UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Securities Exchange Act of 1934 (Amendment No. )
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| Preliminary Proxy Statement | |
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☒ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material Pursuant to§240.14a-12 |
EXELIXIS, INC.
(Exact name of registrant as specified in its charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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DEAR FELLOW STOCKHOLDERS,
WhetherWe write to thank you are a recent investor or have been withfor your continued interest in Exelixis, for a longer portion of our25-year history, thanks forand your confidence in our company. With your support, Exelixis made important progressthe company’s ability to execute on ourits mission to help cancer patients recover stronger and live longer in 2018, our second consecutive year of profitability on an operating basis. Our performance was made possible by increased U.S. uptake of our lead medicine, CABOMETYX®, as well as strong growth in collaboration revenues from our partners advancing our products – COMETRIQ®, CABOMETYX®, COTELLIC®, and now MINNEBRO™ – aroundaccelerate the world. We are proud that we continued to maintain our profitability even as we made extensive investments in internal drug discovery, productin-licensing, clinical development and corporate infrastructurecommercialization of new medicines fordifficult-to-treat cancers. As we navigate theCOVID-19 pandemic, now more than ever we recognize the critical importance of this company – and more broadly the importance of a strong and innovative biotech industry – in confronting the most serious medical challenges, such as cancer, and developing innovative medicines that will support our growth intocan give patients and their families hope for the future.
As stewardsdetailed in the accompanying letter from Michael Morrissey and in our Annual Report, Exelixis’ 25th year was one of strong performance, financially, operationally and strategically. The company produced record annual net product revenues, dramatically increased its understanding of the broad therapeutic potential of cabozantinib, and gained strong momentum pursuing the expansion of its product pipeline through internal discovery andin-licensing activities. These achievements strengthened our foundation, giving us reason to be optimistic as we strive to continue Exelixis’ business,growth and create value for all of its stakeholders.
During the last year, we also announced the launch of a variety of environmental, social and governance (ESG) initiatives that reflect our ESG values. We appreciate the ongoing dialogue with our stakeholders as we have elicited input from numerous groups regarding the ESG issues that are most material to the company’s current and future activities. We are pleased to highlight that in 2019, the Exelixis Board of Directors recognizes that as the company grows, so do the performance expectations and responsibilities imposed on its leadership. We have, therefore, workedcontinued to optimize our corporate governance profile, most notably by amending our Bylaws to provide stockholders with the management teamright to conductcall a thorough reviewspecial meeting. The Board approved this change following extensive engagement with our stockholders, during which special meetings were identified as critical to the ability of stockholders to act on matters that may arise between annual meetings. We believe this change demonstrates the Board’s dedication to being responsive to stockholder input concerning governance and we remain committed to the ongoing evaluation of our governance profile as Exelixis and compensation practices to ensure that they are appropriate for a company of Exelixis’ scale and growth potential. Inits business evolve.
Next up is the course of this review, we sought to obtain critical input and perspective from our stockholders. These engagement efforts resulted in the following significant governance and compensation enhancements, including:
Declassification of the Board of Directors through amendment of our certificate of incorporation – if this change is approved by the stockholders, the Board of Directors will be declassified and all directors will stand for election annually, beginning at theExelixis 2020 Annual Meeting of Stockholders;
Adoption of a more objective framework to guide the evaluation of annual executive bonuses;
Adoption of a Policy for Recoupment of Variable Compensation (also known as a clawback policy);
Incorporation of individual and corporate performance components into the long-term incentive compensation program; and
Adoption of stock ownership guidelines for executives and members of the Board of Directors.
We hope you will consider these enhancements favorably, as well as the additional updates and proposals in this Proxy Statement, as you cast your votes at the 2019 Annual Meeting of Stockholders, which will be held at our headquarters located at 1851 Harbor Bay Parkway, Alameda, California 94502in a virtual format on May 22, 2019,20, 2020, beginning at 810:00 a.m. Pacific Time. We have moved to a virtual format due to the emerging public health impact of theCOVID-19 pandemic and to support the health and well-being of our stockholders and employees. You will be able to view the meeting, submit questions and vote online atwww.virtualshareholdermeeting.com/EXEL2020. The following notice of our Annual Meeting contains details of the business to be conducted at the Annual Meeting. Only stockholders of record (or beneficial owners who have obtained a proxy from their broker) at the close of business on March 25, 2019, will be entitledMeeting, as well as information regarding how and when to notice of,vote.
We appreciate your attention and to vote at, the Annual Meeting.
This coming November, Exelixis will mark the 25th anniversary of its founding. Now based at our new campus in Alameda, we have come a long way from our early days as a model systems genetics company spun out of academia and based in Cambridge, Massachusetts. We owe our successes to smart science, effective collaboration, and a resilient culture and team that has withstood the clinical and business challenges that come with our industry—and emerged stronger and better for them. As we move through 2019, we are excited about and grateful for the continued opportunity to introduce medicines that can give patients and their families hope for the future. As we continue in our efforts,best for you have our commitment that we will remain engaged and aligned with all of our stakeholders.your families during this challenging period.
Very truly yours,
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Stelios Papadopoulos, PhD
| Charles Cohen, PhD |
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1851 Harbor Bay Parkway
Alameda, CA 94502
OF STOCKHOLDERS
To be heldBe Held on MAY 22, 2019May 20, 2020
To the Stockholders of Exelixis, Inc.:
NOTICE IS HEREBY GIVEN that the 2020 Annual Meeting of Stockholders (Annual Meeting) of Exelixis, Inc., a Delaware corporation (Exelixis), will be held on Wednesday, May 22, 2019,20, 2020, at 8:10:00 a.m., local time, at Exelixis’ offices located at 1851 Harbor Bay Parkway, Alameda, California 94502Pacific Time. The Annual Meeting will be a completely virtual meeting of stockholders, which will be conducted via live webcast. You will be able to attend the virtual Annual Meeting and submit your questions and vote your shares online during the meeting by visitingwww.virtualshareholdermeeting.com/EXEL2020 and using your16-digit control number to enter the Annual Meeting. In addition, you may submit your questions and vote your shares online in advance of the meeting by visitingwww.proxyvote.com and using your16-digit control number. The Annual Meeting will be held for the following purposes:
1. | To elect the |
2. | To ratify the selection by the Audit Committee of the Board of Directors of Ernst & Young LLP as Exelixis’ independent registered public accounting firm for the fiscal year ending January |
3. | To |
4. | To approve, on an advisory basis, the compensation of Exelixis’ named executive officers, as disclosed in the Proxy Statement accompanying this |
5. | To conduct any other business properly brought before the meeting. |
These items of business are more fully described in the Proxy Statement accompanying this Notice.Notice of Annual Meeting.
You will only be able to attend the virtual Annual Meeting by using your16-digit control number provided on your Notice of Internet Availability of Proxy Materials, your proxy cardor your voting instruction form in order to gain access to the virtual Annual Meeting. Therefore, it is important to retain your Notice of Internet Availability of Proxy Materials or a copy of your proxy card or voting instruction form to enable you to gain access to the virtual Annual Meeting.
We are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials (the Notice)(Notice of Availability) instead of a paper copy of this Proxy Statement and our 2018 Annual Report.Report for the fiscal year ended January 3, 2020 (Annual Report). The Notice of Availability contains instructions on how to access those documents over the Internet. The Notice of Availability also contains instructions on how to request a paper copy of our proxy materials, including this Proxy Statement, our 2018 Annual Report and a form of proxy card or voting instruction card.form. All stockholders who do not receive a Notice of Availability will receive a paper copy of the proxy materials by mail. We believe that this process will allow us to provide our stockholders with the information they need in a more timely manner, while reducing the environmental impact and lowering the costs of printing and distributing our proxy materials.
The record date for the Annual Meeting is March 25, 2019.23, 2020. Only stockholders of record at the close of business on that date may vote at the meeting or any postponement or adjournment thereof.
Important notice regarding the availability of proxy materials for the 2020 Annual Meeting of Stockholders to be held on May
The Proxy Statement and
The Board of Directors recommends that you vote |
By Order of the Board of Directors
JEFFREY J. HESSEKIEL
Executive Vice President and General Counsel
Alameda, California
April , 20199, 2020
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE 2019VIRTUAL ANNUAL MEETING, OF STOCKHOLDERS, TO ENSURE THAT YOU ARE REPRESENTED AT THE MEETING AND TO ENSURE THAT A QUORUM IS PRESENT, WE URGE YOU TO VOTE YOUR PROXY ONLINE, BY TELEPHONE OR BY RETURNING A PROXY CARD BY MAIL AS INSTRUCTED IN THE NOTICE OF AVAILABILITY OF PROXY MATERIALS. EVEN IF YOU HAVE VOTED BY PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE VIRTUAL ANNUAL MEETING. PLEASE NOTE, HOWEVER, THAT IF YOU HOLD YOUR SHARES THROUGH A BROKER, BANK OR OTHER NOMINEE, THEN THAT ENTITY IS THE STOCKHOLDER OF RECORD, AND YOU WILL NEED TO FOLLOW THE INSTRUCTIONS ON THE VOTING INSTRUCTION FORM THEY SEND TO YOU AND THEY WILL VOTE YOUR SHARES AS YOU DIRECT, OR YOU MUST OBTAIN A PROXY ISSUED IN YOUR NAME FROM THAT ENTITY TO VOTE YOUR SHARES.
Table of Contents
20192020 Proxy Statement i
Proxy Statement | Questions and Answers about these Proxy Materials and Voting
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1851 Harbor Bay Parkway
Alameda, CA 94502
PROXY STATEMENT
FORTHE 20192020 ANNUAL MEETINGOF STOCKHOLDERS
MAY 22, 201920, 2020
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
Why am I receiving these materials?
We have made these materials available to you on the Internet or, upon your request, have delivered printed versions of these materials to you by mail because the Board of Directors (the Board), of Exelixis, Inc. (sometimes referred to as “we,” “us,” the “company” or “Exelixis”) is soliciting your proxy to vote at the 20192020 Annual Meeting of Stockholders (Annual Meeting), including at any adjournments or postponements of the meeting. The virtual Annual Meeting will be held on Wednesday, May 22, 2019,20, 2020, at 8:10:00 a.m., local time,Pacific Time, via live webcast at our offices at the address set forth above.www.virtualshareholdermeeting.com/EXEL2020. We invite you to attend the virtual Annual Meeting to vote on the proposals described in this Proxy Statement.Statement, and you will need your16-digit control number provided on your Notice of Internet Availability of Proxy Materials (described below), your proxy card or your voting instruction form in order to gain access to the virtual Annual Meeting. Therefore, it is important to retain your Notice of Internet Availability of Proxy Materials or a copy of your proxy card or voting instruction form to enable you to gain access to the virtual Annual Meeting. However, you do not need to attend the virtual Annual Meeting to vote your shares. Instead, you may simply complete, sign and return a proxy card, or follow the instructions below or in the Notice of Internet Availability of Proxy Materials described below to submit your proxy over the telephone or on the Internet.
We intend to send or make available these materials to stockholders on April 9, 2020.
Why is the Annual Meeting being held as a virtual Annual Meeting?
Due to concerns regarding theCOVID-19 pandemic and to assist in protecting the health and well-being of our stockholders and employees, the Annual Meeting will be held virtually via live webcast on the Internet. We designed the format of the Annual Meeting to ensure that our stockholders who attend virtually will be afforded the same rights and opportunities to participate as they would at anin-person meeting. Accordingly, as stockholders, you will be able to listen, submit your questions and vote your shares online regardless of location atwww.virtualshareholdermeeting.com/EXEL2020 by using your16-digit control number provided on your Notice of Internet Availability of Proxy Materials, your proxy card or your voting instruction form that accompanied your proxy materials. In addition, you may submit your questions and vote your shares online in advance of the meeting by visitingwww.proxyvote.com and using your16-digit control number.
The live webcast will begin promptly at 10:00 a.m., 2019.Pacific Time. We encourage you to access the meeting prior to the start time, as you should allow ample time for thecheck-in procedures.
What is included in these proxy materials?
These proxy materials include:
›› | The Notice of |
›› | The Proxy Statement for the Annual Meeting; and |
›› | Our Annual Report on Form10-K for the fiscal year ended |
If you requested printed versions by mail, these proxy materials also include the proxy card or voting instruction form for the virtual Annual Meeting.
2020 Proxy Statement 1
Why did I receive aone-page notice in the mail regarding Internet availability of proxy materials instead of a full set of printed proxy materials?
Pursuant to rules adopted by the SEC, we have elected to use the Internet as the primary means of furnishing proxy materials to our stockholders this year. This method allows us to deliver the proxy materials to you more quickly, lowers our costs significantly and helps to conserve natural resources. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (Notice of Availability) to our stockholders who have not asked us to provide proxy materials in printed form. All stockholders receiving a Notice of Availability can request a printed set of proxy materials. Moreover, all stockholders can access the proxy materials atwww.exel-annualstockholdermeeting.com, irrespective of whether they receive a Notice of Availability or a printed copy of the proxy materials. Instructions on how to access the proxy materials on the Internet or how to request a printed copy may be found in the Notice of Availability and in this Proxy Statement.
In addition, a stockholder may ask to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. We encourage stockholders to take advantage of the option to receive proxy materials electronically by email to help reduce the environmental impact of our annual meeting and to reduce costs associated with the physical printing and mailing of materials. If you choose to receive future proxy materials by email, you will receive an email message next year with instructions containing a link to those materials and a link to the proxy voting website. Your election to receive proxy materials by email will remain in effect until you terminate it.
2019 Proxy Statement 1
Who may vote at the Annual Meeting?
Only stockholders of record at the close of business on March 25, 2019, the23, 2020 (the Record Date,Date) will be entitled to vote at the virtual Annual Meeting. On the Record Date, there were 301,346,561305,733,496 shares of common stock outstanding and entitled to vote.
Stockholder of Record: Shares Registered in Your Name
If on March 25, 2019,23, 2020, your shares were registered directly in your name with our transfer agent, Computershare Trust Company, N.A., then you are a stockholder of record. As a stockholder of record, you may vote in person at the virtual Annual Meeting or vote by proxy. Whether or not you plan to attend the virtual Annual Meeting, we urge you to vote by proxy over the telephone or on the Internet as instructed below, or complete and mail the proxy card if you received printed materials.
Beneficial Owner: Shares Registered in the Name of a Broker, Bank or Other Stockholder of Record
If on March 25, 2019,23, 2020, your shares were held in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and these proxy materials are being forwarded to you by that organization. The organization holding your shares is considered to be the stockholder of record for purposes of voting at the virtual Annual Meeting. As a beneficial owner, you have the right to direct your broker, bank or other stockholder of record regarding how to vote the shares in your account, and you will receive instructions from your broker, bank or other stockholder of record that must be followed in order for your broker, bank or other stockholder of record to vote your shares per your instructions. You are also invited to attend the virtual Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the meetingvirtual Annual Meeting unless you request and obtain a valid proxy from your broker, bank or other stockholder of record giving you the right to vote such shares in person at the virtual Annual Meeting.
What am I voting on?
There are four matters scheduled for a vote at the virtual Annual Meeting. They are as follows:
›› | Election of the |
›› | Ratification of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January |
›› | Approval of |
›› | Advisory approval of the compensation of our named executive officers, as disclosed in this Proxy Statement. |
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Proxy Statement | Questions and Answers about these Proxy Materials and Voting
How do I vote?
Whether or not you plan to attend the meeting,virtual Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the meetingvirtual Annual Meeting and vote in person even if you have already voted by proxy.
Stockholder of Record: Shares Registered in Your Name
If you are a stockholder of record, you have four ways to vote.
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| ›› | To vote at the virtual Annual Meeting, follow the instructions at www.virtualshareholdermeeting.com/EXEL2020. You will need your16-digit control number provided on your Notice of Internet Availability of Proxy Materials, your proxy card or your voting instruction form in | ||
![]() ![]() Via Internet | ›› | To vote on the Internet, go to | ||
![]() ![]() By Telephone | ›› | To vote by telephone, request a paper or email copy of the proxy materials by following the instructions provided in the Notice of Availability and call the number provided with the proxy materials to transmit your voting instructions. Your vote must be received by 11:59 p.m. Eastern Time, on May | ||
![]() ![]() By Mail | ›› | To vote by mail, request a paper copy of the proxy materials by following the instructions provided in the Notice of Availability and complete, sign and date the proxy card enclosed with the paper copy of the proxy materials and return it promptly in the envelope that will be provided. If you return your signed proxy card to us before the Annual Meeting, we will vote your shares as you direct. |
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Proxy Statement | Questions and Answers about these Proxy Materials and Voting
Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Stockholder of Record (i.e., “Street Name”“Street Name”)
If you are a beneficial owner of shares registered in the name of your broker, bank, or other stockholder of record, you should have received the Notice of Availability containing voting instructions from that organization rather than from us. You must follow these instructions for your bank, broker or other stockholder of record to vote your shares per your instructions. Alternatively, many brokers and banks provide the means to grant proxies to vote shares by telephone and via the Internet. If your shares are held in an account with a broker, bank or other stockholder of record providing such a service, you may grant a proxy to vote those shares by telephone or over the Internet as instructed by your broker, bank or other stockholder of record. To vote in person at the virtual Annual Meeting, you must obtain a valid legal proxy from your broker, bank or other stockholder of record. Follow the instructions from your broker, bank or other stockholder of record included with these proxy materials, or contact your broker, bank or other stockholder of record to request a legal proxy.
We provide Internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.
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How many votes do I have?
On each matter to be voted upon, you have one vote for each share of common stock you own as of the Record Date, March 25, 2019.23, 2020.
How are proxies voted?
All shares represented by valid proxies received prior to the taking of the vote at the Annual Meeting will be voted and, where a stockholder specifies by means of a proxy a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the stockholder’s instructions.
What2020 Proxy Statement 3
If I am a stockholder of record, what happens if I return a proxy card but do not make specific choices?
If you are a stockholder of record and you return a signed and dated proxy card without marking any voting selections, your shares will be voted on the proposals as follows:
›› | “For” the election of Drs. Cohen, Freire, Garber, Marchesi, Morrissey, Papadopoulos, Poste and |
›› | “For” the ratification of our selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January |
›› | “For” the approval of the amendment and restatement of the 2017 Plan to, among other things, increase the |
›› | “For” the advisory approval of the compensation of our named executive officers, as described in Proposal 4. |
If any other matter is properly presented at the Annual Meeting, your proxyholder (one of the individuals named on your proxy card) will vote your shares using his best judgment.
If I am a beneficial owner of shares held in street name and I do not provide my broker or bank with voting instructions, what happens?
If you are a beneficial owner of shares registered in the name of your broker, bank or other stockholder of record and you do not provide the broker, bank or other stockholder of record holding your shares with voting instructions, your broker, bank or other stockholder of record will determine if it has the discretionary authority to vote on the particular matter. If you are a beneficial owner whose shares are held of record by a broker and you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. This is called a “brokernon-vote.” In these cases, the broker can register your shares as being present at the Annual Meeting for purposes of determining the presence of a quorum, but will not be able to vote on those matters for which specific authorization is required under the rules of the New York Stock Exchange.
If you are a beneficial owner whose shares are held of record by a broker, your broker has discretionary voting authority under the rules of the New York Stock Exchange to vote your shares on Proposal No. 2 (the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 3, 2020)1, 2021), even if your broker does not receive voting instructions from you. However, your broker does not have discretionary authority to vote on Proposal No. 1, Proposal No. 3 or Proposal No. 4 without voting instructions from you, in which case a brokernon-vote will occur, and your shares will not be voted on Proposal No. 1, Proposal No. 3 or Proposal No. 4.
2019 Proxy Statement 3
Who is paying for this proxy solicitation?
We are soliciting proxies and will bear the entire cost of soliciting proxies, including the preparation, printing and mailing of the Notice of Availability, the Notice of Annual Meeting, the Proxy Statement, the proxy card and any additional information furnished to stockholders. We have engaged Morrow Sodali LLC, located at 470 West Ave, Stamford, Connecticut 06902, to assist in the solicitation of proxies from shareholders for a fee of $13,000 plus reimbursement of customaryout-of-pocket expenses. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of our common stock beneficially owned by others to forward to such beneficial owners. We may reimburse persons representing beneficial owners of our common stock for their costs of forwarding solicitation materials to such beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone, telegram or personal solicitation by our directors, officers or other regular employees. No additional compensation will be paid to directors, officers or other regular employees for such services.
What does it mean if I receive more than one Notice of Availability or proxy card?
If you receive more than one Notice of Availability or proxy card, your shares are registered in more than one name or are registered in different accounts. Please follow the instructions on each Notice of Availability or proxy card to ensure that all of your shares are voted.
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Proxy Statement | Questions and Answers about these Proxy Materials and Voting
Can I change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. You may revoke your proxy in the following ways:
Stockholder of Record: Shares Registered in Your Name
›› | Your proxy may be revoked by filing with the Secretary of Exelixis at our principal executive office, Exelixis, Inc., 1851 Harbor Bay Parkway, Alameda, California 94502, either (1) a written notice of revocation or (2) a duly executed proxy card bearing a later date. |
›› | Your proxy may also be revoked by granting a subsequent proxy by telephone or on the Internet (your latest telephone or Internet proxy is the one that is counted). |
›› | Your proxy may also be revoked by attending the virtual Annual Meeting and voting |
Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Stockholder of Record
›› | If your shares are held by your broker or bank as nominee or agent, you should follow the instructions provided by your broker or bank to revoke any prior voting instructions. |
What is the quorum requirement for the Annual Meeting?
A majority of the outstanding shares entitled to vote at the virtual Annual Meeting must be present or represented by proxy at the Annual Meeting either in person or by proxy, to hold a valid meeting. This is called a “quorum.” As this is a virtual Annual Meeting, holders of record attending via the live webcast will be deemed to be present at the virtual Annual Meeting.
If you are a stockholder of record, your shares will be counted towards the quorum only if you vote in person at the meetingvirtual Annual Meeting or have properly voted by proxy on the Internet, by telephone or by submitting a proxy card by mail or at the Annual Meeting.mail. You may vote “For,” “Against” or “Abstain” with respect to Proposal Nos. 1, 2, 3 and 4. Abstentions will be counted towards the number of shares considered to be present at the meeting for purposes of determining whether a quorum is present.
If you are a beneficial owner holding your shares in “street name” then only the broker, bank or other stockholder of record can vote your shares unless you obtain a valid proxy from the broker, bank or other stockholder of record. See “What if“If I returnam a proxy card butbeneficial owner of shares held in street name and I do not make specific choices?provide my broker or bank with voting instructions, what happens?” above. Shares represented by “brokernon-votes” will be counted in determining whether there is a quorum present. Votes will be counted by the inspector of election appointed for the Annual Meeting. If there is no quorum, either the chairmanchairperson of the Annual Meeting or the holders of a majority of shares present or represented by proxy at the Annual Meeting in person or represented by proxy may adjourn the Annual Meeting to another date.
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Proxy Statement | Questions and Answers about these Proxy Materials and Voting
How many votes are needed to approve each proposal, how are votes counted, and how are abstentions and brokernon-votes treated?
›› | Proposal1-Election of Directors: Directors in an uncontested election, such as this one, are elected by a majority of the votes cast. |
›› | Proposal2-Ratification of Ernst & Young LLP:The affirmative vote of a majority of shares present |
›› | Proposal3-Approval of the Amendment |
2020 Proxy Statement 5
›› | Proposal4-Advisory Vote on Executive Compensation: The affirmative vote of a majority of shares present |
Do I have dissenters’ rights?
No. We are organized as a corporation under Delaware law. Under the Delaware General Corporation Law, our stockholders are not entitled to dissenters’ rights with respect to any of the proposals set forth in this Proxy Statement and we will not independently provide the stockholders with any such rights.
How can I find out the results of the voting at the Annual Meeting?
PreliminaryWe expect to announce preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a current report on Form8-K that we expect to file within four business days after the Annual Meeting. If final voting results are not available to us in time to file a Form8-K within four business days after the Annual Meeting, we intend to file aForm8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form8-K to publish the final results.
Will other matters be voted on at the Annual Meeting?
We are not aware of any matters to be presented at the Annual Meeting other than those described in this Proxy Statement. If any other matters not described in the Proxy Statement are properly presented at the meeting, proxies will be voted in accordance with the best judgment of the proxyholders.
What proxy materials are available on the Internet?
This Proxy Statement and our Annual Report are available atwww.exel-annualstockholdermeeting.com.
2019 Proxy Statement 5
What is the deadline for submitting stockholder proposals for the 20192021 Annual Meeting?
To be considered for inclusion in the 20202021 proxy materials, your proposal must be submitted in writing by December 13, 2019,11, 2020, to Exelixis’ Secretary at Exelixis, Inc., 1851 Harbor Bay Parkway, Alameda, California 94502, and you must comply with all applicable requirements of Rule14a-8 promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act). However, if our 20202021 Annual Meeting of Stockholders is held before April 22, 2020,20, 2021, or after June 21, 2020,19, 2021, then the deadline will be a reasonable time prior to the time that we make our proxy materials available to our stockholders, either online or in printed form.
If you wish to submit a proposal or nominate a director at the 20202021 Annual Meeting of Stockholders, but you are not requesting that your proposal or nomination be included in next year’s proxy materials, you must submit your proposal in writing, in the manner set forth in our Bylaws, to Exelixis’ Secretary at Exelixis, Inc., 1851 Harbor Bay Parkway, Alameda, California 94502, to be received no earlier than the close of business on February 22, 2020,19, 2021, and no later than the close of business on March 23, 2020.21, 2021. However, if our 20202021 Annual Meeting of Stockholders is held before April 22, 2020,20, 2021, or after June 21, 2020,19, 2021, then you must notify Exelixis’ Secretary, in writing, not earlier than the close of business on the 90th day prior to the date of the 20202021 Annual Meeting of Stockholders and not later than the close of business on the later of (i) the 60th day prior to the date of the 20202021 Annual Meeting of Stockholders or (ii) if we publicly announce the date of the 20202021 Annual Meeting of Stockholders fewer than 70 days prior to the date of the 20202021 Annual Meeting of Stockholders, the 10th day following the day that we first make such public announcement of the date of the 20202021 Annual Meeting of Stockholders. We also advise you to review our Bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations. The chairperson of the 20202021 Annual Meeting of Stockholders may determine, if the facts warrant, that a matter has not been properly brought before the meeting and, therefore, may not be considered at the meeting. In
6 Exelixis, Inc.
Proxy Statement | Questions and Answers about these Proxy Materials and Voting
addition, unless prohibited by Rule14a-4(c) promulgated under the Exchange Act, our management will have discretionary authority to vote all shares for which it has proxies for any such stockholder proposal or director nomination, including in opposition to such stockholder proposal or director nomination.
How may I obtain a printed copy of the Proxy Materials?
Instructions on how to obtain a printed copy of the proxy materials are set forth in the Notice of Availability.
Forward-Looking Statements
6 Exelixis, Inc.
This Proxy Statement | Questionscontains forward-looking statements, including, without limitation, statements related to: Exelixis’ expectations that its employees and Answers aboutpartners will commit to the highest standards of ethical behavior and maintain values and principles that reflect both global awareness and sustainability; Exelixis’ dedication of financial resources to offer patients high-quality cancer treatments and commitment to providing patients with access to Exelixis medicines; Exelixis’ strategies for quality monitoring and compliance in developing its products; Exelixis’ potential to attain future environmental stability; Exelixis’ ongoing efforts towards the achievement of key priorities and anticipated milestones for 2020 and 2021, including generatingtop-line data from key clinical trials, completing enrollment of ongoing studies, initiating new pivotal trials, and progressing itsmid-stage and early product pipeline; the anticipated organizational growth of Exelixis; Exelixis’ market strategies for cabozantinib and other potential business development assets; Exelixis’ plans to initiate variouspre-clinical studies in the first half of 2020; and other statements that are not historical fact. Any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements and are based upon Exelixis’ current plans, assumptions, beliefs, expectations, estimates and projections. Forward-looking statements involve risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of these risks and uncertainties, which include, without limitation: the continuing COVID-19 global pandemic and its impact on our research and development operations, including our ability to initiate new clinical trials and clinical trial sites, enroll clinical trial patients, conduct trials per protocol, and conduct drug research and discovery operations and related activities; the degree of market acceptance of CABOMETYX and other Exelixis products in the indications for which they are approved and in the territories where they are approved, and Exelixis and its partners’ abilities to obtain or maintain coverage and reimbursement for these products; the effectiveness of CABOMETYX and other Exelixis products in comparison to competing products; the level of costs associated with Exelixis’ commercialization, research and development, in-licensing or acquisition of product candidates, and other activities; Exelixis’ ability to maintain and scale adequate sales, marketing, market access and product distribution capabilities for its products or to enter into and maintain agreements with third parties to do so; the availability of data at the referenced times; the potential failure of cabozantinib and other Exelixis product candidates, both alone and in combination with other therapies, to demonstrate safety and/or efficacy in clinical testing; uncertainties inherent in the drug discovery and product development process; Exelixis’ dependence on its relationships with its collaboration partners, including their pursuit of regulatory approvals for partnered compounds in new indications, their adherence to their obligations under relevant collaboration agreements and the level of their investment in the resources necessary to complete clinical trials or successfully commercialize partnered compounds in the territories where they are approved; complexities and the unpredictability of regulatory review and approval processes in the US and elsewhere, including the risk that regulatory authorities may not approve Exelixis’ products as treatments for the indications in which approval has been sought, if at all; Exelixis’ continuing compliance with applicable legal and regulatory requirements; unexpected concerns that may arise as a result of the occurrence of adverse safety events or additional data analyses of clinical trials evaluating cabozantinib and other Exelixis products; Exelixis’ dependence on third-party vendors for the manufacture and supply of its products; Exelixis’ ability to protect its intellectual property rights; market competition, including the potential for competitors to obtain approval for generic versions of Exelixis’ marketed products; changes in economic and business conditions; and other factors discussed under the caption “Risk Factors” in Exelixis’ Annual Report onForm 10-K filed with the SEC on February 25, 2020, and in Exelixis’ future filings with the SEC. All forward-looking statements in this Proxy MaterialsStatement are based on information available to Exelixis as of the date of this Proxy Statement, and VotingExelixis undertakes no obligation to update or revise any forward-looking statements contained herein, except as required by law.
Directions to the Annual Meeting
1851 Harbor Bay Parkway
Alameda, CA 94502
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Directions to our Annual Meeting may also be found on our website at:www.exelixis.com/about/locations-and-directions.
20192020 Proxy Statement 7
ELECTIONOF CLASS II DIRECTORS
OurPrior to the 2019 Annual Meeting of Stockholders, our Certificate of Incorporation and Bylaws provideprovided that the Board iswas divided into three classes, with each class having a three-year term. At the 2019 Annual Meeting of Stockholders, our stockholders approved an amendment to our Certificate of Incorporation to declassify the Board to provide for the annual election of each director by the Annual Meeting. Accordingly, beginning with the Annual Meeting, each director is to be considered for election by our stockholders for a term as set forth inexpiring at the table below:next annual meeting of stockholders; the eleven director nominees listed below are standing forre-election this year:
Director Nominees | Class | Age | Position | Director Since | Current Term Expires | Expiration of Term For Which Nominated | Age | Position | Director Since | |||||||||||||||||||
Charles Cohen, Ph.D. | 69 | Director | 1995 | |||||||||||||||||||||||||
Carl B. Feldbaum, Esq. | II | 75 | Director | 2007 | 2019 | 2022 | 76 | Director | 2007 | |||||||||||||||||||
Maria C. Freire, Ph.D. | II | 64 | Director | 2018 | 2019 | 2022 | 65 | Director | 2018 | |||||||||||||||||||
Alan M. Garber, M.D., Ph.D. | II | 63 | Director | 2005 | 2019 | 2022 | 64 | Director | 2005 | |||||||||||||||||||
Vincent T. Marchesi, M.D., Ph.D. | II | 83 | Director | 2001 | 2019 | 2022 | 84 | Director | 2001 | |||||||||||||||||||
Julie Anne Smith | II | 48 | Director | 2016 | 2019 | 2022 | ||||||||||||||||||||||
Continuing Directors | Class | Age | Position | Director Since | Current Term Expires | |||||||||||||||||||||||
Michael M. Morrissey, Ph.D. | III | 58 | President and Chief Executive Officer | 2010 | 2020 | 59 | President and Chief Executive Officer | 2010 | ||||||||||||||||||||
Stelios Papadopoulos, Ph.D. | III | 70 | Chairman of the Board | 1994 | 2020 | 71 | Chair of the Board | 1994 | ||||||||||||||||||||
George A. Scangos, Ph.D. | III | 70 | Director | 1996 | 2020 | |||||||||||||||||||||||
George Poste, DVM, Ph.D., FRS | 75 | Director | 2004 | |||||||||||||||||||||||||
Julie Anne Smith | 49 | Director | 2016 | |||||||||||||||||||||||||
Lance Willsey, M.D. | III | 57 | Director | 1997 | 2020 | 58 | Director | 1997 | ||||||||||||||||||||
Charles Cohen, Ph.D. | I | 68 | Director | 1995 | 2021 | |||||||||||||||||||||||
George Poste, DVM, Ph.D., FRS | I | 74 | Director | 2004 | 2021 | |||||||||||||||||||||||
Jack L. Wyszomierski, Ph.D., FRS | I | 63 | Director | 2004 | 2021 | |||||||||||||||||||||||
Jack L. Wyszomierski | 64 | Director | 2004 |
Dr. Scangos is not standing forre-election at the Annual Meeting and will resign from the Board effective as of the Annual Meeting. As a result, effective at the Annual Meeting, the number of directors constituting the Board will be reduced from twelve to eleven. We acknowledge with gratitude Dr. Scangos’ long-term service on the Board and his invaluable contributions to Exelixis.
If elected at the Annual Meeting, each of these director nominees would serve until the 2022 Annual Meetingnext annual meeting of Stockholdersstockholders and until the director’s successor is elected and has qualified, or, if sooner, until the director’s death, resignation or removal.
Each of Drs. Garber and Marchesi, and Mr. Feldbaum, were previously elected by our stockholders. Ms. Smith and Dr. Freire were appointed by our Board in 2016 and 2018, respectively, and are being elected by our stockholders for the first time at the Annual Meeting. Ms. Smith was recommended for election to our Board by a third-party search firm, and Dr. Freire was recommended for election to our Board by several of thenon-employee directors.
As this is an uncontested election, each director will be elected by a majority of the votes cast at the meeting with respect to the election of that director. A majority of the votes cast means that the number of shares voted “for” a director must exceed the number of votes cast “against” that director. Abstentions and brokernon-votes will have no effect on the election of directors. If any nominee becomes unavailable for election as a result of an unexpected occurrence, your shares will be voted for the election of such substitute nominee as the Board, after receiving the recommendation of the Nominating and Corporate Governance Committee of the Board, may propose. Each person nominated for election has agreed to serve if elected, and we have no reason to believe that any nominee will be unable to serve.
Our Corporate Governance Guidelines require that all director nominees set forth in this Proxy Statement have tendered an irrevocable resignation as a director conditioned upon: (i) such director failing to receive a majority of the votes cast at the Annual Meeting; and (ii) acceptance by the Board of such resignation. If a director nominee who is serving as a director at the time of the election does not receive a majority of the votes cast at the Annual Meeting, then the Board will take the following actions:
The Nominating and Corporate Governance Committee will act to determine whether to recommend to the Board that it accept the director’s conditional resignation and will submit such recommendation for prompt consideration by the Board.resignation. In making their decision,respective decisions, the Nominating and Corporate Governance Committee and the Board will evaluate the best interests of Exelixis and its stockholders and shall consider all factors and information deemed relevant.relevant by the respective body. The director who tenders his or her conditional resignation shall not participate in the Nominating and Corporate Governance Committee’s recommendation or Board action regarding whether to accept the conditional resignation of such director.
8 Exelixis, Inc.
Proposal 1 | Election of Class II Directors
The Board will act on the Nominating and Corporate Governance Committee’s recommendation within ninety days following certification of the stockholder vote.
If the Board determines not to accept the conditional resignation of a director, the Board will promptly disclose its decision-making process and decision to reject the conditional resignation in a Form8-K furnished to the SEC.
The Board regularly evaluates the skills and experiences that it believes are desirable to be represented on the Board and best align with our strategic vision and business and operations. Below are certain qualifications, skills and experiences of our current directors that contribute the Board’s effectiveness as a whole.
Director Independence 92% (11 out of 12 members of the Board are "independent" under the SEC rules and regulations and the Nasdaq listing standards) Board Skills CEO Leadership Experience 50% (6 out of 12 members of the Board) Public Company Governance 83 % (10 out of 12 members of the Board) Experience as the Chief Executive Officer or equivalent management position of a large or growing business or non-profit organization. Experience as a board member of another publicly-traded company and familiarity with key corporate governance matters. Research & Development 75% (9 out of 12 members of the Board) Commercial 42% (5 out of 12 members of the Board) Experience or expertise in discovery biology/biochemistry or clinical development of pharmaceutical products, including familiarity with FDA regulations ethical practices. Understanding of financial, operational, regulatory and strategic issues related to the sales of pharmaceutical or biotechnology products. Financial Expertise 50% (7 out of 12 members of the Board) Strategic Initiatives 67% (8 out of 12 members of the Board) Experience or expertise in financial accounting and reporting or the financial management of a major organization. Experience driving strategic direction and growth of a biotechnology or pharmaceutical company, including expertise with acquisitions, licensing and other business development activities.
In addition, set forth below is biographical information for each person nominated and each person whose term of office as a director will continue afternominee for election to our Board at the Annual Meeting. Incorporated within each biography is a description of the specific qualifications, skills and experiences of each director or director nominee that led our Board to conclude that the individual should serve as a director as of the date of this Proxy Statement.
20192020 Proxy Statement 9
Class II Director Nominees
for Election for a Three-Year Term Expiring at the 2022 Annual Meeting
Charles Cohen, Ph.D. Independent Biotechnology Investor Former Chief Executive Officer, Perform Biologics, Inc. and On Target Therapeutics, LLC
| Director since 1995 Age 69 Key Qualifications and Expertise: Our Board concluded that Dr. Cohen should continue to serve as a director of Exelixis due to his training as a scientist, his knowledge and experience with respect to the biotechnology, pharmaceutical and healthcare industries, his broad leadership experience resulting from service on various boards and as a chief executive officer, and his knowledge and experience with respect to finance matters. Committee Assignments: • Audit Committee • Compensation Committee (chair) • Research & Development Committee Other Current Public Company Boards: • None | |
Charles Cohen, Ph.D., has been a director since November 1995. Dr. Cohen is an independent investor and from March 2015 to May 2019, he served as Chief Executive Officer and as a member of the board of directors of Perform Biologics, Inc., a privately held biotechnologystart-up company. Previously, Dr. Cohen served as Chief Executive Officer and as a member of the board of directors of On Target Therapeutics, LLC, a privately held biotechnologystart-up company, from June 2015 to June 2017. From May 2007 to December 2015, Dr. Cohen was a managing director of Synthesis Capital (formerly Advent Healthcare Ventures), a venture capital firm. From 2003 to 2007, Dr. Cohen was Vice President of Advent International, a global private equity firm. From 2000 to 2002, Dr. Cohen was the Chief Executive Officer of Cellzome AG, a post-genomics biotechnology company. Prior to that time, Dr. Cohenco-founded Creative BioMolecules, Inc., a biotechnology company, in 1982 and was one of its directors and its Chief Executive Officer from 1985 to 1995. Dr. Cohen served as a member of the board of directors of the following publicly held companies: Anadys Pharmaceuticals, Inc., a biopharmaceutical company dedicated to improving patient care by developing novel medicines for the treatment of hepatitis C, from 2000 to 2005; and Anesiva, Inc., a biopharmaceutical company focused on the development and commercialization of novel pharmaceutical products for pain management from 2005 to 2007. Dr. Cohen also served as the Chairman of the Supervisory Board of Cellzome AG, prior to its acquisition by GlaxoSmithKline in May 2012, and as the Chief Executive Officer of several other companies. Dr. Cohen received his B.A. from the State University of New York at Buffalo and his Ph.D. from New York University School of Medicine. |
Carl B. Feldbaum, Esq. President Emeritus, Biotechnology Innovation Organization
| Director since 2007
Age
Key Qualifications and Expertise: Our Board concluded that Mr. Feldbaum should continue to serve as a director of Exelixis due to his training as an attorney, his knowledge and experience with respect to the biotechnology, pharmaceutical and healthcare industries, his broad leadership experience resulting from service on various boards and as an executive officer and his knowledge and experience with policymaking, regulatory issues and other governmental matters.
Committee Assignments:
•
• Other Current Public Company Boards: • None | |
Carl B. Feldbaum, Esq., has been a director since February 2007. Mr. Feldbaum serves as a member emeritus of the board of directors of BIO Ventures for Global Health, anon-profit organization, and is president emeritus of the Biotechnology Innovation Organization (BIO), which |
10 Exelixis, Inc.
Proposal 1 | Director Nominees
Maria C. Freire, Ph.D. President and Executive Director, Foundation for the National Institutes of Health
| Director since 2018
Age
Key Qualifications and Expertise: Our Board concluded that Dr. Freire should continue to serve as a director of Exelixis due to her training as a scientist, her knowledge and experience with respect to medical research, the pharmaceutical industry and government healthcare policymaking, as well as her leadership experience in the public sector.
Committee Assignments:
• Nominating and Corporate Governance Committee
• Research & Development Committee
• Risk Committee Other Current Public Company Boards:
• Alexandria Real Estate Equities, serving on the Nominating & Corporate Governance Committee and the Science & Technology Committee (chair) | |
Maria C. Freire, Ph.D., has been a director since April 2018. Since November 2012, Dr. Freire has served as President and Executive Director and as a member of the board of directors of the Foundation for the National Institutes of Health. From March 2008 to November 2012, she served as President and as a member of the board of directors of the Albert and Mary Lasker Foundation. Prior to joining the Lasker Foundation, Dr. Freire served as President and Chief Executive Officer of the Global Alliance for TB Drug Development from 2001 to 2008 and Director of the Office of Technology Transfer at the National Institutes of Health from 1995 to 2001. Dr. Freire has served on the board of directors of Alexandria Real Estate Equities, Inc. a |
10 Exelixis, Inc.
Proposal 1 | Class II Director Nominees
Alan M. Garber, M.D., Ph.D. Provost of Harvard University
| Director since 2005
Age
Key Qualifications and Expertise: Our Board concluded that Dr. Garber should continue to serve as a director of Exelixis due to his training as a physician and economist, his knowledge and experience with respect to the life sciences, healthcare and pharmaceutical industries, and his knowledge and experience with policymaking, regulatory issues and other governmental matters.
Committee Assignments:
• Nominating and Corporate Governance Committee (chair)
• Research & Development Committee
Other Current Public Company Boards:
• Vertex Pharmaceuticals Incorporated, serving on the Audit & Finance Committee and the Scientific & Technology Committee | |
Alan M. Garber, M.D., Ph.D., has been a director since January 2005. He became Provost of Harvard University, Mallinckrodt Professor of Health Care Policy at Harvard Medical School, and a Professor in the Harvard Kennedy School of Government and in the Department of Economics at Harvard in September 2011. Before moving to Harvard, from 1998 until August 2011, he was the Henry J. Kaiser Jr. Professor, a Professor of Medicine, and a Professor (by courtesy) of Economics, Health Research and Policy, and of Economics in the Graduate School of Business at Stanford University. Dr. Garber also served as the Director of the Center for Primary Care and Outcomes Research and the Center for Health Policy at Stanford. During his tenure at Stanford University, Dr. Garber also served as a Senior Fellow at the Freeman Spogli Institute for International Studies and as a staff physician at the VA Palo Alto Health Care System. Dr. Garber has served as a member of the board of directors of Vertex Pharmaceuticals Incorporated, a |
2020 Proxy Statement 11
Vincent T. Marchesi, M.D., Ph.D. Professor of Pathology and Cell Biology, Yale University
| Director since 2001
Age
Key Qualifications and Expertise: Our Board concluded that Dr. Marchesi should continue to serve as a director of Exelixis due to his training as a physician and scientist and his research and experience in the fields of healthcare and life sciences, with a particular focus on biotechnology.
Committee Assignments:
• Compensation Committee
• Research & Development Committee Other Current Public Company Boards: • None | |
Vincent T. Marchesi, M.D., Ph.D., has been a director since May 2001. Since 1973, Dr. Marchesi has been a Professor of Pathology and Cell Biology at Yale University and, since 1991, the Director of the Boyer Center for Molecular Medicine at Yale University. In 1982, Dr. Marchesico-founded Molecular Diagnostics, Inc., a diagnostic development company. Dr. Marchesi was formerly Chair of Pathology at theYale-New Haven Hospital. Dr. Marchesi holds an M.D. from Yale University and a Ph.D. from Oxford University, and is a member of the National Academy of Sciences and the Institute of Medicine.
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2019 Proxy Statement 11
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH NAMED NOMINEE.
Class III Directors
Continuing in Office Until the 2020 Annual Meeting
President and Chief Executive Officer, Exelixis, Inc. | Director since 2010
Age
Key Qualifications and Expertise: Our Board concluded that Dr. Morrissey should continue to serve as a director of Exelixis due to his leadership role as the President and Chief Executive Officer of Exelixis. Beyond his role as Exelixis’ principal executive officer, the Board also considered Dr. Morrissey’s extensive qualifications, including his training as a scientist, his significant knowledge and experience with respect to the biotechnology, healthcare and pharmaceutical industries, comprehensive leadership background resulting from service as an executive in the biotechnology industry, and his ability to bring historic knowledge and continuity to the Board.
Committee Assignments:
• None Other Current Public Company Boards: • None | |
Michael M. Morrissey, Ph.D., has served as a director and as Exelixis’ President and Chief Executive Officer since July 2010. Dr. Morrissey has held positions of increasing responsibility at Exelixis since he joined the company in February 2000, including serving as President of Research and Development from January 2007 until July 2010. From 1991 to 2000, Dr. Morrissey held several positions at Berlex Biosciences, last holding the position of Vice President, Discovery Research. Earlier in his career, Dr. Morrissey served as a Senior Scientist and Project Team Leader in Medicinal Chemistry at CIBA-Geigy Corporation. He is the author of numerous scientific publications in medicinal chemistry and drug discovery and an inventor on 70 issued U.S. patents and 25 additional published U.S. patent applications. Dr. Morrissey holds a B.S. (Honors) in Chemistry from the University of Wisconsin and a Ph.D. in Chemistry from Harvard University.
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12 Exelixis, Inc.
Proposal 1 | Class III DirectorsDirector Nominees
Stelios Papadopoulos, Ph.D. Co-Founder and
| Director since 1994
Age
Key Qualifications and Expertise: Our Board concluded that Dr. Papadopoulos should continue to serve as a director of Exelixis due to his training as a scientist, his knowledge and experience with respect to the biotechnology, healthcare and pharmaceutical industries, his broad leadership experience resulting from extensive service on various boards, his knowledge and experience with respect to finance matters, and his ability to bring historic knowledge and continuity to the Board.
Committee Assignments:
• Audit Committee
• Research & Development Committee
Other Current Public Company Boards:
• Biogen Inc.
• Regulus Therapeutics, Inc. | |
Stelios Papadopoulos, Ph.D., aco-founder of Exelixis, has been a director since December 1994 and the |
George Chief
| Director since
Age
Key Qualifications and Expertise: Our Board concluded that Dr.
Committee Assignments:
• Research & Development Committee (chair) • Risk Committee
Other Current Public Company Boards:
• | |
George |
2020 Proxy Statement 13
Julie Anne Smith President and Chief Executive Officer, Escape Bio, Inc. | Director since 2016 Age 49 Key Qualifications and Expertise: Our Board concluded that Ms. Smith should continue to serve as a director of Exelixis due to her knowledge and experience with respect to biotechnology, healthcare and pharmaceutical industries and her broad leadership experience resulting from service as an executive in the pharmaceutical industry. Committee Assignments: • Audit Committee • Compensation Committee Other Current Public Company Boards: • None | |
Julie Anne Smith has been a director since September 2016. Since August 2018, Ms. Smith has served as President and Chief Executive Officer and as a member of the board of directors of |
2019 Proxy Statement 13
Lance Willsey, M.D. Founding Partner, DCF Capital
| Director since 1997
Age
Key Qualifications and Expertise: Our Board concluded that Dr. Willsey should continue to serve as a director of Exelixis due to his skill as a physician, his knowledge and experience with respect to the life sciences and healthcare industries, and his knowledge and experience with respect to finance matters.
Committee Assignments:
• Compensation Committee
• Research & Development Committee Other Current Public Company Boards: • None | |
Lance Willsey, M.D., has been a director since April 1997. Dr. Willsey was a founding partner of DCF Capital, a hedge fund focused on investing in the life sciences, from July 1998 to March 2002, and currently is a consultant to institutional investors in the field of oncology. Since 2000, Dr. Willsey has served on the Visiting Committee of the Department of Genitourinary Oncology at the Dana-Farber Cancer Institute at Harvard Medical School. From July 1997 to July 1998, Dr. Willsey served on the Staff Department of Urologic Oncology at the Dana-Farber Cancer Institute. From July 1996 to July 1997, Dr. Willsey served on the Staff Department of Urology at Massachusetts General Hospital at Harvard University School of Medicine, where he was a urology resident from July 1992 to July 1996. From 2000 to 2010, Dr. Willsey served a member of the board of directors of Exact Sciences Corporation, a |
Class I Directors
Continuing in Office Until the 2021 Annual Meeting
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14 Exelixis, Inc.
Proposal 1 | Class III DirectorsDirector Nominees
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Jack L. Wyszomierski Former Executive Vice President and Chief Financial Officer, VWR International, LLC
| Director since 2004
Age
Key Qualifications and Expertise: Our Board concluded that Mr. Wyszomierski should continue to serve as a director of Exelixis due to his extensive financial reporting, accounting and finance experience, as well as his experience in the healthcare and life sciences industries. These qualities have also formed the basis for the Board’s decision to appoint Mr. Wyszomierski as a member and
Committee Assignments:
• Audit Committee (chair)
• Nominating and Corporate Governance Committee
Other Current Public Company Boards:
• XOMA Corporation, serving on the Audit Committee, the Compensation Committee (chair) and the Nominating and Corporate Governance Committee
• Athersys, Inc., serving on the Audit Committee, the Compensation Committee and the Nominations Committee
• SiteOne Landscape Supply, Inc., serving on the Audit Committee and the Nominating & Corporate Governance Committee (chair) | |
Jack L. Wyszomierski, has been a director since February 2004. From June 2004 to June 2009, Mr. Wyszomierski served as the Executive Vice President and Chief Financial Officer of VWR International, LLC, a supplier of laboratory supplies, equipment and supply chain solutions to the global research laboratory industry. From 1982 to 2003, Mr. Wyszomierski held positions of increasing responsibility within the finance group at Schering-Plough Corporation, a health care company, culminating with his appointment as Executive Vice President and Chief Financial Officer in 1996. Prior to joining Schering-Plough, he was responsible for capitalization planning at Joy Manufacturing Company, a producer of mining equipment, and was a management consultant at Data Resources, Inc. Mr. Wyszomierski has served: as a member of the board of directors of XOMA Corporation, a |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH NAMED NOMINEE.
2020 Proxy Statement 15
Please note that information found on, or accessible through, our website is not a part of, and is not incorporated into, this Proxy Statement.
Corporate Governance Guidelines
We have adopted written Corporate Governance Guidelines, which may be viewed atwww.exelixis.com under the caption “Investors & Media—Corporate Governance—Corporate Governance Documents.” This document includes guidelines for determiningcovers, among other topics, director independence, board composition, structure and qualifications for directors.functioning, director selection criteria, committees of the board, board and board committee evaluations, overboarding guidelines and our majority voting policy. Our Board regularly reviews, and modifies from time to time, our Corporate Governance Guidelines, Board committee charters and Board practices. Please note that information found on, or accessible through, our website is not a part of, and is not incorporated into, this Proxy Statement.
2019 Proxy Statement 15
Corporate Code of Conduct
We have adopted a Corporate Code of Conduct, which functions as our Code of Ethics under the SEC rules thatand applies to all directors, officers and employees, including the principal executive officer and principal financial/accounting officer. The Corporate Code of Conduct is posted on our website atwww.exelixis.com under the caption “Investors & Media—Corporate Governance—Corporate Governance Documents.” We intend to satisfy the disclosure requirement under Item 5.05 ofForm 8-K regarding an amendment to, or waiver from, a provision of this Corporate Code of Conduct by posting such information on our website, at the address and location specified above and, to the extent required by the listing standards of the Nasdaq Stock Market, by filing a Current Report on Form8-K with the SEC, disclosing such information.
Our Corporate Code of Conduct reflects our corporate values and describes how our officers, directors, employees and contractors are expected to conduct themselves when representing Exelixis. It also underscores our commitment to comply with laws that regulate our business activities as a biotechnology company. Our employees receive regular training on our Corporate Code of Conduct, which includes consequences of taking actions that would constitute a violation of our Corporate Code of Conduct.
Included in our Corporate Code of Conduct are procedures for employees to report potential violations to our Ethics Committee, which is chaired by our Chief Executive Officer and includes other members of our senior management team. To ensure our employees feel comfortable raising good faith questions or concerns with respect to our Corporate Code of Conduct or our other policies, these reports can be made confidentially (or anonymously) via our Ethics Hotline, and we maintain a strict policy against any retaliation or discrimination towards an employee who makes such a report. The Board, through the Audit Committee, regularly receives reports of disclosures made through the Ethics Hotline, as well as any concerns raised to the Ethics Committee or otherwise submitted through our internal compliance reporting system. The Audit Committee will be responsible for the oversight of such matters, or as appropriate, will assign such oversight to another committee of the Board.
Director Independence
We have adopted standards for director independence pursuant to Nasdaq listing standards, which require that a majority of the members of a listed company’s board of directors qualify as “independent,” as affirmatively determined by the board of directors. An “independent director” means a person other than an officer or employee of Exelixis or one of our subsidiaries, or another individual having a relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Consistent with these considerations, after review of all relevant transactions or relationships between each director, or any of his or her family members, and Exelixis, its senior management andor its independent registered public accounting firm, the Board has affirmatively determined that Drs. Cohen, Freire, Garber, Marchesi, Papadopoulos, Poste, Scangos and Willsey, Messrs. Wyszomierski and Feldbaum and Ms. Smith, who are eleven of the twelve members of the Board, represent a majority of the Board and are independent under applicable SEC rules and the Nasdaq listing standards. Dr. Morrissey, our President and Chief Executive Officer, is not independent by virtue of his employment with Exelixis. In addition, the Board has also determined that: (i) all directors who serve on the Audit, Compensation and Nominating and Corporate Governance Committees are independent under applicable Nasdaq listing standards; and (ii) all members of the Audit Committee meet the independence requirements under the Exchange Act.
Board Leadership Structure
The Board does not have a formal policy on whether the role of chairmanChair and chief executive officerChief Executive Officer should be separate or combined. Our Corporate Governance Guidelines provide that the Board will select its chairmanChair and the chief executive officer Chief Executive Officer
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in the manner it considers to be in the best interests of our company. Currently, we have an independent chairmanChair of the boardBoard separate from the chief executive officer.Chief Executive Officer. The Board believes this bifurcated structure provides for sufficient independent oversight of management and strong Board leadership, while allowing for the effective management of company affairs. The Board believes that if the positions of chairmanChair and chief executive officerChief Executive Officer are combined, the appointment of a lead independent director would be necessary for effective governance. Accordingly, our Corporate Governance Guidelines provide that if the roles are combined, the independent directors of the Board must appoint a lead independent director. Our Corporate Governance Guidelines further provide that the lead independent director would: (i) preside at all meetings of the Board at which the chairmanChair is not present, including executive sessions of the independent directors; (ii) have the authority to call meetings of the independent directors; (iii) serve as the principal liaison on Board-wide issues between the independent directors and the chairman;Chair; and (iv) have such other authority and duties as the Board may from time to time determine. The Board believes that this flexible approach provides it with the ability to establish a leadership structure that, based upon its judgment, that is in the best interests of our company and those of our stockholders at any given time.
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Role of the Board in Risk Oversight
Management is responsible for identifyingassessing, managing and mitigating the various risks facingassociated with our company,business and operational activities, including, without limitation, strategic, operational, financial, regulatory and cyber-security risks that may exist from time to time. Management has implemented appropriate risk management structures, policies and procedures, and manages our risk exposure on aday-to-day basis. WhileIn accordance with our Corporate Governance Guidelines, the Board, does not have a formal risk oversight policy, the Board does, as a wholeboth directly and through its various committees oversee(including the Risk Committee formed in December 2019), oversees the proper functioning of our internal risk management processes. In itstheir specific risk oversight role,roles, the Board evaluatesand the Risk Committee evaluate whether management has reasonable controls in place to address material risks currently facing our company and those we may face in the future. The Board, the Risk Committee and itsother committees meet at regularly scheduled and special meetings throughout the year at which management reports to the Board concerning the results of its risk management activities, as well as external changes that may change the levels of business risk to which we are exposed.
The Board delegates certain of its risk oversight responsibilities to its various committees as follows:
›› | OurRisk Committee assists the Board with oversight of our internal risk management framework, policies, guidelines and infrastructure, and, if called for, its administration of government and other investigations and material litigation matters. The Risk Committee receives reports from management’s Ethics Committee and also oversees management in the dispatch of its responsibility to administer our various compliance programs, including, but not limited to, data privacy (including cyber-security), drug safety, healthcare compliance and quality management. Finally, the Risk Committee oversees our business and operational risks that are not specifically allocated to the Board or another committee of the Board. The Risk Committee provides periodic reports to the full Board. |
›› | OurAudit Committee oversees the management of risks |
›› | OurCompensation Committee |
›› | OurNominating and Corporate Governance Committee oversees |
Also,
›› | OurResearch & Development Committee evaluates risks associated with the scientific discovery process, preclinical and clinical development programs, to the extent not within the purview of the Risk Committee’s oversight of our compliance programs. |
Senior management presents the full Board is presented with frequent business updates during monthly teleconferences, among our Board and senior management. Following consideration of the information provided by management,at which time the Board provides management with feedback, makes recommendations and, as needed, issues directives to management to address our risk exposure.
2020 Proxy Statement 17
Prohibitions on Derivative, Hedging, Monetization and Other Transactions
We maintain an insider trading policy that applies to directors and employees, including our executive officers, which prohibits certain transactions in our stock, including short sales, puts, calls or other transactions involving derivative securities, hedging or monetization transactions, purchases of Exelixis securities on margin or borrowing against an account in which Exelixis securities are held, or, subject to the following exception, pledging Exelixis stock as collateral for a loan. There are no exceptions to these prohibitions, other than the pledging of Exelixis stock as collateral for a loan, which wouldrequires prior approval of Exelixis’ Securities Compliance Committee (comprising senior members of our legal and finance teams). Before granting the exception, the Securities Compliance Committee will require that such director or employee to establish his or her financial capacity to repay the loan without resort to the pledged securities, and obtains prior approval from management.the pledged securities may not be sold without the advance written consent of the Securities Compliance Committee.
Corporate Responsibility and Sustainability
Exelixis’ mission is to help cancer patients recover stronger and live longer. As we strive to extend and improve cancer patients’ lives, we recognize the need also to contribute positively to society as a whole. To that end, Exelixis expects that its employees will commit to the highest standards of ethical behavior and maintain values and principles that reflect both global awareness and sustainability. This entails integrating environmental, social and governance (ESG) considerations directly into our research and development projects, business operations and investment processes as we strive to create sustained value for all our stakeholders by translating science into impact for patients and all those we serve.
We seek to achieve these commitments through a number of initiatives, including those listed below:
Our Governance and Compliance
At Exelixis, we recognize that good governance, corporate responsibility and accountability are critical to our quest to develop medicines in our ongoing mission to treat and defeat cancer. We embed strong compliance practices and oversight into our scientific and business activities with the goal that these business activities be conducted in a legal and ethical manner and in the best interests of all Exelixis’ stakeholders, in particular, the patients we serve.
Program Highlights:
• | Commitment to high standards and ethics across all departments and company stakeholders, as reflected by our internal policies, including ourPolicy for Recoupment of Variable Compensation (Clawback Policy) |
Access to Health
At Exelixis, we aim to be exceptional in what we do and how we lead, excelling for patients by going the extra mile to care for them and exceeding together as a business and contributor to the scientific community. We dedicate substantial financial resources and work tirelessly in our efforts to offer patients high-quality cancer treatments. Moreover, once our products are available, we have a firm, voluntary commitment that no patient prescribed an Exelixis medicine will go without it due to lack of insurance or inability to pay.
Program Highlights:
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Taking Responsibility for Our Products
The well-being of patients is one of our top priorities. Our Corporate Code of Conduct holds every Exelixis employee accountable to safe and ethical standards of work and behavior and is designed to ensure our products are developed in compliance with Good Practice quality guidelines. As a core tenet of Exelixis values, product responsibility is monitored by teams with a direct chain of reporting to our Board of Directors. This process is designed to allow us to escalate and address issues quickly and holistically.
Program Highlights:
Environmental
Exelixis is committed to conducting business in a way that respects our environment and the Earth’s changing climate, and that is also consistent with providing a high state of wellness for our patients, employees and all our stakeholders. To date, we have incorporated environmentally sustainable practices into certain of our facilities and operations, and we plan to invest in more of these practices as we continue to grow.
Program Highlights:
Human Capital Management
Our mission to help cancer patients recover stronger and live longer depends on the talent and dedication of our employees. Therefore, we invest in building their collective strength as a team by fostering growth opportunities for individuals. At Exelixis, we value being exceptional in what we do and how we lead, excelling for patients by going the extra mile to care for them and exceeding together as a business and contributor to the scientific community.
Program Highlights:
Further information about our ESG programs and sustainability efforts is available on our website atwww.exelixis.com under the caption “Impact—Environmental, Social and Governance.”
2020 Proxy Statement 19
Stockholder Communications with the Board
Security holdersThe Board welcomes communications from Exelixis’ stockholders. Stockholders may send communications tocommunicate with the Board by mail atsending a written communication to “Exelixis, Inc., Board of Directors c/o Corporate Secretary, 1851 Harbor Bay Parkway, Alameda, California 94502,94502.” Stockholders may also communicate with the Board by facsimile at(650) 837-7951 or bye-mail at info@exelixis.com, with each of the foregoing sent with “Attn: Board of Directors.Directors” in the “Subject” line.
Each communication must set forth the name and address of the stockholder as it appears in the Exelixis’ records (and, if the stock is held by a nominee, the name and address of the beneficial owner of the stock). After confirming the stock ownership of the author of the communication, the Corporate Secretary will review and evaluate the communication, and shall have the authority to and will screen out communications from stockholders that are not directly related to the duties and responsibilities of the Board. The Corporate Secretary may also disregard duplicative communications. If deemed directly related to the duties and responsibilities of the Board, the Corporate Secretary will forward the communication, depending on the subject matter, to the Chair of the Nominating and Corporate Governance Committee, the Chair of the Audit Committee, the Chair of the Board, the independent directors, or the full Board, as deemed appropriate.
Stockholder Outreach
We maintain a robust program for stockholder outreach to elicit a better understanding of the concerns and perspectives of our stockholder base, and we have implemented the feedback received from our stockholders into our executive compensation program, governance practices and other areas of our business. For additional details about our stockholder outreach efforts during fiscal 2019, please see “Compensation Discussion and Analysis—How We Determine Executive Compensation—Stockholder Outreach.”
Stock Ownership Guidelines forNon-Employee Directors
In February 2018, the Board adoptedWe maintain Stock Ownership Guidelines applicable tofor our directors and Named Executive Officers (as defined below) to further align their financial interests with those of our stockholders, as well as to promote sound corporate governance. For ournon-employee directors, our Stock Ownership Guidelines provide an ownership target equal to the lesser of 3,000 shares or a value equivalent to three times the annual cash Board retainer. Under the guidelines, we expect retainer or 3,000 shares. Allnon-employee directors are expected to achieve their stock ownership targets within five years of becoming subject to these guidelines. The policy includes procedures for granting exemptions in the case of severe financial hardship. Ownership targets for our Named Executive Officers (including those serving on our Board) are described below under “Compensation Discussion and Analysis—Other Compensation Information—Stock Ownership Guidelines.Guidelines.”
2019 Proxy Statement 17
In determining ownership levels for eachnon-employee director under our Stock Ownership Guidelines, credit is provided for shares held outright (including shares owned through trusts, the Amended and Restated Exelixis, Inc. 401(k) Plan (401(k) Plan), or by a spouse), as well as 50% of the number of vested, but unexercised, stock options. No credit is provided for RSUs (as defined below) until they vest. The values for all shares determined to be held by ournon-employee directors and Named Executive Officers are based on the200-day average stock price as of the measurement date. As of February 12, 2019,10, 2020, all of ournon-employee directors serving on the Board as of such date had met the required ownership targets.
The Board held fiveseven meetings and acted by unanimous written consent one time during 2018,2019, and all of our directors other than Dr. Scangos attended at least 75% of the total meetings of the Board and of the committees on which they served. Dr. Scangos’ absences were due principally to scheduling conflicts with certain activities and meetings in connection with the initial public offering of Vir Biotechnology, Inc. (Vir), for which Dr. Scangos serves as Chief Executive Officer and as a member of the Vir Board of Directors. In February 2020, Dr. Scangos provided us with notice that he will retire from the Board at the end of his current term, which expires at the Annual Meeting. The independent directors met four times in regularly scheduled executive sessions.
During 2018,From January 2019 until December 2019, the Board had four standing committees: the Audit Committee; the Compensation Committee; the Nominating and Corporate Governance Committee; and the Research & Development Committee. On
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December 5, 2019, the Board established a Risk Committee to assist the Board in its oversight of management’s responsibility to assess, manage and mitigate risks associated with our business and operational activities. Committee membership in 20182019 was as follows:
Board Member | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | Research & Development | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | Research & Development | Risk Committee* | |||||||||
Charles Cohen, Ph.D. | Member | Chair | Member | Member | Chair | Member | ||||||||||||
Carl B. Feldbaum, Esq. | Member | Member | Member** | Member | Chair | |||||||||||||
Maria C. Freire, Ph.D.* | Member | Member | ||||||||||||||||
Maria C. Freire, Ph.D. | Member | Member | Member | |||||||||||||||
Alan M. Garber, M.D., Ph.D. | Chair | Member | Chair | Member | ||||||||||||||
Vincent T. Marchesi, M.D., Ph.D. | Member | Member | Member | Member | ||||||||||||||
Stelios Papadopoulos, Ph.D. | Member | Member | Member | Member | ||||||||||||||
George Poste, D.V.M., Ph.D., FRS | Member | Chair | ||||||||||||||||
George A. Scangos, Ph.D. | Member | |||||||||||||||||
Julie A. Smith** | Member | Member | ||||||||||||||||
George Poste, DVM, Ph.D., FRS | Member*** | Chair | Member | |||||||||||||||
George A. Scangos, Ph.D.^ | Member | Member | ||||||||||||||||
Julie A. Smith | Member | Member | ||||||||||||||||
Lance Willsey, M.D. | Member | Member | Member | Member | ||||||||||||||
Jack L. Wyszomierski | Chair*** | Member | Chair**** | Member | ||||||||||||||
Number of Meetings Held in Fiscal 2018 | 4 | 10 | 3 | 3 | ||||||||||||||
Number of Meetings Held in Fiscal 2019 | 5 | 9 | 2 | 3 | 0 |
* |
|
** | On |
*** | On December 5, 2019, Dr. Poste transitioned off of the Nominating and Corporate Governance |
**** | Designated by the Board as an “audit committee financial expert.” |
^ | Dr. Scangos is not standing forre-election at the Annual Meeting and will resign from the Board effective as of the Annual Meeting. |
Audit Committee
The Audit Committee ofassists the Board overseesin overseeing our corporate accounting and financial reporting process ensuresand ensuring the integrity of our financial statements and has been designated as the Qualified Legal Compliance Committee within the meaning of Rule 205.2(k) of Title 17, Chapter II of the Code of Federal Regulations.statements. The Audit Committee is composed entirely of independent directors and performs several functions, including:
• Evaluating the performance, qualifications, compensation and continued engagement of the independent registered public accounting firm, as well as resolving any disagreements between the independent registered public accounting firm and management | • Reviewing our tax strategy, the |
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• Reviewing, providing oversight of, and approving related person transactions | • Reviewing the financial statements for inclusion in our Annual Report on Form10-K and preparing the Audit Committee’s report for inclusion in our Proxy Statement or Annual Report onForm 10-K | ||
• Establishing procedures to receive and address complaints regarding accounting, internal accounting controls or auditing matters | • Reviewing the results of the annual audit and the results of our quarterly financial statement reviews with management and the independent registered public accounting firm | ||
• Overseeing our | • Serving as the Qualified Legal Compliance Committee within the meaning of Rule 205.2(k) of Title 17, Chapter II of the Code of Federal Regulations | ||
• Maintaining compliance with SEC and Nasdaq rules applicable to audit committees | |||
|
2020 Proxy Statement 21
The Board has determined that Mr. Wyszomierski is an “audit committee financial expert” as defined in applicable SEC rules.
The Audit Committee’s report is set forth in “Report“Report of the Audit Committee”Committee” below. The Audit Committee has a written charter, which is available on our website atwww.exelixis.com under the caption “Investors & Media—Corporate Governance—Committee Composition and Charters.”
Compensation Committee
The Compensation Committee ofassists the Board overseesin overseeing our compensation policies, plans and programs. The Compensation Committee is composed entirely of independent directors and performs several functions, including:
• Reviewing and determining the compensation to be paid to executive officers | • Reviewing our Compensation Discussion and Analysis and preparing the Compensation Committee’s report for inclusion in our Proxy Statement | |
• Addressing any conflict of interest with any compensation adviser engaged by management or the Compensation Committee | • Establishing general policies relating to compensation and benefits of employees, including executive officers | |
• Evaluating director compensation and recommending any changes to the Board for approval | • Administering the issuance of | |
• Assisting the Board in its oversight of our policies and strategies relating to our human capital management function. | • Assessing compensation policies and practices in order to determine whether they are reasonably likely to have a material adverse effect on us. |
The Compensation Committee’s report is set forth in “Compensation“Compensation Committee Report”Report” below. Information on the Compensation Committee’s processes and procedures for consideration of executive compensation are addressed in “Compensation“Compensation Discussion and Analysis”Analysis” below. For information regarding our processes and procedures for the consideration and determination of director compensation, please see “Compensation“Compensation of Directors”Directors” below. The Compensation Committee has a written charter, which is available on our website atwww.exelixis.com under the caption “Investors & Media—Corporate Governance—Committee Composition and Charters.” In accordance with its charter, the Compensation Committee also may delegate any of its authority or responsibility to the chairpersonChair of the Compensation of the Committee or to a subcommittee composed of one or more members of the Compensation Committee and/or other members of the Board and/or officers of Exelixis.
Compensation Consultants.The Compensation Committee retained Compensia, Inc. (Compensia), a national compensation consulting firm, as its external compensation consultant to assist the Compensation Committee in its duties related to executive andnon-employee director compensation.compensation from March 2019 until November 2019. Compensia did not perform any work for us other than the executive compensation andnon-employee director compensation consulting services provided to the Compensation Committee and
2019 Proxy Statement 19
reported directly to the Compensation Committee or through its chairperson.Chair. Fees paid to Compensia in 20182019 did not exceed $120,000. Beginning in November 2019, the Compensation Committee retained Radford, a compensation consulting firm serving technology and life sciences companies, to succeed Compensia as the Compensation Committee’s external compensation consultant with respect to future executive andnon-employee director compensation matters. In addition, at the direction of the Compensation Committee, management retained Radford, principally to provide benchmark and industry compensation data for executive and broad-based compensation analyses. In consideration for compensation related services provided during 2019 we paid Radford an aggregate of $18,176. Radford also provided our management with access to the Radford Global Life Sciences Survey, Radford Global Sales Survey and Radford U.S. Benefits Survey, for which we paid Radford an aggregate of $27,405 in 2019. Radford is an Aon Hewitt company and an affiliate of Aon Risk Services which provided insurance brokerage services to us during 2019 at a total cost of $205,000. See “Compensation“Compensation Discussion and Analysis”Analysis” for more information regarding the Compensation Committee’s engagement of Compensia.Compensia and Radford.
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Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee of the Board oversees all aspects of our corporate governance functions on behalf of the Board. The Nominating and Corporate Governance Committee is composed entirely of independent directors and performs several functions, including:
• Overseeing our governance practices, including reviewing and recommending to the Board for approval any changes to our corporate governance framework | • Ensuring effective communication between the Board, its committees and management, as well developing and administering policies and procedures for stockholders’ communications to the Board | |
• Conducting periodic assessments of the performance of the Board and its committees and compliance with SEC and Nasdaq requirements for independence and expertise | • Facilitating our CEO Succession Plan in the event our Chief Executive Officer is no longer able to serve in that position | |
• Identifying, reviewing and evaluating candidates to serve as directors and recommending qualified candidates to the Board | • Developing a set of Corporate Governance Guidelines, as well as administering our Corporate Code of Conduct | |
|
|
The Nominating and Corporate Governance Committee has a written charter, which is available on our website atwww.exelixis.com under the caption “Investors & Media—Corporate Governance—Committee Composition and Charters.”
Director Qualifications; Diversity. The Nominating and Corporate Governance Committee does not have a fixed set of minimum qualifications for candidates for membership on the Board. Instead, in considering candidates for directorship, the Nominating and Corporate Governance Committee will generally consider all relevant factors, including the candidate’s applicable expertise and demonstrated excellence in his or her field, the usefulness of such expertise to us, the availability of the candidate to devote sufficient time and attention to the affairs of Exelixis, the existence of any relationship that would interfere with the exercise of the candidate’s independent judgment, and the candidate’s demonstrated character and judgment. In addition, the Board believes that its members should reflect a diversity of viewpoints, background experience and other characteristics such as gender and race. Accordingly, when evaluating candidates for nomination as new directors, the Nominating and Corporate Governance Committee will seek to consider (and will ask any search firm that it engages to provide) a set of candidates who would contribute to Board diversity, including both women and individuals from communities of color who meet the relevant business and search criteria. In the review process, the Nominating and Corporate Governance Committee evaluates prospective candidates for directorship in the context of the existing membership of the Board (including the qualities and skills of the existing directors), our operating requirements and the long-term interests of our stockholders. While the Board does not have a formal policy with regard to the consideration of diversity in identifying director nominees, the Nominating and Corporate Governance Committee believes that the factors considered above enable it to identify director candidates that possess key industry knowledge as well as a variety of different professional and personal backgrounds, attributes (including, but not limited to, gender and national origin), experiences, skills and expertise such that the Board, as a group, can best fulfill its responsibilities to our stockholders.
The Nominating and Corporate Governance Committee regularly evaluates the needs of the Board with respect to skills and experiences that may be filled by a new director candidate. During the first quarter of 2018, after consultations with certain of our larger institutional stockholders and utilizing various internal resources, the Nominating and Corporate Governance Committee identified Dr. Maria Freire as a candidate for membership on the Board due to her training as a scientist, her knowledge and experience with respect to medical research, the pharmaceutical industry and government healthcare policymaking, as well as her leadership experience in the public sector; Dr. Freire was the elected to the Board in April 2018. In addition, the Nominating and Corporate Governance Committee is authorized to access external resources as it deems necessary or appropriate to fulfill its defined responsibilities, including engagement of executive search firms to help identify director candidates.
Director Nominations.The Nominating and Corporate Governance Committee considers and assesses all candidates recommended by our directors, officers and stockholders. Evaluations of candidates generally involve a review of background materials, internal discussions and interviews with selected candidates as appropriate. If, after its review, the Nominating and
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Corporate Governance Committee supports a candidate, it would recommend the candidate for consideration by the full Board. The Nominating and Corporate Governance Committee considers stockholder recommendations for directors using the same criteria as potential nominees recommended by the members of the Nominating and Corporate Governance Committee or others. The Nominating and Corporate Governance Committee has not received any recommended nominations from any stockholder holding 5% or more of our common stock in connection with the Annual Meeting.
Stockholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board may do so by delivering a written recommendation to the Nominating and Corporate Governance Committee within the timeframe specified in our Bylaws that is applicable to matters
2020 Proxy Statement 23
to be brought before an Annual Meetingannual meeting of Stockholdersstockholders as set forth under “Questions“Questions and Answers About These Proxy Materials and Voting”Voting” above. Such communications should be sent to the following address: Exelixis, Inc., 1851 Harbor Bay Parkway, Alameda, California 94502, Attn: Nominating and Corporate Governance Committee of the Board. Submissions must include (a) the name, age, business address and residence address of such person, (b) the principal occupation or employment of such person, (c) the class and number of shares of the corporation which are beneficially owned by such person, (d) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, (e) a statement whether such person, if elected, intends to comply with the corporation’sour Corporate Governance Guidelines, including with respect to matters relating to the election of directors, and (f) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including without limitation such person’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected).
Performance Assessments. The Nominating and Corporate Governance Committee performs periodic assessments of the performance of the Board and its committees. As part of this process, each director, under the direction of the Nominating and Corporate Governance Committee, completes an annual assessment questionnaire for the full Board and each committee on which such director serves to evaluate, on anonymous basis, the overall performance of the Board and its committees and identify areas for improvement. The factors considered in the annual assessment questionnaires include, but are not limited to: the appropriateness of the size of the Board; whether the directors possess the skills and expertise appropriate for the company; the effectiveness of the Board’s selection criteria for new director candidates (including with respect to the Board’s diversity policy); the overall effectiveness of and efficient use of time at Board and committee meetings; and the process for management to report important information to committees or the full Board, as appropriate. Directors are also given the opportunity to provide open-ended responses with respect to ways to improve Board and/or committee performance. In addition, the Nominating and Corporate Governance Committee and the full Board seek regular input from management and external advisors as part of the ongoing performance assessment process.
Research & Development Committee
The Research & Development Committee ofassists the Board overseesin overseeing various scientific matters related to our drug discovery and preclinical and clinical development programs. The Research & Development Committee is composed entirely of independent directors and performs several functions, including:
• Overseeing our clinical development program and internal drug discovery activities | • Evaluating and discussing trends in the oncology treatment landscape and potential effects on our pipeline strategy and other business needs | |
• Reviewing the progress of preclinical assets that we havein-licensed or acquired and evaluating potential future business development opportunities | • Advising the Board on other matters of scientific importance as the Board, in consultation with management, may designate from time to time |
The Risk Committee of the Board assists the Board in overseeing management’s responsibility to assess, manage and mitigate risks associated with our business and operational activities. The Risk Committee is composed entirely of independent directors and performs several functions, including:
• Reviewing our overall risk management framework and infrastructure designed to identify, assess, manage and mitigate our material risks | • Overseeing management’s administration of our various compliance programs, including, but not limited to, those relating to data privacy (including cyber-security), drug safety, healthcare compliance and quality management | |
• Reviewing the policies, guidelines and practices aimed at the management of business and operational risks | • Overseeing management’s administration of government and other investigations and material litigation matters |
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• Overseeing management’s identification, assessment and management of our business and operational risks not specifically allocated to the Board or another committee of the Board, and obtaining periodic reports from our Ethics Committee | • Evaluating and discussing trends in the relevant areas of risk management and advising the Board on best practices with respect to risk management strategy and implementation |
The Board does not have a formal policy with respect to the attendance of its members at Annual Meetings of Stockholders. Dr. Morrissey was the only member of the Board in attendance at the 20182019 Annual Meeting of Stockholders.
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Overview of Director Compensation
The compensation program for ournon-employee directors is intended to be competitive and fair so that we can attract optimal talent to our Board and recognize the time and effort required of a director given the size and complexity of our operations. In accordance with its charter, our Compensation Committee is responsible for recommending to the Board for approval the annual compensation for ournon-employee directors and acts on behalf of the Board in discharging the Board’s responsibilities with respect to overseeing our compensation policies fornon-employee directors. To assist with the Compensation Committee’s and the Board’s review, Compensia, our external compensation consultant prepares a comprehensive annual assessment of ournon-employee director compensation program. The assessment includes benchmarking director compensation against the same 20182019 peer group used for executive compensation purposes, an update in recent trends in director compensation and a review of related corporate governance best practices.
Recent Changes to Director Compensation
In February 2018,2019, the Board approved changes to thenon-employee director compensation program following consideration of market data prepared by the Compensation Committee’s independent compensation adviser, Compensia, and the recommendation of the Compensation Committee. The primary goal of these changes was to balance our ability to attract and retain the highest quality directors while aligning the program with the interests of our stockholders. As such, the Board sought to approximatealign the 50th percentile of total compensation for ournon-employee directors with those in the 50th60th percentile of our 2018same 2019 peer group.group used for executive compensation purposes. The Board also sought to ensure that the pay structure appropriately reflected the scope of responsibilities and level of contribution provided by ournon-employee directors. Among the changes to the program in 20182019 were the following:
›› | For the cash component of ournon-employee director compensation program, |
›› | For the equity component of ournon-employee director compensation program, the dollar value of the |
These two changes were effective beginning with the first quarter of fiscal 2018.2019.
In addition, at our 2017 Annual Meeting of Stockholders, our stockholders approved a limit on the amount ofnon-employee director compensation under our 2017 Equity Incentive Plan (2017 Plan).Plan. The aggregate value of all compensation granted or paid to any individual solely for service as a non-employee director of the Board of Directors may not exceed (a) $750,000 in total value with respect to any calendar year may not exceed $750,000after a non-employee director is first appointed or elected to the Board or (b) $1,500,000 in total value with respect to the calendar year during which a non-employee director is first appointed or elected to the Board, in each case calculating the value of any stock awards based on the grant date fair value of such awards for financial reporting purposes), or, with respect to the calendar year in which a non-employee director is first appointed or elected to the Board, $1,500,000.purposes. This limit was not intended to serve as an increase in the annual amount ofnon-employee director compensation; rather, this action was approved for the purpose of limiting the amount of compensation the Board can approve fornon-employee directors each year.
Cash Compensation Arrangements
Eachnon-employee director receives an annual cash retainer for his or her service on the Board, as well as an additional annual cash retainer if he or she serves as the ChairmanChair of the Board, on a committee or as the chair of a committee. In addition, ournon-employee directors receive Meeting Feesmeeting fees for attendance at each Board meeting or at each of their respective committee meetings in excess of thepre-determined number of meetings for the fiscal year, which is included in the full description of the 20182019 cash compensation arrangements for ournon-employee directors in the table below.
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Compensation of Directors
The table below provides information regarding the cash compensation arrangements for ournon-employee directors for 2018.2019. Dr. Morrissey receives no compensation in his capacity as a member of the Board.
Service | Fee Type | Cash Compensation ($) | ||||||
Board | Retainer Fee | 50,000 | ||||||
Additional Chair Retainer Fee | 31,000 | |||||||
Meeting Fee (1)(2) | 2,500 | |||||||
Audit Committee | Retainer Fee | 12,000 | ||||||
Additional Chair Retainer Fee | 13,000 | |||||||
Meeting Fee (1)(3) | 1,000 | |||||||
Compensation Committee | Retainer Fee | 10,000 | ||||||
Additional Chair Retainer Fee | 10,000 | |||||||
Meeting Fee (1)(3) | 1,000 | |||||||
Nominating & Corporate Governance Committee | Retainer Fee | 5,000 | ||||||
Additional Chair Retainer Fee | 10,000 | |||||||
Meeting Fee (1)(4) | 1,000 | |||||||
Research & Development Committee | Retainer Fee | 5,000 | ||||||
Additional Chair Retainer Fee | 10,000 | |||||||
Meeting Fee (1)(4) | 1,000 |
(1) | Meeting for which minutes are generated count toward the meeting threshold to determine when Meeting Fees are to be paid. |
(2) | Meeting Fee paid for all meetings in excess of eight meetings. |
(3) | Meeting Fee paid for all meetings in excess of seven meetings. |
(4) | Meeting Fee paid for all meetings in excess of four meetings. |
Equity Compensation Arrangements
Ournon-employee directors are also eligible to receive equity as part of their Board service, including an initial award upon joining the Board and an annual award on the day following each Annual Meetingannual meeting of Stockholders.stockholders. Grants to ournon-employee directors are made under our 2017 Plan, pursuant to theNon-Employee Director Equity Compensation Policy, as amended (2017 Directors’ Policy), as adopted by the Board. To address changes in the trading price of our common stock, we utilize a value-based approach for determining the number of shares subject tonon-employee director equity awards. During 2018, underUnder the terms of the 2017 Directors’ Policy, the aggregate value of eachone-time initial award was approximatelyis $680,000, and the aggregate value of each annual award was approximately $340,000.is $400,000. The value of each initial award and annual award is then divided approximately evenly between a nonstatutory stock option and a restricted stock unit (RSU) award. However, eachnon-employee director may instead elect to receive the full value of his or her annual award in the form of a nonstatutory stock option.options.
Under the 2017 Directors’ Policy, the total number of options and RSUs granted as part of each initial award and annual award is determined using a formula based upon the Black-Scholes Merton option pricing model and the average of the daily closing sale prices of our common stock for the trading days during the30-day calendar period ending on (and including) the last calendar day immediately prior to the relevant grant date .date. The value of each award, as determined in accordance with the 2017 Directors’ Policy, may be greater or lesser than the grant date fair value computed for financial reporting purposes and reflected in the “Director Compensation Table” below. This is a result of the different calculation employed to determine the grant date fair value, which uses a formula based upon the Black-Scholes Merton option pricing model and the closing sale price of our common stock on the grant date.
Options granted under the 2017 Plan in accordance with the 2017 Directors’ Policy are not incentive stock options under the Internal Revenue Code of 1986, as amended (the Code). The exercise price of each initial and annual stock option granted under the 2017 Plan is equal to 100% of the fair market value of a share of common stock on the grant date. Under the terms of the 2017 Directors’ Policy, theone-time initial options are immediately exercisable, but shares issued upon early exercise are subject to a repurchase right and will vest at the rate of 25% of the underlying shares on the first anniversary of the grant date and monthly thereafter over the next three years. The annual options are immediately exercisable, but shares issued upon early exercise are subject to a repurchase right and will vest monthly in equal parts over a one-year period.at the rate of 100% of the underlying shares on the first anniversary of the grant date.
20192020 Proxy Statement 2327
As long as thenon-employee director continues to serve with us or with an affiliate of ours, the options continue to vest and be exercisable during their terms, and shares issued upon early exercise continue to vest. When the option holder’s service terminates, we have the right to repurchase any unvested shares acquired upon exercise of the option at the original exercise price without interest. The post-termination exercise period for the vested portion of options granted to ournon-employee directors is generally set to terminate the earlier of three years after anon-employee director’s service terminates or the remainder of the term of the option, as described in the form of option agreement fornon-employee directors under the 2017 Plan (not to exceed seven years from the date of grant).
The initial RSU awards vest at the rate of 25% of the underlying shares on each of the first four anniversaries of the grant date, and the annual RSU awards vest at the rate of 100% of the underlying shares on the first anniversary of the grant date, in each case so long as thenon-employee director continues to serve with us or with an affiliate of ours.
In the event of a change in control, 100% of thenon-employee director’s outstanding and unvested equity awards will immediately vest, and any applicable repurchase rights we may have will terminate.
On April 5, 2018, Dr. Freire Joined the Board and became eligible to receive an initial equity award having an aggregate value equal to approximately $680,000, pursuant to the terms of the 2017 Directors’ Policy. Accordingly, on April 5, 2018, the Board granted Dr. Freire a one-time initial award, the value of which was divided approximately evenly between a nonstatutory stock option and an RSU award consisting of (i) an option to purchase 28,240 shares of our common stock and (ii) an RSU award representing 14,120 shares of our common stock.
Reimbursement of Expenses
The members of the Board are eligible for reimbursement of certain expenses incurred in connection with their attendance at Board meetings and their service on the Board in accordance with our policy.
The following table shows compensation information for ournon-employee directors for the fiscal year ended December 28, 2018.January 3, 2020.
Director Compensation for Fiscal 20182019
Fees Earned or Paid in Cash ($) | Stock Awards (Restricted Stock Units) ($)(1) | Option Awards ($)(2) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Total ($) | |||||||||||||||||||||||||
Charles Cohen, Ph.D. | 88,000 | — | 320,699 | 408,699 | 88,000 | — | 380,780 | 468,780 | ||||||||||||||||||||||||
Carl B. Feldbaum, Esq. | 66,000 | — | 320,699 | 386,699 | 66,000 | — | 380,780 | 446,780 | ||||||||||||||||||||||||
Maria C. Freire, Ph.D. | 45,000 | 474,761 | (3) | 476,599 | (4) | 996,360 | 60,000 | 203,967 | 184,260 | 448,227 | ||||||||||||||||||||||
Alan M. Garber, M.D., Ph.D. | 70,000 | — | 320,699 | 390,699 | 70,000 | — | 380,780 | 450,780 | ||||||||||||||||||||||||
Vincent T. Marchesi, M.D., Ph.D. | 65,000 | 162,709 | 163,339 | 391,048 | 67,000 | 203,967 | 184,260 | 455,227 | ||||||||||||||||||||||||
Stelios Papadopoulos, Ph.D. | 95,000 | 162,709 | 163,339 | 421,048 | 98,000 | 203,967 | 184,260 | 486,227 | ||||||||||||||||||||||||
George Poste, D.V.M., Ph.D., FRS | 70,000 | 162,709 | 163,339 | 396,048 | ||||||||||||||||||||||||||||
George Poste, DVM, Ph.D., FRS | 70,000 | 203,967 | 184,260 | 458,227 | ||||||||||||||||||||||||||||
George A. Scangos, Ph.D. | 55,000 | — | 320,699 | 375,699 | 55,000 | — | 380,780 | 435,780 | ||||||||||||||||||||||||
Julie A. Smith | 65,250 | — | 320,699 | 385,949 | 73,000 | — | 380,780 | 453,780 | ||||||||||||||||||||||||
Lance Willsey, M.D. | 64,000 | — | 320,699 | 384,699 | 65,000 | — | 380,780 | 445,780 | ||||||||||||||||||||||||
Jack L. Wyszomierski | 80,000 | 162,709 | 163,339 | 406,048 | 80,000 | 203,967 | 184,260 | 468,227 |
(1) | On May |
24 Exelixis, Inc.
Compensation of Directors
Only one RSU award was granted to each of Drs. Freire, Marchesi, Papadopoulos and Poste and Mr. Wyszomierski during fiscal |
28 Exelixis, Inc.
Compensation of Directors
(2) | On May |
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20192020 Proxy Statement 2529
RATIFICATIONOF SELECTIONOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has selected Ernst & Young LLP as Exelixis’ independent registered public accounting firm for the fiscal year ending January 3, 2020.1, 2021. The Board, on behalf of the Audit Committee, has further directed that management submit the selection of the independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP has audited our financial statements for each of the eighteennineteen fiscal years in the period ended December 28, 2018.January 3, 2020. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Neither our Bylaws nor other governing documents or law require stockholder ratification of the selection of Ernst & Young LLP as Exelixis’ independent registered public accounting firm. However, the Board is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate governance. If the stockholders fail to ratify the selection, the Audit Committee of the Board will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee of the Board in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of Exelixis and its stockholders.
The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required to ratify the selection of Ernst & Young LLP. Abstentions will be counted toward the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as a vote against this proposal. Brokers generally have discretionary authority to vote on the ratification of our independent accounting firm; thus, we do not expect any brokernon-votes on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”"FOR" PROPOSAL 2.
Principal Accountant Fees and Services
The aggregate fees billed by Ernst & Young LLP for the last two fiscal years for the services described below are as follows:
Fiscal Year Ended | ||||||||
December 28, 2018 | December 29, 2017 | |||||||
Audit Fees (1) | $ | 1,914,430 | $ | 1,658,395 | ||||
Audit-Related Fees (2) | 155,200 | 220,000 | ||||||
Tax Fees (3) | 416,273 | 208,152 | ||||||
All Other Fees (4) | 3,230 | 1,995 | ||||||
Total Fees | $ | 2,489,133 | $ | 2,088,502 |
Fiscal Year Ended | ||||||||
January 3, 2020 | December 28, 2018 | |||||||
Audit fees (1) | $ | 2,004,195 | $ | 1,914,430 | ||||
Audit-related fees (2) | 66,000 | 155,200 | ||||||
Tax Compliance Fees (3) | 226,600 | — | ||||||
Other tax fees (4) | 289,148 | 416,273 | ||||||
All other fees (5) | 8,255 | 3,230 | ||||||
Total Fees | $ | 2,594,198 | $ | 2,489,133 |
(1) | “Audit fees” consist of fees billed for professional services rendered for the audit of our consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Ernst & Young LLP in connection with statutory and regulatory filings and other engagements such as |
(2) | “Audit-related fees” consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit fees.” During fiscal |
(3) | “Tax compliance fees” |
(4) | “Other tax fees” consist of fees for tax advice and tax planning. |
“All other fees” consist of fees for products and services other than the services described above. During fiscal |
2630 Exelixis, Inc.
Proposal 2 | Ratification of Selection of Independent Registered Public Accounting Firm
All fees described above werepre-approved by the Audit Committee. The Audit Committee has determined that the rendering of the services other than audit services by Ernst & Young LLP is compatible with maintaining the independence of the independent registered public accounting firm.
Pre-Approval of Services
During 20182019 and 2017,2018, the Audit Committee of the Boardpre-approved the audit andnon-audit services to be performed by Exelixis’ independent registered public accounting firm, Ernst & Young LLP.Non-audit services are defined as services other than those provided in connection with an audit or a review of our financial statements. The Audit Committeepre-approves all audit andnon-audit services rendered by Ernst & Young LLP. The Audit Committee generallypre-approves specified services in the defined categories of audit services, audit-related services, tax services and all other services up to specified amounts.Pre-approval may also be given as part of the Audit Committee’s approval of the scope of the engagement of the independent registered public accounting firm or on an individual explicitcase-by-case basis before the independent auditor is engaged to provide each service. The Audit Committee or its chairman,Chair, whom the Audit Committee has designated as aone-person subcommittee withpre-approval authority,pre-approved all audit fees, audit-related fees, tax fees and other fees in 20182019 and 2017.2018. Anypre-approvals by the subcommittee must be and were presented to the Audit Committee at its next scheduled meeting.
20192020 Proxy Statement 2731
The material in this report is not “soliciting material,” is not deemed “filed” with the Securities and Exchange Commission and is not deemed to be incorporated by reference in any filing of Exelixis under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
In connection with the audited consolidated financial statements for the fiscal year ended December 28, 2018,January 3, 2020, of Exelixis, Inc. (“Exelixis”), the Audit Committee of the Board of Directors of Exelixis has:
(1) reviewed and discussed the audited financial statements for the fiscal year ended December 28, 2018,January 3, 2020, with management of Exelixis;
(2) discussed with Ernst & Young LLP, Exelixis’ independent registered public accounting firm (“Ernst & Young”), the matters required to be discussed by Auditing Standard No. 1301,Communications with Audit Committees, as adopted bythe applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”); and
(3) received the written disclosures and the letter from Ernst & Young required by the applicable requirements of the PCAOB regarding Ernst & Young’s communications with the Audit Committee concerning independence, and has discussed with Ernst & Young that accounting firm’s independence.
Based on the foregoing, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in Exelixis’ Annual Report on Form10-K for the fiscal year ended December 28, 2018.January 3, 2020.
Audit Committee:
Jack L. Wyszomierski, ChairmanChair
Charles Cohen
Stelios Papadopoulos
Julie A. Smith
2832 Exelixis, Inc.
Proposal 3 | DeclassificationAmendment and Restatement of the Board by the 2020 Annual Meeting of Stockholders2017 Equity Incentive Plan
DAECLASSIFICATIONMENDMENTOFTHEAND BROARDBYTHE 2020 ANNUAL MEETINGESTATEMENTOF S2017 ETOCKHOLDERSQUITY INCENTIVE PLAN
Currently, Article V.AThe Compensation Committee approved an amendment and restatement of the Certificate2017 Plan in March 2020, subject to approval by our stockholders. For purposes of Incorporationthis Proposal 3, we refer to the 2017 Plan, as amended and restated by the Compensation Committee in March 2020, as the “Amended 2017 Plan.” We are asking our stockholders to approve the Amended 2017 Plan at the Annual Meeting.
The Amended 2017 Plan contains the following material changes from the 2017 Plan:
Subject to adjustment for certain changes in our capitalization, the aggregate number of shares of our common stock that may be issued under the Amended 2017 Plan will not exceed 45,453,064 shares (plus the Prior Plans’ Returning Shares (as defined below), as such shares become available from time to time), which is an increase of 21,000,000 shares over the aggregate number of shares of our common stock that may be issued under the 2017 Plan.
The 2017 Plan provides for accelerated vesting of outstanding awards in the event of (i) certain corporate transactions involving Exelixis in which the surviving or acquiring corporation (or its parent company) does not assume, continue or substitute for such awards, (ii) certain control acquisitions involving Exelixis that are not approved by the Board or Compensation Committee, and (iii) certain involuntary terminations of service that occur within one month before, as of, or within 13 months after a classified boardchange in control of directors divided into three classesExelixis. The Amended 2017 Plan retains such provisions, but specifies that (a) the provision regarding certain corporate transactions involving Exelixis will also apply to a change in control of directors,Exelixis and (b) for purposes of such acceleration, with each class elected for three-year terms.respect to any such awards that are subject to performance-based vesting conditions or requirements, vesting will be deemed to be satisfied at the target level of performance.
Why We Are Asking Our Stockholders to Approve the Amended 2017 Plan
We take corporate governance matters seriously and are committed to achieving best corporate governance practices. We recognize, in particular through our ongoingseeking stockholder engagement, the growing sentiment among stockholders that annual director election is oneapproval of the most meaningful tools availableAmended 2017 Plan to them to evaluate and provide feedback on the performance of the Board. After considering the advantages and disadvantages of declassification, including through discussions with our stockholders and in light of the fact thatincrease the number of companiesshares available for the grant of stock options, RSU awards and other awards to our employees and directors, which will enable us to have a competitive equity incentive program to compete with classified boards continuesour peer group for key talent.
Approval of the Amended 2017 Plan by our stockholders will allow us to decline,continue to grant stock options and RSU awards at levels determined appropriate by the Board hasor Compensation Committee, which determination takes into account the impact of such awards on stockholder dilution. The Amended 2017 Plan will also allow us to utilize a broad array of equity incentives in order to secure and retain the services of our employees and directors, and to provide long-term incentives that align the interests of our employees and directors with the interests of our stockholders.
Requested Share Increase
Subject to adjustment for certain changes in our capitalization, if this Proposal 3 is approved by our stockholders, we will have 21,000,000 new shares available for grant under the Amended 2017 Plan after the Annual Meeting.
Due to the inherent unpredictability of clinical trial outcomes and of regulatory approval processes, we are not presently able to forecast the rate at which we will utilize equity awards as a tool for attracting and retaining talent. Taking these factors into consideration, the Board determined itthat our request for 21,000,000 new shares under the Amended 2017 Plan is an appropriate amount that we believe a majority of our institutional investors would support.
Why You Should Vote to Approve the Amended 2017 Plan
Equity Awards Are an Important Part of Our Compensation Philosophy
The Board believes that our future success depends, in large part, on our ability to maintain a competitive position in attracting, retaining and motivating employees and directors. The Board believes that the grant of equity awards is a key element underlying our ability to attract, retain and motivate employees and directors, and better aligns the interests of our employees and directors with those of our stockholders. The Amended 2017 Plan will allow us to continue to provide equity-based incentives to our employees and directors. Therefore, the Board believes that the Amended 2017 Plan is in the best interests of Exelixis and our stockholders and recommends a vote in favor of this Proposal 3.
2020 Proxy Statement 33
We Have Experienced and Expect to Continue to Experience Substantial Growth in Our Business
Recent progress in our product development programs has driven growth in the number of our employees. As of December 28, 2018, we had 485 employees, compared to 618 employees as of January 3, 2020, and 645 employees as of the Record Date, March 23, 2020.
The Board believes that the Amended 2017 Plan is necessary to ensure that the number of shares available for issuance pursuant to equity awards will be sufficient to allow us to continue to attract, retain and motivate the services of talented individuals essential to our long-term growth and financial success. The Board strongly believes that the grant of equity awards is a key element underlying our ability to attract, retain and motivate our employees, including our executives, and our directors, and is a substantial contributing factor to our success and the growth of our business. We have relied significantly on equity awards in the form of stock options and RSU awards to attract, retain and motivate key employees, and we believe that equity awards are necessary for us to remain competitive in the marketplace for executive talent and other employees.
We Manage Our Equity Award Use Carefully and Dilution Is Reasonable
We believe that equity awards such as stock options and RSU awards are a vital part of our overall compensation program, and we grant awards to substantially all of our employees. However, we recognize that this compensation philosophy dilutes existing stockholders, and, therefore, we must responsibly manage the growth of our equity compensation program. We are committed to monitoring our equity compensation share reserve carefully, including our “burn rate,” to ensure that we maximize stockholders’ value by granting the appropriate number of equity awards necessary to attract, retain and motivate our employees and directors.
The Size of Our Share Reserve Increase Request Is Reasonable
Subject to adjustment for certain changes in our capitalization, if this Proposal 3 is approved by our stockholders, we will have 21,000,000 new shares available for grant under the Amended 2017 Plan after the Annual Meeting (for a total of approximately 26,386,694 shares available for grant under the Amended 2017 Plan after the Annual Meeting (based on the number of shares available for grant under the 2017 Plan as of March 4, 2020) (plus the Prior Plans’ Returning Shares (as defined below), as such shares become available from time to time)).
The Board believes that our request for 21,000,000 new shares under the Amended 2017 Plan is necessary to provide an appropriate amount of equity awards for attracting, retaining, and motivating our employees and directors in accordance with our business plans, and is an amount that we believe a majority of our institutional investors would support.
The Amended 2017 Plan Combines Compensation and Governance Best Practices
The Amended 2017 Plan includes provisions that are designed to protect our stockholders’ interests and to reflect corporate governance best practices including:
• | No liberal share counting or recycling. The following shares will not become available again for issuance under the Amended 2017 Plan: (i) shares that are reacquired or withheld (or not issued) by us to satisfy the exercise or purchase price of a stock award; (ii) shares that are reacquired or withheld (or not issued) by us to satisfy a tax withholding obligation in connection with stock options or stock appreciation rights; (iii) shares repurchased by us on the open market with the proceeds of the exercise price of a stock option or stock appreciation right; and (iv) the gross number of shares subject to a stock appreciation right in the event that such stock appreciation right is settled in shares. |
• | Fungible share counting. The Amended 2017 Plan contains a “fungible share counting” structure, whereby the number of shares available for issuance under the Amended 2017 Plan will be reduced by: (i) one share for each share issued pursuant to a stock option or stock appreciation right with an exercise price that is at least 100% of the fair market value of our common stock on the date of grant (Appreciation Award) granted under the Amended 2017 Plan; and (ii) 1.5 shares for each share issued pursuant to a stock award that is not an Appreciation Award (Full Value Award) granted under the Amended 2017 Plan. As part of such fungible share counting structure, the number of shares available for issuance under the Amended 2017 Plan will be increased by: (i) one share for each share that becomes available again for issuance under the terms of the Amended 2017 Plan subject to an Appreciation Award and (ii) 1.5 shares for each share that becomes available again for issuance under the terms of the Amended 2017 Plan subject to a Full Value Award. |
34 Exelixis, Inc.
Proposal 3 | Amendment and Restatement of 2017 Equity Incentive Plan
• | Minimum vesting requirements. The Amended 2017 Plan provides that no award may vest until at least 12 months following the date of grant of the award; provided, however, that shares up to 5% of the aggregate number of shares that may be issued under the Amended 2017 Plan may be issued pursuant to awards which do not meet such vesting requirements. |
• | Maximum seven-year term for stock options and stock appreciation rights. The Amended 2017 Plan provides that no stock option or stock appreciation right may have a term longer than seven years. |
• | Restrictions on dividends. The Amended 2017 Plan provides that (i) no dividends or dividend equivalents may be paid with respect to any shares subject to an award before the date such shares have vested, (ii) any dividends or dividend equivalents that are credited with respect to any such shares will be subject to all of the terms and conditions applicable to such shares under the terms of the applicable award agreement (including any vesting conditions), and (iii) any dividends or dividend equivalents that are credited with respect to any such shares will be forfeited to us on the date such shares are forfeited to or repurchased by us due to a failure to vest. |
• | Awards subject to forfeiture/clawback. Awards granted under the Amended 2017 Plan will be subject to recoupment in accordance with (i) the Clawback Policy and (ii) any clawback policy that we are required to adopt pursuant to the listing standards of any national securities exchange or association on which our securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the Board may impose other clawback, recovery or recoupment provisions in an award agreement, including a reacquisition right in respect of previously acquired shares or other cash or property upon the occurrence of cause. For additional information on the Clawback Policy, please see “Compensation Discussion and Analysis—Other Compensation Information—Clawback Policy.” |
• | Repricing not allowed. The Amended 2017 Plan prohibits the repricing of outstanding stock options and stock appreciation rights and the cancellation of any outstanding stock options or stock appreciation rights that have an exercise price greater than the then-current fair market value of our common stock in exchange for cash or other awards under the Amended 2017 Plan without prior stockholder approval. |
• | No liberal change in control definition. The change in control definition in the Amended 2017 Plan is not a “liberal” definition. A change in control transaction must actually occur in order for the change in control provisions in the Amended 2017 Plan to be triggered. |
• | Limit onnon-employee director compensation. The maximum number of shares subject to stock awards granted during any calendar year to any of ournon-employee directors, taken together with any cash fees paid by Exelixis to suchnon-employee director during such calendar year, may not exceed $750,000 in total value, or $1,500,000 in total value with respect to the calendar year in which the individual is first appointed or elected to the Board (calculating the value of any such stock awards based on the grant date fair value of such stock awards for financial reporting purposes). |
Overhang
The following table provides certain additional information regarding our equity incentive program.
As of March 4, 2020 | ||||
Total number of shares of common stock subject to outstanding stock options | 19,855,357 | |||
Weighted-average exercise price of outstanding stock options | $10.20 | |||
Weighted-average remaining term of outstanding stock options | 3.17 years | |||
Total number of shares of common stock subject to outstanding full value awards | 9,114,878 | |||
Total number of shares of common stock available for grant under the 2017 Plan (1) | 5,386,694 | |||
As of Record Date | ||||
Total number of shares of common stock outstanding | 305,733,496 | |||
Per-share closing price of common stock as reported on Nasdaq Global Select Market | $15.34 |
(1) | As of March 4, 2020, there were no shares of common stock available for grant under any of our equity incentive plans other than the 2017 Plan, as described in this table. |
2020 Proxy Statement 35
Burn Rate
The following table provides detailed information regarding the activity related to our equity incentive plans for fiscal years 2019, 2018 and 2017.
Fiscal Year 2019 | Fiscal Year 2018 | Fiscal Year 2017 | ||||||||||
Total number of shares of common stock subject to time-based vesting stock options granted | 1,310,696 | 2,930,108 | 2,166,110 | |||||||||
Total number of shares of common stock subject to performance-based vesting stock options vested | — | — | — | |||||||||
Total number of shares of common stock subject to time-based vesting full value awards granted | 1,988,857 | 1,826,294 | 2,137,817 | |||||||||
Total number of shares of common stock subject to performance-based vesting full value awards vested | 141,004 | — | — | |||||||||
Weighted-average number of shares of common stock outstanding | 302,584,000 | 297,892,000 | 293,588,000 | |||||||||
Adjusted Burn Rate (1) | 1.84% | 2.21% | 2.19% | |||||||||
Unadjusted Burn Rate (2) | 1.14% | 1.60% | 1.47% |
(1) | Adjusted Burn Rate is calculated as: (shares subject to time-based vesting stock options granted + shares subject to performance-based vesting stock options vested + 2 (shares subject to time-based vesting full value awards granted + shares subject to performance-based vesting full value awards vested))/weighted average common stock outstanding. For purposes of this calculation, shares subject to time-based vesting full value awards granted and shares subject to performance-based vesting full value awards vested are increased by a 2.0x volatility multiplier for each of fiscal years 2017-2019. The share reserve under the 2017 Plan is reduced by 1.5 shares for each share issued pursuant to a full value award. |
(2) | Unadjusted Burn Rate is calculated as: (shares subject to time-based vesting stock options granted + shares subject to performance-based vesting stock options vested + shares subject to time-based vesting full value awards granted + shares subject to performance-based vesting full value awards vested)/weighted average common stock outstanding. |
Stockholder Approval
If this Proposal 3 is approved by our stockholders, the Amended 2017 Plan will become effective as of the date of the Annual Meeting. In the event that our stockholders do not approve this Proposal 3, the Amended 2017 Plan will not become effective and the 2017 Plan will continue to be effective in accordance with its stockholdersterms.
Description of the Amended 2017 Plan
The material features of the Amended 2017 Plan are described below. The following description of the Amended 2017 Plan is a summary only and is qualified in its entirety by reference to the complete text of the Amended 2017 Plan. Stockholders are urged to read the actual text of the Amended 2017 Plan in its entirety.
Purpose
The Amended 2017 Plan is designed to secure and retain the services of our employees, directors and consultants, provide incentives for our employees, directors and consultants to exert maximum efforts for the success of Exelixis and our affiliates, and provide a means by which our employees, directors and consultants may be given an opportunity to benefit from increases in the value of our common stock.
Successor to 2014 Plan
The Amended 2017 Plan is intended to be the successor to the Exelixis, Inc. 2014 Equity Incentive Plan (2014 Plan).
36 Exelixis, Inc.
Proposal 3 | Amendment and Restatement of 2017 Equity Incentive Plan
Types of Awards
The terms of the Amended 2017 Plan provide for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, RSU awards, other stock awards, and performance awards that may be settled in cash, stock, or other property.
Shares Available for Awards
Subject to adjustment for certain changes in our capitalization, the aggregate number of shares of our common stock that may be issued under the Amended 2017 Plan (Share Reserve) will not exceed 45,453,064 shares (which is the sum of (i) 453,064 shares (the number of unallocated shares that were available for grant under the 2014 Plan as of the effective date of the 2017 Plan), (ii) 24,000,000 additional shares that were reserved as of the effective date of the 2017 Plan, and (iii) 21,000,000 newly requested shares), plus the Prior Plans’ Returning Shares, as such shares become available from time to time.
The “Prior Plans’ Returning Shares” are shares subject to outstanding stock awards granted under any of the following plans (which we refer to as the “Prior Plans” for purposes of this Proposal 3): the 2014 Plan, the Exelixis, Inc. 2000 Equity Incentive Plan, the Exelixis, Inc. 2000Non-Employee Directors’ Stock Option Plan, the Exelixis, Inc. 2011 Equity Incentive Plan, and the Exelixis, Inc. 2016 Inducement Award Plan, in each case that, from and after the effective date of the 2017 Plan, (i) expire or terminate for any reason prior to exercise or settlement, (ii) are forfeited, cancelled or otherwise returned to us because of the failure to meet a contingency or condition required for the vesting of such shares, or (iii) other than with respect to outstanding Appreciation Awards granted under the Prior Plans, are reacquired or withheld (or not issued) by us to satisfy a tax withholding obligation in connection with a stock award.
The number of shares of our common stock available for issuance under the Amended 2017 Plan will be reduced by (i) one share for each share of common stock issued pursuant to an Appreciation Award granted under the Amended 2017 Plan, and (ii) 1.5 shares for each share of common stock issued pursuant to a Full Value Award granted under the Amended 2017 Plan.
If (i) any shares of common stock subject to a stock award granted under the Amended 2017 Plan are not issued because the stock award expires or otherwise terminates without all of the shares covered by the stock award having been issued or is settled in cash, (ii) any shares of common stock issued pursuant to a stock award granted under the Amended 2017 Plan are forfeited back to or repurchased by us because of the failure to meet a contingency or condition required for the vesting of such shares, or (iii) with respect to a Full Value Award granted under the Amended 2017 Plan, any shares of common stock are reacquired or withheld (or not issued) by us to satisfy a tax withholding obligation in connection with the award, then such shares (which we refer to as the “Amended 2017 Plan Returning Shares” for purposes of this Proposal 3) will again become available for issuance under the Amended 2017 Plan. For each Amended 2017 Plan Returning Share or Prior Plans’ Returning Share subject to a Full Value Award, the number of shares of common stock available for issuance under the Amended 2017 Plan will increase by 1.5 shares.
Any shares of common stock reacquired or withheld (or not issued) by us to satisfy the exercise or purchase price of a stock award granted under the Amended 2017 Plan or a Prior Plan will no longer be available for issuance under the Amended 2017 Plan, including any shares subject to a stock award that are not delivered to a participant because the stock award is exercised through a reduction of shares subject to the stock award. Any shares reacquired or withheld (or not issued) by us to satisfy a tax withholding obligation in connection with an Appreciation Award granted under the Amended 2017 Plan or a Prior Plan, or any shares repurchased by us on the open market with the proceeds of the exercise price of an Appreciation Award granted under the Amended 2017 Plan or a Prior Plan will no longer be available for issuance under the Amended 2017 Plan. In the event that a stock appreciation right granted under the Amended 2017 Plan or a Prior Plan is settled in shares of common stock, the gross number of shares subject to such stock appreciation right will no longer be available for issuance under the Amended 2017 Plan.
Eligibility
All of our (including our affiliates’) employees,non-employee directors and consultants are eligible to participate in the Amended 2017 Plan and may receive all types of awards other than incentive stock options. Incentive stock options may be granted under the Amended 2017 Plan only to our (including our affiliates’) employees.
As of the Record Date, we (including our affiliates) had 645 employees, 11non-employee directors and 54 consultants. However, Dr. Scangos, who is not standing forre-election at the Annual Meeting and will resign from the Board effective as of the Annual Meeting, will not be eligible to receive awards as anon-employee director under the Amended 2017 Plan. In addition, we currently do not expect to grant any awards to our consultants under the Amended 2017 Plan.
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Individual Award Limits
Under the Amended 2017 Plan, subject to adjustment for certain changes in our capitalization, no participant will be eligible to be granted during any calendar year more than: (i) a maximum of 5,000,000 shares of our common stock subject to stock options, stock appreciation rights and other stock awards whose value is determined by reference to an increase over an exercise or strike price of at least 100% of the fair market value of our common stock on the date of grant; (ii) a maximum of 5,000,000 shares of our common stock subject to performance stock awards; and (iii) a maximum of $10,000,000 subject to performance cash awards.
Non-Employee Director Compensation Limit
The maximum number of shares of our common stock subject to stock awards granted during any calendar year to any of ournon-employee directors, taken together with any cash fees paid by Exelixis to suchnon-employee director during such calendar year, will not exceed $750,000 in total value, or $1,500,000 in total value with respect to the calendar year in which the individual is first appointed or elected to the Board (calculating the value of any such stock awards based on the grant date fair value of such stock awards for financial reporting purposes).
Administration
The Amended 2017 Plan will be administered by the Board, which may in turn delegate authority to administer the Amended 2017 Plan to a committee. The Board has delegated concurrent authority to administer the Amended 2017 Plan to the Compensation Committee, but may, at any time, revest in itself some or all of the power delegated to the Compensation Committee. The Board and the Compensation Committee are each considered to be a Plan Administrator for purposes of this Proposal 3. Subject to the terms of the Amended 2017 Plan (including certain minimum vesting requirements (see “Minimum Vesting Requirements” below)), the Plan Administrator may determine the recipients, the types of awards to be granted, the number of shares of our common stock subject to or the cash value of awards, and the terms and conditions of awards granted under the Amended 2017 Plan, including the period of their exercisability and vesting. The Plan Administrator also has the authority to provide for accelerated exercisability and vesting of awards. Subject to the limitations set forth below, the Plan Administrator also determines the fair market value applicable to a stock award and the exercise or strike price of stock options and stock appreciation rights granted under the Amended 2017 Plan.
The Plan Administrator may also delegate to one or more officers the authority to designate employees who are not officers to be recipients of certain stock awards and the number of shares of our common stock subject to such stock awards. Under any such delegation, the Plan Administrator will specify the total number of shares of our common stock that may be subject to the stock awards granted by such officer. The officer may not grant a stock award to himself or herself.
Repricing; Cancellation andRe-Grant of Awards
Under the Amended 2017 Plan, the Plan Administrator does not have the authority to reprice any outstanding stock option or stock appreciation right by reducing the exercise or strike price of the stock option or stock appreciation right or to cancel any outstanding stock option or stock appreciation right that has an exercise or strike price greater than the then-current fair market value of our common stock in exchange for cash or other awards without obtaining the approval of our stockholders. Such approval must be obtained within 12 months prior to such an event.
Under the Amended 2017 Plan, no award may vest until at least 12 months following the date of grant of the award; provided, however, that shares up to 5% of the Share Reserve may be issued pursuant to awards which do not meet such vesting requirements.
Dividends and Dividend Equivalents
The Amended 2017 Plan provides that dividends or dividend equivalents may be paid or credited with respect to any shares of our common stock subject to an award, as determined by the Board and contained in the applicable award agreement; provided, however, that (i) no dividends or dividend equivalents may be paid with respect to any such shares before the date such shares have vested, (ii) any dividends or dividend equivalents that are credited with respect to any such shares will be subject to all of the terms and conditions applicable to such shares under the terms of the applicable award agreement (including any vesting conditions), and (iii) any dividends or dividend equivalents that are credited with respect to any such shares will be forfeited to us on the date such shares are forfeited to or repurchased by us due to a failure to vest.
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Proposal 3 | Amendment and Restatement of 2017 Equity Incentive Plan
Section 162(m) Transition Relief for Performance-Based Compensation
Under Section 162(m) of the Code, compensation paid to any publicly held corporation’s “covered employees” (as defined under Section 162(m) of the Code) that exceeds $1 million per taxable year for any covered employee is generallynon-deductible. Certain provisions in the Amended 2017 Plan refer to the “performance-based compensation” exception to the $1 million deductibility limit under Section 162(m) of the Code. Pursuant to the Tax Cuts and Jobs Act, this exception was repealed with respect to taxable years beginning after December 31, 2017. However, an award may still be eligible for this exception if, among other requirements, it is intended to qualify, and is eligible to qualify, as “performance-based compensation” under Section 162(m) of the Code pursuant to the transition relief provided by the Tax Cuts and Jobs Act for remuneration provided pursuant to a written binding contract which was in effect on November 2, 2017 and which was not modified in any material respect on or after such date. For purposes of this Proposal 3, the term “Section 162(m) Transition Relief” refers to such transition relief. Accordingly, the provisions in the Amended 2017 Plan which refer to the “performance-based compensation” exception under Section 162(m) of the Code will only apply to any award that is intended to qualify, and is eligible to qualify, as “performance-based compensation” under Section 162(m) of the Code pursuant to the Section 162(m) Transition Relief and, therefore, such provisions are not applicable to any other awards granted under the Amended 2017 Plan. However, even if an award is intended to qualify as “performance-based compensation” under Section 162(m) of the Code, no assurance can be given that the award will in fact qualify for the Section 162(m) Transition Relief or the “performance-based compensation” exception under Section 162(m) of the Code.
Stock Options
Stock options may be granted under the Amended 2017 Plan pursuant to stock option agreements. The Amended 2017 Plan permits the grant of stock options that are intended to qualify as incentive stock options, or ISOs, and nonstatutory stock options, or NSOs.
The exercise price of a stock option granted under the Amended 2017 Plan may not be less than 100% of the fair market value of the common stock subject to the stock option on the date of grant and, in some cases (see “Limitations on Incentive Stock Options” below), may not be less than 110% of such fair market value.
The term of stock options granted under the Amended 2017 Plan may not exceed seven years and, in some cases (see “Limitations on Incentive Stock Options” below), may not exceed five years. Except as otherwise provided in a participant’s stock option agreement or other agreement with us or one of our affiliates, if a participant’s service relationship with us or any of our affiliates (referred to in this Proposal 3 as “continuous service”) terminates (other than for cause and other than upon the participant’s death or disability), the participant may exercise any vested stock options for up to three months following the participant’s termination of continuous service. Except as otherwise provided in a participant’s stock option agreement or other agreement with us or one of our affiliates, if a participant’s continuous service terminates due to the participant’s disability or death (or the participant dies within a specified period, if any, following termination of continuous service), the participant, or his or her beneficiary, as applicable, may exercise any vested stock options for up to 12 months following the participant’s termination due to the participant’s disability or for up to 18 months following the participant’s death. Except as explicitly provided otherwise in a participant’s stock option agreement or other written agreement with us or one of our affiliates, if a participant’s continuous service is terminated for cause (as defined in the Amended 2017 Plan), all stock options held by the participant will terminate upon the participant’s termination of continuous service and the participant will be prohibited from exercising any stock option from and after such termination date. Except as otherwise provided in a participant’s stock option agreement or other agreement with us or one of our affiliates, the term of a stock option may be extended if the exercise of the stock option following the participant’s termination of continuous service (other than for cause and other than upon the participant’s death or disability) would be prohibited by applicable securities laws or if the sale of any common stock received upon exercise of the stock option following the participant’s termination of continuous service (other than for cause) would violate our insider trading policy. In no event, however, may a stock option be exercised after its original expiration date.
Acceptable forms of consideration for the purchase of our common stock pursuant to the exercise of a stock option under the Amended 2017 Plan will be determined by the Plan Administrator and may include payment: (i) by cash, check, bank draft or money order payable to us; (ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board; (iii) by delivery to us of shares of our common stock (either by actual delivery or attestation); (iv) by a net exercise arrangement (for NSOs only); or (v) in other legal consideration approved by the Plan Administrator.
Subject to certain minimum vesting requirements (see “Minimum Vesting Requirements” above), stock options granted under the Amended 2017 Plan may become exercisable in cumulative increments, or “vest,” as determined by the Plan
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Administrator at the rate specified in the stock option agreement. Shares covered by different stock options granted under the Amended 2017 Plan may be subject to different vesting schedules as the Plan Administrator may determine.
The Plan Administrator may impose limitations on the transferability of stock options granted under the Amended 2017 Plan in its discretion. Generally, a participant may not transfer a stock option granted under the Amended 2017 Plan other than by will or the laws of descent and distribution or, subject to approval by the Plan Administrator, pursuant to a domestic relations order or an official marital settlement agreement. However, the Plan Administrator may permit transfer of a stock option in a manner that is not prohibited by applicable tax and securities laws. In addition, subject to approval by the Plan Administrator, a participant may designate a beneficiary who may exercise the stock option following the participant’s death. Notwithstanding the foregoing, no stock option may be transferred to any financial institution without prior stockholder approval.
Limitations on Incentive Stock Options
The aggregate fair market value, determined at the time of grant, of shares of our common stock with respect to ISOs that are exercisable for the first time by a participant during any calendar year under all of our stock plans may not exceed $100,000. The stock options or portions of stock options that exceed this limit or otherwise fail to qualify as ISOs are treated as NSOs. No ISO may be granted to any person who, at the time of grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any affiliate unless the following conditions are satisfied:
the exercise price of the ISO must be at least 110% of the fair market value of the common stock subject to the ISO on the date of grant; and
the term of the ISO must not exceed five years from the date of grant.
Subject to adjustment for certain changes in our capitalization, the aggregate maximum number of shares of our common stock that may be issued pursuant to the exercise of ISOs under the Amended 2017 Plan is 50,000,000 shares.
Stock Appreciation Rights
Stock appreciation rights may be granted under the Amended 2017 Plan pursuant to stock appreciation right agreements. Each stock appreciation right is denominated in common stock share equivalents. The strike price of each stock appreciation right will be determined by the Plan Administrator, but will in no event be less than 100% of the fair market value of the common stock subject to the stock appreciation right on the date of grant. Subject to certain minimum vesting requirements (see “Minimum Vesting Requirements” above), the Plan Administrator may also impose restrictions or conditions upon the vesting of stock appreciation rights that it deems appropriate. The appreciation distribution payable upon exercise of a stock appreciation right may be paid in shares of our common stock, in cash, in a combination of cash and stock, or in any other form of consideration determined by the Plan Administrator and set forth in the stock appreciation right agreement. The term of stock appreciation rights granted under the Amended 2017 Plan may not exceed seven years. Stock appreciation rights will be subject to the same conditions upon termination of continuous service and restrictions on transfer as stock options under the Amended 2017 Plan.
Restricted Stock Awards
Restricted stock awards may be granted under the Amended 2017 Plan pursuant to restricted stock award agreements. A restricted stock award may be granted in consideration for cash, check, bank draft or money order payable to us, the participant’s services performed for us or any of our affiliates, or any other form of legal consideration acceptable to the Plan Administrator. Subject to certain minimum vesting requirements (see “Minimum Vesting Requirements” above), shares of our common stock acquired under a restricted stock award may be subject to forfeiture to or repurchase by us in accordance with a vesting schedule to be determined by the Plan Administrator. Rights to acquire shares of our common stock under a restricted stock award may be transferred only upon such terms and conditions as are set forth in the restricted stock award agreement; provided, however, that no restricted stock award may be transferred to any financial institution without prior stockholder approval. Upon a participant’s termination of continuous service for any reason, any shares subject to restricted stock awards held by the participant that have not vested as of such termination date may be forfeited to or repurchased by us.
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Proposal 3 | Amendment and Restatement of 2017 Equity Incentive Plan
RSU Awards
RSU awards may be granted under the Amended 2017 Plan pursuant to RSU award agreements. Payment of any purchase price may be made in any form of legal consideration acceptable to the Plan Administrator. A RSU award may be settled by the delivery of shares of our common stock, in cash, in a combination of cash and stock, or in any other form of consideration determined by the Plan Administrator and set forth in the RSU award agreement. Subject to certain minimum vesting requirements (see “Minimum Vesting Requirements” above), RSU awards may be subject to vesting in accordance with a vesting schedule to be determined by the Plan Administrator. Except as otherwise provided in a participant’s RSU award agreement, RSUs that have not vested will be forfeited upon the participant’s termination of continuous service for any reason.
Performance Awards
The Amended 2017 Plan allows us to grant performance stock and cash awards.
A performance stock award is a stock award that is payable (including that may be granted, may vest, or may be exercised) contingent upon the attainment ofpre-determined performance goals during a performance period. A performance stock award may require the completion of a specified period of continuous service. Subject to certain minimum vesting requirements (see “Minimum Vesting Requirements” above), the length of any performance period, the performance goals to be achieved during the performance period, and the measure of whether and to what degree such performance goals have been attained will be determined by the Compensation Committee, except that the Plan Administrator also may make any such determinations to the extent that the award is not intended to qualify as performance-based compensation under Section 162(m) of the Code. In addition, to the extent permitted by applicable law and the performance stock award agreement, the Plan Administrator may determine that cash may be used in payment of performance stock awards.
A performance cash award is a cash award that is payable contingent upon the attainment ofpre-determined performance goals during a performance period. A performance cash award may require the completion of a specified period of continuous service. Subject to certain minimum vesting requirements (see “Minimum Vesting Requirements” above), the length of any performance period, the performance goals to be achieved during the performance period, and the measure of whether and to what degree such performance goals have been attained will be determined by the Compensation Committee, except that the Plan Administrator also may make any such determinations to the extent that the award is not intended to qualify as performance-based compensation under Section 162(m) of the Code. The Plan Administrator may specify the form of payment of performance cash awards, which may be cash or other property, or may provide for a participant to have the option for his or her performance cash award to be paid in cash or other property.
Performance goals under the Amended 2017 Plan will be based on any one or more of the following performance criteria: (1) earnings (including earnings per share and net earnings); (2) earnings before interest, taxes and depreciation; (3) earnings before interest, taxes, depreciation and amortization; (4) total stockholder return; (5) return on equity or average stockholder’s equity; (6) return on assets, investment, or capital employed; (7) stock price; (8) margin (including gross margin); (9) income (before or after taxes); (10) operating income; (11) operating income after taxes;(12) pre-tax profit; (13) operating cash flow; (14) sales or revenue targets; (15) increases in revenues or product revenues; (16) expenses and cost reduction goals; (17) improvement in or attainment of working capital levels; (18) economic value added (or an equivalent metric); (19) market share; (20) cash flow; (21) cash flow per share; (22) share price performance; (23) debt reduction; (24) implementation or completion of projects or processes; (25) customer satisfaction; (26) stockholders’ equity; (27) capital expenditures; (28) debt levels; (29) operating profit or net operating profit; (30) workforce diversity; (31) growth of net income or operating income; (32) billings; and (33) to the extent that an award is not intended to comply with Section 162(m) of the Code, other measures of performance selected by the Plan Administrator.
Performance goals may be based on a company-wide basis, with respect to one or more business units, divisions, affiliates or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Under the Amended 2017 Plan, unless specified otherwise by the Compensation Committee (or, if not required for compliance with Section 162(m) of the Code, the Plan Administrator) (i) in the award agreement at the time the award is granted or (ii) in such other document setting forth the performance goals at the time the performance goals are established, the Compensation Committee (or, if not required for compliance with Section 162(m) of the Code, the Plan Administrator) will appropriately make adjustments in the method of calculating the attainment of performance goals for a performance period: (1) to exclude restructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects, as applicable, fornon-U.S. dollar denominated performance goals; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to
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corporate tax rates; and (5) to exclude the effects of any items that are “unusual” in nature or occur “infrequently” as determined under generally accepted accounting principles. In addition, the Compensation Committee (or, if not required for compliance with Section 162(m) of the Code, the Plan Administrator) retains the discretion to reduce or eliminate the compensation or economic benefit due upon the attainment of any performance goals and to define the manner of calculating the performance criteria it selects to use for a performance period.
Other Stock Awards
Other forms of stock awards valued in whole or in part by reference to, or otherwise based on, our common stock may be granted either alone or in addition to other stock awards under the Amended 2017 Plan. Subject to the terms of the Amended 2017 Plan (including certain minimum vesting requirements (see “Minimum Vesting Requirements” above)), the Plan Administrator will have sole and complete authority to determine the persons to whom and the time or times at which such other stock awards will be granted, the number of shares of our common stock to be granted and all other terms and conditions of such other stock awards.
Clawback Policy
Awards granted under the Amended 2017 Plan will be subject to recoupment in accordance with (i) the Clawback Policy and (ii) any clawback policy that we are required to adopt pursuant to the listing standards of any national securities exchange or association on which our securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the Plan Administrator may impose other clawback, recovery or recoupment provisions in an award agreement as the Plan Administrator determines necessary or appropriate, including a reacquisition right in respect of previously acquired shares of our common stock or other cash or property upon the occurrence of cause. For additional information on the Clawback Policy, please see “Compensation Discussion and Analysis—Other Compensation Information—Clawback Policy.”
Changes to Capital Structure
In the event of certain capitalization adjustments, the Plan Administrator will appropriately adjust: (i) the class(es) and maximum number of securities subject to the Amended 2017 Plan; (ii) the class(es) and maximum number of securities that may be issued pursuant to the exercise of ISOs; (iii) the class(es) and maximum number of securities that may be awarded to any participant pursuant to the individual award limits under the Amended 2017 Plan; and (iv) the class(es) and number of securities and price per share of stock subject to outstanding stock awards.
Corporate Transaction and Change in Control
The following applies to stock awards under the Amended 2017 Plan in the event of a corporate transaction (as defined in the Amended 2017 Plan) or a change in control (as defined in the Amended 2017 Plan) (each of which we refer to as a “Transaction” for purposes of this Proposal 3), unless otherwise provided in a participant’s stock award agreement or other written arrangement with us or one of our affiliates or in any director compensation policy.
In the event of a Transaction, any stock awards outstanding under the Amended 2017 Plan may be assumed, continued or substituted for by any surviving or acquiring corporation (or its parent company), and any reacquisition or repurchase rights held by us with respect to the stock award may be assigned to the successor (or its parent company). If the surviving or acquiring corporation (or its parent company) does not assume, continue or substitute for such stock awards, then (i) with respect to any such stock awards that are held by participants whose continuous service has not terminated prior to the effective time of the Transaction (Current Participants), the vesting (and exercisability, if applicable) of such stock awards will be accelerated in full (and with respect to any such stock awards that are subject to performance-based vesting conditions or requirements, vesting will be deemed to be satisfied at the target level of performance) to a date prior to the effective time of the Transaction (contingent upon the effectiveness of the Transaction), and such stock awards will terminate if not exercised (if applicable) at or prior to the effective time of the Transaction, and any reacquisition or repurchase rights held by us with respect to such stock awards will lapse (contingent upon the effectiveness of the Transaction), and (ii) any such stock awards that are held by persons other than Current Participants will terminate if not exercised (if applicable) prior to the effective time of the Transaction, except that any reacquisition or repurchase rights held by us with respect to such stock awards will not terminate and may continue to be exercised notwithstanding the Transaction.
In the event a stock award will terminate if not exercised prior to the effective time of a Transaction, the Plan Administrator may provide that the holder of such stock award may not exercise such stock award but instead will receive a payment equal
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Proposal 3 | Amendment and Restatement of 2017 Equity Incentive Plan
in value to the excess (if any) of (i) the value of the property the participant would have received upon exercise of such stock award immediately prior to the effective time of the Transaction over (ii) any exercise price payable in connection with such exercise.
For purposes of the Amended 2017 Plan, a corporate transaction generally will be deemed to occur in the event of the consummation of: (i) a sale, lease or other disposition of all or substantially all of our assets; (ii) an acquisition by a person, entity or group of the beneficial ownership of our securities representing at least 50% of the combined voting power entitled to vote in the election of our directors; (iii) a merger, consolidation or similar transaction in which we are not the surviving corporation; or (iv) a reverse merger, consolidation or similar transaction in which we are the surviving corporation but shares of our outstanding common stock are converted into other property by virtue of the transaction.
For purposes of the Amended 2017 Plan, a change in control generally will be deemed to occur in the event of the consummation of: (i) a sale, lease or other disposition of all or substantially all of our assets; (ii) an acquisition by a person, entity or group of the beneficial ownership of our securities representing at least 50% of the combined voting power entitled to vote in the election of our directors other than by virtue of a merger, consolidation or similar transaction; (iii) a merger, consolidation or similar transaction in which we are not the surviving corporation; or (iv) a reverse merger, consolidation or similar transaction in which we are the surviving corporation but shares of our outstanding common stock are converted into other property by virtue of the transaction.
Control Acquisition
The following applies to stock awards under the Amended 2017 Plan in the event of a control acquisition (as defined in the Amended 2017 Plan), unless otherwise provided in a participant’s stock award agreement or other written arrangement with us or one of our affiliates or in any director compensation policy.
In the event of a control acquisition that was not approved by the Plan Administrator prior to the consummation of such transaction, the vesting (and exercisability, if applicable) of any stock awards that are held by Current Participants will be accelerated in full (and with respect to any such stock awards that are subject to performance-based vesting conditions or requirements, vesting will be deemed to be satisfied at the target level of performance) to a date prior to the effective time of the control acquisition (contingent upon the effectiveness of the control acquisition), and any reacquisition or repurchase rights held by us with respect to such stock awards will lapse (contingent upon the effectiveness of the control acquisition).
For purposes of the Amended 2017 Plan, a control acquisition generally will be deemed to occur in the event of the consummation of an acquisition by a person, entity or group of the beneficial ownership of our securities representing at least 50% of the combined voting power entitled to vote in the election of our directors.
Change in Control
The following applies to stock awards under the Amended 2017 Plan in the event of a change in control (as defined in the Amended 2017 Plan), unless otherwise provided in a participant’s stock award agreement or other written arrangement with us or one of our affiliates or in any director compensation policy.
If a change in control occurs and within one month before, as of, or within 13 months after, the effective time of such change in control, a participant’s continuous service terminates due to an involuntary termination (not including death or disability) without cause (as defined in the Amended 2017 Plan) or due to a voluntary termination with good reason (as defined in the Amended 2017 Plan), then the vesting (and exercisability, if applicable) of such participant’s stock awards will be accelerated in accordance with the vesting schedule applicable to such stock awards as if (i) with respect to any such stock awards that are subject to vesting conditions or requirements based solely on such participant’s continuous service, such participant’s continuous service had continued for 12 months following the date of termination, and (ii) with respect to any such stock awards that are subject to performance-based vesting conditions or requirements, vesting has been satisfied at the target level of performance. Any such acceleration will occur on the date of termination, or if later, the effective date of the change in control.
Plan Amendments and Termination
The Plan Administrator will have the authority to amend or terminate the Amended 2017 Plan at any time. However, except as otherwise provided in the Amended 2017 Plan or an award agreement, no amendment or termination of the Amended 2017 Plan may materially impair a participant’s rights under his or her outstanding awards without the participant’s consent. We will obtain stockholder approval of any amendment to the Amended 2017 Plan as required by applicable law and listing
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requirements. No incentive stock options may be granted under the Amended 2017 Plan after the tenth anniversary of the date the 2017 Plan was adopted by our CertificateBoard.
U.S. Federal Income Tax Consequences
The following is a summary of Incorporationthe principal United States federal income tax consequences to participants and Bylawsus with respect to declassifyparticipation in the Board.Amended 2017 Plan. This summary is not intended to be exhaustive and does not discuss the income tax laws of any local, state or foreign jurisdiction in which a participant may reside. The information is based upon current federal income tax rules and therefore is subject to change when those rules change. Because the tax consequences to any participant may depend on his or her particular situation, each participant should consult the participant’s tax adviser regarding the federal, state, local and other tax consequences of the grant or exercise of an award or the disposition of stock acquired the Amended 2017 Plan. The Amended 2017 Plan is not qualified under the provisions of Section 401(a) of the Code and is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974. Our ability to realize the benefit of any tax deductions described below depends on our generation of taxable income as well as the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of our tax reporting obligations.
Nonstatutory Stock Options
Generally, there is no taxation upon the grant of an NSO if the stock option is granted with an exercise price equal to the fair market value of the underlying stock on the grant date. Upon exercise, a participant will resultrecognize ordinary income equal to the excess, if any, of the fair market value of the underlying stock on the date of exercise of the stock option over the exercise price. If the participant is employed by us or one of our affiliates, that income will be subject to withholding taxes. The participant’s tax basis in those shares will be equal to their fair market value on the date of exercise of the stock option, and the participant’s capital gain holding period for those shares will begin on that date.
Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a fully declassified Boardtax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the 2020 Annual Meetingparticipant.
Incentive Stock Options
The Amended 2017 Plan provides for the grant of Stockholders,stock options that are intended to qualify as “incentive stock options,” as defined in Section 422 of the Code. Under the Code, a participant generally is not subject to ordinary income tax upon the grant or exercise of an ISO. If the participant holds a share received upon exercise of an ISO for more than two years from the date the stock option was granted and more than one year from the date the stock option was exercised, which is referred to as the required holding period, the difference, if any, between the amount realized on a sale or other taxable disposition of that share and the participant’s tax basis in that share will be long-term capital gain or loss.
If, however, a participant disposes of a share acquired upon exercise of an ISO before the end of the required holding period, which is referred to as a disqualifying disposition, the participant generally will recognize ordinary income in the year of the disqualifying disposition equal to the excess, if any, of the fair market value of the share on the date of exercise of the stock option over the exercise price. However, if the sales proceeds are less than the fair market value of the share on the date of exercise of the stock option, the amount of ordinary income recognized by the participant will not exceed the gain, if any, realized on the sale. If the amount realized on a disqualifying disposition exceeds the fair market value of the share on the date of exercise of the stock option, that excess will be short-term or long-term capital gain, depending on whether the holding period for the share exceeds one year.
For purposes of the alternative minimum tax, the amount by which the fair market value of a share of stock acquired upon exercise of an ISO exceeds the exercise price of the stock option generally will be an adjustment included in the participant’s alternative minimum taxable income for the year in which the stock option is exercised. If, however, there is a disqualifying disposition of the share in the year in which the stock option is exercised, there will be no adjustment for alternative minimum tax purposes with respect to that share. In computing alternative minimum taxable income, the tax basis of a share acquired upon exercise of an ISO is increased by the amount of the adjustment taken into account with respect to that share for alternative minimum tax purposes in the year the stock option is exercised.
We are not allowed a tax deduction with respect to the grant or exercise of an ISO or the disposition of a share acquired upon exercise of an ISO after the required holding period. If there is a disqualifying disposition of a share, however, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the participant, subject to the
44 Exelixis, Inc.
Proposal 3 | Amendment and Restatement of 2017 Equity Incentive Plan
requirement of reasonableness and the provisions of Section 162(m) of the Code, and provided that either the employee includes that amount in income or we timely satisfy our reporting requirements with respect to that amount.
Restricted Stock Awards
Generally, the recipient of a restricted stock award will recognize ordinary income at the time the stock is received equal to the excess, if any, of the fair market value of the stock received over any amount paid by the recipient in exchange for the stock. If, however, the stock is not vested when it is received (for example, if the employee is required to work for a period of time in order to have the right to sell the stock), the recipient generally will not recognize income until the stock becomes vested, at which time the current term for each director then in officerecipient will expire, notwithstanding that such director may have been elected for a term that extended beyondrecognize ordinary income equal to the excess, if any, of the fair market value of the stock on the date ofit becomes vested over any amount paid by the 2020 Annual Meeting of Stockholders. Thus, uponrecipient in exchange for the filing of a certificate of amendment to our Certificate of Incorporation following stockholder approval of the proposed amendment to our Certificate of Incorporation, beginningstock. A recipient may, however, file an election with the 2020 Annual Meeting of Stockholders, all directors would henceforth be elected annually. The proposed amendment would not change the present number of directors or the Board’s authority to change that number and to fill any vacancies or newly created directorships. Vacancies which occur during the year may be filled by the Board for the remainder of the full term. In accordance with Delaware law, the proposed amendment would provide that once the Board is fully declassified as of the 2020 Annual Meeting of Stockholders, directors may be removed at any time, either with or without cause.
Effect of Declassifying the Board
Classified boards provide protection against certain abusive takeover tactics and more time to solicit higher bids in a hostile takeover situation because it is more difficult to change a majority of directors on the board in a single year. While the Board continues to believe that these are important considerations, the Board also considered potential advantages of declassification, including the ability of stockholders to evaluate directors annually.
Language of Proposed Amendment
If approved, the amendment would enable us to amend and restate Article V of our Certificate of Incorporation as follows:
Article V.A, Section 3, of the Certificate of Incorporation be amended to read in its entirety as follows:
“3. Election of Directors. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances and the remaining provisions of this section 3, until the Corporation’s 2020 annual meeting of stockholders, the directors shall be divided into three classes designated as Class I, Class II and Class III, respectively. At each annual meeting of stockholders held following the closing of the initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock to the public (the Initial Public Offering) and prior to or at the Corporation’s 2019 annual meeting of stockholders, each director was elected for a three year term, expiring at the third annual meeting of stockholdersInternal Revenue Service, within 30 days following his or her election. receipt of the stock award, to recognize ordinary income, as of the date the recipient receives the award, equal to the excess, if any, of the fair market value of the stock on the date the award is granted over any amount paid by the recipient for the stock.
The recipient’s basis for the determination of gain or loss upon the subsequent disposition of shares acquired from a restricted stock award will be the amount paid for such shares plus any ordinary income recognized either when the stock is received or when the stock becomes vested.
Subject to the rightsrequirement of reasonableness, the provisions of Section 162(m) of the holdersCode and the satisfaction of any seriesa tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of Preferred Stockthe restricted stock award.
RSU Awards
Generally, the recipient of an RSU award structured to elect additional directors under specified circumstances,comply with the termrequirements of each director then in office shall expireSection 409A of the Code or an exemption from Section 409A of the Code will recognize ordinary income at the Corporation’s 2020 annual meetingtime the stock is delivered equal to the excess, if any, of stockholders, notwithstanding thatthe fair market value of the stock received over any amount paid by the recipient in exchange for the stock. To comply with the requirements of Section 409A of the Code, the stock subject to a restricted stock unit award may generally only be delivered upon one of the following events: a fixed calendar date (or dates), separation from service, death, disability or a change in control. If delivery occurs on another date, unless the restricted stock unit award otherwise complies with or qualifies for an exemption from the requirements of Section 409A of the Code, in addition to the tax treatment described above, the recipient will owe an additional 20% federal tax and interest on any taxes owed.
The recipient’s basis for the determination of gain or loss upon the subsequent disposition of shares acquired from an RSU award will be the amount paid for such director may have been elected for a term that extended beyondshares plus any ordinary income recognized when the date of such annual meeting. stock is delivered.
Subject to the rightsrequirement of reasonableness, the provisions of Section 162(m) of the holdersCode and the satisfaction of any seriesa tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of Preferred the RSU award.
Stock to elect additional directors under specified circumstances, commencing at the Corporation’s 2020 annual meeting of stockholders, each director elected at such meeting and at each annual meeting of stockholders thereafter to succeed those directors whose terms then expire shall be elected for a term expiring at the next annual meeting of stockholders following their election.Appreciation Rights
NotwithstandingGenerally, if a stock appreciation right is granted with an exercise price equal to the foregoingfair market value of the underlying stock on the grant date, the recipient will recognize ordinary income equal to the fair market value of the stock or cash received upon such exercise. Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code, and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of the stock appreciation right.
Section 162(m) of the Code
Under Section 162(m) of the Code, compensation paid to any publicly held corporation’s “covered employees” (as defined under Section 162(m) of the Code) that exceeds $1 million per taxable year for any covered employee is generallynon-deductible. Prior to the enactment of the Tax Cuts and Jobs Act, compensation that qualified as “performance-based compensation” under Section 162(m) of the Code was not subject to this section, each director shall serve until hisdeduction limitation. Pursuant to the Tax Cuts and Jobs Act, this exception for “performance-based compensation” under Section 162(m) of the Code was repealed with respect to taxable years beginning after December 31, 2017, except that certain transition relief is provided for remuneration provided pursuant to a written binding contract which was in effect on November 2, 2017 and which was not modified in any material respect on or her successor is duly elected and qualified or until his or her death, resignation or removal. No decreaseafter such date. As a result, compensation paid to any of our “covered employees” in the numberexcess of directors constituting the Board of Directors shall shorten the term of any incumbent director.”
20192020 Proxy Statement 2945
Article V.A,$1 million per taxable year generally will not be deductible unless, among other requirements, it is intended to qualify, and is eligible to qualify, as “performance-based compensation” under Section 4,162(m) of the Certificate of Incorporation be amended to read in its entirety as follows:
“4. Removal of Directors. SubjectCode pursuant to the rightstransition relief described above. Because of certain ambiguities and uncertainties as to the application and interpretation of Section 162(m) of the holdersCode, as well as other factors beyond the control of the Compensation Committee, no assurance can be given that any seriesaward granted under the Amended 2017 Plan will be eligible for such transition relief and, therefore, eligible for the “performance-based compensation” exception under Section 162(m) of Preferred Stock then outstanding, any director or the entireCode.
New Plan Benefits under Amended 2017 Plan
Amended 2017 Plan
Name and position | Dollar value | Number of shares | ||||||
Michael M. Morrissey, Ph.D. | (1 | ) | (1 | ) | ||||
Gisela M. Schwab, M.D. | (1 | ) | (1 | ) | ||||
Christopher J. Senner | (1 | ) | (1 | ) | ||||
Jeffrey J. Hessekiel, J.D. | (1 | ) | (1 | ) | ||||
Peter Lamb, Ph.D. | (1 | ) | (1 | ) | ||||
All current executive officers as a group | (1 | ) | (1 | ) | ||||
All current directors who are not executive officers as a group | $ | 4,000,000 per calendar year | | (2 | ) | |||
All employees, including all current officers who are not executive officers, as a group | (1 | ) | (1 | ) |
(1) | Awards granted under the Amended 2017 Plan to our executive officers and other employees are discretionary and are not subject to set benefits or amounts under the terms of the Amended 2017 Plan, and the Board and the Compensation Committee have not granted any awards under the Amended 2017 Plan subject to stockholder approval of this Proposal 3. Accordingly, the benefits or amounts that will be received by or allocated to our executive officers and other employees under the Amended 2017 Plan are not determinable. |
(2) | Awards granted under the Amended 2017 Plan to ournon-employee directors are discretionary and are not subject to set benefits or amounts under the terms of the Amended 2017 Plan. However, pursuant to our equity compensation policy fornon-employee directors, each of our currentnon-employee directors (except Dr. Scangos, who is not standing forre-election at the Annual Meeting) automatically will be granted annual awards in the form of a stock option and RSU award (or in the form of a stock option or RSU award only, if elected by such individual) on the day following each of our annual meetings of stockholders, provided that such individual is anon-employee director on such date. The total dollar value of eachnon-employee director’s annual awards will be $400,000. The number of shares of our common stock subject to each such award will be based on the valuation methodology established by the Board, which is in part based on the fair market value of our common stock during the30-calendar day period prior to the grant date and, therefore, is not determinable at this time. On and after the date of the Annual Meeting, any such awards will be granted under the Amended 2017 Plan if this Proposal 3 is approved by our stockholders. For additional information regarding our equity compensation policy fornon-employee directors, see the “Compensation of Directors” section above. |
46 Exelixis, Inc.
Proposal 3 | Amendment and Restatement of 2017 Equity Incentive Plan
Plan Benefits under 2017 Plan
The following table sets forth, for each of the individuals and the various groups indicated, the total number of shares of our common stock subject to awards that have been granted (even if not currently outstanding) under the 2017 Plan since its approval by our stockholders in 2017 through March 4, 2020.
Name and position | Number of shares | |||
Michael M. Morrissey, Ph.D. | 1,920,436 | |||
Gisela M. Schwab, M.D. | 704,454 | |||
Christopher J. Senner | 619,424 | |||
Jeffrey J. Hessekiel, J.D. | 551,939 | |||
Peter Lamb, Ph.D. | 636,982 | |||
All current executive officers as a group | 5,003,744 | |||
All current directors who are not executive officers as a group | 970,080 | |||
Each nominee for election as a director | ||||
Charles Cohen, Ph.D. | 97,299 | |||
Carl B. Feldbaum, Esq. | 97,299 | |||
Maria C. Freire, Ph.D. | 97,122 | |||
Alan M. Garber, M.D., Ph.D. | 97,299 | |||
Vincent T. Marchesi, M.D., Ph.D. | 72,291 | |||
Michael M. Morrissey, Ph.D. | 1,920,436 | |||
Stelios Papadopoulos, Ph.D. | 72,291 | |||
George Poste, DVM, Ph.D., FRS | 72,291 | |||
Julie Anne Smith | 97,299 | |||
Lance Willsey, M.D. | 97,299 | |||
Jack L. Wyszomierski | 72,291 | |||
Each associate of any executive officers, current directors or director nominees | — | |||
Each other person who received or is to receive 5% of awards | — | |||
All employees, including all current officers who are not executive officers, as a group | 11,589,449 |
2020 Proxy Statement 47
Equity Compensation Plan Information
The following table provides certain information about our common stock that may be removed byissued upon the holdersexercise of a majoritystock options and other rights under all of our existing equity compensation plans as of January 3, 2020, which consists of our 2000Non-Employee Directors’ Stock Option Plan (the Director Plan), our 2000 Employee Stock Purchase Plan (the ESPP), our 2011 Equity Incentive Plan (the 2011 Plan), the shares then entitled to vote at an election of directors.”
Effect on Bylaws
The Board has approved2014 Plan, our 2016 Inducement Award Plan (the 2016 Plan) and the below changes to Exelixis’ Bylaws, contingent on the effectiveness of the proposed amendment to the Certificate of Incorporation:
Section 17 of the Bylaws is amended to read in its entirety as follows:
“Section 17. Term of Office. The term of office of each director shall be as provided in the Certificate of Incorporation.”2017 Plan:
Plan Category | Number of securities options, warrants and | Weighted-average options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||
Equity compensation plans approved by stockholders (1) | 29,030,468 | $ 6.86 | (2) | 10,497,315 | ||||||||
Equity compensation plans not approved by stockholders (3) | 213,014 | $15.76 | (4) | — | ||||||||
Total | 29,243,482 | $ 6.93 | 10,497,315 |
Section 20 of the Bylaws is amended to read in its entirety as follows:
(1) | Equity plans approved by our stockholders include the Director Plan, the 2011 Plan, the 2014 Plan, the 2017 Plan and the ESPP. As of January 3, 2020, a total of 4,238,999 shares of our common stock remained available for issuance under the ESPP, and up to a maximum of 465,480 shares of our common stock may be purchased in the current purchase period. The shares issuable pursuant to our ESPP are not included in the number of shares to be issued pursuant to rights outstanding or the weighted-average exercise price of such rights as of January 3, 2020, as those numbers are not known. |
“Section 20. Intentionally Omitted.”
(2) | The weighted-average exercise price takes into account the shares subject to outstanding RSUs, including such awards with performance conditions which have no exercise price. The weighted-average exercise price, excluding such outstanding RSUs, is $9.83. |
(3) | Represents shares of our common stock issuable pursuant to the 2016 Plan. As of January 3, 2020, no shares of our common stock remained available for additional grants under the 2016 Plan. In November 2016, the Board adopted the 2016 Plan pursuant to which we reserved 1,500,000 shares of our common stock for issuance under the 2016 Plan. The only persons eligible to receive grants of Awards under the 2016 Plan are individuals who satisfy the standards for inducement grants under Nasdaq Marketplace Rule 5635(c)(4) and the related guidance under Nasdaq IM5635-1—that is, generally, a person not previously an employee or director of Exelixis, or following a bona fide period ofnon-employment, as an inducement material to the individual’s entering into employment with Exelixis. An “Award” is any right to receive Exelixis common stock pursuant to the 2016 Plan, consisting of nonstatutory stock options, stock appreciation rights, restricted stock awards, RSUs, or any other stock award. |
(4) | The weighted-average exercise price takes into account the shares subject to outstanding RSUs, which have no exercise price. The weighted-average exercise price, excluding such outstanding RSUs, is $19.41. |
Required Vote and Board of Directors Recommendation
The affirmative vote of at least sixty-six and two-thirds percent (66-2/3%)the holders of a majority of the shares issued and outstandingpresent or represented by proxy and entitled to vote onat the proposalAnnual Meeting is required to approve the amendment toAmended 2017 Plan. Abstentions will be counted toward the Certificatetabulation of Incorporation to declassifyvotes cast on the Board to provide for annual elections by the 2020 Annual Meeting of Stockholders. Abstentionsproposal and broker non-votes, if any, will have the same effect ofas votes against this proposal.
If our stockholders approve Brokernon-votes will have no effect and will not be counted towards the proposed amendment to the Certificate of Incorporation, it will become effective upon filing with the Secretary of State of the State of Delaware a certificate setting forth the amendment, which we anticipate doing as soon as practicable following stockholder approval.vote total.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 3.
3048 Exelixis, Inc.
Proposal 4 | Advisory Vote on the Compensation of the Named Executive Officers
ADVISORY VOTEONTHE COMPENSATIONOFTHE NAMED EXECUTIVE OFFICERS
Our stockholders are entitled to vote to approve, on an advisory basis, the compensation, as disclosed in this Proxy Statement, of our Chief Executive Officer, Chief Financial Officer and the other executive officers appearing in the table entitled “Summary“Summary Compensation Table”Table” later in this Proxy Statement (collectively, the Named Executive Officers). This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, policies and practices described in this Proxy Statement.
The compensation of our Named Executive Officers subject to the vote is disclosed in “Compensation Discussion and Analysis,” and the compensation tables and the related narrative disclosure contained in this Proxy Statement. This year, we have also included a discussion of our stockholder engagement effort focused on executive compensation during fiscal 2018, as well as a discussion of changes made by our Compensation Committee to the executive compensation program for fiscal 2018 in response to that engagement effort. As discussed in the “Compensation Discussion and Analysis” section of this Proxy Statement, the success of biotechnology companies is significantly influenced by their work forces. We believe it is critical to our business that we retain our core team of highly qualified employees, including our executive officers. Large pharmaceutical and biotechnology companies and strong local competitors have aggressively recruited our executives and other skilled employees, with the most critical positions at our company among those that are the most in demand. In light of these circumstances, we have designed our executive compensation program to help attract and retain highly qualified individuals with relevant experience in the biotechnology industry to manage the varied aspects of our evolving business. The primary objective of our executive compensation program is to retain and motivate our core team of highly qualified employees, including our Named Executive Officers, and align their compensation with our critical business objectives and performance, as well as with the interests of our stockholders.
The Board encourages our stockholders to review the compensation tables and read the disclosures set forth in the “Compensation Discussion and Analysis” section of this Proxy Statement that describe our executive compensation program and the compensation of our Named Executive Officers for fiscal 2018. The2019. For the reasons described in this Proxy Statement, the Board believes that our executive compensation program strongly aligns with the interests of our stockholders, effectively alignsties executive compensation with our performance and results in the attraction and retention of highly talented executives.
Accordingly, the Board recommends that our stockholders vote FOR the following resolution:
“RESOLVED, that the compensation paid to the Named Executive Officers, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”
Required Vote and Board of Directors Recommendation
Advisory approval of Proposal 4 requires the affirmative vote of a majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote at the Annual Meeting.on this proposal. Abstentions will be counted toward the tabulation of votes cast on the proposal and will have the same effect as votes against this proposal. Brokernon-votes will have no effect.
Our stockholders have expressed a preference, and our Board has determined, to hold an advisory vote on executive compensation annually. We are presenting this Proposal 4 as required by Section 14A of the Exchange Act. Our Board believes that approval of Proposal 4 is in our best interests and the best interests of our stockholders for the reasons stated above. Because the vote is advisory, it is not binding on the Board or on us. Nevertheless, the views expressed by our stockholders, whether through this vote or otherwise, are important to management and the Board and, accordingly, the Compensation Committee and Board intend to consider the results of this vote in making determinations in the future regarding executive compensation arrangements. Your vote will serve as an additional tool to guide the Compensation Committee and Board in continuing to improve the alignment of our executive compensation programs with business objectives and performance and with the interests of our stockholders. Unless our Board changes the frequency of future advisory votes on executive compensation, the next advisory vote on executive compensation will be held at the 2021 Annual Meeting of Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 4.
20192020 Proxy Statement 3149
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of our common stock as of February 28, 2019,2020, (except as noted) by: (i) each director and nominee for director; (ii) each of the executive officers named in theSummary Compensation Table;Table; (iii) all current executive officers and directors of Exelixis as a group; and (iv) all those known by us to be beneficial owners of more than five percent of our common stock.
Beneficially Owned (1) | Beneficially Owned (1) | |||||||||||||||
Name of Beneficial Owner | Number of Shares of Common Stock | Percentage of Total | Number of Shares of Common Stock | Percentage of Total | ||||||||||||
Executive Officers and Directors | ||||||||||||||||
Michael M. Morrissey, Ph.D. (2) | 3,222,949 | 1.1 | % | 2,942,639 | 1.0 | % | ||||||||||
Gisela M. Schwab, M.D. (3) | 1,860,620 | * | 1,606,944 | * | ||||||||||||
Christopher J. Senner (4) | 646,671 | * | 785,993 | * | ||||||||||||
Jeffrey J. Hessekiel, J.D. (5) | 882,434 | * | 920,737 | * | ||||||||||||
Peter Lamb, Ph.D. (6) | 1,256,800 | * | 1,155,890 | * | ||||||||||||
Charles Cohen, Ph.D. (7) | 356,033 | * | 398,674 | * | ||||||||||||
Carl B. Feldbaum, Esq. (8) | 232,725 | * | 275,366 | * | ||||||||||||
Maria C. Freire, Ph.D. (9) | 47,644 | * | 79,745 | * | ||||||||||||
Alan M. Garber, M.D., Ph.D. (10) | 352,943 | * | 266,128 | * | ||||||||||||
Vincent T. Marchesi, M.D., Ph.D. (11) | 303,477 | * | 270,365 | * | ||||||||||||
Stelios Papadopoulos, Ph.D. (12) | 1,347,665 | * | 1,376,236 | * | ||||||||||||
George Poste, D.V.M., Ph.D., FRS (13) | 310,620 | * | ||||||||||||||
George Poste, DVM, Ph.D., FRS (13) | 290,331 | * | ||||||||||||||
George A. Scangos, Ph.D. (14) | 1,627,970 | * | 1,255,611 | * | ||||||||||||
Julie A. Smith (15) | 98,041 | * | 140,682 | * | ||||||||||||
Lance Willsey, M.D. (16) | 744,073 | * | 736,714 | * | ||||||||||||
Jack L. Wyszomierski (17) | 375,057 | * | 395,806 | * | ||||||||||||
All current directors, executive officers as a group (17 persons) (18) | 14,037,144 | 4.5 | % | 13,336,913 | 4.2 | % | ||||||||||
5% Stockholders | ||||||||||||||||
BlackRock, Inc. (19) 55 East 52nd Street New York, New York 10055 | 30,584,751 | 10.2 | % | 31,834,126 | 10.4 | % | ||||||||||
The Vanguard Group (20) 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | 27,335,719 | 9.1 | % | 28,111,171 | 9.2 | % | ||||||||||
FMR LLC (21) 245 Summer Street Boston, Massachusetts 02210 | 21,317,889 | 7.1 | % | |||||||||||||
Meditor Group Ltd. (22) Wessex House, 3rd Floor 45 Reid Street Hamilton HM12, Bermuda | 15,966,038 | 5.3 | % | |||||||||||||
Renaissance Technologies LLC (21) 800 Third Avenue New York, New York 10022 | 17,953,926 | 5.9 | % |
* | Less than one percent. |
(1) | This table is based upon information supplied by executive officers and directors and upon information gathered by us about principal stockholders known to us. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting |
32 Exelixis, Inc.
Security Ownership of Certain Beneficial Owners and Management
and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on |
50 Exelixis, Inc.
Security Ownership of Certain Beneficial Owners and Management
acquire voting or investment power within 60 days of February 28, |
(2) | Includes |
(3) | Includes |
(4) | Includes |
(5) | Includes |
(6) | Includes |
(7) | Includes |
(8) | Includes |
(9) | Includes 3,530 shares issuable pursuant to RSUs that will vest within 60 days of February 28, |
(10) | Includes |
(11) | Includes |
(12) | Includes |
(13) | Includes |
(14) | Includes 8,963 shares held by Dr. Scangos and Leslie S. Wilson, as Trustees of The Jennifer Wilson Scangos Trust, and 8,963 shares held by Dr. Scangos and Leslie S. Wilson, as Trustees of The Katherine Wilson Scangos Trust. Also includes |
(15) | Includes |
(16) | Includes |
(17) | Includes |
2019 Proxy Statement 33
(18) | Total number of shares includes |
2020 Proxy Statement 51
2020, 381,360 of which would be subject to repurchase by us, if so exercised. Also includes |
(19) | BlackRock, Inc. reported that it has sole voting power over |
(20) | The Vanguard Group reported that it has sole voting power over |
(21) |
|
These shares are beneficially owned by |
3452 Exelixis, Inc.
Executive Officers
The following chart sets forth certain information regarding our executive officers as of March 25, 2019:23, 2020:
Name | Age | Position | ||
Michael M. Morrissey, Ph.D. (1) | President and Chief Executive Officer | |||
Gisela M. Schwab, M.D. | President, Product Development and Medical Affairs and Chief Medical Officer | |||
Christopher J. Senner | Executive Vice President and Chief Financial Officer | |||
Patrick J. Haley | ||||
Jeffrey J. Hessekiel, J.D. | Executive Vice President and General Counsel | |||
Peter Lamb, Ph.D. | Executive Vice President, Scientific Strategy and Chief Scientific Officer |
(1) | Please see |
Gisela M. Schwab, M.D. President, Product Development and Medical Affairs and Chief Medical Officer
|
Gisela M. Schwab, M.D., has served as President, Product Development and Medical Affairs and Chief Medical Officer since February 2016. Previously she served as Executive Vice President and Chief Medical Officer from January 2008 to February 2016 and as Senior Vice President and Chief Medical Officer from September 2006 to January 2008. From 2002 to 2006, she held the position of Senior Vice President and Chief Medical Officer at Abgenix, Inc., a human antibody-based drug development company. She also served as Vice President, Clinical Development, at Abgenix from 1999 to 2001. Prior to working at Abgenix, from 1992 to 1999, she held positions of increasing responsibility at Amgen Inc., most recently as Director of Clinical Research and Hematology/Oncology Therapeutic Area Team Leader. From August 2011 through July 2014, Dr. Schwab served as a member of the board of directors of Topotarget A/S, a |
Christopher J. Senner Executive Vice President and Chief Financial Officer
|
Christopher J. Senner, has served as Executive Vice President and Chief Financial Officer (and in such capacity, as our principal financial officer and principal accounting officer, as defined under applicable securities laws) since July 2015. Prior to joining Exelixis, Mr. Senner served as Vice President, Corporate Finance for Gilead Sciences, Inc., a biopharmaceutical company, from March 2010 to July 2015, where he was accountable for controllership, tax, treasury and corporate and operational financial planning. Mr. Senner previously spent eighteen years at Wyeth, a pharmaceutical company acquired by Pfizer Inc. in 2009, in a variety of financial roles with increasing responsibility, most notably as Chief Financial Officer of Wyeth’s U.S. pharmaceuticals business and the BioPharma Business Unit. Since 2019, Mr. Senner has served as a member of the board of directors of Cortexyme, Inc., a publicly held clinical-stage biopharmaceutical company. Mr. Senner holds a B.S. in Finance from Bentley College. |
P.J. Haley
|
P.J. Haley, has served as the company’s |
20192020 Proxy Statement 3553
Jeffrey J. Hessekiel, J.D. Executive Vice President and General Counsel
|
Jeffrey J. Hessekiel, J.D., has served as Executive Vice President and General Counsel since February 2014 and as its Secretary from October 2014 to September 2017. From 2012 to 2014, he held the position of Senior Counsel at Arnold & Porter Kaye Scholer LLP, where he advised emerging growth and public companies, primarily in the life sciences sector, on complex legal issues connected with strategic transactions, healthcare compliance programs and investigations, and regulatory matters. Prior to working with Arnold & Porter, from 2002 to 2012, he held positions of increasing responsibility at Gilead Sciences, Inc., most recently as Chief Compliance & Quality Officer where he was responsible for the creation and management of Gilead’s Corporate Compliance & Quality department. From 1998 to 2002, Mr. Hessekiel held the position of Associate, working on both litigation and corporate matters for Wilson Sonsini Goodrich and Rosati PC. Mr. Hessekiel also worked as an Associate focusing on litigation matters for Heller Ehrman LLP from 1996 to 1998. Prior to joining Heller Ehrman LLP, Mr. Hessekiel also worked for several internationalnon-governmental organizations. Mr. Hessekiel received his J.D. from The George Washington University Law School and is admitted to practice in California. Mr. Hessekiel received a B.A. in Political Science from Duke University. |
Peter Lamb, Ph.D. Executive Vice President, Scientific Strategy and Chief Scientific Officer
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Peter Lamb, Ph.D., has served as Executive Vice President, Scientific Strategy and Chief Scientific Officer since February 2016. Previously, he served as Executive Vice President, Discovery Research and Chief Scientific Officer from September 2009 to February 2016, as Senior Vice President, Discovery Research and Chief Scientific Officer from January 2007 until September 2009, as Vice President, Discovery Pharmacology from December 2003 until January 2007 and as Senior Director, Molecular Pharmacology and Structural Biology from October 2000 until December 2003. Prior to joining Exelixis, from June 1992 until September 2000, Dr. Lamb held positions of increasing responsibility at Ligand Pharmaceuticals, a pharmaceutical company, most recently serving as Director of Transcription Research. Dr. Lamb has held post-doctoral research fellowships at the Carnegie Institution, Department of Embryology, with Dr. S.L. McKnight and the University of Oxford with Dr. N.J. Proudfoot, working in the field of gene regulation. He has authored numerous articles in the fields of gene expression, signal transduction and oncology, and is an author on multiple issued and pending U.S. patents. He has a Ph.D. in Molecular Biology from the ICRF/University of London and a B.A. in Biochemistry from the University of Cambridge. |
3654 Exelixis, Inc.
Compensation of Executive Officers | Compensation Discussion and Analysis
COMPENSATION OF EXECUTIVE OFFICERS
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (CD&A) explains the strategy, design, and decision-making related to our compensation programs and practices for our principal executive officer, our principal financial officer and our three other most highly compensated executive officers, who we refer to collectively as our Named Executive Officers. This CD&A is intended to provide perspective on the information contained in the tables that follow this discussion. For fiscal 2018,2019, our Named Executive Officers were:
Named Executive Officers | Title | |
Michael M. Morrissey, Ph.D. | President and Chief Executive Officer | |
Gisela M. Schwab, M.D. | President, Product Development and Medical Affairs and Chief Medical Officer | |
Christopher J. Senner | Executive Vice President and Chief Financial Officer | |
Jeffrey J. Hessekiel, J.D. | Executive Vice President and General Counsel | |
Peter Lamb, Ph.D. | Executive Vice President, Scientific Strategy and Chief Scientific Officer |
While the principal purpose of this CD&A is to discuss the compensation of our Named Executive Officers, many of the programs discussed apply to other members of senior management who, together with the Named Executive Officers, are collectively referred to as our executive officers.
Our Business
We are an oncology-focused biotechnology company that aimsstrives to accelerate the discovery, development and commercialization of new medicines fordifficult-to-treat cancers. Since we were founded in 1994, four products resulting from our discovery efforts have progressed through clinical development, and received regulatory approval; three haveapproval and established a growing commercial presence in markets worldwide, and we expect thatvarious geographies around the fourth will soon enter the marketplace in Japan.world. Two are derived from cabozantinib, our flagship molecule, an inhibitor of multiple tyrosine kinases including MET, AXL, VEGF receptors and RET. TheseOur cabozantinib products are: CABOMETYX® (cabozantinib) tablets, approved for advanced renal cell carcinoma (RCC) and previously treated hepatocellular carcinoma (HCC),; and COMETRIQ® (cabozantinib) capsules, approved for progressive, metastatic medullary thyroid cancer. The two other products resulting from our discovery efforts are: COTELLIC® (cobimetinib), an inhibitor of MEK approved as part of a combination regimen to treat advanced melanoma and marketed under a collaboration with Genentech, Inc. (a member of the Roche Group) (Genentech); and MINNEBROTM® (esaxerenone), an oral,non-steroidal, selective blocker of the mineralocorticoid receptor approved for the treatment of hypertension in Japan and licensed to Daiichi Sankyo Company, Limited Company.(Daiichi Sankyo).
20182019 Financial Performance Highlights1
We delivered strong financial results in fiscal 2018, increasing total revenue by 89% year over year and ending fiscal 2018 with a healthy cash and investments balance of $851.6 million. We also continued to execute on our tactical plan to generate product and collaboration revenue to reinvest in our business in order to drive the expansion and depth of our product offerings. Other key financial highlights from fiscal 2018 include:
13% Year over year total revenue growth | We delivered strong financial results in fiscal 2019, increasing total revenues by 13% year over year and ending fiscal 2019 with a healthy cash and investments balance of $1.4 billion. We also continued to execute on our tactical plan to generate product and collaboration revenues to reinvest in our business and drive the expansion and depth of our product offerings. Other key financial highlights from fiscal 2019 include: ›› | Cabozantinib franchise net product |
›› | Total |
›› | Total operating expenses of |
›› | A | |||
$1.4B Year-end cash and investments balance | ||||
$1.02 Diluted earnings per share |
1 | Amounts included in 2019 Financial Performance Highlights are calculated in accordance with U.S. Generally Accepted Accounting Principles. |
20192020 Proxy Statement 3755
Stock Price Performance
Our strong financial and corporate performance for the three-year period ended December 31, 2018 also resulted in a stock price that continued to significantly outperform our 2018 peer group (described below) as a whole and the Russell 3000 Index, as well as the Standard & Poor’s (S&P) 400 MidCap Index, to which we were added in July 2018.
The foregoing graph compares, for the three-year period ended December 31, 2018, the cumulative total stockholder return for our common stock, the Russell 3000 Index, the S&P 400 MidCap Index and an average of the companies that form our 2018 peer group. The graph assumes that $100 was invested on December 31, 2015 in each of our common stock, the Russell 3000 Index, the S&P 400 MidCap Index and in each company in our 2018 peer group, and assumes reinvestment of any dividends. We believe it places our corporate performance in context and highlights the strength of our results relative to our 2018 peer group as a whole and the market, despite the decline of our stock price during 2018. The stock price performance on the graph is not necessarily predictive of future stock price performance.
20182019 Corporate Performance Highlights
4 Commercial products | 9 Ongoing potentially | 20 Ongoingdiscovery |
In fiscal 2018,2019, we continued to drive growth by executing on our strategy to make CABOMETYX the tyrosine kinase inhibitor of choice for patients with RCC, to build our product portfolio through cabozantinib label-enabling clinical trials and substantially advanced toward our goal to become a fully integrated biotechnology company. When considering corporate performance factors, the Compensation Committee’s decision-making in 2018 was rooted in the understanding that our Named Executive Officers led our company to achieve this noteworthy success.create new product opportunities through internal and external research and development efforts. Key highlights of our corporate performance included:
Successful Commercialization of CABOMETYX for Advanced RCC in an Increasingly Competitive Market
›› | In the U.S., |
›› | In markets outside the U.S., we |
38 Exelixis, Inc.
Compensation of Executive Officers | Compensation Discussion and Analysis
Navigation of Regulatory Pathways Toward Expansion of CABOMETYX Label as afor the Treatment for Patients with HCC Who Have Previously Been Treated with Sorafenib
›› |
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›› | In an effort to help make CABOMETYX available to eligible HCC patients |
Late-Stage 56 Exelixis, Inc.
Compensation of Executive Officers | Compensation Discussion and Analysis
Evaluation of Cabozantinib as a Monotherapy and in Combination with Immune Checkpoint InhibitorsMultiple Potentially Label-Enabling Clinical Trials
›› | In |
|
›› | Building upon encouraging clinical activity observed in |
Expansion of Product Pipeline
›› | In |
›› | As part of our strategy to expand our product pipeline through thein-license of attractive, early-stage oncology assets, in |
›› | Significant milestones were reached under our collaboration agreements with Daiichi Sankyo and Genentech, including regulatory approval of MINNEBRO for the treatment of |
Successful Management of Organizational Growth and TransitionExpansion of Corporate Headquarters
›› | In support of the execution of our planned cabozantinib development activities and resumption of internal discovery efforts, we increased hiring activities, and as of the end of fiscal |
›› | In contemplation of our continued organizational growth, we expanded our corporate headquarters by approximately 94,000 square feet of laboratory and office space and entered into abuild-to-suit lease for approximately 220,000 square feet of office space located adjacent to our existing corporate headquarters in |
2020 Proxy Statement 57
2019 Executive Compensation Program Highlights
Following several years of growth and evolution, we have developed into a fully integrated biotechnology company and created a strong foundation from which we intend to continue to create value for all of our stakeholders. Building upon this foundation, in 2019, we achieved significant research, development and financial milestones that helped position us to be able to deliver upon our goal of driving the expansion and depth of our product offerings. The Compensation Committee believes that the 2019 compensation of our employees, including our Named Executive Officers, reflects not only the achievement of these milestones, but will also encourage appropriate efforts towards the achievement of our key priorities and anticipated milestones for 2020 and 2021, including generatingtop-line data from key clinical trials, completing enrollment of ongoing studies, initiating new pivotal trials, and progressing ourmid-stage and early product pipeline. In light of the above, the Board and Compensation Committee took the following key actions with respect to 2019 compensation for our Named Executive Officers:
Key Compensation Actions | Description | |
Approved Salary Increases for Named Executive Officers | In February 2019, the Compensation Committee increased base salaries of our Named Executive Officers by between 4.0% and 6.5% over salaries for 2018. | |
Implemented a 100% Performance-Based | In September 2019, as part of our ongoing equity incentive compensation program, the Compensation Committee granted 100% performance-based RSU awards (PSUs). A 100% PSU approach strongly aligns our Named Executive Officers’ compensation with the interests of our stockholders because the PSUs only vest upon the achievement of a regulatory milestone critical to our future long-term growth. | |
Applied an Objective Framework to Determine Annual Cash Bonuses that are Aligned with Strong Company Performance | In February 2020, the Compensation Committee approved the payment of cash bonuses in amounts between 110% and 114% of each Named Executive Officer’s 2019 target cash bonus amounts. These decisions reflected the Compensation Committee’s assessment of the overall achievement of ourpre-determined 2019 corporate |
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Compensation of Executive Officers | Compensation Discussion and Analysis
Compensation Practices and Governance Highlights
Pay for Performance | ›› We link the compensation of our Named Executive Officers to the achievement of our corporate goals and | |
Stockholder Alignment | ›› We use long-term equity incentives to align the interests of our | |
Alignment of Compensation Metrics and Corporate Strategy | ›› Our Compensation Committee establishes long-term incentive compensation programs based on metrics that are aligned with our corporate strategy and designed to build value for our stockholders. | |
Compensation Governance | ›› Our Compensation Committee is made up entirely of independent directors and engages an independent compensation consultant to advise on executive compensation matters. | |
Stockholder Feedback | ›› We value the feedback of our stockholders and solicit it on a regular basis, including through an annual stockholder vote to approval oursay-on-pay proposal. | |
Recoupment (or Clawback) Policy | ›› We adopted the Clawback Policy that permits the company to recoup variable compensation from senior level employees, including our Named Executive Officers, in the | |
Annual Cash Bonus Amounts Subject to | ›› Our | |
Equity Plan Features | ›› Applies a maximum7-year term for stock options. ›› Prohibits repricing of underwater stock options without prior stockholder approval. ›› The 2017 Plan also includes minimum vesting requirements of no less than one year for all types of awards, subject to limited exceptions. | |
Stock Ownership Guidelines | ›› We apply stock ownership guidelines to directors and executive officers to further align their interests with those of our stockholders. | |
Change in Control Provisions | ›› Does not include excessive change in control or severance payments. ›› Provides “double-trigger” change in control benefits. ›› Does not include taxgross-ups on severance or change in control benefits. | |
Perquisites, Retirement and Pension Benefits | ›› Our Named Executive Officers do not receive excessive perquisites or post-termination retirement or pension benefits that are | |
Prohibition on Hedging and Margin Loans | ›› We prohibit hedging and purchases on margin by executive officers and directors. | |
Meaningful Limits on Pledging | ›› We limit pledging of our common stock by executive officers and directors to circumstances where the individual can clearly demonstrate the financial capacity to repay the loan without resorting to the pledged securities. No executive officers or directors pledged our common stock during 2019. | |
Compensation Risk Assessment | ›› Our Compensation Committee conducts an annual risk assessment of our compensation policies and practices to ensure that our programs are not reasonably likely to have a |
EnhancementsObjectives of the Compensation Program
The primary goals of our executive compensation program are to:
›› | Provide market-competitive compensation that attracts, retains and motivates our executive officers to achieve our short- and long-term business objectives; |
2020 Proxy Statement 59
›› | Align our executive officers’ compensation with the interests of our stockholders; and |
›› | Reward our executive officers for success in achieving our corporate goals. |
The success of any biotechnology company depends in large part upon the quality of its work force. Therefore, we believe it is critical to 2018our business that we retain our core team of highly qualified employees, including our Named Executive Officers. As a testament to the high demand for their services in the marketplace, large pharmaceutical and biotechnology companies and strong local competitors have pursued our executives and other highly skilled employees. In light of this competitive pressure, each year we design our executive compensation program to help attract, motivate and retain highly qualified individuals with relevant experience in the biotechnology industry to manage the varied aspects of our growing business operations. We believe the twelve-year average tenure of our Named Executive Officers and the strength of our corporate and financial performance following the first FDA approval of CABOMETYX in April 2016 are evidence of what we believe to be the effectiveness of our compensation program with respect to retention and building value for our stockholders.
How We Determine Executive Compensation
Role of the Compensation ProgramCommittee, Compensation Consultants and Executive Officers in Compensation Decisions
Role of the Compensation Committee
The Compensation Committee is responsible for evaluating and approving the compensation packages offered to our Named Executive Officers. When appropriate, the Compensation Committee will solicit the input of, or present its recommendations on compensation matters for consideration and approval to, the full Board. The Compensation Committee acts on behalf of the Board in discharging the Board’s responsibilities with respect to overseeing our compensation policies, plans, and programs, and establishing and reviewing general policies relating to compensation and benefits of our employees. The Compensation Committee also administers our equity and other incentive plans. The Compensation Committee does not delegate any of its functions to others in determining executive compensation.
Role of Compensation Consultants
Under its charter, the Compensation Committee has the authority to obtain the advice and assistance from external advisors to assist it in the performance of its duties. In accordance with this authority, the Compensation Committee engages external advisors to advise on executive officer compensation, including base salaries, bonus targets and equity compensation, as well as director compensation. These advisors also prepare industry compensation data, assist with the development of our peer group, and advise the Compensation Committee on best industry practices and relevant changes to regulations that may impact the Compensation Committee’s decision-making process with regard to executive officer and director compensation determinations. For 2019 compensation matters, the Compensation Committee retained the consulting firm Compensia, to advise and assist with the following:
›› | Development of a peer group to be used in the evaluation of 2019 executive and director compensation determinations. |
›› | Documentary support, including peer group and industry data with respect to base salaries, target annual cash bonuses, and equity compensation. |
›› | A market analysis of executive officer compensation compared to our peer group, which market analysis was reviewed with the Compensation Committee and used to guide 2019 base salary and bonus target decisions for our Named Executive Officers. |
›› | A market analysis of long-term incentive compensation of our executive officers compared to our peer group, which market analysis was reviewed with the Compensation Committee and used to guide 2019 long-term equity compensation determinations. |
The Compensation Committee assessed the independence of Compensia pursuant to SEC rules and concluded that the work performed by Compensia for the Compensation Committee did not raise any conflicts of interest.
Role of Executive OfficersDr. Morrissey, our President and Chief Executive Officer, also participates in the Compensation Committee’s deliberations with respect to Named Executive Officer compensation other than his own; he is not present during deliberations and voting concerning his compensation. Each year, Dr. Morrissey and other senior management develop annual corporate goals and performance targets for long-term incentive awards for the company, which are reviewed and, subject to their input, approved by the Compensation Committee.
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Compensation of Executive Officers | Compensation Discussion and Analysis
Compensation Committee Process
In setting the level of salary, annual cash bonus and long-term incentive compensation for our Named Executive Officers, the Compensation Committee typically considers various factors, including:
›› | the performance of the company during the prior year; |
›› | the contribution of each Named Executive Officer toward achievement of our corporate goals, including contributions toward departmental achievements in each Named Executive Officer’s area of responsibility that drove the achievement of such corporate goals during the prior year; |
›› | the criticality of each Named Executive Officer’s skill set and relative expected future contributions to our business; |
›› | the growing complexity of our business and expanding workforce resulting in increased workloads and responsibilities of our Named Executive Officers; |
›› | the appropriate mix of compensation for each Named Executive Officer; |
›› | the historical salary, cash bonus and percentage of vested versus unvested equity awards held by each Named Executive Officer; and |
›› | market data, which include competitive information relating to compensation levels for comparable positions in the biotechnology and life sciences sector and for our specific peer group. |
The Compensation Committee balances each of these factors, as applicable in any given year, against our cash resources and the critical need to prioritize clinical development and pipeline expansion investments over other expenditures, as well as our aggregate equity burn rate. Using this process, our Compensation Committee strives to ensure that our executive compensation program as a whole is competitive.
An integral part of the review process with respect tofor our executive compensation program wasis our stockholder outreach initiative, aimed at creatingeliciting a better understanding of the concerns and perspectives of our stockholder base.
Range of Governance and Business Topics Discussed with Stockholders During 2019
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›› Executive Compensation |
›› ESG Disclosures |
›› Special Meeting Requests |
›› Business Strategy and Execution |
›› Board Refreshment |
›› Risk Oversight |
Each year, during the period following the filing of our Proxy Statement with the SEC and the date of our annual meeting, we engage with our stockholders to seek support for our annual meeting proposals and request feedback regarding our executive compensation program and other governance matters of importance to our stockholders.matters. Stockholder feedback is then reported to the Compensation Committee, Nominating & Corporate Governance Committeeappropriate committee and/or the entire Board for consideration. During this period in 2018,2019, we reached out to stockholders representing more than 57%44% of our outstanding shares at that time. Participants at these meetings included members of the management team and the chairChair of our Compensation Committee.Committee, depending on availability. This outreach effort provided the opportunity to discuss executive compensation measures that are in the best interest of our stockholders and to convey our commitment to align pay and performance.
After our 2019 Annual Meeting, we again reached out to stockholders holding more than 51% of our outstanding shares at that time to solicit additional feedback on the design of our executive compensation program, discuss governance practices and obtain input on our ESG disclosure plans. Members of the management team, as well as either the Chair of our Board or
2020 Proxy Statement 61
the Compensation Committee, participated in these meetings. These conversations yielded constructive feedback, which was summarized and reported to the Compensation Committee and the Board as a whole. In consideration of this feedback, the Compensation Committee designed a 100% performance-based long-term incentive compensation program, the Board provided our stockholders with the right to call a special meeting, subject to certain ownership requirements and procedures, and we published our ESG disclosures on our website atwww.exelixis.com under the caption “Impact—Environmental, Social and Governance.”
We intend to continue to engage with our stockholders throughout the year, and we invite you to reach out with any comments or questions at any time. Please see our website atwww.exelixis.com under the caption “Investors & Media—Contact IR” for the appropriate contact information.
Stockholder Advisory Vote on Executive Compensation
Our stockholders are provided the opportunity to cast an annual advisory vote on our executive compensation program, andRole of the Compensation Committee takes the results of this vote into account when determining
The Compensation Committee is responsible for evaluating and approving the compensation of the company’spackages offered to our Named Executive Officers. At our annual meeting of stockholders held in May 2018, approximately 79% of the votes present and entitled to vote voted in favor of thesay-on-pay proposal, which was a decline from 97% in 2017. We gave thoughtful consideration to this development, and to better understand our stockholders’ perspective concerning our executive compensation, we greatly expanded our regular engagement activities. We were particularly focused on those stockholders who voted against oursay-on-pay proposal and reached out to all such stockholders holding more than 0.35% of outstanding shares. Members of the management team participated in these meetings, and the stockholder feedback received was shared and discussed with the Compensation Committee. As a result of this feedback,When appropriate, the Compensation Committee approved several changeswill solicit the input of, or present its recommendations on compensation matters for consideration and approval to, our executive compensation program in an effort to enhance the performance-based naturefull Board. The Compensation Committee acts on behalf of the program, create better alignmentBoard in discharging the Board’s responsibilities with the interestsrespect to overseeing our compensation policies, plans, and programs, and establishing and reviewing general policies relating to compensation and benefits of our stockholders, establish greater accountabilityemployees. The Compensation Committee also administers our equity and increase overall transparency.other incentive plans. The Compensation Committee does not delegate any of its functions to others in determining executive compensation.
Role of Compensation Consultants
In consideration of the constructive feedback from our stockholders and following thoughtful deliberation,Under its charter, the Compensation Committee has the authority to obtain the advice and Board tookassistance from external advisors to assist it in the following key actionsperformance of its duties. In accordance with respectthis authority, the Compensation Committee engages external advisors to advise on executive officer compensation, forincluding base salaries, bonus targets and equity compensation, as well as director compensation. These advisors also prepare industry compensation data, assist with the development of our Named Executive Officers:peer group, and advise the Compensation Committee on best industry practices and relevant changes to regulations that may impact the Compensation Committee’s decision-making process with regard to executive officer and director compensation determinations. For 2019 compensation matters, the Compensation Committee retained the consulting firm Compensia, to advise and assist with the following:
›› | Development of a peer group to be used in the evaluation of 2019 executive and director compensation determinations. |
| ›› | Documentary support, including peer group and industry data with respect to base salaries, target annual cash bonuses, and equity compensation. |
How We Responded
| A market analysis of executive officer compensation compared to our |
›› | A market analysis of long-term | |
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The Compensation Committee assessed the independence of Compensia pursuant to SEC rules and concluded that the work performed by Compensia for the Compensation Committee did not raise any conflicts of interest.
Role of Executive OfficersDr. Morrissey, our President and Chief Executive Officer, also participates in the Compensation Committee’s deliberations with respect to Named Executive Officer compensation other than his own; he is not present during deliberations and voting concerning his compensation. Each year, Dr. Morrissey and other senior management develop annual corporate goals and performance targets for long-term incentive awards for the company, which are reviewed and, subject to their input, approved by the Compensation Committee.
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Compensation of Executive Officers | Compensation Discussion and Analysis
Compensation Committee Process
In contemplationsetting the level of our continued growthsalary, annual cash bonus and evolving complexities of our business following the commercial success of CABOMETYX, we undertook a comprehensive review of our executive compensation program, including through the evaluation of each component of our program relative to our 2018 peer group. That review process resulted in the following additional actions with respect to 2018long-term incentive compensation for our Named Executive Officers:Officers, the Compensation Committee typically considers various factors, including:
› | the performance of the company during the prior year; |
How We Responded
| the contribution of each Named Executive Officer toward achievement of our corporate goals, including contributions toward departmental achievements in each Named Executive Officer’s area of responsibility that drove the achievement of such |
›› | the criticality of each Named Executive Officer’s skill set and relative expected future contributions to our business; |
›› | the growing complexity of our business and expanding workforce resulting in increased workloads and responsibilities of our Named Executive Officers; |
›› | the appropriate mix of compensation for each Named Executive Officer; |
›› | the historical salary, cash bonus and percentage of vested versus unvested equity awards held by each Named Executive Officer; and |
›› | market data, which include competitive information relating to compensation levels for comparable positions in the biotechnology and life sciences sector and for our specific peer group. |
The Compensation Committee balances each of these factors, as applicable in any given year, against our cash resources and the critical need to prioritize clinical development and pipeline expansion investments over other expenditures, as well as our aggregate equity burn rate. Using this process, our Compensation Committee strives to ensure that our executive compensation program as a whole is competitive.
An integral part of the review process for our executive compensation program is our stockholder outreach initiative, aimed at eliciting a better understanding of the concerns and perspectives of our stockholder base.
Range of Governance and Business Topics Discussed with Stockholders During 2019 | ||
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›› Special Meeting Requests | ||
›› Business Strategy and | ||
›› Board Refreshment | ||
›› Risk Oversight | ||
Each year, during the period following the filing of our Proxy Statement with the SEC and the date of our annual meeting, we engage with our stockholders to seek support for our annual meeting proposals and request feedback regarding our executive compensation program and other governance matters. Stockholder feedback is then reported to the appropriate committee and/or the entire Board for consideration. During this period in 2019, we reached out to stockholders representing more than 44% of our outstanding shares at that time. Participants at these meetings included members of the management team and the Chair of our Compensation Committee, depending on availability. This outreach effort provided the opportunity to discuss executive compensation measures that are in the best interest of our stockholders and to convey our commitment to align pay and performance.
After our 2019 Annual Meeting, we again reached out to stockholders holding more than 51% of our outstanding shares at that time to solicit additional feedback on the design of our executive compensation program, discuss governance practices and obtain input on our ESG disclosure plans. Members of the management team, as well as either the Chair of our Board or
2020 Proxy Statement 61
the Compensation Committee, participated in these meetings. These conversations yielded constructive feedback, which was summarized and reported to the Compensation Committee and the Board as a whole. In consideration of this feedback, the Compensation Committee designed a 100% performance-based long-term incentive compensation program, the Board provided our stockholders with the right to call a special meeting, subject to certain ownership requirements and procedures, and we published our ESG disclosures on our website atwww.exelixis.com under the caption “Impact—Environmental, Social and Governance.”
We intend to continue to engage with our stockholders throughout the year, and we invite you to reach out with any comments or questions at any time. Please see the Investor section of our website atwww.exelixis.com under the caption “Investors & Media—Contact IR” for the appropriate contact information.
Compensation Practices and Governance Highlights
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2019 Proxy Statement 41
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Objectives of the Compensation Program
The primary goals of our executive compensation program are to:
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The success of any biotechnology company is significantly influenced by the quality of its work force. We believe it is critical to our business that we retain our core team of highly qualified employees, including our Named Executive Officers. As a testament to their high value in the marketplace, large pharmaceutical and biotechnology companies and strong local competitors have aggressively recruited our executives and other skilled employees. In light of these circumstances, each year we design our executive compensation program to help attract and retain highly qualified individuals with relevant experience in the biotechnology industry to manage the varied aspects of our growing business operations. In fact, our Named Executive Officers have an average tenure of over eleven years with Exelixis, which we believe is evidence of the effectiveness of our compensation program with respect to retention.
How We Determine Executive Compensation
Role of the Compensation Committee, Compensation Consultants and Executive Officers in Compensation Decisions
Stock Ownership GuidelinesRole
›› We apply stock ownership guidelines to directors and executive officers to further align their interests with those of the Compensation Committeeour stockholders.
Change in Control Provisions
›› Does not include excessive change in control or severance payments.
The Compensation Committee is responsible for evaluating
›› Provides “double-trigger” change in control benefits.
›› Does not include taxgross-ups on severance or change in control benefits.
Perquisites, Retirement and approving the compensation packages offered to ourPension Benefits
›› Our Named Executive Officers. When appropriate, the Compensation Committee will solicit the input of,Officers do not receive excessive perquisites or present its recommendationspost-termination retirement or pension benefits that are not available to all employees generally.
Prohibition on compensation matters for considerationHedging and approval to, the full Board. The Compensation Committee actsMargin Loans
›› We prohibit hedging and purchases on behalf of the Board in discharging the Board’s responsibilities with respect to overseeing our compensation policies, plans,margin by executive officers and programs, and establishing and reviewing general policies relating to compensation and benefitsdirectors.
Meaningful Limits on Pledging
›› We limit pledging of our employees. The Compensation Committee also administers our equity and other incentive plans. The Compensation Committee does not delegate any of its functions to others in determining executive compensation.
Role of Compensation Consultants
Under its charter, the Compensation Committee has the authority to obtain the advice and assistance from external advisors to assist it in the performance of its duties. In accordance with this authority, the Compensation Committee engages external advisors to advise on executive officer compensation, including base salaries, bonus targets and equity compensation, as well as director compensation. These advisors also prepare industry compensation data, assist with the development of our peer group, and advise the Compensation Committee on best industry practices and relevant changes to regulations that may impact the Compensation Committee’s decision-making process with regard to executive officer and director compensation determinations. In particular, in November 2017, the Compensation Committee retained the consulting firm Compensia, to compile biotechnology industry compensation of ourcommon stock by executive officers and directors against that peer group. Theto circumstances where the individual can clearly demonstrate the financial capacity to repay the loan without resorting to the pledged securities. No executive officers or directors pledged our common stock during 2019.
Compensation Risk Assessment
›› Our Compensation Committee also received documentary support, including peer groupconducts an annual risk assessment of our compensation policies and industry data from Compensia withpractices to ensure that our programs are not reasonably likely to have a material adverse effect on us.
Objectives of the Compensation Program
The primary goals of our executive compensation program are to:
Provide market-competitive compensation that attracts, retains and motivates our executive officers to achieve our short- and long-term business objectives; |
2020 Proxy Statement 59
›› |
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›› |
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The success of any biotechnology company depends in large part upon the quality of its work force. Therefore, we believe it is critical to our business that we retain our core team of highly qualified employees, including our Named Executive Officers. As a testament to the high demand for their services in the marketplace, large pharmaceutical and biotechnology companies and strong local competitors have pursued our executives and other highly skilled employees. In light of this competitive pressure, each year we design our executive compensation program to help attract, motivate and retain highly qualified individuals with relevant experience in the biotechnology industry to manage the varied aspects of our growing business operations. We believe the twelve-year average tenure of our Named Executive Officers and the strength of our corporate and financial performance following the first FDA approval of CABOMETYX in April 2016 are evidence of what we believe to be the effectiveness of our compensation program with respect to retention and building value for our stockholders.
2019 Proxy Statement 45
Other Compensation
Role of the Compensation Committee, Compensation Consultants and Executive Officers in Compensation Decisions
In addition to the primary elements of compensation described above, our Named Executive Officers are also eligible to participate, on the same basis as other employees, in our 401(k) Plan, our employee stock purchase plan (ESPP) and other benefit programs generally available to all employees. These programs are intended to providetax-beneficial ways to save toward retirement, promote health and wellness and encourage stock ownership. Our Named Executive Officers are also eligible to participate in our Change in Control and Severance Benefit Plan, a compensation program that incentivizes our Named Executive Officers to remain with our company, and objectively evaluate and facilitate an acquisition of our company should consideration of such a transaction be determined appropriate by the Board and in the best interests of our stockholders. The Compensation Committee believes that, together, these benefits are also an important driver of the Named Executive Officers’ retention and motivation and are consistent with compensation arrangements provided in a competitive market for executive talent.
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46 Exelixis, Inc.
Compensation of Executive Officers | Compensation Discussion and Analysis
The Compensation Committee has not established any formal policies or guidelines for allocating compensation between annual and long-term incentive compensation, or between cash andnon-cash compensation. Instead, through our compensation program, the Compensation Committee seeks to align pay and performance. To that end, a significant portion of our Named Executive Officers’ compensation is “at risk” because it is variable, performance-based and in large part dependent on the success of our company.At-risk compensation for 2018 included stock option awards, the value of which depends on increases in the price of our common stock, PSUs and annual incentive cash bonuses, which relate to the overall level of achievement of our company performance goals and, other than for Dr. Morrissey, each Named Executive Officer’s individual contributions toward the achievement of such performance goals. The following charts highlight the 2018 pay mix for our Chief Executive Officer and all of our other Named Executive Officers as a group.
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In 2018, we achieved significant corporate and financial milestones that helped fuel the growth of our organization. The Compensation Committee believes that the 2018 compensation of our employees, including our Named Executive Officers, reflects not only those achievements, but also encourages appropriate efforts towards the achievement of our future commercial, product development and pipeline expansion goals.
2018 Base Salaries
In considering the appropriate level of base salaries for our Named Executive Officers, the Compensation Committee did not apply a formula, but rather employed a holistic analysis emphasizing:
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2019 Proxy Statement 47
The Compensation Committee also considered the base salaries of similarly situated executives at our 2018 peer group companies for an understanding of whether our compensation program is competitively positioned to retain our highly qualified Named Executive Officers. Following such analysis, in February 2018, the Compensation Committee determined that each Named Executive Officer should receive an increase in his or her base salary for 2018 as follows:
Name | 2017 Base Salary | 2018 Base Salary | Percentage Increase | |||||||||
Michael M. Morrissey, Ph.D. (1) | $ | 901,000 | $ | 955,060 | 6.00 | % | ||||||
Gisela M. Schwab, M.D. (2) | $ | 636,000 | $ | 680,520 | 7.00 | % | ||||||
Christopher J. Senner (3) | $ | 567,000 | $ | 601,020 | 6.00 | % | ||||||
Jeffrey J. Hessekiel, J.D. (4) | $ | 511,045 | $ | 536,597 | 5.00 | % | ||||||
Peter Lamb, Ph.D. (5) | $ | 476,100 | $ | 497,525 | 4.50 | % |
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2018 Annual Cash Bonuses
In February 2018, the Compensation Committee approved the Annual Cash Bonus Plan, an annual incentive program designed to provide our senior management team, including our Named Executive Officers, with incentives and rewards for working to achieve the strongest possible performance againstpre-determined corporate goals, while also enhancing our ability to attract and retain highly talented individuals. Under our Annual Cash Bonus Plan, Named Executive Officers are eligible to receive an annual performance-based cash bonus award, the amount of which is based on apre-set target percentage of the Named Executive Officer’s annual base salary earned during the year. The Compensation Committee is responsible for establishing the bonus target percentages, as well as the relative percentage contributions of corporate performance and individual performance. For each Participant, the amount of the cash bonus award for each fiscal year depends upon our achievement of applicable corporate performance goals established by the Compensation Committee for that year, and, as applicable, an assessment of each Named Executive Officer’s individual performance. The corporate performance goals under the Annual Cash Bonus Plan may be based on criteria such as the following: sales or commercial goals; research, development and clinical activities; financial metrics, including revenue, cash flow and net income, cash balance, operating expenses and stock price performance; hiring, retention, development of plans and other operational goals; commercial, clinical and strategic collaborations and alliance management; acquisitions and licensing or partnering
48 Exelixis, Inc.
Compensation of Executive Officers | Compensation Discussion and Analysis
transactions; manufacturing and supply goals; quality goals; regulatory goals; and government affairs and public policy goals. Individual performance may be assessed by the Compensation Committee based on the individual participant’s contributions toward the achievement of our corporate performance goals, department goals for the participant’s area of responsibility, or other individual goals derived from or related to our corporate performance goals. For any year, the achieved corporate performance percentage and/or individual performance percentage may exceed 100% in the event the company or the Named Executive Officer exceeds the targeted level of achievement of the applicable goals, provided that neither percentage may exceed 200%.
Bonus Targets
Bonus targets (expressed as a percentage of base salary) are based on the seniority of the applicable position. They are reviewed annually by the Compensation Committee, taking into consideration competitive market data. In February 2018, the Compensation Committee determined 2018 target annual cash bonuses should remain at the same levels as 2017 for all Named Executive Officers other than Dr. Morrissey (i.e., 50% for Dr. Schwab and 45% for each of Messrs. Senner and Hessekiel and Dr. Lamb). The Compensation Committee’s decision regarding 2018 target bonuses was based on its assessment that the percentages of base salaries previously established were appropriate and continued to align us competitively with our 2018 peer group. A review of a market analysis prepared by Compensia indicated that with a bonus target of 75%, Dr. Morrissey’s target total cash compensation fell below the 50th percentile of market peers. In order to better align his total cash compensation with those of chief executive officers of the companies included in our 2018 peer group and in recognition of his greater role in determining the course of, and ability to influence the future of the company, as well as the critical importance of his leadership to the company’s achievement of its 2018 business and financial objectives, the Compensation Committee approved an increase to Dr. Morrissey’s 2018 target annual bonus to 100%.
Corporate Goal Development and Weighting
In connection with establishing the bonus program for 2018, the Compensation Committee reviewed management’s proposed commercial, product development, pipeline development, finance, legal and facilities goals and recommended them to the Board for approval. In February 2018, the Board then reviewed and approved the proposed company goals for 2018, as identified in the table below. In selecting these goals, the Compensation Committee and the Board believed that they were appropriate drivers for our business, as they provided a balance between the efforts necessary to continue to execute on a successful commercial launch for CABOMETYX in advanced RCC, further our cabozantinib development program and expand our product pipeline, all while maintaining a solid financial position, which together, would enhance stockholder value. At the time the 2018 corporate performance goals were set, the Compensation Committee and management believed that such goals were challenging and achieving them would require not only continued strong commercial performance, research and product development success, and prudent fiscal and legal management, but also a high level of effort and execution on the part of our Named Executive Officers.
The Compensation Committee also applied a performance weighting to each goal relative to the overall performance of the company to reflect the prioritization of key business objectives. Additionally, a weighting between corporate performance and individual performance was also applied for each Named Executive Officer to reflect the level of impact such individual would be able to make on the overall corporate performance. The relative weighting for each corporate goal and corporate versus individual performance is as follows:
Corporate Performance Goals | Weighting (%) | Named Executive Officer | Weighting of Corporate Performance Goals | Weighting of Individual Performance Assessment | ||||||||||||||
Commercial | 40 | % | Michael M. Morrissey, Ph.D. | 100 | % | 0 | % | |||||||||||
Product Development | 30 | % | Gisela M. Schwab, M.D. | 60 | % | 40 | % | |||||||||||
Pipeline Development | 20 | % | Christopher J. Senner | 60 | % | 40 | % | |||||||||||
Finance, Legal and Facilities | 10 | % | Jeffrey J. Hessekiel, J.D. | 50 | % | 50 | % | |||||||||||
Total | 100 | % | Peter Lamb, Ph.D. | 60 | % | 40 | % |
2019 Proxy Statement 49
Performance Evaluation
During 2018, management reported regularly to the Compensation Committee and the Board on the status of the company’s performance against these goals, including in formal meetings in February, May, September and December. In February 2019, the Compensation Committee evaluated the company’s performance in relation to the 2018 goals, as well as, other than for Dr. Morrissey, each Named Executive Officer’s individual contribution to the achievement of those goals. As further described below, the Compensation Committee concluded that 2018 was a year of meaningful accomplishments during which the company partially met, met or exceeded each of the goals, as highlighted by the corporate achievements identified in the table below.
PERFORMANCE OBJECTIVES | ACHIEVEMENTS | EVALUATION | TARGET % | PAYOUT % | ||||||
Commercial
| 40%
| 50%
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Exceed cabozantinib franchise net product revenue target established by the Board | ›› Generated cabozantinib franchise net product revenue of $619.3 million during 2018. | Exceeded | ||||||||
Implement a comprehensive and rigorous launch strategy for CABOMETYX in the first-line (1L) RCC indication | ›› Implemented 1L RCC tactical plan immediately upon FDA approval of CABOMETX as a treatment for 1L RCC.
›› Improved CABOMETYX position in marketplace relative to competitors, despite launch of competing products, according to brand marketplace metrics.
›› As of September 2018, CABOMETYX became the VEGFR-targeting tyrosine kinase inhibitor (TKI) of choice in RCC, as reflected by IQVIA National Prescription AuditTM data. | Exceeded | ||||||||
Implement launch readiness plan for potential second-line (2L) HCC indication | ›› Overall launch readiness was completed on November 5, 2018, including HCC staffing and the completion of an HCC commercial strategy plan. | Met |
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PERFORMANCE OBJECTIVES | ACHIEVEMENTS | EVALUATION | TARGET % | PAYOUT % | ||||||
Product Development and Medical Affairs
| 30%
| 40%
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File sNDA for CABOMETYX as a treatment for 2L HCC based on CELESTIAL clinical trial results in the first quarter of 2018 | ›› Filed sNDA with the FDA on March 15, 2018; the FDA subsequently approved CABOMETX as a treatment for patients with previously treated HCC on January 14, 2019. | Met | ||||||||
Initiate at least 2 late stage studies of cabozantinib alone or in combination with immune checkpoint inhibitors (ICI) in renal, bladder, liver, or thyroid cancer indications | ›› InitiatedCOSMIC-311, evaluating cabozantinib as a monotherapy (thyroid) in October 2018 andCOSMIC-312 (liver) in December 2018.
›› Supported The Alliance for Clinical Trials in Oncology’s (The Alliance) initiation of a phase 3 trial evaluating cabozantinib in neuroendocrine tumors. The Alliance is conducting the trial through our Cooperative Research and Development Agreement with the National Cancer Institute’s Cancer Therapy Evaluation Program.
›› Extensive planning for the initiation of additional phase 3 trials in renal and bladder cancer planned for 2019.
›› Finalized launch preparedness efforts in line with regulatory timelines for a potential approval of CABOMETYX as a treatment for patients with previously treated advanced HCC.
| Exceeded | ||||||||
Continue the broad evaluation of cabozantinib in other tumor types through internally and externally-sponsored studies | ›› Managed or supported 77 active or planned studies, including those administered through our internal and clinical partner sponsored development program, our Cooperative Research and Development Agreement with National Cancer Institute’s Cancer Therapy Evaluation Program and our investigator sponsored trial program.
›› Studies are evaluating cabozantinib as a single agent and in combination with other therapies, including ICIs, in a variety of tumor types such asnon-small cell lung cancer, endometrial cancer, head and neck cancer, RCC, HCC and urothelial carcinoma. | Met | ||||||||
Add additional full-time employees across the product development team in accordance with the 2018 budget approved by the Board | ›› 100% of planned hires for 2018 had either started, accepted offers or were in the offer process. | Met | ||||||||
Support cabozantinib worldwide regulatory filings by cabozantinib partners | ›› Supported Ipsen’s receipt of regulatory approvals in the EU and throughout the world for CABOMETYX as a 1L treatment for advanced RCC and 2L treatment for HCC by providing filing documents and assistance in responding to regulatory inquiries.
›› Assisted Takeda Pharmaceutical Company Limited’s with its clinical development activities in Japan in support of potential future regulatory filings for CABOMETYX in both RCC and HCC. | Exceeded |
2019 Proxy Statement 51
PERFORMANCE OBJECTIVES | ACHIEVEMENTS | EVALUATION | TARGET % | PAYOUT % | ||||||
Pipeline Development
| 20%
| 20%
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Complete two early-stage oncologyin-licensing deals (not including StemSynergy) | ›› Conducted a worldwide landscape review of oncology opportunities, followed by due diligence efforts, site visits and early stage partnering discussions for multiple preclinical and clinical stage oncology assets, resulting in the execution of an exclusive license and collaboration agreement with Invenra on May 2, 2018. | Partially met | ||||||||
Complete buildout of internal discovery team per 2018 budget | ›› Hired the necessary FTEs to enable substantial internal discovery work, conducted multipleproof-of-concept experiments and advanced programs to preclinical development. | Exceeded | ||||||||
Advance two discovery programs to development candidate (DC) status and initiate good laboratory practice (GLP) toxicology studies for one DC | ›› Completed GLP toxicology study and filed an IND with the FDA for XL092 in December 2018.
›› Profiled additional late stage analogues that did not reach DC status byyear-end. | Partially met | ||||||||
Finance, Legal and Facilities
| 10%
| 15%
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Manage cash balance to a target established by the Board and manage operating expenses within the agreed budget and subsequent forecasts | ›› Managed operating expenses to $415.0 million and ended fiscal 2018 with a cash balance of $851.6 million. | Exceeded | ||||||||
Integrate and implement compliance into all aspects of organizational activities | ›› Appropriately managed business risks and operated in compliance with applicable laws, regulations, and guidance. | Met | ||||||||
Complete buildout and move into Alameda facility by end of June 2018 | ›› Completed the renovation and buildout of new corporate headquarters in Alameda, California in June 2018 and successfully relocated our employee base in the same month. | Met | ||||||||
TOTAL | 100% | 125% |
The Compensation Committee also recognized the individual contributions, other than for Dr. Morrissey, toward achievement of the corporate goals and the combined contribution of our Named Executive Officers and cohesive management effort that led to these 2018 corporate achievements. Specifically, the Compensation Committee considered the following contributions from each Named Executive Officer, other than Dr. Morrissey:
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Compensation of Executive Officers | Compensation Discussion and Analysis
In consideration of our overall performance during 2018 and the contributions of our Named Executive Officers to such performance, in February 2019, pursuant to the terms and conditions of the Annual Cash Bonus Plan, the Compensation Committee approved annual cash bonus payments for each Named Executive Officer as reflected in the table below.
When determining the annual cash bonus payment for Dr. Morrissey in particular, the Compensation Committee considered our meaningful accomplishments in 2018 and level of achievement of pre-determined corporate goals. However, the Compensation Committee also considered that it is Dr. Morrissey’s responsibility to create stockholder value, and because our stock price declined during 2018, the Compensation Committee used its discretion, as provided for in the Annual Cash Bonus Plan, to reduce Dr. Morrissey’s 2018 cash bonus below the level of the overall corporate performance. Dr. Morrissey’s annual cash bonus payment is also reflected in the table below.
Name | 2018 Base Salary | 2018 Target Award (%) | 2018 Corporate Performance Weighting (%) | 2018 Approved Corporate Performance (%) | 2018 Individual Performance Weighting (%) | 2018 Individual Performance (%) | 2018 Annual Cash Bonus Payout (% of Target Award) | 2018 Annual Cash Bonus Payout ($) | ||||||||||||||||||||||||
Michael M. Morrissey, Ph.D. | $ | 955,060 | 100 | % | 100 | % | 125 | % | N/A | N/A | 105 | % | $ | 1,000,000 | ||||||||||||||||||
Gisela M. Schwab, M.D. | $ | 680,520 | 50 | % | 60 | % | 125 | % | 40 | % | 155 | % | 137 | % | $ | 466,156 | ||||||||||||||||
Christopher J. Senner | $ | 601,020 | 45 | % | 60 | % | 125 | % | 40 | % | 125 | % | 125 | % | $ | 338,074 | ||||||||||||||||
Jeffrey J. Hessekiel, J.D. | $ | 536,597 | 45 | % | 50 | % | 125 | % | 50 | % | 125 | % | 125 | % | $ | 301,836 | ||||||||||||||||
Peter Lamb, Ph.D. | $ | 497,525 | 45 | % | 60 | % | 125 | % | 40 | % | 160 | % | 139 | % | $ | 311,202 |
2018 Long-Term Incentive Awards
Because of our goal to align executive compensation and performance that advances our critical business objectives, a significant portion of the Named Executive Officers’ total compensation typically has consisted of, and is expected to continue to consist of, equity-based awards. In evaluating the mix of equity awards for 2018, the Compensation Committee considered market trends, as well as feedback from stockholders and proxy advisory firms, and determined that a combination of stock options and PSUs would be the most appropriate incentive structure for our Named Executive Officers to reward performance over time and achieve our retention objectives.
Allocation of Long-Term Incentive Awards
For 2018, the Compensation Committee intended to deliver approximately 50% of the value of each Named Executive Officer’s equity award in the form of stock options and 50% of the value in the form of PSUs (except for Mr. Hessekiel who received a mix of 65% stock options and 35% PSUs) and applied a 2 to 1 ratio of stock option grants to PSUs, in order to mitigate dilution and to reflect the increased value of receiving shares at full value. The mix for each Named Executive Officer took into consideration both peer practices and market data, as well as, in the case of Mr. Hessekiel, his ability to impact the achievement of key corporate objectives in his position as Executive Vice President and General Counsel relative to the rest of the Named Executive Officers.
2019 Proxy Statement 53
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The stock options for each of the Named Executive Officers have an exercise price of $18.80 per share, the fair market value of our common stock on the date of grant (September 10, 2018), and expire seven years from the date of grant or earlier upon termination of service with us. All of the stock options vest over a four-year period following the grant date. Dr. Morrissey’s stock option is also subject to a market performance condition and will not be exercisable until the closing market price of our common stock is equal to or greater than 125% of the exercise price of the option over a period of at least 30 consecutive calendar days.
The PSUs granted to Named Executive Officers were allocated among five separate awards and only vest upon the achievement of certain commercial, clinical development and pipeline expansion performance targets, as described below. The Compensation Committee selected these performance targets because they represent the critical business objectives for which the Named Executive Officers are responsible, thereby linking executive compensation with continued long-term success for the company. Additional detail about each performance target will be disclosed at the end of the relevant performance period, as disclosing the specific, numerical target before that time could be competitively harmful to the company.
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Compensation of Executive Officers | Compensation Discussion and Analysis
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Each PSU will vest as to 50% of the original number of shares subject to the award upon the Compensation Committee’s certification that we have achieved the performance target and 50% of the original number of shares subject to the award on the first quarterly vesting date (i.e. February 15th, May 15th, August 15th and November 15th) following theone-year anniversary of the Compensation Committee’s certification. Failure to achieve a performance target by December 31, 2021 will result in forfeiture of 100% of the applicable PSU award.
Vesting of these stock options and PSUs will cease upon termination of service as an employee for any reason. The Named Executive Officers are party to our Change in Control and Severance Benefit Plan, which provides for acceleration of vesting of the award in the event of certain specified change in control events involving us, for the reasons discussed above. In addition, following certain change in control events wherein the PSU awards are assumed by the surviving entity, the PSU awards will convert to time-based vesting and vest annually over a three-year period following the grant date.
Value of Long-Term Incentive Awards
When determining the appropriate value of equity incentive awards, the Compensation Committee asked Compensia to provide guidance with respect to implementing a program that would incentivize our Named Executive Officers to drive toward the achievement of key company priorities and increase stockholder value over the long-term, while maintaining competitive market practices and being mindful of the company’s equity burn rate.
As part of the decision-making process, the Compensation Committee considered the challenges of managing a rapidly expanding organization, as well as our need to retain a cohesive management team to facilitate the continued commercial success of CABOMETYX, and the achievement of product development and pipeline expansion objectives that would position the company for future success. The Compensation Committee also believed it was important that the value of the equity awards continue to reflect the individual performance of each Named Executive Officer during the 2018 fiscal year to date and criticality of each Named Executive Officer’s skill set and expected future contributions to our business. Taking these factors into consideration and applying Compensia’s market analysis of long-term incentive compensation of our Named Executive Officers compared to our 2018 peer group, the Compensation Committee determined that the value of the aggregate equity awards granted to each of our Named Executive Officers should be between the 50th and 75th percentile of market peers and in September 2018, approved the grants to the Named Executive Officers summarized in the table below. The actual share amounts granted to each executive officer were determined by dividing the value the Compensation Committee intended to deliver by the30-day average trailing stock price (as of a date shortly before the grant date) in the case of PSUs and applying a Black-Scholes option pricing model calculation using the average share price, in the case of stock options.A 30-day average share price was used, rather than a single day share price, in order to provide a more stabilized share value less susceptible to possible swings in the market.
2019 Proxy Statement 55
Name | Number of Shares Subject to Time- Based Stock Options | Number of Shares Based Stock Options | Number of Shares Subject to PSUs | |||||||||
Michael M. Morrissey, Ph.D. | — | 308,365 | 154,923 | |||||||||
Gisela M. Schwab, M.D. | 129,314 | — | 64,968 | |||||||||
Christopher J. Senner | 129,314 | — | 64,968 | |||||||||
Jeffrey J. Hessekiel, J.D. | 129,314 | — | 34,983 | |||||||||
Peter Lamb, Ph.D. | 124,341 | — | 62,469 |
Other Compensation Information
Timing of Equity Awards
Annual grants of equity awards to our executive officers, including our Named Executive Officers, are generally determined and approved atpre-scheduled Compensation Committee meetings, with such meeting date typically serving as the grant date. However, the Compensation Committee may sometimes approve the grant of equity awards to executive officers and other employees in advance of its next scheduled meeting, either at a special meeting or by unanimous written consent, in connection with certain new hires, promotions and other circumstances where the Compensation Committee deems it appropriate to make such grants. The grant dates for these equity awards are typically the same date that a newly hired officer begins employment or the effective date of an officer’s promotion, as applicable. Grants made to new hires below the level of Vice President, are approved on a monthly basis by our Equity Award Committee, comprised solely of Dr. Morrissey, acting in his capacity as a director pursuant to authority delegated to him by the Compensation Committee. All stock options are granted with an exercise price that is not less than the closing price of our common stock on The Nasdaq Global Select Market on the grant date. We have no plan or practice to time option grants in coordination with the release ofnon-public information, and we do not time the release ofnon-public information to affect the value of executive compensation.
Stock Ownership Guidelines
In February 2018, the Board adopted Stock Ownership Guidelines for our Named Executive Officers in order›› We apply stock ownership guidelines to directors and executive officers to further align their financial interests with those of our stockholders, as well as to promote sound corporate governance. The Stock Ownership Guidelines for ourstockholders.
Change in Control Provisions
›› Does not include excessive change in control or severance payments.
›› Provides “double-trigger” change in control benefits.
›› Does not include taxgross-ups on severance or change in control benefits.
Perquisites, Retirement and Pension Benefits
›› Our Named Executive Officers provide for ownership targets as follows:
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In considering appropriate guidelines forProhibition on Hedging and Margin Loans
›› We prohibit hedging and purchases on margin by executive officers and directors.
Meaningful Limits on Pledging
›› We limit pledging of our common stock by executive officers and directors to circumstances where the individual can clearly demonstrate the financial capacity to repay the loan without resorting to the pledged securities. No executive officers or directors pledged our common stock during 2019.
Compensation Risk Assessment
›› Our Compensation Committee reviewed a market analysisconducts an annual risk assessment of stock ownership guidelines of our 2018 peer group. The approved guidelines provide for a “lesser of” approach to address stock price volatility often experienced by biotechnology companies.
All Named Executive Officers are expected to achieve their stock ownership targets within five years of becoming subject to these guidelines. The policy includes procedures for granting exemptions in the case of severe financial hardship. In determining ownership levels for each Named Executive Officer under our Stock Ownership Guidelines, credit is provided for shares held outright (including shares owned through trusts, our 401(k) Plan, or by a spouse), as well as 50% of the number of vested, but unexercised, stock options. No credit is provided for RSUs until they vest. The values for all shares determined to be held by Named Executive Officers are based on the200-day average stock price as of the measurement date. As of February 12, 2019, all of our Named Executive Officers had met the required ownership targets.
“Clawback” Policy
We are dedicated to maintaining a culture of high integrity and accountability, and to discourage conduct harmful to our business and the interests of our various stakeholders. On February 28, 2019, upon recommendation from the Compensation Committee, the Board approved aPolicy for Recoupment of Variable Compensation (Clawback Policy) that applies to all forms of compensation, except base salary, granted after the adoption of the Clawback Policy. A triggering event under the
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Clawback Policy shall occur when a covered employee (which includes all Named Executive Officers):
For clarity, “material harm” includes, but is not limited to, the requirement to prepare an accounting restatement for any fiscal quarter or year commencing after adoption of the Clawback Policy due to our material noncompliance with any financial reporting requirement. If triggered, then to the fullest extent permitted by law, we may recoup all variable compensation granted or paid to the covered employee during each fiscal year in which the covered employee’s “misconduct” occurred.
Accounting and Tax Considerations
Under FASB ASC 718, we are required to estimate and record an expense for each award of equity compensation (including stock options, RSUs and PSUs) over the vesting period of the award. As long as stock options, RSUs and PSUs remain the sole components of our long-term compensation program, we expect to record stock-based compensation expense on an ongoing basis according to ASC 718. Compensation expense relating to awards subject to performance conditions is recognized if it is probable that the performance goals will be achieved. The probability of achievement of such goals is assessed on a quarterly basis. The Compensation Committee has considered, and may in the future consider, the grant of restricted stock to our executive officers in lieu of stock option grants, RSU and/or PSU awards.
Section 162(m) of the Code, as amended by the Tax Cuts and Jobs Act, limits the deductibility for federal income tax purposes to not more than $1 million of compensation paid to “covered employees” in a calendar year. Prior to the recent enactment of the Tax Cuts and Jobs Act, compensation that qualified as “performance-based compensation” under Section 162(m) of the Code was not subject to this deduction limitation. Pursuant to the Tax Cuts and Jobs Act, this exception for “performance-based compensation” under Section 162(m) of the Code was repealed with respect to taxable years beginning after December 31, 2017, except that certain transition relief is provided for compensation paid pursuant to a written binding contract which was in effect on November 2, 2017, and which was not modified in any material respect on or after such date. As a result, compensation paid to any of our “covered employees” in excess of $1 million per taxable year generally will not be deductible unless, among other requirements, it is intended to qualify, and is eligible to qualify, as “performance-based compensation” under Section 162(m) of the Code pursuant to the transition relief provided by the Tax Cuts and Jobs Act. Certain equity awards issued prior to the transition date were designed to permit us to qualify for the performance-based exception, but because of certain ambiguities and uncertainties as to the application and interpretation of Section 162(m) of the Code and the regulations issued thereunder, as well as other factors beyond the control of the Compensation Committee, no assurance can be given that any compensation paid by the company will be eligible for such transition relief and be deductible by the company in the future. Although the Compensation Committee will continue to consider tax implications as one factor in determining executive compensation, the Compensation Committee also looks at other factors in making its decisions and retains the flexibility to provide compensation for the Named Executive Officers in a manner consistent with the goals of the company’s executive compensation program and the best interests of the company and its stockholders, which may include providing for compensation that is not deductible by the company due to the deduction limit under Section 162(m). The Compensation Committee also retains the flexibility to modify compensation that was initially intended to be exempt from the deduction limit under Section 162(m) if it determines that such modifications are consistent with the company’s business needs.
Compensation Policies and Practices as They Relate to Risk Management
In 2018, the Compensation Committee reviewed our compensation policies and practices and concludedto ensure that the mix and design of these policies and practices are not reasonably likely to encourage our employees to take excessive risks. In connection with its evaluation, the Compensation Committee considered, among other things, the structure, philosophy and
2019 Proxy Statement 57
design characteristics of our primary incentive compensation plans and programs in light of our risk management and governance procedures, as well as other factors that may calibrate or balance potential risk-taking incentives. Based on this assessment, the Compensation Committee concluded that risks arising from our compensation policies and practices for all employees, including executive officers, are not reasonably likely to have a material adverse effect on us.
Objectives of the Compensation Program
The primary goals of our executive compensation program are to:
›› | Provide market-competitive compensation that attracts, retains and motivates our executive officers to achieve our short- and long-term business objectives; |
2020 Proxy Statement 59
›› | Align our executive officers’ compensation with the interests of our stockholders; and |
›› | Reward our executive officers for success in achieving our corporate goals. |
The success of any biotechnology company depends in large part upon the quality of its work force. Therefore, we believe it is critical to our business that we retain our core team of highly qualified employees, including our Named Executive Officers. As a testament to the high demand for their services in the marketplace, large pharmaceutical and biotechnology companies and strong local competitors have pursued our executives and other highly skilled employees. In light of this competitive pressure, each year we design our executive compensation program to help attract, motivate and retain highly qualified individuals with relevant experience in the biotechnology industry to manage the varied aspects of our growing business operations. We believe the twelve-year average tenure of our Named Executive Officers and the strength of our corporate and financial performance following the first FDA approval of CABOMETYX in April 2016 are evidence of what we believe to be the effectiveness of our compensation program with respect to retention and building value for our stockholders.
How We Determine Executive Compensation
Role of the Compensation Committee, Compensation Consultants and Executive Officers in Compensation Decisions
Role of the Compensation Committee
The Compensation Committee is responsible for evaluating and approving the compensation packages offered to our Named Executive Officers. When appropriate, the Compensation Committee will solicit the input of, or present its recommendations on compensation matters for consideration and approval to, the full Board. The Compensation Committee acts on behalf of the Board in discharging the Board’s responsibilities with respect to overseeing our compensation policies, plans, and programs, and establishing and reviewing general policies relating to compensation and benefits of our employees. The Compensation Committee also administers our equity and other incentive plans. The Compensation Committee does not delegate any of its functions to others in determining executive compensation.
Role of Compensation Consultants
Under its charter, the Compensation Committee has the authority to obtain the advice and assistance from external advisors to assist it in the performance of its duties. In accordance with this authority, the Compensation Committee engages external advisors to advise on executive officer compensation, including base salaries, bonus targets and equity compensation, as well as director compensation. These advisors also prepare industry compensation data, assist with the development of our peer group, and advise the Compensation Committee on best industry practices and relevant changes to regulations that may impact the Compensation Committee’s decision-making process with regard to executive officer and director compensation determinations. For 2019 compensation matters, the Compensation Committee retained the consulting firm Compensia, to advise and assist with the following:
›› | Development of a peer group to be used in the evaluation of 2019 executive and director compensation determinations. |
›› | Documentary support, including peer group and industry data with respect to base salaries, target annual cash bonuses, and equity compensation. |
›› | A market analysis of executive officer compensation compared to our peer group, which market analysis was reviewed with the Compensation Committee and used to guide 2019 base salary and bonus target decisions for our Named Executive Officers. |
›› | A market analysis of long-term incentive compensation of our executive officers compared to our peer group, which market analysis was reviewed with the Compensation Committee and used to guide 2019 long-term equity compensation determinations. |
The Compensation Committee assessed the independence of Compensia pursuant to SEC rules and concluded that the work performed by Compensia for the Compensation Committee did not raise any conflicts of interest.
Role of Executive OfficersDr. Morrissey, our President and Chief Executive Officer, also participates in the Compensation Committee’s deliberations with respect to Named Executive Officer compensation other than his own; he is not present during deliberations and voting concerning his compensation. Each year, Dr. Morrissey and other senior management develop annual corporate goals and performance targets for long-term incentive awards for the company, which are reviewed and, subject to their input, approved by the Compensation Committee.
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Compensation Committee Process
In setting the level of salary, annual cash bonus and long-term incentive compensation for our Named Executive Officers, the Compensation Committee typically considers various factors, including:
›› | the performance of the company during the prior year; |
›› | the contribution of each Named Executive Officer toward achievement of our corporate goals, including contributions toward departmental achievements in each Named Executive Officer’s area of responsibility that drove the achievement of such corporate goals during the prior year; |
›› | the criticality of each Named Executive Officer’s skill set and relative expected future contributions to our business; |
›› | the growing complexity of our business and expanding workforce resulting in increased workloads and responsibilities of our Named Executive Officers; |
›› | the appropriate mix of compensation for each Named Executive Officer; |
›› | the historical salary, cash bonus and percentage of vested versus unvested equity awards held by each Named Executive Officer; and |
›› | market data, which include competitive information relating to compensation levels for comparable positions in the biotechnology and life sciences sector and for our specific peer group. |
The Compensation Committee balances each of these factors, as applicable in any given year, against our cash resources and the critical need to prioritize clinical development and pipeline expansion investments over other expenditures, as well as our aggregate equity burn rate. Using this process, our Compensation Committee strives to ensure that our executive compensation program as a whole is competitive.
An integral part of the review process for our executive compensation program is our stockholder outreach initiative, aimed at eliciting a better understanding of the concerns and perspectives of our stockholder base.
Each year, during the period following the filing of our Proxy Statement with the SEC and the date of our annual meeting, we engage with our stockholders to seek support for our annual meeting proposals and request feedback regarding our executive compensation program and other governance matters. Stockholder feedback is then reported to the appropriate committee and/or the entire Board for consideration. During this period in 2019, we reached out to stockholders representing more than 44% of our outstanding shares at that time. Participants at these meetings included members of the management team and the Chair of our Compensation Committee, depending on availability. This outreach effort provided the opportunity to discuss executive compensation measures that are in the best interest of our stockholders and to convey our commitment to align pay and performance.
After our 2019 Annual Meeting, we again reached out to stockholders holding more than 51% of our outstanding shares at that time to solicit additional feedback on the design of our executive compensation program, discuss governance practices and obtain input on our ESG disclosure plans. Members of the management team, as well as either the Chair of our Board or
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the Compensation Committee, participated in these meetings. These conversations yielded constructive feedback, which was summarized and reported to the Compensation Committee and the Board as a whole. In consideration of this feedback, the Compensation Committee designed a 100% performance-based long-term incentive compensation program, the Board provided our stockholders with the right to call a special meeting, subject to certain ownership requirements and procedures, and we published our ESG disclosures on our website atwww.exelixis.com under the caption “Impact—Environmental, Social and Governance.”
We intend to continue to engage with our stockholders throughout the year, and we invite you to reach out with any comments or questions at any time. Please see our website atwww.exelixis.com under the caption “Investors & Media—Contact IR” for the appropriate contact information.
Stockholder Advisory Vote on Executive Compensation
We provide our stockholders the opportunity to cast an annual advisory vote on our executive compensation program, and the Compensation Committee takes the results of this vote into account when determining compensation of the company’s Named Executive Officers. At our annual meeting of stockholders held in May 2019, approximately 98% of the votes present and entitled to vote voted in favor of thesay-on-pay proposal. Our Compensation Committee considered these votes to be an endorsement of the Compensation Committee’s policies and practices.
Competitive Assessment
A key objective of our executive compensation program is to ensure that the overall compensation packages we offer our executive officers remain competitive with the packages offered by companies with which we compete for executive talent. The Compensation Committee consults with its independent compensation consultant, to develop a peer group of companies to serve as the basis for comparing our executive compensation program to the market.
Peer Group Development Process and How We Used the Data
The Compensation Committee reviews and makes adjustments to the composition of the peer group on an annual basis, or more often as deemed necessary, to account for changes in both our business and the businesses of the companies in the peer group. The Compensation Committee does not have a specific target compensation level for the Named Executive Officers. Instead, we review data concerning practices at our peer group companies and within the general biotechnology market as a reference point to assist in developing programs that will attract and retain exceptional talent and drive company performance.
In developing the 2019 peer group, the Compensation Committee considered the significant evolution of our business and meaningful developments in comparison to the 2018 peer group companies. It also considered what other companies might make suitable additions to the 2019 list. The key qualitative and quantitative considerations that influenced the development of the 2019 peer group were:
›› | industry—including, biotechnology and pharmaceutical companies; |
›› | therapeutic area, including companies with an oncology product focus, while avoiding the inclusion of companies marketing solely orphan and rare disease drugs; |
›› | stage of business, as reflected by the existence of at least one marketed product; |
›› | location of headquarters and whether the company is traded on a major U.S. exchange; |
›› | market capitalization between 0.25x—4.0x of our then-current market capitalization (approximately $1.2 billion—approximately $20.0 billion); and |
›› | revenues between 0.3x—5.0x of our then revenues (approximately $225 million—approximately $3.7 billion). Due to the limited number of companies identified by the scope criteria that had comparable revenues, the Compensation Committee continued to use a wide revenue range. |
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Following this analysis, the Compensation Committee, in consultation with management and Compensia, identified the following 21 publicly-traded, U.S—based biotechnology/pharmaceutical companies as our peer group to be used in reviewing compensation for 2019:
Fiscal 2019 Peer Group | ||||
Agios Pharmaeuticals, Inc. | Halozyme Therapeutics, Inc. | Nektar Therapeutics | ||
Alkermes Public Limited Company | Incyte Corporation | Neurocrine Biosciences, Inc. | ||
Alnylam Pharmaceuticals, Inc. | Ionis Pharmaceuticals, Inc. | OPKO Health, Inc. | ||
Array BioPharma Inc. | Ironwood Pharmaceuticals, Inc. | Sarepta Therapeutics, Inc. | ||
BioMarin Pharmaceutical Inc. | Jazz Pharmaceuticals Public Limited Company | Seattle Genetics, Inc. | ||
Blueprint Medicines Corporation | Ligand Pharmaceuticals Incorporated | Supernus Pharmaceuticals, Inc. | ||
Corcept Therapeutics Incorporated | Loxo Oncology, Inc. | United Therapeutics Corporation |
Positioning Relative to 2019 Peers
(as of November 2018)
Percentile Rank
Of these companies, 14 companies (Alkermes Public Limited Company, BioMarin Pharmaceutical Inc., Corcept Therapeutics Incorporated, Halozyme Therapeutics, Inc., Incyte Corporation, Ionis Pharmaceuticals, Inc., Ironwood Pharmaceuticals, Inc., Jazz Pharmaceuticals Public Limited Company, Ligand Pharmaceuticals Incorporated, Nektar Therapeutics, OPKO Health, Inc., Seattle Genetics, Inc., Supernus Pharmaceuticals, Inc. and United Therapeutics Corporation) were in our 2018 peer group. The Compensation Committee did not include in our 2019 peer group five companies (Bioverativ Inc., Clovis Oncology, Inc., Juno Therapeutics, Inc., TESARO, Inc. and The Medicines Company) that were in our 2018 peer group, because they were either acquired or had a market capitalization or revenues that fell below the selection criteria.
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Our executive compensation program generally consists of three principal components: base salary; annual cash bonus; and long-term incentive compensation. A description and objective(s) for each element of compensation, which may vary from year to year, is set forth below:
Element | Description | Objective(s) | ||||
Annual Base Salary | Fixed cash compensation to recognize each Named Executive Officer’s role and responsibilities. | Provide an appropriate and competitive base level of current cash income for Named Executive Officers. | ||||
Annual Cash Bonus | Variable cash compensation based on performance againstpre-determined corporate goals. | Align our Named Executive Officers’ compensation with our annual corporate goals. Rewards Named Executive Officers for overall achievement of ourpre-determined 2019 corporate goals and, for executive officers other than our CEO, their individual contributions toward achievement of our corporate goals, including contributions toward departmental achievements in each Named Executive Officer’s area of responsibility that drove the achievement of such corporate goals. | ||||
Long-Term Incentive Compensation | RSUs (or PSUs, if performance-based) | Variable share-based compensation, subject to either performance-based vesting or time-based vesting based on the achievement of key corporate goals. | Align the interests of our Named Executive Officers with those of our stockholders. Motivate our Named Executive Officers to achieve long-term corporate performance objectives. Promote retention, including during periods of stock price volatility common to biotechnology companies. | |||
Stock Options | Variable share-based compensation whereby value is derived from appreciation in stock price. | Align the interests of our Named Executive Officers with those of our stockholders. Motivate our Named Executive Officers to pursue our critical business objectives, because stock options only have value if the value of our company as reflected by our stock price increases over time. |
As explained under “—2019 Compensation Decisions—2019 Long-Term Incentive Awards” in more detail below, for 2019, the Compensation Committee determined that an entirely performance-based equity program consisting solely of PSUs would be the most appropriate incentive structure for our Named Executive Officers in 2019 to reward performance over time and achieve our retention objective; accordingly, no stock options or time-based RSUs were granted to our Named Executive Officers in 2019.
Other Compensation and Benefits
In addition to the primary elements of compensation described above, all of our employees, including our Named Executive Officers are also eligible to participate, on the same basis as other employees, in our 401(k) Plan, our employee stock purchase plan (ESPP) and other benefit programs generally available to all employees. These programs are intended to providetax-beneficial ways to save toward retirement, promote health and wellness and encourage stock ownership. Our Named Executive Officers are also eligible to participate in our Change in Control and Severance Benefit Plan, a compensation program that incentivizes our Named Executive Officers to remain with our company, and objectively evaluate
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and facilitate an acquisition of our company should consideration of such a transaction be determined appropriate by the Board and in the best interests of our stockholders. The Compensation Committee believes that considered together, these benefits are critical for retaining and motivating these leaders and are consistent with compensation arrangements provided in the competitive market for executive talent.
Element | Description | |
401(k) Plan | Named Executive Officers contribute their own funds, as salary deductions, on apre-tax orafter-tax basis, subject to plan and government limits. For 2019, we matchedpre-tax and Roth 401(k) contributionsdollar-for-dollar up to $8,500, in the form of Exelixis common stock. As of January 2020, we increased the annual match to $10,000 per calendar year and have transitioned to making the match in cash rather than Exelixis common stock going forward. | |
Employee Stock Purchase Plan | Our ESPP allows for Named Executive Officers to purchase shares of our common stock at a price equal to the lower of 85% of the closing price on the first day of thesix-month offering period or 85% of the closing price on the final day of such offering period, subject to specified limits. | |
Health Care, Dental and Vision Benefits | Subject to applicable laws, these health and welfare benefits are available to all eligible employees, including our Named Executive Officers. | |
Change in Control and Severance Benefit | A double-trigger plan, in which each participant receives plan benefits only if the participant is terminated without To ensure our best interests, the plan requires a release of claims against us as a condition to receiving any severance benefits. |
(1) | A description of the Change in Control and Severance Benefit Plan is set forth below under the heading “Potential Payments Upon Termination or Change in Control.” |
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The Compensation Committee has not established formal policies or guidelines for allocating compensation between annual and long-term incentive compensation, or between cash andnon-cash compensation. Instead, through our compensation program, the Compensation Committee seeks to align pay and performance. To that end, a significant portion of our Named Executive Officers’ compensation is “at risk” because it is variable, performance-based and in large part dependent on the success of our company.At-risk compensation for 2019 included PSUs and annual incentive cash bonuses, which annual incentive cash bonuses relate to the Compensation Committee’s assessment of the overall achievement of ourpre-determined 2019 corporate goals and, other than for Dr. Morrissey, the Compensation Committee’s consideration of the individual contributions of each Named Executive Officer toward the achievement of our corporate goals, including contributions toward departmental achievements in each Named Executive Officer’s area of responsibility that drove the achievement of such corporate goals. The following charts highlight the 2019 pay mix for our Chief Executive Officer and all of our other Named Executive Officers as a group.
Chief Executive Officer Pay Mix 91% of CEO 2019 Compensation is ConsideredAt-Risk | All Other Named Executive Officers (as a group) Pay Mix 82% of All Other Named Executive Officers (as a group) 2019 | |
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In considering the appropriate level of base salaries for our Named Executive Officers for 2019, the Compensation Committee did not apply a formula, but rather employed a holistic analysis of multiple relevant factors using its professional judgment and experience, emphasizing the following:
›› | the individual contribution of the Named Executive Officer to our exceptional 2018 research, development, regulatory, pipeline expansion and financial achievements, as explained in more detail below; |
›› | the criticality of each Named Executive Officer’s skill set and relative expected future contributions to our business; |
›› | the growing complexity of our business resulting in increased workloads and responsibilities of each of our Named Executive Officers; |
›› | other competing business priorities for our company that |
›› | the |
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The Compensation Committee considered the base salaries of similarly situated executives at our 2019 peer group companies for an understanding of whether our compensation program is competitively positioned to retain our highly qualified Named Executive Officers. Following such analysis, in February 2019, the Compensation Committee determined that each Named Executive Officer should receive an increase in his or her base salary for 2019 as follows:
Name | 2018 Base Salary | 2019 Base Salary | Percentage Increase | |||||||||
Michael M. Morrissey, Ph.D. (1) | $ | 955,060 | $ | 1,017,140 | 6.5 | % | ||||||
Gisela M. Schwab, M.D. (2) | $ | 680,520 | $ | 717,949 | 5.5 | % | ||||||
Christopher J. Senner (3) | $ | 601,020 | $ | 628,067 | 4.5 | % | ||||||
Jeffrey J. Hessekiel, J.D. (4) | $ | 536,597 | $ | 558,061 | 4.0 | % | ||||||
Peter Lamb, Ph.D. (5) | $ | 497,525 | $ | 552,401 | 5.0 | % |
(1) | Dr. Morrissey’s base salary increase reflects the strength of our overall corporate performance during 2018, including our clinical and regulatory achievements and commercial success of CABOMETYX. Dr. Morrissey’s leadership was also viewed as critical to achieving our goal |
(2) | Dr. Schwab’s base salary increase reflects her strong leadership of our product development and medical affairs organizations and her performance with respect to the |
(3) | Mr. Senner’s base salary increase reflects his leadership of our finance organization and his performance with respect to the achievement of our financial goals in 2018, particularly with respect to the management of operating expenses and long-range planning. Mr. Senner’s leadership was also viewed as critical to our ability to execute on our 2019 business development and fiscal management objectives. |
(4) | Mr. Hessekiel’s base salary increase reflects his leadership of our legal and compliance organizations and his performance with respect to the achievement of our business and legal goals in 2018, particularly with respect to his appropriate management of business risks through a well-established compliance program. Mr. Hessekiel’s leadership was also viewed as critical to our ability to ensure the continued strength of our compliance program during a period of anticipated growth. |
(5) | Dr. Lamb’s base salary increase reflects his leadership of our research and discovery organization and his performance with respect to the achievement of our pipeline development goals, particularly with respect to the progress on the license and collaboration agreement with Invenra, Inc. (Invenra) and our internal discovery efforts resulting in the FDA’s acceptance of our IND application for XL092. Dr. Lamb’s leadership was also viewed as critical to our efforts to expand our product pipeline beyond cabozantinib. |
Process for Determining Annual Cash Bonus
Our Annual Cash Bonus Plan is an annual incentive program designed to provide our senior management team, including our Named Executive Officers, with incentives and rewards for working to achieve the strongest possible performance againstpre-determined corporate goals, while also enhancing our ability to attract and retain highly talented individuals. Under our Annual Cash Bonus Plan, Named Executive Officers are eligible to receive an annual performance-based cash bonus award, the amount of which is based on apre-set target percentage of the Named Executive Officer’s annual base salary earned during the year. The Compensation Committee is responsible for establishing the bonus target percentages, as well as the relative percentage contributions of corporate performance and individual performance. For each Named Executive Officer, the amount of the cash bonus award for each fiscal year depends upon our overall achievement of applicable corporate goals established by the Compensation Committee for that year, and, as applicable, the Compensation Committee’s consideration of the individual contributions of each Named Executive Officer toward the achievement of our corporate goals and the departmental achievements in each Named Executive Officer’s area of responsibility that drove the achievement of such
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corporate goals. The corporate goals under the Annual Cash Bonus Plan may be based on criteria such as the following: sales or commercial goals; research, development and clinical activities; financial metrics, including revenues, cash flow and net income, cash balance, operating expenses and stock price performance; hiring, retention, development of plans and other operational goals; commercial, clinical and strategic collaborations and alliance management; acquisitions and licensing or partnering transactions; manufacturing and supply goals; quality goals; regulatory goals; compliance and government affairs and public policy goals. Individual performance may be assessed by the Compensation Committee based on the Named Executive Officer’s contributions toward the achievement of our corporate goals and departmental goals, recommended by the Chief Executive Officer and approved by the Compensation Committee, for the Named Executive Officer’s area of responsibility. Taking these factors into account, the Compensation Committee assigns an individual performance percentage for each Named Executive Officer, other than Dr. Morrissey. For any year, the achieved corporate performance percentage and/or individual performance percentage may exceed 100% in the event the targeted level of achievement of the applicable goals is exceeded, provided that neither percentage may exceed 200%.
2019 Bonus Targets
Bonus targets (expressed as a percentage of base salary) are based on the seniority of the applicable position. They are reviewed annually by the Compensation Committee, taking into consideration competitive market data, and adjusted if deemed appropriate by the Compensation Committee. In February 2019, the Compensation Committee determined 2019 target annual cash bonuses should remain at the same levels as 2018 for all Named Executive Officers, as reflected in the table below. The Compensation Committee’s decision regarding 2019 target bonuses was based on its assessment that the percentages of base salaries previously established were appropriate and continued to align us competitively with our 2019 peer group.
Named Executive Officer | 2019 Bonus Target | |||
Michael M. Morrissey, Ph.D. | 100 | % | ||
Gisela M. Schwab, M.D. | 50 | % | ||
Christopher J. Senner | 45 | % | ||
Jeffrey J. Hessekiel, J.D. | 45 | % | ||
Peter Lamb, Ph.D. | 45 | % |
2019 Corporate Goal Development and Weighting
In connection with establishing the bonus program for 2019, the Compensation Committee reviewed management’s proposed commercial, product development, pipeline development, finance, legal and business operations goals and recommended them to the Board for approval. In February 2019, the Board then reviewed and approved the proposed company goals for 2019, as identified in the table below. In selecting these goals, the Compensation Committee and the Board believed that they were appropriate drivers for our business, as they provided a balance between the efforts necessary to continue the successful commercialization of CABOMETX in its approved RCC and HCC indications, further our cabozantinib development program and expand our product pipeline, all while maintaining a strong financial position, which together, would enhance stockholder value. At the time the 2019 corporate goals were set, the Compensation Committee and management believed that such goals were challenging and achieving them would require not only continued strong commercial performance, research and product development success, and prudent fiscal and legal management, but also a high level of effort and execution on the part of our Named Executive Officers.
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The Compensation Committee also applied a performance weighting to each goal relative to the overall performance of the company to reflect the prioritization of key business objectives. Additionally, a weighting between corporate performance and individual performance was also applied for each Named Executive Officer to reflect the level of impact such individual would be able to make on the overall corporate performance. The relative weighting for each corporate goal and corporate versus individual performance is as follows:
Corporate Goals | Weighting (%) | Named Executive Officer | Weighting of Corporate Goals | Weighting of Individual Performance Assessment | ||||||||||||||
Commercial | 40 | % |
|
|
| Michael M. Morrissey, Ph.D. | 100 | % | 0 | % | ||||||||
Product Development | 30 | % |
|
|
| Gisela M. Schwab, M.D. | 60 | % | 40 | % | ||||||||
Pipeline Development | 20 | % |
|
|
| Christopher J. Senner | 60 | % | 40 | % | ||||||||
Finance, Legal and Facilities | 10 | % |
|
|
| Jeffrey J. Hessekiel, J.D. | 50 | % | 50 | % | ||||||||
Total | 100 | % | Peter Lamb, Ph.D. | 60 | % | 40 | % |
2019 Performance Evaluation
During 2019, management reported regularly to the Compensation Committee and the Board on the status of the company’s performance against these goals, including in formal meetings in February, May, September and December. In February 2020, the Compensation Committee evaluated the company’s performance in relation to the 2019 goals, as well as, other than for Dr. Morrissey, each Named Executive Officer’s individual contribution to the achievement of those goals. After consideration of such performance, the Compensation Committee concluded that 2019 was a year of meaningful accomplishments during which the company largely achieved each of the goals, as further described in the table below.
PERFORMANCE OBJECTIVES
| ACHIEVEMENTS
| TARGET %
| PAYOUT %
| |||||
Commercial | ||||||||
Exceed cabozantinib franchise net product revenue target established by the Board
|
›› Generated cabozantinib franchise net product revenues of $760 million during 2019. | 40% | 40% | |||||
Implement a comprehensive and rigorous launch strategy for CABOMETYX for second-line+ HCC indication while continuing growth in RCC
|
›› Successfully launched CABOMETYX in approved HCC indication while growing demand in an increasingly competitive RCC market.
| |||||||
Provide commercial evaluation and assessments of new assets from strategic and business development activity and for cabozantinib lifecycle management
|
›› Completed initial lifecycle indication prioritization onCOSMIC-021 indications.
›› Conducted strategic evaluation of mCRPC, NSCLC, and other markets for cabozantinib and other potential business development assets.
|
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PERFORMANCE OBJECTIVES
| ACHIEVEMENTS
| TARGET %
| PAYOUT %
| |||||
Product Development and Medical Affairs | ||||||||
Achieve approval of supplemental New Drug Application for CABOMETYX as a treatment for patients with previously treated HCC in January 2019 and support the launch for the new indication with market access support, educational efforts and customer service
|
›› FDA approved CABOMETYX as a treatment for patients with HCC who have previously been treated with sorafenib on January 14, 2019.
›› Met all Medical Affairs operational performance metrics, including those regarding field interactions with key opinion leaders and continuing medical education events. | 30% | 40% | |||||
Initiate at least 2 new cabozantinib phase 3 studies
|
›› InitiatedCOSMIC-313 in June 2019.
›› Supported the initiation of PDIGREE, in May 2019 through our Cooperative Research and Development Agreement (CRADA) with the National Cancer Institute’s Cancer Therapy Evaluation Program(NCI-CTEP).
| |||||||
AdvanceCOSMIC-311 andCOSMIC-312 by initiating at least 75% of planned countries as sites
|
›› Activated 88% of planned countries and 83% of identified sites forCOSMIC-311.
›› Activated 88% of planned countries and 77% of identified sites forCOSMIC-312.
| |||||||
Continue to explore cabozantinib alone or in combination with other therapies through a broad lifecycle management program; support the start of at least twelve new investigator-sponsored trials orNCI-CTEP studies and the continued progress of CABINET and randomized phase 2 trials evaluating cabozantinib in RCC, NSCLC and endometrial cancer
|
›› Established a cross company filing team and initiated planning workstreams with Bristol-Myers Squibb Company pending results for CheckMate 9ER.
›› Yielded encouraging initial data from the mCRPC and NSCLC cohorts ofCOSMIC-021 and amended the trial protocol to expand the patient enrollment in such cohorts and add new mCRPC cohorts.
›› Entered into an agreement with Roche to further evaluate the combination of cabozantinib and atezolizumab in patients with locally advanced or metastatic solid tumors, including in three planned phase 3 pivotal trials in advanced NSCLC, mCRPC and RCC.
›› Facilitated the initiation of 13 investigator sponsored trials in the U.S., as well as the continued progress of CTEP-sponsored randomized trials in RCC, NSCLC, neuroendocrine tumors and endometrial cancer.
| |||||||
Add additional FTEs to support Development and Medical Affairs plans and ensure continuous process improvements to enable expeditious and compliant trial execution
|
›› Hired all planned FTEs per the 2019 budget. | |||||||
Support cabozantinib worldwide regulatory filings by collaboration partners
|
›› Supported Ipsen’s receipt of worldwide CABOMETYX regulatory approvals by providing filing documents and assistance in responding to regulatory inquiries.
›› Assisted Takeda with its April 2019 and January 2020 regulatory applications to the Japanese MHLW for Manufacturing and Marketing Approval of CABOMETYX as a treatment for patients with RCC and HCC respectively.
|
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PERFORMANCE OBJECTIVES
| ACHIEVEMENTS
| TARGET %
| PAYOUT %
| |||||
Pipeline Development | ||||||||
Determine the recommended phase 2 dose for XL092 and initiate single agent cohort expansions
|
›› Enrolled dose escalation cohorts in the phase 1 trial evaluating XL092 and amended the trial protocol to introduce tablets.
| 20% | 15% | |||||
Advance two small molecules (internal or partnered) to development candidate (DC) status and initiate good laboratory practice (GLP) toxicology studies for one DC
|
›› Identified XL265 as a DC for the TAM kinase program with a GLP toxicology study to be initiated in the first half of 2020.
›› Progress made toward identification of a second DC, anticipated to be selected in the first half of 2020 pending additional profiling.
| |||||||
Advance one biotherapeutic program to cell line development stage
|
›› Lead program progressing under collaboration with Invenra delayed.
| |||||||
Complete two early-stage oncologyin-licensing deals
|
›› Executed an exclusive option and license agreement with Iconic to advance an innovative next-generation ADC program for cancer and an exclusive collaboration, option and license agreement with Aurigene toin-license programs to discover and develop small molecules as therapies for cancer.
| |||||||
Complete buildout of internal discovery team per 2019 budget and reinitiate high throughput screening
|
›› Hired all planned FTEs per the 2019 budget.
›› Completed three high throughput screens. | |||||||
Finance, Legal and Facilities | ||||||||
Manage cash balance and operating expenses within budget established by the Board
|
›› Managed operating expenses to $598.3 million and ended fiscal 2019 with a cash and investments balance of $1.4 billion.
| 10% | 15% | |||||
Integrate and implement compliance into all aspects of organizational activities
|
›› Completed all planned monitoring activities. Compliance programs operated effectively across the enterprise, with appropriate ongoing oversight.
| |||||||
Build Exelixis brand recognition within U.S. Government to support our business and the interests of patients
|
›› Engaged with Congress and the Administration on legislative, regulatory and policy matters, including a novel policy initiative related to drug pricing.
| |||||||
Develop and implement business continuity management and facilities growth plans that support long range planning
|
›› Increased campus footprint by approximately 94,000 square feet to serve as additional laboratory and office space.
›› Entered into abuild-to-suit lease for approximately 220,000 square feet on the property adjacent to our existing corporate headquarters.
| |||||||
100% | 110% |
The Compensation Committee also recognized the individual contributions of each Named Executive Officer, other than Dr. Morrissey, toward achievement of the 2019 corporate goals, as well as the departmental achievements in each Named Executive Officer’s area of responsibility that drove the achievement of such corporate goals. In evaluating the individual contributions of each Named Executive Officer, the Compensation Committee determined that all Named Executive Officers performed above expectations and considered the following contributions from each in such determination:
›› | Dr. Schwab’s overall leadership of our product development and medical affairs organizations and her performance with respect to the achievement of our product development goals in 2019, particularly regarding the FDA’s approval of CABOMETYX as a treatment for patients with HCC previously treated with sorafenib, the initiation ofCOSMIC-313 and management of other potentially label-enabling clinical trials, support of cabozantinib worldwide regulatory filings by collaboration partners and the oversight of a rapidly growing Product Development organization. The Compensation Committee gave specific weight to the criticality of Dr. Schwab’s performance with respect to the advancement of the cabozantinib development program and its strategic importance to Exelixis’ growth potential. |
›› | Mr. Senner’s overall leadership of our finance organization and his performance with respect to the achievement of our financial goals in 2019, particularly regarding our disciplined expense management and his role in positioning position the company to be able to execute on future strategic initiatives. |
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›› | Mr. Hessekiel’s overall leadership of our legal and compliance organizations and his performance with respect to the achievement of our business and legal goals in 2019, particularly regarding the advanced preparations for and management of our patent infringement lawsuit against MSN Pharmaceuticals, Inc., as well as the continued integration and implementation of compliance throughout a rapidly expanding organization. |
›› | Dr. Lamb’s overall leadership of our research and discovery organization and his performance with respect to the achievement of our pipeline development goals in 2019, particularly regarding the rebuilding of our discovery organization andre-initiation of high throughput screening, research progress made with respect to potential development candidates, the FDA’s acceptance of our IND for XL092 and the execution of our license and collaboration agreements with Iconic and Aurigene. The Compensation Committee also considered Dr. Lamb’s contributions to the advancement of Exelixis’ information technology and cyber-security programs. |
In consideration of the foregoing, in February 2020, pursuant to the terms and conditions of the Annual Cash Bonus Plan, the Compensation Committee approved annual cash bonus payments for each Named Executive Officer as reflected in the table below.
Name | 2019 Base Salary | 2019 Target Award (%) | 2019 Corporate Performance Weighting (%) | 2019 Approved Corporate Performance (%) | 2019 Individual Performance Weighting (%) | 2019 Individual Performance (%) | 2019 Annual Cash Bonus Payout (% of Target Award) | 2019 Annual Cash Bonus Payout ($) | ||||||||||||||||||||||||
Michael M. Morrissey, Ph.D. | $ | 1,017,140 | 100 | % | 100 | % | 110 | % | N/A | N/A | 110 | % | $ | 1,118,854 | ||||||||||||||||||
Gisela M. Schwab, M.D. | $ | 717,949 | 50 | % | 60 | % | 110 | % | 40 | % | 120 | % | 114 | % | $ | 409,231 | ||||||||||||||||
Christopher J. Senner | $ | 628,067 | 45 | % | 60 | % | 110 | % | 40 | % | 110 | % | 110 | % | $ | 310,893 | ||||||||||||||||
Jeffrey J. Hessekiel, J.D. | $ | 558,061 | 45 | % | 50 | % | 110 | % | 50 | % | 110 | % | 110 | % | $ | 276,240 | ||||||||||||||||
Peter Lamb, Ph.D. | $ | 522,401 | 45 | % | 60 | % | 110 | % | 40 | % | 110 | % | 110 | % | $ | 258,589 |
2019 Long-Term Incentive Awards
Because of our goal to align executive compensation and performance that advances our critical business objectives, a significant portion of the Named Executive Officers’ total compensation typically has consisted of, and is expected to continue to consist of, equity-based awards. In evaluating the mix of equity awards for 2019, the Compensation Committee considered market trends, as well as feedback from stockholders and proxy advisory firms, and determined that an entirely performance-based program consisting solely of PSUs would be the most appropriate incentive structure for our Named Executive Officers to reward performance over time and achieve our retention objectives. | ![]() |
Determination of September 2019 Performance Target for Long-Term Incentive Awards
The Compensation Committee seeks to develop long-term incentive compensation programs based on metrics that are aligned with our corporate strategy and designed to build value for our stockholders. The PSUs granted to Named Executive Officers in 2019 vest upon the approval by the FDA for the commercial sale and marketing of one or more products for which we hold, or have licensed to a partner, development and commercialization rights in the U.S. in one or more new indications or an indication for which the product has previously received FDA approval, if such product is part of a combination therapy. The Compensation Committee selected this performance target because it represented the most critical business objective for which the Named Executive Officers are responsible, thereby linking executive compensation with our long-term growth strategy.
Depending on the level of achievement of such performance goal, Named Executive Officers are eligible to vest up to a maximum of 200% of the target number of shares of Exelixis common stock subject to the PSU. Failure to achieve the performance target by December 31, 2021 will result in forfeiture of 100% of the PSU award.
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Compensation of Executive Officers | Compensation Discussion and Analysis
Vesting Percentage of Performance
0% | 100% | 150% | 200% | |||||||||||||||||||||||||||||||||||||||||||||||||||
Failure to Achieve:Achievement on January 1, 2022 or later | Target Achievement:Achievement between January 1, 2021 and December 31, 2021 | Early Achievement:Achievement on December 31, 2020 or earlier | Over Achievement:Achievement with respect to more than one new indication on or before December 31, 2021
|
The 2019 PSU awards will vest as to 50% of the original number of shares subject to the award upon the Compensation Committee’s certification that we have achieved the performance goal and 50% of the original number of shares subject to the award on the first quarterly vesting date (i.e. February 15th, May 15th, August 15th and November 15th) following theone-year anniversary of the Compensation Committee’s certification.
Potential PSU Payouts
(% of Target)
Vesting of these PSUs will cease upon termination of service as an employee for any reason. Pursuant to the terms of the award agreements, following certain change in control events wherein the PSU awards are assumed by the surviving entity, the PSU awards will convert to time-based vesting and vest annually over a three-year period following the grant date. The purpose of this conversion feature is to account for the fact that the goal may not be achievable in the context of the newly formed organization. In addition, the Named Executive Officers are party to our Change in Control and Severance Benefit Plan, which provides for acceleration of vesting of the award in the event of certain specified change in control events involving us, as further described under the caption “Potential Payments Upon Termination or Change in Control” below.
Determination of Long-Term Incentive Awards
When determining the appropriate value of equity incentive awards, the Compensation Committee asked Compensia to provide guidance with respect to implementing a program that would incentivize our Named Executive Officers to achieve key company priorities and increase stockholder value over the long-term, while maintaining competitive market practices and being mindful of the company’s equity burn rate.
As part of the decision-making process, the Compensation Committee considered the challenges of managing a rapidly expanding organization, as well as our need to retain a cohesive management team to facilitate the achievement of product development and pipeline expansion objectives, while supporting the continued commercial success of CABOMETYX, that would position the company for future success. The Compensation Committee also believed it was important that the value of the equity awards continue to reflect the individual performance of each Named Executive Officer during the fiscal year to
2020 Proxy Statement 73
date and the criticality of each Named Executive Officer’s skill set and expected future contributions to our business. Taking these factors into consideration and applying Compensia’s market analysis of long-term incentive compensation of our Named Executive Officers compared to our 2019 peer group, the Compensation Committee determined that the value of the aggregate equity awards granted to each of our Named Executive Officers should be between the 50th and 75th percentile of market peers and in September 2019, approved the grants to the Named Executive Officers summarized in the table below. The actual number of PSUs granted to each executive officer were determined by dividing the value the Compensation Committee intended to deliver by the30-day average trailing stock price (as of a date shortly before the grant date).A 30-day average share price was used, rather than a single day share price, in order to provide a more stabilized share value less susceptible to possible swings in the market.
Name | Number of Shares Subject to 2019 PSUs – Target Achievement | Number of Shares Subject to 2019 PSUs – Early Achievement | Number of Shares Subject to 2019 PSUs – Over Achievement | Number of Shares Early Achievement | ||||||||||||
Michael M. Morrissey, Ph.D. | 448,574 | 672,861 | 897,148 | 897,148 | ||||||||||||
Gisela M. Schwab, M.D. | 142,586 | 213,879 | 285,172 | 285,172 | ||||||||||||
Christopher J. Senner | 118,821 | 178,231 | 237,642 | 237,642 | ||||||||||||
Jeffrey J. Hessekiel, J.D. | 118,821 | 178,231 | 237,642 | 237,642 | ||||||||||||
Peter Lamb, Ph.D. | 142,586 | 213,879 | 285,172 | 285,172 |
2018 Long-Term Incentive Awards Achievements Table
In 2018, the Compensation Committee granted PSUs to Named Executive Officers allocated among five separate awards that only vest upon the achievement of certain commercial, clinical development and pipeline expansion performance targets. The Compensation Committee selected these performance targets because they represented the critical business objectives for which the Named Executive Officers are responsible, thereby linking executive compensation with continued long-term success for the company.
During 2019, the Compensation Committee certified the achievement of the two commercial performance targets. The following chart reflects thepre-established commercial performance targets and the actual results achieved. The remaining three clinical development and pipeline expansion related performance targets are not disclosed for competitive reasons and because the relevant performance periods are ongoing.
2018 PSU Grant # | Business Focus | Pre-Established Performance Target | Achievement | |||
1 | Commercial | $250 million in cabozantinib global net product revenue1 target in a single quarter | $260.2 million in cabozantinib global net product revenue1 for the quarter ended June 28, 2019 | |||
2 | Commercial | $1 billion in cabozantinib global net product revenue1 target over four consecutive quarters | $1.0 billion in global net product revenue1 for the four consecutive fiscal quarters ended September 27, 2019 |
1 | Includes revenues generated by Ipsen |
The Compensation Committee certified 2018 PSU Grant #1 on September 12, 2019 and 2018 PSU Grant #2 on December 4, 2019. Upon such certification, each PSU vested as to 50% of the original number of shares subject to the award. The remaining 50% of the original number of shares subject to each award will vest on the first quarterly vesting date (i.e. February 15th, May 15th, August 15th and November 15th) following theone-year anniversary of the Compensation Committee’s certification.
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Compensation of Executive Officers | Compensation Discussion and Analysis
Other Compensation Information
Timing of Equity Awards
Annual grants of equity awards to our executive officers, including our Named Executive Officers, are generally determined and approved atpre-scheduled Compensation Committee meetings, with such meeting date typically serving as the grant date. However, the Compensation Committee may sometimes approve the grant of equity awards to executive officers and other employees in advance of its next scheduled meeting, either at a special meeting or by unanimous written consent, in connection with certain new hires, promotions and other circumstances where the Compensation Committee deems it appropriate to make such grants. The grant dates for these equity awards are typically the same date that a newly hired officer begins employment or the effective date of an officer’s promotion, as applicable. Grants made to new hires below the level of Vice President, are approved on a monthly basis by our Equity Award Committee, comprised solely of Dr. Morrissey, acting in his capacity as a director pursuant to authority delegated to him by the Compensation Committee. All stock options are granted with an exercise price that is not less than the closing price of our common stock on The Nasdaq Global Select Market on the grant date. We have no plan or practice to time option grants in coordination with the release ofnon-public information, and we do not time the release ofnon-public information to affect the value of executive compensation.
The Board maintains Stock Ownership Guidelines for our Named Executive Officers in order to further align their financial interests with those of our stockholders, as well as to promote sound corporate governance. The Stock Ownership Guidelines for our Named Executive Officers establish the following ownership targets and provide for a “lesser of” approach to address stock price volatility often experienced by biotechnology companies:
Position | Ownership Level | |
Chief Executive Officer | Lesser of a value equivalent to 5 times annual base salary or 160,000 shares | |
Other Named Executive Officers | Lesser of a value equivalent to 1.5 times annual base salary or 25,000 shares |
All Named Executive Officers are expected to achieve their stock ownership targets within five years of becoming subject to these guidelines. The policy includes procedures for granting exemptions in the case of severe financial hardship. In determining ownership levels for each Named Executive Officer under our Stock Ownership Guidelines, credit is provided for shares held outright (including shares owned through trusts, our 401(k) Plan, or by a spouse), as well as 50% of the number of vested, but unexercised, stock options. No credit is provided for RSUs until they vest. The values for all shares determined to be held by Named Executive Officers are based on the200-day average stock price as of the measurement date. As of February 10, 2020, all of our Named Executive Officers had met the required ownership targets.
We are dedicated to maintaining a culture of high integrity and accountability, and to discourage conduct harmful to our business and the interests of our various stakeholders. On February 28, 2019, upon recommendation from the Compensation Committee, the Board approved the Clawback Policy that applies to all forms of compensation, except base salary, granted after the adoption of the Clawback Policy. A triggering event under the Clawback Policy shall occur when a covered employee (which includes all Named Executive Officers):
For clarity, “material harm” includes, but is not limited to, the requirement to prepare an accounting restatement for any fiscal quarter or year commencing after adoption of the Clawback Policy due to our material noncompliance with any financial reporting requirement. If triggered, then to the fullest extent permitted by law, we may recoup all variable compensation granted or paid to the covered employee during each fiscal year in which the covered employee’s “misconduct” occurred.
2020 Proxy Statement 75
Accounting and Tax Considerations
Under FASB ASC 718, we are required to estimate and record an expense for each award of equity compensation (including stock options, RSUs and PSUs) over the vesting period of the award. As long as stock options, RSUs and PSUs remain the sole components of our long-term compensation program, we expect to record stock-based compensation expense on an ongoing basis according to ASC 718. Compensation expense relating to awards subject to performance conditions is recognized if it is probable that the performance goals will be achieved. The probability of achievement of such goals is assessed on a quarterly basis. The Compensation Committee has considered, and may in the future consider, the grant of restricted stock to our executive officers in lieu of stock option grants, RSU and/or PSU awards.
Section 162(m) of the Code, as amended by the Tax Cuts and Jobs Act, limits the deductibility for federal income tax purposes to not more than $1 million of compensation paid to “covered employees” in a calendar year. Prior to the recent enactment of the Tax Cuts and Jobs Act, compensation that qualified as “performance-based compensation” under Section 162(m) of the Code was not subject to this deduction limitation. Pursuant to the Tax Cuts and Jobs Act, this exception for “performance-based compensation” under Section 162(m) of the Code was repealed with respect to taxable years beginning after December 31, 2017, except that certain transition relief is provided for compensation paid pursuant to a written binding contract which was in effect on November 2, 2017, and which was not modified in any material respect on or after such date. As a result, compensation paid to any of our “covered employees” in excess of $1 million per taxable year generally will not be deductible unless, among other requirements, it is intended to qualify, and is eligible to qualify, as “performance-based compensation” under Section 162(m) of the Code pursuant to the transition relief provided by the Tax Cuts and Jobs Act. Certain equity awards issued prior to the transition date were designed to permit us to qualify for the performance-based exception, but because of certain ambiguities and uncertainties as to the application and interpretation of Section 162(m) of the Code and the regulations issued thereunder, as well as other factors beyond the control of the Compensation Committee, no assurance can be given that any compensation paid by the company will be eligible for such transition relief and be deductible by the company in the future. Although the Compensation Committee will continue to consider tax implications as one factor in determining executive compensation, the Compensation Committee also looks at other factors in making its decisions and retains the flexibility to provide compensation for the Named Executive Officers in a manner consistent with the goals of the company’s executive compensation program and the best interests of the company and its stockholders, which may include providing for compensation that is not deductible by the company due to the deduction limit under Section 162(m). The Compensation Committee also retains the flexibility to modify compensation that was initially intended to be exempt from the deduction limit under Section 162(m) if it determines that such modifications are consistent with the company’s business needs.
Compensation Policies and Practices as They Relate to Risk Management
In 2019, the Compensation Committee reviewed our compensation policies and practices and concluded that the mix and design of these policies and practices are not reasonably likely to encourage our employees to take excessive risks. In connection with its evaluation, the Compensation Committee considered, among other things, the structure, philosophy and design characteristics of our primary incentive compensation plans and programs in light of our risk management and governance procedures, as well as other factors that may calibrate or balance potential risk-taking incentives. Based on this assessment, the Compensation Committee concluded that risks arising from our compensation policies and practices for all employees, including executive officers, are not reasonably likely to have a material adverse effect on us.
76 Exelixis, Inc.
Compensation of Executive Officers | Summary of Compensation
The following table shows for the fiscal years ended January 3, 2020, December 28, 2018 and December 29, 2017 (referred to as fiscal years 2019, 2018 and 2017, respectively), compensation awarded to, paid to or earned by our Chief Executive Officer, our Chief Financial Officer, and our other three most highly compensated executive officers in 2019, which we refer to as our “Named Executive Officers.”
Name and Principal Position | Year (1) | Salary ($)(2) | Bonus ($)(3) | Stock Awards ($)(5) | Option Awards ($)(6) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||
Michael M. Morrissey, Ph.D. | 2019 | 1,005,201 | — | — | — | 1,118,854 | 8,500 | 2,132,555 | ||||||||||||||||||||||||
President and Chief | 2018 | 945,080 | — | — | 3,111,403 | 1,000,000 | 8,500 | 5,064,983 | ||||||||||||||||||||||||
Executive Officer | 2017 | 891,781 | 675,750 | 1,952,800 | 5,911,152 | — | 8,100 | 9,439,583 | ||||||||||||||||||||||||
Gisela M. Schwab, M.D. | 2019 | 710,751 | — | — | — | 409,231 | 8,500 | 1,128,482 | ||||||||||||||||||||||||
President, Product Development | 2018 | 672,301 | — | — | 1,227,500 | 466,156 | 8,500 | 2,374,457 | ||||||||||||||||||||||||
and Medical Affairs and Chief | 2017 | 629,493 | 318,000 | 1,830,750 | 1,847,235 | — | 8,100 | 4,633,578 | ||||||||||||||||||||||||
Medical Officer | ||||||||||||||||||||||||||||||||
Christopher J. Senner | 2019 | 622,866 | — | — | — | 310,893 | 8,500 | 942,259 | ||||||||||||||||||||||||
Executive Vice President and | 2018 | 594,740 | — | — | 1,227,500 | 338,074 | 8,500 | 2,168,814 | ||||||||||||||||||||||||
Chief Financial Officer | 2017 | 562,120 | 255,150 | 1,525,625 | 1,539,363 | — | 8,100 | 3,890,358 | ||||||||||||||||||||||||
Jeffrey J. Hessekiel, J.D. | 2019 | 553,934 | — | — | — | 276,240 | 8,500 | 838,674 | ||||||||||||||||||||||||
Executive Vice President and | 2018 | 531,880 | — | — | 1,227,500 | 301,836 | 8,500 | 2,069,716 | ||||||||||||||||||||||||
General Counsel | 2017 | 507,067 | 229,970 | 1,220,500 | 1,231,490 | — | 7,076 | 3,196,103 | ||||||||||||||||||||||||
Peter Lamb, Ph.D. | 2019 | 517,617 | — | — | — | 258,589 | 8,500 | 784,706 | ||||||||||||||||||||||||
Executive Vice President, | 2018 | 493,570 | — | — | 1,180,295 | 311,202 | 8,500 | 1,993,567 | ||||||||||||||||||||||||
Scientific Strategy and Chief | 2017 | 473,190 | 214,245 | 1,342,550 | 1,354,639 | — | 8,100 | 3,392,724 | ||||||||||||||||||||||||
Scientific Officer |
(1) | The compensation reflected in |
(2) | The amount in this column represents the amount actually earned by each Named Executive Officer for the indicated fiscal year. For information regarding 2019 base salaries, please see “Compensation Discussion and Analysis—2019 Compensation Decisions—2019 Base Salaries.” |
(3) | The amounts in this column represents discretionary cash bonuses awarded for services rendered during the indicated fiscal year by the Named Executive Officers. |
(4) | The amounts in this column represent cash bonuses awarded under our Annual Cash Bonus Plan in fiscal 2018 and 2019 based on the |
With respect to PSU awards granted to the Named Executive Officers during fiscal 2019, the grant date fair values, as computed in accordance with FASB ASC 718 and |
2020 Proxy Statement 77
stock price of $19.56 per share of our common stock on the September 20, 2019 grant date and excluding estimates of forfeiture, the values of the PSU awards granted to each Named Executive Officer during fiscal 2019 are as follows: |
Name and Principal Position | Target Payout of PSUs Granted in 2019 ($) | Maximum Payout of PSUs Granted in 2019 ($) | ||||||
Michael M. Morrissey, Ph.D. | 8,774,107 | 17,548,215 | ||||||
Gisela M. Schwab, M.D. | 2,788,982 | 5,577,964 | ||||||
Christopher J. Senner | 2,324,139 | 4,648,278 | ||||||
Jeffrey J. Hessekiel, J.D. | 2,324,139 | 4,648,278 | ||||||
Peter Lamb, Ph.D. | 2,788,982 | 5,577,964 |
For a description of the PSU awards granted during fiscal 2019, see “Compensation Discussion and Analysis—2019 Compensation Decisions—2019 Long-Term Incentive Awards” above.
With respect to PSU awards granted during fiscal 2018, the grant date fair values, as computed in accordance with FASB ASC 718 and presented in the table above, are based upon the then-probable outcome of the performance conditions, which was $0 for each Named Executive Officer. Assuming achievement of the target level of the performance conditions for the PSU awards granted to each Named Executive Officer during fiscal 2018 (which was also the maximum level of performance), and assuming a closing stock price of $18.80 per share of our common stock on the September 10, 2018 grant date and excluding estimates of forfeiture, the values of the PSU awards granted to each Named Executive Officer during fiscal 2018 are as follows:
Name and | Target/Maximum Payout of PSUs Granted in 2018 ($) | |||
Michael M. Morrissey, Ph.D. | 2,912,552 | |||
Gisela M. Schwab, M.D. | 1,221,398 | |||
Christopher J. Senner | 1,221,398 | |||
Jeffrey J. Hessekiel, J.D. | 657,680 | |||
Peter Lamb, Ph.D. | 1,174,417 |
The values of the PSU awards granted to each Named Executive Officer during fiscal 2018 were previously disclosed in our proxy statement for the 2019 Annual Meeting of Stockholders under the column “Stock Awards” at the Target/Maximum values presented in the foregoing table.
(6) | Amounts shown in this column do not reflect compensation actually received or amounts that may be realized in the
78 Exelixis, Inc.
The following table shows for the fiscal year ended January 3, 2020, certain information regarding grants of plan-based awards to the Named Executive Officers: Grants of Plan-Based Awards in Fiscal 2019 Michael M. Morrissey, Ph.D. Gisela M. Schwab, M.D. Christopher J. Senner Jeffrey J. Hessekiel, J.D. Peter Lamb, Ph.D. Amounts shown in this column do not reflect compensation actually received or amounts that may be realized in the future by the Named Executive Officers. The amounts shown in this column reflect the aggregate grant date fair value in fiscal year 2019 for the PSU awards as computed in accordance with FASB ASC 718. The assumptions used to calculate the grant date fair value of the PSU awards are set forth in Note 8 of the Notes to Consolidated Financial Statements included in our Annual Report on Form10-K for the fiscal year ended January 3, 2020, filed with the SEC on February 25, 2020. The grant date fair values of the PSU awards, as computed in accordance with FASB ASC 718, granted to each Named Executive Officer presented in the table above are based upon the then-probable outcome of the performance conditions, which was $0 for each Named Executive Officer. For additional information regarding the values of the PSU awards granted to each Named Executive Officer during fiscal 2019, seeFootnote 5 to the Summary Compensation Table above. The PSU award was granted pursuant to our 2017 Plan. The PSU award will vest as to (i) 50% of the original number of shares subject to the award upon the Compensation Committee’s certification that the company has obtained approval by the FDA for the commercial sale and marketing of one or more products for which we hold, or have licensed to a partner, development and commercialization rights in the U.S. in one or more new indications, and (ii) 50% of the original number of shares subject to the award on the first quarterly vesting date (i.e. February 15th, May 15th, August 15th and November 15th) following theone-year anniversary of the Compensation Committee’s certification. Depending on the level of achievement of such performance target, Named Executive Officers are eligible to vest up to a maximum of 200% of the target number of shares of Exelixis common stock subject to the PSU award. For more information regarding the PSUs granted in 2019, please see “Compensation Discussion and Analysis—2019 Compensation Decisions—2019 Long-Term Incentive Awards” above. Failure to achieve the aforementioned performance target by December 31, 2021 will result in forfeiture of 100% of the PSU award, and vesting is subject to acceleration as described under the caption “—Potential Payments Upon Termination or Change in Control” below. 2020 Proxy Statement 79 Base Salaries. For a description of actions taken by the Compensation Committee with respect to base salaries for our Named Executive Officers for fiscal 2019, please see “Compensation Discussion and Analysis—2019 Compensation Decisions—2019 Base Salaries” above. Annual Cash Bonuses. Prior to 2018 the Compensation Committee considered and approved the payment of annual cash bonuses to the Named Executive Officers for services rendered in the prior year. Historically, the payment of bonuses had been entirely within the discretion of the Compensation Committee. Accordingly, we did not consider the bonuses reported in theSummary Compensation Table in fiscal 2017 tobe “Non-Equity Incentive Plan Compensation” within the meaning of applicable SEC rules. In 2018, we adopted our Annual Cash Bonus Plan that provides for annual bonus awards to reward executive officers based on our achievement ofpre-determined corporate goals and their contribution to the that achievement, and we consider the bonuses reported in theSummary Compensation Table in fiscal 2018 and fiscal 2019 to be“Non-Equity Incentive Plan Compensation” within the meaning of applicable SEC rules. For more information regarding our Annual Cash Bonus Plan, please see “Compensation Discussion and Analysis—2019 Compensation Decisions—2019 Annual Cash Bonuses” above. Stock Awards and Option Awards. Our 2017 Plan provides for the grant of RSUs, PSUs and time-based and performance-based stock options to our Named Executive Officers and other employees. In September 2019, we granted PSU awards, which will only vest following our achievement of a certain performance target in line with our longer-term business strategy, to all of our Named Executive Officers. For information regarding PSU awards granted to the Named Executive Officers in fiscal 2019, including the number of underlying shares and vesting conditions related thereto, please see “Compensation Discussion and Analysis—2019 Compensation Decisions—2019 Long-Term Incentive Awards” above. Employment Agreements.We have no employment agreements with our Named Executive Officers. Change in Control and Severance Benefit Plan. Each of our Named Executive Officers participates in our Change in Control and Severance Benefit Plan, a description of which is included below under the heading “Potential Payments Upon Termination or Change in Control.” Other Compensatory Arrangements. Please see “Compensation Discussion and Analysis—Compensation Elements—Other Compensation” above for a description of other executive compensatory arrangements, including our 401(k) Plan and other benefits. 80 Exelixis, Inc. Compensation of Executive Officers | Outstanding Equity Awards at Fiscal Year–End Outstanding Equity Awards at Fiscal Year-End The following table shows certain information regarding outstanding equity awards at January 3, 2020, for the Named Executive Officers. Outstanding Equity Awards at January 3, 2020
2020 Proxy Statement 81
82 Exelixis, Inc. Compensation of Executive Officers | Outstanding Equity Awards at Fiscal Year–End
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