advises and assists the Director of the National Cancer Institute with respect to the National Cancer Program, in October 2011. Dr. Jacks was a director of the Massachusetts Institute of Technology’s MIT’s
Center for Cancer Research from 2001 to 20082007 and received numerous awards including the Paul Marks Prize for Cancer Research and the American Association for Cancer Research Award for Outstanding Achievement. He was elected to the National Academy of Sciences as well as the Institute of Medicine in 2009. Dr. Jacks received an undergraduate degree from Harvard University and his doctorate from the University of California, San Francisco.
The Board concluded that Dr. Jacks should serve on the Board due to Dr. Jacks’ extensive scientific expertise relevant to our industry, including his broad experience as a cancer researcher and service on several scientific advisory boards. His expertise in the field of oncology, which includes pioneering the use of technology to study cancer-associated genes and to construct animal models of many human cancer types, is evidenced by his appointment to the National Cancer Advisory Board and by his numerous awards for cancer research. Dr. Jacks’ scientific knowledge and thorough understanding of our industry positions him to provide valuable insights into the scientific activities of our Company.
14 GILBERT S. OMENNï 2015 Proxy Statement
Dr. Gilbert S. Omenn has been Professor of Internal Medicine, Human Genetics and Public Health and Director of the Center for Computational Medicine and Bioinformatics at the University of Michigan since 1997. From 1997 to 2002, he was the Chief Executive Officer of the University of Michigan Health System and Executive Vice President of the University of Michigan for Medical Affairs. Previously he was a professor of medicine and of environmental health and Dean of the School of Public Health and Community Medicine at the University of Washington, as well as a senior member of the Fred Hutchinson Cancer Research Center. He has been an affiliate faculty member of the Institute for Systems Biology in Seattle since June 2009.
| ITEM 1 — ELECTION OF DIRECTORS |
Dr. Omenn is a director of Etubics Corporation, a privately-held, early-stage bio-pharmaceutical company developing targeted immunotherapies and vaccine products, since 2012. Dr. Omenn was a director of Rohm & Haas Co., a manufacturer of specialty chemicals (now a wholly-owned subsidiary of The Dow Chemical Company) from May 1987 until March 2009, where he served on the Audit, Nominating, and Sustainability Committees, and of OccuLogix, Inc., an early-stage eye disease therapy company, from 2005 until 2008, serving on its Finance and Compensation Committees. Dr. Omenn has been a member of the scientific advisory boards of: Motorola, Inc., an electronics and equipment company, from 1998 to December 2010; Galectin Therapeutics, Inc. (formerly Pro-Pharmaceuticals Inc), an early-stage pharmaceutical company, since July 2009; Compendia Biosciences, Inc., a privately-held bioinformatics firm, since February 2007 until October 2012 when they were acquired by Life Technologies Corporation; InnoCentive Innovation, Inc., a privately-held open innovation and crowdsourcing company, since 2006, and Armune BioSciences, Inc. a privately-held early-stage in vitro diagnostic company, since February 2008, as well as a director of the latter.
Dr. Omenn’s civic, scientific and non-profit leadership roles include serving as a director of the Harvard Medical Alumni Association, Hastings Center, the Center for Public Integrity, the U.S. Civilian R&D Foundation CRDF-Global, Population Services International, Center for Naval Analysis (CNA) and the Salzburg Global Seminar. Previously, he served as a director of United Way, the Fred Hutchinson Cancer Research Center, and the American Association for the Advancement of Science. Earlier he served as Associate Director of the Office of Science and Technology Policy and Associate Director of the Office of Management and Budget in the Executive Office of the President of the United States from 1977 to 1981 and Chair of the Presidential/Congressional Commission on Risk Assessment and Risk Management from 1994 to 1997. Dr. Omenn has received several honors and awards and has published many significant papers, reviews and books.
The Board concluded that Dr. Omenn should serve on the Board due to Dr. Omenn’s broad scientific, medical and research experience, including his leadership roles at the University of Michigan and the University of Washington, which provides perspectives on the requirements and behaviors of the medical community as well as special insight into the research and development, risk management, and compliance activities of our Company.
JUDITHJudith C. PELHAMPelham
Ms.
Judith C. Pelham is the President Emeritus of Trinity Health, a national system of healthcare facilities, including hospitals, long-term care, home care, psychiatric care, residences for the elderly and ambulatory care, and one of the largest Catholic healthcare systems in the U.S. Prior to her current position at Trinity Health, she was the President and Chief Executive Officer of Trinity Health from 2000 to 2004, the President and Chief Executive Officer of Mercy Health Services, a system of hospitals, home care, long-term care, ambulatory services and managed care, from 1993 to 2000, the President and Chief Executive Officer of the Daughters of Charity Health Services of Austin, a network of hospitals, home care and ambulatory services, from 1982 to 1992, and the Assistant Vice President of Brigham and Women’s Hospital from 1976 to 1980.
Ms. Pelham has been a director of Health Care REIT, Inc., a public real estate investment trust for senior living and health care real estate, since May 2012 and serves on its Compensation, Planning, Nominating/Corporate Governance and Investment Committees. Ms. Pelham was a director of Zoll Medical Corporation, a medical products and software solutions company, from February 2011 to April 2012 when it became a wholly owned subsidiary of Asahi Kasei Group. Ms. Pelham was a director of Eclipsys Corporation, a healthcare IT solutions company, from 2009 to August 2010 when it merged with AllScripts, and was a member of its Compensation Committee. In addition, from 2005 to 2006 she was a director of Hospira, Inc., a specialty pharmaceutical
delivery company, and a member of its Audit and Public Policy and Compliance Committees. She also sits on the board of trustees of Smith College and is a member of its Audit, Finance, and Buildings and Grounds, and Campus LifeLibraries Committees and chairs the Audit and Information Technology Committee.Committees.
Ms. Pelham has received numerous honors for her civic and healthcare systems leadership, including the CEO IT Achievement Award in 2004 from Modern Healthcare and the Healthcare Information Management Systems Society for her leadership in implementing information technology in healthcare provider organizations and the National Quality Healthcare Award in 2004 from the National Committee for Quality Healthcare, for innovation and implementation of clinical quality and patient safety systems. She received the American Hospital Association Partnership for Action Grassroots Advocacy Award in 1992 in recognition of her work in healthcare reform.
The Board concluded that Ms. Pelham should serve on the Board due to Ms. Pelham’s career as an executive leader at a number of large healthcare systems, as well her extensive experience developing programs to improve the health status of communities and championing innovation and advances in the delivery of, access to and financing of healthcare, provide anher understanding of the nation’s healthcare system, the patient populations served by our Company’s products and the operations of our Company.
LEONARD D. SCHAEFFERï 2015 Proxy Statement15
Mr. Leonard
| ITEM 1 — ELECTION OF DIRECTORS |
Ronald D. Schaeffer has been a Senior Advisor for TPG Capital, a private investment firm, since 2006 and a partner at North Bristol Partners LLC, a privately-held consulting company since 2006. From 2007 to 2011, Mr. Schaeffer served as the Chairman of the Board of Surgical Care Affiliates, LLC, a privately-held company operating a national network of ambulatory surgical centers and surgical hospitals. From November 2004 to November 2005, Mr. Schaeffer served as Chairman of the Board of WellPoint, Inc., then the largest health insurance company in the United States created by the combination of WellPoint Health Networks, Inc. and Anthem, Inc. From 1992 until 2004, Mr. Schaeffer served as Chairman of the Board and Chief Executive Officer of WellPoint Health Networks, Inc. He was a director of Allergan, Inc., a specialty pharmaceutical company, from 1993 to May 2011, serving as Chair of its Organization and Compensation Committee and as a member of its Corporate Governance Committee, and serves as a director of Quintiles Transnational Corp., a privately-held clinical research and consulting services company, since 2008, serving as Chair of its Corporate Governance and Compliance Committee and on its Audit Committee. Mr. Schaeffer was a director of the National Institute for Health Care Management from 1993 to 2006 and served on its Advisory Board from 2006 to 2012.
Mr. Schaeffer has been the Chairman of the Board, from 1989 to 2004, and Chief Executive Officer, from 1986 to 2002, of Blue Cross of California, President and Chief Executive Officer of Group Health, Inc., a health
maintenance organization, from 1983 to 1986, Executive Vice President and Chief Operating Officer of the Student Loan Marketing Association (Sallie Mae) from 1980 to 1982, and Administrator of the Centers for Medicaid and Medicare Services, or CMS (formerly the Health Care Financing Administration), from 1978 to 1980. Prior to CMS, Mr. Schaeffer was employed by the Department of Health and Human Services in 1978, the Illinois Bureau of the Budget from 1975 to 1976 and the Illinois Department of Mental Health from 1972 to 1975. Mr. Schaeffer was named the Judge Widney Professor and Chair at the University of Southern California in 2007 and serves on the board of The Brookings Institution, the RAND Corporation and the board of fellows of Harvard Medical School. Mr. Schaeffer is also a member of the Institute of Medicine of the National Academy of Sciences.
The Board concluded that Mr. Schaeffer should serve on the Board as Mr. Schaeffer’s career as a chief executive officer of health insurance organizations such as Blue Cross and WellPoint, as well as his experience with and insight gained into government reimbursement programs while with CMS, provide a deep understanding of the nation’s healthcare system, healthcare industry, private and public reimbursement programs and the operations of our Company.
RONALD D. SUGARSugar
Dr.
Ronald D. Sugar is the retired Chairman of the Board and Chief Executive Officer of Northrop Grumman Corporation, a global securityaerospace and defense company, having held these posts from 2003 through 2009. He was President and Chief Operating Officer of Northrop Grumman Corporation from 2001 until 2003. He was President, Chief Operating Officer and director of Litton Industries, Inc., a developer of military products, from 2000 until 2001, and Chief Financial Officer of TRW, Inc., an aerospace, automotive and credit reporting company, from 1994 to 1996, and President and Chief Operating Officer of TRW Aerospace, a developer of missile systems and spacecraft, from 1998 to 2000. He is a senior advisor to Ares Management LLC, a privately-held asset manager and registered investment advisor, and a senior advisor to Northrop Grumman Corporation, both since 2010.
Dr. Sugar has been a director of Chevron Corporation, a petroleum, exploration, production and refining company, since 2005, and chairs its Audit Committee.2005. Dr. Sugar has also been a director of Apple Inc., a manufacturer and seller of, among other things, personal computers, mobile communication and media devices since
2010 and of Air Lease Corporation, an aircraft leasing company, since 2010. Dr. Sugar chairs the Audit Committee of Chevron, chairs the Audit and Finance Committee of Apple, chairs the Compensation Committee of Air Lease, and serves on the Air Lease Governance Committee. In 2014, Dr. Sugar joined the Temasek Americas Advisory Panel of Temasek Holdings (Private) Limited, a private investment company based in Singapore. Dr. Sugar is a member of the National Academy of Engineering, trustee of the University of Southern California, member of UCLA Anderson School of Management Board of Visitors, director and Executive Committee member of the Los Angeles Philharmonic Association and national trustee of the Boys and Girls Clubs of America.
The Board concluded that Dr. Sugar should serve on our Board because Dr. Sugar’s board and senior executive-level expertise, including his recent experience as Chairman and Chief Executive Officer of Northrop Grumman Corporation, provides valuable leadership experience and insight in the areas of operations, government affairs, technology and finance.
R. Sanders Williams
R. Sanders Williams has served as a director of the Company since October 17, 2014. Dr. Williams was first identified to the Governance and Nominating Committee as a potential director candidate by Vance D. Coffman, our lead independent director, and Robert A. Bradway, our Chairman of the Board and Chief Executive Officer. Dr. Williams is President of Gladstone Institutes, a non-profit biomedical research enterprise, and its Robert W. and Linda L. Mahley Distinguished Professor of Medicine, both since 2010. He is also a Professor of Medicine at the University of California, San Francisco since 2010. Prior to this, Dr. Williams served as Senior Vice Chancellor of the Duke University School of Medicine from 2008 to 2010 and Dean of the Duke University School of Medicine from 2001 to 2008. He was the founding Dean of the Duke-NUS Graduate Medical School, Singapore, from 2003 to 2008 and served on its Governing Board from 2003 to 2010. From 1990 to 2001, Dr. Williams was Chief of Cardiology and Director of the Ryburn Center for Molecular Cardiology at the University of Texas, Southwestern Medical Center. Dr. Williams has been a director of the Laboratory
Corporation of America Holdings, a diagnostic technologies company, since 2007. Dr. Williams was a director of Bristol-Meyers Squibb Company, a pharmaceutical company, from 2006 until 2013. Dr. Williams has served on the board of directors of the Gladstone Foundation, a non-profit institution that is distinct from Gladstone Institutes, since 2012 and on the board of directors of Exploratorium, a non-profit science museum and learning center located in San Francisco, since 2011. Dr. Williams received his undergraduate degree from Princeton University and his doctorate from Duke University.
The Board concluded that Dr. Williams should serve on the Board due to his broad medical and scientific background, including his leadership roles at Gladstone Institutes and Duke University, deep experience in cardiology, oversight of governance of multi-hospital healthcare provider systems, leadership of international medical programs in Singapore and China, and prior industry board experience, all of which provide valuable perspectives and insight into the operations of our Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE ABOVE THIRTEEN13 NAMED NOMINEES.
16 ï 2015 Proxy Statement
| ITEM 2 — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS |
RATIFICATION OF SELECTION OF INDEPENDENTRatification of Selection of Independent Registered Public Accountants
REGISTERED PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors has selected Ernst & Young LLP, or Ernst & Young, as our independent registered public accountants for the fiscal year ending December 31, 2013,2015, and the Board has further directed that management submit this selection for ratification by the stockholders at our 20132015 Annual Meeting of Stockholders. Ernst & Young has served as our independent registered public accounting firm and has audited our financial statements since the Company’s inception in 1980. The Audit Committee periodically considers whether there should be a rotation of our independent registered public accountants. The members of the Audit Committee believe that the continued retention of Ernst & Young as our independent registered public accountants is in the best interests of the Company. In conjunction with the mandated rotation of Ernst & Young’s lead engagement partner, the Audit Committee and its chairperson are directly involved in the selection of Ernst & Young’s new lead engagement partner. A representative of Ernst & Young is expected to be present at the
Annual Meeting and will have an opportunity to make a statement and respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young as our independent registered public accountants is not required by the Amgen Inc. Restated Certificate of Incorporation, the Amended and Restated Bylaws of Amgen Inc., or otherwise. However, the Board is submitting the selection of Ernst & Young to the stockholders for ratification because we believe it is a matter of good corporate governance practice. If our stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain Ernst & Young, but still may retain them. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in our best interests and that of our stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS.
ï 2015 Proxy Statement17
| ITEM 3— ADVISORY VOTE TO APPROVE OUR EXECUTIVE COMPENSATION |
ADVISORY VOTE TO APPROVE OUR EXECUTIVE COMPENSATIONAdvisory Vote to Approve Our Executive Compensation
This advisory stockholder vote, commonly known as “Say on Pay,” gives you as a stockholder the opportunity to endorse or not endorse our executive pay program and policies. Accordingly, you are being asked to vote on the compensation of our Named Executive Officers, or NEOs, as disclosed in the Compensation Discussion and Analysis and related compensation tables and the narrative in this proxy statement.
Our executive compensation program is designed to achieve the following objectives:
Pay for performance in a manner that strongly aligns with stockholder interests by rewarding both our short- and long-term measurable performance.
Attract, motivate and retain the highest level of executive talent by providing competitive compensation, consistent with their roles and responsibilities, our success and their contributions to this success.
Mitigate compensation riskby maintaining pay practices that reward actions and outcomes consistent with the sound operation of our Company and with the creation of long-term stockholder value.
Consider all Amgen staff members in the design of our executive compensation programs, to ensure a consistent approach that encourages and rewards all staff members who contribute to our success.
Our 20122014 Executive Compensation Was Aligned With Our Performance:Performance
A significant majority of each NEO’s compensation is dependent on our performance and our execution of our strategic priorities. In 2014, we delivered strong performance, the highlights of which include:
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GivenStock Price Appreciation
of 40%in 2014
Our stock price increased from $114.08 to $159.29 per share during 2014, reflecting appreciation of 40%. This 2014 stock price performance contributed to our strong relative TSRthree-year stock price performance. Since 2012, our stock price has increased 148% versus 103% for our peer group and 64% for the 2010-2012 performance period, where we ranked thirdStandard & Poor’s 500, or S&P 500.
One-Year TSR of fourteen companies (Amgen42%
in 2014
Our one-year total shareholder return, or TSR, of 42%, including our dividends, outperforms the TSRs of our peer group and our 2010 peer group), 144.1% of target performance units were earnedthe S&P 500 for the performancesame period that ended of 24% and 14%, respectively. Our three-year TSR of 157% also outperforms the TSRs of our peer group and the S&P 500 for the same period of 111% and 75%, respectively.
| – | Payout Under Our Long-Term Incentive Performance Award Program Reflects our TSR Performance. Consistent with our robust three-year TSR, the performance units earned in 2014 under our long-term incentive, or LTI, performance award program (for the 2012-2014 performance period) were 150% of target, or maximum payout, based on our TSR for the 2012-2014 performance period compared with the average TSR of our 15-company peer group for this period. Commencing with performance awards granted in 2013, our TSR is compared against that of the S&P 500. |
18 ï 2015 Proxy Statement
| ITEM 3— ADVISORY VOTE TO APPROVE OUR EXECUTIVE COMPENSATION |
| • | Delivering on Return of Capital to Our Stockholders. |
$1.9 billion
in 2012; due to the approximate 133.7% effect of the TSR multiplier on the 2010 financial performance measures (revenues and adjusted earnings per share, or EPS) for which we performed at approximately 107.8% of target.dividends in 2014
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| – | In 2014, we increased our quarterly cash dividend to $0.61 per share from $0.47 per share in 2013. Since |
| – | We Repurchased Stock in 2014. In the fourth quarter of 2014, we repurchased 0.9 million shares of our Common Stock. |
| • | Cost Containment. |
| – | We undertook actions to support our transformation plans announced in 2014 to invest in continuing innovation and the launch of our new pipeline molecules, while improving our cost structure. As part of the plan, these actions will result in an approximate 23% reduction in our facilities footprint Company-wide. |
| – | There were no annual base salary increases in 2014 for staff members at senior manager level or above, including our NEOs. There was a reduction in value of the LTI equity award grants made in January 2014 from those made in 2013 for all NEOs, other than our Chief Executive Officer, or CEO, to respond to lower median values among our peer group. We increased our CEO’s LTI equity award grant value in 2014 to maintain median positioning against our peer group as the 2013 median for the CEO position increased over the prior year. |
Our Annual Cash Incentive Award Program is Tied Directly to Our Performance Based on Pre-Established Performance Goals.
| • | Strong Financial |
| – | Our strong operating performance resulted in above-target performance on our pre-established performance goals for 2014 revenues (147.4% of target performance) and adjusted net income (187.9% of target performance), that comprise 60% of the weighting under our 2014 annual cash incentive award program. |
We exceeded our maximum goals for 2012 revenues and adjusted net income, the two pre-established financial measures
| • | Significant Pipeline Advancement and Success. In 2014, we continued to significantly enhance our pipeline, the highlights of which include that six of our medicines generated positive registration-enabling data and four (Repatha™ (evolocumab)*, Corlanor® (ivabradine)*, talimogene laherparepvec and BLINCYTO™ (blinatumomab)) were submitted for regulatory approval. In December 2014, the Food and Drug Administration, or FDA, approved BLINCYTO™ less than three months after submission. We also reported positive data on our AMG 334 study for patients with episodic migraines and, as a consequence, we announced a decision to move into Phase 3 in 2015. |
| – | We performed at 127.6% of our pre-established target goal of “Deliver the Best Pipeline” that represents a 25% weighting under our 2014 annual cash incentive award program. |
| • | Execution on Key Strategic Priorities. We performed at 96.7% of our pre-established performance goals of “Deliver Annual Priorities” comprising 15% of the weighting under our 2014 annual cash incentive award program and including Full Potential, Drug Delivery and Decision Making sub-goals. |
| – | In 2014, the FDA also granted approval of the Neulasta® (pegfilgrastim) Delivery Kit, including the On-body Injector for Neulasta®, a drug delivery system. |
The payout under our annual cash incentive award program which contributed to payment of 205.3%for all measures after weighting was 147% of target opportunity under this program. These financial measures represented 60% weighting with performance at 225% of target opportunity, while various operational goals relating to “Deliver the Best Pipeline” and “Reach More Patientsbonus opportunity.
| (1) | Adjusted operating income, adjusted net income |
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ï 2015 Proxy Statement19
| ITEM 3— ADVISORY VOTE TO APPROVE OUR EXECUTIVE COMPENSATION |
Positive 2014 Say on Pay Vote and Engagement With Our Stockholders
Mr. Bradway’s total target compensation97% stockholder support
on our 2014 say on pay
In 2014, we received over 97% stockholder support on our say on pay advisory vote. We have engaged consistently in broad direct stockholder outreach over the rolepast several years and have found these interactions highly valuable and informative and will continue to engage with our stockholders to further enhance our understanding of CEO reflects the shift in our compensation philosophy to target the medianperspectives of our peer group for all elements ofinvestors. The compensation and to provide LTI equity award grants that are primarily performance-based. Ourrelated feedback from our stockholders is reviewed by our Compensation and Management Development Committee, or Compensation Committee, setand we have made a number of compensation changes in response to past discussions with our current CEO’s total target cash compensation 28% lower than the previous total target cash compensation ofstockholders.
Since our former CEO and slightly below the median of our peer group due to this being Mr. Bradway’s first year in the CEO position. Mr. Bradway’s target annual cash incentive award opportunity was 130% of base salary and his base salary was $1.4 million. By comparison, Mr. Sharer’s ending target annual cash incentive award opportunity was 150% of base salary and his base salary was $1.8 million.
Our 2012 Say on Pay Vote and Engagement With Our Stockholders:
We enhanced our stockholder outreach program, which we continued throughout 2012 and in 2013, and our say on pay vote in 2012 had 87.17% stockholder support. While pleased with this outcome, we believe it is important to continue engaging our stockholders. To further enhance our understanding of the perspective of our investors, since our 20122014 annual meeting of stockholders, we have engaged in outreach toactivities and discussions with stockholders comprising approximately 50% of our outstanding sharesshares. In 2014, our predominant feedback from investors with respect to our compensation practices was that they are satisfied with our compensation program. While we are pleased with our say on pay results and have had fulsome discussions with stockholders owning over 37%stockholder feedback, we will continue to reach out to understand and address any concerns of our outstanding shares. The feedback from our stockholders is reviewed by our Compensation Committee. We have made a number of compensation changes as a result of the discussions with our stockholders over the past two years. For 2012 compensation:
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We significantly increased the percentage of equity compensation that is performance-based such that 80% of our LTI equity awards are performance units and earned based on our relative three-year TSR performance.
We rebalanced our peer group to include Allergan, Inc. and Celgene Corporation, two companies among those in our industry with which we compete for executive talent and provide greater balance with our peer group in terms of market capitalization and revenues.
stockholders. Our stockholder outreach efforts will continue with plans to reach out to top institutional holders after the filing of this proxy statement, as well as through our executive compensation website accessible(accessible atwww.amgen.com/executivecompensation that we) initiated in 2008 andthat invites all of our stockholders to fill out a survey to provide feedback directly to the Compensation Committee regarding our executive compensation philosophy, policies, programsprogram.
We Have Implemented Compensation Best Practices
We are mindful of compensation and practices.governance best practices and have implemented the following practices, among others:
We have a clawback policy that requires our Board of Directors, or Board, to consider the recapture of past cash or LTI equity award payouts to our NEOs if the amounts were determined based on financial results that are later restated and the NEOs’ misconduct is determined by the Board to have caused the restatement.
Our incentive compensation plans contain recoupment provisions applicable to all staff members that expressly allow the Compensation Committee to determine that annual cash incentive awards are not earned fully or in part where such employee has engaged in misconduct that causes serious financial or reputational damage to the Company.
Our LTI equity award grants are primarily performance-based with 80% of LTI equity awards granted as performance units.
We have robust stock ownership guidelines, with a six times base salary ownership requirement for our CEO.
Our staff members and Board are prohibited from engaging in short sales, purchasing Common Stock on margin, pledging Common Stock, or entering into any hedging, derivative or similar transactions with respect to our Common Stock.
| • | We target compensation at the 50th percentile, or median, of our peer group. |
We do not provide tax gross-ups, except for business related payments such as reimbursement of certain moving and relocation expenses.
We do not have “single-trigger” equity vesting acceleration upon a change of control for restricted stock units or stock options, and our double-trigger cash severance is limited to a multiple of two times target annual cash compensation, without tax gross-ups.
We do not have any defined benefit pension or supplemental executive retirement plan benefits or “above-market” interest on deferred compensation.
20 ï 2015 Proxy Statement
| ITEM 3 — ADVISORY VOTE TO APPROVE OUR EXECUTIVE COMPENSATION |
Board Recommends a Vote “FOR” Our Executive Compensation:Compensation
Our Board believes that our current executive compensation program aligns the interests of our executives with those of our stockholders and is earned primarily based on the performance of our Company. We intend that our compensation programs reward actions and outcomes that are consistent with the sound operation of our Company and are aligned with the creation of long-term stockholder value.
For the reasons discussed above, the Board recommends that stockholders vote “FOR” the following resolution:
“Resolved, that the stockholders approve, on an advisory basis, the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Securities and
Exchange Commission rules in the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative disclosure of this proxy statement.”
Although this vote is advisory and is not binding on the Board, our Compensation Committee values the opinions expressed by our stockholders and will consider the outcome of the vote when making future executive compensation decisions.
We currently conduct annual advisory votes on executive compensation, and we expect to conduct the next advisory vote on executive compensation at our 20142016 annual meeting of stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE ADVISORY RESOLUTION INDICATING THE APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
ITEM 4ï 2015 Proxy Statement21
APPROVAL OF OUR PROPOSED AMENDED AND RESTATED 2009 EQUITY INCENTIVE PLAN
We are asking you to approve the proposed Amgen Inc. Amended and Restated 2009 Equity Incentive Plan, or Amended Plan, which is an amendment and restatement of – and successor to – the Amgen Inc. 2009 Equity Incentive Plan, as approved by our stockholders on May 6, 2009, or the 2009 Plan. Our Board of Directors, or Board, has adopted, subject to stockholder approval, the Amended Plan on March 6, 2013, which authorizes equity and cash awards to members of our Board, and the employees and consultants of Amgen, its subsidiaries and affiliates.We believe that equity incentive awards are critical to attracting and retaining the most talented employees in our industry. Stockholder approval of the proposed Amended Plan will allow us to continue to provide these important incentives.
Material Changes to 2009 Plan
The Amended Plan would implement the following material changes to the 2009 Plan, subject to our stockholders’ approval:
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Incorporate certain changes to the share counting provision to reflect that shares withheld to pay for tax obligations with respect to “full value” awards and repurchases of restricted shares will be available for issuance again under the Amended Plan. Full value awards are awards settled in shares, excluding stock options and stock appreciation rights.
Consistent with the current terms of our outstanding performance units, require that dividends and dividend equivalents payable in connection with performance-based awards will only be paid to the extent that the performance-based vesting conditions are satisfied and the shares underlying such awards are earned and vest.
Provide the administrator with discretion to allow for automatic exercises of certain “in-the-money” stock options and stock appreciations rights shortly prior to the expiration of their term.
Eliminate certain performance criteria that may be used to award “performance-based compensation” under Section 162(m) of the Internal Revenue Code.
Stockholder Approval Requirement
The Amended Plan will become effective upon approval of the Amended Plan by our stockholders at the 2013 Annual Meeting of Stockholders, or Annual Meeting.Unless and until our stockholders approve the Amended Plan, we will continue to grant awards under the terms of the 2009 Plan, as approved by our stockholders on May 6, 2009, and from the shares available for issuance under the 2009 Plan, without regard to the amendment and restatement being proposed in this Item 4. Accordingly, if the Amended Plan is not approved by our stockholders, we may continue to grant performance-based compensationwithin the meaning of Section 162(m) of the Internal Revenue Code under the terms of the 2009 Plan until
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our 2014 annual meeting of stockholders, based on our stockholders’ previous approval of the 2009 Plan on May 6, 2009, and we expect that, absent stockholder approval of the proposal set forth in this Item 4, we will seek stockholder approval of the performance criteria under the 2009 Plan at the 2014 annual meeting of stockholders.
Stockholder approval of the Amended Plan is necessary in order for us to (i) meet the stockholder approval requirements of The NASDAQ Stock Market, or NASDAQ, (ii) take tax deductions for certain compensation resulting from awards granted under the Amended Plan that may be intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code and (iii) grant incentive stock options, or ISOs, under the Amended Plan. Under our current practice, we no longer grant ISOs, although we may choose to grant ISOs in the future.
Specifically, approval of the Amended Plan will constitute approval of the performance criteria set forth in the Amended Plan pursuant to the stockholder approval requirements of Section 162(m) of the Internal Revenue Code, which will enable us to award performance-based compensation within the meaning of Section 162(m) through our 2018 annual meeting of stockholders, preserving the deductibility of these awards for federal income tax purposes. In addition, approval of the Amended Plan will constitute approval pursuant to the stockholder approval requirements of Section 422 of the Internal Revenue Code relating to ISOs.
Compensation and Governance Best Practices
The Amended Plan authorizes the grant of equity-based compensation in the form of restricted stock units, performance-based awards, dividend equivalents, stock options, stock appreciation rights, restricted stock, stock payments and deferred stock awards, as well as cash-based awards, for the purpose of providing the members of our Board and our employees and consultants compensation, incentives and rewards for performance. Similar to the 2009 Plan, the Amended Plan both continues and enhances a broad range of compensation and governance best practices, with some of the key features as follows:
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Significant Historical Award Information
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Key Historical Equity Metrics
Our gross burn rate has decreased over the last three fiscal years.
While our net burn rate has increased over the last year, the increase is largely attributable to stock repurchases (net of issuances under our stock-based compensation plans), which have reduced outstanding shares of Common Stock by approximately 24% since 2009 and approximately 5% in 2012.
Based on our historical usage and presuming stockholder approval of this proposal, we estimate that the shares reserved for issuance under the Amended Plan would be sufficient for approximately five to six years, assuming we continue to grant awards consistent with our historical usage and current practices, and noting that future circumstances or market or other conditions may result in a different outcome.
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The following table shows how the key equity metrics have changed over the past three fiscal years under the 2009 Plan:
| Key Equity Metrics | 2012 | 2011 | 2010 |
3-Year Average (2010-2012) | ||||
| Shares subject to awards granted during year, counted on 1:1 basis (1) | 6.95 million | 8.80 million | 11.75 million | 9.17 million | ||||
| Shares subject to awards granted during year, counted using fungible share counting formula (2) | 13.15 million | 14.68 million | 16.31 million | 14.71 million | ||||
Gross burn rate during year (3) | 0.90% | 0.97% | 1.23% | 1.03% | ||||
Net burn rate during year (4) | 0.62% | -0.24% | 0.19% | 0.19% | ||||
Dilution at end of year (5) | 8.12% | 10.81% | 11.20% | 10.04% | ||||
Overhang at end of year (6) | 3.65% | 5.95% | 6.30% | 5.30% |
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Background for the Current Request to Increase the Share Reserve
In its determination to recommend that the Board approve the Amended Plan, the Compensation Committee reviewed the analysis prepared by Frederick W. Cook & Co., Inc., or Cook & Co., its independent compensation consultant, the foregoing burn rate, dilution and overhang metrics, peer group market practices and trends, and the cost of the Amended Plan, including the estimated shareholder value transfer cost. The Compensation Committee and the Board also considered that stockholder approval of the 2009 Plan would be required no later than the date of our 2014 annual meeting of stockholders for the Compensation Committee to have discretion to grant awards, including our performance units, which may be intended to qualify as performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code, preserving the deductibility of such performance-based awards for federal income tax purposes.
SUMMARY OF THE AMENDED PLAN
Equity-based compensation has been a major component of our compensation programs. Our Board believes that our capacity to grant equity-based compensation has been a significant factor in our ability to achieve our growth objectives and enhance stockholder value. The principal features of the Amended Plan are summarized below, but the summary is qualified in its entirety by reference to the Amended Plan itself. The Amended Plan is attached to this proxy statement asAppendix C. You are encouraged to read the Amended Plan in its entirety.
Purpose
The purpose of the Amended Plan is to promote our success and enhance our value by linking the individual interests of the members of our Board, our employees and our consultants to those of our stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to our stockholders. The Amended Plan is further intended to provide us flexibility in our ability to motivate, attract, and retain the services of members of our Board, our employees, and our consultants upon whose judgment, interest, and special effort the successful conduct of our operation is largely dependent. The Amended Plan is designed to enable us to grant performance-based equity and cash awards that may be intended to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code.
Size of Share Pool; Limitation on Awards and Shares Available
As of March 1, 2013, there are 47,033,953 total shares remaining available for issuance under the 2009 Plan, subject to the replenishment provisions described below. If our stockholders approve the Amended Plan, the number of shares reserved for issuance will be increased by 17,100,000 authorized shares.
As of its effective date of May 6, 2009, the 2009 Plan authorizes the issuance of 87,180,107 shares of our Common Stock, subject to the replenishment provisions described below.(1) After our stockholders approved the 2009 Plan on May 6, 2009, the following equity plans, or Prior Plans, were terminated as to future awards: the Amgen Inc. Amended and Restated 1991 Equity Incentive Plan; the Amgen Inc. Amended and Restated 1999 Equity Incentive Plan; the Amgen Inc. Amended and Restated 1999 Incentive Stock Plan; the Amgen Limited Sharesave Plan; the Amgen Limited 2000 U.K. Company Employee Share Option Plan and the Amgen Technology Ireland Irish Tax Approved Share Plan.
Similar to the 2009 Plan, shares that are subject to awards of stock options or stock appreciation rights granted under the Amended Plan will be counted against this limit as one (1) share for every one (1) share granted, and shares that are subject to full value awards will be counted against this limit as 1.9 shares for every one (1) share granted.
Subject to certain permitted adjustments, the number of shares authorized for grant as ISOs will be no more than the total number of shares authorized for grant under the Amended Plan. The shares of our Common Stock covered by the Amended Plan may be treasury shares, authorized but unissued shares, or shares purchased in the open market.
Replenishment Provisions. Consistent with the 2009 Plan, the Amended Plan provides that if (i) any shares subject to an award under the Amended Plan are forfeited or expire or an award under the Amended Plan is settled for cash or (ii) any shares subject to an award granted after December 31, 2008 under any Prior Plan are forfeited or expire or an award under any Prior Plan is settled for cash, then any shares subject to such award may, to the extent of such forfeiture, expiration or cash settlement, be used again for new grants under the Amended Plan. Each share subject to any such forfeited or expired stock option or stock appreciation right is
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added back as one (1) share to the share pool, while each such share subject any such forfeited or expired full value award is added back as 1.9 shares to the share pool.
Any shares tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any stock option or stock appreciation right, any shares subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right on its exercise, and any shares purchased on the open market with the cash proceeds from the exercise of stock options, either under any of the Prior Plans or the Amended Plan, may not be used again for new grants.
The Amended Plan amends the 2009 Plan to add the following to the share pool on the basis of 1.9 shares for each such share tendered, withheld or purchased: (i) any shares tendered or withheld to satisfy the tax withholding obligation pursuant to any full value award and (ii) certain restricted shares repurchased by us at the same price paid by the holder of such shares and returned to us.
Consistent with the 2009 Plan, awards, or Substitute Awards, granted under the Amended Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by an entity in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock (but not awards made in connection with the cancellation and repricing of a stock option or stock appreciation right) will not reduce the shares authorized for grant under the Amended Plan. In the event that a company acquired by us or any of our subsidiaries or affiliates or with which we combine or any of our subsidiaries or affiliates combine has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, or Pre-existing Plan Shares, such Pre-existing Plan Shares may be used for awards under the Amended Plan and will not reduce the shares authorized for grant under the Amended Plan. However, awards using Pre-existing Plan Shares will not be made after the date that awards could have been made under the terms of the pre-existing plan, absent the acquisition or combination. In addition, we can only use Pre-existing Plan Shares for awards to individuals who were not employed by or providing services to us or any of our subsidiaries or affiliates immediately prior to such acquisition or combination.
Limitations on Awards. The maximum number of shares of our Common Stock that may be subject to one or more awards granted to any one participant pursuant to the Amended Plan during any calendar year is 4,000,000 and the maximum amount that may be paid in cash to any one participant during any calendar year with respect to any performance-based award is $15,000,000. These limits are the same as those in the 2009 Plan.
Unless and until our stockholders approve the Amended Plan, we will continue making grants under the terms and conditions of the 2009 Plan with respect to the approximately 47,033,953 shares remaining available for issuance under the 2009 Plan as of March 1, 2013.
Administration
The Compensation Committee generally is the administrator of the Amended Plan. Unless otherwise determined by our Board, the Compensation Committee consists solely of two or more directors appointed by our Board, each of whom is an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code, a “non-employee director” within the meaning of the rules under Section 16 of the Securities Exchange Act of 1934, as amended, and an “independent director” under the rules of the NASDAQ (or other principal securities market on which shares of our Common Stock are traded). The Compensation Committee may delegate to a committee of one or more members of our Board or one or more of our officers the authority to grant or amend awards to participants other than: (i) our senior executives who are subject to Section 16 of the Exchange Act; (ii) employees who are “covered employees” within the meaning of Section 162(m) of the Internal Revenue Code; (iii) a member of our Board or (iv) an officer to whom authority has been delegated under the Amended Plan to grant or amend awards. Consistent with this delegation authority, the Equity Award Committee (consisting of members of the Board) has been delegated the authority to administer the Amended Plan with respect to awards granted to certain non-key employees, and the Compensation Committee has authority to administer the Amended Plan to all other eligible employees.
The Board, acting by a majority of its members in office, has authority to administer the Amended Plan with respect to awards granted to non-employee members of our Board. References to Administrator in the
remainder of this Item 4 will mean, as applicable, the full Board, the Compensation Committee or the Equity Award Committee as the entity to which the administration of the Amended Plan has been delegated within the limits described in the Amended Plan. Unless otherwise limited by the Board or applicable law, the Administrator has the authority to administer the Amended Plan with respect to grants of equity awards, including the power to determine eligibility, the types and sizes of awards, the price and timing of awards and the acceleration or waiver of any vesting restriction, as well as the authority to delegate such administrative responsibilities.
Eligibility
Persons eligible to participate in the Amended Plan are all of our non-employee members of our Board (currently thirteen members) and approximately 18,000 worldwide employees and approximately 1,300 worldwide consultants of Amgen and its subsidiaries and affiliates, as determined and selected by the Administrator.
Awards
The Amended Plan provides for the grant of restricted stock units, performance-based awards, dividend equivalents, nonqualified stock options, ISOs, restricted stock, stock appreciation rights, stock payments and deferred stock awards. Award agreements evidencing the following awards may also contain additional terms and conditions relating to such awards.
Restricted stock units may be granted pursuant to the Amended Plan. A restricted stock unit award provides for the issuance of our Common Stock at a future date upon the satisfaction of specific conditions set forth in the applicable award agreement. The Administrator will specify the dates on which the restricted stock units will become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate, including conditions based on achieving one or more of the performance criteria listed below, or other specific criteria, including service to us or any of our subsidiaries or affiliates. A holder of restricted stock units will not have voting rights or dividend rights prior to the time when the vesting conditions are satisfied and the shares of Common Stock are issued. Restricted stock units generally will be forfeited and the underlying shares of our Common Stock will not be issued, if the applicable vesting conditions are not met. The Administrator will specify, or permit the restricted stock unit holder to elect, the conditions and dates upon which the shares underlying the vested restricted stock units will be issued (subject to compliance with the deferred compensation requirements of Section 409A of the Internal Revenue Code). Restricted stock units may be paid in cash, shares, or both, as determined by the Administrator. On the distribution dates, we will transfer to the participant one unrestricted, fully transferable share of our Common Stock (or the fair market value of one such share in cash) for each restricted stock unit scheduled to be paid out on such date and not previously forfeited. Restricted stock units may constitute, or provide for a deferral of compensation, subject to Section 409A of the Internal Revenue Code and there may be certain tax consequences if the requirements of Section 409A of the Internal Revenue Code are not met.
Performance awards may also be granted pursuant to the Amended Plan. Performance awards may be granted in the form of cash bonus awards, stock bonus awards, performance awards or incentive awards that are paid in cash, shares or a combination of both. The value of performance awards may be linked to any one or more of the performance criteria listed below, or other specific criteria determined by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Performance awards may be payable upon the attainment of pre-established performance goals based on one or more of the performance criteria listed below, or other specific criteria determined by the Administrator. The goals are established and evaluated by the Administrator and may relate to performance over any periods as determined by the Administrator. The Administrator will also determine whether performance awards are intended to be performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code, as discussed below. Following is a brief discussion of the requirements for awards to be treated as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code.
Performance-based compensation under Section 162(m). The Compensation Committee may grant awards to employees who are or may be “covered employees,” as defined in Section 162(m) of the Internal Revenue Code, that may be intended to be performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code in order to preserve the deductibility of these awards for federal income tax purposes. Under the Amended Plan, these performance-based awards may be either equity or cash awards or a combination of the two. Participants are only entitled to receive payment for a Section 162(m) performance-based award for any given performance period to the extent that pre-established performance goals set by our Compensation Committee for the period are satisfied.
Performance Goals.These pre-established performance goals must be based on one or more of the following performance criteria, which reflect the elimination of certain performance criteria previously approved under the 2009 Plan:
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Any of the pre-established performance goals may be measured with respect to us, or any subsidiary, affiliate or other internal unit of ours, either in absolute terms, terms of growth or as compared with any incremental increase, or as compared with results of a peer group. The Administrator will define in an objective fashion the manner of calculating the performance criteria it selects to use for such awards. With regard to a particular performance period, the Administrator will have the discretion to select the length of the performance period, the type of performance-based awards to be granted, and the performance goals that will be used to measure the performance for the period. In determining the actual size of an individual performance-based award for a performance period, the Administrator may reduce or eliminate (but not increase) the initial award. Generally, a participant will have to be employed by or providing services to us on the date the performance-based award is paid to be eligible for a performance-based award for any period.
Permitted Items of Adjustment. Except as provided by the Administrator, the achievement of each performance goal will be determined in accordance with U.S. generally accepted accounting principles, international financial reporting standards, or such other accounting principles or standards as may apply to our financial statements under the U.S. federal securities laws from time to time, to the extent applicable. At the time of grant, the Administrator may provide that objectively determinable adjustments will be made for purposes of determining the achievement of one or more of the performance goals established for an award. Any such adjustments will be based on one or more of the following items related to:
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Dividend equivalents mayItem 4
Stockholder Proposal
A stockholder and co-filer have informed the Company that they intend to present the proposal set forth below at our 2015 Annual Meeting of Stockholders, or Annual Meeting. If the stockholder (or its “qualified representative” as determined under our Amended and Restated Bylaws) is present at the Annual Meeting and properly submits the proposal for a vote, then the stockholder proposal will be granted pursuant tovoted upon at the Amended Plan, except that no dividend equivalents may be payableAnnual Meeting.
In accordance with respect to stock options or stock appreciation rights pursuant to the Amended Plan. A dividend equivalentFederal securities laws, the stockholder proposal and supporting statement is the right to receive the equivalent value of dividends paid on shares. Dividend equivalents that are grantedpresented below as submitted by the Administrator are credited asstockholder and is quoted verbatim and is in italics. The Company disclaims all responsibility for the content of dividend payments dates during the period between the date an award is grantedproposal and the date such award vests, is exercised, is distributed or expires, as determined bysupporting statement, including other sources referenced in the Administrator. Such dividend equivalents will be converted to cash or additionalsupporting statement.
FOR THE REASONS STATED IN THE BOARD’S RESPONSE, WHICH FOLLOWS THE STOCKHOLDER PROPOSAL, THE BOARD STRONGLY AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE “AGAINST” THE STOCKHOLDER PROPOSAL.
Stockholder Proposal
Michael Burke Stansbury and Francie Rutherford, each owner of a purported 50 shares of our Common Stock by such formula,as of December 9, 2014, appointing Investor Voice, SPC as their representative, with an address of 10033 12th Avenue NW, Seattle, WA 98177, have notified us of their intention to submit the following proposal at such time and subject to such limitations as may be determined by the Administrator.
Consistent with the termsour Annual Meeting. Walden Asset Management, owner of our outstanding performance units that provide for dividend equivalents, the Amended Plan amends the 2009 Plan to require that dividend equivalents with respect to an award with performance-based vesting will only be paid out to the holder to the extent that the performance-based vesting conditions are satisfied and the award vests.
Stock options,including ISOs, as defined under Section 422 of the Internal Revenue Code, and nonqualified stock options may be granted pursuant to the Amended Plan. The exercise price of all stock options granted pursuant to the Amended Plan will not be less than 100% of the fair market value of our Common Stock on the date of grant. In general, the fair market value will be the closing sales price for a sharepurported 25,636 shares of our Common Stock as quoted onof December 3, 2014, has notified us that they are co-filing the NASDAQ onproposal.
RESOLVED: Shareholders of Amgen, Inc. (“Amgen”) hereby request the dateBoard of grant,Directors to initiate the steps necessary to amend Amgen’s governing documents to provide that all matters presented to shareholders, other than the election of directors, shall be decided by a simple majority of the shares voted FOR and AGAINST an item. This policy shall apply to all such matters unless shareholders have approved higher thresholds, or applicable laws or stock exchange regulations dictate otherwise.
SUPPORTING STATEMENT:
This proposal is needed because Amgen counts votes two different ways in its proxy – a practice we feel is confusing, inconsistent, does not fully honor voter intent, and harms shareholder best-interest.
Vote Calculation Methodologies, a CalPERS / GMI Ratings report, studied companies in the S&P 500 and Russell 1000 and found that 48% employ simple majority vote-counting as requested by this Proposal. See http://www.calpers-governance.org/docs-sof/provyvoting/calpers-russell-1000-vote-caculation-methodology-final-v2.pdf
Recently, Cardinal Health, ConAgra Foods, Plum Creek Timber, and Smucker’s each implemented the request of this Proposal.
The Securities and Exchange Commission dictates a specific vote-counting formula for the purpose of establishing eligibility for resubmission of shareholder-sponsored proposals. This formula – which we will call the “Simple Majority Vote” – is the votes cast FOR, divided bytwo categories of vote, the:
| • | FOR votes, plus |
| • | AGAINST votes. |
However, Amgen does not uniformly follow theSimple Majority Vote. With respect to adopting a shareholder-sponsored proposal (versus determining its eligibility for resubmission), Amgen’s proxy states that abstentions “will have the same effect as of March 1, 2013 was $92.58. Stock options may vest and become exercisable asvotes against”.
Thus, results are determined by the Administrator,votes cast FOR a proposal, divided by not two, butthree categories of vote:
| • | FOR votes, |
| • | AGAINST votes, plus |
| • | ABSTAIN votes. |
At the same time as Amgen applies this more restrictive formula thatincludes abstentions to shareholder-sponsored items (and other management ones), it employs the Simple Majority Vote andexcludes abstentions for management’s Proposal 1 (in uncontested director elections), saying they “will not count”.
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These practices boost the appearance of support for management’s Proposal 1, but depress the calculated level of support for other items – including every shareholder proposal.
Invariably, abstaining voters havenot followed a Board’s typical recommendation to vote AGAINST every shareholder-sponsored item. Despite this, Amgen counts every abstain vote – without exception – as if the voter agreed with the Board’s AGAINST recommendation.
In our view, Amgen’s use of two vote-counting formulas is confusing, inconsistent, does not fully honor voter intent, and harms shareholder best-interest.
Therefore, please vote FOR good governance andSimple Majority Voting at Amgen.
~ ~ ~
Board Response to the Stockholder Proposal
The Board of Directors recommends a vote “AGAINST” the Stockholder Proposal for the following reasons:
Our Board of Directors has considered this proposal and has concluded that it is not in no event may a stock option have a term extending beyond the tenth anniversarybest interests of the dateCompany or its stockholders to adopt the proponent’s vote-counting methodology.
Our stockholder approval standard and vote counting methodology of grant. ISOs grantedincluding abstentions adheres to any person who owns, asDelaware law. The Company is incorporated in the State of Delaware and, therefore, Delaware law governs the date of grant, stock possessing more than 10% of the total combined voting power of all classes of our stock, however, will have an exercise price that is not less than 110% of the fair market value of our Common Stock on the date of grant and may not have a term extending beyond the fifth anniversary of the date of grant. The aggregate fair market value of the shares with respect to which stock options intended to be ISOs are exercisablestandards for the first time by an employee in any calendar year may not exceed $100,000, or such other amount as Section 422 of the Internal Revenue Code provides.
Restricted stock may be granted pursuant to the Amended Plan. A restricted stock award is the grant of shares of our Common Stock at a price determinedaction by the Administrator, if any,Company’s stockholders. The required vote for action by the Company’s stockholders follows the default approval standard for stockholder action under Delaware law. The Company’s Amended and which is nontransferable and may be subject to substantial riskRestated Bylaws provide that, except in the election of forfeiture until specific conditions are met. Conditions may be based on continuing service to us or any of our subsidiaries or affiliates or achieving one or more of the performance criteria listed below, or other specific criteria. During the period of restriction, participants holding shares of restricted stock have full voting and dividend rights with respect to such shares unlessdirectors, as otherwise provided by the Administrator. Restricted stock generally may be repurchasedCompany’s governing documents or required by us atapplicable laws, rules and regulations, when a quorum is present, the original purchase price, ifaffirmative vote of the holders of a majority of the shares present (in person or by proxy) and entitled to vote is required to approve any or forfeited, ifmatter brought before a stockholder meeting. We believe the vesting conditionsmajority of Delaware corporations adhere to the same default voting standard.
Under Delaware law, abstention votes are considered shares “entitled to vote.” Accordingly, in the vote tabulation for matters that require the affirmative vote of the majority of the shares present and other restrictionsentitled to vote, abstentions are not met.included in the numerator (because they are not affirmative votes), but are included in the denominator as shares entitled to vote. Therefore, abstentions under this standard have the same practical effect as a vote “against” a proposal.
Our vote counting methodology applies identically to management-sponsored proposalsand stockholder proposals. In its supporting statement, the proponent focuses on the effect that counting abstentions has on stockholder proposals. As disclosed in this proxy statement, abstention votes are included in the vote count for each of these management-sponsored proposals and have the same practical effect as a vote against them. This vote count standard does not favor these management-sponsored proposals over the stockholder proposals. Both are treated equally.
Our Board of Directors believes that since stockholders are made aware of the treatment and effect of abstentions, counting abstention votes effectively honors the intent of our stockholders.Stockholders typically have three voting choices for a particular proposal: for; against and abstain. In the proxy statement for the annual meeting, the Company discloses the vote required to approve each proposal, and also describes how abstentions will be counted in the vote tabulation and the effect of abstentions on the outcome of a matter. The restrictionsCompany’s stockholders are informed that if they vote “abstain” on a proposal other than the election of directors, their vote will lapsehave the same practical effect as an “against” vote, and the Board believes that counting abstention votes effectively honors the intent of the Company’s stockholders. If a stockholder elects to abstain on a matter, the Board believes that the stockholder recognizes the impact of the vote and expects it to be included in accordancethe vote count.
Furthermore, the Board believes that abstentions serve a worthwhile purpose. The proponent of an item of business,
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| ITEM 4 — STOCKHOLDER PROPOSAL |
be it management or a stockholder, bears the burden of persuading a majority of stockholders to affirmatively vote in favor of the item. Consistent with a scheduleconversations we have had with some of our stockholders, the proponent’s own cited source recognizes the value of abstentions, noting, “that some institutional investors abstain on shareholder proposals when they wish to convey support for the general subject matter, but have reservations about the specific action requested.”(1) We therefore do not believe it would be in our stockholders’ best interest or other conditions determined byeffective corporate governance to disregard these views.
Our Board of Directors believes that lowering the Administrator.
approval standard for proposals would be poor corporate governance.The Amended Plan amends the 2009 Plan to provideproponent requests that dividends payable in connection with restricted stock with performance-based vesting will onlyabstentions be paid outignored for all matters presented to the holder toCompany’s stockholders. Ignoring abstention votes would lower the extentapproval standard and at the time that the performance-based vesting conditions are satisfied and the share of restricted stock vests.
Stock appreciation rights may be granted pursuant to the Amended Plan. A stock appreciation right entitles its holder, upon exercise of all or a portion of the stock appreciation right, to receive from us an amount determined by multiplying the difference obtained by subtracting the exercise price per share of the stock appreciation right from the fair market value on the date of exercise of the stock appreciation right by the number of shareseffectively make approval easier. Except with respect to which the stock appreciation rightelection of directors and matters that require, statutorily or otherwise, a different vote, the Board believes that a proposal—whether management-sponsored or stockholder-sponsored—should receive more “for” votes than the sum of “against” and “abstain” votes in order to constitute approval by the Company’s stockholders. Moreover, the proponent’s argument of using the “SEC Standard” of excluding abstentions in vote tabulations is based on the SEC’s vote-counting rules for determining whether a stockholder may resubmit a proposal for inclusion in a company’s proxy statement. These rules do not govern whether a stockholder proposal has been exercised, subject to any limitations imposedapproved by the Administrator. The exercise price per share subject to a stock appreciation right will be set by the Administrator, but may not be less than 100% of the fair market value on the date the stock appreciation right is granted. The Administrator determines the period during which the right to exercise the stock appreciation right vests in the holder, but in no event may a stock appreciation right have a term extending beyond the tenth anniversary of the date of grant. No portion of a stock appreciation right which is unexercisable at the time the holder’s employment with us terminates will thereafter become exercisable, except asstockholders. It may be otherwise provided bythat in this limited context the Administrator. Payment ofSEC
wished to set a lower bar to enable stockholders to more easily resubmit proposals. However, in other contexts, the stock appreciation right may be in cash, shares, orSEC promotes voting standards similar to ours. For instance, the SEC expressly requires a combination of both, as determined by the Administrator.
Stock payments may be granted pursuant to the Amended Plan. A stock payment is a payment in the form of shares of our Common Stock or a stockproxy to include an abstention option or other right to purchase shares, as part of a bonus, deferred compensation or other arrangement. The number or value of shares of any stock payment will be determined by the Administrator and may be based on continuing service with us or any of our subsidiaries or affiliates or achieving one or more of the performance criteria listed below, or other specific criteria determined by the Administrator. Except as otherwise determined by the Administrator, shares underlying a stock payment which is subject to a vesting schedule or other conditions set by the Administrator will not be issued until those conditions have been satisfied. Stock payments may, but are not required to, be made in lieu of base salary, bonus, fees or other cash compensation otherwise payable to any individual who is eligible to receive awards.
Deferred stock may be granted pursuant to the Amended Plan. Deferred stock is a right to receive shares of our Common Stock. The number of shares of deferred stock will be determined by the Administrator and may be based on continuing service with us or any of our subsidiaries or affiliates or achieving one or more of the performance criteria listed below, or other specific criteria determined by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Except as otherwise determined by the Administrator, shares underlying a deferred stock award which is subject to a vesting schedule or other conditions set by the Administrator will not be issued until those conditions have been satisfied. Deferred stock may constitute, or provide for a deferral of compensation, subject to Section 409A of the Internal Revenue Code and there may be certain tax consequences if the requirements of Section 409A of the Internal Revenue Code are not met.
Payment Methods. The Administrator will determine the methods by which payments by any award holder with respect to any awards granted under the Amended Plan may be paid, the form of payment, including, without limitation: (i) cash or check; (ii) shares of our Common Stock issuable pursuant to the award (net share settlement) or shares held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences and having a fair market valueadvisory vote on the datefrequency of delivery equal toadvisory vote on executive compensation. The Board believes that it would not be effective corporate governance or serve the aggregate
payments required; (iii) other property acceptable to the Administrator (including through the delivery of a notice that the award holder has placed a market sell order with a broker with respect to shares of our Common Stock then issuable upon exercise or vesting of an award, and that the broker has been directed to pay a sufficient portionbest interests of the net proceedsCompany’s stockholders to take one voting standard that an organization applies to a specific context and adopt that standard universally.
Faced with similar proposals in 2014, stockholders overwhelmingly did not support the adoption of the sale to usproposed vote counting methodology. In 2014, three companies included a similar proposal from Investor Voice in satisfactiontheir 2014 annual meeting proxy statements. Each of the aggregate payments required; provided that payment of such proceeds is then made to us upon settlement of such sale) or (iv) other form of legal consideration acceptable to the Administrator. However, no participant who is a member of our Board or an “executive officer” of Amgen within the meaning of Section 13(k) of the Exchange Act will be permitted to make payment with respect to any awards granted under the Amended Plan, or continue any extension of credit with respect to such payment in any method which would violate the prohibitions on loans made or arranged by us as set forth in Section 13(k) of the Exchange Act. Only whole shares of Common Stock may be purchased or issued pursuant to an award. No fractional shares will be issued and the Administrator will determine, in its sole discretion, whether cash will be given in lieu of fractional shares or whether such fractional shares will be eliminated by rounding down.
Vesting and Exercise of an Award. The applicable award agreement governing an award will contain the period during which the right to exercise the award in whole or in part vests, including the events or conditions upon which the vesting of an award will occur or may accelerate. No portion of an award which is not vested at the holder’s termination of service with us will subsequently become vested, except as may be otherwise provided by the Administrator in the agreement relating to the award or by action following the grant of the award.
Generally, a stock option or stock appreciation right may only be exercised while such person remains an employee, consultant or non-employee director of us or one of our subsidiaries or affiliates or for a specified period of time (up to the remainder of the award term) following the holder’s termination of service with us or one of our subsidiaries or affiliates. An award may be exercised for any vested portion of the shares subject to such award until the award expires. Upon the grant of an award or following the grant of an award, the Administrator may provide that the period during which the award will vest or become exercisable will accelerate, in whole or in part, upon the occurrence of one or more specified events, including, a change in control or a holder’s termination of employment or service with us or otherwise.
Authority Permitting Automatic Exercise Feature for Certain “In-The-Money” Stock Options and Stock Appreciation Rights. The Amended Plan amends the 2009 Plan to clarify that the Administrator, in its sole discretion, may provide in an award agreement or otherwise that any stock option or stock appreciation right outstanding on the last business day of the term of such stock option or stock appreciation right, or the automatic exercise date, with an exercise price per share that isthose proposals received less than 13% support from stockholders. The proponent’s supporting statement claims that ConAgra Foods has implemented the fair market value per sharerequest of this proposal yet ConAgra Food’s 2014 annual meeting proxy statement proposal on this topic received just 12.6% of its stockholders’ support and we have found no evidence in public filings that ConAgra Foods has indeed implemented the subject of this proposal. Additionally, Investor Voice failed to attend our 2014 Annual Meeting of Stockholders to properly present the proposal and so it was not properly placed before the meeting. However, had it been presented, based on voting information as of such date will automatically and without further action by us or the holder (or in the event of holder’s death, holder’s personal representative or estate) be exercised on the automatic exercise date if the Administrator, in its sole discretion, determines that such exercise would provide economic benefit to the award holder after payment of the exercise price, applicable taxes and any expenses to effect the exercise. In its sole discretion, the Administrator will determine how payment of the exercise price of any such stock option or stock appreciation right may be made in accordance with the Amended Plan, and we may deduct or withhold an amount sufficient to satisfy all taxes associated with such exercise in accordance with the Amended Plan. Unless otherwise determined by the Administrator, this automatic exercise feature will not apply to a stock option or stock appreciation right if the holder thereof incurs a termination of service on or before the automatic exercise date.
Transferability. No award under the Amended Plan may be transferred other than by will or the then applicable laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a domestic relations order, unless and until such award has been exercised or the shares underlying such award have been issued and all restrictions applicable to such shares have lapsed. No award will be liable for the debts or contracts of the holder or his successors in interest or will be subject to disposition by any legal or equitable proceedings. During the lifetime of the holder of an award granted under the Amended Plan, only such holder may exercise such award unless it has been disposed of pursuant to a domestic relations order. After the holder’s death, any exercisable portion of an award may be exercised by his personal representative or any person empowered to do so under such holder’s will or the then applicable laws of descent and distribution until such portion becomes
unexercisable under the Amended Plan or the applicable award agreement. Notwithstanding the foregoing, the Administrator may permit an award holder to transfer an award other than an ISO to any “family member” of the holder, as defined under the instructions to use of the Form S-8 Registration Statement under the Securities Act of 1933, subject to certain terms and conditions. Further, an award holder may, in a manner determined by the Administrator, designate a beneficiary to exercise the holder’s right and to receive any distribution with respect to any award upon the holder’s death, subject to certain terms and conditions.
Forfeiture
To the extent permitted by law, the Administrator has the right to provide, in the terms of programs or awards made under the Amended Plan or any clawback or recoupment policy, or by any separate instrument, that, in the event of financial restatements, the occurrence of other events that are inconsistent with the payment of compensation, or to comply with the requirements of applicable law, including but not limited to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, any proceeds, gains or other economic benefit actually or constructively received by the holder of an award upon any receipt or exercise of the award, or upon the receipt or resale of any shares underlying the award, must be paid to us, and the award will terminate and any unexercised portion of the award (whether or not vested) will be forfeited, if (i) the holder’s service is terminatedimmediately prior to a specified date or for “cause,” (ii) the holder engages in any activity in competition with us or which is inimical, contrary or harmful to our interests, (iii) our financial results are materially restated and such proceeds, gains or other economic benefit actually or constructively received by the holdermeeting, it would have been lower had they been calculated based on such restated results or (iv) any other reason required under applicable law.
Adjustment Provisions
Certain transactions withreceived very low support (approximately 5.4%) from our stockholders not involving our receipt of consideration, such as stock splits, spin-offs, stock dividends or certain recapitalizations may affect the shares or the share price of our Common Stock (which transactions are referred to collectively as equity restructurings). In the event that an equity restructuring occurs, the Administrator will equitably adjust the class of shares issuable and the maximum number and kind of shares of our Common Stock subject to the Amended Plan, and will equitably adjust outstanding awards as to the class, number of shares and price per share of our Common Stock. Other types of transactions may also affect our Common Stock, such as a dividend or other distribution, reorganization, merger or other changes in corporate structure. In the event that there is such a transaction, which is not an equity restructuring, and the Administrator determines that an adjustment to the Amended Plan and any outstanding awards would be appropriate to prevent any dilution or enlargement of benefits under the Amended Plan, the Administrator will equitably adjust the Amended Plan as to the class of shares issuable and the maximum number of shares of our Common Stock subject to the Amended Plan, as well as the maximum number of shares that may be issued to an employee during any calendar year, and will adjust any outstanding awards as to the class, number of shares, and price per share of our Common Stock in such manner as it may deem equitable.stockholders.
Amendment and Termination
The Board may terminate, amend or modify the Amended Plan at any time; however, except to the extent permitted by the Amended Plan in connection with certain transactions and changes in capital structure, stockholder approval must be obtained for any amendment to (i) increase the number of shares available under the Amended Plan, (ii) reduce the per share exercise price of the shares subject to any stock option or stock appreciation right below the per share exercise price as of the date the stock option or stock appreciation right was granted, (iii) cancel any stock option or stock appreciation right in exchange for cash or another award when the stock option or stock appreciation right price per share exceeds the fair market value of the underlying shares, except with respect to any Substitute Award or (iv) increase the participant award limits under the Amended Plan.
Material U.S. Federal Income Tax Consequences
If an optionee is granted a non-qualified stock option under the Amended Plan, the optionee should not have taxable income on the grant of the stock option. Generally, the optionee should recognize ordinary income at the time of exercise in an amount equal to the fair market value of a share of our Common Stock at such time, less the exercise price paid. The optionee’s basis in the Common Stock for purposes of determining gain or loss on a subsequent sale or disposition of such shares generally will be the fair market value of our Common Stock on the date the optionee exercises such stock option. Any subsequent gain or loss will be taxable as a capital gain or loss. We or our subsidiaries or affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount as the optionee recognizes ordinary income.
A participant receiving ISOs should not recognize taxable income upon grant. Additionally, if applicable holding period requirements are met, the participant should not recognize taxable income at the time of exercise. However, the excess of the fair market value of our Common Stock received over the stock option price is an item of tax preference income potentially subject to the alternative minimum tax. If stock acquired upon exercise of an ISO is held for a minimum of two years from the date of grant and one year from the date of exercise, the gain or loss (in an amount equal to the difference between the fair market value on the date of sale and the exercise price) upon disposition of the stock will be treated as a long-term capital gain or loss, and we will not be entitled to any deduction. If the holding period requirements are not met, the ISO will be treated as one that does not meet the requirements of the Internal Revenue Code for ISOs and the tax consequences described for nonqualified stock options will apply.
The current federal income tax consequences of other awards authorized under the Amended Plan generally follow certain basic patterns: stock appreciation rights are taxed and deductible in substantially the same manner as nonqualified stock options; nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid, if any, only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); restricted stock units, stock-based performance awards, dividend equivalents and other types of awards are generally subject to tax at the time of payment, vesting or settlement based on the fair market value of the award on that date. Compensation otherwise effectively deferred is taxed when paid. In each of the foregoing cases, we will generally have a corresponding deduction at the time the participant recognizes income, subject to Section 162(m) of the Internal Revenue Code with respect to covered employees.
Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code denies a deduction to any publicly held corporation for compensation paid to certain “covered employees” in a taxable year to the extent that compensation to such covered employee exceeds $1,000,000. It is possible that compensation attributable to awards under the Amended Plan, when combined with all other types of compensation received by a covered employee from us, may cause this limitation to be exceeded in any particular year.
Qualified “performance-based compensation” is disregarded for purposes of the deduction limitation. In accordance with Treasury Regulations issued under Section 162(m), compensation attributable to stock awards will generally qualify as performance-based compensation if (i) the award is granted by a compensation committee composed solely of two or more “outside directors,” (ii) the plan contains a per-employee limitation on the number of awards which may be granted during a specified period, (iii) the plan is approved by the stockholders and (iv) under the terms of the award, the amount of compensation an employee could receive is based solely on an increase in the value of the stock after the date of the grant (which requires that the exercise price of the stock option is not less than the fair market value of the stock on the date of grant), and for awards other than stock options, established performance criteria that must be met before the award actually will vest or be paid.
The Amended Plan is designed to meet the requirements of Section 162(m); however, awards other than stock options and stock appreciation rights granted under the Amended Plan will only be treated as qualified performance-based compensation under Section 162(m) if the awards and the procedures associated with them comply with all other requirements of Section 162(m). There can be no assurance that compensation attributable
to awards granted under the Amended Plan will be treated as qualified performance-based compensation under Section 162(m) and thus be deductible to us.
HISTORICAL PLAN BENEFITS
The following table sets forth summary information concerning the number of shares of our Common Stock subject to stock options, restricted stock units, performance units and dividend equivalents (rounded down to the nearest whole number) granted under the 2009 Plan since the plan’s inception through March 1, 2013.
| Name and Position | Shares Stock Option | Shares Restricted Stock | Shares Performance | Shares Dividend | ||||
Robert A. Bradway Chairman of the Board, President and Chief Executive Officer | 200,500 | 78,631 | 242,565 | 1,427 | ||||
Kevin W. Sharer Former Chairman of the Board and Former Chief Executive Officer | 528,500 | 114,433 | 320,080 | 609 | ||||
Anthony C. Hooper Executive Vice President, Global Commercial Operations | — | 87,866 | 186,287 | 589 | ||||
Jonathan M. Peacock Executive Vice President and Chief Financial Officer | 230,125 | 131,931 | 94,640 | 589 | ||||
Fabrizio Bonanni Former Executive Vice President, Operations | 139,125 | 76,454 | 111,621 | 589 | ||||
Sean E. Harper Executive Vice President, Research and Development | 53,000 | 51,731 | 92,537 | 589 | ||||
David J. Scott Senior Vice President, General Counsel and Secretary | 78,875 | 50,596 | 89,171 | 418 | ||||
All current executive officers as a group (8 persons) | 677,405 | 504,406 | 855,249 | 4,419 | ||||
| All current non-executive employee directors as a group (13 persons) | 240,000 | 52,563 | — | 481 | ||||
| All employees, including current officers who are not executive officers, as a group | 8,478,164 | 12,039,221 | 6,458,980 | 76,364 | ||||
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF OUR PROPOSED AMENDED AND RESTATED 2009 EQUITY INCENTIVE PLAN UNDER THIS ITEM 4.“AGAINST” THE STOCKHOLDER PROPOSAL.
| (1) | Vote Calculation Methodologies Report prepared for CalPERS by GMI Ratings, September 17, 2013 located at http://www.calpers-governance.org/docs-sof/provyvoting/calpers-russell-1000-vote-calculation-methodology-final-v2.pdf |
| SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS |
Security Ownership of Directors and Executive Officers
The following table sets forth certain information regarding the beneficial ownership of our Common Stock as of March 25, 201316, 2015 by: (i) each current director and nominee; (ii) our Named Executive Officers, or NEOs (as specified on page 51)39) and (iii) all of our current directors and executive officers as a group. There were 749,321,909757,913,499 shares of our Common Stock outstanding as of March 25, 2013.16, 2015. None of our directors, nominees, NEOs or executive officers, individually or as a group, beneficially owns greater than 1% of our outstanding shares of Common Stock.
| Amgen Inc. Common Stock(1)(2) | ||||||||||||
Beneficial Owner | Total Common Stock Beneficially Owned | Shares Acquirable Within 60 Days | Percent of Total | |||||||||
Non-Employee Directors and Nominees | ||||||||||||
David Baltimore | 60,526 | 30,000 | * | |||||||||
Frank J. Biondi, Jr. | 41,696 | 25,000 | * | |||||||||
François de Carbonnel | 38,589 | 30,000 | * | |||||||||
Vance D. Coffman | 56,518 | 45,000 | * | |||||||||
Robert A. Eckert | 0 | 0 | * | |||||||||
Rebecca M. Henderson | 36,421 | 36,421 | * | |||||||||
Frank C. Herringer(3) | 45,345 | 30,000 | * | |||||||||
Tyler Jacks | 45 | 0 | * | |||||||||
Gilbert S. Omenn | 197,320 | 25,000 | * | |||||||||
Judith C. Pelham | 46,304 | 25,000 | * | |||||||||
J. Paul Reason(4) | 17,401 | 0 | * | |||||||||
Leonard D. Schaeffer | 28,277 | 15,000 | * | |||||||||
Ronald D. Sugar | 30,000 | 30,000 | * | |||||||||
Named Executive Officers | ||||||||||||
Robert A. Bradway | 436,728 | 366,935 | * | |||||||||
Kevin W. Sharer(5) | 257,801 | 253,350 | * | |||||||||
Anthony C. Hooper | 52,874 | 0 | * | |||||||||
Jonathan M. Peacock | 138,807 | 110,905 | * | |||||||||
Fabrizio Bonanni(6) | 126,557 | 71,405 | * | |||||||||
Sean E. Harper | 42,832 | 27,185 | * | |||||||||
David J. Scott | 69,103 | 39,399 | * | |||||||||
All current directors and executive officers as a group (21 individuals)(7) | 1,468,250 | 906,560 | * | |||||||||
| Amgen Inc. Common Stock(1)(2) | ||||||||||||
| Beneficial Owner | Total Common Stock Beneficially Owned | Shares Acquirable Within 60 Days | Percent of Total | |||||||||
Non-Employee Directors and Nominees | ||||||||||||
David Baltimore | 51,159 | 20,000 | * | |||||||||
Frank J. Biondi, Jr. | 31,696 | 15,000 | * | |||||||||
François de Carbonnel | 22,051 | 5,000 | * | |||||||||
Vance D. Coffman | 48,709 | 20,000 | * | |||||||||
Robert A. Eckert | 0 | 20,000 | * | |||||||||
Greg C. Garland | 2,224 | 0 | * | |||||||||
Rebecca M. Henderson | 8,000 | 8,000 | * | |||||||||
Frank C. Herringer(3) | 44,467 | 20,000 | * | |||||||||
Tyler Jacks | 21,819 | 20,000 | * | |||||||||
Judith C. Pelham | 15,734 | 0 | * | |||||||||
Ronald D. Sugar | 30,000 | 30,000 | * | |||||||||
R. Sanders Williams | 309 | 0 | * | |||||||||
Named Executive Officers | ||||||||||||
Robert A. Bradway | 585,405 | 298,940 | * | |||||||||
Anthony C. Hooper | 177,141 | 3,016 | * | |||||||||
David W. Meline | 0 | 0 | * | |||||||||
Sean E. Harper | 123,812 | 42,056 | * | |||||||||
Madhavan Balachandran(4) | 87,755 | 24,155 | * | |||||||||
Michael A. Kelly(5) | 34,775 | 2,969 | * | |||||||||
Jonathan M. Peacock(6) | 46,124 | 0 | * | |||||||||
All current directors and executive officers as a group (22 individuals)(7) | 1,647,980 | 675,826 | * | |||||||||
| * | Less than 1%. |
| (1) | Information in this table is based on our records and information provided by directors, NEOs, executive officers and in public filings. Unless otherwise indicated in the footnotes and subject to community property laws, where applicable, each of the directors and nominees, NEOs and executive officers has sole voting and/or investment power with respect to such shares, including shares held in trust. |
ï 2015 Proxy Statement25
| SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS |
| (2) | Includes shares which the individuals shown have the right to acquire (a) upon vesting of restricted stock units, or RSUs, and related dividend equivalents (excluding fractional shares), where the shares are issuable as of March |
equivalents, for which receipt has been deferred by certain of the non-employee directors to a date later than 60 days after March |
Name | RSUs and Dividend Equivalents Included | Stock Options Included | RSUs and Dividend Equivalents Excluded | |||||||||
David Baltimore | 0 | 30,000 | 0 | |||||||||
Frank J. Biondi, Jr. | 0 | 25,000 | 11,239 | |||||||||
François de Carbonnel | 0 | 30,000 | 2,050 | |||||||||
Vance D. Coffman | 0 | 45,000 | 6,274 | |||||||||
Robert A. Eckert | 0 | 0 | 0 | |||||||||
Rebecca M. Henderson | 1,421 | 35,000 | 3,632 | |||||||||
Frank C. Herringer | 0 | 30,000 | 12,620 | |||||||||
Tyler Jacks | 0 | 0 | 0 | |||||||||
Gilbert S. Omenn | 0 | 25,000 | 4,504 | |||||||||
Judith C. Pelham | 0 | 25,000 | 0 | |||||||||
J. Paul Reason | 0 | 0 | 6,274 | |||||||||
Leonard D. Schaeffer | 0 | 15,000 | 3,080 | |||||||||
Ronald D. Sugar | 0 | 30,000 | 3,283 | |||||||||
Robert A. Bradway | 14,430 | 352,505 | 0 | |||||||||
Kevin W. Sharer | 40,425 | 212,925 | 0 | |||||||||
Anthony C. Hooper | 0 | 0 | 0 | |||||||||
Jonathan M. Peacock | 5,214 | 105,691 | 0 | |||||||||
Fabrizio Bonanni | 11,214 | 60,191 | 0 | |||||||||
Sean E. Harper | 4,255 | 22,930 | 0 | |||||||||
David J. Scott | 6,571 | 32,828 | 0 | |||||||||
| Name | RSUs and Dividend Equivalents Included | Stock Options Included | RSUs and Dividend Equivalents Excluded | |||||||||
David Baltimore | 0 | 20,000 | 0 | |||||||||
Frank J. Biondi, Jr. | 0 | 15,000 | 15,396 | |||||||||
François de Carbonnel | 0 | 5,000 | 2,125 | |||||||||
Vance D. Coffman | 0 | 20,000 | 8,419 | |||||||||
Robert A. Eckert | 0 | 20,000 | 3,741 | |||||||||
Greg C. Garland | 0 | 0 | 0 | |||||||||
Rebecca M. Henderson | 0 | 8,000 | 7,507 | |||||||||
Frank C. Herringer | 0 | 20,000 | 16,828 | |||||||||
Tyler Jacks | 0 | 20,000 | 1,828 | |||||||||
Judith C. Pelham | 0 | 0 | 0 | |||||||||
Ronald D. Sugar | 0 | 30,000 | 7,176 | |||||||||
R. Sanders Williams | 0 | 0 | 0 | |||||||||
Robert A. Bradway | 14,440 | 284,500 | 0 | |||||||||
Anthony C. Hooper | 3,016 | 0 | 0 | |||||||||
David W. Meline | 0 | 0 | 0 | |||||||||
Sean E. Harper | 5,056 | 37,000 | 0 | |||||||||
Madhavan Balachandran | 2,405 | 21,750 | 0 | |||||||||
Michael A. Kelly | 1,192 | 1,777 | 0 | |||||||||
Jonathan M. Peacock | 0 | 0 | 0 | |||||||||
| (3) | Includes |
| (4) |
|
| (5) | Mr. |
| (6) | Includes 36,675 shares pledged after Mr. Peacock’s termination of employment with the Company to secure loan obligations. Mr. Peacock ceased being an executive officer on |
|
| (7) | Includes |
| SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS |
Security Ownership of Certain Beneficial Owners
The following table shows the number of shares of our Common Stock owned by each person or entity known to the Company to be the beneficial owners of more than 5% of our Common Stock as of December 31, 2012,2014, except as noted, based on a review of publicly available statements of beneficial ownership filed with the Securities and Exchange Commission, or SEC, on Schedules 13D and 13G through March 25, 2013.16, 2015.
| Common Stock Beneficially Owned | ||||||
Name and Address of Beneficial Owner | Number of Shares | Percent of Total (1) | ||||
Capital Research Global Investors(2) 333 South Hope Street Los Angeles, CA 90071 | 63,091,358 | 8.42% | ||||
FMR LLC(3) 82 Devonshire Street Boston, MA 02109 | 58,227,814 | 7.77% | ||||
BlackRock, Inc.(4) 40 East 52nd Street New York, NY 10022 | 44,895,140 | 5.99% | ||||
PRIMECAP Management Company(5) 225 South Lake Avenue, #400 Pasadena, CA 91101 | 42,036,924 | 5.61% | ||||
| Common Stock Beneficially Owned | ||||||||
| Name and Address of Beneficial Owner | Number of Shares | Percent of Total(1) | ||||||
Capital Research Global Investors(2) 333 South Hope Street Los Angeles, CA 90071 | 93,166,375 | 12.29% | ||||||
BlackRock, Inc.(3) 55 East 52nd Street New York, NY 10022 | 48,285,295 | 6.37% | ||||||
The Vanguard Group(4) 100 Vanguard Blvd. Malvern, PA 19355 | 40,918,008 | 5.40% | ||||||
| (1) | The “Percent of |
| (2) | The amounts shown and the following information was provided by Capital Research Global Investors pursuant to a Schedule 13G filed with the SEC on February |
| (3) |
|
The amounts shown and the following information was provided by BlackRock, Inc. pursuant to a Schedule 13G filed with the SEC on February |
The amounts shown and the following information was provided by |
ï 2015 Proxy Statement27
| CORPORATE GOVERNANCE |
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EXISTINGCorporate Governance
EQUITY COMPENSATION PLANS
The following table sets forth certain information as of December 31, 2012, concerning the shares of our Common Stock that may be issued under any form of award granted under our equity compensation plans in effect as of December 31, 2012 (including upon the exercise of stock options, the vesting of awards of restricted stock units, or RSUs, or when performance units are earned, and related dividend equivalents have been granted).
| (a) | (b) | (c) | (d) | |||||||||||||
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options and Rights | Weighted Average Exercise Price Outstanding Options and Rights | Weighted Average Remaining Term Outstanding Options (in years) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | ||||||||||||
Equity compensation plans approved by Amgen security holders: | ||||||||||||||||
2009 Equity Incentive Plan(1) | 20,787,017 | $57.22 | 7.7 | 48,251,175 | ||||||||||||
Amended and Restated 1991 Equity Incentive Plan(2) | 5,025,734 | $52.54 | 2.6 | - | ||||||||||||
Amended and Restated Employee Stock Purchase Plan | - | - | - | 5,669,013 | ||||||||||||
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|
| |||||||||||||
Total Approved Plans | 25,812,751 | $55.26 | 5.5 | 53,920,188 | ||||||||||||
Equity compensation plans not approved by Amgen security holders: | ||||||||||||||||
Amended and Restated 1999 Equity Incentive Plan(3) | 929,132 | $57.07 | 1.7 | - | ||||||||||||
Amended and Restated 1997 Equity Incentive Plan(4) | 113,921 | $38.85 | 0.8 | - | ||||||||||||
Amended and Restated 1997 Special Non-Officer Equity Incentive Plan(5) | 472,557 | $69.87 | 0.5 | - | ||||||||||||
Amended and Restated 1996 Incentive Stock Plan(6) | 38,180 | $69.00 | 0.4 | - | ||||||||||||
Amended and Restated 1999 Incentive Stock Plan(6) | 265,840 | $67.66 | 1.1 | - | ||||||||||||
Amended and Restated Assumed Avidia Equity Plan(7) | 1,825 | $1.91 | 3.4 | - | ||||||||||||
Amgen Profit Sharing Plan for Employees in Ireland(8) | - | - | - | 177,301 | ||||||||||||
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Total Unapproved Plans | 1,821,455 | $61.06 | 1.2 | 177,301 | ||||||||||||
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Total All Plans | 27,634,206 | $56.09 | 4.9 | 54,097,489 | ||||||||||||
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Board of Directors Corporate Governance Highlights
Our Board of Directors, or Board, is governed by our Amgen Board of Directors Corporate Governance Principles, or Corporate Governance Principles, which are amended from time to time to incorporate certain current best practices in corporate governance. Our Corporate Governance Principles may be found on our website atwww.amgen.comand are available in print upon written request to the Company’s Secretary.Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799, Mail Stop 38-5-A. The Board’s corporate governance practices include the following:
| • | Lead Independent |
| • | Regular Executive Sessions of Independent |
| • | Majority |
| • | Board Access to |
| • | Board Authority to Retain Outside |
The Audit Committee has the sole authority to |
| • | Director Limitation on Number of |
| • | Director Tenure. Our average Board tenure is substantially less than the Standard & Poor’s 500 average. |
| • | Director Retirement |
| • | Director Changes in Circumstances |
28 ï 2015 Proxy Statement
| CORPORATE GOVERNANCE |
Committee. The Governance Committee determines whether to accept the resignation based on what it believes to be in the best interests of the Company and our stockholders. |
| • | Director Outside Relationships Require |
which they will have a financial or a personal interest or any transaction that otherwise involves a conflict of interest. |
| • | Director Conflicts of |
| • | Regular Board and Committee |
Director Qualifications and Review of Board Diversity
Our Governance Committee is responsible for determining Board membership qualifications and for selecting, evaluating and recommending to the Board nominees for the annual election to the Board and to fill vacancies as they arise. The Governance Committee reviews, periodically with the Board, the composition and size of the Board, reviews each committee’s performance and recommends, ifmakes recommendations, as necessary, measures to be taken so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity advisable for the Board as a whole and contains at least the minimum number of independent directors required by applicable laws and regulations.
The Governance Committee maintains guidelines for selecting nominees to serve on the Board and for considering stockholder recommendations for nominees. The Amgen Inc. Board of Directors Guidelines for Director Qualifications and Evaluations are included in this proxy statement as
Appendix BA.. Among other things, Board members should possess demonstrated breadth and depth of management and leadership experience, financial and/or business acumen or relevant industry or scientific experience, integrity and high ethical standards, sufficient time to devote to the Company’s business, the ability to oversee, as a director, the Company’s business and affairs for the benefit of our stockholders, the ability to comply with the Amgen Board of Directors Code of Conduct and a demonstrated ability to think independently and work collaboratively. In addition, although the Governance Committee does not maintain a diversity policy, the Governance Committee considers diversity in its determinations. Diversity includes race, ethnicity, age and gender and is also broadly construed to take into consideration many other factors, including industry knowledge, operational experience and scientific and academic expertise, geography and personal backgrounds.
ï 2015 Proxy Statement29
| CORPORATE GOVERNANCE |
Leadership Structure
Our current leadership structure and governing documents permit the roles of Chairman and CEO to be filled by the same or different individuals. The Board has currently determined that it is in the best interests of the Company and our stockholders to have Robert A. Bradway, our PresidentCEO and CEO,President, serve as Chairman, coupled with an active lead independent director. As such, Mr. Bradway holds the position of Chairman, PresidentCEO and CEO,President, and Dr. Coffman serves as the lead independent director.
Corporate Governance StructureStructure.. The Board believes our corporate governance structure, with its strong emphasis on Board independence, an active lead independent director and strong Board and committee involvement, provides sound and robust oversight of management.
Board IndependenceDirector Independence.. At least annually, the Governance Committee reviews the independence of each non-employee director and makes recommendations regarding director independence to the Board and the Board
affirmatively determines whether each director qualifies as independent. Each director must keep the Governance Committee fully and promptly informed as to any development that may affect the director’s independence.
Twelve12 out of the thirteen13 director nominees (over 92%) are independent as defined by The NASDAQ Stock Market, or NASDAQ, listing standards and the requirements of the Securities and Exchange Commission, or SEC, with the exception being Mr. Bradway. All of our directors are elected annually.
Lead Independent DirectorDirector.. The lead independent director is elected by the independent members of the Board on an annual basis. Dr. Coffman currently serveshas served as the lead independent director.director since January 1, 2012. His term was extended by the independent members of the Board in December 2014 and he was re-elected to serve for an additional term by the independent members of the Board in March 2015. In such position, heDr. Coffman serves as a means for regular communication between the independent directors and Mr. Bradway, keeping Mr. Bradway apprised of any concerns, issues or determinations made during the independent sessions, and consults with Mr. Bradway on other matters pertinent to the Company and the Board. The lead independent director’s additional responsibilities include:
Presiding at meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;
Serving as a liaison between the Chairman and the independent directors;
Previewing the information to be provided to the Board;
Approving meeting agendas for the Board;
Assuring that there is sufficient time for discussion of all meeting agenda items;
Organizing and leading the Board’s evaluation of the CEO;
Being responsible for leading the Board’s annual self-assessment;
Having the authority to call meetings of the independent directors; and
If requested by major stockholders, ensuring that he/she is available for consultation and direct communication.
In March 2013, the Amended and Restated Bylaws of Amgen Inc. were amended to reflect the lead independent director’s responsibility to preside over meetings of the Board and meetings of stockholders when the Chairman is absent.
Key Committees Comprised of Independent DirectorsDirectors.. The Audit, Committee, the Compensation, Committee, the Compliance Committee and the Governance CommitteeCommittees are each composed solely of independent directors and provide independent oversight of management. In addition, the Audit, Compensation and Compliance Committees meet in executive session on a regular basis with no members of management present (unless otherwise requested by the committee). Each of our committees effectively manages its Board delegated duties and communicates regularly with the Chairman and members of management. In addition, the Compensation Committee has an effective process for monitoring and evaluating Mr. Bradway’s compensation and performance. Each committee chair reportsprovides a report on committee meetings held to the full Board at each regular meeting of the Board.
Independent Directors SessionsSessions.. At each regularly scheduled Board meeting, the independent directors generally meet in an executive session without Mr. Bradway to review Company performance, management effectiveness, proposed programs and transactions and the Board meeting agenda items. These independent sessions are organized and chaired by our lead independent director.
Annual AssessmentAssessment.. As part of the Board’s annual self-evaluation process, the Board reviews its leadership structure and whether combining or separating the roles of
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Chairman and CEO is in the best interests of the Company and our stockholders.
Benefits of Combined Leadership Structure.The Board believes that the Company and our stockholders have been best served by having Mr. Bradway in the role of Chairman and CEO for the following reasons:
Mr. Bradway is most familiar with our highly complex and long-cycle business and the unique challenges we face. Mr. Bradway’s day-to-day insight into our challenges facilitates a timely deliberation by the Board of important matters.
Mr. Bradway has and will continue to identify agenda items and lead effective discussions on the important matters affecting us. Mr. Bradway’s wealth of knowledge regarding our operations and the industries and markets in which we compete positions him to identify and prioritize matters for Board review and deliberation.
As Chairman and CEO, Mr. Bradway serves as an important bridge between the Board and management and provides critical leadership for carrying out our strategic initiatives and confronting our challenges. The Board believes that Mr. Bradway brings unique insight to assist the Company to most effectively execute its strategy and business plans to maximize stockholder value.
The strength and effectiveness of the communications between Mr. Bradway as our Chairman and Dr. Coffman as our lead independent director results in effective Board oversight of the issues, plans and prospects of our Company.
This leadership structure provides the Board with more complete and timely information about the Company, a unified structure and consistent leadership direction and provides a collaborative and collegial environment for Board decision making.
Flexibility of the Board.Leadership Structure. The Board is committed to high standards of corporate governance. The Board values its flexibility to select, from time to time, a leadership structure that is best able to serve the Company’s
and stockholders’ best interests based on the qualifications of individuals available and circumstances existing at the time. As such, the Board regularly evaluates whether combining or separating the roles of Chairman and CEO is in the best interests of the Company and our stockholders. The Board believes that a policy limiting its flexibility to choose, consistent with its fiduciary duties, a leadership structure that will enable the Company to most effectively execute its strategy and business plans to maximize stockholder value would be detrimental to the Company and our stockholders.
The Board’s Role in Risk Oversight
Our Board oversees an enterprise-wide approach to risk management, which is designed to support the achievement of the Company’s objectives, including strategic objectives to improve long-term financial and operational performance and enhance stockholder value. Our Board believes that a fundamental part of risk management is not only understanding control and mitigation of the risks that we face, but also understanding what levelmonitoring these risks and adopting appropriate control and mitigation of risk is appropriate for our Company and how that level of risk may change over time or due to circumstances.these risks. We believe that the risk management areas that are fundamental to the success of our annual and strategic plans include certaintythe areas of supply, product safety, the resiliency of our business operations, the direction and productivity of our product development, efforts, legal and regulatory compliancesafety, supply, quality, value and access, to publicsales and private reimbursement systems,promotion and corporate development, as well as protecting our assets (financial, intellectual property and information), all of which are managed cross-functionally by senior executive management reporting directly to our CEO.
We have implemented an Enterprise Risk Management, or ERM, program, which is a Company-wide effort to identify, assess, manage, report and monitor enterprise risks and risk areas that may affect our ability to achieve the Company’s objectives. The ERM program involves our Board, our management and other personnel and is overseen by one of our senior executive officers. Enterprise risks are identified and managed by management and the business functions and, as discussed below, are overseen by the Board or the appropriate Board committee.
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The Board discusses enterprise risks with our senior management on a regular basis, including as a part of its annual strategic planning process, annual budget review and approval, capital plan review and approval and through reviews of compliance issues in the appropriate committees of our Board, as appropriate. While the Board has the ultimate oversight responsibility for the risk management process, various committees of the Board are structured to oversee specific risks, as follows:
Committee | Primary Risk Oversight Responsibility | |||||
Audit Committee | • | Oversees financial risk, such as capital risk, financial compliance risk and internal controls over financial reporting. | ||||
Corporate Responsibility and Compliance Committee | • | Oversees non-financial compliance risk, such as regulatory risks (including the compliance risks associated with the requirements of the Federal health care program, Food and Drug Administration and Corporate Integrity Agreement). Oversees staff member compliance with the Code of Conduct. | ||||
Compensation and Management Development Committee | • |
|
| |||
Governance and Nominating Committee | • | Oversees the assessment of each member of the Board’s independence, as well as the effectiveness of our Corporate Governance Principles and Board of Directors’ Code of Conduct. | ||||
At each regular meeting, or more frequently as needed, the Board considers reports from each of the committees set forth above, which reports oftenmay provide considerableadditional detail on risk management issues and management’s response.
Compensation Risk Management
On an annual basis, management, working with the Compensation Committee’s independent compensation consultant, conducts an assessment of the Company’s compensation policies and practices for all staff members generally, and for our staff members who participate in our sales incentive compensation program, for material risk to the Company. The results of this assessment are reviewed and discussed with the Compensation Committee. Based on this assessment, review and discussion, we believe that, through a combination of risk-mitigating features and incentives guided by relevant market practices and Company-wide goals, our compensation policies and practices do not present risks that are reasonably likely to have a material adverse effect on us.
In evaluating our compensation policies and practices, a number of factors were identified which the Company, the Compensation Committee and its independent consultant believe discourage excessive risk-taking, including the factors described below:
Our compensation programs consist of a mix of incentives that are tied to varying performance periods and are designed to balance our need to drive our current performance with the need to position the Company for longer-term success.
Of this mix of incentives, Company-wide results are the most important factor in determining the amount of an incentive award for each of our staff members. Additionally, we cap short-term incentives and make long-term incentive, or LTI, equity awards a component of compensation for nearly all of our full-time staff members. In particular, the CEO and the other executive officers participate in compensation plans that are designed so that the largest component of their compensation is in the form of LTI equity awards to
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We employ strong practices with respect to equity awards: we do not award mega-grants, discounted stock options or immediately vested stock options to staff members; we have grant guidelines that generally limit the grant date for our equity grants to the third business day after our announcement of quarterly earnings and we prohibit staff members from hedging the economic risk of our Company’s Common Stock.
We have robust stock ownership guidelines for vice presidents and above that require significant investment by these individuals in our Common Stock.
Our Company values and leadership behaviors are an integral part of the performance assessments of our staff members and are particularly emphasized in our assessment tools at higher positions. These evaluations serve as an important information tool and basis for compensation decisions.
The Compensation Committee retains full discretion to reduce or eliminate annual cash incentive awards to our executive officers and can and has modified awards downwards.
We have a clawback policy that requires our Board to consider recapturing past cash or equity compensation payouts awarded to our executive officers if it is subsequently determined that the amounts of such compensation were determined based on financial results that are later restated and the executive officer’s misconduct caused or partially caused such restatement.
We have recoupment provisions that expressly allow the Compensation Committee or management, as appropriate, to consider employee misconduct that caused serious financial or reputational damage to the Company when determining whether an employee has earned an annual cash incentive award or the amount of any such award.
Our Insider Trading Policy prohibits pledging and hedging our Common Stock.
CodeCodes of Ethics and Business Conduct
Our Board has adopted two codes of business conduct and ethics, one that applies to our directors and the second which applies to all of our staff members, including our executive officers. We also have a Code of Ethics for Senior Financial Officers.senior financial officers. To view our codes of business conduct, please visit our website atwww.amgen.com.www.amgen.com. We intend to
disclose any future amendments to certain provisions of our codes of business conduct and ethics, or waivers of such provisions, applicable to our directors and executive officers, at the same location on our website identified above. There were no waivers of any of the codes of business conduct or the codecodes of ethics in 2012.2014.
Director Independence
Board Independence
At least annually, the Governance Committee reviews the independence of each non-employee director and makes recommendations to the Board and the Board affirmatively determines whether each director qualifies as independent. Each director must keep the Governance Committee fully and promptly informed as to any development that may affect the director’s independence.
The Board has determined that each of our non-employee directors is independent under the listing standards of NASDAQ and the requirements of the SEC. Mr. Bradway is
not independent based on his service as our PresidentCEO and CEO.President. Mr. Bradway is the only director who also serves us in a management capacity. In making its independence determinations, the Board reviewed direct and indirect transactions and relationships between each director, or any member of his or her immediate family, and us or one of our subsidiaries or affiliates based on information provided by the director, our records and publicly available information. All of the reviewed transactions and arrangements were entered into in the ordinary course of business and none of the business transactions, donations or grants involved an
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amount that (i) exceeded the greater of 5% of the recipient entity’s revenues or $200,000 with respect to transactions where our directorsa director or any member of his or her immediate
family or spouse served in any capacity other than as a director of a publicly held-corporation or (ii) exceeded $10,000 with respect to professional or consulting services provided by entities at which our directors serve as professors or employees. The following types and categories of transactions, relationships and arrangements were considered by our Board in making its independence determinations:
Each of our independent directors (or their spouses)immediate family members), other than J. Paul Reason, currently serves or has previously served within the last three years as a professor, trustee, director, or member of a board, council or committee for one or more colleges, universities or non-profit, charitable organizations, including research or scientific institutions, to which The Amgen Foundation, Inc. has made matching donations under our Amgen matching gift program that is available to all of our employees and directors, or has made grants.
Each of our independent directors (or their spouses)immediate family members), other than Admiral Reason, Frank J. Biondi and Judith C.Ms. Pelham, currently serves or has previously served as a member of the board of directors or the board of trustees or an advisory board for an entity with which Amgen has business transactions or to which Amgen makes donations or grants. The business transactions include, among other things, purchasing supplies, equipment and software licenses, healthcare sponsorships and programs, clinical trials, research and development lab expenses, conferences and limited consulting services.
or has previously served within the last three years as a member of the board of directors or the board of trustees or an advisory board for an entity with which Amgen has business transactions or to which Amgen makes donations or grants. The business transactions include, among other things, purchasing supplies, equipment and software licenses, repair and maintenance fees, healthcare sponsorships and programs, utilities, clinical trials, research and development expenses, executive education, conferences and limited consulting services. |
Dr.Drs. Baltimore, TylerHenderson, Jacks and Rebecca M. HendersonWilliams currently serve as professors for universities and Ronald D. Sugar serves as a senior advisor to a corporation, to which Amgen has made payments for certain business transactions such as symposiums, conferences, clinical trials, training and research and development expenses, subscription, equipment repairsoftware licenses and licensemaintenance fees, as well as for grants.
None of our directors directly or indirectly provides any professional or consulting services to us and none of our directors currently has or has had any direct or indirect material interest in any of the above transactions and arrangements. The Board determined that these transactions and arrangements did not warrant a determination that the director was not independent.
Board Meetings
The Board held nineseven meetings in 20122014 and all of the directors attended at least 75% of the total number of meetings of the Board and committees on which they served. Dr. JacksWilliams was appointed to the Board in May 2012October 2014 and attended all meetings of the Board and committees on which he served in 20122014 after the date of his appointment. Robert A. Eckert was appointed to the Board in December 2012 and attended the December 2012 meeting of the Board after his appointment. The independent directors generally meet in executive session without management, present, including Mr. Bradway, present at all regularly
scheduled meetings of the Board. Dr. Coffman, our lead independent director, presidespresided at such meetings. We and the Board expect all current directors to attend our annual meetings of stockholders barring unforeseen circumstances or irresolvable conflicts. All of the then-current members of the Board, except for Ms. Pelham,Drs. Baltimore and Coffman, were present at our 20122014 annual meeting of stockholders.
Board Committees and Charters
The Board has six standing committees: Audit Committee,Committee; Compensation Committee,Committee; Compliance Committee,Committee; Equity Award Committee,Committee; Executive Committee and Governance Committee. The Board maintains charters for each of these standing committees. In addition, the Board has adopted a written set of Corporate Governance Principles and a Board
of Directors’ code of conduct that generally formalize practices we have in place. To view the charters of our standing Board committees, our Corporate Governance Principles and the Board of Directors’ code of conduct, please visit our website atwww.amgen.com.www.amgen.com.
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Audit Committee The Audit Committee met The Audit Committee has sole authority for the appointment, compensation, retention and oversight of the work of the independent registered public accountants, and responsibility for reviewing and discussing, prior to filing or issuance, with management and the independent registered public accountants (when appropriate) our audited consolidated financial statements to be included in our Annual Report on Form 10-K and earnings press releases. Compensation and Management Development Committee The Compensation Committee met The Compensation Committee assists the Board in fulfilling its fiduciary responsibilities with respect to the oversight of the Company’s compensation plans, policies and programs, especially those regarding executive compensation. The Compensation Committee is responsible for attract, develop and retain talented leadership to serve the long-term best interests of the Company. The Compensation Committee has authority for overseeing the Board’s relationship with stockholders on executive compensation matters, including stockholder outreach efforts, stockholder proposals, advisory votes, communications with proxy advisory firms and related matters. The processes and procedures of the Compensation Committee for considering and determining compensation for Compensation for our executive officers, including our Named Executive Officers, or NEOs, is generally determined annually in With respect to our CEO, by the first calendar quarter of each year, the Compensation Committee reviews and approves Company performance goals and objectives for the current year and evaluates the CEO’s performance in light of the Company performance goals and objectives established for the prior year. The Compensation Committee evaluates the performance of the CEO within the context of the financial and operational performance of the Company, considers competitive market data and establishes the CEO’s compensation based on this evaluation. The values of each component of total compensation (base salary, target annual cash incentive awards and equity awards) for the current year, as well as total annual compensation for the prior year (including the value of equity holdings, potential change of control payments and vested benefits under our Retirement and Savings Plan, Supplemental Retirement Plan and Nonqualified Deferred Compensation Plan as of the end of the last fiscal year) are considered at this time. Final determinations regarding our CEO’s performance and compensation are made during an executive session of the Compensation Committee and are reported to and reviewed by the Board in an independent directors’ session. During CORPORATE GOVERNANCE 10nine times in 2012.2014. Throughout 20122014 and currently, Mr. Biondi serves as chairman and Ms. Pelham, Dr. Baltimore Françoisand Messrs. de Carbonnel, Eckert and Gilbert S. OmennGarland serve as members of the Audit Committee.Mr. Eckert was appointed to Dr. Gilbert S. Omenn served on the Audit Committee until his retirement from the Board in December 2012.May 2014. All members of the Audit Committee meet the NASDAQ composition requirements, including the requirements regarding financial literacy and financial sophistication, and the Board has determined that each member is independent under the listing standards of NASDAQ and the rules of the SEC, regarding audit committee membership. The Board has also determined that Messrs. Biondi, de Carbonnel, Eckert and EckertGarland are each an “audit committee financial expert” as defined by SEC rules.fivesix times in 2012.2014. Throughout 20122014 and currently, Frank C.Mr. Herringer serves as chairman and Admiral Reason, Leonard D. SchaefferMs. Pelham, Mr. Biondi and Drs.Dr. Coffman and Sugar serve as members of the Compensation Committee. Mr. Biondi was appointed to the the Compensation Committee effective December 2012. Each member of the Compensation Committee has been determined by the Board to be independent under the listing standards of NASDAQ and the requirements of the SEC.ensuring thatdesigning the Company’s compensation programs are designed tothat encourage high performance, promote accountability and adherence to Company values and the staff member code of conduct and to align with the interests of the Company’s stockholders. The Compensation Committee is responsible for ensuring that the executive management development processes are designed to 20122014 for our executive officers were as follows:March.March, except for annual LTI equity awards which are determined in December of the prior year and are granted in January.2012,2014, the Compensation Committee engaged Frederic W. Cook & Co., Inc., or Cook & Co. or the consultant, an independent compensation consultant, to provide advice regarding executive compensation market data as requested, opinions on the appropriateness and competitiveness of our executive compensation programs relative to market practice, advice on executive compensation trends and developments, and consults on compensation designs and equity compensation practices. In 2012,
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|
In setting executive compensation, the Compensation Committee compares the Company’s pay levels and programs to those of the Company’s competitors for executive talent and uses this comparative data as a guide in its review and determination of compensation. Our Compensation Committee considers and selects an appropriate peer group (consisting of biotechnology and pharmaceutical companies), based in part on the recommendations of Cook & Co., and, for each NEO, the Compensation Committee reviews the compensation levels and practices of our peer group, consistingwhich for our NEOs, other than the CEO, is based on reports prepared by management from information contained in compensation surveys and proxy statements. Cook & Co. provides the Compensation Committee with market data, practices of biotechnologyour peer group and pharmaceutical companies.recommendations for the CEO position.
Our Compensation Committee determines compensation for the executive officers (other than the CEO) based, in part, on the recommendations of our CEO regarding base salary, annual cash incentive awards and annual equity awards. In determining his compensation recommendations for each NEO, our CEO reviews comparative peer group data. The Compensation Committee has typically followed these recommendations.
The Compensation Committee generally holds executive sessions (with no members of management present, unless requested by the Compensation Committee) at each of its regular meetings.
The Compensation Committee has authority to delegate any of the functions described above to a subcommittee of its members. No new delegation of this authority was made in 2012.2014.
Each year the Compensation Committee reviews the independence of its compensation consultants and other advisors. In performing its analysis, the Compensation Committee considers the factors set forth in the SEC rules and the NASDAQ listing requirements. After review and consultation with Cook & Co., the Compensation Committee has determined that Cook & Co. is independent and there is no conflict of interest resulting from retaining Cook & Co. currently or during the year ended December 31, 2012. In reaching these conclusions, the Compensation Committee considered the factors set forth in the SEC rules and the NASDAQ listing requirements that recently became effective.2014.
Equity Award Committee
The Equity Award Committee met four times in 2012.2014. Throughout 20122014 and currently, Mr. Herringer serves as chairman and Dr. Coffman servesand Mr. Bradway serve as a membermembers of the Equity Award Committee. Mr. Bradway replaced Kevin W. Sharer as a member of the Equity Award Committee upon Mr. Bradway’s appointment as our Chairman effective January 2013. Our Board has delegated to the Equity Award Committee the responsibility for determining annual equity-based awards to vice presidents and below who are not Section 16 officers and authority to make equity-based awards from time to time to such eligible staff members for purposes of compensation, retention, promotion and upon commencement of their employment consistent with the equity grant guidelines established by the Compensation Committee. In addition, the Equity Award Committee presents a report to the Compensation Committee detailing the equity-based awards made by the Equity Award Committee at least twice per year.
Governance and Nominating Committee
The Governance Committee met four times in 2012.2014. Throughout 20122014 and currently, Dr. Coffman serves as chairman and Drs. Baltimore, Henderson, Jacks and Sugar, and Messrs. de Carbonnel, Garland and Herringer serve as members of the Governance Committee, with Dr. JacksWilliams joining the Governance Committee effective July 2012.October 2014. Each of the members of the Governance Committee has been determined by the Board to be independent under the listing standards of NASDAQ and the requirements of the SEC.
The Governance Committee is responsible for developing and overseeing the Board’s Corporate Governance Principles and a code of conduct applicable to members of the Board and for monitoring the independence of the Board. The
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Governance Committee also determines Board membership qualifications, selects, evaluates and recommends to the Board nominees to fill vacancies as they arise, reviews the performance of the Board and its committees and is responsible for director education. The Governance Committee maintains, with the approval of the Board, guidelines for selecting nominees to serve on the Board and considering stockholder recommendations for nominees. Such guidelines are included in this proxy statement asAppendix BA. Stockholders wishing to communicate with the Governance Committee regarding recommendations for director nominees should follow the procedure described in “Communication with the Board” below. See “OTHER MATTERS—Stockholder Proposals” for a description of the information that a stockholder proposing to nominate a director for election must provide to the Company in their advance notice. Additionally, the Governance Committee recommends to the Board nominees for appointment as executive officers and certain other officers.
The Governance Committee also oversees the corporate governance and Board membership matters of the Company. The Governance Committee identifies and recommends to the Board qualified individuals for Board and committee membership and considers and recommends to the Board nominees to stand for election at the annual meeting of stockholders and to fill vacancies as they arise as more fully described previously in “Director Qualifications and Review of Board Diversity” above.Diversity.” Among the Governance Committee’s responsibilities, the Governance Committee evaluates and makes recommendations to our Board regarding compensation for non-employee Board members. Any Board member who is also an employee of the Company does not receive separate compensation for service on the Board.
The processes and procedures of the Governance Committee for considering and determining director compensation are as follows:
The Governance Committee has the authority to evaluate and make recommendations to our Board regarding director compensation. The Governance Committee conducts this evaluation periodically by reviewing our director compensation practices against the practices of an appropriate peer group and the Governance Committee may determine to make recommendations to our Board regarding possible changes to director compensation.
The Governance Committee has the authority to retain consultants to advise on director compensation matters. No executive officer has any role in determining or recommending the form or amount of director compensation. In 2012, the Governance Committee retained Cook & Co. to advise on director compensation and determined to make a change to director compensation, the first increase to director cash compensation since 2003.2003, effective January 1, 2013. No additional changes were made to director compensation in 2014.
The Governance Committee has authority to delegate any of these functions to a subcommittee of its members. No delegation of this authority was made in 2012.2014.
Corporate Responsibility and Compliance Committee
The Compliance Committee met five times in 2012.2014. Throughout 20122014 and currently, Mr. SchaefferDr. Sugar serves as chairman and Drs. Henderson and Omenn, Ms. PelhamJacks and Admiral ReasonMr. Eckert serve as members of the Compliance Committee. Dr. Jacks and Mr. EckertOmenn served on the Compliance Committee until his retirement from the Board in May 2014. Dr. Williams joined the Compliance Committee upon commencement of their service on the Board in May 2012 and December 2012, respectively.effective October 2014.
The Compliance Committee is responsible for overseeing our compliance program and reviewing our programs in a number of areas governing ethical conduct including: (i) Federal health care program requirements; (ii) Food and Drug Administration requirements and other regulatory agency requirements, including good manufacturing, clinical and laboratory practices, drug safety and pharmacovigilance activities; (iii) interactions with members of the healthcare community; (iv) the Company’s Corporate Integrity Agreement; (v) environment, health and safety and (iv) human resources and government affairs. Additionally, the Compliance Committee receives regular updates on political, social and environmental trends, and public policy issues that may affect our business or public image, and reviews our environmental sustainability, political and philanthropic activities.
Our compliance program is designed to promote ethical business conduct and ensure compliance with applicable laws and regulations. We have codes of conduct for our officers, staff and suppliers that delineate
standards for ethical business conduct and legal and regulatory
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compliance as well as a business conduct hotline through which anonymous reports of misconduct can be made to our Chief Compliance Officer. To view the codes of conduct, please visit our website atwww.amgen.com.www.amgen.com.
Our Chief Compliance Officer, who reports to the Compliance Committee, oversees the ongoing operations of the compliance program. The key objectives of our compliance program operations include developing policies and procedures, providing ongoing compliance training and education, auditing and monitoring of compliance risks, maintaining and promoting the business conduct hotline, conducting investigations, responding appropriately to any compliance violations and taking appropriate steps to detect and prevent recurrence.
Executive Committee
The Executive Committee did not meet in 2012.2014. Throughout 20122014 and currently, Mr. Bradway serves as chairman and Messrs. Biondi and Herringer and SchaefferDrs. Coffman and Dr. Coffman servedSugar serve as members of the Executive Committee. Mr. Bradway replaced Mr. Sharer as chairman of the Executive Committee upon Mr. Bradway’s appointment as our Chairman effective January 2013. The Executive Committee has all the powers and authority of the Board in the management of our business and affairs, except with respect to certain enumerated matters, including Board composition and compensation, changes to the Amgen Inc. Restated Certificate of Incorporation or any other matter expressly prohibited by law or the Amgen Inc. Restated Certificate of Incorporation.
Communication with the Board
Our annual meeting of stockholders provides an opportunity each year for stockholders to ask questions of, or otherwise communicate directly with, members of the Board on appropriate matters. In addition, stockholders may communicate in writing with any particular director, any committee of the Board, or the directors as a group, by sending such written communication to our Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799, Mail Stop 38-5-A. Copies of written communications received at such address will be provided to the Board or the relevant director unless such communications are considered, in the reasonable judgment of our Secretary, to be inappropriate for submission to the intended recipient(s). Examples of stockholder
communications that would be considered inappropriate for submission to the Board include, without limitation, customer complaints, solicitations, communications that do not relate directly or indirectly to our business or communications that relate to improper or irrelevant topics. The Secretary or his designee may analyze and prepare a response to the information contained in communications received and may deliver a copy of the communication to other Company staff members or agents who are responsible for analyzing or responding to complaints or requests. Communications concerning potential director nominees submitted by any of our stockholders will be forwarded to the chairman of the Governance Committee.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the following Compensation Discussion and Analysis with management, and based on the review and discussions, recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in the Company’s 20132015 Annual Meeting proxy statement and incorporated by reference into the Company’s Annual Report on Form 10-K.
Compensation Committee
of the
Board of Directors
Frank C. Herringer, Chairman
Frank J. Biondi, Jr.
Vance D. Coffman
J. Paul Reason
Leonard D. Schaeffer
Ronald D. SugarJudith C. Pelham
38 ï 2015 Proxy Statement
| COMPENSATION DISCUSSION AND ANALYSIS |
EXECUTIVE COMPENSATIONExecutive Compensation
COMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysis
This Compensation Discussion and Analysis describes our compensation strategy, philosophy, policies, programs and practices, or compensation program, for our Named Executive Officers, or NEOs, for 2012:and the positions they held in 2014:
Name |
| ||
Robert A. Bradway | Chairman of the Board, | ||
| |||
Anthony C. Hooper | Executive Vice President, Global Commercial Operations | ||
David W. Meline | Executive Vice President and Chief Financial Officer(1) | ||
Sean E. Harper | Executive Vice President, Research and Development | ||
Madhavan Balachandran | Executive Vice President, Operations | ||
Michael A. Kelly | Former Acting Chief Financial Officer and Vice President, Global Business Services(2) | ||
Jonathan M. Peacock | Former Executive Vice President and Chief Financial Officer(3) | ||
| (1) |
|
| (2) | ||
| ||
| Mr. Kelly served as our Acting Chief Financial Officer from January 10, 2014 until July 21, 2014. Effective January 5, 2015, Mr. Kelly was promoted to Senior Vice President, |
| (3) | Mr. Peacock ceased service as our Chief Financial Officer as of January 10, 2014 and |
SELECTED 2012 BUSINESS HIGHLIGHTS AND PAY FOR PERFORMANCESelected 2014 Business Highlights and Pay for Performance
A significant majority of each NEO’s compensation is dependent on our performance and our execution of our strategic priorities. In 2014, we delivered strong performance, the highlights of which include:
| • |
|
We ranked third Stock Price Appreciation
of fourteen companies (Amgen40%in 2014
Our stock price increased from $114.08 to $159.29 per share during 2014, reflecting appreciation of 40%. This 2014 stock price performance contributed to our strong three-year stock price performance. Since 2012, our stock price has increased 148% versus 103% for our peer group and our 2010 peer group) resulting in 144.1% of target performance units being earned64% for the performanceStandard & Poor’s 500, or S&P 500.
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| COMPENSATION DISCUSSION AND ANALYSIS |
One-Year TSR of 42%
in 2014
Our one-year total shareholder return, or TSR, of 42%, including our dividends, outperforms the TSRs of our peer group and the S&P 500 for the same period that ended of 24% and 14%, respectively. Our three-year TSR of 157% also outperforms the TSRs of our peer group and the S&P 500 for the same period of 111% and 75%, respectively.
| – | Payout Under Our Long-Term Incentive Performance Award Program Reflects our TSR Performance. Consistent with our robust three-year TSR, the performance units earned in 2014 under our long-term incentive, or LTI, performance award program (for the 2012-2014 performance period) were 150% of target, or maximum payout, based on our TSR for the 2012-2014 performance period compared with the average TSR of our 15-company peer group for this period. Commencing with performance awards granted in 2013, our TSR is compared against that of the S&P 500. |
| • | Delivering on Return of Capital to Our Stockholders. |
$1.9 billion
in 2012.dividends in 2014
|
| – | In 2014, we increased our quarterly cash dividend to $0.61 per share from $0.47 per share in 2013. Since |
our first dividend in July 2011 through 2014, we have raised the dividend |
*represents annualized dividend
| – | We Repurchased Stock in 2014. In the fourth quarter of 2014, we repurchased 0.9 million shares of our Common Stock. |
| • | Cost Containment. |
| – | We undertook actions to support our transformation plans announced in 2014 to invest in continuing innovation and the launch of our new pipeline molecules, while improving our cost structure. As part of the plan, these actions will result in an approximate 23% reduction in our facilities footprint Company-wide. |
| – | There were no annual base salary increases in 2014 for staff members at senior manager level or above, including our NEOs. There was a reduction in value of the LTI equity award grants made in January 2014 from those made in 2013 for all NEOs, other than our Chief Executive Officer, or CEO, to respond to lower median values among our peer group. We increased our CEO’s LTI equity award grant value in 2014 to maintain median positioning against our peer group as the 2013 median for the CEO position increased over the prior year. |
Our Annual Cash Incentive Award Program is Tied Directly to Our Performance Based on Pre-Established Performance Goals.
40 ï 2015 Proxy Statement
| COMPENSATION DISCUSSION AND ANALYSIS |
| • | Strong Financial |
| – | Our strong operating performance resulted in above-target performance on our pre-established performance goals for 2014 revenues (147.4% of target performance) and adjusted net income (187.9% of target performance), that comprise 60% of the weighting under our 2014 annual cash incentive award program. |
| • | Significant Pipeline Advancement and Success. In 2014, we continued to significantly enhance our pipeline, the highlights of which include that six of our medicines generated positive registration-enabling data and four (Repatha™ (evolocumab)*, Corlanor® (ivabradine)*, talimogene laherparepvec and BLINCYTO™ (blinatumomab)) were submitted for regulatory approval. In December 2014, the Food and Drug Administration, or FDA, approved BLINCYTO™ less than three months after submission. We also reported positive data on our AMG |
334 study for patients with episodic migraines and, as a consequence, we announced a decision to move into Phase 3 in 2015. |
We exceeded our maximum goals for 2012 revenues and adjusted net income, the two pre-established financial measures
| – | We performed at 127.6% of our pre-established target goal of “Deliver the Best Pipeline” that represents a 25% weighting under our 2014 annual cash incentive award program. |
| • | Execution on Key Strategic Priorities. We performed at 96.7% of our pre-established performance goals of “Deliver Annual Priorities” comprising 15% of the weighting under our 2014 annual cash incentive award program and including Full Potential, Drug Delivery and Decision Making sub-goals. |
| – | In 2014, the FDA also granted approval of the Neulasta® (pegfilgrastim) Delivery Kit, including the On-body Injector for Neulasta®, a drug delivery system. |
The payout under our annual cash incentive award program which contributed to an overall payment of 205.3%for all measures after weighting was 147% of target opportunity under this program. These financial measures represented 60% weighting, while various operational goals relating to “Deliver the Best Pipeline” and “Reach More Patients Through Growth Opportunities” each represented 20% weighting.bonus opportunity.
Our 2014 Say on Pay Vote and Engagement With Our Stockholders |
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97% stockholder support
on our 2014 say on pay
In the fall of 2011, we successfully recruited Anthony C. Hooper, our Executive Vice President, Global Commercial Operations, from a company in our peer group; and
Sean E. Harper, our former Senior Vice President, Global Development, was promoted to Executive Vice President, Research and Development effective February 2012, succeeding Roger M. Perlmutter who retired. Dr. Harper was recruited from one of the companies in our peer group in 2002 and developed within the Company.
OUR 2012 SAY ON PAY VOTE AND ENGAGEMENT WITH OUR STOCKHOLDERS
In 2012,2014, we received over 87%97% stockholder support on our say on pay advisory vote. While we are pleased with this level ofWe have engaged consistently in broad direct stockholder support for our executive compensation program, we believe it is important tooutreach over the past several years and have found these interactions highly valuable and informative and will continue to engage with our stockholders andto further enhance our understanding of the perspectives of our investors.
Since our 2012 annual meeting of stockholders, we have engaged in outreach to stockholders comprising approximately 50% of our outstanding shares and have had extensive discussions with stockholders owning over 37% of our outstanding shares. The reason most often cited by those investors who declined our invitation for extended discussion was that they had no outstanding concerns or questions. Thecompensation related feedback from our stockholders is reviewed by our Compensation and Management Development Committee, or Compensation Committee. WeCommittee, and we have made a number of compensation changes as a result of thein response to past discussions with our stockholders over the past two years:stockholders.
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For 2012 compensation decisions,Since our 2014 annual meeting of stockholders, we rebalancedhave engaged in outreach activities and discussions with stockholders comprising approximately 50% of our peer group to include Allergan, Inc. and Celgene Corporation, two companies inoutstanding shares. In 2014, our industry that we competepredominant feedback from investors with for executive talent and that better balance our peer group in terms of relative market capitalization and revenues size.
For performance periods commencing in 2011 and 2012, we linked actual pay delivery from LTI equity awards more closelyrespect to our performancecompensation practices was that they are satisfied with our compensation program. While we are pleased with our say on pay results and stockholder interests by using our TSR compared with the average of the TSRsfeedback, we will continue to reach out to understand and address any concerns of our peer group as the sole measure for earning performance unit grants.
Our new CEO total compensation package reflected our philosophical shift to target the median of our peer group for all elements of compensation. This philosophical adjustment coupled with the internal promotion of our new CEO to the role combined to reduce the new CEO’s initial total target compensation by 28% from the previous total target compensation of our former CEO.
stockholders. Our stockholder outreach efforts will continue after the filing of this proxy statement, as well as through our executive compensation website (accessible atwww.amgen.com/executivecompensation) that we initiated in
2008 andthat invites stockholders to provide feedback directly to the Compensation Committee regarding our executive compensation program.
| (1) | Adjusted operating income, adjusted net income and adjusted earnings per share are reported and reconciled in our Form 8-K dated as of January 27, 2015. |
| * | FDA provisionally approved trade name. |
OUR COMPENSATION PROGRAM HIGHLIGHTSï 2015 Proxy Statement41
| COMPENSATION DISCUSSION AND ANALYSIS |
Our Compensation Program Highlights and Objectives
Our compensation practices include three elements (LTI Equity Awards, Annual Cash Incentive Awards and Base Salaries) presented below in order of magnitude and degree of alignment with pay for performance.
The vast majority of compensation for each NEO is “at risk” and based solely on our performance, with 88% of our CEO’s direct compensation and 81% of direct compensation of our other NEOs, earned solely based on our performance and paid in the form of performance units and annual cash incentives.
LTI Equity Awards (at risk and the largest component of compensation for our NEOs)
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• Align NEOs’ interests with stockholders. • Foster long-term focus and retention. | |
Ourequity award grants are primarily performance-basedwith80% of LTI equity awards granted in the form of performance units and the remaining 20% in restricted stock units, or RSUs.
42 ï 2015 Proxy Statement
| COMPENSATION DISCUSSION AND ANALYSIS |
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Performance units are earned only if specified long-term performance goals are achieved. For all performance periods commencing |
| Performance Period | Relative TSR Multiplier | Absolute TSR | Payout as a % of Target | |||||||||
2012-2014 performance period | n/a | 185.7% | 150.0% | |||||||||
2011-2013 performance period | n/a | 114.4% | 122.7% | |||||||||
2010-2012 performance period(1) | 133.7% | 60.9% | 144.1% | |||||||||
| (1) | Performance units for the performance |
Performance Period | Multiplier (Relative or Absolute TSR) | TSR Multiplier (% of Earned Award Paid) | TSR Measure | Payout as a % of Target | ||||||||||
2010-2012 performance period | Relative | 133.7 | % | 60.9% (1) | 144.1 | % | ||||||||
2009-2011 performance period | Relative | 50.0 | % | 6.5% (1) | 45.5 | % | ||||||||
2008-2010 performance period | Absolute | 73.0 | % | 3.7% (2) | 73.0 | % | ||||||||
2007-2009 performance period | Absolute | 50.0 | % | (0.3)%(2) | 47.4 | % | ||||||||
Beginning with the 2013-2015 performance period of our performance award program,we measure our TSR compared with the TSR of the S&P 500, a broad-based and realistic measure of our stockholders’ investment opportunities.If our absolute TSR is less than zero, the payout percentage shall not be greater than 100% to limit rewards in a performance period in which we perform in-line with, or better than, the S&P 500 companies, but investors do not recognize growth in their investment in our Company.
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Our RSUs are designed to encourage retention and long-term value creationas they generally vest over four years, with no vesting in the first year and vesting in approximately three equal annual installments on the second, third and fourth anniversaries of the grant date.
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Annual Cash Incentive Awards (at risk) Our Compensation Committee annually approves Company performance goals for our Global Management Incentive Plan, or GMIP, designed to focus the Company’s staff on and reward performance against the results of such goals. Our Executive Incentive Plan, or EIP, establishes a maximum award possible for each participant and annual cash incentive awards are generally made to our NEOs under the EIP based on the pre-established GMIP Company performance goals. Each year, the GMIP goals are tailored to focus on our financial performance, operational objectives and specific priorities. |
| Purposes | ||||
| • | Measure NEOs’ performance against pre-established GMIP Company performance goals. | ||
• | Align all staff members around the same Company performance goals as all such annual cash incentive awards are based on the same GMIP Company performance goals. | |||
• | Motivate NEOs to meet or exceed our annual GMIP Company performance goals to drive annual performance and position us for longer-term success. | |||
ï 2015 Proxy Statement43
| COMPENSATION DISCUSSION AND ANALYSIS |
Our annual cash incentives are earned based on achieving our financial growth and operational objectives that drive long-term growth and stockholder value. In 2014, we established annual cash incentives based on our performance against our measures of revenues (30%) and adjusted net income (30%) and a number of operational objectives designed to drive delivery of the best pipeline (25%) and delivery of specific annual priorities (15%).
Base Salaries (the smallest component of compensation for our NEOs)
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• • | Provide a degree of financial certainty and stability that helps us retain talent. Recognize competitive market conditions and/or rewards individual performance through periodic increases. | |||
The preceding pie charts are calculated using (i) the “Salary” column from the “Summary Compensation Table” in our Executive Compensation Tables, (ii) the target annual cash incentive award in the “Estimated Possible Payouts Under Non-Equity Incentive Plan Awards—Target” column in the table in footnote 3 to the “Grants of Plan-Based Awards” table in our Executive Compensation Tables and (iii) the grant date fair value of annual grants of performance units and RSUs in the “Grant Date Fair Value of Stock and Option Awards” column of the “Grants of Plan-Based Awards” table in our Executive Compensation Tables. Messrs. Meline, Kelly and Peacock are not included in the pie charts because Mr. Meline commenced employment with our Company on July 21, 2014, Mr. Kelly served in an NEO capacity for only a portion of 2014 and Mr. Peacock ceased service as our Chief Financial Officer as of January 10, 2014.
Our compensation practices are designed to be competitive and balanced.
| • | We target compensation at the 50th percentile, or median, of our peer group. |
| • | We target the 50th percentile of our peer group for our equity award budget. We are mindful of stockholder dilution and the potential dilutive effect is considered against our peer group levels.We provide broad-based grants to nearly all of our full-time staff members and our Board of Directors, or Board. The rates at which we grant awards of stock and its potential dilutive effect are consistent with our peer group levels and have decreased over the last five years. |
We have objective criteria for selection of our peer group and review our peer group annually. We draw our peers from biotechnology and pharmaceuticals companies as we believe they are our direct competitors for executive talent and have comparable enterprise requirements and complexity.
44 ï 2015 Proxy Statement
| COMPENSATION DISCUSSION AND ANALYSIS |
| We Maintain Other Compensation and Governance Best Practices | ||||||
| Clawback | • | We have a clawback policy that | ||||
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| • | We have strong LTI equity award plans and policies that prohibit re-pricing or backdating of equity awards. | |||||
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| Tax Gross-Ups | • | We | ||||
| Change of Control | • | We do not have | ||||
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| Any performance awards earned upon a change in control are | ||||
In the event of a change of control, double-trigger cash severance islimited to a multiple of two times target annual cash compensation. | ||||||
| Limited Additional
| • | Our perquisites are limited to those with a clear business-related | ||||
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| • | We do not have defined benefit pension or | |||||
PURPOSES SERVED BY PRIMARY ELEMENTS OF COMPENSATIONï 2015 Proxy Statement45
| COMPENSATION DISCUSSION AND ANALYSIS |
How Compensation Decisions Are Made For Our executive compensation program is comprised of three primary elements presented below in order of magnitude and alignment with pay for performance.Named Executive Officers
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EXECUTIVE COMPENSATION OBJECTIVES
Our executive compensation program is designed to achieve the following objectives:
Pay for performance in a manner that strongly aligns with stockholder interests by rewarding performance on both a short- and long-term basis. Our executive annual cash incentive award and equity incentive programs for 2012 depended primarily on achieving our business and financial goals, growth in the price of our Common Stock and our relative long-term TSR. The largest portion of LTI equity awards granted to our NEOs is based on the relative performance of our TSR over a three-year period. We generally do not offer defined benefit or traditional executive supplemental defined benefit pension plans to our NEOs.
Attract, motivate and retain the highest level of executive talent by providing competitive compensation, consistent with their roles and responsibilities, our success and their contributions to this success. To attract executive talent with proven skills and experience, we believe the inducements and compensation packages we offer need to provide a sufficient catalyst for executives to agree to join our management team, account for compensation lost in joining our team and compare favorably to compensation obtainable at companies where we compete for high caliber executive talent.
Mitigate compensation riskby maintaining pay practices that reward actions and outcomes consistent with the sound operation of our Company and with the creation of long-term stockholder value. Examples include our clawback policy, which applies to cash or equity compensation payouts awarded to executive officers, and our recoupment provisions. Another example is our executive stock ownership guidelines, which, by requiring executives to hold significant amounts of the Company’s equity, further align their interests with the interests of our stockholders and our long-term success.
Consider all Amgen staff members in the design of our executive compensation program, to ensure a consistent approach that encourages and rewards all staff members who contribute to our success. As a result, although our NEOs receive compensation commensurate with their level, there are no special plans for our NEOs.
HOW COMPENSATION DECISIONS ARE MADE FOR OUR NAMED EXECUTIVE OFFICERS
Primary Roles and Responsibilities | |||||
Compensation Committee (Comprised solely of independent directors and reports to the Board) | • | Evaluates the performance of Company. | |||
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officers (collectively, “Senior Management”). | |||
| • | Reviews and approves all compensation programs in which our NEOs participate. | |||
| • | Oversees the development planning for members of Senior Management. | |||
| • | Oversees the Board’s relationship with and response to stockholders on executive compensation | |||
| • | Exercises the sole authority to select, retain, replace and/or obtain advice of compensation and benefits consultants, legal counsel and other outside advisors and conducts an analysis of the independence of each such advisor. | ||||
Consultant to the Compensation Committee (Frederic W. Cook & Co., Inc.– independent consultant retained directly by the Compensation Committee) | • | Regularly attends Compensation Committee meetings, including meeting in executive session with the Compensation Committee. | |||
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| Provides advice on the appropriateness and competitiveness of our compensation program relative to market practice, including advising the Compensation Committee on the selection of our peer group. | ||||
• | Consults on executive compensation trends and developments. | ||||
• | Consults on various compensation matters and recommends compensation program designs and practices to support our business strategy and objectives. | ||||
| • | Cooperates with management to compile market data and review the appropriateness of such data. | ||||
| • | Works with management to | |||
CEO
(Assisted by the Senior Vice President, Human Resources and other Company staff members) | • | Conducts performance reviews for the other NEOs and makes recommendations to the Compensation Committee with respect to compensation of than himself. | |||
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members of Senior Management other than himself. | |||
46 ï 2015 Proxy Statement
| COMPENSATION DISCUSSION AND ANALYSIS |
Use of Independent Compensation Committee Consultant
To assist the Compensation Committee in its review and determination of executive compensation, the Compensation Committee retained and sought advice from Frederic W. Cook & Co., Inc., or Cook & Co., an independent consultant, throughout 20122014 and to date in 2013.2015. George B. Paulin, the CEOChairman of Cook & Co., worked directly with the Compensation Committee in the roles and undertaking the responsibilities previously described in the table above. In addition, in determining the compensation of Messrs. Bradway“How Compensation Decisions Are Made for Our Named Executive Officers” and Sharer for 2012, the Compensation Committee considered specific market data and recommendations prepared by Cook & Co. concerning CEO transitions and CEO retirement. In 2012, Cook & Co. alsospecifically provided consultation regarding dividend policiesregulatory updates, selection of our peer group and market practices for equity awards and an equity plan authorization analysis.NEO compensation.
On a periodic basis, the Company purchases proprietary executive compensation survey data from Cook & Co. to inform the Compensation Committee’s decisions, but does not engage Cook & Co. for any other services to the Company. During 2012,2014, the Compensation Committee, as in past years, had responsibility for engaging Cook & Co. and directed the nature of the communicationsactivity and interchange of data between Cook & Co. and management. In addition, also during 2012, the Governance and Nominating Committee engaged Cook & Co. to assist in a review of director compensation.
Peer Group
The Compensation Committee recognizes the unique demands of our industry, including its complex regulatory and reimbursement environment, and the challenges of running an enterprise focused on the discovery, development, manufacture and commercialization of novelinnovative treatments to address serious illness. The Compensation Committee believes that these unique demands require executive talent withthat has significant industry experience as well as, for certain key functions, unique scientific expertise to oversee research and development activities and the complex manufacturing requirements for biologic products. Further, the Compensation Committee believes that these very specific skills and capabilities limit the pool of talent from which we can recruit and also cause our employees to be highly valued and sought after in our industry.
This makes it imperative forthat our peer group tofor compensation purposes include those wherecompanies with which we compete for new executives given the similarities in experience and knowledge that are
developed at these companies. For example, Messrs. Peacock and Hooper, our two most recently hired NEOs from outside of our company, and Dr. Harper, a recent internal promotion to an executive officer position, each previously worked for companies in our peer group. Moreover, as evidenced by the fact that thirteen13 of the fifteen15 companies in our peer group (10 U.S.-based companies) also list us as a peer, we believe that our peer group most accurately reflects those companies with whom we compete for executive talent. The Compensation Committee compares our pay levels and programs to those of thisthe peer group and uses this comparative data as a reference point in its review and determination of executive compensation. OurThe Compensation Committee’s approach however, also considers our performance, and the individual’s performance and other relevant factors in setting pay as opposedpay.
In July 2014, Cook & Co. reviewed our peer group with the Compensation Committee to simply establishing target levels of compensation at specific benchmark percentiles.
determine whether it remained appropriate. Based in part on recommendations from Cook & Co., the Compensation Committee usesdetermined that the peer group remained appropriate and continued to meet the following objective criteria in selecting its peer group from the universe of other pharmaceutical and biotechnology companies:companies given that our relative size and positioning remains generally the same as the prior year:
our GICS codes of biotechnology (352010) and pharmaceuticals (352020);
12-month average market capitalization between 0.25 and 4.0x that of Amgen’s average market capitalization for the same period;
trailing four-quarter revenues between 0.25 and 4.0x that of Amgen’s revenues;
non-U.S. peers limited to those commonly identified as a “peer of peers”;
competitors for executive talent;
companies that compete directly with our products (ten companies in our fifteen-company peer group have products that compete directly with our products);of comparable scope and complexity;
competitors for equity investor capital;
companies that identify us as their direct peer (thirteen companies in our fifteen-company peer group include Amgen in their peer groups);
companies that generally compare in market capitalization and/or revenues;peer; and
companies with similar pay models.practices.
To address concerns of our stockholders and in responseTherefore, no changes were made to the reduction in the number of peer group companies resulting from merger activity, in 2011 we rebalanced our peer group for 2012 compensation decisions to include Allergan, Inc. and Celgene Corporation. These companies were chosen because they are among those in our industry with which we compete for executive talent, and to provide greater balance with our peer group in terms of market capitalization2014 and revenues.
2012 Peer Group
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The market capitalization of our peer group ranged between $26.7 billion and $179.1 billion determined as of the last trading day of 2011 as provided by Bloomberg L.P. The 2011 revenues of our peer group ranged between $4.8 billion and $67.4 billion based on filings with the Securities and Exchange Commission, or SEC, except for Roche Group which was obtained from data disclosed on their website. Amgen’s 2011 market capitalization and revenues were $56.3 billion and $15.6 billion, respectively. The median 2011 market capitalization and revenues of our peer group (not including Amgen) was $87.6 billion and $38.9 billion, respectively. While our revenues and market capitalization are below the median values for the peer group, it is the Compensation Committee’s view that this peer group is the most appropriate for benchmarking executive compensation becauseas these companies are generally those in our industry wherewith which we most closely compete against for executive talent.
ï 2015 Proxy Statement47
| COMPENSATION DISCUSSION AND ANALYSIS |
2014 Peer Group
• AbbVie Inc.(1) • Allergan, Inc. • AstraZeneca PLC • Biogen Idec Inc. • Bristol-Myers Squibb Company • Celgene Corporation • Eli Lilly and Company • Gilead Sciences, Inc. | • GlaxoSmithKline plc(2) • Johnson & Johnson • Merck & Co., Inc. • Novartis AG • ��Pfizer Inc. • Roche Holding AG(2) • Sanofi S.A. (formerly Sanofi-Aventis)(2) |
The market capitalization of our peer group ranged between $33 billion and $258 billion determined as of the last trading day of 2013 as provided by ThomsonONE™. The 2013 revenues of our peer group ranged between $6.3 billion and $71.3 billion based on public filings. Amgen’s 2013 market capitalization and revenues were $86 billion and $18.7 billion, respectively. The median 2013 market capitalization and revenues of our peer group (not including Amgen) was $115 billion and $25.7 billion, respectively. We were between the 25th percentile and median relative to all of our peer group and in the range of median relative to our U.S. peers.
Peer Group Data
Our primary data sources for evaluating all elements of compensation for our CEO and other NEOs’ compensation against the peer group in March 20122014 were the 20112013 Towers Watson Pharmaceutical Human Resources Association, or PHRA, Executive Compensation Survey (the 2013 Towers Survey), and the available data from proxy statements filed in 20112013 with the SEC for our peer group. The 2013 Towers Survey contains compensation information from pharmaceutical companies in our peer group, but does not contain information on many biotechnology companies. Therefore, compensation information for the biotechnology companies within our peer group is compiled by Equilar using proxy statement filings to provide additional data and to inform the
Compensation Committee. The 2013 Towers Survey data and the peer group proxy data is compiled and presented by management to the Compensation Committee both individually and in the aggregate, including the rankingcomparison of theeach NEO against those in similar positionson a position or pay rank basis and an analysis of each element of direct compensation at the 25th percentile, median and 75th percentile of the peer group for each NEO position, other than for Messrs.Mr. Bradway, and Sharer, as our CEOs. In consideringCEO. For Mr. Scott’s compensation,Bradway, Cook & Co. provides data to the Compensation Committee reviewed Towers Survey dataof the median and a range between the 25th percentile and 75th percentile of the specific compensation elements paid to CEOs in our peer group. In addition to the sources provided previously, for his position because Mr. Scott was not a named executive officer at the time his compensation was determined.
In connection with our CEO succession plan in March 2012,determination of LTI equity awards, we also considered the Cook & Co. presented data regarding (i) CEO compensation values at the 25th percentile, median and 75th percentile, and (ii) compensation payable to retiring CEOs, each as derived from our peer group and companies within the Standard & Poor’s 100 over the past three years. The data regarding compensation paid to CEOs within our peer group differed from the information prepared for the other NEO positions because Cook & Co. accessed updated proxy statement filings and Form 8-K reports filed through the date2013 Survey of Cook & Co.’s report.Long-Term Incentives.
In the tables below, in general, the “Market Median” is derived by averaging the values of the 20112013 Towers Survey 50th percentile and the 20112013 peer group proxy statement 50th percentile, except for Messrs.Mr. Bradway and Sharer, as our CEOs.CEO. The Market Median shown for Messrs.Mr. Bradway and Sharer iswas the median of the specific
compensation elements paid to CEOs in our peer group, as reported by Cook & Co. from proxy statement filings and Form 8-K reports.filings. Mr. Hooper’s position was not well-represented in either the 2013 Towers Survey or peer group proxy statements and, accordingly, based on his position as Executive Vice President, Global Commercial Operations with its global scope and span as well as degree of importance to the
| (1) | For purposes of the 2012-2014 performance award program, Abbott Laboratories and a weighted TSR for Abbott Laboratories and AbbVie starting on January 1, 2013 was used. This is described under “Elements of Compensation and Specific Compensation Decisions—Long-Term Incentive Equity Awards—Performance Units—Performance Award Program—Performance Units Earned for the Performance Period Ending in 2014.” |
| (2) | Revenues for GlaxoSmithKline plc, |
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ELEMENTS OF COMPENSATION AND SPECIFIC COMPENSATION DECISIONS48 ï 2015 Proxy Statement
| COMPENSATION DISCUSSION AND ANALYSIS |
Company, Mr. Hooper was matched to the median of the second highest paid NEOs in the 2013 Towers Survey. No market comparable position data was available for Mr. Balachandran because his position as Executive Vice President, Operations had no comparable position included in the 2013 Towers Survey or peer group proxy statement filings as our peer group companies did not have individuals
in similarly global positions. Mr. Balachandran’s position was unique, as compared to positions reported in the 2013 Towers Survey and the peer group proxy statements, because it includes global oversight of all of the Company’s manufacturing operations, quality and product and process engineering.
Elements of Compensation and Specific Compensation Decisions
Described below are our three primary elements of executive compensation in order of magnitude.magnitude and alignment with pay for performance: LTI equity awards; annual cash incentive awards and base salaries.
Long-Term Incentive Equity Awards
Long-Term Incentive Equity Award Grant Guidelines
WeOur compensation program aims to achieve the appropriate balance of compensation relative to the responsibilities of our staff members, with the result that the largest proportion of the compensation program for our CEO and the other executive officers is in the form of LTI equity awards that are risk-based and closely aligned with the creation of long-term stockholder value. Equity-based compensation represents 72% of our CEO’s compensation and 64% of compensation for our other NEOs. In addition, we also grant LTI equity awards each year to nearly all of our approximately 18,000 staff members worldwide to emphasizeincrease awareness of how our performance impacts stockholder value.
Company Continues to Exercise Discipline in the Grant of Long-Term Incentive Equity Awards
Our compensation philosophy, practices and provide incentives for long-term Company performance andapproach continue to be effective in balancing the use of equity to align employees with our stockholders while being mindful of the interestslevel of every staff member with thosedilution that our stockholders experience. The Compensation Committee sets an LTI budget that is approximately at the 50th percentile, or median, of our stockholders. peer group because, while the Compensation Committee supports a broad-based equity plan to align our staff members with our stockholders, based on the rates at which we grant LTI equity awards the Compensation Committee strives to limit the amount of stockholder dilution to that which would be expected to be experienced by stockholders of our peer group. The rates at which we grant LTI equity awards and its potential dilutive effect is consistent with our peer group levels and has decreased over the last five years.
LTI equity award grant guidelines for each job level within the Company are then set based on the size of the annual total LTI equity award budget and peer group market data. When determining thebudget. We believe that our capacity to grant guidelines forequity-based compensation has been a significant factor in achieving our executive officers and each NEO’s grant level, the Compensation Committee considers the goal of tying more compensation to the interestsstrategic objectives by rewarding execution of our strategy and stock price appreciation, aligning our NEOs’ and staff members’ interests with stockholders and the desire to be competitive among our peer group. We had extensive conversations with our stockholders following our 2011 say on pay vote. During these conversations, our stockholders acknowledged the lack of more traditional forms offostering long-term wealth creation or retention programs, such as a defined benefit pension plan or subsidized Company-provided retiree medical plans that exist in our peer group, but also recommended targeting a lower percentile among our peer group for our LTI equity awards.focus and retention.
In response, the Compensation Committee reduced the targeted benchmark measure for our LTI equity award budget for 2012 by 25 percentage points to the 50th percentile, or median, of our peer group. The Compensation Committee believes that the 50th percentile is an appropriate competitive target level for our 2012 LTI equity awards budget because it is responsive to our stockholders’ concerns about targeting a higher LTI equity award value while maintaining competitive positioning. In addition, the Compensation Committee changed its methodology effective with April 2012 grants so that the Compensation Committee grants shares based on a specific dollar valuation rather than a specific number of shares to avoid the impact of fluctuations in the stock price between the date on which the Compensation Committee determines the grant amount and the actual grant date, thus ensuring that value is delivered as intended.
Long-Term Incentive Equity Award MixComposition
Effective for LTI equity awards granted to our NEOs in 2012, the Compensation Committee changed the LTI equity award mix to2014 consisted of 80% performance units and 20% RSUs and eliminated stock options. These changes were madeRSUs.
This allocation results in response to stockholder feedback and to provide a greater percentagethe substantial majority of equity compensation that isbeing earned predominantly based on our measurableachieved performance. We believe it is important to retainmaintain a relatively small percentage of equity awards in the form of RSUs to provide retention incentives.incentivize retention. This mixcomposition of LTI equity awards also facilitates a more efficient use of the shares available under our LTI equity award plan and minimizes dilution as fewer shares are used when granting performance units and RSUs than when grantingas compared to stock options. Performance units are generally earned at the end of the three-year performance period to the extent to which the performance
In addition, since 2011, our
ï 2015 Proxy Statement49
| COMPENSATION DISCUSSION AND ANALYSIS |
goals for the applicable period are met. Our time-vested RSUs generally vest over four years, with no vesting in the first year and vesting in approximately three approximately equal annual installments on the second, third and fourth anniversaries of the grant date. Prior to 2011, our time-vested RSUs and stock options vested indate (instead of four equal annual installments commencing on the first anniversary of the grant date.date). This delay in the commencement of RSU vesting further emphasizes the long-term performance focus of our LTI equity award program and enhances the retentionretention.
Value of talented staff members. Performance units are generally earned at the end of the three-year performance period based on the extent to which the performance goals for the applicable period are met.
Long-Term Incentive Equity Awards Granted to Named Executive Officers in 20122014
During 2012,In December 2013, the Compensation Committee considered executive LTI equity award grants for 2014. To determine 2014 executive LTI equity award grant compensation, the Compensation Committee compared the value of the 20122014 annual LTI equity awards for each NEO being recommended by management to the Market Median50th and 75th percentile of the peer group for each available NEO position (as more specificallypreviously described above under “Peer Group Data”).
The Compensation Committee also took ourthe Company’s performance, and the individual’s performance in their role and historical grant levels into account when determining individual grants. Given
In reviewing the proximitypeer group market data, the Compensation Committee took into account the reduction in the median values of competitive marketour peer group. Also, the Compensation Committee noted the difference in LTI equity award values for each position,our Executive Vice President roles (or their equivalents). As a result, the
Compensation Committee approved reduced values for LTI equity award grants made in 2014 from those made in 2013 for all NEOs, other than the CEO, to respond to lower median values among our peer group for those roles. Also, the Compensation Committee approved slightly higher grant values for Mr. Hooper and Dr. Harper than granted to Mr. Balachandran because Mr. Hooper and Dr. Harper are viewed as having positions that have comparable impact to the execution of the Company’s strategy, whereas Mr. Balachandran’s role was viewed to be more comparable to the Chief Financial Officer market data available shown in the table below. The Compensation Committee awarded the same equity award grant value to each NEO at the Executive Vice President level. Additionally, the Compensation Committee believes that internal parity among the NEO group at the same level is a valuable tool to promote an effective team.
Mr. Scott, a Senior Vice President, received an annual 2012 grant at a level higher than other Senior Vice Presidents, yet below the Executive Vice Presidents, to serve as an incentive for Mr. Scott to remain at the Company during the execution of our executive transitions and corporate reorganization. Mr. Bradway was promoted to CEO in May 2012 and, in connection with the assumption of the CEO role, he received an increased 2012 annuala LTI equity award grant valuevalued higher than in 2013 to address his increased responsibilities, while still reflectingmaintain median positioning against our shift in compensation philosophy to targetpeer group for this position as the Market Median of2013 median for the CEO peer group. In determiningposition increased over the value of Mr. Sharer’s grant of 2012-2014 performance units and the 2012 annual grant of RSUs, the Compensation Committee also targeted the Market Median of the peer group and reduced the amount that would have otherwise been granted to Mr. Sharer to reflect his shortened service period as the CEO through May 23, 2012. In addition, given the reduced amount awarded to Mr. Sharer, the Compensation Committee determined that the provisions of his equity award agreements normally requiring pro-ration of the performance units earned or RSUs vesting upon the occurrence of certain events, including death, disability or retirement, should not apply to his grant of 2012-2014 performance units or RSUs. Lastly, in connection with Dr. Harper’s promotion to Executive Vice President, Research and Development, effective February 2012, the Compensation Committee determined to increase the value of Dr. Harper’s annual LTI equity award opportunity from a total equity value granted of $1,300,000 to $3,100,000 to reflect his new responsibilities and align Dr. Harper with the other Executive Vice Presidents.prior year.
2014 Long-Term Incentive Equity Awards
Given the design of our performance award program, there is no guarantee of any value realized from grants of performance units as they are dependent on our relative TSR. Reflecting our shift in philosophy of targeting the 50th percentile, or median, of our peer group for LTI equity awards, theThe Compensation Committee granteddetermined to grant the following LTI equity awards to our CEO and the other NEOs in March 2012. This annual equity award table does not reflectDecember 2013, with an effective grant date in January 2014. The Compensation Committee approves the special grantsaggregate grant value, with the exact number of performance units and RSUs to Messrs. Hooper and Scottdetermined based on January 31, 2012, described more fullythe fair value of such awards in the footnotes to80% performance units/20% RSUs proportion on the table below.date of grant. For more information regarding the determination of Market Median and the peer group data reviewed, see “Peer Group Data” above. Mr. Sharer’s Market Median reflects his shortened period of service as CEO through May 23, 2012 and the Market Median is similarly reduced.previously discussed.
Named Executive Officer | Performance Units ($) | Restricted Stock Units ($) | Total Equity Value Granted ($) | Market Median ($) | Difference vs. Market Median Over/ (Under) (%) | ||||||||||||||||||||
Robert A. Bradway | 6,000,000 | 1,500,000 | 7,500,000 | 7,500,000 | 0 | ||||||||||||||||||||
Kevin W. Sharer | 2,560,000 | 640,000 | 3,200,000 | 3,125,000 | 2 | ||||||||||||||||||||
Anthony C. Hooper(1) | 2,480,000 | 620,000 | 3,100,000 | 3,056,457 | 1 | ||||||||||||||||||||
Jonathan M. Peacock | 2,480,000 | 620,000 | 3,100,000 | 3,331,238 | (7) | ||||||||||||||||||||
Fabrizio Bonanni(2) | 2,480,000 | 620,000 | 3,100,000 | n/a | n/a | ||||||||||||||||||||
Sean E. Harper | 2,480,000 | 620,000 | 3,100,000 | 3,010,481 | 3 | ||||||||||||||||||||
David J. Scott (3) | 1,760,000 | 440,000 | 2,200,000 | 2,007,900 | 10 | ||||||||||||||||||||
| Named Executive Officer | Performance ($) | Restricted ($) | Total Equity ($) | Market Median ($) | Difference vs. Market Median Over/ (Under) (%) | |||||||||||||||
Robert A. Bradway | 7,200,000 | 1,800,000 | 9,000,000 | 8,875,000 | 1.4 | |||||||||||||||
Anthony C. Hooper | 2,400,000 | 600,000 | 3,000,000 | 3,754,503 | (20.1 | ) | ||||||||||||||
David W. Meline | (1) | (1) | (1) | (1) | n/a | |||||||||||||||
Sean E. Harper | 2,400,000 | 600,000 | 3,000,000 | 2,756,373 | 8.8 | |||||||||||||||
Madhavan Balachandran | 2,240,000 | 560,000 | 2,800,000 | 2,839,588 | (1.4 | ) | ||||||||||||||
Michael A. Kelly | 280,000 | (2) | 1,370,000 | (2) | 1,650,000 | (2) | n/a | n/a | ||||||||||||
Jonathan M. Peacock | n/a | (3) | n/a | (3) | n/a | (3) | (3) | n/a | ||||||||||||
| (1) |
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50 ï 2015 Proxy Statement
| COMPENSATION DISCUSSION AND ANALYSIS |
| (2) |
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| (3) |
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Mr. Meline’s New Hire Equity Grant
Mr. Meline was appointed to serve as the Company’s Chief Financial Officer effective July 21, 2014. Mr. Meline received an RSU grant with a value of $6,800,000 to compensate Mr. Meline for equity forfeited as a result of his leaving his previous employer, to induce him to join the Company and to provide LTI equity awards that are in alignment with the Company’s stockholder interests.
Mr. Kelly’s Equity Grants
Mr. Kelly was appointed to serve as the Company’s Acting Chief Financial Officer on January 10, 2014. In connection with Mr. Kelly being asked to serve in this important capacity while the Company recruited a Chief Financial Officer, Mr. Kelly received a special RSU grant the value of which was $1,000,000 to compensate Mr. Kelly for his service as Acting Chief Financial Officer for the amount of time it was anticipated the search for a Chief Financial Officer would take. The first 50% of such grant vested on June 30, 2014 and the remaining 50% will vest on June 30, 2015, subject to Mr. Kelly’s continued service with the Company. In April 2014, in connection with our annual LTI equity award grants to all staff members, Mr. Kelly received his annual grant valued at $350,000 (with performance units valued at $280,000 and RSUs valued at $70,000), commensurate with Vice President job level LTI equity award values. Mr. Kelly served as Acting Chief Financial Officer until Mr. Meline’s appointment to Chief Financial Officer in July 2014 and assisted in the transition of Mr. Meline.
After Mr. Meline’s appointment to Chief Financial Officer, Mr. Kelly was appointed to lead Global Business Services as a Vice President. In October 2014, Mr. Kelly was promoted to Senior Vice President, Global Business Services effective January 5, 2015. Based on the scope and strategic importance of Mr. Kelly’s new position, he received a promotion RSU grant valued at $300,000 in October 2014. This grant, when coupled with his 2014 annual grant of $350,000, brought his total annual grant level commensurate with typical Senior Vice President job level LTI equity award values.
Performance Units
The Compensation Committee grants performance units to tie actual compensation earned from LTI equity awards directly to our long-term performance. Performance units are rights to receiveearn shares of our Common Stock, based on pre-established performance goals achieved over a performance period, generally three years. Each performance unit earned entitles the participant to one share of the Company’s Common Stock. Performance units granted to our NEOs in 2014 represented 80% in value of their total LTI equity awards, ensuring that a significant proportion of equity compensation is earned based on the performance achieved by the Company.
Performance Award Program—Performance Units AwardedGranted in 20122014 for the 2012-20142014-2016 Performance Period
In March 2012, theThe Compensation Committee decidedregularly reviews and considers whether to retain the design ofupdate the performance goalsaward goal design with input from management and Cook & Co. This is to ensure that the 2011-2013 performance period, which was based wholly onaward program continues to strongly align with the relative ranking of the Company’s TSR results against the average of the TSRs of the fifteen companies in our peer group. We believe TSR is an important metric as it provides the greatest indication of stockholder alignment and ensures that compensation realized reflects our stock performance relative to thatinterests of our peer group. The payout percentage equals 100% plus two times the TSR percentage difference of our TSR less the average of the TSRs of our peer group, which may be a positive or negative amount. The number of performance units earned at the end of the performance period continues to range from 0% to a maximum of 150% of the target performance units granted for the 2012-2014 performance period.
For example, assume that a participantstockholders. Based on such review, in the 2012-2014 performance period grant has 1,500 target performance units and that at the end of the performance period, our TSR is 15% and the average of the TSRs of our peer group is 9%. In this illustration, our TSR percentage is six percentage points above the peer group average. The resulting payout percentage would be 112% of target equal to 100% plus two times the positive TSR percentage difference. The participant would thus earn 1,680 shares of our Common Stock, equal to multiplying 1,500 performance units by the 112% payout percentage.
Performance Award Program—2013–2015 Performance Period
In December 2012,2013, the Compensation Committee approved a performance award goal design and calculationfor the 2014-2016 performance period substantially identical to that of last year’s performance awards (i.e., for the 2013-2015 performance periodperiod) based wholly on the relative ranking of the Company’s three-year TSR results against the three-year TSR results of the companies listed in the S&P 500 as of the grant date. We believeThe continued use of this design is based on the belief that a comparison to the S&P 500 companies:
Allows comparison to broader market performance indicators which is more representativea realistic representation of our capital market competitors versusstockholders’ investment opportunities;
Addresses the challenges of using a single performance metric (TSR) given the broad comparator group; and
Tests our labor market competitors, provides continuity from year to year and reduces the statistical bias that can occur in a relative comparison to a small sample. Our TSR and the S&P 500 TSRs are calculated using the average daily closing Common Stock price per shareperformance against our competition for the Company and each of the S&P 500 companies for the twenty trading days starting on the grant date and the last twenty trading days of the 2013-2015 performance period. equity investor capital.
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| COMPENSATION DISCUSSION AND ANALYSIS |
The target payout (100%)of 100% of the units granted requires our TSR to rank at the 50th percentile, maximum payout of 150% is based on 75th percentile ranking or median. Thresholdabove, 50% payout is based on 25th percentile ranking and maximum0% payout is based on bottom ranking, with linear interpolation between bottom ranking and 75th percentile ranking resulting in payouts areranging from 0% andto 150%, respectively. Notwithstanding our ranking, of the target performance units granted. However, in the event our absolute TSR is less than zero, the payout percentage shall not be greater than 100%., notwithstanding our ranking, to limit rewards in a performance period in which we perform in-line with, or better than, the S&P 500 companies but investors do not recognize growth in their investment in our Company.
The grant date of LTI equity awards to our executive management (comprised of Senior Vice Presidents and above), including our NEOs, is the third business day after the announcement of our annual results in January and the performance period commences on the grant date. The stock prices for TSR measurements is determined using the 20 trading days starting on the grant date and the last 20 trading days of the performance period, which reduces the effect of random stock price volatility on a given day or over a shorter time period.
Performance Award Program – Program—2015–2017 Performance Period
In December 2014, the Compensation Committee decided to retain the design of the performance goals for the performance units granted for the 2015-2017 performance period as previously described.
Performance Award Program—Performance Units Earned for the Performance Period Ending in 20122014
Performance units for the 2010-20122012-2014 performance period were paidearned and converted into shares of Common Stock in March 2013, based upon our 2010 revenues and 2010 adjusted EPS weighted equally,2015, calculated as set forth in alignment with our 2010 GMIP Company performance goals, and modified at the end oftable below using a payout percentage resulting from the three-year performance period by a relative TSR multiplier based on the rankingscomparison of our three-year TSR results compared with(185.7%) to the TSRsaverage three-year TSR of the companies in the comparator group for the 2010-2012this performance period. Ourperiod (125.8%). The comparator group for this performance period was our peer group at the time the performance goals were set in 2010.
The relative TSR multiplier is based on the ranking2012. However, Abbott Laboratories, a member of our three-year TSR compared with the three-year TSRs of the fourteen companies (Amgen and our 2010 peer group) in our peer group in 2012, spun off its pharmaceutical business into a new company called AbbVie Inc. in 2013. As a result of the Abbott Laboratories spin-off, in compliance with pre-established performance goals and Section 162(m) of the Internal Revenue Code, or Section 162(m), the Compensation Committee determined that AbbVie Inc. should replace Abbott Laboratories on a go-forward basis and that we would use a weighted TSR of 47.85% Abbott Laboratories (the proportion of the performance period before the spin-off) and 52.15% AbbVie Inc. starting January 1, 2013, the effective date of the spin-off.
For the awards granted in 2012 whose performance period ended December 31, 2014, the payout percentage equals 100% plus two times the TSR percentage difference of our TSR less the average of the TSRs of our comparator group companies which may be a positive or negative amount, with actual results shown in the table below. The number of performance units earned at the commencementend of
the performance period. The relative TSR multiplier is expressed asperiod ranges from 0% to a percentagemaximum of 150% of the target performance units granted.
52 ï 2015 Proxy Statement
| COMPENSATION DISCUSSION AND ANALYSIS |
2012-2014 Performance Award Program Results and varies depending on our ranking with the comparator group companies. The maximum TSR multiplier that can be achieved is 160%. Payouts
The performance results and performance units earned for our 2010-20122012-2014 performance period are as follows:
| Performance Goals for the 2010-2012 Performance Period | ||||||||||||||
| Measures | Threshold | Target | Maximum | Actual Performance | Percentage Earned | |||||||||
2010 Revenues(1) | $14.352 billion earns 0% | $15.102 billion earns 50% | $15.852 billion earns 62.5% | $15.053 billion | 46.7 | % | ||||||||
2010 Adjusted EPS(2) | $4.74 earns 0% | $4.99 earns 50% | $5.24 earns 62.5% | $5.21 | 61.1 | % | ||||||||
Overall Percentage | 0% | 100% | 125.0% | 107.8 | % | |||||||||
| Relative TSR Multiplier for the 2010-2012 Performance Period | ||||||||||||||
| Measure | Threshold | Target | Maximum | Actual | Multiplier | |||||||||
Relative TSR | 50% for a ranking of 10th through 14th | 100% for a 6th through 9th | 160% for a ranking of 1st | Ranking of 3rd | 133.7 | % | ||||||||
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Payout Calculation for the 2010-2012 Performance Period:
| Payout Percentage: | ||||||||||
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| 2 X | ( | |||||||
| (1) | We achieved a payout percentage of 219.8%, however the payout percentage was capped at 150% as the maximum for the 2012-2014 performance award program. |
| Payout Calculation for the 2012-2014 Performance Period: | ||||||||||||
Common Stock Earned | = | Performance Units Granted | X | Payout Percentage (150%) | ||||||||
Our actual performance results for the performance periods that ended in 20122014 resulted in the following value of Common Stock being earned under our performance award program:program for the 2012-2014 performance period:
Named Executive Officer | Number of Units Granted (Target) | Number of Shares of our Common Stock Earned(1) | ||||||||
Robert A. Bradway | 24,000 | 34,584 | ||||||||
Kevin W. Sharer | 91,000 | 131,131 | ||||||||
Anthony C. Hooper(2) | 35,185 | 52,777 | ||||||||
Jonathan M. Peacock(3) | n/a | n/a | ||||||||
Fabrizio Bonanni | 24,000 | 34,584 | ||||||||
Sean E. Harper | 9,200 | 13,257 | ||||||||
David J. Scott | 11,500 | 16,571 | ||||||||
| Named Executive Officer | Performance Units ($) | Shares (#) | Shares (#) | |||||||||
Robert A. Bradway | 6,000,000 | 83,752 | 125,628 | |||||||||
Anthony C. Hooper | 2,480,000 | 34,617 | 51,925 | |||||||||
David W. Meline | (2) | (2) | (2) | |||||||||
Sean E. Harper | 2,480,000 | 34,617 | 51,925 | |||||||||
Madhavan Balachandran | 720,000 | 10,050 | 15,075 | |||||||||
Michael A. Kelly(3) | 405,312 | 4,800 | 7,200 | |||||||||
Jonathan M. Peacock(4) | 2,480,000 | 34,617 | 0 | |||||||||
| (1) |
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| (2) | Mr. |
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| (3) | Mr. |
| (4) | Mr. Peacock ceased service as our Chief Financial Officer as of January 10, 2014 and is no longer an employee. |
Initial Hire Performance Units for Mr. Hooper.Hooper
To compensate Mr. Hooper’sHooper for equity forfeited as a result of his leaving his previous employer, to induce him to join us and to provide long-term incentives that are in alignment with stockholder interests, certain performance units were based solelyawarded upon our TSRhis hiring in October 2011. The last of these new hire performance as compared with the average of the TSRs of our peer group during theunit awards had a performance period running from Mr. Hooper’shis hire date of October 27, 2011 throughand ending on December 31, 2012.2014 with a grant of 35,185 performance units. The performance award goal design for these this
performance unit awardsaward is identical to that of the 2011-20132012-2014 performance period previously discussed, including a maximum payout of 150%. These performance units were calculated using a payout percentage that is based upon our three-year TSR (204.2%) for the period compared to the average three-year TSR of the companies in the comparator group for this performance period (139.5%) and resulted in a payout percentage that was limited to the maximum of 150%, or 52,777 performance units.
ï 2015 Proxy Statement53
| COMPENSATION DISCUSSION AND ANALYSIS |
Value of Long-Term Incentive Equity Awards Granted to Named Executive Officers in 2015
In December 2014, the Compensation Committee considered executive LTI equity award grants for 2015 and compared the proposed value of the 2015 annual LTI equity awards except that Allergan, Inc.for each NEO being recommended by management to the 50th and Celgene Corporation were added to75th percentile of the peer group used to calculatefor each NEO position and between the payout, resulting in a fifteen-company35th and 85th percentile of the Company’s peer group with respect to our CEO (as previously described under “Peer Group Data”). The Compensation Committee also took the Company’s and the individual’s performance into account when determining individual grants. In reviewing the peer group market data, the Compensation Committee determined that the peer group data supported greater differentiation among LTI equity award values in 2015 for these awards. The maximum payout amountExecutive Vice President roles. As such, Mr. Hooper received an increased LTI equity award for 2015 in response to the higher Market Median based on the second highest paid NEOs in 2014 peer group proxy statements and
Mr. Hooper’s role in the 2014 Towers Survey. Dr. Harper received the same LTI equity award grant as the prior year, consistent with the Market Median for his role. Mr. Meline also received an LTI equity award grant approximately at the Market Median for his role. Additionally, although more data was 150%available for the 2015 LTI equity award for Mr. Balachandran than at the time of the 2014 LTI equity award, management and 35,185 performance units were granted forthe Compensation Committee believe that Mr. Balachandran’s position continues to be unique because it includes global oversight of all of the Company’s manufacturing operations, quality, and product and process engineering. As such, this performance period. As a payout percentageposition is still not well-represented in either the peer group proxy statements or the 2014 Towers Survey because this data does not have individuals in similarly global positions. Accordingly, given his strategic importance and pay ranking within our Company, the Compensation Committee determined to set Mr. Balachandran’s LTI equity award level equal to 100% plus two times the TSR percentage difference for the periodhis grant from the previous year.
2015 Long-Term Incentive Equity Award Grants
The Compensation Committee approved the following LTI equity award values to our CEO and the other NEOs in December 2014 for grant date through December 31, 2012 exceeded the maximum payout percentage for the award, the maximum payout percentage was used. The actual payout toin January 2015. Mr. Hooper was 52,777 shares duePeacock ceased service as our Chief Financial Officer as of January 10, 2014 and terminated employment prior to the 150% TSR multiplier.December 2014 grant decisions. For more information regarding the determination of Market Median and the peer group data reviewed, see “Peer Group Data” previously described.
| Named Executive Officer | Performance Units ($) | Restricted Stock Units ($) | Total Equity Value Granted ($) | Market Median ($) | Difference vs. Market Median Over/ (Under) (%) | |||||||||||||||
Robert A. Bradway | 8,160,000 | 2,040,000 | 10,200,000 | 10,235,000 | (0.3) | |||||||||||||||
Anthony C. Hooper(1) | 2,800,000 | 700,000 | 3,500,000 | 3,574,394 | (2.1) | |||||||||||||||
David W. Meline | 2,400,000 | 600,000 | 3,000,000 | 2,971,892 | (4) | 0.9 | ||||||||||||||
Sean E. Harper | 2,400,000 | 600,000 | 3,000,000 | 2,921,167 | (4) | 2.7 | ||||||||||||||
Madhavan Balachandran(2) | 2,240,000 | 560,000 | 2,800,000 | 2,158,919 | (4) | 29.7 | ||||||||||||||
Michael A. Kelly(3) | 560,000 | 140,000 | 700,000 | n/a | n/a | |||||||||||||||
| (1) | See “Peer Group Data” and “Long-Term Incentive Equity Awards” previously described regarding the market data for Mr. Hooper. |
| (2) | See “Peer Group Data” and “Long-Term Incentive Equity Awards” previously described regarding the market data for Mr. Balachandran. |
| (3) | Mr. Kelly served as Acting Chief Financial Officer from January 10, 2014 until July 21, 2014. He is no longer an executive officer and currently serves as Senior Vice President, Global Business Services. A good match for this position is not found in the 2014 Towers Survey or peer group proxy statements. |
| (4) | In addition to the 2014 Towers Survey and the available peer group proxy statement filings, management also presented a Cook & Co. 2014 Survey of Long-Term Incentives to the Compensation Committee to inform their decisions. |
54 ï 2015 Proxy Statement
| COMPENSATION DISCUSSION AND ANALYSIS |
Restricted Stock Units
Time-vested RSUs comprise only 20% of our LTI equity award grants for NEOs. They result in aone share of Common Stock being delivered on the vesting of each RSU and serve as an effectiveimportant and cost-effective retention tool within our mix of grant types because RSUs have intrinsic value on the date of grant and going forward. Our RSUs have annual vesting periods that commence on the second anniversary of the grant date and continue through the fourth anniversary of the grant date.
Stock Options Eliminated in 2012
The Compensation Committee previously granted time-vested stock options to tie compensation to absolute increases in our stock pricegenerally vest over multi-year periods. Stock options are rights to purchase our Common Stock on or after the vesting date at the closing price of our Common Stock on the date of grant. Unlike RSUs, our stock price must increase over the exercise price set at the date of grant for stock options to have any value. In 2012, the Compensation Committee eliminated time-vested stock options for all staff members, including our NEOs, and instead provided greater emphasis on our performance units which, as discussed above, for 2012 are tied exclusively to our TSR as compared with the average of the TSRs of the companies in our peer group.
Terms and Vesting
Beginning with the 2011 annual LTI equity award grants, the Compensation Committee revised the vesting period of RSUs and stock options (the last grants of stock options were made in 2011) from vesting in four equal annual installments commencing on the first anniversary of the grant date, to a delayed commencement of vesting,years in three approximately equal annual installments on the second, third and fourth anniversaries of the grant date.date (instead of four equal annual installments commencing on the first anniversary of the grant date). This action was taken todelayed vesting schedule further emphasizeemphasizes the long-term performance focus of our LTI equity award program and to enhanceenhances the retention of staff members by lengthening the average time from the date of grant over which shares are earned.members.
Dividend Equivalents Added in 2012
In response to the Company’s payment of regular cash dividends to our stockholders, which commenced in September 2011, the Compensation Committee asked Cook & Co. to provide market data regardingWe have dividend equivalent practices. Based on market prevalence, in March 2012, the Compensation Committee approved providing dividend equivalentsrights on RSUs and on performance units granted in 2012.units. Such dividend equivalents are payable only when and to the extent such awards are earned.earned and converted to shares of Common Stock. The dividend equivalents are intended tomay be paid in stock with(with cash paid for fractional shares.
Total Cash Compensation
Target Annual Cash Compensation
Target annual cash is the sum of the NEO’s base salary and target annual cash incentive award. The Compensation Committee believes that target annual cash compensation valued at the Market Median is an appropriate standard, absent unusual or special circumstances. During 2012, the Compensation Committee compared target annual cash compensation for each NEO to the Market Median (as more specifically described above under “Peer Group Data”).
In connection with the Compensation Committee’s review of market practices for CEO retirement, in light of Mr. Sharer’s continued service as an employee and as Chairman of the Board through 2012 and the recommendations of Cook & Co., the Compensation Committee determined to continue Mr. Sharer’s salary throughout 2012 and to pro-rate the 2012 annual cash incentive award earned and the grant of LTI equity award incentives based on the time Mr. Sharer worked as our CEO during 2012.
In March 2012, the Compensation Committee approved target annual cash compensation for each NEO after reviewing and comparing it to the Market Median as set forth below. For more information regarding the determination of Market Median and the peer group data reviewed, see “Peer Group Data” above.
Named Executive Officer | 2012 Amgen Target Annual Cash ($)(1) | Market Median ($) | Difference vs. Market Median Over/(Under) (%) | ||||||||||||
Robert A. Bradway | 3,220,000 | 3,311,000 | (3) | ||||||||||||
Kevin W. Sharer | 4,497,500 | 3,311,000 | 36 | ||||||||||||
Anthony C. Hooper | 1,855,350 | 1,749,188 | 6 | ||||||||||||
Jonathan M. Peacock | 1,675,800 | 1,739,168 | (4) | ||||||||||||
Fabrizio Bonanni(2) | 1,646,540 | n/a | n/a | ||||||||||||
Sean E. Harper | 1,660,220 | 1,868,484 | (11) | ||||||||||||
David J. Scott | 1,523,160 | 1,525,912 | 0 | ||||||||||||
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Annual Cash Incentive Awards
Annual cash incentive awards to our NEOs are generally made under our stockholder approved EIP, which employs a stockholder approved formula that establishes a maximum award possible for each participant. Actualparticipant based on our adjusted net income. Our EIP is an umbrella plan intended to satisfy the performance-based requirements of Section 162(m). This year and in the past, actual awards under the EIP are determined by the Compensation Committee using their negative discretion under the EIP, generally then determined usingbased on the pre-established Company performance goals and results measured under our GMIP. This approach is not purely formulaic, as the Compensation Committee also considers the contributions of
each participant’s role to our success during the performance period. Historically, and in 2014, the Compensation Committee has paid well below the maximum award permitted under the EIP and consistent with the results warranted by our performance under our Company goals. The majority of our staff members participate in our GMIP andor our Value Enhancement Program, or VEP, an annual cash incentive award program also based on our pre-established GMIP Company performance goals and results. During
No later than the first 90 days of the calendar year, the Compensation Committee determines the EIP participants, the EIP definition of adjusted net income, the maximum award payable to each participant under the EIP, the target annual cash incentive award opportunities under the EIP as a percentage of base salary, the GMIP Company performance goals and weightings and the percentages payable for threshold, target annual cash incentive award opportunities asand maximum performance under the GMIP.
For 2014, Messrs. Bradway, Hooper, Balachandran and Kelly and Dr. Harper were each a percentage of base salary. For 2012,participant in the EIP and the maximum award for each participant under the EIP continued to be based on a
percentage of our adjusted net income, as defined in the EIP(1) (0.125% for our CEO, 0.075% for each of the Executive Vice President NEOs and 0.05% for Mr. Scott,Kelly). In 2014, Mr. Meline was a Senior Vice President). Theparticipant in the GMIP because he was not an employee at the time participants in the EIP were determined. Mr. Peacock left the Company prior to the time EIP payments were made and he did not receive any cash incentive award for 2014. In 2014, the Compensation Committee’sCommittee continued its practice has been to exerciseof exercising negative discretion from the calculated EIP maximum award payable to each individual by using the GMIP Company performance goals score as applied to the participant’s target annual cash incentive award opportunity in making its determination of the actual award amount paid. This approach is not purely formulaic, as the Compensation Committee also considers the contributions of each participant to our success during the performance period. Annual cash incentive awards are paid in March of the year following the EIP and GMIP annual performance periods. The Compensation Committee cannot increaseperiod and certification of the calculated EIP maximum award payable and can only reduce it.
In connection with Dr. Harper’s promotion to Executive Vice President, Research and Development, effective February 2012, the Compensation Committee increased the target annual cash incentive award opportunity for Dr. Harper from 65% to 80% of base salary. In March 2012, in connection with Mr. Bradway’s promotion to CEO effective May 23, 2012, the Compensation Committee increased the target annual cash incentive award opportunity for Mr. Bradway to 130% of base salary for 2012 compensation. This percentage aligns with the Market Median of our peer group and is lower than the target annual cash incentive award opportunity of 150% for Mr. Sharer because the peer group median has decreased since Mr. Sharer’s target annual cash incentive award opportunity was set. In March 2012, the Compensation Committee also increased the target annual cash incentive award opportunity for our Executive Vice Presidents, including Messrs. Peacock and Hooper and Drs. Bonanni and Harper, from 80% to 90% of base salary and for Mr. Scott, a Senior Vice President, from 70% to 80% of base salary for 2012 compensation. This increase was made based on our peer group market data, which suggested that this increase in our target annual cash incentive award opportunity to 90% and 80%, respectively, would align us more competitively with our peer group and fall slightly below the median of our peer group.
2012 GMIP Company Performance Goals
The GMIP Company performance goals approvedresulting payouts by the Compensation Committee for 2012 were “Deliver Financially” (60% weighting), “Deliver the Best Pipeline” (20% weighting), and “Reach More Patients Through Growth Opportunities” (20% weighting). These goals were selected to retain the emphasis on financial performance, while focusing the remaining goals on other factors that are embedded in our operating plans, budgets and forecasts that are critical to our near- and longer-term clinical and commercialization success. While all of these goals measure single-year performance, taken as a whole, they are intended to positively position us for both short- and long-term success:Committee.
The 2012 “Deliver Financially” goals (Revenues and Adjusted Net Income) are equally focused on top- and bottom-line growth and were assigned the largest weighting, consistent with the fundamental importance of financial performance to us and our stockholders over the longer-term. Adjusted net income replaced adjusted EPS as one of the two primary financial goals for our 2012 annual cash incentive award program to align compensation with a measure that more directly correlates with the underlying performance of our operations. In addition, the use of adjusted net income avoids the issue of having to adjust for the potential impact on adjusted EPS of stock repurchases.
| (1) | For |
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Consistent with the prior year, the target annual cash incentive award opportunity for 2014 for Mr. Bradway was 130%, and for each Executive Vice President was 90%, of base salary. The target annual cash incentive award opportunity for Mr. Bradway and each Executive Vice President aligns us competitively with our peer group and, on average, falls slightly below the median of our peer group. Mr. Kelly’s target annual cash incentive award opportunity was 55% of base salary as his bonus opportunity had been increased from 40% in recognition of his service in the capacity of Acting Chief Financial Officer until Mr. Meline’s appointment to Chief Financial Officer.
2014 GMIP Company Performance Goals
The GMIP Company performance goals approved by the Compensation Committee for 2014 were “Deliver Financially” (60% weighting), “Deliver the Best Pipeline” (25% weighting), and “Deliver Annual Priorities” (15% weighting). These goals were selected to retain the emphasis on financial performance, while focusing the remaining goals on other factors that are relevant to the Company’s strategy and critical to our near- and longer-term clinical and commercialization success. While all of these goals measure single-year performance, taken as a whole, they are intended to positively position us for both near- and longer-term success:
The 2014 “Deliver Financially” goals (60%) Revenues and Adjusted Net Income are equally focused on top- and bottom-line growth and were assigned the largest weighting of 30% each, consistent with the fundamental importance of financial performance to us and our stockholders over the longer-term.
“Deliver the Best Pipeline” goals (25%) measured progress on both early- and later-stage product candidates to focus us on executing key clinical studies and delivering a robust product pipeline at all stages of the development continuum, which we believe is critical to our continued success over the near- and longer-term.
which we believe is critical to our continued success over both the near- and longer-term. In 2014, we continued to significantly enhance our pipeline, the highlights of which include that six of our medicines generated positive registration-enabling data, four (Repatha™ (evolocumab)*, Corlanor® (ivabradine)*, talimogene laherparepvec and BLINCYTO™ (blinatumomab)) were submitted for regulatory approval. In December 2014, the FDA approved BLINCYTO™ less than three months after submission. We also reported positive data on our AMG 334 study for patients with episodic migraines and, as a consequence, we announced a decision to move into Phase 3 in 2015. |
“Reach More Patients Through Growth Opportunities”Deliver Annual Priorities” (15%) was chosen as a 20122014 goal category to highlight the importance of accomplishing a series of current-year objectives to expandposition us for the longer-term to execute under our business internationallyFull Potential Program, develop drug delivery devices and into emerging markets and to acquire or develop innovative new products, advance device development programs and initiatives and seize biosimilars opportunities.deliver improvements in the area of decision making.
All of these goal categories are intended to create stockholder value in the near- and longer-term. There are no payouts for below-threshold performance on the two financial metrics. Threshold performance for the non-financial primary metrics, which are often expressed in milestones, are more subjective in nature than are the financial metrics and could result in a very small payout percentage (less than 1% of annual cash compensation). There are no threshold goals for the financial metrics. Maximum performance under each measuremetric results in earning 225% of target annual cash incentive award opportunity for that measure. metric.
For 2014, to reduce the GMIP Company performance goal score during years of high financial over-achievement, the Compensation Committee widened the minimum and maximum ranges of performance. In addition, the maximum payout for the financial goals for 2014 requires higher performance over plan than prior years.
| * | FDA provisionally approved trade name. |
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2014 GMIP Company Performance Goals and Results
The table below illustrates the weighting of each goal, the goals established and our actual performance for 2012:2014:
| Deliver Financially (60% | |||||||||||||||||||
| Sub-goals | Threshold | Target | Maximum | Achieved | |||||||||||||||
Revenues (30%) | $ | $ | $ | $20,063 million Achieved– | |||||||||||||||
Adjusted Net Income(1) (30%) | $ | $ | $ | $6,700 million Achieved–187.9 | |||||||||||||||
| (1) | Adjusted net income for purposes of the GMIP is adjusted net income as we reported in our Form 8-K dated as of January |
| Deliver the Best Pipeline | |||||||||||||||||
| Sub-goals | Results | Achieved | |||||||||||||||
| • | Generated new product strategy teams. | 50.0% | ||||||||||||||
• | Initiated first-in-human studies. | ||||||||||||||||
| • | Advanced programs through the early-to-late stage portal. | ||||||||||||||||
Advance Late-stage Assets (20%) | • | Executed key clinical programs, including filings and obtaining approvals. | |||||||||||||||
| 147.0% | |||||||||||||||||
| Deliver Annual Priorities (15% weighting)—Achieved 96.7% | |||||||||||||||||
| Sub-goals | Results | Achieved | |||||||||||||||
| 104.1% | ||||||||||||||||
| • | Move the first wave of transformation to implementation. | ||||||||||||||||
Drug Delivery (5%) | • | Develop and implement drug delivery systems to optimize lifecycle management, pipeline development, and innovation. | 75.0% | ||||||||||||||
Decision Making (3%) | • | Decision making goal setting. | 112.5% | ||||||||||||||
| Decision making tool usage. | ||||||||||||||||
| |||||||||||||||||
| 2014 GMIP Company Performance Goals Composite Score | 147.0% |
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2014 Annual Cash Incentive Awards
Our performance against the 2012 GMIP Company performance goals (asAs shown in the table above)above, our performance against the 2014 GMIP Company performance goals yielded a composite score of approximately 205.3%. The147% and the Compensation Committee awarded actual annual cash incentive awards under the EIP to theour NEOs based on this composite score.
The following actual annual cash incentive awards were paid to our NEOs under the EIP at approximately 205.3% of target: No further discretion was employed.
Named Executive Officer | Target 2012 Award($)(1) | Actual 2012 Award($) | Target 2014 Award($)(1) | Actual 2014 Award($) | ||||||||||||
Robert A. Bradway | 1,615,400 | 3,316,000 | 1,950,000 | 2,867,000 | ||||||||||||
Kevin W. Sharer(2) | 1,124,395 | 2,308,000 | ||||||||||||||
Anthony C. Hooper | 874,263 | 1,795,000 | 901,620 | 1,325,000 | ||||||||||||
Jonathan M. Peacock | 786,531 | 1,615,000 | ||||||||||||||
Fabrizio Bonanni | 775,855 | 1,593,000 | ||||||||||||||
David W. Meline(2) | 327,121 | 481,000 | ||||||||||||||
Sean E. Harper | 747,685 | 1,535,000 | 806,850 | 1,186,000 | ||||||||||||
David J. Scott | 673,421 | 1,383,000 | ||||||||||||||
Madhavan Balachandran | 693,000 | 1,019,000 | ||||||||||||||
Michael A. Kelly | 280,388 | 412,000 | ||||||||||||||
Jonathan M. Peacock(3) | n/a | 0 | ||||||||||||||
| (1) | Calculated in accordance with GMIP. |
| (2) | Because Mr. |
| (3) | Mr. Peacock ceased service as our Chief Financial Officer as of January 10, 2014 and is no longer an executive officer or employee. No annual cash incentive award |
In March 2013,2015, the Compensation Committee approved GMIP Company goal categories for 2013 performance that are substantially consistent with the 2012 Company2015 performance. These goal categories except it replaced “Reach More Patients Through Growth Opportunities” withare “Deliver Strategic Priorities.”Results” (70%) (which is comprised of Revenues (30%), Adjusted Net Income (30%) and Execute New Product/Delivery System Launches (10%) sub-goals) and “Progress Innovative Pipeline” (30%) (which is comprised of “Execute Key Clinical Studies and Regulatory Filings” (20%) and “Advance Early Pipeline” (10%) sub-goals).
2011 Special Retention Award
In March 2011, while Mr. Balachandran served as our Senior Vice President, Manufacturing, the Compensation Committee approved a $1,000,000 special cash retention award to Mr. Balachandran, payable in installments of $330,000 on March 2, 2012 and 2013 and $170,000 on March 2, 2014 and 2015, subject to his continued employment through such dates (excluding terminations due to death or disability and involuntary termination by us not for cause). This special retention award was made in light of Mr. Balachandran’s valued performance in his then-current role and the Company’s desire to retain him as a succession candidate for the role of Executive Vice President, Operations. In August 2012, Mr. Balachandran was promoted to Executive Vice President, Operations.
Mr. Meline’s Sign-On Bonus
To replace the pro-rata value of Mr. Meline’s 2014 bonus at his current employer, which was forfeited upon his leaving, and to induce Mr. Meline to accept the Company’s offer of employment and join the Company, Mr. Meline received a sign-on bonus of $2,000,000 (50% vested on August 21, 2014 and the other 50% will vest on July 21, 2015) in addition to his initial hire RSU grant previously discussed.
Base Salaries
Generally, in March of each year, the base salaries for the NEOs are set based, in part, upon the Compensation Committee’s review of the peer group base salary data compared with the Market Median as more specificallypreviously described under “Peer Group Data” above. Data reviewed typically includes the 25thpercentile, median and 75th percentile.Data.” In addition, the Compensation Committee considers our performance, market conditions, retention and such other factors deemed relevant. Further, our CEO engages in a discussion with the Compensation Committee concerning hisreceives management’s, including our CEO’s, assessment of the performance of each of the other NEOs and his recommendations regarding any base salary adjustments for them. The Compensation Committee uses our management’s and CEO’s evaluation of the performance of the NEOs that report to theour CEO, each NEO’s performance, information with respect to each NEO’s experience and other
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qualifications, the Market Median and any base salary adjustments recommended by the CEOenvironmental conditions in determining each NEO’s base salary. No increase in base salary is automatic or guaranteed.
In connection with Dr. Harper’s promotion to Executive Vice President, Research and Development, effective February 2012,March 2014, the Compensation Committee determined that there would be no increase in base salaries for our NEOs. This is consistent with the Compensation Committee’s determination that base salaries for each staff member at a
senior managerial level and above would not be increased, Dr. Harper’s base salary from $600,000 to $850,000. This amount is lower than the Market Median for this position, because Dr. Harper is new to the position andexcept as previously approved by the Compensation Committee wantedwith respect to allow room for future increases as warranted.
In March 2012, each NEO,recent promotions or appointments, to attain better alignment with the exceptionpeer group for such levels. As a result, base salaries of Mr. Sharer who retired fromour NEOs were generally slightly below the position of CEO effective May 23, 2012, received aMarket Median.
2014 Base Salary Market Position
The 2014 base salary increase. In March 2012, Mr. Bradway received a base salary increase of approximately 36% to $1,400,000 annually, effective May 23, 2012, in connection with his promotion to CEO on May 23, 2012. This increased base salary for our CEO, however, is equal to the 35th percentile of the CEOsalaries and Market Median due to Mr. Bradway being new to the role of CEO. Mr. Peacock received a base salary increase of 5% to bring him closer to (although still below) the Market Median. Messrs. Hooper, Scott and Drs. Bonanni and Harper each received a base salary increase of approximately 2.8%, which was intended to generally maintain their relative positioning as compared with the Market Median and was consistent with the increases granted to our U.S.-based staff members generally.
The base salary adjustments approved and implemented in March 2012position are shown in the table below:
Named Executive Officer | 2011 Base Salary ($) | Increase (%) | 2012 Base Salary ($) | Market Median ($) | Difference vs. Market Median Over/(Under) (%) | ||||||||||||||||||||
Robert A. Bradway | 1,028,000 | 36.2 | 1,400,000 | 1,500,000 | (6.7) | ||||||||||||||||||||
Kevin W. Sharer | 1,799,000 | 0.0 | 1,799,000 | 1,500,000 | 19.9 | ||||||||||||||||||||
Anthony C. Hooper | 950,000 | 2.8 | 976,500 | 897,213 | 8.8 | ||||||||||||||||||||
Jonathan M. Peacock | 840,000 | 5.0 | 882,000 | 884,128 | (0.2) | ||||||||||||||||||||
Fabrizio Bonanni(1) | 843,000 | 2.8 | 866,600 | n/a | n/a | ||||||||||||||||||||
Sean E. Harper | 850,000 | (2) | 2.8 | 873,800 | 983,413 | (11.1) | |||||||||||||||||||
David J. Scott | 823,200 | 2.8 | 846,200 | 847,729 | (0.2) | ||||||||||||||||||||
| Named Executive Officer | 2013 Base ($) | Increase (%) | 2014 Base ($) | Market Median ($) | Difference vs. Market Median Over/(Under) (%) | |||||||||||||||
Robert A. Bradway | 1,500,000 | 0 | 1,500,000 | 1,575,000 | (4.8 | ) | ||||||||||||||
Anthony C. Hooper(1) | 1,001,800 | 0 | 1,001,800 | 1,070,000 | (6.4 | ) | ||||||||||||||
David W. Meline(2) | n/a | n/a | 900,016 | 901,092 | (0.1 | ) | ||||||||||||||
Sean E. Harper | 896,500 | 0 | 896,500 | 989,703 | (9.4 | ) | ||||||||||||||
Madhavan Balachandran(3) | 770,000 | 0 | 770,000 | n/a | n/a | |||||||||||||||
Michael A. Kelly(4) | 509,796 | 0 | 509,796 | n/a | n/a | |||||||||||||||
Jonathan M. Peacock(5) | 904,900 | 0 | n/a | n/a | n/a | |||||||||||||||
| (1) |
|
| (2) | Mr. Meline commenced employment with us in July 2014 and was not an employee at the time base salaries were determined. |
| (3) | As there was no position |
| (4) | As Mr. Kelly served as our Acting Chief Financial Officer during our search for our Chief Financial Officer, the Compensation Committee maintained his base salary to reflect the temporary nature of this role. |
| (5) | Mr. Peacock ceased service as our Chief Financial Officer as of January 10, 2014 and is no longer an executive officer or employee. Mr. Peacock did not serve in an executive officer role when the Compensation Committee determined base salaries in March 2014. |
2015 Base Salary Adjustments
In March 2015, the Compensation Committee determined that base salaries for each NEO would again not be increased. This is consistent with the Compensation Committee’s determination that base salaries for each staff member at an executive director level and above would not be increased in recognition of our on-going transformation activities.
Target Total Annual Cash Compensation
Target total annual cash is the sum of the NEO’s base salary and target annual cash incentive award. The Compensation Committee believes that reviewing our NEOs’ target annual cash compensation as compared to the Market Median provides a useful check.
In March 2014, the Compensation Committee reviewed target annual cash compensation for each NEO comparing it to the Market Median as set forth below and received historical target annual cash compensation figures over the previous three years. Our target total annual cash compensation was generally below the Market Median, which the Compensation Committee considered appropriate. For more information regarding the determination of Market Median and the peer group data reviewed, see “Peer Group Data” previously described. No material adjustments were made to target annual cash compensation for any of our NEOs as a result of this review by the Compensation Committee as the comparisons demonstrated acceptable market alignment as well as appropriate internal pay equity among the Executive Vice Presidents.
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2014 Target Annual Cash Compensation
| Named Executive Officer | 2014 Amgen Target Annual Cash ($) | Market Median ($) | Difference vs. Market Median Over/(Under) (%) | |||||||||
Robert A. Bradway | 3,450,000 | 3,750,000 | (8.0 | ) | ||||||||
Anthony C. Hooper(1) | 1,903,420 | 2,140,000 | (11.1 | ) | ||||||||
David W. Meline(2) | 1,710,030 | 2,029,200 | (15.7 | ) | ||||||||
Sean E. Harper | 1,703,350 | 1,897,212 | (10.2 | ) | ||||||||
Madhavan Balachandran(3) | 1,463,000 | 1,903,426 | (23.1 | ) | ||||||||
Michael A. Kelly(4) | 790,184 | n/a | n/a | |||||||||
Jonathan M. Peacock(5) | n/a | n/a | n/a | |||||||||
| (1) | See “Peer Group Data” previously described regarding the market data for Mr. Hooper. |
| (2) | Mr. Meline commenced employment with us in July 2014 and was not an employee at the time target annual cash compensation was determined for the other NEOs. The |
| (3) | As there was no position match in either the 2013 Towers Survey or peer group proxy statements, Mr. Balachandran was compared to the target annual cash compensation of the other NEOs to determine his target annual cash compensation. |
| (4) | As Mr. Kelly served as our Acting Chief Financial Officer during our search for our Chief Financial Officer, no increase was made to Mr. Kelly’s target annual cash compensation as a result of his service as Acting Chief Financial Officer or his promotion to |
| (5) | Mr. Peacock ceased service as our Chief Financial Officer as of January 10, 2014 and |
Perquisites
Perquisites are intended to be limited in both type and monetary value. We do believe,The Compensation Committee believes, however, that certain perquisites facilitate the efficient operation of our business, allowing our NEOs to better focus their time, attention and capabilities on our Company, permit them to be accessible to the business as required, alleviate safety and security concerns and assist us in recruiting and retaining these key executives. The perquisites provided to our NEOs generally include an allowance for personal financial planning services, including tax preparation services (not to exceed $15,000 annually in aggregate), annual physical examinations, Company-paid moving and relocation expenses when our NEOs are required by uspaid on behalf of newly-hired and current executives who agree to moverelocate to a new location and,work on the Company’s behalf, in limited instances, personal expenses when on business travel such as guests accompanying NEOs on business travel. Certain of our NEOs also have access to the personal use of a Company car and driver and, subject to the useapproval of our CEO, the Company aircraft.aircraft for personal use. Our CEO is encouraged to use our privateCompany aircraft for all of his travel (business and personal) because the Compensation Committee believes that the value to us of
making the aircraft available to our CEO, in terms of safety, security, accessibility and efficiency, is greater than the incremental cost that we incur to make the aircraft available.incur.
No tax gross-up reimbursements for NEOs are provided to NEOs, except in connection with reimbursement of moving and relocation expenses (excludingconsistent with our other staff members and our general relocation policy. We do not provide tax gross-ups for assistance with loss on sale of a home), consistent with our other staff members and our general relocation policy.home. We believe that providing tax gross-up reimbursements on the applicable moving and relocation expenses paid on behalf of newly-hired executives who agree to relocate on the Company’s behalf and current executives who agree to expatriate to another country to workrelocate on the Company’s behalf is appropriate because it treats these executives in a similar manner as non-executives under our Company-wide policy andwhich is designed to maximize allocation of our human resources in the best interest of the Company. It also assists in the attraction and retention of the executive talent necessary to compete successfully in the market.successfully.
In 2011, the Compensation Committee providedWe have caps on moving and relocation expenses and on home sale loss assistance for Senior Vice Presidents and above. Our Company-wide policy includes a repayment provision applicable to all staff members (including our NEOs) which requires a new staff member hired from outside the
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Company or staff members who accept an assignment and relocate, to repay us for moving and relocation expenses incurred by us in the event that the staff member does not
complete the move, resigns or is discharged for cause from the Company within two years of the employment start date (with a pro-rata refund in the second year). For staff members who accept an expatriate assignment, the repayment provision has been one year from the assignment date
Compensation Policies and starting in 2013, will be two years from the assignment date.
Mr. Hooper, our Executive Vice President, Global Commercial Operations, who relocated from New Jersey to California, incurred moving and relocation expenses during 2012 in accordance with our relocation policies. Specifically, the material relocation benefits provided to Mr. Hooper in 2012 included costs to relocate household goods, reimbursement for closing expenses and other costs related to the sale of a prior residence,
housing and living expenses, reimbursement of miscellaneous other relocation expenses (including costs for use of our aircraft for relocation-related trips), and tax gross-up payments on the taxable portion of such benefits provided. See “Summary Compensation Table—All Other Compensation—Perquisites and Other Compensation” in our Executive Compensation Tables for more information on these benefits.Practices
COMPENSATION POLICIES AND PRACTICES
Recoupment Provisions
In December 2012, the Compensation Committee approved amendments to our incentive cash compensation plans (EIP, GMIP and VEP) to expressly allow the Compensation Committee, or management, as appropriate, to consider employee misconduct that caused serious financial or reputational damage to the Company when determining whether an employee has earned an annual cash incentive award or the amount of any such award. This provision is in no way intended to limit any other action that the Company could take against an employee, including other disciplinary actions (up to termination), ordinary course performance considerations, disclosure of wrongdoing to the government and pursuit of any other legal claims against such employees.
Clawback Policy
We have a clawback policy that requires our Board to consider recapturing past cash or equity compensation payouts awarded to our executive officers, including our NEOs, if it is subsequently determined that the amounts of such compensation were determined based on financial results that are later restated and the executive officer’s misconduct caused or partially caused such restatement.
Recoupment Provisions
Our cash incentive compensation plans (EIP, GMIP and VEP) expressly allow the Compensation Committee, or management, as appropriate, to consider employee misconduct that caused serious financial or reputational damage to the Company when determining whether an
employee has earned an annual cash incentive award or the amount of any such award. This provision is not intended to limit any other action that the Company could take against an employee, including other disciplinary actions (up to termination), ordinary course performance considerations, disclosure of wrongdoing to the government and pursuit of any other legal claims against such employees.
Stock Ownership Guidelines
Our stock ownership guidelines require our executives to hold a meaningful amount of our Common Stock, promote a long-term perspective in managing the company,Company, further align the interests of our executives and stockholders and mitigate potential compensation-related risk. In March 2012, the stock ownership requirement for our CEO was increased from five times base salary to six times base salary. Executives are generally given five years following their placement into their current job level to comply with these guidelines, with compliance measured based on holdings and stock price as of December 31
st. Once these ownership guidelines are met, executives are expected to maintain such ownership until they change job levels or are no longer employed by the Company. As of November 19, 2012, the date of our executive certification, all executive officers, including our NEOs, who were expected to meet such guidelines, did so. Messrs. Bradway, Hooper and Peacock are not required to meet their guidelines until 2017, 2016 and 2015, respectively. Meanwhile, Mr. Bradway meets the stock ownership requirement applicable to his prior position as President and Chief Operating Officer.Stock Ownership Guidelines Requirements
The current stock ownership guidelines arefor 2014 were as follows, with the ownership requirement for the CEO having increased from five times base salary to six times base salary effective March 15, 2012:follows:
Position | Stock Ownership Requirement | |||
Chief Executive Officer | ||||
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Executive Vice President | 3x base salary | |||
Senior Vice President | 2x base salary | |||
Vice President | 1x base salary |
The following holdings count towards satisfying these stock ownership requirements:
shares of our Common Stock that are not subject to forfeiture restrictions and are beneficially held;
shares of our Common Stock held through a 401(k) plan or other qualified pension or profit-sharing plan; and
shares purchasable with funds then allocated under our Employee Stock Purchase Plan.
Executives are generally given five years following their placement into their current job level to comply with these guidelines. Executives who are promoted to a status with a
stock ownership level one level higher than the executive was previously required to satisfy, have three years to comply with the new ownership level if the executive has been subject to the stock ownership guidelines for five or more years. Once these ownership guidelines are met, executives are expected to maintain such ownership until they change job levels or are no longer employed by the Company. As of October 24, 2014, the effective date of our executive certifications, all executive officers, including our NEOs, who were expected to meet such guidelines, were in compliance. NEOs promoted to a new position within the last five years have the compliance dates for their new position as set forth in the table below.
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| COMPENSATION DISCUSSION AND ANALYSIS |
Stock Ownership Guidelines Compliance Dates and Holdings
With the exception of Mr. Meline, who commenced employment with our Company on July 21, 2014, all NEOs substantially exceed their applicable stock ownership requirements.
Insider Trading Policy and Practices
All staff members and our Board are prohibited from: (i) buying or selling our Common Stock while aware of any material nonpublic information; (ii) engaging in short sales with respect to our Common Stock; (iii) pledging or purchasing our Common Stock on margin (except the use of a margin account to purchase our Common Stock in connection with the exercise of company-granted stock options) or (iv) entering into any derivative, hedging or similar transactions with respect to our Common Stock. We do not have any executive 10b5-1 plans.
Policies for Grants of Long-Term Incentive Equity Awards
In accordance with our Equity Awards Policy, our regular annual grants of LTI equity awardsaward grants are typically approved at an in-person or telephonic meeting of the Compensation Committee (for grants of equity awards to executive officers,management, including our NEOs) or the Equity Award Committee (for grants to all other staff members). In unusual circumstances, LTI equity awards may be approved by the Compensation Committee or Equity Award Committee by unanimous written consent.
The grant date for annual awards of stock options and RSUs is the third business day after the release of our first fiscal quarter earnings. For stock options, the exercise price is equal to the closing price of the Company’s Common Stock on the grant date. For 2013, regularRegular grants of annual LTI equity awards to our executive management (comprised of Senior Vice Presidents and above), including our NEOs, wereare approved in December 2012 with a grant date that wasis the third business day after the release of our fourth quarterannual earnings, generally in January 2013,of the following year, to align the grant date with the start of the performance period. Our NEOs may also receive special equity awards of stock options or RSUs on an ad hoc basis as determined by the Compensation Committee as new hires or for recognition and retention, promotional
promotions or other purposes, but generally only on the third business day after the release of our quarterly or annual earnings after the date of determination by our Compensation Committee. The grant date for annual awards of performance units and RSUs to staff members other than our executive management is the third business day after the release of our first fiscal quarter earnings.
Tally Sheets
The Compensation Committee annually reviews a tally sheetsheets for each NEO, setting forth all components of compensation, including compensation payable at termination, retirement or a change of control. These tally sheets also includes a summary of bothsummarize the number of shares and the value at a given price of the LTI equity awards held by each NEO, as well as each NEO’s individual cumulative account balances in our benefit plans. These tools are employed by the Compensation Committee as a useful check on total annual compensation and the cumulative impact of our long-term programs and are considered important to understand both the overall and longer-term impact of compensation decisions.
Based on its review of the tally sheets, the Compensation Committee may increase or decrease certain individual elements of compensation to align total compensation with peer group market data and to promote internal equity among our NEOs, other than theour CEO. No material adjustments to total compensation for any of our NEOs were made in 2012 as a result of the review of these tally sheets by the Compensation Committee.Committee in 2014.
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| COMPENSATION DISCUSSION AND ANALYSIS |
Executive Compensation Website
We have implemented a website, accessible atwww.amgen.com/executivecompensation, which provides a link to this proxy statement and invites our stockholders to fill out a survey to provide input and feedback to the
Compensation Committee regarding our executive compensation policies and practices. All input from our stockholders is valuable and the Compensation Committee appreciates your time and effort in completing the survey.
Non-Direct Compensation and Payouts in Certain Circumstances
NON-DIRECT COMPENSATION AND PAYOUTS IN CERTAIN CIRCUMSTANCES
Retirement Arrangement,
Offer Letters, ConsultingLetter, Severance Arrangement and Change of Control Benefits
Our CEO and other NEOs are generally not covered by contractual arrangements that provide for severance or other payments in the event of termination, but all are participants in our Change of Control Severance Plan
discussed below. In addition, we typically enter into offer letters with new hires detailing their compensation and requirements to pay back certain elements of compensation.
To attract talented executives from outside the Company, our offer letters generally include severance terms that apply to terminations initiated by the Company and occur for reasons “other than cause” within a limited period of timethree years from the date of hire. Benefits of this typeThese benefits are sometimes provided to officer-level candidates to provide an incentive tofor them to join the Companyus by reducing the risk ofrisks associated with making such a job change.
KevinOffer Letter—David W. SharerMeline
Mr. Sharer ceased service as our CEO effective May 23, 2012, at which time he continued to serve as Chairman of the Board and an employee of the Company through December 31, 2012, assisting in the transition of our new CEO and providing leadership to the Board. In recognition of his service provided as our CEO and throughout the transition period, for 2012 we (i) continued to pay Mr. Sharer his base salary at his rate in effect as a CEO, (ii) paid him a pro-rata portion (approximately five/twelfths) of his annual CEO cash incentive award earned for 2012 and (iii) provided the benefits and perquisites we have historically provided to Mr. Sharer as our CEO.
In 2012, Mr. Sharer was granted a reduced amount (approximately five/twelfths) of his annual LTI equity awards for service as CEO through May 2012. The provisions of the performance award program and our RSU grant agreement generally require pro-ration of the performance units earned or RSUs vesting, as applicable, upon the occurrence of certain events, including death, disability or retirement. These provisions were modified not to apply to Mr. Sharer’s grant of performance units under the 2012-2014 performance program and his 2012 annual grant of RSUs given the five/twelfths pro-ration had already been applied. Like all of our qualified retirees, following Mr. Sharer’s retirement in December 2012, he continued to vest in his outstanding RSUs and stock options in accordance with their original vesting schedules and he will continue to be entitled to a full payout from his outstanding performance units (for the 2011-2013 and 2012-2014 performance periods).
The Compensation Committee approved providing Mr. Sharer with office space and administrative and technical support until December 31, 2017. Following his retirement as our CEO and departure from the Company, we are currently providing and intend to continue to provide Mr. Sharer with secretarial, information technology and travel support until December 31, 2017.
Anthony C. Hooper
Mr. Hooper,Meline, who commenced employment as our Chief Financial Officer effective October 27, 2011,July 21, 2014, is currently subject to an offer letter that was negotiated in connection with his hiring and approved by the Compensation Committee. Mr. Hooper’sMeline’s offer letter included our standard relocation assistance and our standard severance protection for new executives. In addition, we agreed to compensatefacilitate Mr. Hooper for cancellations or forfeitures of previously earned or vested compensationMeline’s relocation from his former employer (or the denial of vesting of such compensation) arising out of his employment with us andMinnesota to indemnify him against claims relating to recoupment of such compensation.California. We agreed to provide Mr. HooperMeline with a base salary of $900,016, which was targeted at the Market Median, and a target annual cash incentive award opportunity of 90% of base salary, which is consistent with the target annual cash incentive award opportunity for each of the other Executive Vice Presidents. We also agreed to provide Mr. Meline with a $2,000,000 sign-on bonus, with $1,000,000 payable within 30 days of his hire date and $1,000,000 to be paid on the one year anniversary of his hire date, or July 21, 2015, to replace the pro-rata value of Mr. Meline’s 2014 bonus with his former employer which was forfeited upon leaving his position. We also agreed to provide Mr. Meline with an RSU grant at a value of $6,800,000 to compensate Mr. Meline for equity forfeited as
a result of his leaving his previous employer, to induce him to join the Company and to provide long-term incentives that tie a significant portion of Mr. Meline’s compensation to the value of our stock in alignment with the Company’s and its stockholders’ interests. To replace Mr. Meline’s forfeiture of certain pension benefits at his former employer, Mr. Meline was also provided with a contribution to his Deferred Compensation Plan of $1,600,000 which will vest at the rate of 12.5% per year from 2015 through 2022 as long as Mr. Meline remains actively and continuously employed by us. We agreed to provide Mr. Meline with such compensation and benefits because Mr. Hooper’sMeline’s leadership talent and broad commercial operationsinternational experience and his leadership roles in developing the pharmaceutical business in Latin America, the Middle East, Africa, Canada, Japan and several countries in the Pacific Rim arewas important to implementingthe Company as we execute our strategic visionstrategy for long-term growth and international expansionbring our pipeline of medicines toward commercialization in a number of new markets and to attract him to our Company and California. Mr. Hooper’sMeline’s compensation and benefits were designed and negotiated to facilitate a prompt, effective and fair process.
Mr. Hooper’sMeline’s offer letter provides for cash severance protection for three years following his hire date at a multiple of two timesequal to one year’s annual base salary and a target annual cash incentive award of 80%(currently 90% of his annual base salarysalary) plus up to eighteen12 months of Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, medical and dental coverage paid by us. As with Mr. Peacock (described below), benefitsBenefits of this type are sometimesoften provided to officer-level candidates to provide an incentive to them to join the Company by reducing the risk of making such a job change. These severance benefits will expire on October 27, 2014.
Severance Arrangement—Jonathan M. Peacock
To facilitate Mr. Hooper’s relocation from New JerseyPeacock resigned as our Chief Financial Officer effective January 10, 2014, at which time he continued to California, he received our relocation package which includesbe employed in a repayment agreement that says he will repay the moving and relocation expenses incurred by the Companynon-executive officer capacity to assist in the event thattransition of Mr. Hooper does not complete the move, resigns or is discharged for causeKelly, our then-Acting Chief Financial Officer, which transition period ended in May 2014. Upon his
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termination from the Company, within two years (with a pro-rata refund in the second year). Reimbursement of relocation expenses is essential to ensure the executive is able to move in a timely manner and able to more quickly take on his responsibilities.
Jonathan M. Peacock
Mr. Peacock who commencedwas provided the following severance benefits: (1) lump sum payment that is approximately equal to 1.5 times base pay salary plus target annual cash incentive award opportunity; (2) reimbursement for COBRA medical coverage for up to 18 months; (3) senior executive career transition services for up to 12 months; (4) a cash payment in an amount that is approximately equal to the pro-rata value of the last unvested tranche of his new hire equity awards (stock options and RSUs) that would have vested in October 2014, based on the total period of time that he was expected to be employed over the total vesting period of such tranche (48 months) calculated on the date of his termination of employment effectivewith the Company, and using a stock price equal to $113 per share and (5) an aggregate payment of $10,800, representing an hourly rate of $1,200 for authorized time that he spent following the termination of his employment in further transitioning his responsibilities and with matters that arose during his tenure with the Company. In determining these benefits, the Compensation Committee considered that, until September 1, 2010, is currently subject to an offer letter that provides2013, Mr. Peacock was eligible for standard cash severance protection for three years following his hire date at a higher benefit multiple of two times annual base salary plus theand target annual cash incentive award opportunity at the time of termination, andplus up to eighteen18 months of COBRA medical coverage paid by us. These severance benefits will expire on September 1, 2013.
Fabrizio Bonanni
In connection with his retirement on January 25, 2013 and in lightprotection, that the pro-rata value of the last unvested tranche of his expertisenew hire equity awards was made, in our global operations, qualitypart, to compensate Mr. Peacock for value that he left behind at his former employer and engineering, we entered intothat Mr. Peacock served (including by providing important transition services) nearly the full vesting period. The agreement between the Company and Mr. Peacock includes a consultinggeneral release of all claims by Mr. Peacock and provides that Mr. Peacock forfeit and repay substantial benefits of this agreement with Dr. Bonanni for the provision of consulting services during 2013, consistent with the material terms established by the Compensation Committee, and under which we compensated Dr. Bonanni with accelerated vesting of his 40,000 RSU retention grant (originally grantedif Mr. Peacock materially breaches any covenants or conditions in April 2010 with a December 2013 vesting date) that would have been forfeited upon his retirement. The Compensation Committee determined that the accelerated vesting of the RSUs was appropriate because Dr. Bonanni will have fulfilled the purpose of the original retention grant based on his active service through January 2013 taken together with his consulting services through the end of 2013. Payments under the agreement are subject to recapture in the event of any breach of the agreement or the Amgenpreviously signed Proprietary Information and Inventions Agreement, by Dr. Bonanni.including if Mr. Peacock fails to fulfill his post-termination obligations to cooperate, to maintain the confidentiality of our information and not to disparage the Company.
Change of Control Benefits
Change of Control Severance Plan
In the event of a change of control and a qualifying termination, our Change of Control Severance Plan provides severance payments to 1,7381,586 U.S. staff members (as of
December 31, 2012)2014), including each NEO. There are no tax gross-up payments provided under the plan. The plan was structured so that payments and benefits are provided only if there is both a change of control and a termination of employment, either by us other than for “cause” or “disability” or by the participant for “good reason” (as each is defined in the plan)—sometimes referred to as a “double-trigger”—because the intent of the plan is to provide appropriate severance benefits in the event of a termination following a change of control, rather than to provide a change of control bonus. The cash severance multiple for theour CEO and all other NEOs is two times annual cash compensation. The payments and benefit levels under the Change of Control Severance Plan do not influence and were not influenced by other elements of compensation. The Change of Control Severance Plan was adopted, and is continued by the Compensation Committee, to reinforce and encourage the continued attention and dedication of members of management to their assigned duties without the distraction arising from the possibility of a change of control, to enable and encourage management to focus their attention on obtaining the best possible deal for our stockholders and making an independent evaluation of all possible transactions, without being influenced by their personal concerns regarding the possible impact of various transactions on the security of their jobs and benefits, and to provide severance benefits to any participant who incurs a termination of employment under the circumstances described within a certain period following a change of control in recognition of their contributions to the Company.
Change of Control Treatment of Long-Term Incentive Equity Awards
Stock Options, Restricted Stock and Restricted Stock Units and Stock Options
To ensure that our LTI equity award practices remain aligned with current governance best practices and are competitive with the practices of our peer group, in March 2011, the Compensation Committee eliminated the single trigger full acceleration of vesting upon a change in control for futureAll LTI equity award grants and replaced it with athat have yet to vest have “double-trigger” acceleration of vesting that requires a qualifying termination in connection with a change of control. As a result, annual grants of LTI equity awards made on or after March 2, 2011 provide that, assumingAssuming the awards are continued or assumed, all unvested stock options and RSUs vest in full only if the grantee’s employment is involuntarily terminated other than for “cause” or “disability,” or, in the case of staff members subject to the Change of Control Severance Plan, voluntarily terminated with “good reason” within two years following a change of control.
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| COMPENSATION DISCUSSION AND ANALYSIS |
Performance Units
The Compensation Committee has maintained change of control features for each of the performance periods under our performance award programs to ensure that these programs reward participants for our performance up until the time thatsuccessful closing of the change of control. In general, the performance units are earned based on a truncated performance period and our performance through the change of control, occurs. Payment calculation methods differ according toand provides for potential earn-out at the termsend of the award for each performance period and whetherwith the amount earned pro-rated for a change of control that occurs inwithin the first six or 12 months of the performance period or thereafter. For additional information on the levels of payout, see “Potential Payments Upon Termination or Change of Control—Long-Term Incentive Equity Awards—Performance Units” in our Executive Compensation Tables.
Limited Retirement Benefits and Deferred Compensation Plan
Our health, retirement and other benefits programs are available to all of our U.S.-based staff members (excluding Puerto Rico) and are typically targeted to align in value with our peer group on a total company basis. The primary survey used to make this total company comparison is the Aon Hewitt Benefit Index®, last updated as of May 20122014, using a sample group of fourteen14 companies, chosen so as to have the greatest representation from our peer group. The data generated from this survey is used by the Compensation Committee and management in evaluating the competitive positioning and program design of our health, retirement and other benefit programs that pertain to all U.S.-based staff members, including our NEOs.
Retirement and Savings Plan, Supplemental Retirement Plan and Nonqualified Deferred Compensation Plan
Our Retirement and Savings Plan, or 401(k) Plan, is available to all regular U.S.-based staff members of the Company and participating subsidiaries. All 401(k) Plan participants are eligible to receive the same proportionate level of matching and core contributions from us.
We credit to our Supplemental Retirement Plan, or SRP, which is available to all 401(k) Plan participants, Company core and matching contributions on eligible compensation that cannot be made to the 401(k) Plan because they relate
to compensation that is in excess of the maximum amount of recognizable compensation allowed under the Internal Revenue Code’s qualified plan rules. We also credit staff members in the SRP for lost 401(k) Plan Company match and core contributions resulting from making a deferral into the Nonqualified Deferred Compensation Plan, or NDCP. Earnings under the SRP are market-based—there are no “above market” or guaranteed rates of returns offered in this plan and this plan enables us to provide the same percentage of base salary and annual cash incentive award as a retirement contribution to U.S.-based staff members at all levels. Unlike a traditional pension plan, which provides a lifetime annuity that replaces a significant portion of a participant’s final pay, retirement benefits from our 401(k) Plan and SRP are based on the investment return on the staff member’s own investment elections, with the participant bearing the investment risk. We also credit staff members in the SRP for lost 401(k) Plan Company match and core contributions resulting from making a deferral into the Nonqualified Deferred Compensation Plan, or NDCP.
The NDCP offers all U.S.-based staff members (excluding employees acquired in our acquisition of Onyx Pharmaceuticals, Inc.) at director level and above the opportunity to defer eligible base salary and annual cash incentive awards, up to maximum amounts typical at our peer group. We also have
the discretion to make contributions to this plan, but we do not make such contributions on a regular basis. We believe that offering the NDCP is appropriate because it provides executives the opportunity to save for retirement in a tax-effective fashion that is not readily available without our sponsorship. In March 2012, we made a one-time contribution to certain SRP accounts in order to correct for erroneous under-contributions made between 2003 and 2007 to these SRP accounts. The accounts of Messrs. Bradway, Sharer and Scott and Drs. Bonanni and Harper, among others, were affected by this error and thus their accounts were credited with the one-time correction contribution, which amounts are reflected as 2012 contributions in the Nonqualified Deferred Compensation table.
Retiree Medical Savings Account Plan and Retiree Health Access Plan for all U.S.-based Staff membersMembers
In 2009, we implementedWe maintain a Retiree Medical Savings Account Plan and a high deductible health plan, referred to as the Retiree Health Access Plan, available to all U.S.-based (excluding Puerto Rico) staff members. The Retiree Medical Savings Account Plan allows all staff members to make after-tax deferrals to be used post-termination to reimburse them for eligible medical expenses. The Company credits all eligible staff members with an annual contribution ($1,000) and makes a matching contribution equal to 50% of a staff member’s deferrals (up to a match of $1,500 per year). Company credits can be accessed to reimburse eligible medical expenses toof staff members who terminate having fulfilled the Company’s retirement criteria. The permissible uses of such credits were expanded to include COBRA, individual and health insurance exchange-related premiums. We do not offer a traditional Company-paid retiree medical plan to our NEOs or other U.S.-based staff members. The Retiree Health Access Plan is
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| COMPENSATION DISCUSSION AND ANALYSIS |
available to U.S.-based staff members who retire after attaining age 55 and ten years of service and who are not eligible for Medicare. Our Retiree Health Access Plan is paid for entirely by a retiree’s contributions, unlike a traditional retiree medical plan that provides a company subsidy based
on retirement status or years of service. Our intent is to terminate the Retiree Health Access Plan when the health insurance exchange system becomes a viable health insurance option for our retirees.
TAXES AND ACCOUNTING STANDARDSTaxes and Accounting Standards
Tax Deductibility Under Section 162(m) of the Internal Revenue Code
We developmaintain certain incentive compensation programs that are intended to provide for compensation that is tax deductible to us, but we recognize that the best interests of our stockholders may at times be better served by compensation arrangements that are not tax deductible. Section 162(m) of the Internal Revenue Code places a $1,000,000 limit on the amount of compensation that we may deduct for tax purposes for any year with respect to the executive who serves as our CEO at year-end, and any of our three other most highly compensated employees who serve as executive officers at year-end, other than our Chief Financial Officer. The $1,000,000 limit does not apply to performance-based compensation, as defined under Section 162(m). Our executive compensation program is designed with the intent to maximize the deductibility ofprovide cash incentive compensation under our EIP and performance units under our performance award program as qualifying performance-based compensation. However, when warranted dueDue to competitive or other factors, the Compensation Committee may decide in certain circumstances to exceed the deductibility limit under Section 162(m) or to otherwise pay non-deductible compensation. These circumstances have included the following:
To maintain a competitive base salary, for the CEO position, the base salary provided to Messrs. Bradway and SharerHooper in 20122014 exceeded the tax-deductible limit.
As previously referenced, the introductionThe use of RSUs as part (20%) of the annual LTI equity award mix for executives and officers is focused primarily on the attraction and retention of the talent needed to drive our long-term success. This compensation, however, is not performance-based compensation under Section 162(m) of the Internal Revenue Code. The fiscal impact for 2012 of the RSUs not being performance-based is approximately $1,100,000, assuming the Company’s U.S. combined effective tax rate for 2012.
Section 162(m). The fiscal impact for 2014 of the RSUs not being performance-based is approximately $3.3 million assuming the Company’s U.S. combined effective tax rate for 2014. |
To attract highly qualified executives to join us and to promote their retention, we may offer other compensation elements that are not performance-based compensation under Internal Revenue Code Section 162(m), such as retention bonuses or sign-on bonuses, as part of their initial employment offers.
Accounting Standards
Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 718 requires us to recognize an expense for the fair value of equity-based compensation awards. Grants of stock options, RSUs and performance units under our LTI equity incentive award plans are accounted for under FASB ASC Topic 718. The Compensation Committee regularly considers the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our LTI equity incentive award plans and programs. For example, the Compensation Committee took these accounting standards into account when discontinuing grants of incentive stock options. In addition, we modified our Employee Stock Purchase Plan to make it non-compensatory under the “safe harbor” provisions of the accounting rules and therefore no longer recognize compensation expense under this plan. As accounting standards change, we may revise certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives.
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| EXECUTIVE COMPENSATION TABLES |
EXECUTIVE COMPENSATION TABLESExecutive Compensation Tables
Summary Compensation Table
The following table sets forth summary information concerning the compensation awarded to, paid to, or earned by each of our Named Executive Officers, or NEOs.
Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | ||||||||||||||||||||||||
Performance
| Stock Options | EIP | ||||||||||||||||||||||||||||||
Robert A. Bradway | 2012 | 1,262,308 | 0 | 8,571,724 | 0 | 3,316,000 | 420,059 | 13,570,091 | ||||||||||||||||||||||||
Chairman of the Board, President and Chief Executive Officer |
| 2011 2010 |
|
| 1,023,692 971,204 |
|
| 0 0 |
| | 3,147,900 2,541,180 | |
| 833,850 2,668,143 |
|
| 1,860,000 1,340,000 |
|
| 259,522 251,216 |
|
| 7,124,964 7,771,743 |
| ||||||||
Kevin W. Sharer(6) | 2012 | 1,805,919 | 0 | 3,657,214 | 0 | 2,308,000 | 1,357,579 | 9,128,712 | ||||||||||||||||||||||||
Former Chairman of the Board and Former Chief Executive Officer |
| 2011 2010 |
|
| 1,791,462 1,748,846 |
|
| 0 0 |
| | 8,994,000 8,306,025 | |
| 2,382,429 6,691,367 |
|
| 4,882,000 3,635,000 |
|
| 800,420 756,895 |
|
| 18,850,311 21,138,133 |
| ||||||||
Anthony C. Hooper(7) | 2012 | 976,179 | 0 | 5,296,747 | 0 | 1,795,000 | 518,068 | 8,585,994 | ||||||||||||||||||||||||
Executive Vice President, Global Commercial Operations | 2011 | 171,731 | 3,050,045 | 8,464,614 | 0 | 196,000 | 174,822 | 12,057,212 | ||||||||||||||||||||||||
Jonathan M. Peacock(8) | 2012 | 878,931 | 0 | 3,542,911 | 0 | 1,615,000 | 240,588 | 6,277,430 | ||||||||||||||||||||||||
Executive Vice President and Chief Financial Officer |
| 2011 2010 |
|
| 833,846 270,769 |
|
| 0 1,000,000 |
| | 2,363,499 5,727,000 | |
| 625,388 3,314,483 |
|
| 1,211,000 267,000 |
|
| 245,158 371,942 |
|
| 5,278,891 10,951,194 |
| ||||||||
Fabrizio Bonanni(9) | 2012 | 866,302 | 0 | 3,542,911 | 0 | 1,593,000 | 346,493 | 6,348,706 | ||||||||||||||||||||||||
Former Executive Vice President, Operations |
| 2011 2010 |
|
| 839,462 820,000 |
|
| 0 0 |
|
| 2,363,499 4,527,800 |
|
| 625,388 1,764,756 |
|
| 1,220,000 910,000 |
|
| 196,075 206,481 |
|
| 5,244,424 8,229,037 |
| ||||||||
Sean E. Harper(10) | 2012 | 835,038 | 0 | 3,542,911 | 0 | 1,535,000 | 176,814 | 6,089,763 | ||||||||||||||||||||||||
Executive Vice President, Research and Development | ||||||||||||||||||||||||||||||||
David J. Scott(11) | 2012 | 845,916 | 0 | 3,911,578 | 0 | 1,383,000 | 225,696 | 6,366,190 | ||||||||||||||||||||||||
Senior Vice President, General Counsel and Secretary | ||||||||||||||||||||||||||||||||
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | |||||||||||||||||||||
| Performance Units and Restricted Stock Units | EIP | |||||||||||||||||||||||||||
Robert A. Bradway Chairman of the Board, Chief Executive Officer and President |
| 2014 2013 2012 |
|
| 1,505,769 1,490,769 1,262,308 |
|
| 0 0 0 |
|
| 8,999,880 7,999,917 8,571,724 |
|
| 2,867,000 3,598,000 3,316,000 |
|
�� | 589,018 561,121 420,059 |
|
| 13,961,667 13,649,807 13,570,091 |
| |||||||
Anthony C. Hooper Executive Vice President, Global Commercial Operations |
| 2014 2013 2012 |
|
| 1,005,653 1,001,858 976,179 |
|
| 0 0 0 |
|
| 2,999,960 3,199,895 5,296,747 |
|
| 1,325,000 1,677,000 1,795,000 |
|
| 291,341 300,750 518,068 |
|
| 5,621,954 6,179,503 8,585,994 |
| |||||||
David W. Meline(5) Executive Vice President and Chief Financial Officer | 2014 | 408,469 | 1,000,000 | 6,799,914 | 481,000 | 1,909,980 | 10,599,363 | |||||||||||||||||||||
Sean E. Harper(6) Executive Vice President, Research and Development |
| 2014 2013 2012 |
|
| 899,948 896,543 835,038 |
|
| 0 0 0 |
|
| 2,999,960 3,199,895 3,542,911 |
|
| 1,186,000 1,501,000 1,535,000 |
|
| 259,782 265,228 176,814 |
|
| 5,345,690 5,862,666 6,089,763 |
| |||||||
Madhavan Balachandran(7) Executive Vice President, Operations |
| 2014 2013 |
|
| 772,961 762,461 |
|
| 170,000 330,000 |
|
| 2,799,884 3,199,895 |
|
| 1,019,000 1,273,000 |
|
| 224,300 203,354 |
|
| 4,986,145 5,768,710 |
| |||||||
Michael A. Kelly(8) Former Acting Chief Financial Officer and Vice President, Global Business Services | 2014 | 511,757 | 0 | 1,627,205 | 412,000 | 251,248 | 2,802,210 | |||||||||||||||||||||
Jonathan M. Peacock(9) Former Executive Vice President and Chief Financial Officer |
| 2014 2013 2012 |
|
| 428,087 904,945 878,931 |
|
| 0 0 0 |
|
| 0 3,199,895 3,542,911 |
|
| 0 1,515,000 1,615,000 |
|
| 7,467,590 266,967 240,588 |
|
| 7,895,677 5,886,807 6,277,430 |
| |||||||
| (1) | Reflects base salary earned in each bi-weekly pay period (or portion thereof) during each fiscal year before pre-tax contributions and, therefore, includes compensation deferred under our qualified and nonqualified deferred compensation plans. Under payroll practices for salaried staff members of our U.S. entities, including our NEOs, base salary earned in a pay period is computed by dividing the annual base salary then in effect by 26, which is the number of full bi-weekly pay periods in a year. |
| (2) | For |
The single measure that determines the number of units to be earned for the performance unit awards granted during |
| (3) |
|
Reflects amounts that were earned under our Executive Incentive Plan, or EIP, for |
See the subsection |
ï 2015 Proxy Statement67
| EXECUTIVE COMPENSATION TABLES |
Mr. |
or 2013. Mr. |
|
|
|
Mr. |
| (8) | Mr. Kelly was not an NEO in 2012 or 2013. Mr. Kelly served as our Acting Chief Financial Officer from January 10, 2014 until July 21, 2014. |
| (9) | Mr. Peacock ceased service as our Chief Financial Officer as of January 10, 2014 and is no longer an employee. Mr. Peacock is entitled to receive the following severance benefits, which are included in the “All Other Compensation” column of the “Summary Compensation Table”: (1) lump sum severance payment ($2,600,000); (2) reimbursement for the Consolidated Omnibus Reconciliation Act of 1985, or COBRA, medical coverage ($36,104) assuming full 18-months of coverage; (3) career transition services ($15,000); (4) payment for forfeited equity ($4,605,289) and (5) transition service hourly fees ($10,800). |
All Other Compensation—Perquisites and Other Compensation
Perquisites. The amounts reported reflect the aggregate incremental cost of perquisites and other personal benefits provided to our NEOs.NEOs and are included in the “All Other Compensation” column of the “Summary Compensation Table.” The following table sets forth the perquisites provided and any associated tax gross-up reimbursements made to our NEOs in 2012. Tax gross-up reimbursements are provided only with respect to moving and relocation expenses. For a description of our principles regarding moving and relocation benefits, see the discussion in “ELEMENTS OF COMPENSATION AND SPECIFIC COMPENSATION DECISIONS—Perquisites” in our Compensation Discussion and Analysis.2014.
| Personal Use of Company Aircraft(1) | Personal Use of Company Car and Driver(2) | Personal Financial Planning Services | Moving and Relocation Expenses(3) | Personal Expenses on Business Travel | Expenses Related to Guests Accompanying Officers on Business Travel | Other(4) | Personal Use of Company Aircraft(1) | Personal Use of Company Car and Driver(2) | Personal Financial Planning Services | Moving and Relocation Expenses(3),(4) | Other(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Tax Gross- Up($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Total($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Aggregate Incremental Cost($) | Tax Gross- Up($) | Aggregate Incremental Cost($) | Total($) | ||||||||||||||||||||||||||||||||||||||||||||||||
Robert A. Bradway | 65,009 | 4,256 | 15,000 | 0 | 0 | 17,805 | 2,564 | 1,836 | 106,470 | 55,332 | 2,068 | 15,000 | 0 | 0 | 6,818 | 79,218 | ||||||||||||||||||||||||||||||||||||||||||||||||
Kevin W. Sharer | 261,712 | 20,346 | 15,000 | 0 | 0 | 23,346 | 15,040 | 270,721 | 606,165 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Anthony C. Hooper | 0 | 1,732 | 15,000 | 284,305 | 97,310 | 390 | 686 | 1,905 | 401,328 | 280 | 1,558 | 15,000 | 0 | 0 | 6,623 | 23,461 | ||||||||||||||||||||||||||||||||||||||||||||||||
David W. Meline | 200 | 138 | 10,000 | 245,415 | 22,198 | 856 | 278,807 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sean E. Harper | 0 | 32 | 15,000 | 0 | 0 | 5,000 | 20,032 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Madhavan Balachandran | 0 | 0 | 15,000 | 0 | 0 | 5,000 | 20,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael A. Kelly | 0 | 243 | 7,500 | 91,717 | 54,108 | 1,700 | 155,268 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jonathan M. Peacock | 167 | 1,356 | 15,000 | 0 | 0 | 13,142 | 2,431 | 0 | 32,096 | 0 | 281 | 0 | 0 | 0 | 1,631 | 1,912 | ||||||||||||||||||||||||||||||||||||||||||||||||
Fabrizio Bonanni | 17,830 | 71,346 | 15,000 | 0 | 0 | 0 | 1,310 | 2,557 | 108,043 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sean E. Harper | 62 | 333 | 15,000 | 0 | 0 | 500 | 2,842 | 0 | 18,737 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
David J. Scott | 12,628 | 117 | 15,000 | 0 | 0 | 0 | 1,234 | 1,631 | 30,610 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | The aggregate incremental cost of use of our aircraft for personal travel by our NEOs is allocated entirely to the highest ranking NEO present on the |
| (2) | The aggregate incremental cost for personal use of |
| (3) | Mr. |
| (a) | $ |
|
|
$ |
68 ï 2015 Proxy Statement
| EXECUTIVE COMPENSATION TABLES |
$ |
| (d) | $7,032 for transportation costs of relocation-related trips; |
| (e) | $8,275 for miscellaneous other relocation expenses; and |
| (f) | $ |
| (4) | Mr. Kelly agreed to relocate from Switzerland to Thousand Oaks, California to serve as Acting Chief Financial Officer and subsequently other positions in January 2014. Certain relocation benefits were provided to Mr. Kelly in 2014 in connection with this relocation in accordance with our relocation policies, including: |
| (a) | $45,183 for costs related to the purchase of his new residence; |
| (b) | $34,842 for costs to relocate household goods; |
| (c) | $9,387 for housing and living expenses; |
| (d) | $2,305 for miscellaneous other relocation expenses; and |
| (e) | $54,108 for tax gross-up payments on moving and relocation benefits provided. |
| (5) | Other expenses include |
|
Other CompensationCompensation.. The following table sets forth compensation for our NEOs in 20122014 incurred in connection with our 401(k) Retirement and Savings Plan, or 401(k) Plan, and our Supplemental Retirement Plan, or SRP. These amounts are included in the “All Other Compensation” column of the “Summary Compensation Table.” See “Nonqualified Deferred Compensation” below for a description of these plans.
Name | Company Contributions to 401(k) Retirement and Savings Plan($) | Company Credits to Supplemental Retirement Plan($)(1) | Total($) | |||||
Robert A. Bradway | 25,000 | 288,589 | 313,589 | |||||
Kevin W. Sharer | 25,000 | 726,414 | 751,414 | |||||
Anthony C. Hooper | 25,000 | 91,740 | 116,740 | |||||
Jonathan M. Peacock | 25,000 | 183,492 | 208,492 | |||||
Fabrizio Bonanni | 25,000 | 213,450 | 238,450 | |||||
Sean E. Harper | 25,000 | 133,077 | 158,077 | |||||
David J. Scott | 25,000 | 170,086 | 195,086 | |||||
| Name | Company Contributions to 401(k) Retirement and Savings Plan($) | Company Credits to Supplemental Retirement Plan($) | Company Deferred | Total($) | ||||||||||||
Robert A. Bradway | 26,000 | 483,800 | 0 | 509,800 | ||||||||||||
Anthony C. Hooper | 26,000 | 241,880 | 0 | 267,880 | ||||||||||||
David W. Meline | 13,000 | 18,173 | 1,600,000 | (1) | 1,631,173 | |||||||||||
Sean E. Harper | 26,000 | 213,750 | 0 | 239,750 | ||||||||||||
Madhavan Balachandran | 26,000 | 178,300 | 0 | 204,300 | ||||||||||||
Michael A. Kelly | 26,000 | 69,980 | 0 | 95,980 | ||||||||||||
Jonathan M. Peacock | 26,000 | 172,485 | 0 | 198,485 | ||||||||||||
| (1) |
|
Narrative Description to the Compensation Tables—Performance Units
Long-term incentive performance units are granted to our NEOs annually during the first year of a three-year performance period and are paid out at the end of the performance period based on our level of achievement of the applicable pre-established performance goals establishedover the performance period, as determined by our Compensation and Management Development Committee, or Compensation Committee, for such performance period for each grant. The number of performance units earned is determined by the Compensation Committee at the end of the performance period based on our performance against the pre-established formula for such performance period, and isare paid out in shares of our Common Stock at a ratio of one share of Common Stock for each performance unit earned.
Performance units are generally forfeited unless a participant is continuously employed through the last business day of the performance period. The underlying principle is that the participant needs to have been an active employee during the entire performance period in order to have contributed to the results on which the earned awards are based. Exceptions to this treatment are a termination of employment in connection with a change of control or the death, disability or retirement of a participant as discussed under “Potential Payments Upon Termination or Change of Control” below.
ï 2015 Proxy Statement69
| EXECUTIVE COMPENSATION TABLES |
Performance Goals and Formulas
For a description of the performance units for the 2010-2012 performance period that began on January 1, 2010 and ended on December 31, 2012 and for the 2012-2014 performance period that began on January 1, 2012
and ended on December 31, 2014 and for the 2014-2016 performance period that began on January 31, 2014 and will end on DecemberJanuary 31, 2014,2017, see “ELEMENTS OF COMPENSATION AND SPECIFIC COMPENSATION DECISIONS—“Elements of Compensation and Specific Compensation Decisions—Long-Term Incentive Equity Awards” in our Compensation Discussion and Analysis.
Performance goals for the 2011-2013outstanding 2013-2015 performance period that began on January 1, 201128, 2013 and will end on December 31, 2013January 28, 2016 are based upon our TSR for the 2011-2013
2013-2015 performance period (or Amgen TSR) compared with the average ofrelative to the TSRs of companies that are listed in the S&P 500, as defined (the Reference Group), over the performance period. If the rank of the TSR of our thirteen-company peer group for such period (PeerCommon Stock is the 0th, 25th, 50th or 75th percentile relative to the companies of the Reference Group, Average TSR). Thethe percentage payout will be 0%, 50%, 100% or 150%, respectively, with linear interpolation used to determine the payout percentage if the rank of the TSR of our Common Stock falls between these percentiles, as applicable. If the rank of the TSR of our Common Stock is above the 75th percentile, the percentage payout will be 150%, the maximum number of performance units that may be earned is 150% of the target performance units granted for the 2011-20132013-2015 performance period.
The number of performance units earned at the end of the performance period will range from 0% to 150% of the number of performance units granted based on the payout percentage, which is determined in accordance with the following formula:
Payout Percentage:
|
|
|
|
Performance Units for Mr. Hooper
To compensate Mr. Hooper for equity lost as a result of his leaving his previous employer, to induce him to join us and to provide long-term incentives that are in alignment with stockholder interests, he was granted three performance-based performance unit awards. The performance periods for the performance unit awards each commenced on October 27, 2011 and ended or will end on December 31, 2012, December 31, 2013 and December 31, 2014, respectively. The goal design for these performance unit awards is identical to the 2011-2013 performance period awards, except that Allergan, Inc. and Celgene Corporation were added to the peer group used to calculate the payout, resulting in a fifteen-company peer group for each of his awards.
Grants of Plan-Based Awards
The following table sets forth summary information regarding all grants of plan-based awards made to our NEOs for the year ended December 31, 2012. None2014. Mr. Peacock is not included in the table as his service as our Chief Financial Officer terminated in January 2014, resulting in no grants of the NEOs were granted stock options during 2012.equity or non-equity awards to him in 2014.
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2)($) | Estimated Future Payouts Under Equity Incentive Plan Awards(3)(# of units) | All Other Stock Awards: Number of Shares of Stock or Units(#)(4) | Grant Date Fair Value of Stock and Option Awards($) | Estimated Future Payouts | Estimated Future Payouts Under Equity Incentive Plan Awards(# of units)(4) | All Other Stock Awards: Number of Shares of Stock or Units(#)(5) | Grant Date Fair Value of Stock and Option Awards($) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Approval Date(1) | Threshold | Target | Maximum | Threshold | Target | Maximum | Grant Date | Approval Date(1) | Threshold | Target | Maximum | Threshold | Target | Maximum | ||||||||||||||||||||||||||||||||||||||||||||||
| EIP | Performance Units | RSUs | EIP | Performance Units | RSUs | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Robert A. Bradway | 3/14/12 | 3/14/12 | (2) | (2) | 6,398,750 | 3/5/14 | 3/5/14 | (3) | (3) | 8,213,750 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/12 | 3/14/12 | (3) | 83,752 | 125,628 | 7,071,726(5) | 1/31/14 | 12/13/13 | (4) | 57,738 | 86,607 | 7,199,929 | (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/12 | 3/14/12 | 20,938 | 1,499,998(6) | 1/31/14 | 12/13/13 | 15,132 | 1,799,951 | (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kevin W. Sharer | 3/14/12 | 3/14/12 | (2) | (2) | 6,398,750 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Anthony C. Hooper | 3/5/14 | 3/5/14 | (3) | (3) | 4,928,250 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/12 | 3/14/12 | (3) | 35,734 | 53,601 | 3,017,254(5) | 1/31/14 | 12/13/13 | (4) | 19,246 | 28,869 | 2,399,976 | (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/12 | 3/14/12 | 8,933 | 639,960(6) | 1/31/14 | 12/13/13 | 5,044 | 599,984 | (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
David W. Meline | 7/21/14 | (2) | 7/21/14 | (2) | (3) | 327,121 | 736,022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 8/1/14 | 6/5/14 | 54,161 | 6,799,914 | (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Anthony C. Hooper | 3/14/12 | 3/14/12 | (2) | (2) | 3,839,250 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sean E. Harper | 3/5/14 | 3/5/14 | (3) | (3) | 4,928,250 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/31/14 | 12/13/13 | (4) | 19,246 | 28,869 | 2,399,976 | (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/31/14 | 12/13/13 | 5,044 | 599,984 | (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Madhavan Balachandran | 3/5/14 | 3/5/14 | (3) | (3) | 4,928,250 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/31/14 | 12/13/13 | (4) | 17,963 | 26,944 | 2,239,986 | (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/31/14 | 12/13/13 | 4,707 | 559,898 | (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Michael A. Kelly | 3/5/14 | 3/5/14 | (3) | (3) | 3,285,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/12 | 3/14/12 | (3) | 34,617 | 51,925 | 2,922,938(5) | 4/25/14 | 3/5/14 | (4) | 2,541 | 3,811 | 257,454 | (6) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/12 | 3/14/12 | 8,654 | 619,973(6) | 10/30/14 | 10/17/14 | 1,856 | 299,892 | (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/31/12 | 12/15/11 | 26,497 | 1,753,836(7) | 4/25/14 | 3/5/14 | 628 | 69,965 | (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/31/14 | 12/13/13 | 8,406 | 999,894 | (7) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jonathan M. Peacock | 3/14/12 | 3/14/12 | (2) | (2) | 3,839,250 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/12 | 3/14/12 | (3) | 34,617 | 51,925 | 2,922,938(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/12 | 3/14/12 | 8,654 | 619,973(6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fabrizio Bonanni | 3/14/12 | 3/14/12 | (2) | (2) | 3,839,250 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/12 | 3/14/12 | (3) | 34,617 | 51,925 | 2,922,938(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/12 | 3/14/12 | 8,654 | 619,973(6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sean E. Harper | 3/14/12 | 3/14/12 | (2) | (2) | 3,839,250 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/12 | 3/14/12 | (3) | 34,617 | 51,925 | 2,922,938(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/12 | 3/14/12 | 8,654 | 619,973(6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
David J. Scott | 3/14/12 | 3/14/12 | (2) | (2) | 2,559,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/12 | 3/14/12 | (3) | 24,567 | 36,850 | 2,074,351(5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4/27/12 | 3/14/12 | 6,141 | 439,941(6) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/31/12 | 12/15/11 | 22,081 | 1,397,286(7) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
70 ï 2015 Proxy Statement
| EXECUTIVE COMPENSATION TABLES |
| (1) | Reflects the date on which the grants were approved by the Compensation Committee. See |
| (2) | Because Mr. Meline commenced employment with us in July 2014, he received a pro-rata share of his 2014 eligible award under the Global Management Incentive Plan, or GMIP, as he was not an employee when participants in the EIP were determined. Amounts shown represent his target and maximum opportunity under the GMIP after pro-rating based on his hire date. |
| (3) | Represents awards to our NEOs made under our EIP. The “maximum” amounts shown in the table above reflect the largest possible payments under our EIP for the |
performance goals and the use of the GMIP in the Compensation Committee’s exercise of negative discretion see |
| GMIP | GMIP | Non-Equity Incentive Plan Compensation($) | ||||||||||||||||||||||||||||||
| Estimated Possible Payouts Under Non- Equity Incentive Plan Awards($) | Non-Equity Incentive Plan Compensation($) | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards($) | ||||||||||||||||||||||||||||||
Name | Threshold | Target | Maximum | Actual | Threshold | Target | Maximum | Actual | ||||||||||||||||||||||||
Robert A. Bradway | — | 1,615,400 | 3,634,650 | 3,316,000 | — | 1,950,000 | 4,387,500 | 2,867,000 | ||||||||||||||||||||||||
Kevin W. Sharer | — | 1,124,375 | 2,529,844 | 2,308,000 | ||||||||||||||||||||||||||||
Anthony C. Hooper | — | 874,263 | 1,967,092 | 1,795,000 | — | 901,620 | 2,028,645 | 1,325,000 | ||||||||||||||||||||||||
Jonathan M. Peacock | — | 786,531 | 1,769,695 | 1,615,000 | ||||||||||||||||||||||||||||
Fabrizio Bonanni | — | 775,855 | 1,745,674 | 1,593,000 | ||||||||||||||||||||||||||||
David W. Meline | — | 327,121 | 736,022 | 481,000 | ||||||||||||||||||||||||||||
Sean E. Harper | — | 747,685 | 1,682,291 | 1,535,000 | — | 806,850 | 1,815,413 | 1,186,000 | ||||||||||||||||||||||||
David J. Scott | — | 673,421 | 1,515,197 | 1,383,000 | ||||||||||||||||||||||||||||
Madhavan Balachandran | — | 693,000 | 1,559,250 | 1,019,000 | ||||||||||||||||||||||||||||
Michael A. Kelly | — | 280,388 | 630,873 | 412,000 | ||||||||||||||||||||||||||||
Reflects |
Reflects RSUs granted during |
Reflects the grant date fair values of the performance units granted during |
ï 2015 Proxy Statement71
| EXECUTIVE COMPENSATION TABLES |
interest rate of |
Reflects the grant date fair values of RSUs granted |
|
Outstanding Equity Awards at Fiscal Year End
The following table sets forth summary information regarding the outstanding equity awards at December 31, 20122014 granted to each of our NEOs.
| Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($/ Option) | Option Expiration Date(1) | Number of Shares or Units of Stock That Have Not Vested (#)(4) | Market Value of Shares or Units of Stock That Have Not Vested ($)(5) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5) | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($/ Option) | Option Expiration Date(1) | Number of Shares or Units of Stock That Have Not Vested (#)(3) | Market Value of Shares or Units of Stock That Have Not Vested ($)(4) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(4) | ||||||||||||||||||||||||||||||||||||||
| Stock Options | Restricted Stock Units and Dividend Equivalents | Performance Units and Dividend Equivalents | Stock Options | Restricted Stock Units and Dividend Equivalents | Performance Units and Dividend Equivalents | |||||||||||||||||||||||||||||||||||||||||||||||||
Robert A. Bradway | 0 | 73,500 | 54.69 | 4/25/21 | (2) | 54,223 | 4,674,023 | 127,340(6) | 10,976,708 |
| 48,510 127,000 84,000 84,000 |
|
| 24,990 0 0 0 |
|
| 54.69 58.43 50.44 42.13 |
|
| 4/25/21 4/26/20 4/28/16 4/29/15 | (2)
| 56,678 | 9,028,239 |
| 88,193 110,915 132,045 | (5) (6) (7) |
| 14,048,263 17,667,650 21,033,448 |
| |||||||||||||||||||||||||
| 63,500 | 63,500 | 58.43 | 4/26/20 | (3) | 55,062(7) | 4,746,344 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 63,000 | 21,000 | 50.44 | 4/28/16 | (3) | 34,584(8) | 2,981,141 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 84,000 | 0 | 42.13 | 4/29/15 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 65,000 | 0 | 62.55 | 4/26/14 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Kevin W. Sharer | 0 | 210,000 | 54.69 | 12/31/17 | (2) | 101,054 | 8,710,855 | 54,331(6) | 4,683,332 | |||||||||||||||||||||||||||||||||||||||||||||
| 0 | 159,250 | 58.43 | 12/31/17 | (3) | 157,320(7) | 13,560,984 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 0 | 64,000 | 50.44 | 4/28/16 | (3) | 131,131(8) | 11,303,492 | ||||||||||||||||||||||||||||||||||||||||||||||||
Anthony C. Hooper | 0 | 0 | n/a | n/a | 49,143 | 4,236,127 | 52,633(6) | 4,536,965 | 0 | 0 | 26,222 | 4,176,902 |
| 29,397 44,365 54,577 52,777 | (5) (6) (7) (8) |
| 4,682,648 7,066,901 8,693,570 8,406,848 |
| ||||||||||||||||||||||||||||||||||||
| 52,777(9) | 4,549,377 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 52,777(10) | 4,549,377 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 52,777(10) | 4,549,377 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
David W. Meline | 0 | 0 | 54,596 | 8,696,597 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Sean E. Harper |
| 13,860 16,000 |
|
| 7,140 0 |
|
| 54.69 58.43 |
|
| 4/25/21 4/26/20 | (2)
| 21,023 | 3,348,754 |
| 29,397 44,365 54,577 | (5) (6) (7) |
| 4,682,648 7,066,901 8,693,570 |
| ||||||||||||||||||||||||||||||||||
Madhavan Balachandran |
| 10,395 6,000 |
| | 5,355 0 | |
| 54.69 58.43 |
|
| 4/25/21 4/26/20 | (2)
| 34,505 | 5,496,301 |
| 27,438 44,365 15,845 | (5) (6) (7) |
| 4,370,599 7,066,901 2,523,950 |
| ||||||||||||||||||||||||||||||||||
Michael A. Kelly | 0 | 1,777 | 54.69 | 4/25/21 | (2) | 8,935 | 1,423,256 |
| 3,862 4,828 7,567 | (5) (6) (7) |
| 615,178 769,052 1,205,347 |
| |||||||||||||||||||||||||||||||||||||||||
Jonathan M. Peacock | 0 | 55,125 | 54.69 | 4/25/21 | (2) | 74,571 | 6,428,020 | 52,633(6) | 4,536,965 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||
| 87,500 | 87,500 | 57.27 | 10/28/20 | (3) | 41,296(7) | 3,559,715 | ||||||||||||||||||||||||||||||||||||||||||||||||
Fabrizio Bonanni | 0 | 55,125 | 54.69 | 4/25/21 | (2) | 73,571 | 6,341,820 | 52,633(6) | 4,536,965 | |||||||||||||||||||||||||||||||||||||||||||||
| 0 | 42,000 | 58.43 | 4/26/20 | (3) | 41,296(7) | 3,559,715 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 0 | 21,000 | 50.44 | 4/28/16 | (3) | 34,584(8) | 2,981,141 | ||||||||||||||||||||||||||||||||||||||||||||||||
Sean E. Harper | 0 | 21,000 | 54.69 | 4/25/21 | (2) | 43,196 | 3,723,495 | 52,633(6) | 4,536,965 | |||||||||||||||||||||||||||||||||||||||||||||
| 0 | 16,000 | 58.43 | 4/26/20 | (3) | 15,732(7) | 1,356,098 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 0 | 8,000 | 50.44 | 4/28/16 | (3) | 13,257(8) | 1,142,753 | ||||||||||||||||||||||||||||||||||||||||||||||||
David J. Scott | 0 | 38,875 | 54.69 | 4/25/21 | (2) | 43,830 | 3,778,146 | 37,352(6) | 3,219,742 | |||||||||||||||||||||||||||||||||||||||||||||
| 0 | 20,000 | 58.43 | 4/26/20 | (3) | 29,235(7) | 2,520,057 | ||||||||||||||||||||||||||||||||||||||||||||||||
| 0 | 10,000 | 50.44 | 4/28/16 | (3) | 16,571(8) | 1,428,420 | ||||||||||||||||||||||||||||||||||||||||||||||||
| (1) | Stock options granted prior to April 26, 2010 expire on the seventh anniversary of their grant date. Stock options granted on or after April 26, 2010 expire on the tenth anniversary of their grant |
| (2) | Stock options vest at a rate of 33%, 33% and 34% on the second, third and fourth anniversaries of the April 25, 2011 grant date, respectively. |
|
The following table shows the vesting of RSUs and any related accrued dividend equivalents (rounded down to the nearest whole number of units) outstanding as of December 31, |
Name Robert A. Bradway Kevin W. Sharer Anthony C. Hooper Jonathan M. Peacock Fabrizio Bonanni Sean E. Harper David J. Scott Units
Granted on
April 27,
2012(a) Units
Granted on
January 31,
2012(b) Units
Granted on
October 27,
2011(c) Units
Granted on
April 25,
2011(a) Units
Granted on
October 28,
2010(d) Units
Granted on
April 26,
2010(d) Units
Granted on
April 28,
2009(e) 21,223 0 0 21,000 0 9,000 3,000 9,054 0 0 60,000 0 22,750 9,250 8,771 17,753 22,619 0 0 0 0 8,771 0 0 15,800 50,000 0 0 8,771 0 0 15,800 0 46,000 3,000 8,771 0 0 6,000 0 27,300 1,125 6,224 22,081 0 11,200 0 2,900 1,425
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| EXECUTIVE COMPENSATION TABLES |
| Granted on | ||||||||||||||||||||||||||||||||||||||||
| Name | October 30, | August 1, 2014(b) | April 25, | January 31, | April 26, | January 28, | July 31, | April 27, | October 27, | April 25, | ||||||||||||||||||||||||||||||
Robert A. Bradway | 0 | 0 | 0 | 15,409 | 0 | 19,383 | 0 | 14,746 | 0 | 7,140 | ||||||||||||||||||||||||||||||
Anthony C. Hooper | 0 | 0 | 0 | 5,136 | 0 | 7,753 | 0 | 6,094 | 7,239 | 0 | ||||||||||||||||||||||||||||||
David W. Meline | 0 | 54,596 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||
Sean E. Harper | 0 | 0 | 0 | 5,136 | 0 | 7,753 | 0 | 6,094 | 0 | 2,040 | ||||||||||||||||||||||||||||||
Madhavan Balachandran | 0 | 0 | 0 | 4,793 | 0 | 7,753 | 18,659 | 1,770 | 0 | 1,530 | ||||||||||||||||||||||||||||||
Michael A. Kelly | 1,862 | 0 | 636 | 4,280 | 804 | 0 | 0 | 845 | 0 | 508 | ||||||||||||||||||||||||||||||
| (a) | Reflects total RSUs granted and related dividend equivalents accrued through December 31, |
|
Reflects RSUs |
|
| (c) | Reflects RSUs and related dividend equivalents accrued through December 31, 2014, of which approximately 33% vested on the second anniversary of the grant date and the remainder are scheduled to vest in approximately equal installments on the third and fourth anniversaries of the grant |
| (d) | Reflects RSUs which vested on March 2, 2015. |
| (e) | Reflects remaining unvested RSUs which are scheduled to vest on April |
The market values of RSUs and performance units (and related dividend equivalents) were calculated by multiplying the number of RSUs outstanding or the number of performance units (as determined in accordance with Securities and Exchange Commission, or SEC, rules and footnotes |
Reflects the sum of the number of performance units granted for the |
Reflects the number of performance units granted for the |
Reflects the actual number of performance units earned for the |
|
Reflects the actual number of performance units earned by Mr. Hooper for the performance period that began on October 27, 2011 and ended on December 31, |
|
The TSR percentage difference referenced in footnotes 6, 7, 9 and 10 equals our TSR less the average of TSRs of the peer group for the applicable performance period. See “ELEMENTS OFCOMPENSATION AND SPECIFIC COMPENSATION DECISIONS—Long-Term Incentive Equity Awards” in our Compensation Discussion and Analysis and“Summary Compensation Table—Narrative Description to the Compensation Tables – Performance Units” for more information regarding our performance units.
The estimated payouts of the performance units described above are disclosed in the limited context of our executive compensation program and should not be understood to be statements of our expectations of our stock price or estimates of results or other guidance. We specifically caution investors not to apply these statements to other contexts.
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| EXECUTIVE COMPENSATION TABLES |
Option Exercises and Stock Vested
The following table summarizes the option exercises and vesting of stock awardsRSUs (and related dividend equivalents) for each of our NEOs for the year ended December 31, 2012.2014. For a description of the performance units and associated payout values ofrelated dividend equivalents earned for the performance periods that ended on December 31, 20122014 and that were earned as of that date, see the “Outstanding Equity Awards at Fiscal Year End” table above and footnotes 87 and 98 to the table.
| Option Awards | Stock Awards | |||||||||||||||
Name | Number of Securities Acquired on Exercise(#) | Value Realized on Exercise($)(1) | Number of Shares Acquired on Vesting(#) | Value Realized on Vesting($)(2) | ||||||||||||
Robert A. Bradway | 40,000 | 957,200 | 10,500 | 745,695 | ||||||||||||
Kevin W. Sharer | 1,222,250 | 24,669,088 | 29,875 | 2,123,751 | ||||||||||||
Anthony C. Hooper | 0 | 0 | 31,363 | 2,119,825 | ||||||||||||
Jonathan M. Peacock | 0 | 0 | 25,000 | 2,190,750 | ||||||||||||
Fabrizio Bonanni | 356,000 | 8,910,753 | 9,000 | 640,410 | ||||||||||||
Sean E. Harper | 117,900 | 1,565,489 | 7,725 | 551,752 | ||||||||||||
David J. Scott | 227,000 | 4,188,842 | 5,725 | 408,037 | ||||||||||||
| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Securities Acquired on Exercise(#) | Value Realized on Exercise($)(1) | Number of Shares Acquired on Vesting(#) | Value Realized on Vesting($)(2) | ||||||||||||
Robert A. Bradway | 65,000 | 3,814,850 | 18,596 | 2,087,842 | ||||||||||||
Anthony C. Hooper | 0 | 0 | 19,660 | 2,401,006 | ||||||||||||
David W. Meline | 0 | 0 | 0 | 0 | ||||||||||||
Sean E. Harper | 0 | 0 | 31,091 | 4,699,033 | ||||||||||||
Madhavan Balachandran | 0 | 0 | 12,334 | 1,547,226 | ||||||||||||
Michael A. Kelly | 14,848 | 1,223,300 | 5,477 | 641,979 | ||||||||||||
Jonathan M. Peacock | 167,632 | 10,290,376 | 8,175 | 922,932 | ||||||||||||
| (1) | The value realized upon exercise of stock options reflects the price at which shares acquired upon exercise of the stock options were sold, |
| (2) | The value realized on vesting of RSUs, including cash received in lieu of fractional dividend equivalents, was calculated as the product of the closing price of a share of our Common Stock on the business day immediately prior to the vesting date, multiplied by the number of units vested. |
Nonqualified Deferred Compensation
The following table sets forth summary information regarding aggregate contributions to and account balances under our SRP and Nonqualified Deferred Compensation Plan, or NDCP for and as of the year ended December 31, 2012.2014. There were no withdrawals by any of the NEOs in 2012.2014.
Name | Executive Contributions in 2012($)(1) | Company Contributions in 2012($)(2) | Aggregate Earnings in 2012($)(3) | Aggregate Balance at December 31, 2012($)(4) | ||||||
Robert A. Bradway | 930,000 | 288,589 | 285,919 | 3,107,554 | ||||||
Kevin W. Sharer | 0 | 726,414 | 3,312,436 | 26,490,246 | ||||||
Anthony C. Hooper | 0 | 91,740 | 4,187 | 95,927 | ||||||
Jonathan M. Peacock | 0 | 183,492 | 21,096 | 289,548 | ||||||
Fabrizio Bonanni | 0 | 213,450 | 538,753 | 4,159,582 | ||||||
Sean E. Harper | 0 | 133,077 | 159,378 | 1,439,590 | ||||||
David J. Scott | 0 | 170,086 | 171,662 | 1,462,873 | ||||||
| Name | 2014 Employee Contributions ($)(1) | 2014 Company Contributions ($)(2) | 2014 Earnings ($)(3) | Balance as of 12/31/14($)(4) | ||||||||||||
Robert A. Bradway | 1,799,000 | 483,800 | 357,495 | 8,240,060 | ||||||||||||
Anthony C. Hooper | 1,000 | 241,880 | 39,761 | 715,971 | ||||||||||||
David W. Meline | 181,734 | 1,618,173 | 33,046 | 1,832,953 | ||||||||||||
Sean E. Harper | 0 | 213,750 | 92,136 | 2,169,060 | ||||||||||||
Madhavan Balachandran | 0 | 178,300 | 47,193 | 3,498,551 | ||||||||||||
Michael A. Kelly | 135,000 | 69,980 | 160,856 | 3,142,424 | ||||||||||||
Jonathan M. Peacock | 0 | 172,485 | 50,009 | 800,386 | ||||||||||||
| (1) | Reflects |
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| EXECUTIVE COMPENSATION TABLES |
| (2) | Reflects credits to the SRP. Also reflects a credit of $1,600,000 to Mr. Meline’s NDCP account which will vest at a rate of 12.5% per year from 2015 through 2022 as long as Mr. Meline remains actively and continuously employed with the Company, and which vesting accelerates upon a change of control consistent with the terms of the NDCP. Credits to the SRP |
| (3) | Reflects earnings in the NDCP and SRP for |
| (4) | Reflects balances in the NDCP and SRP on December 31, |
General Provisions of the Supplemental Retirement Plan and Nonqualified Deferred Compensation Plan
The SRP is designed to provide a “make-whole” benefit to 401(k) Plan participants who have eligible compensation in excess of the Internal Revenue Code’s qualified plan compensation limit. The Company credits to the SRP a 10% contribution on such compensation to represent the equivalent percentage of Company contributions that would have been made to the 401(k) Plan if the compensation had been eligible for deferral into the 401(k) Plan. For the same reason, the Company also credits to the SRP a 10% contribution on amounts deferred into the NDCP. No “above market” crediting rates are offered.offered under the SRP and employee contributions are not permitted.
The SRP and the NDCP are unfunded plans for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended. Deferred amounts are our general unsecured obligations and are subject to our on-going financial solvency. We have established a grantor trust (a so-called “rabbi” trust) for the purpose of accumulating funds to assist us in satisfying our obligations under the NDCP. Earnings on amounts contributed to our SRP and NDCP, like our 401(k) Plan, are based on participant
selections among the investment options selected by a committee of our executives. This committee has the sole discretion to discontinue, substitute or add investment options at any time. Participants can select from among these investment options for purposes of determining the earnings or losses that we will credit to their plan accounts, but they do not have an ownership interest in the investment options they select. Unlike our 401(k) Plan, we do
not offer the opportunity to invest through a brokerage window or in our Common Stock under our NDCP or SRP. The investment options in the NDCP and the SRP also differ in that they include six portfolios based on different target retirement dates, referred to as “Target Retirement Portfolios,” that have been created for use as default investment options. The investment options during 20122014 are described in the subsection “Investment“Investment Options Under the Supplemental Retirement Plan and Nonqualified Deferred Compensation Plan”Plan” below. Invested amounts can be transferred among available plan investment options on any business day and effective at the close of business on that day (subject to the time of the request and the market being open).
Retirement and Savings Plan and Supplemental Retirement Plan
Our 401(k) Plan is a qualified plan that is available to regular U.S.-based staff members of the Company and participating subsidiaries. All 401(k) Plan participants, including our NEOs, are eligible to receive the same level of matching and nonelective or “core” contributions from us. Company contributions on eligible compensation earned above the Internal Revenue Code qualified plan compensation limit and on amounts that were deferred to the NDCP are credited to our SRP, a nonqualified plan that is available to all 401(k) Plan eligible staff members.
ContributionsContributions.. We make a core contribution of 5% of eligible compensation to all regular U.S-based staff members under
the 401(k) Plan, regardless of whether the staff members elect to defer any of their compensation to the 401(k) Plan. In addition, under the 401(k) Plan, participants are eligible to receive matching contributions of up to 5% of their eligible compensation.compensation that they contribute to the 401(k) Plan. Under our SRP, we credit 10% of each participant’s eligible compensation in excess of the maximum recognizable compensation limit for qualified plans, which equals the combined percentage of our core contributions and maximum matching contributions under our 401(k) Plan. We also credit 10% of each participant’s compensation that is not eligible for deferral into our 401(k) Plan because the participant deferred it to the NDCP.
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Distributions.Participants receive distributions from the SRP following their termination of employment. Distributions for most participants are made in a lump sum payment in the first or second year following termination of employment, or, for balances in excess of a de minimis amount, in installments that commence in the year following termination. For our NEOs, Section 409A of the Internal Revenue Code generally requires that their distributions may not occur earlier than six months following our NEO’s termination of employment.
VestingVesting.. Participants in the 401(k) Plan are immediately vested in participant and Company contributions and related
earnings and losses on such amounts. Participants in the SRP are immediately vested in contributions that are made with respect to amounts the participants deferred under the NDCP and related earnings and losses on such amounts, and are fully vested in the remainder of their accounts upon the earlier of: (i) three continuous years of their service to us; (ii) termination of their employment on or after their normal retirement date (as defined in the 401(k) Plan); (iii) their disability (as defined in the 401(k) Plan); (iv) their death or (v) a change of control and termination of their employment as described below in “Potential Payments Upon Termination or Change of Control—Amended and Restated Change of Control Severance Plan.”
2012 Correction Contribution. In March 2012, we made a one-time contribution to certain SRP accounts in order to correct for erroneous under-contributions made between 2003 and 2007 to these SRP accounts. The accounts of Messrs. Bradway, Sharer and Scott and Drs. Bonanni and Harper, among others, were affected by this error and thus their accounts were credited with the one-time contribution.
Nonqualified Deferred Compensation Plan
Our NDCP allows participants to defer receipt of a portion of their eligible compensation to a future date, with an opportunity to earn tax-deferred returns on the deferrals. Members of our Board of Directors, or Board, and our U.S.- and Puerto Rico-based staff members at the director level or above, whichwho include our NEOs, are eligible to participate in this plan. Our NEOs may participate in this plan on the same basis as the other participants in the plan.
ContributionsContributions.. Participants who are staff members may elect to defer up to a maximum of 50% of their eligible base salary, up to a maximum of 100% of their annual cash incentive award and up to 100% of sales commissions. Non-employee members of our Board may defer all or a portion of their fees, including retainers and meeting fees. In addition, we may, in our sole discretion, contribute additional amounts to any participant’s account at any time, such as contributing sign-on bonuses to the accounts of newly-hired staff members or for retention purposes.
DistributionsDistributions.. Participants may elect to receive distributions as a lump sum or, for balances in excess of a de minimis amount, in annual installments for up to ten years. For most
participants, distributions commence in the first or second year following the participant’s termination of employment. For our NEOs, Section 409A of the Internal Revenue Code generally requires that distributions may not occur earlier than six months following our NEO’s termination of employment. Participants may also elect to receive an in-service distribution of an elective deferral (called a short-term deferral) that is paid no earlier than three full years after the end of the plan year in which the deferral was made. Participants canmay also petition for a distribution due to an unforeseeable financial hardship.
Vesting.Participants are at all times 100% vested in the amounts that they elect to defer and related earnings and losses on such amounts. As part of his initial hire package, and to replace the forfeiture of certain pension benefits at his former employer, we contributed $1,600,000 to Mr. Meline’s NDCP account. This contribution and related earnings and losses thereon vest at the rate of 12.5% per year from 2015 through 2022 as long as Mr. Meline remains continuously employed by us, which vesting accelerates upon a change of control consistent with the terms of the NDCP.
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| EXECUTIVE COMPENSATION TABLES |
Investment Options Under the Supplemental Retirement Plan and Nonqualified Deferred Compensation Plan
The investment options under the SRP and the NDCP and their annual rates of return for 20122014 are contained in the tables below. The 401(k) Plan offers the same investment options as the SRP and the NDCP except: (i) the 401(k) Plan also allows investments in our Common Stock and offers a brokerage window and (ii) the 401(k) Plan does not offer the six portfolios based on different target retirement dates, referred to as “Target Retirement Portfolios” below. The
Target Retirement Portfolios are designed to provide an all-in-one investment option for creating a diversified portfolio. Each portfolio is an asset allocation strategy built around a combination of investments from the plan’s investment options (provided below) and is adjusted over time to gradually become more conservative as the target maturity date of the portfolio approaches. We retain the right to change, at our discretion, the available investment options.
Name of Investment Option | Rate of Return for 2012 | Name of Investment Option | Rate of Return for 2012 | Rate of Return for 2014 | Name of Investment Option | Rate of Return for 2014 | ||||||||||||||
Amgen Target Retirement Portfolio Income | 12.41 | % | Capital Preservation | 2.36 | % | 6.98% | Capital Preservation | 1.39% | ||||||||||||
Amgen Target Retirement Portfolio 2010 | 12.77 | % | Fixed Income | 5.23 | % | 7.00% | Fixed Income Index | 6.06% | ||||||||||||
Amgen Target Retirement Portfolio 2020 | 14.59 | % | Large Cap Value | 20.02 | % | 6.98% | Fixed Income | 5.75% | ||||||||||||
Amgen Target Retirement Portfolio 2030 | 17.01 | % | Large Cap Index | 16.02 | % | 6.81% | High Yield | 2.48% | ||||||||||||
Amgen Target Retirement Portfolio 2040 | 18.31 | % | Large Cap Growth | 16.80 | % | 6.41% | Inflation-Protection | 3.57% | ||||||||||||
Amgen Target Retirement Portfolio 2050 | 18.56 | % | Small-Mid Cap Value | 21.12 | % | 5.94% | Large Cap Value | 11.10% | ||||||||||||
Small-Mid Cap Index | 18.35 | % | Large Cap Index | 13.66% | ||||||||||||||||
Small-Mid Cap Growth | 17.60 | % | Large Cap Growth | 9.35% | ||||||||||||||||
International Value | 21.05 | % | Small-Mid Cap Value | 3.36% | ||||||||||||||||
International Growth | 21.36 | % | Small-Mid Cap Index | 7.51% | ||||||||||||||||
High Yield | 16.07 | % | Small-Mid Cap Growth | 1.71% | ||||||||||||||||
Inflation-Protection | 6.89 | % | International Value | (2.43%) | ||||||||||||||||
Emerging Markets | 17.51 | % | International Index | (3.75%) | ||||||||||||||||
REIT Index | 16.65 | % | International Growth | (2.36%) | ||||||||||||||||
| Emerging Markets | (3.52%) | |||||||||||||||||||
| REIT Index | 28.01% | |||||||||||||||||||
Potential Payments Upon Termination or Change of Control
Change of Control Severance Plan
Our Amended and Restated Change of Control Severance Plan
Our (“Change of Control Severance PlanPlan”) provides a lump sum payment and certain other benefits for each participant in the plan who separates from employment with us in connection
with a change of control. Our
Compensation Committee periodically reviews the terms of the Change of Control Severance Plan, which was originally adopted in 1998, to ensure it is aligned with current governance best practices.
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| EXECUTIVE COMPENSATION TABLES |
If a change of control occurs and a participant’s employment is terminated by us other than for cause or disability or by the participant for good reason within two years after the change of control, a participant under the Change of Control Severance Plan would be entitled to:
a lump sum cash payment in an amount equal to:
the product of:
| – | the product of: |
a benefits multiple of one or two based on the participant’s position (each of our NEOs havehas a benefits multiple of two); and
the sum of (i) the participant’s annual base salary immediately prior to termination or, if higher, immediately prior to the change of control, plus (ii) the participant’s targeted annual cash incentive award for the year in which the termination occurs;
if, as a result of the participant’s termination of employment, the participant becomes entitled to, and timely elects to continue, healthcare (including any applicable vision benefits) and/or dental coverage under the Consolidated Omnibus Reconciliation Act of 1985, or COBRA Company-paid group health and dental insurance continuation coverage for the participant and his or her dependents under COBRA until the earlier of (i) the expiration of a participant’s eligibility for coverage under COBRA or (ii) the expiration of the eighteen-month18-month period immediately following the participant’s termination (whichever occurs earlier);
fully-vested benefits accrued under our 401(k) Plan and our SRP;
either a lump-sum cash payment or a contribution to our SRP, as determined by us in our sole discretion, in an amount equal to the sum of (1) the product of $2,500 and the participant’s benefits multiple and (2) the product of (x) 10%, (y) the sum of (i) the participant’s annual base salary as in effect immediately prior to the participant’s termination or, if higher, as in effect immediately prior to the change of control, plus (ii) the participant’s targeted annual cash incentive award for the year in which the termination occurs (which equals the participant’s annual base salary multiplied by the participant’s target annual cash incentive award percentage, each as in effect immediately prior to the termination or, if higher, as in effect immediately prior to the change of control) and (z) the benefits multiple; and
indemnification and, if applicable, directors’ and officers’ liability insurance provided by us for four years following the participant’s termination (each of our NEOs would receive such liability insurance benefits, which would result in no additional cost to us).
No tax gross-up payments are provided under the Change of Control Severance Plan. If all payments or benefits received under the Change of Control Severance Plan or any other plan, arrangement or agreement would cause the participant to be subject to excise tax, then the payments will be reduced to the extent necessary to avoid the excise tax, provided that the reduced payments, net of federal, state and local income taxes, isare greater than the payments without such reduction, net of federal, state and local income taxes and excise tax.
The plan provides that the benefits described above would be provided in lieu of any other severance benefits that may be payable by us (other than accrued vacation and similar benefits otherwise payable to all staff members upon a termination). However, other than with respect to Messrs. Hooper and Peacock, we currently have no standing severance arrangement that provides severance benefits to any of our NEOs. For a description of Messrs. Hooper’s and Peacock’s severance benefits, see the subsection “Messrs. Hooper’s and Peacock’s Offer Letters” below. The plan also provides that the benefits described above may be forfeited if the participant discloses our confidential information or solicits or offers employment to any of our staff members during a period of years equal to the participant’s benefits multiple following the participant’s termination.
The plan expires on December 31, 2014 and is subject to automatic one-year extensions unless we notify participants no later than November 30 of the year prior to the expiration date that the term will not be extended.
If a change of control occurs prior toduring the plan’s expiration,term of the plan, the plan will continue in effect for at least twenty-four24 months following the change of control. Prior to a change of control, we can terminate or amend the plan at any time. After a change of control, the plan may not be terminated or amended in any way that adversely affects a participant’s interests under the plan, unless the participant consents in writing.
“Change of Control” is defined in the plan as the occurrence of any of the following:
any person, entity or group has acquired beneficial ownership of 50% or more of (i) our then outstanding common shares or (ii) the combined voting power of our then outstanding securities entitled to vote in the election of directors;
individuals making up the incumbent Board (as defined in the plan) cease for any reason to constitute at least a majority of our Board;
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| EXECUTIVE COMPENSATION TABLES |
immediately prior to our consummation of a reorganization, merger or consolidation with respect to which persons who were the stockholders of the Company immediately prior to such transaction do not, immediately thereafter, own more than 50% of the then outstanding shares of the reorganized, merged or consolidated company entitled to vote generally in the election of directors;
a liquidation or dissolution of the Company or the sale of all or substantially all of the assets of the Company; or
any other event which the incumbent Board (as defined in the plan), in its sole discretion, determines is a change of control.
“Cause” is defined in the plan as (i) conviction of a felony or (ii) engaging in conduct that constitutes willful gross neglect or willful gross misconduct in carrying out the participant’s duties, resulting in material economic harm to us, unless the participant believed in good faith that the conduct was in, or not contrary to, our best interests.
“Disability” under the plan is determined based on our long-term disability plan as is in effect immediately prior to a change of control.
“Good reason” is defined in the plan as (i) an adverse and material diminution of a participant’s authority, duties or responsibilities, (ii) a material reduction in a participant’s base salary, (iii) an increase in a participant’s daily commute by more than 100 miles roundtrip or (iv) any other action or inaction by the Company that constitutes a material breach of the agreement under which the participant provides services. In order to terminate with “good reason,” a participant must provide written notice to the Company of the existence of the condition within the required period, the Company must fail to remedy the condition within the required time period and the participant must then terminate employment within the required time period.
Long-Term Incentive Equity Awards
Stock Options and Restricted Stock Units
Our stock plans (or the related grant agreements approved for use under such stock plans) provide for accelerated vesting or continued vesting of unvested stock options and RSUs in the circumstances described below.
Change of Control/Qualifying Termination in Connection with a Change of ControlControl.. With respect to Unvested stock options and RSUs made prior to March 2, 2011 all such unvested awards will vest(all of which by their terms were fully
vested as of March 2, 2015), would have vested in full upon a Change of Control (as defined in the stock plans or the related grant agreements approved for use under such stock plans), irrespective of the scheduled vesting dates for these awards. With respect to stock options and RSUs made on or after March 2, 2011, all such awards will vest in full only if, within twenty-four24 months following the change of control, the grantee’s employment is involuntarily terminated other than for “cause” or “disability,” and, in the case of staff members subject to the Change of Control Severance Plan, voluntarily terminated with “good reason” (as each is defined in the grant agreements). With respect to stock options and RSUs made on or after March 6, 2013, Change of Control no longer includes any other event which the incumbent Board (as defined in the related grant agreements), in its sole discretion, determines is a change of control.
Death or DisabilityDisability.. In general, unvested stock options and RSUs granted in calendar years prior to the year death or disability occurs vest in full upon the occurrence of such event. For unvested stock options and RSUs granted in the calendar year death or disability occurs, a pro-rata amount of these stock options and RSUs immediately vests based on the number of completed months of employment during the calendar year such event occurs. Under our stock plans, a disability has the same meaning as under Section 22(e)(3) of the Internal Revenue Code and occurs where the disability has been certified by either the Social Security Administration, the comparable government authority in another country with respect to non-U.S. staff members or an independent medical advisor appointed by us.
RetirementRetirement.. In general, unvested stock options and RSUs granted in calendar years prior to the year in which an employee retires continue to vest on their original vesting schedule following the retirement of the holder if the holder has been continuously employed for at least ten years and is age 55 or older or is age 65 or older, regardless of service (a retirement-eligible participant). If a retirement-eligible participant receives a grant of stock options or RSUs in the calendar year such retirement occurs, the participant will vest in a pro-rata amount of the award he or she would be otherwise entitled to based upon the number of complete months of employment during the calendar year such retirement occurs. Holders have the lesser of five years from the date of retirement or the remaining period before expiration to exercise any vested stock options. Messrs. Balachandran and Kelly were retirement eligible as of December 31, 2014 and they would have received this
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benefit (other than with respect to RSUs granted to Mr. Sharer received these benefits in connection with hisBalachandran on July 31, 2012 and Mr. Kelly on January 31 and October 30, 2014, which were expressly excepted from our standard retirement provisions), had they retired on December 31, 2012, and Dr. Bonanni received these benefits in connection with his retirement on January 25, 2013.2014. No other NEOs would have received this benefit because they did not meet the above-mentioned retirement eligibility requirements.
Performance Units
Our performance award program provides for a potential payoutearn-out of outstanding performance units upon a Change of Control (as defined in our Change of Control Severance Plan) or uponbased on a truncated performance period and our performance through the change of control, and provides for potential earn-out at the end of the performance period in the event of a termination of employment due to death, disability or retirement.retirement subject to the proration provisions described below. With respect to grants of performance units made on or after March 6, 2013, Change of Control no longer includes any other event which the incumbent Board (as defined in the performance award program), in its sole discretion, determines is a change of control.
Change of ControlControl.. With respect to grants of outstanding performance units, in the event of a change of control that occurs after the sixth month of the performance period and before the end of the performance period, the performance period terminates as of the last business day of the last completed quarter before the change of control (or, with respect to the 2013-2015 performance period only, the last business day before the change of control) and the participant is entitled to a payment equal to the amount the participant would have received for the performance period based onon: (A) our TSR performance for which our ending Common Stock price is computed on the greater of (i) the average daily closing price of our Common Stock for the last sixty (60) trading days (or, with respect to the 2013-2015 performance period only, the last twenty (20) trading days)days of such shortened period or (ii) the value of consideration paid for a share of our Common Stock in the change of control (whether such consideration is paid in cash, stock or other property, or any combination thereof) and (B) the TSR performance of the companies in our comparatorthe applicable reference group based on such companies’ average daily closing stock price for the last sixty (60) trading days (or, with respect to the 2013-2015 performance period only, the last twenty (20) trading days)days of such shortened performance period. In the event of a change of control that occurs during the first six months of the performance period, the participant is entitled to a payment equal to an amount calculated in the manner described in the preceding sentence pro-rated for the number of complete months elapsed during the shortened performance period.
Death or DisabilityDisability.. For all performance unit grants made in calendar years prior to the year death or disability occurs, the participant will be paid the full amount of the award he or she would be otherwise entitled to, if any, as determined at the end of the performance period. For a performance unit grant made in the calendar year in which death or disability occurs, a participant will be paid a pro-rata amount of the award he or she would otherwise be entitled to, if any, as determined at the end of the performance period, based upon the number of complete months of employment during the performance period in the calendar year such event occurs.
RetirementRetirement.. In the event of retirement of a participant who has been continuously employed with us for at least ten years and is age 55 or older or is age 65 or older, regardless of service (a retirement-eligible participant),
for performance unit grants made in calendar years prior to the year in which retirement occurs, the participant will be paid the full amount of the award he or she would be otherwise entitled to, if any, as determined at the end of the performance period. If a retirement-eligible participant receives a performance unit grant in the calendar year such retirement occurs, the participant will be paid a pro-rata amount of the award he or she would be otherwise entitled to, if any, as determined at the end of the performance period, based upon the number of complete months of employment during the performance period in the calendar year such retirement occurs. Mr. SharerBalachandran and Mr. Kelly would have received these benefitsthis benefit had they retired on December 31, 2014. No other NEOs would have received this benefit because they did not meet the above-mentioned retirement requirements.
Mr. Meline’s Offer Letter
We entered into an offer letter with Mr. Meline in connection with his retirement on December 31, 2012, and Dr. Bonanni received these benefits in connection with his retirement on January 25, 2013. None of the other NEOs meet the retirement eligibility requirements.
Messrs. Hooper’s and Peacock’s Offer Letters
We entered into offer letters with Messrs. Hooper and Peacock in connection with their initial hiring in October 2011 and September 2010, respectively,as Chief Financial Officer effective July 21, 2014, which provideprovides our limited severance benefits in the event of terminationstermination of employment by us, other than for cause. EachSpecifically, the offer letter provides for severance protection for three years following the hire date at a benefit multipleequal to one year of two timesbase salary and target bonus, as defined, plus up to eighteen12 months of COBRA medical and dental coverage paid by us. Benefits of this type are sometimes provided to officer-level candidates in order to provide an incentive to them to join the Company by reducing the risk of making such a job change. These severance benefits will expire on October 27, 2014 for Mr. Hooper and on September 1, 2013 for Mr. Peacock,July 21, 2017, the third anniversariesanniversary of the commencement of theirhis employment with the Company.
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For purposes of the offer letters, “cause” is defined as: (i) unfitness for service, inattention to or neglect of duties, or incompetence; (ii) dishonesty; (iii) disregard or violation of the policies or procedures of the Company; (iv) refusal or failure to follow lawful directions of the Company; (v) illegal, unethical or immoral conduct; or (vi) breach of our Proprietary Information and Inventions Agreement or (vii) any other reason set forthAgreement.
Mr. Balachandran’s 2011 Special Retention Award
We entered into an arrangement with Mr. Balachandran in California Labor Code Section 2924,March 2011 which provided for specified annual cash installment payments commencing in all cases, as determined by us.
Dr. Bonanni’s Consulting Agreement
On January 25, 2013, Dr. Bonanni retired fromMarch 2012 in order to promote his continued employment with Amgen. Dr. Bonanni is entitledus. Payments made under this arrangement are subject to Mr. Balachandran’s continued employment until each installment date, except in the standard retirement benefits provided to our retirement-eligible employees under our long-term incentive equity award agreements. As a result, except with respect to the certain RSUs for which vesting was accelerated in connection with his consulting agreement discussed below, Dr. Bonanni will continue to vest in allevent of his outstanding RSUsdeath, disability or involuntary termination of employment not for “Cause.” For purposes of this arrangement, “cause” is defined in the same manner as it is in Mr. Meline’s offer letter described above. Pursuant to this arrangement Mr. Balachandran received a cash payment of $330,000 on each of March 2, 2012 and stock options in accordance with their original vesting schedules. In addition,2013, and a cash payment of $170,000 on each of March 2, 2014 and 2015, for a total of $1,000,000.
Mr. Peacock’s Severance Arrangement
Mr. Peacock resigned as our Chief Financial Officer effective January 10, 2014, at which time he will continuecontinued to be entitled toemployed in a full payout from his outstanding performance units at the end of the performance period based on actual performance (for the 2011-2013 and 2012-2014 performance periods).
In connection with his retirement and in light of Dr. Bonanni’s expertise in our global operations, quality and engineering, we entered into a consulting agreement with Dr. Bonanni. Under the consulting agreement, Dr. Bonanni has agreed to be available at least twelve days through the year to advise on issues related to his areas of expertise andnon-executive officer capacity to assist in the transition of Michael A. Kelly, our Acting Chief Financial Officer, which transition period ended in May 2014. Upon his termination from the positionCompany, Mr. Peacock received the following severance benefits: (1) lump sum payment of Executive Vice President, Operations. In consideration$2,600,000 that is approximately equal to 1.5 times base pay salary plus target annual cash incentive award opportunity; (2) reimbursement of $36,104 for COBRA medical coverage for up to 18 months; (3) senior executive career transition services for up to 12 months at a cost of $15,000; (4) a payment of $4,605,289 that is approximately equal to the pro-rata value of the last unvested tranche of his services under the consulting agreement, 40,000 RSUs granted to Dr. Bonanni on April 26, 2010new hire equity awards (stock options and RSUs) that were originally to vest on December 31, 2013, and would have been forfeited in connection with his retirement, became vested in fullOctober 2014, based on the total period of time that he was employed over the total vesting period of such tranche (48 months) calculated on the date of his retirement (the Vested Shares). Thetermination of employment with the Company, and using a stock price equal to $113 per share and (5) a payment of $10,800 representing authorized time that he spent following the
termination of his employment in further transitioning his responsibilities and with matters that arose during his tenure with the Company at an hourly rate of $1,200. In determining these benefits, the Compensation Committee determinedconsidered that, until September 2013, Mr. Peacock was eligible for severance protection at a higher benefit multiple of two times annual base salary and target annual cash incentive award opportunity plus up to 18 months of COBRA protection, that the accelerated vestingpro-rata value of the RSUslast unvested tranche of his new hire equity awards was appropriate because, with Dr. Bonanni consulting through 2013,made, in part, to compensate Mr. Peacock for value that he will have fulfilledleft behind at his former employer and that Mr. Peacock served (including by providing important transition services) nearly the purposefull vesting period. The agreement between the Company and Mr. Peacock includes a general release of the original retention grant. The valueall claims by Mr. Peacock and provides that Mr. Peacock forfeit and repay substantial benefits of 40,000 shares of our Common Stock on January 25, 2013 was $3,336,800.We have also agreed to reimburse Dr. Bonanni for all reasonable and normal travel-related expenses incurredthis agreement if Mr. Peacock materially breaches any covenants or conditions in connection with the performance of the consulting services and to allow him to retain his iPad and computer through the term of the consulting agreement. In the event that Dr. Bonanni fails to make himself available for the minimum days of consulting service under the consulting agreement or breaches any terms of the consulting agreement or any terms of the Amgenpreviously signed Proprietary Information and Inventions Agreement, we are authorizedincluding if Mr. Peacock fails to recapture,fulfill his post-termination obligations to cooperate, to maintain the confidentiality of our information and Dr. Bonanni will be requirednot to
deliver and pay to us, all Vested Shares or, if such shares have been sold, transferred or otherwise disposed of, the fair market value of such shares on the date of such transaction (the FMV of sold shares). Pursuant to the consulting agreement, if Dr. Bonanni accepts employment or an engagement during the term of the consulting agreement, which we determine, in our sole discretion, is not appropriate, such acceptance shall constitute a material breach of the consulting agreement authorizing our recapture of the Vested Shares or the FMV of sold shares.
Estimated Potential Payments
The tables below set forth the estimated current value of payments and benefitsbenefits: (i) to each of our NEOs (other than Mr. Sharer and Dr. Bonanni)Peacock who was not employed by us on December 31, 2014), upon a change of control, upon a qualifying termination within two years following a change of control, theor upon death or disability, of our NEOs, and with respect(ii) to Messrs. HooperMeline and Peacock,Balachandran, upon termination without cause. None of these officerscause and (iii) to Messrs. Balachandran and Kelly, upon their retirement (Messrs. Balachandran and Kelly are retirement eligible. Thethe only retirement-eligible NEOs). All other amounts shown in the tables below assume that the triggering events occurred on December 31, 20122014 and do not include: (i) the 2010-20122012-2014 performance unit awards and the 2014 EIP payouts, which were earned as of December 31, 2012;2014; (ii) other benefits earned during the term of our NEO’s employment that are available to all salaried staff members, such as accrued vacation; (iii) benefits paid by insurance providers under life and disability policies and (iv) benefits previously accrued and vested under the SRP and the NDCP. For information on the accrued amounts payable under these plans, see the “Nonqualified Deferred Compensation” table above. The actual amounts of payments and benefits that would be
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provided can only be determined at the time of a change of control and/or the NEO’s separation from the Company. The tables below for Mr. Sharer and Dr. Bonanni set forth the estimated value of payments and benefits resulting from such person’s retirement on December 31, 2012 and January 25, 2013, respectively.
In accordance with SEC rules, the value of accelerated equity awards (and the value of equity awards that would continue to vest after retirement) shown in the tables below was calculated using the closing price of our Common Stock on December 31, 2012 ($86.20), except with respect to Dr. Bonanni’s awards, which reflect the closing price of our Common Stock ($83.42) as of his actual retirement date of January 25, 2013.2014 $159.29. The value of accelerated stock options is the aggregate spread between the applicable
closing price and the exercise pricesprice of the stock options, if less than such closing price, while the value per unit of accelerated RSUs and performance units, including the related accrued dividend equivalents (rounded down to the nearest whole number of units), equals the applicable closing price.price multiplied by the number of units and dividend equivalents vested or earned, as applicable, as a result of such event.
Estimated Payments to Mr.Robert A. Bradway
| Triggering Event | ||||||||||||||||
Estimated Potential Payment or Benefit | Change of Control($) | Change of Control and Termination($) | Retirement($) | Death or Disability($) | ||||||||||||
Lump sum cash severance payment | 0 | 6,440,000 | 0 | 0 | ||||||||||||
Intrinsic value of accelerated unvested stock options | 2,514,355 | 4,830,340 | 0 | 4,830,340 | ||||||||||||
Intrinsic value of accelerated unvested RSUs | 1,034,400 | 4,674,023 | 0 | 4,674,023 | ||||||||||||
Value of 2012-2014 performance units | 10,684,059 | (1) | 10,684,059 | (1) | 0 | 10,976,708 | (2) | |||||||||
Value of 2011-2013 performance units | 4,387,925 | (1) | 4,387,925 | (1) | 0 | 4,746,344 | (2) | |||||||||
Continuing health benefits for 18 months(3) | 0 | 37,624 | 0 | 0 | ||||||||||||
Retirement plan contributions for two years(4) | 0 | 649,000 | 0 | 0 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Total | 18,620,739 | 31,702,971 | 0 | 25,227,415 | ||||||||||||
| Triggering Event | ||||||||||||
| Estimated Potential Payment or Benefit | Change in Control($) | Change in Control and Termination($) | Death or Disability($) | |||||||||
Lump sum cash severance payment | 0 | 6,900,000 | 0 | |||||||||
Intrinsic value of accelerated unvested options | 0 | 2,613,954 | 2,613,954 | |||||||||
Intrinsic value of accelerated unvested RSUs | 0 | 9,028,239 | 9,028,239 | |||||||||
Value of 2014-2016 performance units | 14,048,263 | (1) | 14,048,263 | (1) | 14,048,263 | (2) | ||||||
Value of 2013-2015 performance units | 17,667,650 | (1) | 17,667,650 | (1) | 17,667,650 | (2) | ||||||
Continuing health care benefits for 18 months(3) | 0 | 36,532 | 0 | |||||||||
Continuing retirement plan contributions for two years(4) | 0 | 695,000 | 0 | |||||||||
Total | 31,715,913 | 50,989,638 | 43,358,106 | |||||||||
Estimated Payments to Mr. SharerAnthony C. Hooper(6)
| Triggering Event | ||||||||||||
| Estimated Potential Payment or Benefit | Change in Control($) | Change in Control and Termination($) | Death or Disability($) | |||||||||
Lump sum cash severance payment | 0 | 3,806,840 | 0 | |||||||||
Intrinsic value of accelerated unvested options | n/a | n/a | n/a | |||||||||
Intrinsic value of accelerated unvested RSUs | 0 | 4,176,902 | 4,176,902 | |||||||||
Value of 2014-2016 performance units | 4,682,648 | (1) | 4,682,648 | (1) | 4,682,648 | (2) | ||||||
Value of 2013-2015 performance units | 7,066,901 | (1) | 7,066,901 | (1) | 7,066,901 | (2) | ||||||
Continuing health care benefits for 18 months(3) | 0 | 24,756 | 0 | |||||||||
Continuing retirement plan contributions for two years(4) | 0 | 385,684 | 0 | |||||||||
Total | 11,749,549 | 20,143,731 | 15,926,451 | |||||||||
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Estimated Payments to Mr. HooperDavid W. Meline
| Triggering Event | ||||||||||||||||||||
Estimated Potential Payment or Benefit | Change of Control($) | Change of Control and Termination($) | Termination Without Cause($)(8) | Retirement($) | Death or Disability($) | |||||||||||||||
Lump sum cash severance payment | 0 | 3,710,700 | 3,515,400 | 0 | 0 | |||||||||||||||
Intrinsic value of accelerated unvested stock options | 0 | 0 | 0 | 0 | 0 | |||||||||||||||
Intrinsic value of accelerated unvested RSUs | 0 | 4,236,127 | 0 | 0 | 4,236,127 | |||||||||||||||
Value of 2012-2014 performance units | 4,415,940 | (1) | 4,415,940 | (1) | 0 | 0 | 4,536,965 | (2) | ||||||||||||
Value of 2011-2014 performance units | 4,528,172 | (1) | 4,528,172 | (1) | 0 | 0 | 4,549,377 | (2) | ||||||||||||
Value of 2011-2013 performance units | 4,528,172 | (1) | 4,528,172 | (1) | 0 | 0 | 4,549,377 | (2) | ||||||||||||
Continuing health benefits for 18 | 0 | 25,504 | 25,504 | 0 | 0 | |||||||||||||||
Retirement plan contributions for two years(4) | 0 | 376,070 | 0 | 0 | 0 | |||||||||||||||
Acceleration of unvested balance of SRP | 0 | 95,927 | 0 | 0 | 95,927 | |||||||||||||||
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|
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|
|
|
|
|
|
| |||||||||||
Total | 13,472,284 | 21,916,612 | 3,540,904 | 0 | 17,967,773 | |||||||||||||||
| Triggering Event | ||||||||||||||||
| Estimated Potential Payment or Benefit | Change in Control($) | Change in Control and Termination($) | Termination Without Cause($)(5) | Death or Disability($) | ||||||||||||
Lump sum cash severance payment | 0 | 3,420,061 | 1,710,030 | 0 | ||||||||||||
Intrinsic value of accelerated unvested options | n/a | n/a | n/a | n/a | ||||||||||||
Intrinsic value of accelerated unvested RSUs | 0 | 8,696,597 | 0 | 3,623,517 | (8) | |||||||||||
Value of 2014-2016 performance units | n/a | n/a | n/a | n/a | ||||||||||||
Value of 2013-2015 performance units | n/a | n/a | n/a | n/a | ||||||||||||
Continuing health care benefits for applicable period(3) | 0 | 36,532 | 23,707 | 0 | ||||||||||||
Continuing retirement plan contributions(4) | 0 | 347,006 | 0 | 0 | ||||||||||||
Acceleration of unvested balance of DCP account | 1,630,913 | 1,630,913 | 0 | 0 | ||||||||||||
Total | 1,630,913 | 14,131,109 | 1,733,737 | 3,623,517 | ||||||||||||
Estimated Payments to Mr. PeacockSean E. Harper
| Triggering Event | ||||||||||||
| Estimated Potential Payment or Benefit | Change in Control($) | Change in Control and Termination($) | Death or Disability($) | |||||||||
Lump sum cash severance payment | 0 | 3,406,700 | 0 | |||||||||
Intrinsic value of accelerated unvested options | 0 | 746,844 | 746,844 | |||||||||
Intrinsic value of accelerated unvested RSUs | 0 | 3,348,754 | 3,348,754 | |||||||||
Value of 2014-2016 performance units | 4,682,648 | (1) | 4,682,648 | (1) | 4,682,648 | (2) | ||||||
Value of 2013-2015 performance units | 7,066,901 | (1) | 7,066,901 | (1) | 7,066,901 | (2) | ||||||
Continuing health care benefits for 18 months(3) | 0 | 36,532 | 0 | |||||||||
Continuing retirement plan contributions for two years(4) | 0 | 345,670 | 0 | |||||||||
Total | 11,749,549 | 19,634,049 | 15,845,147 | |||||||||
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| Triggering Event | ||||||||||||||||||||
Estimated Potential Payment or Benefit | Change of Control($) | Change of Control and Termination($) | Termination Without Cause($)(8) | Retirement($) | Death or Disability($) | |||||||||||||||
Lump sum cash severance payment | 0 | 3,351,600 | 3,351,600 | 0 | 0 | |||||||||||||||
Intrinsic value of accelerated unvested stock options | 2,531,375 | 4,268,364 | 0 | 0 | 4,268,364 | |||||||||||||||
Intrinsic value of accelerated unvested RSUs | 4,310,000 | 6,428,020 | 0 | 0 | 6,428,020 | |||||||||||||||
Value of 2012-2014 performance units | 4,415,940 | (1) | 4,415,940 | (1) | 0 | 0 | 4,536,965 | (2) | ||||||||||||
Value of 2011-2013 performance units | 3,290,944 | (1) | 3,290,944 | (1) | 0 | 0 | 3,559,715 | (2) | ||||||||||||
Continuing health benefits for 18 months(3) | 0 | 37,624 | 37,624 | 0 | 0 | |||||||||||||||
Retirement plan contributions for two years(4) | 0 | 340,160 | 0 | 0 | 0 | |||||||||||||||
Acceleration of unvested balance of SRP | 0 | 289,548 | 0 | 0 | 289,548 | |||||||||||||||
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Total | 14,548,259 | 22,422,200 | 3,389,224 | 0 | 19,082,612 | |||||||||||||||
Estimated Payments to Dr. BonanniMadhavan Balachandran(6)
Estimated Potential Payment or Benefit | Retirement($) | |||
Intrinsic value of unvested stock options | 3,325,901 | |||
Intrinsic value of unvested RSUs | 6,137,293 | (9) | ||
Value of 2012-2014 performance units | 4,390,645 | |||
Value of 2011-2013 performance units | 3,444,912 | |||
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Total | 17,298,751 | |||
| Triggering Event | ||||||||||||||||||||
| Estimated Potential Payment or Benefit | Change in Control($) | Change in Control and Termination($) | Termination Without Cause($) | Retirement($) | Death or Disability($) | |||||||||||||||
Lump sum cash severance payment | 0 | 2,926,000 | 0 | 0 | 0 | |||||||||||||||
Intrinsic value of accelerated unvested options | 0 | 560,133 | 0 | 560,133 | 560,133 | |||||||||||||||
Intrinsic value of accelerated unvested RSUs | 0 | 5,496,301 | 0 | 2,524,109 | (7) | 5,496,301 | ||||||||||||||
Value of 2014-2016 performance units | 4,370,599 | (1) | 4,370,599 | (1) | 0 | 4,370,599 | (2) | 4,370,599 | (2) | |||||||||||
Value of 2013-2015 performance units | 7,066,901 | (1) | 7,066,901 | (1) | 0 | 7,066,901 | (2) | 7,066,901 | (2) | |||||||||||
Continuing health care benefits for 18 months(3) | 0 | 36,532 | 0 | 0 | 0 | |||||||||||||||
Continuing retirement plan contributions for two years(4) | 0 | 297,600 | 0 | 0 | 0 | |||||||||||||||
Special retention award(6) | 0 | 170,000 | 170,000 | 0 | 170,000 | |||||||||||||||
Total | 11,437,500 | 20,924,066 | 170,000 | 14,521,742 | 17,663,934 | |||||||||||||||
Estimated Payments to Dr. HarperMichael A. Kelly
| Triggering Event | ||||||||||||||||
Estimated Potential Payment or Benefit | Change of Control($) | Change of Control and Termination($) | Retirement($) | Death or Disability($) | ||||||||||||
Lump sum cash severance payment | 0 | 3,320,440 | 0 | 0 | ||||||||||||
Intrinsic value of accelerated unvested stock options | 730,400 | 1,392,110 | 0 | 1,392,110 | ||||||||||||
Intrinsic value of accelerated unvested RSUs | 2,450,235 | 3,723,495 | 0 | 3,723,495 | ||||||||||||
Value of 2012-2014 performance units | 4,415,940 | (1) | 4,415,940 | (1) | 0 | 4,536,965 | (2) | |||||||||
Value of 2011-2013 performance units | 1,253,693 | (1) | 1,253,693 | (1) | 0 | 1,356,098 | (2) | |||||||||
Continuing health benefits for 18 months(3) | 0 | 37,624 | 0 | 0 | ||||||||||||
Retirement plan contributions for two years(4) | 0 | 337,044 | 0 | 0 | ||||||||||||
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Total | 8,850,268 | 14,480,346 | 0 | 11,008,668 | ||||||||||||
Lump sum cash severance payment Intrinsic value of accelerated unvested options Intrinsic value of accelerated unvested RSUs Value of 2014-2016 performance units Value of 2013-2015 performance units Continuing health care benefits for 18 months(3) Continuing retirement plan contributions for two years(4) TotalEstimated Payments to Mr. Scott Triggering Event Estimated Potential Payment or Benefit Change in
Control($) Change in
Control and
Termination($) Retirement($) Death or
Disability($) 0 1,580,368 0 0 0 185,874 185,874 185,874 0 1,423,256 444,897 (7) 1,423,256 615,178 (1) 615,178 (1) 615,178 (2) 615,178 (2) 769,052 (1) 769,052 (1) 769,052 (2) 769,052 (2) 0 36,532 0 0 0 163,037 0 0 1,384,230 4,773,297 2,015,001 2,993,360
| Triggering Event | ||||||||||||||||
Estimated Potential Payment or Benefit | Change of Control($) | Change of Control and Termination($) | Retirement($) | Death or Disability($) | ||||||||||||
Lump sum cash severance payment | 0 | 1,992,554 | (5) | 0 | 0 | |||||||||||
Intrinsic value of accelerated unvested stock options | 913,000 | 2,137,951 | 0 | 2,137,951 | ||||||||||||
Intrinsic value of accelerated unvested RSUs | 372,815 | 3,778,146 | 0 | 3,778,146 | ||||||||||||
Value of 2012-2014 performance units | 3,133,887 | (1) | 3,133,887 | (1) | 0 | 3,219,742 | (2) | |||||||||
Value of 2011-2013 performance units | 2,329,727 | (1) | 2,329,727 | (1) | 0 | 2,520,057 | (2) | |||||||||
Continuing health benefits for 18 months(3) | 0 | 25,504 | 0 | 0 | ||||||||||||
Retirement plan contributions for two years(4) | 0 | 309,632 | 0 | 0 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | 6,749,429 | 13,707,401 | 0 | 11,655,896 | ||||||||||||
84 ï 2015 Proxy Statement
| EXECUTIVE COMPENSATION TABLES |
| (1) | In the event of a change of control occurring after the first six months of the |
In the event of a change of control during the second year of the 2011-2013 performance period, the number of performance units that would have been earned is the number of performance units granted multiplied by a payout percentage of 121.2%, which equals 100% plus two times the TSR percentage difference for the period from January 1, 2011 through September 30, 2012.
In the event of a change of control with respect to performance unit awards granted to Mr. Hooper with performance periods beginning on the October 27, 2011 grant date, the number of performance units that would have been earned is the number of performance units granted multiplied by a payout percentage of 149.3%, which equals 100% plus two times the TSR percentage difference for the period from October 27, 2011 through September 30, 2012.
In accordance with the terms of these performance unit awards, the TSR percentage differences equals our TSR over the shortened performance periods ended September 30, 2012 less the average of the TSRs of the peer group for the same periods. Our TSRs for purposes of determining the TSR percentage differences would be based on the higher of the average closing price of our Common Stock for a 60 day averaging period that ended on September 30, 2012 or the value of consideration the acquirer paid for a share of our Common Stock in the change of control. For purposes of the payout values shown in the tables, the TSR for our Common Stock was based on the 60 day averaging period. The resulting number of units that would have been earned was multiplied by $86.20, the closing price of our Common Stock on December 31, 2012.
For information on the actual number of units to be earned for these performance unit grants, see “ELEMENTS OF COMPENSATION AND SPECIFIC COMPENSATION DECISIONS—Long-Term Incentive Equity Awards” in our Compensation Discussion and Analysis, and “Summary Compensation Table—Narrative Description to the Compensation Tables—Performance Units” above.
In the event of a change of control during the second year of the 2013-2015 performance period, the number of performance units that would have been earned is the sum of the number of performance units granted and related dividend equivalents accrued through December 31, 2014 multiplied by the maximum payout percentage of 150% which is the relative TSR percentage multiplier based on our TSR percentile rank relative to the TSRs of the companies in the Reference Group for the period from the January 28, 2013 grant date through December 30, 2014, the last business day before the change in control. |
Our TSRs for purposes of determining the payout percentages of these awards would be based on the higher of: (i) the average closing price of our Common Stock for the last 20 trading days of the shortened performance period ended on December 30, 2014, and (ii) the value of consideration the acquirer paid for a share of our Common Stock in the change of control. For purposes of the payout values shown in the tables, the TSRs for our Common Stock were based on the respective actual TSRs over the respective averaging periods. The resulting number of units that would have been earned was multiplied by $159.29, the closing price of our Common Stock on December 31, 2014. |
For information on the actual number of units to be earned for these performance unit grants, see “Elements of Compensation and Specific Compensation Decisions—Long-Term Incentive Equity Awards” in our Compensation Discussion and Analysis, and “Summary Compensation Table—Narrative Description to the Compensation Tables—Performance Units” above. |
| (2) | In the event death or disability occurs, the participant is entitled to the number of performance units that would have been earned by the NEO if he had remained employed for the entire performance period. The number of performance units |
of the performance periods. For more information, see |
As Messrs. Balachandran and Kelly were retirement-eligible as of December 31, 2014, the retirement payout amounts for the performance units for the 2014-2016 and 2013-2015 performance periods were calculated in the same manner as the respective death and disability payout amounts. |
| (3) | Reflects the estimated cost of medical and dental insurance coverage based on rates charged to our staff members for post-employment coverage provided in accordance with COBRA for the first |
| (4) | Reflects the value of retirement plan contributions for two years calculated as two times the sum of: (i) $2,500 and (ii) the product of: (a) 10% and (b) the sum of the NEO’s annual base salary as of December 31, |
| (5) |
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Reflects amounts that would be paid to |
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| (7) | Excludes the value of |
| (8) | Reflects a pro-rata reduction of the |
ï 2015 Proxy Statement85
| DIRECTOR COMPENSATION |
DIRECTOR COMPENSATIONDirector Compensation
The compensation program for our non-employee directors is intended to be competitive and fair so that we can attract the best talent to our Board of Directors, or Board, and recognize the time and effort required of a director given the size and complexity of our operations. In addition to cash compensation, we provide equity grants and have stock
ownership guidelines to align the directors’ interests with all of our stockholders’ interests and to motivate our directors to focus on our long-term growth and success. Directors who are our employees are not paid any fees for serving on our Board or for attending Board meetings.
2014 Director Compensation
2012 Director Compensation
Cash Compensation. For 2012, eachEach non-employee director receivedreceives an annual cash retainer of $55,000.$100,000. In addition, committee chairs of our Board committees receive additional annual retainers as follows: (i) Audit Committee, $20,000; (ii) Compensation and Management Development Committee, $10,000;$20,000; (iii) Corporate Responsibility and Compliance Committee, $6,000$20,000 and (iv) Governance and Nominating Committee, or Governance Committee, $6,000.$20,000. The lead independent director receives an additional $35,000 annual retainer. Directors wereare not additionally compensated $3,000 for each Board meeting they attended ($1,500 for telephonic attendance) and $1,500attendance. Directors are compensated $2,000 for each committee meeting they attendedattend ($7501,000 for telephonic attendance). Directors are also compensated for attending meetings of committees of which they are not members or special meetings if they are invited to do soattend by the Chairman of the Board or the committee chair. Directors are entitled to reimbursement of their expenses, in accordance with our policy, incurred in connection with attendance at Board and committee meetings and conferences with our senior management. We also make tax gross-up payments to our directors to reimburse them for additional income taxes imposed when we are required to impute income on perquisites that we providedprovide.
Equity Incentives.Incentives For 2012, under. Under the provisions of our revised Director Equity Incentive Program, each non-employee director receives an automatic annual grant of RSUs on the third business day after the release of our first fiscal quarter earnings, each continuing non-employee director received an automatic annual grant of restricted stock units, or RSUs, with a grant date fair market value of $100,000,$200,000, based on the closing price of our Common Stock on the date of grant (rounded down to the nearest whole number). The RSUs vest immediately and an automatic annual grant of stock optionsearn dividend equivalents, including if the director chooses to purchase 5,000 shares of our Common Stock. The exercise pricedefer receipt of the stock options is 100%award. Vested RSUs may be deferred by the director. Directors that elect to defer receipt of the closing price of our Common Stock on the grant date, and the stock options expire ten years after the grant date for those issued prior to March 15, 2004 and those issued on and after May 6, 2009. Stock options issued from March 15, 2004 through April 29, 2009 expire seven years after the grant date. On July 31, 2012, Tyler Jacks received an inaugural grant of stock options to purchase 20,000 shares of our Common Stock in connection with his appointment to the Board on May 23, 2012. On January 28, 2013, Robert A. Eckert received an inaugural grant of stock options to purchase 20,000 shares of our Common Stock in connection with his appointment to the Board on December 13, 2012.accrue
The stock options and RSUs vest (i) on the date of grant if the non-employee director has had three years of prior continuous service as a non-employee director of the Company or (ii) on the first anniversary of the date of grant if the non-employee director has had less than three years of prior continuous service as a non-employee director of the Company. Upon the death or disability (as defined in the stock plans) of a non-employee director, the vesting of unvested stock options is accelerated by one year for each full year of service as a non-employee director and the vesting of RSUs is accelerated by one month for each full month of service as a non-employee director. In March 2012, our Board approved an amendment to the Director Equity Incentive Program to grant dividend equivalents on the vested RSUs during the deferral period. Stock options were eliminated from the annual equity grants of RSUs to non-employee directors which accrue and become payable, typically,commencing in shares only to the extent and when such RSUs vest and are issued after any applicable deferral period commencing with the 2012 annual grant of RSUs.2013.
Deferred Compensation and Other Benefits.Benefits. Non-employee directors are eligible to participate in the Nonqualified Deferred Compensation Plan, or NDCP, that we maintain for our staff members (see “Nonqualified Deferred Compensation” in our Executive Compensation Tables above for more information). Earnings under this plan are market-based—there areis no “above market” or guaranteed rates of returns.
Through The Amgen Foundation, Inc., the Company maintains a charitable contributions matching gift program for all eligible staff members and non-employee directors. Our directors participate in the program on the same terms as our staff members. The Amgen Foundation, Inc. matches, on a dollar-for-dollar basis, qualifying donations made by directors and staff members to eligible organizations, up to $20,000 per person, per year.
Guests of our Board members are occasionally invited to Board events, and we may pay or reimburse travel expenses and may provide transportation on our aircraft for both the director and his or her guest.
Director Stock Ownership Guidelines. We have maintained Non-Employee Director Stock Ownership Guidelines since 2002. Under the non-employee director stock ownership guidelines in effect during 2012 allAll non-employee directors wereare expected to hold 8,000 sharesthe equivalent of five times the Board annual cash retainer (currently $500,000) in our Common Stock while serving as a non-employee director.
All non-employee directors are expected to comply with the stock ownership guidelines on or before December 31st of the calendar year in which the fifth anniversary of their date of election by stockholders or the Board falls. For purposes of the Board stock ownership guidelines, issued and outstanding shares of our Common Stock held beneficially or
86 ï 2015 Proxy Statement
| DIRECTOR COMPENSATION |
of record by the non-employee director, issued and outstanding shares of our Common Stock held in a qualifying trust (as defined in the guidelines) and vested RSUs that are deferred will count towards satisfying the stock ownership guidelines. All directors with compliance dates that were prior to December 31, 2012 met the stock ownership guidelines as of December 31, 2012. Directors elected to the Board within the last five years have the following compliance dates:
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2013 Director Compensation
In December 2012, the Governance Committee reviewed our director compensation. Director compensation had last been reviewed in July 2010, but no changes were recommended to the Board at that time. To advise in the process, the Governance Committee hired Frederic W. Cook & Co., Inc., or Cook & Co., as an independent consultant to the Governance Committee to advise on director compensation. Cook & Co. found that the Company’s director compensation design lagged the prevailing market trend in U.S. director compensation because no changes to director compensation had been made since 2003 and there was a competitive shortfall in the Company’s Board and committee retainers. Based on market practices, Cook & Co. recommended that the Board:
Eliminate Board meeting fees and increase the Board retainer and committee meeting fees.
Increase retainers for certain committee chairs.
Implement a lead director retainer given the election of a new lead independent director.
Eliminate the inaugural grant of equity awards for new directors.
Eliminate stock options in the annual equity grant and replace with RSUs.
Change the stock ownership guidelines from a fixed share amount to a multiplier of the cash retainer.
Based on Cook & Co.’s recommendation and because director compensation had not been changed since 2003, the Governance Committee recommended to the Board and the Board determined to make the following changes to director compensation effective January 1, 2013:
Cash Compensation. Each non-employee director will receive an annual retainer of $100,000. In addition, chairs receive additional annual retainers, as follows: (i) Audit Committee, $20,000; (ii) Compensation and Management Development Committee, $20,000; (iii) Corporate Responsibility and Compliance Committee, $20,000 and (iv) Governance Committee, $20,000. The lead independent director will receive a $35,000 annual retainer. Directors will not be compensated for Board meeting attendance. Directors will be compensated $2,000 for each committee meeting they attend ($1,000 for telephonic attendance). Directors continue to also be compensated for attending meetings of committees of which they are not members or special meetings if they are invited to attend by the Chairman of the Board or the committee chair. Directors continue to be entitled to reimbursement of their expenses, in accordance with our policy, incurred in connection with attendance at Board and committee meetings and conferences with our senior management. We continue to make tax gross-up payments to our directors to reimburse them for additional income taxes imposed when we are required to impute income on perquisites that we provide.
Equity Incentives. Under the provisions of our revised Director Equity Incentive Program, each non-employee director receives an automatic annual grant of RSUs on the third business day after the release of our first fiscal quarter earnings, with a grant date fair market value of $200,000, based on the closing price of our Common Stock on the date of grant (rounded down to the nearest whole number). The RSUs vest immediately and earn dividend equivalents if the director chooses to defer receipt of the award. Stock options have been eliminated.
Deferred Compensation and Other Benefits. Non-employee directors continue to be eligible to participate in the NDCP and charitable contributions matching program on the same terms as described above. Guests of our Board members continue to be occasionally invited to Board events, and we pay or reimburse travel expenses and may provide transportation on our aircraft for both the director and his or her guest.
Director Stock Ownership Guidelines. The Non-Employee Director Stock Ownership Guidelines were amended, effective January 1, 2013, and all non-employee directors are expected to hold the equivalent of five times the Board cash retainer (currently $500,000) in our Common Stock while serving as a non-employee director. No additional time has been provided to the directors to comply with these guidelines. Certain other provisions of the Non-Employee Director Stock Ownership Guidelines were clarified, including reiterating the Company’s policy that subsequent to joining the Board, Board members are prohibitedsubject to our insider trading policy that prohibits them from engaging in short sales with respect to
the Company’s securities, purchasing or pledging the Company’s stock on margin (with the exception of the use of a margin account to purchase the Company’s Common Stock in connection with the exercise of Company granted stock options) or entering into any hedging, derivative or similar transactions with respect to the Company’s securities.
Director Stock Ownership Guidelines Compliance Dates
All directors with compliance dates that were on or prior to December 31, 2014 met the stock ownership guidelines as of December 31, 2014. Directors elected to the Board within the last five years have the following compliance dates:
| Director | Compliance Date | |
Robert A. Eckert | December 31, 2018 | |
Greg C. Garland | December 31, 2019 | |
Rebecca M. Henderson | December 31, 2015 | |
Tyler Jacks | December 31, 2017 | |
Ronald D. Sugar | December 31, 2016 | |
R. Sanders Williams | December 31, 2020 |
ï 2015 Proxy Statement87
| DIRECTOR COMPENSATION |
Director Compensation Table
The following table shows compensation of the non-employee members of our Board for 2012.2014. Robert A. Bradway, our Chairman of the Board, President and Chief Executive Officer and President is not included in the table as he is an employee and thus receives no compensation for his service as a director. Kevin W. Sharer served as our Chief Executive Officer through May 23, 2012 and as a director and our Chairman of the Board through December 31, 2012. Mr. Sharer continued to receive his salary and other benefits provided as our Chief Executive Officer throughout 2012 and his compensation is reported above in the “Summary Compensation Table.” Dr. Jacks commenced service on our Board on May 23, 2012 and Mr. Eckert commenced service on our Board on December 13, 2012 and both received pro-rated fees for Board service for the remainder of 2012.
Director | Fees Earned or Paid in Cash($)(1) | Stock Awards($)(3)(5) | Option Awards($)(4)(5) | All Other Compensation($)(6) | Total($) | |||||||||||||||
David Baltimore | 82,750 | 99,938 | 72,506 | 45,830 | 301,024 | |||||||||||||||
Frank J. Biondi, Jr. | 110,250 | 99,938 | 72,506 | 33,106 | 315,800 | |||||||||||||||
François de Carbonnel | 93,250 | 99,938 | 72,506 | 13,277 | 278,971 | |||||||||||||||
Vance D. Coffman | 99,250 | 99,938 | 72,506 | 28,890 | 300,584 | |||||||||||||||
Robert A. Eckert | 7,583 | 0 | 0 | 0 | 7,583 | |||||||||||||||
Rebecca M. Henderson | 85,000 | 99,938 | 72,506 | 16,857 | 274,301 | |||||||||||||||
Frank C. Herringer | 103,250 | (2) | 99,938 | 72,506 | 59,047 | 334,741 | ||||||||||||||
Tyler Jacks | 45,500 | 0 | 301,210 | 1,000 | 347,710 | |||||||||||||||
Gilbert S. Omenn | 91,750 | 99,938 | 72,506 | 45,810 | 310,004 | |||||||||||||||
Judith C. Pelham | 88,750 | 99,938 | 72,506 | 20,698 | 281,892 | |||||||||||||||
J. Paul Reason | 90,250 | 99,938 | 72,506 | 10,991 | 273,685 | |||||||||||||||
Leonard D. Schaeffer | 94,750 | 99,938 | 72,506 | 24,364 | 291,558 | |||||||||||||||
Ronald D. Sugar | 88,750 | 99,938 | 72,506 | 20,000 | 281,194 | |||||||||||||||
| Non-Employee Director | Fees Earned or Paid in Cash($)(3) | Stock Awards($)(4)(5) | All Other Compensation($)(6) | Total($) | ||||||||||||
David Baltimore | 121,000 | 199,981 | 21,009 | 341,990 | ||||||||||||
Frank J. Biondi, Jr. | 145,000 | 199,981 | 42,821 | 387,802 | ||||||||||||
François de Carbonnel | 121,000 | 199,981 | 19,038 | 340,019 | ||||||||||||
Vance D. Coffman | 177,000 | 199,981 | 35,627 | 412,608 | ||||||||||||
Robert A. Eckert(1) | 124,000 | 199,981 | 20,705 | 344,686 | ||||||||||||
Greg C. Garland | 122,000 | 199,981 | 15,000 | 336,981 | ||||||||||||
Rebecca M. Henderson | 116,000 | 199,981 | 19,408 | 335,389 | ||||||||||||
Frank C. Herringer(1) | 145,000 | 199,981 | 45,755 | 390,736 | ||||||||||||
Tyler Jacks | 118,000 | 199,981 | 20,000 | 337,981 | ||||||||||||
Gilbert S. Omenn(2) | 61,000 | 199,981 | 35,800 | 296,781 | ||||||||||||
Judith C. Pelham | 125,000 | 199,981 | 20,622 | 345,603 | ||||||||||||
Ronald D. Sugar | 138,000 | 199,981 | 20,240 | 358,221 | ||||||||||||
R. Sanders Williams(2) | 29,000 | 49,928 | 13,100 | 92,028 | ||||||||||||
| (1) | All cash fees were deferred by Messrs. Eckert and Herringer under our NDCP. |
| (2) | Dr. Williams was appointed to our Board on October 17, 2014, and Dr. Omenn left our Board on May 15, 2014. Accordingly, fees earned by Drs. Williams and Omenn in 2014 consist of a pro-rata amount of the annual retainer fee (pro-rated on a quarterly basis) and fees for committee meetings attended in 2014. |
| (3) | Reflects all fees paid to members of our Board for participation in regular, telephonic and special meetings of |
|
Reflects the grant date fair |
88 ï 2015 Proxy Statement
| DIRECTOR COMPENSATION |
| (5) | All of the RSUs granted to directors in 2014 were fully vested upon grant. |
|
Grant Date | Risk-Free Interest Rate(%) | Expected Life | Expected Volatility(%) | Dividend Yield(%) | Exercise Price($) | |||||||||||||||
April 27, 2012 | 1.7 | 8.1 years | 22.5 | 2.1 | 71.64 | |||||||||||||||
July 31, 2012 | 1.2 | 8.1 years | 21.2 | 2.0 | 82.60 | |||||||||||||||
|
| Non-Employee Director | Aggregate Stock Awards Outstanding as of December 31, 2014(#) | Aggregate Option Awards Outstanding as of December 31, 2014(#) | ||||||
Restricted Stock Units and Dividend Equivalents | Stock Options | |||||||
David Baltimore | 0 | 25,000 | ||||||
Frank J. Biondi, Jr. | 15,318 | 15,000 | ||||||
François de Carbonnel | 2,115 | 5,000 | ||||||
Vance D. Coffman | 8,377 | 25,000 | ||||||
Robert A. Eckert | 3,722 | 20,000 | ||||||
Greg C. Garland | 0 | 0 | ||||||
Rebecca M. Henderson | 7,469 | 8,000 | ||||||
Frank C. Herringer | 16,742 | 25,000 | ||||||
Tyler Jacks | 1,818 | 20,000 | ||||||
Gilbert S. Omenn | 4,647 | 25,000 | ||||||
Judith C. Pelham | 0 | 0 | ||||||
Ronald D. Sugar | 7,109 | 30,000 | ||||||
R. Sanders Williams | 0 | 0 | ||||||
ï 2015 Proxy Statement89
|
| DIRECTOR COMPENSATION |
The table below shows the aggregate numbers of stock awards and stock option awards outstanding for each non-employee director as of December 31, 2012. Stock awards consist of unvested RSUs, vested RSUs for which receipt of the underlying shares of our Common Stock has been deferred (vested/deferred RSUs) and dividends paid on vested/deferred RSUs reinvested to acquire additional vested/deferred RSUs (rounded down to the nearest whole number of units). Upon vesting and the passage of any applicable deferral period, the RSUs are paid in shares of our Common Stock on a one-for-one basis. Directors may elect to defer payment until a later date, which would result in a deferral of taxable income to the director. Option awards consist of exercisable and unexercisable stock options.
Director | Aggregate Stock Awards Outstanding as of December 31, 2012(#) | Aggregate Option Awards Outstanding as of December 31, 2012(#) | ||||||||
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| Restricted Stock Units and Dividend Equivalents |
| Stock Options | |||||||
David Baltimore | 0 | 35,000 | ||||||||
Frank J. Biondi. Jr. | 11,182 | 25,000 | ||||||||
François de Carbonnel | 2,039 | 40,000 | ||||||||
Vance D. Coffman | 6,242 | 45,000 | ||||||||
Robert A. Eckert | 0 | 0 | ||||||||
Rebecca M. Henderson | 5,027 | 35,000 | ||||||||
Frank C. Herringer | 12,556 | 35,000 | ||||||||
Tyler Jacks | 0 | 20,000 | ||||||||
Gilbert S. Omenn | 4,481 | 25,000 | ||||||||
Judith C. Pelham | 0 | 30,000 | ||||||||
J. Paul Reason | 6,242 | 0 | ||||||||
Leonard D. Schaeffer | 3,064 | 15,000 | ||||||||
Ronald D. Sugar | 3,266 | 30,000 | ||||||||
| (6) | The table below provides a summary of amounts paid by the Company for perquisites and other special benefits. |
| Matching of Charitable Contributions ($)(a) | Personal Use of Company Aircraft(b) | Personal Expenses While on BusinessTravel and Expenses inConnection with Guests Accompanying Directors on Business Travel(c) | Dividends Accrued on Vested/ Deferred RSUs($)(d) | Total($) | ||||||||||
Director | Aggregate Incremental Amounts($) | Tax Gross- Up($) | Aggregate Incremental Amounts ($) | Tax Gross- Up($) | ||||||||||
David Baltimore | 20,000 | 723 | 183 | 17,034 | 7,890 | 0 | 45,830 | |||||||
Frank J. Biondi, Jr. | 20,000 | 0 | 1,875 | 0 | 0 | 11,231 | 33,106 | |||||||
François de Carbonnel | 10,000 | 0 | 0 | 260 | 112 | 2,905 | 13,277 | |||||||
Vance D. Coffman | 20,000 | 0 | 0 | 0 | 0 | 8,890 | 28,890 | |||||||
Robert A. Eckert | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||
Rebecca M. Henderson | 14,350 | 0 | 0 | 0 | 0 | 2,507 | 16,857 | |||||||
Frank C. Herringer | 20,000 | 0 | 0 | 17,663 | 8,196 | 13,188 | 59,047 | |||||||
Tyler Jacks | 1,000 | 0 | 0 | 0 | 0 | 0 | 1,000 | |||||||
Gilbert S. Omenn | 20,000 | 2,344 | 1,586 | 10,965 | 4,533 | 6,382 | 45,810 | |||||||
Judith C. Pelham | 20,000 | 0 | 698 | 0 | 0 | 0 | 20,698 | |||||||
J. Paul Reason | 0 | 0 | 1,727 | 256 | 118 | 8,890 | 10,991 | |||||||
Leonard D. Schaeffer | 20,000 | 0 | 0 | 0 | 0 | 4,364 | 24,364 | |||||||
Ronald D. Sugar | 20,000 | 0 | 0 | 0 | 0 | 0 | 20,000 | |||||||
| Matching of Charitable Contributions ($)(a) | Personal Use of Company Aircraft(b) | Reimbursement of Expenses in Connection with Guests Accompanying Directors on Business Travel(c) | Other(d) | Dividends Accrued on Vested/ Deferred RSUs($)(e) | Total($) | |||||||||||||||||||||||||||||||
| Non-Employee Director | Aggregate Incremental Amounts($) | Tax Gross- Up($) | Aggregate Incremental Amounts ($) | Tax Gross- Up($) | Aggregate Incremental Amounts($) | Tax Gross- Up($) | ||||||||||||||||||||||||||||||
David Baltimore | 20,000 | 0 | 0 | 690 | 319 | 0 | 0 | 0 | 21,009 | |||||||||||||||||||||||||||
Frank J. Biondi, Jr. | 20,000 | 191 | 2,016 | 595 | 275 | 0 | 0 | 19,744 | 42,821 | |||||||||||||||||||||||||||
François de Carbonnel | 10,000 | 2,408 | 1,265 | 0 | 0 | 181 | 78 | 5,106 | 19,038 | |||||||||||||||||||||||||||
Vance D. Coffman | 20,000 | 0 | 0 | 0 | 0 | 0 | 0 | 15,627 | 35,627 | |||||||||||||||||||||||||||
Robert A. Eckert | 20,000 | 0 | 705 | 0 | 0 | 0 | 0 | 0 | 20,705 | |||||||||||||||||||||||||||
Greg C. Garland | 15,000 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 15,000 | |||||||||||||||||||||||||||
Rebecca M. Henderson | 15,000 | 0 | 0 | 0 | 0 | 0 | 0 | 4,408 | 19,408 | |||||||||||||||||||||||||||
Frank C. Herringer | 20,000 | 1,566 | 1,006 | 0 | 0 | 0 | 0 | 23,183 | 45,755 | |||||||||||||||||||||||||||
Tyler Jacks | 20,000 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 20,000 | |||||||||||||||||||||||||||
Gilbert S. Omenn | 20,000 | 569 | 1,393 | 1,232 | 509 | 621 | 257 | 11,219 | 35,800 | |||||||||||||||||||||||||||
Judith C. Pelham | 20,000 | 0 | 622 | 0 | 0 | 0 | 0 | 0 | 20,622 | |||||||||||||||||||||||||||
Ronald D. Sugar | 20,000 | 0 | 240 | 0 | 0 | 0 | 0 | 0 | 20,240 | |||||||||||||||||||||||||||
R. Sanders Williams | 13,100 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 13,100 | |||||||||||||||||||||||||||
| (a) | These are charitable contributions of The Amgen Foundation, Inc. that matched the directors’ charitable contributions made in |
| (b) | Where we have |
| (c) | These amounts reflect the incremental costs of personal expenses incurred while on business travel and related imputed income to the director for his or her income tax purposes. We reimburse the director for the additional income taxes imposed on the director in these circumstances. Where we have |
| (d) | Amounts reflect the cost of other expenses and related imputed income to the director for his or her income tax purposes. We reimburse the director for the additional income taxes imposed on the director in these circumstances. |
| (e) | Amounts reflect dividends accrued on vested/deferred RSUs granted prior to 2011 as the impact of dividends was not considered in determining the grant date fair values of these awards for purposes of reporting compensation in the “Stock Awards” column in the “Director Compensation Table” in the Company’s proxy statements in prior years. |
90 ï 2015 Proxy Statement
| AUDIT MATTERS |
Audit Committee Report
The Audit Committee has reviewed and discussed with management the Company’s audited consolidated financial statements as of and for the year ended December 31, 2012.2014.
The Audit Committee has also discussed with Ernst & Young LLP, or Ernst & Young, the matters required to be discussed by Statement of Auditing Standards No. 61, Communication with Audit Committees, as amended, and as adopted by the Public Company Accounting Oversight Board (PCAOB) in Rule 3200T.Auditing Standard No. 16,Communications with Audit Committees.
The Audit Committee has received and reviewed the written disclosures and the letter from Ernst & Young required by the
applicable requirements of the PCAOB regarding Ernst & Young’s communication with the Audit Committee concerning independence and has discussed with Ernst & Young their independence.
Based on the reviews and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the audited consolidated financial statements referred to above be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20122014 for filing with the Securities and Exchange Commission, or SEC.Commission.
Audit Committee of the Board of Directors
Frank J. Biondi, Jr., Chairman
David Baltimore
François de Carbonnel
Robert A. Eckert
Gilbert S. OmennGreg C. Garland
Judith C. Pelham
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| AUDIT MATTERS |
Independent Registered Public Accountants
The following table presents fees for professional services provided or to be provided by Ernst & Young for audits of the years ended December 31, 20122014 and December 31, 2011,2013, and fees for other services rendered by Ernst & Young during these periods.
| 2012 | 2011 | 2014 | 2013 | |||||||||||||
Audit | $ | 5,926,000 | $ | 5,931,000 | $ | 6,894,000 | $ | 6,425,000 | ||||||||
Audit-Related | 342,000 | 529,000 | 385,000 | 371,000 | ||||||||||||
Tax | 205,000 | 133,000 | 136,000 | 367,000 | ||||||||||||
All Other Fees | 0 | 0 | 0 | 0 | ||||||||||||
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| |||||||||||||||
Total Fees | $ | 6,473,000 | $ | 6,593,000 | $ | 7,415,000 | $ | 7,163,000 | ||||||||
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Included in Audit fees above are professional services associated with the integrated audit of our consolidated financial statements and our internal control over financial reporting and the statutory audits of various subsidiaries of the Company. Audit-Related fees are primarily attributable to audits of our affiliated companies and our retirement plans. Tax fees are primarily attributable to various U.S. and Internationalinternational tax compliance and planning services. The Audit Committee has considered whether the Audit-Related and Tax services provided by Ernst & Young are compatible with maintaining that firm’s independence.
From and after the effective date of the SEC rule requiring Audit Committee pre-approval of all audit and permissible non-audit services provided by independent registered public accountants, theThe Audit Committee has approved all audit and permissible non-audit services prior to such services being provided by Ernst & Young. The Audit Committee, or one or more of its designated members that have been granted authority by the Audit Committee, meets to approve each audit or non-audit service prior to the engagement of Ernst & Young for such service. Each such service approved by one or more of the authorized and designated members of the Audit Committee is presented to the entire Audit Committee at a subsequent meeting.
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| ANNUAL REPORT AND FORM 10-K |
ANNUAL REPORT AND FORMAnnual Report and Form 10-K
The Company’s Annual Report for fiscal 2012,2014, which contains the consolidated financial statements of the Company for fiscal 2012,2014, accompanies this proxy statement, but is not a part of the Company’s soliciting materials.
Stockholders may obtain, without charge, a copy of the Company’s Annual Report on Form 10-K for fiscal 2012,2014, filed with the Securities and Exchange Commission, including the financial statements and schedules thereto, without the accompanying exhibits, by writing to: Investor Relations, Senior Manager, Amgen Inc., One
Amgen Center Drive, Thousand Oaks, CA 91320-1799, Mail Stop 28-1-C, or contact Investor Relations by telephone at (805) 447-1060 or email at investor.relations@amgen.com. The Company’s Annual Report on Form 10-K is also available online at the Company’s website atwww.amgen.com. A list of exhibits is included in the Form 10-K and exhibits are available from the Company upon the payment to the Company of the cost of furnishing them.
| CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSCertain Relationships and Related Transactions
Under our written Approval of Related Party Transactions policy, a related party transaction (as defined below) may be consummated or may continue only if the Audit Committee approves or ratifies the transaction in accordance with the guidelines set forth in the policy. The policy applies to: (1) any person who is, or at any time since the beginning of our last fiscal year was, a member of our Board of Directors, or Board, one of our executive officers or a nominee to become a member of our Board; (2) any person who is known to be the beneficial owner of more than 5% of any class of our voting securities; (3) any immediate family member, as defined in the policy, of, or sharing a household with, any of the foregoing persons and (4) any firm, corporation or other entity in which any of the foregoing persons is employed, or is a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest.
All potential related party transactions are presented to the Audit Committee for its consideration and, if the Audit Committee deems it appropriate, approval. The Audit Committee considers all relevant facts and circumstances available to it, including the recommendation of management. No member of the Audit Committee participates in any review, consideration or approval of any related party transaction involving such member or any of his or her immediate family members, except that such member is required to provide all material information concerning the related party transaction to the Audit Committee.
Related party transactions may be preliminarily entered into by management subject to ratification by the Audit Committee; provided that if ratification shall not be forthcoming, management shall make all reasonable efforts to cancel or annul such transaction. At each scheduled meeting of the Audit Committee, management shallis required to update the Audit Committee as to any material changes to any approved or ratified related party transaction. A “Related Party Transaction” is defined in the policy as a transaction, arrangement or relationship, or series of similar transactions, arrangements or relationships (including but not limited to any indebtedness or guarantee of indebtedness), between us and any of the persons listed in the first paragraph of this section. A related party transaction also includes any material amendment or modification to an existing related party transaction.
The Audit Committee has excluded each of the following related party transactions under the terms of our Approval of Related Party Transactions policy:
| 1. | any matters related to compensation or benefits to the extent such compensation or benefits would not be required to be disclosed under Item 404 of Regulation S-K under the Securities Act of 1933; |
| 2. | transactions involving less than $120,000 (or such different amount as may require disclosure or approval under any future amendment to the rules and regulations of the Securities and Exchange Commission, including |
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| CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
Item 404 of Regulation S-K, or the listing requirements of The NASDAQ Stock Market LLC, including Rule 5630) when aggregated with all similar transactions; or |
| 3. | transactions approved by another independent committee of the Board. |
In deciding whether to approve or ratify a related party transaction, the Audit Committee will consider the following factors:
whether the terms of the transaction are (i) fair to the Company and (ii) at least as favorable to the Company as would apply if the transaction did not involve a related party;
whether there are demonstrable business reasons for the Company to enter into the transaction;
whether the transaction would impair the independence of an outside director; and
whether the transaction would present an improper conflict of interest for any director or executive officer, taking into account the size of the transaction, the overall financial position of the related party, the direct or indirect nature of the related party’s interest in the transaction and the ongoing nature of any proposed relationship, and any other factors the Audit Committee deems relevant.
Transactions with Related Persons
Keith Jones, who is the brother-in-law of Brian M. McNamee, our Senior Vice President, Human Resources and an executive officer of the Company, is employed by the Companyus as a Corporate AccountKey Accounts Senior Manager. Mr. Jones’ compensation earned in 20122014 consisted of $96,883$121,921 in base salary, $37,649$70,350 in annual cash incentive awards and bonuses and a
grant of 120123 restricted stock units and 124 performance units, each valued at $8,597$13,703 and $12,564, respectively, on the date of grant. This transaction did not require the review or approval of the Audit Committee pursuant to the Company’sour Approval of Related Party Transactions policy.
In connection with their promotions to the roles of Executive Vice President, Research and Development and Executive Vice President, Operations, on February 13, 2012 and August 13, 2012, respectively, Sean Harper and Madhavan Balachandran each repaid mortgage loans they had outstanding with Amgen pursuant to a company-wide program Amgen offered to non-executive employees. Dr. Harper paid in full his loan balance and all interest of $166,360 as of August 21, 2012, and Mr. Balachandran paid in full his loan balance of $200,000 as of August 31, 2012. The interest rate on Dr. Harper’s loan was 2.76% and on Mr. Balachandran’s loan was 3.0%.
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| OTHER MATTERS |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, or Exchange Act, requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities (collectively, Reporting Persons), to file reports of ownership and changes in ownership with the Securities and Exchange Commission, or SEC. Copies of the Section 16 reports are also required to be supplied to the Company and such reports are available on our website atwww.amgen.com.www.amgen.com.
Based solely on our review of the reports filed by Reporting Persons and written representations from certain Reporting Persons that no other reports were required for those persons, during the year ended December 31, 2012,2014, the Reporting Persons met all applicable Section 16(a) filing requirements.
Stockholder Proposals
Proposals Pursuant to Rule 14a-8. Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals for inclusion in our proxy statement and for consideration at our 20142016 annual meeting of stockholders. To be eligible for inclusion in our 20142016 proxy statement, your proposal must be received by usour Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799, Mail Stop 38-5-A no later than December 9, 2013,4, 2015, and must otherwise comply with Rule 14a-8. While the Board of Directors, or Board, will consider stockholder proposals, we reserve the right to omit from our proxy statement stockholder proposals that we are not required to include under the Exchange Act, including Rule 14a-8.
Business Proposals and Nominations Pursuant to our Bylaws. Under the Amended and Restated Bylaws of Amgen Inc., or Bylaws, to nominate a director or bring any other business before the stockholders at the 20142016 annual meeting of stockholders that will not be included in our proxy statement pursuant to Rule 14a-8, you must comply with the procedures set forth in our Bylaws, including those summarized below. In addition, assuming the date of the 20142016 annual meeting of stockholders is not more than thirty days before and not more than seventy days after the anniversary date of the 20132015 Annual Meeting of Stockholders, or Annual Meeting, you must notify us in writing and such notice must be delivered to our Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799, Mail Stop 38-5-A no earlier than January 22, 201415, 2016 and no later than February 21, 2014.14,
2016. Moreover, as further described below, certain information required to be included in such notice must be updated as of the record date of the meeting at which the nomination or other proposal is to be presented not later than ten days after such record date. In addition, our Bylaws provide that if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders to present a nomination or other business proposal, the nomination will be disregarded and the proposed business will not be transacted, notwithstanding that proxies in respect of the vote on the nomination or other business proposal may have been received by the Company.
Our Bylaws provide that a stockholder’s advance notice of a nomination must contain the following as to each person whom the stockholder proposes to nominate for election as a director: (1) the information relating to the nominee that is required by paragraphs (a), (e) and (f) of Item 402 of Regulation S-K adopted by the SEC (or the corresponding provisions of any rule or regulation subsequently adopted by the SEC applicable to the Company); (2) such nominee’s written consent to being named in the proxy statement as a nominee and serving as a director if elected; (3) whether such nominee, the stockholder or the beneficial owner, if any, on whose behalf the nomination is being made has received any financial assistance, funding or other consideration from any other person (Stockholder Associated Person) in respect of the nomination and the details thereof and (4) whether any nominee is eligible for consideration as an independent director under the relevant standards
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| OTHER MATTERS |
contemplated by Item 407(a) of Regulation S-K adopted by the SEC (or any corresponding provisions subsequently adopted by the SEC and applicable to the Company). Our Bylaws provide that a a stockholder’s advance notice of a proposed business item (other than a nomination) must include: (1) a brief description of the business desired to be brought before the meeting; (2) the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend our Bylaws, the language of the proposed amendments); (3) the reasons why the stockholder favors the proposal and
(4) whether the stockholder or the beneficial owner, if any, on whose behalf the proposal is being made has received any financial assistance, funding or other consideration from any other person (also a Stockholder Associated Person) in respect of the proposal (and the details thereof) and any material interest in such business of the stockholder, such beneficial owner or any Stockholder Associated Person.
In addition, our Bylaws provide that a stockholder giving advance notice of a nomination or a proposed business item must include the following information, as to such stockholder and the beneficial owner, if any, on whose behalf the nomination or proposal is made, all nominees proposed by the stockholder giving the notice and any Stockholder Associated Persons, in the notice: (1) the name and address of the stockholder, as they appear on the Company’s books, and of such beneficial owner, if any; (2) a representation setting forth the class or series and number of shares of our capital stock which are owned beneficially and of record by the stockholder, and any such beneficial owner, nominee or Stockholder Associated Person; (3) a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among such stockholder and any such beneficial owner, nominee and Stockholder Associated Person, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing; (4) a representation whether and the extent to which any hedging, derivative or other transaction or agreement is in place or has been entered into with respect to the Company or its securities (whether or not such transaction shall be subject to settlement in underlying shares of capital stock of the Company), bank debt or credit ratings, within the past six months by, or for the benefit of,
such stockholder and any such beneficial owner, nominee or Stockholder Associated Person, the effect or intent of which is to give rise to gain or loss as a result of changes in the trading price of the Company’s securities or bank debt or changes in the credit ratings for the Company, its securities or bank debt (or, more generally, changes in the perceived creditworthiness of the Company) or to increase or decrease the voting power of such stockholder and any such beneficial owner, nominee or Stockholder Associated Person, and if so, a summary of the material terms thereof; (5) a representation that the stockholder is a holder of record of our stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such nomination or other business item; (6) a representation whether the stockholder or beneficial owner, if any, intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to stockholders of at least the percentage of our outstanding capital stock required to approve or adopt the proposal or elect the nominee, and/or (b) otherwise to solicit proxies from stockholders in support of such nomination or proposed business item and (7) any other information relating to such stockholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder. Moreover, the information described in subsections (2), (3) and (4) of this paragraph that is required to be included in the notice must be updated by the stockholder and beneficial owner, if any, presenting the nomination or other business proposal not later than 10 days after the record date of the meeting at which the nomination or other business proposal is to be presented to disclose such information as of such record date.
You may write to our Secretary at our principal executive offices at One Amgen Center Drive, Thousand Oaks, California 91320-1799, Mail Stop 38-5-A, to deliver the notices discussed above and for a copy of the relevant Bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates pursuant to our Bylaws.
96 ï 2015 Proxy Statement
| OTHER MATTERS |
Householding of Proxy Materials
The SEC has adopted rules that permit companies and intermediaries (such as banksbrokers and brokers)banks) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” is also permissible under the General Corporation Law of the State of Delaware and potentially means extra convenience for stockholders and cost savings for companies.
This year, a number of banks and brokers with account holders who are our stockholders will be householding our proxy materials. A single Notice of Annual Meeting of
Stockholders or proxy statement 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 bankbroker or brokerbank that it 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 proxy statement and annual report, please notify your broker or bank. Stockholders who currently receive multiple copies of the proxy statement at their address and would like to request householding of their communications should contact their broker or bank.
No Incorporation by Reference
To the extent that this proxy statement is incorporated by reference into any other filing by us under the Securities Act of 1933 or the Exchange Act, the sections of this proxy statement entitled “Audit Committee Report” or “Compensation Committee Report” to the extent permitted by the rules of the SEC will not be deemed incorporated, unless specifically provided otherwise in such filing.
In addition, references to our website are not intended to function as a hyperlink and the information contained on our website is not intended to be part of this proxy statement. Information on our website, other than our proxy statement, Notice of Annual Meeting of Stockholders and form of proxy, is not part of the proxy soliciting material and is not incorporated herein by reference.
Disclaimer
This proxy statement contains statements regarding future individual and Company performance targets and Company performance goals. These targets and Company performance goals are disclosed in the limited context of our
compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. We specifically caution investors not to apply these statements to other contexts.
Forward-Looking Statements
This proxy statement contains “forward-looking statements” (as defined in the Private Securities Litigation Reform Act of 1995). Theseforward-looking statements that are based on ourmanagement’s current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those set forth in the statements.described. All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements. The forward-looking statements, may include statements regarding actions to be taken by us. We undertake no obligation to publicly update any forward-looking statement, whether as a resultincluding estimates of new information, future eventsrevenues, operating margins, other financial metrics, expected regulatory or otherwise.clinical results or practices and other such estimates and results. Forward-looking statements involve significant risks and uncertainties, including those mentioned
discussed below and more fully described in the risk factors in Item 1A of our Annual ReportSEC reports filed by Amgen, including Amgen’s annual report on Form 10-K for the year ended December 31, 20122014 and in our most recentany subsequent periodic reports on Form 10-Q and Form 8-K. Please refer to the Form 10-K and any subsequentForms 10-Q and 8-K filed withfor additional information on the SEC,uncertainties and risk factors related to our business. Unless otherwise noted, Amgen is providing this information as of March 16, 2015 and expressly disclaims any duty to update information contained in this proxy statement. No forward-looking statement can be guaranteed and actual results may vary materially.
ï 2015 Proxy Statement97
| OTHER MATTERS |
differ materially from those we project. Our results may be affected by our ability to successfully market both new and existing products domestically and internationally, clinical and regulatory developments (domestic or foreign) involving current and future products, sales growth of recently launched products, competition from other products (domestic or foreign) and difficulties or delays in manufacturing our products. Discovery or identification of new product candidates cannot be guaranteed and movement from concept to product is uncertain; consequently, there can be no guarantee that any particular product candidate will be successful and become a commercial product. Further, preclinical results do not guarantee safe and effective performance of product candidates in humans. The length of time that it takes for us to complete clinical trials and obtain regulatory approval for product marketing has in the past varied and we expect similar variability in the future. We develop product candidates internally and through licensing collaborations, partnerships, joint ventures and acquisitions. Product candidates that are derived from relationships or acquisitions may be subject to disputes between the parties or may prove to be not as effective or as safe as we may have believed at the time of entering into such relationship. In addition, sales of our products are affected by reimbursement policies imposed by third-party payers, including governments, private insurance plans and managed care providers and may be affected by regulatory, clinical and guideline developments and domestic and international trends toward managed care and healthcare cost containment as well as U.S. legislation affecting pharmaceutical pricing and reimbursement. Government and others’ regulations and reimbursement policies may affect the development, usage
and pricing of our products. Furthermore, our research, testing, pricing, marketing and other operations are subject to extensive regulation by domestic and foreign government regulatory authorities. We or others could identify safety, side effects or manufacturing problems with our products after they are on the market. Our business may be impacted by government investigations, litigation and products liability claims. If we fail to meet the compliance obligations in the corporate integrity agreement between us and the U.S. government, we could become subject to significant sanctions. Further, while we routinely obtain patents for our products and technology, the protection offered by our patents and patent applications may be challenged, invalidated or circumvented by our competitors. We depend on third parties for a significant portion of our manufacturing capacity for the supply of certain of our current and future products and limits on supply may constrain sales of certain of our current products and product candidate development. In addition, we compete with other companies with respect to some of our marketed products as well as for the discovery and development of new products. Our products may compete against products that have lower prices, established reimbursement, superior performance, are easier to administer, or that are otherwise competitive with our products. Further, some raw materials, medical devices and component parts for our products are supplied by sole third-party suppliers. We may experience difficulties, delays or unexpected costs and not achieve anticipated benefits and savings from our restructuring plan. Our efforts to integrate the operations of companies we have acquired may not be successful. Our business performance could affect or limit the ability of our Board to declare a dividend or our ability to pay a dividend or repurchase our Common Stock.
Other Matters
The Board knows of no matters other than those listed in the attached Notice of Annual Meeting of Stockholders that are likely to be brought before the Annual Meeting. However, if any other matter properly comes before the Annual Meeting, the persons named on the enclosed proxy card will vote the proxy in accordance with their best judgment on such matter.
By Order of the Board of Directors
David J. Scott
Secretary
April 2, 2015
98 ï 2015 Proxy Statement
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| APPENDIX A |
April 8, 2013
RECONCILIATION OF GAAP EARNINGS PER SHARE TO ADJUSTED EARNINGS PER SHAREAmgen Inc. Board of Directors
Amgen Inc.
Reconciliation of GAAP Earnings Per Share to “Adjusted” Earnings Per Share (Unaudited)Guidelines for Director Qualifications and Evaluations
Results for the years ended December 31, | 2012 | 2011 | ||||||
GAAP earnings per share (diluted) | $ | 5.52 | $ | 4.04 | ||||
Adjustments to GAAP earnings per share (a): | ||||||||
Restructuring/cost-savings initiatives | 0.31 | 0.12 | ||||||
Non-cash amortization of product technology rights acquired in a prior year business combination | 0.24 | 0.20 | ||||||
Acquisition-related expenses | 0.18 | 0.04 | ||||||
Non-cash interest expense associated with our convertible notes | 0.11 | 0.10 | ||||||
Expenses related to various legal proceedings | 0.07 | 0.78 | ||||||
Stock option expense | 0.05 | 0.06 | ||||||
Tax net expense/(benefit) (b) | 0.03 | (0.01 | ) | |||||
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“Adjusted” earnings per share (diluted) | $ | 6.51 | $ | 5.33 | ||||
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AMGEN INC. BOARD OF DIRECTORS
GUIDELINES FOR DIRECTOR QUALIFICATIONS AND EVALUATIONS
These guidelines set forth (1) the minimum qualifications that the Governance and Nominating Committee of the Board of Directors (the “Committee”) of Amgen Inc. (“Amgen”) believes are important for directors to possess, and (2) a description of the Committee’s process for identifying and evaluating nominees for director, including nominees recommended by stockholders. These guidelines are only guidelines and may be waived and/or changed by the Committee and/or the Board of Directors as appropriate.
1. Candidate Qualifications
|
In seeking individuals to join the Board of Directors or to fill director vacancies on the Board of Directors, the Committee considers the following to be minimum qualifications that a candidate must possess:
Demonstrated breadth and depth of management and leadership experience, preferably in a senior leadership role in a large or recognized organization;
Financial and/or business acumen or relevant industry or scientific experience;
Integrity and high ethical standards;
Sufficient time to devote to Amgen’s business as a member of the Board;
Ability to oversee, as a director, Amgen’s business and affairs for the benefit of Amgen’s stockholders;
Ability to comply with the Board’s Code of Conduct; and
Demonstrated ability to think independently and work collaboratively.
In addition, the Committee may consider the following where necessary and appropriate:
A candidate’s independence, as defined by The NASDAQ Stock Market, Inc.;
A candidate’s ability to satisfy the composition requirements for the Audit Committee and the Compensation and Management Development Committee;
Maintaining a Board that reflects diversity; and
The Board’s overall size, structure and composition.
2. Candidate Identification and Evaluation Process
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(a) For purposes of identifying nominees for the Board of Directors, the Committee relies on professional and personal contacts of the Committee, other members of the Board of Directors and senior management, as well as candidates recommended by independent search firms retained by the Committee from time to time. The Committee also will consider candidates recommended by stockholders. Any director nominations submitted by stockholders will be evaluated in the same manner that nominees suggested by Board members, management or other parties are evaluated.
(b) In evaluating potential candidates, the Committee will determine whether the candidate is qualified for service on the Board of Directors by evaluating the candidate under the guidelines set forth above and by determining if any individual candidate suits the Committee’s and the Board of Director’s overall objectives at the time the candidate is being evaluated.
Appendix Cï 2015 Proxy StatementA-1
AMGEN INC.
AMENDED AND RESTATED 2009 EQUITY INCENTIVE PLAN
ARTICLE 1.
PURPOSE
The purpose of the Amgen Inc. Amended and Restated 2009 Equity Incentive Plan (the “Plan”) is to promote the success and enhance the value of Amgen Inc. by linking the individual interests of the members of the Board, Employees, and Consultants to those of Company stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to Company stockholders. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board, Employees, and Consultants upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent. The Amgen Inc. 2009 Equity Incentive Plan (the “2009 Plan”) was amended and restated on [], 2013, and this Amended and Restated 2009 Equity Incentive Plan is referred to herein as the “Plan”.
ARTICLE 2.
DEFINITIONS AND CONSTRUCTION
Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.
2.1 “Administrator” shall mean the entity that conducts the general administration of the Plan as provided in Article 12. With reference to the duties of the Committee under the Plan which have been delegated to one or more persons pursuant to Section 12.6, or as to which the Board has assumed, the term “Administrator” shall refer to such person(s) unless the Committee or the Board has revoked such delegation or the Board has terminated the assumption of such duties.
2.2 “Affiliate” shall mean (a) any Parent or Subsidiary, and (b) any domestic eligible entity that is disregarded, under Treasury Regulation Section 301.7701-3, as an entity separate from either (i) the Company or (ii) any Parent or Subsidiary.
2.3 “Applicable Accounting Standards” shall mean Generally Accepted Accounting Principles in the United States, International Financial Reporting Standards or such other accounting principles or standards as may apply to the Company’s financial statements under United States federal securities laws from time to time.
2.4 “Automatic Exercise Date” shall mean, with respect to an Option or a Stock Appreciation Right, the last business day of the term of an Option or Stock Appreciation Right that was initially established by the Administrator for such Option or Stock Appreciation Right.
2.5 “Award” shall mean an Option, a Restricted Stock award, a Restricted Stock Unit award, a Performance Award, a Dividend Equivalents award, a Deferred Stock award, a Stock Payment award or a Stock Appreciation Right, which may be awarded or granted under the Plan (collectively, “Awards”).
2.6 “Award Agreement” shall mean any written notice, agreement, terms and conditions, contract or other instrument or document evidencing an Award, including through electronic medium, which shall
contain such terms and conditions with respect to an Award as the Administrator shall determine consistent with the Plan and any applicable Program.
2.7 “Award Limit” shall mean with respect to Awards that shall be payable in Shares or in cash, as the case may be, the respective limit set forth in Section 3.3.
2.8 “Board” shall mean the Board of Directors of the Company.
2.9 “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, together with the regulations and official guidance promulgated thereunder.
2.10 “Committee” shall mean the Compensation and Management Development Committee of the Board, or another committee or subcommittee of the Board, appointed as provided in Section 12.1.
2.11 “Common Stock” shall mean the common stock of the Company, par value $0.0001 per share.
2.12 “Company” shall mean Amgen Inc.,a Delaware corporation.
2.13 “Company Stock Administrator” shall mean the stock administrator of the Company, or such other person or entity designated by the Administrator, or his, her or its office, as applicable, whether or not employed by the Company.
2.14 “Consultant” shall mean any consultant or adviser engaged to provide services to the Company or any Affiliate that qualifies as a consultant under the applicable rules of the Securities and Exchange Commission for registration of shares on a Form S-8 Registration Statement.
2.15 “Covered Employee” shall mean any Employee who is, or could be, a “covered employee” within the meaning of Section 162(m) of the Code.
2.16 “Deferred Stock” shall mean a right to receive Shares awarded under Section 9.4.
2.17 “Director” shall mean a member of the Board, as constituted from time to time.
2.18 “Dividend Equivalent” shall mean a right to receive the equivalent value (in cash or Shares) of dividends paid on Shares, awarded under Section 9.2.
2.19 “Effective Date” shall mean the date that this Plan, as the amendment and restatement of and successor to the 2009 Plan, is approved by the stockholders of the Company.
2.20 “Eligible Individual” shall mean any person who is an Employee, a Consultant or a Non-Employee Director, as determined by the Committee.
2.21 “Employee” shall mean any officer or other employee (as determined in accordance with Section 3401(c) of the Code and the Treasury Regulations thereunder) of the Company or of any Affiliate.
2.22 “Equity Restructuring” shall mean a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of shares of Common Stock (or other securities of the Company) or the share price of Common Stock (or other securities) and causes a change in the per share value of the Common Stock underlying outstanding Awards.
2.23 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.
2.24 “Fair Market Value” shall mean, as of any given date, the value of a Share determined as follows:
(a) If the Common Stock is listed on any Securities Exchange, its Fair Market Value shall be the closing sales price for a share of Common Stock as quoted on such exchange or system for such date or, if there is no closing sales price for a share of Common Stock on the date in question, the closing sales price for a share of Common Stock on the last preceding date for which such quotation exists, as reported inThe Wall Street Journal or such other source as the Administrator deems reliable;
(b) If the Common Stock is not listed on any Securities Exchange, but the Common Stock is regularly quoted by a recognized securities dealer, its Fair Market Value shall be the mean of the high bid and low asked prices for such date or, if there are no high bid and low asked prices for a share of Common Stock on such date, the high bid and low asked prices for a share of Common Stock on the last preceding date for which such information exists, as reported inThe Wall Street Journal or such other source as the Administrator deems reliable; or
(c) If the Common Stock is neither listed on any Securities Exchange nor regularly quoted by a recognized securities dealer, its Fair Market Value shall be established by the Administrator in good faith.
2.25 “Full Value Award” shall mean any Award settled in Shares other than (i) an Option, (ii) a Stock Appreciation Right or (iii) any other Award for which the Holder pays the intrinsic value existing as of the date of grant (whether directly or by forgoing a right to receive a payment from the Company or any Affiliate).
2.26 “Greater Than 10% Stockholder” shall mean an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any subsidiary corporation (as defined in Section 424(f) of the Code) or parent corporation thereof (as defined in Section 424(e) of the Code).
2.27 “Holder” shall mean a person who has been granted an Award.
2.28 “Incentive Stock Option” shall mean an Option that is intended to qualify as an incentive stock option and conforms to the applicable provisions of Section 422 of the Code.
2.29 “Non-Employee Director” shall mean a Director of the Company who is not an Employee.
2.30 “Non-Qualified Stock Option” shall mean an Option that is not an Incentive Stock Option.
2.31 “Option” shall mean a right to purchase Shares at a specified exercise price, granted under Article 6. An Option shall be either a Non-Qualified Stock Option or an Incentive Stock Option;provided,however, that Options granted to Non-Employee Directors and Consultants shall only be Non-Qualified Stock Options.
2.32 “Parent” shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities ending with the Company if each of the entities other than the Company beneficially owns, at the time of the determination, securities or interests representing more than fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
2.33 “Performance Award�� shall mean a cash bonus award, stock bonus award, performance award or incentive award that is paid in cash, Shares or a combination of both, awarded under Section 9.1.
2.34 “Performance-Based Compensation” shall mean any compensation that is intended to qualify as “performance-based compensation” as described in Section 162(m)(4)(C) of the Code.
2.35 “Performance Criteria” shall mean the criteria (and adjustments) that the Committee selects for an Award for purposes of establishing the Performance Goal or Performance Goals for a Performance Period, determined as follows:
(a) The Performance Criteria that shall be used to establish Performance Goals are limited to the following: (i) net earnings (either before or after one or more of the following: (A) interest, (B) taxes, (C) depreciation and (D) amortization); (ii) gross or net sales or revenues; (iii) net income (either before or after taxes); (iv) adjusted net income; (v) adjusted operating earnings or profit; (vi) cash flow (including, but not limited to, operating cash flow and free cash flow); (vii) return on assets; (viii) return on capital; (ix) return on stockholders’ equity; (x) total stockholder return; (xi) return on sales; (xii) gross or net profit or operating margin; (xiii) costs or expenses; (xiv) working capital; (xv) earnings per share; (xvi) adjusted earnings per share; (xvii) price per Share; (xviii) implementation or completion of critical projects; (xix) segment or product market share; (xx) economic value; (xxi) product development; (xxii) manufacturing; (xxiii) manufacturing capacity; (xxiv) mergers; or (xxv) acquisitions or sales of assets or subsidiaries, any of which may be measured either in absolute terms or as compared to any incremental increase or decrease or as compared to results of a peer group or to market performance indicators or indices.
(b) The Administrator may, in its sole discretion, provide that one or more objectively determinable adjustments shall be made to one or more of the Performance Goals. Such adjustments may include one or more of the following: (i) items related to a change in accounting principle; (ii) items relating to financing activities; (iii) expenses for restructuring or productivity initiatives; (iv) other non-operating items; (v) items related to acquisitions; (vi) items attributable to the business operations of any entity acquired by the Company during the Performance Period; (vii) items related to the disposal of a business or segment of a business; (viii) items related to discontinued operations that do not qualify as a segment of a business under Applicable Accounting Standards; (ix) items attributable to any stock dividend, stock split, combination or exchange of stock occurring during the Performance Period; (x) any other items of significant income or expense which are determined to be appropriate adjustments; (xi) items relating to unusual or extraordinary corporate transactions, events or developments, (xii) items related to amortization of acquired intangible assets; (xiii) items that are outside the scope of the Company’s core, on-going business activities; (xiv) items related to acquired in-process research and development; (xv) items relating to changes in tax laws; (xvi) items relating to major licensing or partnership arrangements; (xvii) items relating to asset impairment charges; (xviii) items relating to gains or losses for litigation, arbitration and contractual settlements; or (xix) items relating to any other unusual or nonrecurring events or changes in applicable laws or business conditions. For all Awards intended to qualify as Performance-Based Compensation, such determinations shall be made within the time prescribed by, and otherwise in compliance with, Section 162(m) of the Code.
2.36 “Performance Goals” shall mean, for a Performance Period, one or more goals established in writing by the Administrator for the Performance Period based upon one or more Performance Criteria. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance, either independently or as compared to a comparator group of companies, performance of internal Company units, either independently or as compared to a comparator group of companies’ internal units, or otherwise as determined by the Administrator. The achievement of each Performance Goal shall be determined in accordance with Applicable Accounting Standards, as appropriate.
2.37 “Performance Period” shall mean one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Holder’s right to, and the payment of, a Performance Award.
2.38 “Permitted Transferee” shall mean, with respect to a Holder, any “family member” of the Holder, as defined under the instructions to use of the Form S-8 Registration Statement under the Securities Act.
2.39 “Plan” shall mean this Amgen Inc. Amended and Restated 2009 Equity Incentive Plan (as the successor to the Amgen Inc. 2009 Equity Incentive Plan), as it may be amended or restated from time to time.
2.40 “Prior Plans” shall mean, collectively, the Amgen Inc. Amended and Restated 1991 Equity Incentive Plan, the Amgen Inc. Amended and Restated 1999 Equity Incentive Plan, the Amgen Inc. Amended and Restated 1999 Incentive Stock Plan, the Amgen Limited Sharesave Plan, the Amgen Limited 2000 U.K. Company Employee Share Option Plan, and the Amgen Technology Ireland Irish Tax Approved Share Plan.
2.41 “Program” shall mean any program adopted by the Committee pursuant to the Plan containing terms and conditions intended to govern a specified type of Award granted under the Plan and pursuant to which such type of Award may be granted under the Plan.
2.42 “QDRO” shall mean a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended from time to time, or the rules thereunder.
2.43 “Restricted Stock” shall mean Shares awarded under Article 8 that is subject to certain restrictions and may be subject to risk of forfeiture or repurchase.
2.44 “Restricted Stock Units” shall mean the right to receive Shares awarded under Section 9.5.
2.45 “Securities Act” shall mean the Securities Act of 1933, as amended.
2.46 “Securities Exchange” shall mean the NASDAQ Global Select Market or any other securities exchange or any other national market system or automated quotation system on which the Shares are listed, quoted, or traded.
2.47 “Shares” shall mean shares of Common Stock.
2.48 “Stock Appreciation Right” shall mean a stock appreciation right granted under Article 10.
2.49 “Stock Payment” shall mean (a) a payment in the form of Shares, or (b) an option or other right to purchase Shares, as part of a bonus, deferred compensation or other arrangement, awarded under Section 9.3.
2.50 “Subsidiary” shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing more than fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
2.51 “Substitute Award” shall mean an Award granted under the Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock;provided,however, that in no event shall the term “Substitute Award” be construed to refer to an award made in connection with the cancellation and repricing of an Option or Stock Appreciation Right.
2.52 “Termination of Service” shall mean,
(a) As to a Consultant, the time when the engagement of a Holder as a Consultant to the Company or an Affiliate is terminated for any reason, with or without cause, including, without
limitation, by resignation, discharge, death or retirement, but excluding terminations where the Consultant simultaneously commences or remains in employment or service with the Company or any Affiliate.
(b) As to a Non-Employee Director, the time when a Holder who is a Non-Employee Director ceases to be a Director for any reason, with or without cause, including, without limitation, a termination by resignation, failure to be elected, death or retirement, but excluding terminations where the Holder simultaneously commences or remains in employment or service with the Company or any Affiliate.
(c) As to an Employee, the time when the employee-employer relationship between a Holder and the Company or any Affiliate is terminated for any reason, with or without cause, including, without limitation, a termination by resignation, discharge, death, disability or retirement, but excluding terminations where the Holder simultaneously commences or remains in employment or service with the Company or any Affiliate.
The Administrator, in its sole discretion, shall determine the effect of all matters and questions relating to Terminations of Service, including, without limitation, the question of whether a Termination of Service resulted from a discharge for cause and all questions of whether particular leaves of absence constitute a Termination of Service;provided,however, that, with respect to Incentive Stock Options, unless the Administrator otherwise provides in the terms of the Program, Award Agreement or otherwise, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Service only if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. For purposes of the Plan, a Holder’s employee-employer relationship or consultancy relations shall be deemed to be terminated in the event that the Affiliate employing or contracting with such Holder ceases to remain an Affiliate following any merger, sale of stock or other corporate transaction or event (including, without limitation, a spin-off).
ARTICLE 3.
SHARES SUBJECT TO THE PLAN
3.1 Number of Shares.
(a) Subject to adjustment as provided in Section 3.1(b) and Section 13.2, a total of One Hundred Four Million Two Hundred Eighty Thousand One Hundred Seven (104,280,107)1 Shares shall be authorized for grant under the Plan;provided, that, subject to adjustment as provided in Section 13.2, the number of Shares authorized for grant as Incentive Stock Options shall be no more than the total number of Shares authorized for grant under the Plan, above. Any Shares that are subject to Awards of Options or Stock Appreciation Rights shall be counted against this limit as one (1) Share for every one (1) Share granted. Any Shares that are subject to Full Value Awards shall be counted against this limit as 1.9 Shares for every one (1) Share granted. After May 6, 2009, no awards may be granted under any Prior Plan, however, any awards under any Prior Plan that are outstanding as of May 6, 2009 shall continue to be subject to the terms and conditions of such Prior Plan.
(b) If (i) any Shares subject to an Award are forfeited or expire or an Award is settled for cash (in whole or in part), or (ii) any Shares subject to an award granted under any Prior Plan after December 31, 2008 are forfeited or expire or an award under any Prior Plan is settled for cash (in whole
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or in part), the Shares subject to such Award or award under the Prior Plan shall, to the extent of such forfeiture, expiration or cash settlement, again be available for Awards under the Plan, in accordance with Section 3.1(d) below. Notwithstanding anything to the contrary contained herein, the following Shares shall not be added to the Shares authorized for grant under Section 3.1(a): (i) Shares tendered by a Holder or withheld by the Company in payment of the exercise price of an Option; (ii) Shares tendered by the Holder or withheld by the Company to satisfy any tax withholding obligation with respect to an Option or Stock Appreciation Right; (iii) Shares subject to a Stock Appreciation Right that are not issued in connection with the stock settlement of the Stock Appreciation Right on exercise thereof; and (iv) Shares purchased on the open market with the cash proceeds from the exercise of Options. Notwithstanding the foregoing, Shares tendered by the Holder or withheld by the Company to satisfy any tax withholding obligation with respect to a Full Value Award, and any Shares repurchased by the Company under Section 8.4 at the same price paid by the Holder so that such Shares are returned to the Company, in each case shall again be available for Awards in accordance with Section 3.1(d) below. Dividend Equivalents paid in cash in conjunction with any outstanding Awards shall not be counted against the Shares available for issuance under the Plan.
(c) Substitute Awards shall not reduce the Shares authorized for grant under the Plan. Additionally, in the event that a company acquired by the Company or any Affiliate or with which the Company or any Affiliate combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan;provided, that Awards using such available shares shall not be made after the date awards could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employed by or providing services to the Company or its Affiliates immediately prior to such acquisition or combination.
(d) Any Shares that again become available for grant pursuant to this Section 3.1 shall be added back as (i) one (1) Share if such Shares were subject to an Option or a Stock Appreciation Right, and (ii) as 1.9 Shares if such Shares were subject to Full Value Awards.
3.2 Stock Distributed. Any Shares distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Common Stock, treasury Common Stock or Common Stock purchased on the open market.
3.3 Limitation on Awards. Notwithstanding any provision in the Plan to the contrary, and subject to Section 13.2, the maximum aggregate number of Shares with respect to one or more Awards that may be granted to any one person during any calendar year shall be Four Million (4,000,000) and the maximum aggregate amount of cash that may be paid to any one person during any calendar year with respect to one or more Performance Awards payable in cash shall be Fifteen Million Dollars ($15,000,000). To the extent required by Section 162(m) of the Code, Shares subject to Awards which are canceled shall continue to be counted against the Award Limit.
ARTICLE 4.
GRANTING OF AWARDS
4.1 Participation. The Administrator may, from time to time, select from among all Eligible Individuals, those to whom an Award shall be granted and shall determine the nature and amount of each
Award, which shall not be inconsistent with the requirements of the Plan. No Eligible Individual shall have any right to be granted an Award pursuant to the Plan.
4.2 Award Agreement. Each Award shall be evidenced by an Award Agreement. Award Agreements evidencing Awards intended to qualify as Performance-Based Compensation shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. Award Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code.
4.3 Programs. The Board or the Committee may from time to time establish Programs pursuant to the Plan. An Award Agreement evidencing an Award granted pursuant to any Program shall comply with the terms and conditions of such Program. Any Program containing terms and conditions governing Awards intended to qualify as Performance-Based Compensation shall contain such terms and conditions as may be necessary to allow such Awards to meet the applicable provisions of Section 162(m) of the Code. Any Program containing terms and conditions governing Incentive Stock Options shall contain such terms and conditions as may be necessary to allow such Incentive Stock Options to meet the applicable provisions of Section 422 of the Code.
4.4 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan, any Award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act, and any applicable Program, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange Act and any amendments thereto) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan, any applicable Program and Awards granted or awarded thereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
4.5 At-Will Employment. Nothing in the Plan, any Program or any Award Agreement hereunder shall confer upon any Holder any right to continue in the employ of, or as a Director or Consultant for, the Company or any Affiliate, or shall interfere with or restrict in any way the rights of the Company and any Affiliate, which rights are hereby expressly reserved, to discharge any Holder at any time for any reason whatsoever, with or without cause, and with or without notice, or to terminate or change all other terms and conditions of employment or engagement, except to the extent expressly provided otherwise in a written agreement between the Holder and the Company or any Affiliate.
4.6 Foreign Holders. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company and its Affiliates operate or have Employees, Non-Employee Directors or Consultants, or in order to comply with the requirements of any foreign securities exchange, the Administrator, in its sole discretion, shall have the power and authority to: (a) determine which Affiliates shall be covered by the Plan; (b) determine which Eligible Individuals outside the United States are eligible to participate in the Plan; (c) modify the terms and conditions of any Award granted to Eligible Individuals outside the United States to comply with applicable foreign laws or listing requirements of any such foreign securities exchange; (d) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable (any such subplans and/or modifications shall be attached to the Plan as appendices);provided,however, that no such subplans and/or modifications shall increase the share limitations contained in Sections 3.1 and 3.3; and (e) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local governmental regulatory exemptions or approvals or listing requirements of any such foreign securities exchange. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate the Code, the Exchange Act, the Securities Act, any other securities law or governing statute, or the rules of any Securities Exchange or any other applicable law.
4.7 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the sole discretion of the Administrator, be granted either alone, in addition to, or in tandem with, any other Award
granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.
4.8 Automatic Exercise of In-The-Money Options and Stock Appreciation Rights. The Administrator, in its sole discretion, may provide in an Award Agreement or otherwise that any Option or Stock Appreciation Right outstanding on the Automatic Exercise Date with an exercise price per Share that is less than the Fair Market Value per Share as of such date shall automatically and without further action by the Holder (or, in the event of Holder’s death, Holder’s personal representative or estate) or the Company be exercised on the Automatic Exercise Date if the Administrator, in its sole discretion, determines that such exercise would provide economic benefit to the Holder after payment of the exercise price, applicable taxes and any expenses to effect the exercise. In the sole discretion of the Administrator, payment of the exercise price of any such Option or Stock Appreciation Right may be made pursuant to Section 11.1(b) or 11.1(c), and the Company may deduct or withhold an amount sufficient to satisfy all taxes associated with such exercise in accordance with Section 11.2. Unless otherwise determined by the Administrator, this Section 4.8 shall not apply to an Option or Stock Appreciation Right if the Holder of such Option or Stock Appreciation Right incurs a Termination of Service on or before the Automatic Exercise Date.
ARTICLE 5.
PROVISIONS APPLICABLE TO AWARDS INTENDED TO QUALIFY AS PERFORMANCE-BASED COMPENSATION.
5.1 Purpose. The Committee, in its sole discretion, may determine at the time an Award is granted or thereafter whether such Award is intended to qualify as Performance-Based Compensation. If the Committee, in its sole discretion, decides to grant such an Award to an Eligible Individual that is intended to qualify as Performance-Based Compensation, then the provisions of this Article 5 shall control over any contrary provision contained in the Plan. The Administrator may in its sole discretion grant Awards to other Eligible Individuals that are based on Performance Criteria or Performance Goals but that do not satisfy the requirements of this Article 5 and that are not intended to qualify as Performance-Based Compensation. Unless otherwise specified by the Administrator at the time of grant, the Performance Criteria with respect to an Award intended to be Performance-Based Compensation payable to a Covered Employee shall be determined on the basis of Applicable Accounting Standards. The Committee, in its sole discretion, may determine at the time an Award is granted or at any time thereafter whether such Award is not intended to qualify as Performance-Based Compensation.
5.2 Applicability. The grant of an Award to an Eligible Individual for a particular Performance Period shall not require the grant of an Award to such Individual in any subsequent Performance Period and the grant of an Award to any one Eligible Individual shall not require the grant of an Award to any other Eligible Individual in such period or in any other period.
5.3 Types of Awards. Notwithstanding anything in the Plan to the contrary, the Committee may grant any Award to a Covered Employee intended to qualify as Performance-Based Compensation, including, without limitation, Restricted Stock the restrictions with respect to which lapse upon the attainment of specified Performance Goals, and any Performance Awards described in Article 9 that vest or become exercisable or payable upon the attainment of one or more specified Performance Goals.
5.4 Procedures with Respect to Performance-Based Awards. To the extent necessary to comply with the requirements of Section 162(m)(4)(C) of the Code, with respect to any Award granted under Articles 7 or 8 to one or more Covered Employees and which is intended to qualify as Performance-Based Compensation, no later than 90 days following the commencement of any Performance Period or any designated fiscal period or period of service (or such earlier time as may be required under Section 162(m)
of the Code), the Committee shall, in writing, (a) designate one or more Eligible Individuals, (b) select the Performance Criteria applicable to the Performance Period, (c) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period based on the Performance Criteria, and (d) specify the relationship between Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by each Covered Employee for such Performance Period. Following the completion of each Performance Period, the Committee shall certify in writing whether and the extent to which the applicable Performance Goals have been achieved for such Performance Period. In determining the amount earned under such Awards, to the extent provided under any applicable Program or Award Agreement, the Committee shall have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant, including the assessment of individual or corporate performance for the Performance Period.
5.5 Payment of Performance-Based Awards. Unless otherwise provided in the applicable Program or Award Agreement, as to an Award that is intended to qualify as Performance-Based Compensation, the Holder must be employed by the Company or an Affiliate throughout the Performance Period. Unless otherwise provided in the applicable Performance Goals, Program or Award Agreement, a Holder shall be eligible to receive payment pursuant to such Awards for a Performance Period only if and to the extent the Performance Goals for such period are achieved.
5.6 Additional Limitations. Notwithstanding any other provision of the Plan and except as otherwise determined by the Administrator, any Award which is granted to a Covered Employee and is intended to qualify as Performance-Based Compensation shall be subject to any additional limitations set forth in Section 162(m) of the Code or any regulations or rulings issued thereunder that are requirements for qualification as Performance-Based Compensation, and the Plan, any applicable Program and the Award Agreement shall be deemed amended to the extent necessary to conform to such requirements.
ARTICLE 6.
GRANTING OF OPTIONS
6.1 Granting of Options to Eligible Individuals. The Administrator is authorized to grant Options to Eligible Individuals from time to time, in its sole discretion, on such terms and conditions as it may determine which shall not be inconsistent with the Plan.
6.2 Qualification of Incentive Stock Options. No Incentive Stock Option shall be granted to any person who is not an Employee of the Company or any subsidiary corporation of the Company (as defined in Section 424(f) of the Code). No person who qualifies as a Greater Than 10% Stockholder may be granted an Incentive Stock Option unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code. Any Incentive Stock Option granted under the Plan may be modified by the Administrator, with the consent of the Holder, to disqualify such Option from treatment as an “incentive stock option” under Section 422 of the Code. To the extent that the aggregate fair market value of stock with respect to which “incentive stock options” (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by a Holder during any calendar year under the Plan, and all other plans of the Company and any subsidiary or parent corporation thereof (each as defined in Section 424(f) and (e) of the Code, respectively), exceeds $100,000, the Options shall be treated as Non-Qualified Stock Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options and other “incentive stock options” into account in the order in which they were granted and the Fair Market Value of stock shall be determined as of the time the respective options were granted. In no event may any Incentive Stock Option be granted under the Plan after the tenth (10th) anniversary of the date the Plan is approved by the Board.
6.3 Option Exercise Price. The exercise price per Share subject to each Option shall be set by the Administrator, but shall not be less than 100% of the Fair Market Value of a Share on the date the Option is granted (or, as to Incentive Stock Options, on the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code). In addition, in the case of Incentive Stock Options granted to a Greater Than 10% Stockholder, such price shall not be less than 110% of the Fair Market Value of a Share on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code).
6.4 Option Term. The term of each Option shall be set by the Administrator in its sole discretion;provided,however, that the term shall not be more than ten (10) years from the date the Option is granted, or five (5) years from the date an Incentive Stock Option is granted to a Greater Than 10% Stockholder. The Administrator shall determine the time period, including the time period following a Termination of Service, during which the Holder has the right to exercise the vested Options, which time period may not extend beyond the term of the Option. Except as limited by the requirements of Section 409A or Section 422 of the Code and regulations and rulings thereunder, the Administrator may extend the term of any outstanding Option, and may extend the time period during which vested Options may be exercised, in connection with any Termination of Service of the Holder, and may amend any other term or condition of such Option relating to such a Termination of Service.
6.5 Option Vesting.
(a) The period during which the right to exercise, in whole or in part, an Option vests in the Holder shall be set by the Administrator and the Administrator may determine that an Option may not be exercised in whole or in part for a specified period after it is granted. Such vesting may be based on service with the Company or any Affiliate, any of the Performance Criteria, or any other criteria selected by the Administrator. At any time after grant of an Option, the Administrator may, in its sole discretion and subject to whatever terms and conditions it selects, accelerate the period during which an Option vests.
(b) No portion of an Option which is unexercisable at a Holder’s Termination of Service shall thereafter become exercisable, except as may be otherwise provided by the Administrator either in the Program, the Award Agreement or by action of the Administrator following the grant of the Option.
6.6 Substitute Awards. Notwithstanding the foregoing provisions of this Article 6 to the contrary, in the case of an Option that is a Substitute Award, the price per share of the shares subject to such Option may be less than the Fair Market Value per share on the date of grant;provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate exercise price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Administrator) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate exercise price of such shares.
6.7 Substitution of Stock Appreciation Rights. The Administrator may provide in the applicable Program or the Award Agreement evidencing the grant of an Option that the Administrator, in its sole discretion, shall have the right to substitute a Stock Appreciation Right for such Option at any time prior to or upon exercise of such Option;provided, that such Stock Appreciation Right shall be exercisable with respect to the same number of Shares for which such substituted Option would have been exercisable.
ARTICLE 7.
EXERCISE OF OPTIONS
7.1 Partial Exercise. An exercisable Option may be exercised in whole or in part. However, an Option shall not be exercisable with respect to fractional shares and the Administrator may require that, by the terms of the Option, a partial exercise must be with respect to a minimum number of shares.
7.2 Manner of Exercise. All or a portion of an exercisable Option shall be deemed exercised upon delivery of all of the following to the Company Stock Administrator:
(a) A written or electronic notice complying with the applicable rules established by the Company Stock Administrator stating that the Option, or a portion thereof, is exercised. The notice shall be signed by the Holder or other person then entitled to exercise the Option or such portion of the Option;
(b) Such representations and documents as the Company Stock Administrator, in its sole discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal, state or foreign securities laws or regulations, the rules of any Securities Exchange or any other applicable law. The Company Stock Administrator may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars;
(c) In the event that the Option shall be exercised pursuant to Section 11.3 by any person or persons other than the Holder, appropriate proof of the right of such person or persons to exercise the Option, as determined in the sole discretion of the Company Stock Administrator; and
(d) Full payment of the exercise price and applicable withholding taxes to the Company for the shares with respect to which the Option, or portion thereof, is exercised, in a manner permitted by Section 11.1 and 11.2.
7.3 Notification Regarding Disposition. The Holder shall give the Company Stock Administrator prompt written or electronic notice of any disposition of Shares acquired by exercise of an Incentive Stock Option which occurs within (a) two years from the date of granting (including the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code) such Option to such Holder, or (b) one year after the transfer of such shares to such Holder.
ARTICLE 8.
AWARD OF RESTRICTED STOCK
8.1 Award of Restricted Stock.
(a) The Administrator is authorized to grant Restricted Stock to Eligible Individuals, and shall determine the terms and conditions, including the restrictions applicable to each award of Restricted Stock, which terms and conditions shall not be inconsistent with the Plan, and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate.
(b) The Administrator shall establish the purchase price, if any, and form of payment for Restricted Stock;provided,however, that if a purchase price is changed, such purchase price shall be no
less than the par value of the Shares to be purchased, unless otherwise permitted by applicable state law. In all cases, legal consideration shall be required for each issuance of Restricted Stock.
8.2 Rights as Stockholders. Subject to Section 8.4, upon issuance of Restricted Stock, the Holder shall have, unless otherwise provided by the Administrator, all the rights of a stockholder with respect to said shares, subject to the restrictions in the applicable Program or in his or her Award Agreement, including the right to receive all dividends and other distributions paid or made with respect to the shares;provided,however, that, in the sole discretion of the Administrator, any extraordinary distributions with respect to the Shares of Restricted Stock shall be subject to the restrictions set forth in Section 8.3. In addition, dividends payable in connection with Restricted Stock with performance-based vesting shall only be paid out to the Holder to the extent and at the time that the performance-based vesting conditions are satisfied and the share of Restricted Stock vests.
8.3 Restrictions. All shares of Restricted Stock (including any shares received by Holders thereof with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, in the terms of the applicable Program or in each individual Award Agreement, be subject to such restrictions and vesting requirements as the Administrator shall provide. Such restrictions may include, without limitation, restrictions concerning voting rights and transferability and such restrictions may lapse separately or in combination at such times and pursuant to such circumstances or based on such criteria as selected by the Administrator, including, without limitation, criteria based on the Holder’s duration of employment, directorship or consultancy with the Company, the Performance Criteria, Company performance, individual performance or other criteria selected by the Administrator. By action taken after the Restricted Stock is issued, the Administrator may, on such terms and conditions as it may determine to be appropriate, accelerate the vesting of such Restricted Stock by removing any or all of the restrictions imposed by the terms of the Program or Award Agreement. Restricted Stock may not be sold or encumbered until all restrictions are terminated or expire.
8.4 Repurchase or Forfeiture of Restricted Stock. If no price was paid by the Holder in cash or property for the Restricted Stock, upon a Termination of Service the Holder’s rights in unvested Restricted Stock then subject to restrictions shall lapse, and such Restricted Stock shall be surrendered to the Company and cancelled without consideration. If a price was paid by the Holder in cash or property for the Restricted Stock, upon a Termination of Service the Company shall have the right to repurchase from the Holder the unvested Restricted Stock then subject to restrictions at a cash price per share equal to the price paid by the Holder in cash or property for such Restricted Stock or such other amount as may be specified in the Program or the Award Agreement. The Administrator in its sole discretion may provide that in the event of certain events, including the Holder’s death, retirement or disability or any other specified Termination of Service or any other event, the Holder’s rights in unvested Restricted Stock shall not lapse, such Restricted Stock shall vest and, if applicable, the Company shall not have a right of repurchase.
8.5 Certificates for Restricted Stock. Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Company Stock Administrator shall determine. Certificates, book entries or electronic registration evidencing shares of Restricted Stock must include an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, in its sole discretion, retain physical possession of any stock certificate until such time as all applicable restrictions lapse.
8.6 Section 83(b) Election. If a Holder makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Holder would otherwise be taxable under Section 83(a) of the Code, the Holder shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service.
ARTICLE 9.
AWARD OF PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK, STOCK PAYMENTS, RESTRICTED STOCK UNITS
9.1 Performance Awards.
(a) The Administrator is authorized to grant Performance Awards to any Eligible Individual and to determine whether such Performance Awards shall be Performance-Based Compensation. The value of Performance Awards may be linked to any one or more of the Performance Criteria or other specific criteria determined by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Performance Awards may be paid in cash, Shares, or both, as determined by the Administrator.
(b) Without limiting Section 9.1(a), the Administrator may grant Performance Awards to any Eligible Individual in the form of a cash bonus payable upon the attainment of objective Performance Goals, or such other criteria, whether or not objective, which are established by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. Any such bonuses paid to a Holder which are intended to be Performance-Based Compensation shall be based upon objectively determinable bonus formulas established in accordance with the provisions of Article 5.
9.2 Dividend Equivalents.
(a) Dividend Equivalents may be granted by the Administrator based on dividends declared on the Common Stock, to be credited as of dividend payment dates during the period between the date an Award is granted to a Holder and the date such Award vests, is exercised, is distributed or expires, as determined by the Administrator. Such Dividend Equivalents shall be converted to cash or additional shares of Common Stock by such formula and at such time and subject to such limitations as may be determined by the Administrator. In addition, Dividend Equivalents with respect to an Award with performance-based vesting shall only be paid out to the Holder to the extent that the performance-based vesting conditions are satisfied and the Award vests.
(b) Notwithstanding the foregoing, no Dividend Equivalents shall be payable with respect to Options or Stock Appreciation Rights.
9.3 Stock Payments. The Administrator is authorized to make Stock Payments to any Eligible Individual. The number or value of shares of any Stock Payment shall be determined by the Administrator and may be based upon one or more Performance Criteria or any other specific criteria, including service to the Company or any Affiliate, determined by the Administrator. Shares underlying a Stock Payment which is subject to a vesting schedule or other conditions or criteria set by the Administrator will not be issued until those conditions have been satisfied. Unless otherwise provided by the Administrator, a Holder of a Stock Payment shall have no rights as a Company stockholder with respect to such Stock Payment until such time as the Stock Payment has vested and the Shares underlying the Award have been issued to the Holder. Stock Payments may, but are not required to be made in lieu of base salary, bonus, fees or other cash compensation otherwise payable to such Eligible Individual.
9.4 Deferred Stock. The Administrator is authorized to grant Deferred Stock, which shall consist of the right to receive Shares at some future date, to any Eligible Individual. The number of shares of Deferred Stock shall be determined by the Administrator and may be based on one or more Performance Criteria or other specific criteria, including service to the Company or any Affiliate, as the Administrator determines, in each case on a specified date or dates or over any period or periods determined by the Administrator. Shares underlying a Deferred Stock award which is subject to a vesting schedule or other
conditions or criteria set by the Administrator will not be issued until those conditions have been satisfied. Unless otherwise provided by the Administrator, a Holder of Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such time as the Award has vested and the Shares underlying the Award have been issued to the Holder.
9.5 Restricted Stock Units. The Administrator is authorized to grant Restricted Stock Units to any Eligible Individual. The number and terms and conditions of Restricted Stock Units shall be determined by the Administrator. The Administrator shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate, including conditions based on one or more Performance Criteria or other specific criteria, including service to the Company or any Affiliate, in each case on a specified date or dates or over any period or periods, as the Administrator determines. The Company Stock Administrator shall specify, or permit the Holder to elect, the conditions and dates upon which the Shares underlying the Restricted Stock Units which shall be issued. Restricted Stock Units may be paid in cash, Shares, or both, as determined by the Administrator. On the distribution dates, the Company shall issue to the Holder one unrestricted, fully transferable Share (or the Fair Market Value of one such Share in cash) for each vested and nonforfeitable Restricted Stock Unit.
9.6 Term. The term of a Performance Award, Dividend Equivalent award, Deferred Stock award, Stock Payment award and/or Restricted Stock Unit award shall be set by the Administrator in its sole discretion.
9.7 Exercise or Purchase Price. Subject to the Administrator’s discretion, as provided for in this Section 9.7, the Administrator may establish the exercise or purchase price of a Performance Award, shares of Deferred Stock, shares distributed as a Stock Payment award or shares distributed pursuant to a Restricted Stock Unit award;provided,however, that value of the consideration shall not be less than the par value of a Share, unless otherwise permitted by applicable law.
9.8 Exercise upon Termination of Service. A Performance Award, Dividend Equivalent award, Deferred Stock award, Stock Payment award and/or Restricted Stock Unit award is exercisable or distributable only while the Holder is an Employee, Director or Consultant, as applicable. The Administrator, however, in its sole discretion may provide that the Performance Award, Dividend Equivalent award, Deferred Stock award, Stock Payment award and/or Restricted Stock Unit award may be exercised or distributed subsequent to a Termination of Service in certain events, including the Holder’s death, retirement or disability or any other specified Termination of Service.
ARTICLE 10.
AWARD OF STOCK APPRECIATION RIGHTS
10.1 Grant of Stock Appreciation Rights.
(a) The Administrator is authorized to grant Stock Appreciation Rights to Eligible Individuals from time to time, in its sole discretion, on such terms and conditions as it may determine consistent with the Plan.
(b) A Stock Appreciation Right shall entitle the Holder (or other person entitled to exercise the Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying the difference obtained by subtracting the exercise price per share of the Stock Appreciation Right from the Fair Market Value on the date of exercise of the Stock Appreciation Right by the number of Shares with respect to which the Stock Appreciation Right shall have been exercised, subject to any limitations the Administrator may impose. Except as described in (c) below, the exercise price per Share subject to each Stock Appreciation Right shall be set by the
Administrator, but shall not be less than 100% of the Fair Market Value on the date the Stock Appreciation Right is granted.
(c) Notwithstanding the foregoing provisions of Section 10.1(b) to the contrary, in the case of an Stock Appreciation Right that is a Substitute Award, the price per share of the shares subject to such Stock Appreciation Right may be less than 100% of the Fair Market Value per share on the date of grant;provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate exercise price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Administrator) of the shares of the predecessor entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate exercise price of such shares.
10.2 Stock Appreciation Right Term. The term of each Stock Appreciation Right shall be set by the Administrator in its sole discretion;provided,however, that the term shall not be more than ten (10) years from the date the Stock Appreciation Right is granted.
10.3 Stock Appreciation Right Vesting.
(a) The period during which the right to exercise, in whole or in part, a Stock Appreciation Right vests in the Holder shall be set by the Administrator and the Administrator may determine that a Stock Appreciation Right may not be exercised in whole or in part for a specified period after it is granted. Such vesting may be based on service with the Company or any Affiliate, or any other criteria selected by the Administrator. At any time after grant of a Stock Appreciation Right, the Administrator may, in its sole discretion and subject to whatever terms and conditions it selects, accelerate the period during which a Stock Appreciation Right vests.
(b) No portion of a Stock Appreciation Right which is unexercisable at Termination of Service shall thereafter become exercisable, except as may be otherwise provided by the Administrator either in the applicable Program or Award Agreement or by action of the Administrator following the grant of the Stock Appreciation Right.
10.4 Manner of Exercise. All or a portion of an exercisable Stock Appreciation Right shall be deemed exercised upon delivery of all of the following to the stock administrator of the Company, or such other person or entity designated by the Administrator, or his, her or its office, as applicable:
(a) A written or electronic notice complying with the applicable rules established by the Company Stock Administrator stating that the Stock Appreciation Right, or a portion thereof, is exercised. The notice shall be signed by the Holder or other person then entitled to exercise the Stock Appreciation Right or such portion of the Stock Appreciation Right;
(b) Such representations and documents as the Company Stock Administrator, in its sole discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal, state or foreign securities laws or regulations. The Company Stock Administrator may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance; and
(c) In the event that the Stock Appreciation Right shall be exercised pursuant to this Section 10.4 by any person or persons other than the Holder, appropriate proof of the right of such person or persons to exercise the Stock Appreciation Right.
10.5 Payment. Payment of the amounts payable with respect to Stock Appreciation Rights pursuant to this Article 10 shall be in cash, Shares (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised), or a combination of both, as determined by the Administrator.
ARTICLE 11.
ADDITIONAL TERMS OF AWARDS
11.1 Payment. The Administrator shall determine the methods by which payments by any Holder with respect to any Awards granted under the Plan shall be made, including, without limitation: (a) cash or check, (b) Shares (including, in the case of payment of the exercise price of an Award, shares of Common Stock issuable pursuant to the exercise of the Award) or Shares held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences, in each case, having a Fair Market Value on the date of delivery equal to the aggregate payments required, (c) delivery of a written or electronic notice that the Holder has placed a market sell order with a broker with respect to Shares then issuable upon exercise or vesting of an Award, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate payments required;provided, that payment of such proceeds is then made to the Company upon settlement of such sale, or (d) other form of legal consideration acceptable to the Administrator. The Administrator shall also determine the methods by which Shares shall be delivered or deemed to be delivered to Holders. Notwithstanding any other provision of the Plan to the contrary, no Holder who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any extension of credit with respect to such payment with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
11.2 Tax Withholding. The Company or any Affiliate shall have the authority and the right to deduct or withhold, or require a Holder to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including the Holder’s FICA or employment tax obligation) required by law to be withheld with respect to any taxable event concerning a Holder arising as a result of the Plan. The Administrator may, in its sole discretion and in satisfaction of the foregoing requirement, allow a Holder to elect to have the Company withhold Shares otherwise issuable under an Award (or allow the surrender of Shares). The number of Shares which may be so withheld or surrendered shall be limited to the number of shares which have a fair market value on the date of withholding or repurchase equal to the aggregate amount of such liabilities not to exceed the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such supplemental taxable income. The Company Stock Administrator shall determine the fair market value of the Shares, consistent with applicable provisions of the Code, for tax withholding obligations due in connection with a broker-assisted cashless Option or Stock Appreciation Right exercise involving the sale of shares to pay the Option or Stock Appreciation Right exercise price or any tax withholding obligation.
11.3 Transferability of Awards.
(a) Except as otherwise provided in Section 11.3(b):
(i) No Award under the Plan may be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a QDRO, unless and until such Award has been exercised, or the shares underlying such Award have been issued, and all restrictions applicable to such shares have lapsed;
(ii) No Award or interest or right therein shall be liable for the debts, contracts or engagements of the Holder or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence; and
(iii) During the lifetime of the Holder, only the Holder may exercise an Award (or any portion thereof) granted to him under the Plan, unless it has been disposed of pursuant to a QDRO; after the death of the Holder, any exercisable portion of an Award may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Program or Award Agreement, be exercised by his personal representative or by any person empowered to do so under the deceased Holder’s will or under the then applicable laws of descent and distribution.
(b) Notwithstanding Section 11.3(a), the Administrator, in its sole discretion, may determine to permit a Holder to transfer an Award other than an Incentive Stock Option to any one or more Permitted Transferees, subject to any state, federal, local or foreign tax and securities laws applicable to transferable Awards, and subject to the following terms and conditions: (i) an Award transferred to a Permitted Transferee shall not be assignable or transferable by the Permitted Transferee other than by will or the laws of descent and distribution; (ii) an Award transferred to a Permitted Transferee shall continue to be subject to all the terms and conditions of the Award as applicable to the original Holder (other than the ability to further transfer the Award); and (iii) the Holder and the Permitted Transferee shall execute any and all documents requested by the Administrator, including, without limitation documents to (A) confirm the status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer under applicable federal, state and foreign securities laws and (C) evidence the transfer.
(c) Notwithstanding Section 11.3(a), a Holder may, in the manner determined by the Administrator, designate a beneficiary to exercise the rights of the Holder and to receive any distribution with respect to any Award upon the Holder’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Program or Award Agreement applicable to the Holder, except to the extent the Plan, the Program and the Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Administrator. If the Holder is married and resides in a community property state, a designation of a person other than the Holder’s spouse as his or her beneficiary with respect to more than 50% of the Holder’s interest in the Award shall not be effective without the prior written or electronic consent of the Holder’s spouse. If no beneficiary has been designated or survives the Holder, payment shall be made to the person entitled thereto pursuant to the Holder’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Holder at any time provided the change or revocation is filed with the Administrator prior to the Holder’s death.
11.4 Conditions to Issuance of Shares.
(a) Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates or make any book entries evidencing Shares pursuant to the exercise of any Award, unless and until the Board or the Administrator has determined, with advice of counsel, that the issuance of such shares is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the Shares are listed or traded, and the Shares are covered by an effective registration statement or applicable exemption from registration. In addition to the terms and conditions provided herein, the Board or the Committee may require that a Holder make such reasonable covenants, agreements, and representations as the Board or the Administrator, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements.
(b) All Shares certificates delivered pursuant to the Plan and all shares issued pursuant to book entry procedures are subject to any stop-transfer orders and other restrictions as the Administrator or the
Company Stock Administrator deems necessary or advisable to comply with federal, state, or foreign securities or other laws, rules and regulations and the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted, or traded. The Company Stock Administrator may place legends on any Share certificate or book entry to reference restrictions applicable to the Shares.
(c) The Company Stock Administrator shall have the right to require any Holder to comply with any timing or other restrictions with respect to the settlement, distribution or exercise of any Award, including a window-period limitation, as may be imposed in the sole discretion of the Company Stock Administrator, or other requirement arising from compliance with any applicable securities laws, as determined by the Company Stock Administrator, in its sole discretion.
(d) No fractional Shares shall be issued and the Company Stock Administrator shall determine, in its sole discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding down.
(e) Notwithstanding any other provision of the Plan, unless otherwise determined by the Company Stock Administrator or required by any applicable law, rule or regulation, the Company shall not deliver to any Holder certificates evidencing Shares issued in connection with any Award and instead such Shares shall be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).
11.5 Forfeiture Provisions. Pursuant to its general authority to determine the terms and conditions applicable to Awards under the Plan, the Administrator shall have the right to provide, in the terms of Programs or Awards made under the Plan or in any policy with respect to the recovery or recoupment of compensation or benefits in the event of financial restatements, the occurrence of other events that are inconsistent with the payment of compensation, or to comply with the requirements of Applicable Law, including but not limited to the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, in each case as determined by the Administrator, or to require a Holder to agree by separate written or electronic instrument, that, to the extent permitted by applicable law: (a)(i) any proceeds, gains or other economic benefit actually or constructively received by the Holder upon any receipt or exercise of the Award, or upon the receipt or resale of any Shares underlying the Award, must be paid to the Company, and (ii) the Award shall terminate and any unexercised portion of the Award (whether or not vested) shall be forfeited, if (b)(i) a Termination of Service occurs prior to a specified date, or within a specified time period following receipt or exercise of the Award, (ii) the Holder at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Administrator, (iii) the Holder incurs a Termination of Service for “cause” (as such term is defined in the sole discretion of the Administrator, or as set forth in a written agreement relating to such Award between the Company and the Holder), (iv) the Company’s financial results are materially restated and such proceeds, gains or other economic benefit actually or constructively received by the Holder would have been lower had they been calculated based on such restated results or (v) any other reason required under Applicable Law.
11.6 Prohibition on Repricing. Subject to Section 13.2, the Administrator shall not, without the approval of the stockholders of the Company, (i) authorize the amendment of any outstanding Option or Stock Appreciation Right to reduce its price per share, except with respect to any Substitute Award, or (ii) cancel any Option or Stock Appreciation Right in exchange for cash or another Award when the Option or Stock Appreciation Right price per share exceeds the Fair Market Value of the underlying Shares, except with respect to any Substitute Award. Subject to Section 13.2, the Administrator shall have the authority, without the approval of the stockholders of the Company, to amend any outstanding award to increase the price per share or to cancel and replace an Award with the grant of an Award having a price per share that is greater than or equal to the price per share of the original Award.
ARTICLE 12.
ADMINISTRATION
12.1 Administrator. The Compensation Committee (or another committee or a subcommittee of the Board assuming the functions of the Committee under the Plan) shall administer the Plan (except as otherwise permitted herein) and shall consist solely of two or more Non-Employee Directors appointed by and holding office at the pleasure of the Board, each of whom is intended to qualify as both a “non-employee director” as defined by Rule 16b-3 of the Exchange Act or any successor rule, an “outside director” for purposes of Section 162(m) of the Code and an “independent director” under the rules of any Securities Exchange;provided, that any action taken by the Committee shall be valid and effective, whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section 12.l or otherwise provided in any charter of the Committee. Except as may otherwise be provided in any charter of the Committee, appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written or electronic notice to the Board. Vacancies in the Committee may only be filled by the Board. Notwithstanding the foregoing, (a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to Awards granted to Non-Employee Directors and (b) the Board or Committee may delegate its authority hereunder to the extent permitted by Section 12.6.
12.2 Duties and Powers of Committee. It shall be the duty of the Committee to conduct the general administration of the Plan in accordance with its provisions, subject to the Committee’s power to delegate duties under Section 12.6. The Committee shall have the power to interpret the Plan, the Program and any Award Agreement, and to adopt such rules for the administration, interpretation and application of the Plan as are not inconsistent therewith, to interpret, amend or revoke any such rules and to amend any Program or Award Agreementprovided, that the rights or obligations of the Holder of the Award that is the subject of any such Program or Award Agreement are not affected adversely by such amendment, unless the consent of the Holder is obtained or such amendment is otherwise permitted under Section 13.10. Any such Award under the Plan need not be the same with respect to each Holder. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan except with respect to matters which under Rule 16b-3 under the Exchange Act or any successor rule, or Section 162(m) of the Code, or any regulations or rules issued thereunder, or the rules of any Securities Exchange are required to be determined in the sole discretion of the Committee.
12.3 Action by the Committee. Unless otherwise established by the Board or in any charter of the Committee, a majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by all members of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Affiliate, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.
12.4 Authority of Administrator. Subject to any specific designation in the Plan or any applicable Program, the Administrator has the exclusive power, authority and sole discretion to:
(a) Designate Eligible Individuals to receive Awards;
(b) Determine the type or types of Awards to be granted to each Eligible Individual;
(c) Determine the number of Awards to be granted and the number of Shares to which an Award will relate;
(d) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any performance criteria, any reload provision, any restrictions or limitations on the Award, any schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers thereof, and any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Administrator in its sole discretion determines;
(e) Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in cash, Shares, other Awards, or other property, or an Award may be canceled, forfeited, or surrendered;
(f) Prescribe the form of each Award Agreement, which need not be identical for each Holder;
(g) Decide all other matters that must be determined in connection with an Award;
(h) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan;
(i) Interpret the terms of, and any matter arising pursuant to, the Plan, any Program or any Award Agreement; and
(j) Make all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable to administer the Plan.
12.5 Decisions Binding. The Administrator’s interpretation of the Plan, any Awards granted pursuant to the Plan, any Program, any Award Agreement and all decisions and determinations by the Administrator with respect to the Plan are final, binding, and conclusive on all parties.
12.6 Delegation of Authority. To the extent permitted by applicable law or the rules of any Securities Exchange, the Board or Committee may from time to time delegate to a committee of one or more members of the Board or one or more officers of the Company the authority to grant or amend Awards or to take other administrative actions pursuant to Article 12;provided,however, that in no event shall an officer of the Company be delegated the authority to grant awards to, or amend awards held by, the following individuals: (a) individuals who are subject to Section 16 of the Exchange Act; (b) Covered Employees or (c) officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated hereunder;provided further, that any delegation of administrative authority shall only be permitted to the extent it is permissible under Section 162(m) of the Code and applicable securities laws or the rules of any Securities Exchange. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation, and the Board may at any time rescind the authority so delegated or appoint a new delegate At all times, the delegatee appointed under this Section 12.6 shall serve in such capacity at the pleasure of the Board and the Committee.
ARTICLE 13.
MISCELLANEOUS PROVISIONS
13.1 Amendment, Suspension or Termination of the Plan. Except as otherwise provided in this Section 13.1, the Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board or the Committee. However, without approval of the Company’s stockholders given within twelve (12) months before or after the action by the Administrator, no action of the Administrator may, except as provided in Section 13.2, (i) increase the limits imposed in
Section 3.1 on the maximum number of shares which may be issued under the Plan, (ii) reduce the price per share of any outstanding Option or Stock Appreciation Right granted under the Plan, (iii) cancel any Option or Stock Appreciation Right in exchange for cash or another Award when the Option or Stock Appreciation Right price per share exceeds the Fair Market Value of the underlying Shares, except with respect to any Substitute Award, or (iv) increase the limits on Awards imposed in Section 3.3. Except as provided in Section 13.10, no amendment, suspension or termination of the Plan shall, without the consent of the Holder, impair any rights or obligations under any Award theretofore granted or awarded, unless the Award itself otherwise expressly so provides. No Awards may be granted or awarded during any period of suspension or after termination of the Plan.
13.2 Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events.
(a) In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of the Company’s stock or the share price of the Company’s stock other than an Equity Restructuring, the Administrator shall make equitable adjustments, if any, to reflect such change with respect to (i) the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 on the maximum number and kind of shares which may be issued under the Plan, adjustments of the Award Limit, and adjustments of the manner in which shares subject to Full Value Awards will be counted); (ii) the number and kind of shares of Common Stock (or other securities or property) subject to outstanding Awards; (iii) the terms and conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (iv) the grant or exercise price per share for any outstanding Awards under the Plan. Any adjustment affecting an Award intended as Performance-Based Compensation shall be made consistent with the requirements of Section 162(m) of the Code.
(b) In the event of any transaction or event described in Section 13.2(a) or any unusual or nonrecurring transactions or events affecting the Company, any Affiliate of the Company, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations or accounting principles, the Administrator, in its sole discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Holder’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles:
(i) To provide for either (A) termination of any such Award in exchange for an amount of cash, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Holder’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this Section 13.2 the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Holder’s rights, then such Award may be terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the Administrator in its sole discretion having an aggregate value not exceeding the amount that could have been attained upon the exercise of such Award or realization of the Holder’s rights had such Award been currently exercisable or payable or fully vested;
(ii) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices;
(iii) To make adjustments in the number and type of shares of the Company’s stock (or other securities or property) subject to outstanding Awards, and in the number and kind of outstanding Restricted Stock or Deferred Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards and Awards which may be granted in the future;
(iv) To provide that such Award shall be exercisable or payable or fully vested with respect to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Program or Award Agreement; and/or
(v) To provide that the Award cannot vest, be exercised or become payable after such event.
(c) In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Sections 13.2(a) and 13.2(b):
(i) The number and type of securities subject to each outstanding Award and the exercise price or grant price thereof, if applicable, shall be equitably adjusted; and/or
(ii) The Administrator shall make such equitable adjustments, if any, as the Administrator in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Section 3.1 on the maximum number and kind of shares which may be issued under the Plan, and adjustments of the Award Limit, and adjustments of the manner in which shares subject to Full Value Awards will be counted). The adjustments provided under this Section 13.2(c) shall be nondiscretionary and shall be final and binding on the affected Holder and the Company.
(d) The Administrator may, in its sole discretion, include such further provisions and limitations in any Award, Program, agreement or certificate, as it may deem equitable and in the best interests of the Company that are not inconsistent with the provisions of the Plan or any other applicable Program.
(e) With respect to any Award which is granted to a Covered Employee and is intended to qualify as Performance-Based Compensation, no adjustment or action described in this Section 13.2 or in any other provision of the Plan, any applicable Program or the Award Agreement shall be authorized to the extent that such adjustment or action would cause such Award to fail to so qualify as Performance-Based Compensation, unless the Administrator determines that the Award should not so qualify. No adjustment or action described in this Section 13.2 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause the Plan to violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would result in short-swing profits liability under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the Administrator determines that the Award is not to comply with such exemptive conditions.
(f) The existence of the Plan, any Program, any Award Agreement and any Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Stock or the rights thereof or which are convertible into or exchangeable for Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
(g) No action shall be taken under this Section 13.2 which shall cause an Award to fail to comply with Section 409A of the Code or the Treasury Regulations thereunder, to the extent applicable to such Award.
(h) In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of Common Stock or the share price of the Common Stock including any Equity Restructuring, for reasons of administrative convenience, the Company in its sole discretion may refuse to permit the exercise of any Award during a period of thirty (30) days prior to the consummation of any such transaction.
13.3 Approval of Plan by Stockholders. This Plan, which serves as the amendment and restatement of and successor to the 2009 Plan (as approved by the stockholders of the Company on May 9, 2009), will be submitted for the approval of the Company’s stockholders within twelve (12) months after the date that this Plan is approved by the Board.Until such time as the Company’s stockholders approve this Plan, the terms of the 2009 Plan (without regard to the amendment and restatement) shall continue to govern and the Company shall continue to grant Awards under the terms of the 2009 Plan, including without limitation the share limits set forth in Section 3.1 of the Plan (without regard to the amendment and restatement). If this Plan is not approved by the Company’s stockholders, the 2009 Plan (without regard to the amendment and restatement) will continue in full force and effect in accordance with its terms. If the Plan is approved by the Company’s stockholders, the Company shall grant awards under the Plan (as the amendment and restatement of and successor to the 2009 Plan), including without limitation the increase in the share limit under Section 3.1 of the Plan, as of the Effective Date.
13.4 No Stockholders Rights. Except as otherwise provided herein, a Holder shall have none of the rights of a stockholder with respect to shares of Common Stock covered by any Award until the Holder becomes the record owner of such shares of Common Stock.
13.5 Paperless Administration. In the event that the Company Stock Administrator establishes, for the Company or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Holder may be permitted through the use of such an automated system.
13.6 Effect of Plan upon Other Compensation Plans. The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company or any Affiliate. Nothing in the Plan shall be construed to limit the right of the Company or any Affiliate: (a) to establish any other forms of incentives or compensation for Employees, Directors or Consultants of the Company or any Affiliate or (b) to grant or assume options or other rights or awards otherwise than under the Plan in connection with any proper corporate purpose including without limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association.
13.7 Compliance with Laws. The Plan, the granting and vesting of Awards under the Plan and the issuance and delivery of Shares and the payment of money under the Plan or under Awards granted or awarded hereunder are subject to compliance with all applicable federal, state, local and foreign laws, rules and regulations (including but not limited to state, federal and foreign securities law and margin requirements), the rules of any Securities Exchange, and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under the Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with
all applicable legal requirements. To the extent permitted by applicable law, the Plan, any Program and any Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
13.8 Titles and Headings, References to Sections of the Code, the Securities Act or Exchange Act. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. References to sections of the Code, the Securities Act or the Exchange Act shall include any amendment or successor thereto.
13.9 Governing Law. The Plan, any Program and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof.
13.10 Section 409A. To the extent that the Administrator determines that any Award granted under the Plan is subject to Section 409A of the Code, the Program pursuant to which such Award is granted and the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan, the Program and any Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding any provision of the Plan or the applicable Program or Award Agreement to the contrary, in the event that the Administrator determines that any Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Administrator may adopt such amendments to the Plan and the applicable Program and Award Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of any penalty taxes under such Section.
13.11 No Rights to Awards. No Eligible Individual or other person shall have any claim to be granted any Award pursuant to the Plan, and neither the Company nor the Administrator is obligated to treat Eligible Individuals, Holders or any other persons uniformly.
13.12 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Holder pursuant to an Award, nothing contained in the Plan or any Program or Award Agreement shall give the Holder any rights that are greater than those of a general creditor of the Company or any Affiliate.
13.13 Indemnification. To the extent allowable pursuant to applicable law, each member of the Committee or of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
13.14 Relationship to other Benefits. No payment pursuant to the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Affiliate except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.
13.15 Expenses. The expenses of administering the Plan shall be borne by the Company and its Affiliates.
* * * * *
I hereby certify that the foregoing Amgen Inc. Amended and Restated 2009 Equity Incentive Plan was duly adopted by the Board of Directors of Amgen Inc. on March 6, 2013.
* * * * *
I hereby certify that the foregoing Amgen Inc. Amended and Restated 2009 Equity Incentive Plan was approved by the stockholders of Amgen Inc. on May 22, 2013.
Executed thisday of, 2013.
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SAMPLE
Only Amgen Inc. stockholders with admittance tickets will be admitted to the 20132015 Annual Meeting of Stockholders. Each stockholder is entitled to one admittance ticket. If you come to the meeting and do not have an admittance ticket, you will be admitted only upon presentation of proper identification and evidence of stock ownership as of March 25, 2013.16, 2015. Ensuring the 2015 Annual Meeting of Stockholders is safe and productive is our top priority. As such, failure to follow these admission procedures may result in being denied admission or being directed to view the meeting in an overflow room. Because seating in the main meeting room is limited, and in order to be able to address security concerns, we reserve the right to direct attendees to view the meeting in an overflow room.
| ¨ | Please send me an admittance ticket for the Amgen Inc. |
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YOU DO NOT NEED TO RETURN THIS CARD IF YOU DO NOT PLAN TO ATTEND
THE 20132015 ANNUAL MEETING OF STOCKHOLDERS.
SAMPLE
ANNUAL MEETING OF STOCKHOLDERS OF
AMGEN INC.
May 22, 2013
14, 2015
GO GREEN
e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.amstock.com to enjoy online access.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 22, 2013:14, 2015: The Notice of 20132015 Annual Meeting of Stockholders, Proxy Statement, Form Proxy Card and 20122014 Annual Report are available at http://www.amstock.com/ProxyServices/www.astproxyportal.com/ast/Amgen.
If you wish to attend the Annual Meeting, please visit http:https://www.seeuthere.com/AnnualMeeting2013 to register.
starcite. Please smarteventscloud. sign,com/2015AnnualMeeting date and mail to register.
your proxy card in the envelope provided as soon as possible.
Please detach along perforated as possible. line and mail in the envelope provided.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE X
x
The Board of Directors recommends a vote “FOR” each listed nominee in item #1.
1. To elect thirteen directors
of for office election expiring to the at Board of Directors of Amgen Inc. for a term of office expiring at the 20142016 are: annual meeting of stockholders. FOR AGAINST The nominees for election to the Board are:
FOR AGAINST ABSTAIN
Dr. David Baltimore
Mr. Frank J. Biondi, Jr.
Mr. Robert A. Bradway
Mr. François de Carbonnel
Dr. Vance D. Coffman
Mr. Robert A. Eckert
Dr. Rebecca M. Henderson
Mr. FrankGreg C. Herringer
FOR AGAINST ABSTAIN
Dr. Tyler Jacks
Dr. Gilbert S. Omenn
Ms. Judith C. Pelham
Mr. Leonard D. Schaeffer
Dr. Ronald D. Sugar
The Board of Directors recommends a vote “FOR” each of items #2, #3 and #4.
2. Garland
To ratifyindicate changes change your to the selection of Ernst & Young LLP as our independentthe new address registered public accountants for the fiscal year ending December 31, 2013.
3. Advisory vote to approve our executive compensation.
4. Approval of our proposed Amended and Restated 2009 Equity Incentive Plan.
To change the address on name(s) your in the account, address on the please account space check above. may not the Please be box submitted at note right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
Signature of Stockholder Date: Signature of Stockholder Date:
Note: Please sign exactly as your name or names appear on this Proxy Card. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney-in-fact, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such.
Date:
Signature of Stockholder
If When signer signing is a partnership, as executor, please administrator, sign in partnership attorney-in name -fact, trustee by authorized person.or guardian, person please . give
Date:
Dr. Rebecca M. Henderson Mr. Frank C. Herringer Dr. Tyler Jacks Ms. Judith C. Pelham Dr. Ronald D. Sugar Dr. R. Sanders Williams
FOR AGAINST ABSTAIN
The Board of Directors recommends a vote “FOR” each of items #2 and #3.
2. To ratify the selection of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending December 31, 2015.
3. Advisory vote to approve our executive compensation.
The Board of Directors recommends a vote “AGAINST” the Stockholder Proposal in item #4.
4. Stockholder Proposal (Vote Tabulation).
SAMPLE
This Proxy Card will be voted as specified or, if no choice is specified, will be voted FOR the election of the named director nominees, FOR ratification of the selection of Ernst & Young LLP, FOR the advisory vote to approve our executive compensation and FORAGAINST the approval of our proposed Amended and Restated 2009 Equity Incentive Plan.
Stockholder Proposal.
As of the date hereof, the undersigned hereby acknowledges receipt of the 20132015 Proxy Statement and accompanying Notice of 20132015 Annual Meeting of Stockholders to be held on May 22, 2013,14, 2015, Form Proxy Card and the 20122014 Annual Report.
In their discretion, the Proxy Holders (as defined below) are authorized to vote upon such other matters as may properly come before the 20132015 Annual Meeting of Stockholders and at any continuation, postponement or adjournment thereof. The Board of Directors, at present, knows of no other business to be presented at the 20132015 Annual Meeting of Stockholders.
By signing this proxy you revoke all prior proxies. This proxy will be governed by the laws of the State of Delaware and federal securities laws.
AMGEN INC.
ONE AMGEN CENTER DRIVE, THOUSAND OAKS, CA 91320-1799
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE 20132015 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 22, 2013
14, 2015
Robert A. Bradway, Jonathan M. PeacockDavid W. Meline and David J. Scott (the “Proxy Holders”), or any of them, each with the power of substitution, hereby are authorized to represent the undersigned, with all powers which the undersigned would possess if personally present, to vote the shares of Amgen Inc. Common Stock of the undersigned at the 20132015 Annual Meeting of Stockholders of Amgen Inc., to be held on Wednesday,Thursday, May 22, 2013,14, 2015, at 11:00 A.M., local time, at the Four Seasons Hotel Westlake Village, Two Dole Drive, Westlake Village, CA 91362, and at any continuation, postponement or adjournment of that meeting, upon and in respect of the following matters and in accordance with the following instructions, with discretionary authority as to any and all other business that may properly come before the meeting.
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations. PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on the reverse side)
14475
SAMPLE
ANNUAL MEETING AMGEN OF STOCKHOLDERS INC. OF
AMGEN INC.
May 22, 2013
14, 2015 PROXY VOTING INSTRUCTIONS
INTERNET -
INTERNET—Access “www.voteproxy.com” and follow the on-screen instructions.instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page.
TELEPHONE -
TELEPHONE—Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call.
Vote online/phone until 11:59 PM Eastern TimePMET the day before the meeting.
MAIL - MAIL—Sign, date and mail your proxy card in the envelope provided as soon as possible.
IN PERSON -
INPERSON—You may vote your shares in person by attending the Annual Meeting.
GO GREEN—e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.amstock.com to enjoy online access.
If you wish to attend the Annual Meeting, please visit http://www.seeuthere.com/AnnualMeeting2013[deleted text from public filing] to register.
COMPANY NUMBER
ACCOUNT NUMBER
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 22, 2013:
14, 2015:
The Notice of 20132015 Annual Meeting of Stockholders, Proxy Statement, Form Proxy Card and 20122014 Annual Report are available at http://www.amstock.com/ProxyServices/www.astproxyportal.com/ast/Amgen.
Please detach along perforated line and mail in the envelope provided IF you are not voting by telephone or the Internet.
————————
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
The Board of Directors recommends a vote “FOR” each listed nominee in item #1.
1. To of office elect thirteen expiring directors at the 2016 to annual the Board meeting of Directors of stockholders. of Amgen The Inc. for nominees a term of office expiring at the 2014 annual meeting of stockholders. The nominees for election to the Board are:
FOR AGAINST ABSTAIN
Dr. David Baltimore
Mr. Frank J. Biondi, Jr.
Mr. Robert A. Bradway
Mr. François de Carbonnel
Dr. Vance D. Coffman
Mr. Robert A. Eckert
Dr. Rebecca M. Henderson
Mr. FrankGreg C. Herringer
FOR AGAINST ABSTAIN
Dr. Tyler Jacks
Dr. Gilbert S. Omenn
Ms. Judith C. Pelham
Mr. Leonard D. Schaeffer
Dr. Ronald D. Sugar
The Board of Directors recommends a vote “FOR” each of items #2, #3 and #4.
2. Garland
To ratifyindicate changes change your to the selection of Ernst & Young LLP as our independentthe new address registered public accountants for the fiscal year ending December 31, 2013.
3. Advisory vote to approve our executive compensation.
4. Approval of our proposed Amended and Restated 2009 Equity Incentive Plan.
To change the address on name(s) your in the account, address on the please account space check above. may not the Please be box submitted at note right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
Signature of Stockholder
Date:
Signature of Stockholder
Date:
Note: Please sign exactly as your name or names appear on this Proxy Card. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney-in-fact, trustee or guardian, please give
full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such.
Signature of Stockholder
If When signer signing is a partnership, as executor, please administrator, sign in partnership attorney-in-fact, name trustee by authorized or guardian, person. please give
Date:
Dr. Rebecca M. Henderson Mr. Frank C. Herringer Dr. Tyler Jacks Ms. Judith C. Pelham Dr. Ronald D. Sugar Dr. R. Sanders Williams
FOR AGAINST ABSTAIN
The Board of Directors recommends a vote “FOR” each of items #2 and #3.
2. To ratify the selection of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending December 31, 2015.
3. Advisory vote to approve our executive compensation.
The Board of Directors recommends a vote “AGAINST” the Stockholder Proposal in item #4.
4. Stockholder Proposal (Vote Tabulation).
SAMPLE
This Proxy Card will be voted as specified or, if no choice is specified, will be voted FOR the election of the named director nominees, FOR ratification of the selection of Ernst & Young LLP, FOR the advisory vote to approve our executive compensation and FORAGAINST the approval of our proposed Amended and Restated 2009 Equity Incentive Plan.
Stockholder Proposal.
As of the date hereof, the undersigned hereby acknowledges receipt of the 20132015 Proxy Statement and accompanying Notice of 20132015 Annual Meeting of Stockholders to be held on May 22, 2013,14, 2015, Form Proxy Card and the 20122014 Annual Report.
In their discretion, the Proxy Holders (as defined below) are authorized to vote upon such other matters as may properly come before the 20132015 Annual Meeting of Stockholders and at any continuation, postponement or adjournment thereof. The Board of Directors, at present, knows of no other business to be presented at the 20132015 Annual Meeting of Stockholders.
By signing this proxy you revoke all prior proxies. This proxy will be governed by the laws of the State of Delaware and federal securities laws.
AMGEN INC.
ONE AMGEN CENTER DRIVE, THOUSAND OAKS, CA 91320-1799
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE 20132015 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 22, 2013
14, 2015
Robert A. Bradway, Jonathan M. PeacockDavid W. Meline and David J. Scott (the “Proxy Holders”), or any of them, each with the power of substitution, hereby are authorized to represent the undersigned, with all powers which the undersigned would possess if personally present, to vote the shares of Amgen Inc. Common Stock of the undersigned at the 20132015 Annual Meeting of Stockholders of Amgen Inc., to be held on Wednesday,Thursday, May 22, 2013,14, 2015, at 11:00 A.M., local time, at the Four Seasons Hotel Westlake Village, Two Dole Drive, Westlake Village, CA 91362, and at any continuation, postponement or adjournment of that meeting, upon and in respect of the following matters and in accordance with the following instructions, with discretionary authority as to any and all other business that may properly come before the meeting.
You are encouraged to specify your choices by marking the appropriate boxes, SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors’ recommendations. PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on the reverse side)
14475
