UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of
1934 (Amendment No. )
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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AFFYMETRIX, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined):
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control
number.
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AFFYMETRIX, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 7, 2013
TO OUR STOCKHOLDERS:
The 2013 annual meeting of stockholders of Affymetrix, Inc. will be held on Tuesday, May 7, 2013, beginning at 8:00
a.m., Pacific Daylight Time, at 3380 Central Expressway, Santa Clara, California 95051, for the following purposes:
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To elect seven directors to serve until the next annual meeting of stockholders or until their successors are elected;
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To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2013;
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To approve, by an advisory vote, the compensation of our named executive officers; and
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To transact such other business as may properly come before the meeting or any postponement or adjournment.
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These items of business are more fully described in the proxy statement accompanying this notice. Our Board of Directors has fixed the
close of business on March 11, 2013 as the record date for determination of the stockholders entitled to notice of, and to vote at, the meeting and any postponements or adjournments of the meeting.
We will mail to our stockholders of record and beneficial owners on or about March 27, 2013 a Notice of Internet Availability of
Proxy Materials containing instructions on how to access our proxy statement and our Annual Report to Stockholders via the Internet and vote online. The Notice of Internet Availability of Proxy Materials also contains instructions on how you can
receive a paper copy of the proxy materials.
Our proxy statement and Annual Report to Stockholders are available at
www.proxyvote.com.
All stockholders are cordially invited to attend the annual meeting in person.
However, to assure your representation at the meeting, please vote as soon as possible.
By Order of the
Board of Directors,
JOHN F. RUNKEL, JR.
Secretary
Santa Clara, California
March 27, 2013
AFFYMETRIX, INC.
3420 CENTRAL EXPRESSWAY
SANTA CLARA, CALIFORNIA 95051
(408) 731-5000
PROXY STATEMENT FOR 2013 ANNUAL MEETING OF STOCKHOLDERS
The enclosed proxy is solicited on behalf of the Board of Directors of Affymetrix, Inc. (the Company) for use at our
2013 annual meeting of stockholders, or at any postponement or adjournment of the meeting.
These proxy solicitation materials
are first being made available on or about March 27, 2013, together with our 2012 Annual Report to Stockholders and our Form 10-K, to all stockholders of record at the close of business on March 11, 2013.
ABOUT THE MEETING
When and where is the meeting being held?
Our annual meeting of stockholders for 2013 is being held on Tuesday, May 7, 2013, beginning at 8:00 a.m. Pacific Daylight Time, at 3380 Central Expressway, Santa Clara, California 95051.
What is the purpose of the annual meeting?
At our 2013 annual meeting, stockholders will act on the matters outlined in the notice of annual meeting on the cover page of this proxy statement, namely,
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the election of directors;
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the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the current fiscal
year;
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the approval, by an advisory vote, of the compensation of our named executive officers; and
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any other matters that may properly be presented at the meeting.
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Who is entitled to notice of and to vote at the meeting?
You are entitled
to receive notice of and to vote at our annual meeting (and any postponements or adjournments of the meeting) if our records indicate that you owned shares of our common stock at the close of business on March 11, 2013, the record date for the
meeting. At the close of business on that date, 71,064,260 shares of our common stock were outstanding and entitled to vote. You are entitled to one vote for each share held and you may vote on each matter to come before the meeting.
How can I receive a paper or electronic copy of this proxy statement?
On or about March 27, 2013, we will mail to our stockholders of record and beneficial owners a Notice of Internet Availability of Proxy Materials (the Notice) containing instructions on
how to access this proxy statement and our Annual Report to Stockholders via the Internet and vote online. As a result, you will not receive a printed copy of the proxy materials in the mail unless you request a copy. All stockholders will have the
ability to access the proxy materials on a website referred to in the Notice and may request a printed set of the
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proxy materials by mail or electronically from such website. If you would like to receive a printed or electronic copy of our proxy materials, you should follow the instructions for requesting
such materials included in the Notice. By participating in the e-proxy process, we will save money on the cost of printing and mailing documents to you and reduce the impact of our annual stockholders meetings on the environment.
What is the difference between holding shares as a stockholder of record and as a beneficial owner of shares held in street name?
Stockholder of Record.
If your shares are registered directly in your name with our
transfer agent, American Stock Transfer & Trust Company, you are considered the stockholder of record with respect to those shares, and the Notice will be sent directly to you. As our stockholder of record, you have the right to grant your
voting proxy directly to us or to vote in person at the annual meeting. We have enclosed a proxy card for your vote.
Beneficial Owner of Shares Held in Street Name.
If your shares are held in an account at a brokerage
firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in street name, and the Notice will be forwarded to you by that organization. The organization holding your account is considered
the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. You are also invited to attend the annual meeting. However,
since you are not the stockholder of record, you may not vote these shares in person at the annual meeting unless you request, complete and deliver the proper documentation provided by your broker, bank or other holder of record and bring it with
you to the meeting.
What is householding and how does it affect me?
Under SEC rules, delivery of each Notice in one mailing envelope (or delivery of one proxy statement and annual report, for those who
request paper copies) to two or more investors sharing the same mailing address is permitted, under certain conditions. This procedure, called householding, is available if all of the following criteria are met:
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you have the same address as other stockholders registered on our books;
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you have the same last name as the other stockholders; and
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your address is a residential address or post office box.
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If you are eligible for householding, but you and other stockholders of record with whom you share an address currently receive multiple copies of the same mailings, or if you hold stock in more than one
account, and in either case you wish to receive only a single mailing of each of these documents for your household, please submit a request to Broadridge, 51 Mercedes Way, Edgewood, NY 11717 or call (800) 542-1061. Stockholders who participate
in householding will continue to be mailed separate proxy cards (to the extent we send proxy cards by mail).
If you
participate in householding and wish to receive a separate copy of our proxy mailings, or if you do not wish to participate in householding and prefer to receive separate copies of these documents in the future, please contact Broadridge as
indicated above. A separate copy of our proxy mailings will be sent to you upon request.
Beneficial owners can request
information about householding from their banks, brokers or other holders of record.
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If I am a stockholder of record of Affymetrix shares, how do I vote?
If you are a stockholder of record, you may vote in person at the annual meeting. We will give you a ballot when you arrive.
If you do not wish to vote in person or if you will not be attending the annual meeting, you may vote by proxy. You can vote by proxy by
either completing and signing the proxy card and returning it to us by mail in accordance with the instructions on the proxy card, by telephone or over the Internet by going to
www.proxyvote.com
and completing an electronic proxy card.
Instructions for voting by telephone or over the Internet are included on the proxy card. Stockholders of record who vote by mail should mail completed proxy cards to Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
If I am the beneficial owner of Affymetrix shares held in street name, how do I vote?
If you are a beneficial owner of shares held in street name, you will receive instructions from the holder of record that you must follow
to vote your shares. If you wish to vote in person at the annual meeting, you must obtain a valid proxy from the holder of record.
Can I
change my vote after I have voted?
You may revoke your proxy and change your vote at any time before the proxy is
exercised at the meeting. You may vote again on a later date on the Internet or by telephone (only your latest Internet or telephone proxy submitted prior to the meeting will be counted), or by signing and returning a new proxy card with a later
date, or by attending the meeting and voting in person. However, your attendance at the annual meeting will not automatically revoke your proxy unless you vote again at the meeting or specifically request in writing that your prior proxy be revoked.
What happens if I sign, date and return my proxy but do not specify how I want my shares voted on one of the proposals?
Stockholders of Record:
Your proxy will be counted as a vote FOR all of the director
nominees and FOR Proposals 2 and 3.
Beneficial Owner of Affymetrix Shares Held in Street
Name:
Your broker or nominee may vote your shares only on those proposals on which it has discretion to vote; if your broker or nominee does not have discretion to vote, your returned proxy will be considered a
broker non-vote. Your broker or nominee does not have discretion to vote your shares on the non-routine matters such as the election of directors or advisory vote on the compensation of our named executive officers (Proposals 1 and 3).
However, we believe your broker or nominee does have discretion to vote your shares on routine matters such as Proposal 2.
What
constitutes a quorum?
The meeting will be held if a majority of the shares of common stock issued and outstanding on the
record date are present at the meeting, either in person or by proxy. This is called a quorum for the transaction of business. At the record date, there were 71,064,260 shares of common stock issued and outstanding. Accordingly, the presence of the
holders of common stock representing at least 35,532,131 shares will be required to establish a quorum.
Your shares will be
counted for purposes of determining if there is a quorum if you are present in person at the meeting, or have properly submitted a proxy card. Votes for and against, and proxies received but marked as abstentions
and broker non-votes will each be counted as present for purposes of determining the presence of a quorum.
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What vote is required to approve each item?
Proposal 1
. Under our majority voting policy, in an uncontested election, each nominee for director
shall be elected to the Board of Directors by a majority of the votes cast with respect to the directors election (that is, the votes cast for a directors election must exceed the votes cast against that directors election). This
election is an uncontested election. In the election of directors, votes may be cast in favor of or against any or all nominees. Any director who does not receive a majority of the votes cast will not be elected. Each nominee for director has
submitted an irrevocable resignation that becomes effective if the director does not receive a majority of the votes cast with respect to the directors election. For Proposal 1, votes cast excludes both abstentions and broker
non-votes.
Proposals 2 and 3.
The affirmative vote of a majority of the shares of
common stock present in person or represented by proxy and entitled to vote on the item will be required to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the current fiscal year
(Proposal 2) and to approve, by an advisory vote, the compensation of our named executive officers (Proposal 3). If any other matter is properly submitted to the stockholders at the annual meeting, its adoption generally will require the affirmative
vote of a majority of the shares of common stock present in person or represented by proxy and entitled to vote on that matter.
In accordance with Delaware law, only votes cast for a matter constitute affirmative votes. A properly executed proxy marked
abstain with respect to any matter will not be voted, although it will be counted for purposes of determining whether there is a quorum. Abstentions will have the same effect as negative votes for Proposals 2 and 3.
If you hold your shares in street name through a broker or other nominee, your broker or nominee may not be permitted to
exercise voting discretion with respect to some of the matters to be acted upon, including the election of directors and the advisory vote on the compensation of our named executive officers. Thus, if you do not give your broker or nominee specific
instructions with respect to a non-discretionary matter, your shares will not be voted on such matter and will not be counted as shares entitled to vote on such matter. However, shares represented by such broker non-votes will be counted
in determining whether there is a quorum. As broker non-votes are not considered entitled to vote they will have no effect on the outcome other than reducing the number of shares present in person or by proxy and entitled to vote from
which a majority is calculated.
What are the Boards recommendations?
Our Board of Directors recommends that you vote:
FOR the election of the seven directors;
FOR
ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2013;
FOR approval of the compensation of the named executive officers.
Who will count
the vote?
Broadridge, Inc. will act as the inspector of elections and will tabulate the votes.
When will the voting results be announced?
The voting results will be announced at the meeting and published in a Current Report on Form 8-K filed after the meeting date.
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Is Affymetrix paying the cost of this proxy solicitation?
We will pay the costs of the solicitation. We may request banks and brokers and other custodians, nominees and fiduciaries to solicit
their customers who own our shares and will reimburse them for their reasonable out-of-pocket expenses. Our employees, directors, officers and others may solicit proxies on our behalf, personally or by telephone, without additional compensation. In
addition, we may hire MacKenzie Partners, Inc. to serve as proxy solicitor. If we do, we expect to pay MacKenzie Partners approximately $15,000.
Is the meeting being webcast?
Yes. If you choose to listen to the
webcast, go to the
Investors
section of our website (
www.affymetrix.com
) before the meeting time, and follow the instructions for downloading the webcast. If you miss the annual meeting, you can listen to a re-broadcast of the webcast
through the last week of May.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE AS SOON
AS POSSIBLE.
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GOVERNANCE OF THE COMPANY
Who are the current members of the Board?
The current members of the
Board of Directors are Stephen P.A. Fodor, Ph.D., Frank Witney, Ph.D., Nelson C. Chan, John D. Diekman, Ph.D., Gary S. Guthart, Ph.D., Jami Dover Nachtsheim, Robert H. Trice, Ph.D. and Robert P. Wayman.
Is a majority of the directors independent?
Yes. As required by the NASDAQ listing standards and our
Corporate Governance Guidelines,
a majority of the Board of Directors is independent within the meaning of such standards and
guidelines. The Board of Directors is required to make an affirmative determination at least annually as to the independence of each director. The Board of Directors has determined that all of its members other than Stephen P.A. Fodor, Ph.D. and
Frank Witney, Ph.D. are independent.
Does Affymetrix have a lead independent director?
Yes. The Board of Directors has elected a non-management director to serve in a lead capacity to coordinate the activities of the
other non-management directors, preside at executive sessions, function as principal liaison on Board-wide issues between the independent directors and the Chairman and to perform such other duties and responsibilities set forth in our
Corporate Governance Guidelines
and as the Board of Directors may determine. Robert P. Wayman has served as our lead independent director since May 2010.
How often did the Board meet in 2012?
The Board of Directors held eleven
meetings in 2012. Under our
Corporate Governance Guidelines
directors are expected to be active and engaged in discharging their duties and to keep themselves informed about our business and operations. Directors are expected to attend all
Board meetings and meetings of each committee on which they serve and to prepare themselves for those meetings. During 2012, six of our directors attended 100% of the total number of meetings of the Board of Directors and the total number of
meetings held by all committees of the Board of Directors on which he or she served. The other two directors attended at least 82% of such meetings.
Do the independent directors meet in executive sessions?
Our
Corporate
Governance Guidelines
require the independent directors to meet regularly in executive sessions in which management does not participate, at least four times a year. In executive sessions, the independent directors review the report of the
independent registered public accounting firm, the performance of the Chairman, CEO and other senior managers, the compensation of the Chairman, CEO and other senior managers and any other relevant matter. In 2012, the directors met in executive
session four times, with only independent directors present.
Does Affymetrix have a policy with respect to attendance of directors at the
annual meeting of stockholders?
All of our directors serving on the Board of Directors at the time attended last
years annual meeting. Our
Corporate Governance Guidelines
provide that directors are required to attend our annual meeting of stockholders, absent extraordinary circumstances.
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What is the role of the Boards committees?
The Board of Directors currently has three standing committees: Audit Committee, Compensation Committee and Nominating and Corporate
Governance Committee. Each member of the three standing committees is independent as defined by applicable NASDAQ and SEC rules and each of these committees has a written charter approved by the Board of Directors. Under our
Corporate Governance
Guidelines,
committee members are appointed by the Board of Directors based on the recommendation of the Nominating and Corporate Governance Committee, except that members of the Nominating and Corporate Governance Committee are appointed by the
independent members of the Board of Directors. The current members of the committees are as follows:
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Director
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Audit
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Compensation
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Nominating
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Corporate
Governance
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Nelson C. Chan.
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(Chairman)
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Gary S. Guthart, Ph.D.
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Jami Dover Nachtsheim.
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(Chairwoman)
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Robert H. Trice, Ph.D.
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(Chairman)
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Robert P. Wayman.
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Audit Committee.
The function of the Audit Committee, as more fully
set forth in its charter, is to assist the Board of Directors in fulfilling its responsibility to oversee our financial statements, our financial reporting process and our system of internal control over financial reporting. A copy of the Audit
Committee charter is available on our website (
www.affymetrix.com
) in the
Corporate Governance
section under the
Investors
link.
The Audit Committee currently consists of three members, Mr. Chan, its Chairman, Dr. Trice and Mr. Wayman. The Board of Directors has determined that each of Dr. Trice and Messrs. Chan
and Wayman is independent within the meaning of the NASDAQ listing standards, applicable SEC regulations and our
Corporate Governance Guidelines,
and that each member has the financial literacy required by the NASDAQ listing standards. The
Board of Directors also has determined that both Messrs. Wayman and Chan are qualified as an audit committee financial expert within the meaning of applicable SEC regulations and has the accounting and related financial
sophistication required by NASDAQ listing standards.
The Audit Committee held five meetings during 2012. The Audit Committee
Report for 2012 is included below.
Compensation Committee.
The Compensation Committee
currently consists of three members, Mr. Chan, Dr. Guthart and Ms. Nachtsheim, its Chairwoman. The Board of Directors has determined that each of Mr. Chan, Dr. Guthart and Ms. Nachtsheim is independent within the
meaning of the NASDAQ listing standards and our
Corporate Governance Guidelines
. The functions of the Compensation Committee, as more fully set forth in its charter, are to oversee our compensation policies generally, evaluate senior
executive performance, oversee and determine compensation for senior executives and review and recommend to the Board of Directors actions regarding director compensation. A copy of the Compensation Committee charter is available on our website
(
www.affymetrix.com
) in the
Corporate Governance
section under the
Investors
link.
The Compensation
Committee held six meetings during 2012. The Compensation Committee Report for 2012 is included below. For further information about the Compensation Committees process for determining compensation, see Compensation Discussion and
Analysis below.
Nominating and Corporate Governance Committee.
The Nominating and
Corporate Governance Committee currently consists of two members, Dr. Trice, its Chairman, and Mr. Wayman. The Board of Directors has determined that each of Dr. Trice and Mr. Wayman is independent within the meaning of the
NASDAQ listing standards and our
Corporate Governance Guidelines
. As more fully set forth in its charter, the
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Nominating and Corporate Governance Committee is responsible for searching for and identifying director nominees and recommending them to the Board of Directors for election, recommending
directors for appointment to the Board committees, establishing criteria for Board membership, evaluating the Board of Directors and its committees at least annually and recommending any proposed changes to the Board of Directors. In addition, the
Nominating and Corporate Governance Committee is responsible for developing, evaluating the adequacy of and overseeing compliance with our
Corporate Governance Guidelines
and
Code of Business Conduct and Ethics
and recommending any
proposed changes to the Board of Directors. Copies of the Nominating and Corporate Governance Committee charter and our
Corporate Governance Guidelines
are available on our website (
www.affymetrix.com
) in the
Corporate
Governance
section under the
Investors
link. The Nominating and Corporate Governance Committee held one meeting in 2012.
How
are nominees for the Board selected?
The Nominating and Corporate Governance Committee makes a periodic assessment of the
Board of Directors and Board members. In making its assessment and in identifying and evaluating director nominees, the Committee will consider the membership criteria described below, taking into account the enhanced independence, financial
literacy and financial expertise standards that may be required under applicable SEC regulations, NASDAQ listing standards or our
Corporate Governance Guidelines
, as well as the current challenges and needs of the Board of Directors and
Affymetrix. The Nominating and Corporate Governance Committee uses multiple sources for identifying and evaluating director nominees, including referrals from current directors, recommendations by stockholders and input from third party executive
search firms. In evaluating director nominees, the Nominating and Corporate Governance Committee evaluates all candidates under consideration, as it deems appropriate.
The Nominating and Corporate Governance Committee charter requires the Committee to establish criteria for director independence, and Board and committee membership. The Committee has established the
following criteria:
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a reputation for the highest personal and professional ethics, integrity and values;
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experience at the policy-making level in business, government, education, technology or public interest;
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expertise that is useful to Affymetrix and complementary to the background and experience of other Board members;
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willingness to devote the required amount of time to perform the duties and responsibilities of Board membership;
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commitment to serve on the Board of Directors over a period of several years to develop knowledge about our principal operations;
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willingness and capacity to objectively appraise management performance; and
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absence of involvement in activities or interests that create a conflict with the directors responsibilities to Affymetrix and its stockholders.
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The Committee does not have a formal diversity policy. The Committee seeks nominees with a broad diversity
of experience, professions, skills, geographic representation and backgrounds, and also considers diversity of gender and race. The Committee does not assign specific weights to particular criteria. Rather, the Board of Directors believes that the
backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the Board of Directors to fulfill its responsibilities.
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Will the Nominating and Corporate Governance Committee consider director candidates nominated by
stockholders?
Stockholders may recommend director nominees for consideration by the Nominating and Corporate Governance
Committee by writing to the Secretary, specifying the nominees name and qualifications for Board membership and providing confirmation of the nominees consent to serve as a director. Following verification that the person submitting the
recommendation is a stockholder of the Company, all properly submitted recommendations are brought to the attention of the Nominating and Corporate Governance Committee at a regularly scheduled Committee meeting.
If a stockholder properly recommends a director nominee, the Nominating and Corporate Governance Committee will give due consideration to
that nominee and will use the same criteria used for evaluating other director nominees, in addition to considering the information relating to the director nominee provided by the stockholder.
Stockholders also may nominate directors for election at our annual meeting of stockholders by following the provisions set forth in our
bylaws. The deadline for stockholder nominations is disclosed elsewhere in this proxy statement under the caption Deadline for Receipt of Stockholder Proposals.
How do stockholders communicate with the Board?
Stockholders and other
parties interested in communicating directly with the Board of Directors may do so by writing to: Affymetrix, Inc., Attention: Board of Directors, 3420 Central Expressway, Santa Clara, CA 95051 or by electronic mail to:
Affymetrix_BoardOfDirectors@affymetrix.com.
Pursuant to a process approved by the Board of Directors, the Secretary reviews
all correspondence received by us and addressed to members of the Board and regularly forwards to the Board of Directors a summary of such correspondence and copies of all correspondence that, in the opinion of the Secretary, deals with the
functions of the Board or Board committees or otherwise requires the Boards attention. Directors may at any time review a log of all correspondence received by us that are addressed to members of the Board and request copies of any such
correspondence. Concerns relating to accounting, internal controls or auditing matters are immediately brought to the attention of our internal audit department and handled in accordance with procedures established by the Audit Committee to address
such matters.
Does Affymetrix have a Code of Ethics?
We strive to foster a culture of honesty, integrity and accountability. Our
Code of Business Conduct and Ethics
sets forth our key guiding principles, policies and procedures for employment at
Affymetrix. The Code is applicable to all of our directors, officers and employees, including our Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer. The
Code of Business Conduct and Ethics
is available
on our website (
www.affymetrix.com
) in the
Corporate Governance
section under the
Investors
link. Waivers of the Code for executive officers and directors may be granted only by the Board of Directors. Waivers of the Code for
other employees may be granted only by our General Counsel. Amendments to the Code must be approved by the Board of Directors. We intend to provide disclosure of any such amendments or waivers on our website (
www.affymetrix.com
) in the
Corporate Governance
section under the
Investors
link.
How are non-employee directors compensated?
Cash.
The Chairman receives an annual cash retainer of $90,000 per year, the Lead Director receives
an annual cash retainer of $60,000 per year, and each other non-employee director receives an annual cash retainer fee of $45,000 per year. Each non-employee director who serves on the Compensation Committee also receives an annual fee of $15,000,
with the chairwoman receiving an additional $2,500. Each non-employee director who
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serves on the Nominating and Corporate Governance Committee also receives an annual fee of $10,000, with the chairman receiving an additional $7,500. Each non-employee director who serves on the
Audit Committee also receives an annual fee of $20,000, with the chairman receiving an additional $10,000.
Option and
Stock Awards.
Each new non-employee director receives an option to purchase 20,000 shares upon election to the Board of Directors. These options vest in equal installments on each of the first two anniversaries of the
date of grant so long as the director is serving on the Board of Directors on each vesting date. In addition, on the date of each annual stockholders meeting, each non-employee director is granted, at such directors election, (a) options
to purchase shares, which vest in full the earlier of the date of the next Annual Stockholder Meeting or one year after the date of grant and have an exercise price equal to the fair market value of the common stock on the date of grant, or
(b) restricted stock units, which vest in equal installments over three years from the date of grant, or (c) a combination of options and restricted stock units, in any case with the same aggregate value.
COMPENSATION OF DIRECTORS
The following table sets forth compensation for our non-employee directors for fiscal year 2012. Dr. Witney does not receive separate compensation for his service as a director.
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|
Name
|
|
Fees
Earned or
Paid in
Cash ($)(1)
|
|
|
Stock
Awards
($)(2)(3)
|
|
|
Option
Awards
($)(2)(3)(4)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
Change in
Pension
Value
and
Non-Qualified
Deferred
Compensation
Earnings
|
|
|
All Other
Compensation
($)
|
|
|
Total ($)
|
|
Stephen P.A. Fodor, Ph.D.
|
|
$
|
90,000
|
|
|
$
|
58,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
148,305
|
|
Nelson C. Chan
|
|
$
|
90,000
|
|
|
$
|
58,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
148,305
|
|
John D. Diekman, Ph.D.
|
|
$
|
45,000
|
|
|
$
|
58,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
103,305
|
|
Gary S. Guthart, Ph.D.
|
|
$
|
60,000
|
|
|
|
|
|
|
$
|
54,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
114,228
|
|
Jami Dover Nachtsheim.
|
|
$
|
62,500
|
|
|
$
|
29,152
|
|
|
$
|
27,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
118,766
|
|
Robert H. Trice, Ph.D.
|
|
$
|
82,500
|
|
|
$
|
58,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
140,805
|
|
Robert P. Wayman
|
|
$
|
90,000
|
|
|
|
|
|
|
$
|
54,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
144,228
|
|
(1)
|
This column represents the cash compensation received in 2012 for Board and committee services.
|
(2)
|
On May 11, 2012, Drs. Fodor, Diekman and Trice and Mr. Chan each received a grant of 11,500 restricted stock units; Dr. Guthart and Mr. Wayman each
received a grant of 20,000 stock options; and Ms. Nachtsheim received a grant of 10,000 stock options and 5,750 restricted stock units. All of the stock options vest in full the earlier of the date of the 2013 Annual Stockholders Meeting
or one year after the date of grant, and have an exercise price equal to $5.07 per share. All of the restricted stock units vest in three equal annual installments from the grant date.
|
(3)
|
At December 31, 2012, each of our directors held the following number of options (both vested and unvested) and restricted stock awards (unvested) or restricted
stock units (unvested): Dr. Fodor, 661,000 options, 10,000 restricted stock awards and 18,000 restricted stock units; Mr. Chan, 38,841 options and 19,167 restricted stock units; Dr. Diekman, 122,618 options and 19,167 restricted stock
units; Dr. Guthart, 106,619 options; Ms. Nachtsheim, 40,000 options and 13,195 restricted stock units; Dr. Trice, 57,778 options and 22,778 restricted stock units; and Mr. Wayman, 90,254 options and 7,445 restricted stock units.
|
(4)
|
The reported dollar value of stock awards and option awards is equal to the full aggregate grant date fair value under FASB ASC 718 of equity awards made to the
directors during 2012. See Note 14Stockholders Equity and Share-Based Compensation Expense of our Annual Report on Form 10-K for the year ended December 31, 2012 regarding the assumptions underlying valuation of our equity
awards. The actual value of an equity award, if any, will depend on the future market price of our common stock and, for an option, the option holders individual exercise and sale decisions.
|
10
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
Our bylaws provide for a Board of Directors consisting of at least six but not more than eleven directors. The term of office of all of
our current directors will expire at the 2013 annual meeting. Currently, we have eight directors. Seven directors are to be elected at the annual meeting. Dr. Diekman is not standing for re-election upon expiration of his term at the 2013
annual meeting.
If any director nominee is unable or unwilling to serve as a nominee at the time of the annual meeting, the
proxies may vote either: (1) for a substitute nominee designated by the present Board of Directors to fill the vacancy; or (2) for the balance of the nominees, leaving a vacancy. Alternatively, the Board of Directors may choose to reduce
the size of the Board of Directors to less than seven, as permitted by our bylaws. Any vote cast for any director who is unable or unwilling to serve is disregarded.
The names of the nominees, and certain information about them as of the record date, are set forth below. The nominees were selected by the Board of Directors upon the recommendation of the Nominating and
Corporate Governance Committee. Each of the nominees has a long record of integrity, a strong professional reputation and a record of scientific, entrepreneurial or managerial achievement. We believe that the nominees have the qualifications and
experience to focus on the complex issues currently confronting our company and our industry. In addition, each nominee has specific experience, qualifications, attributes or skills, discussed below, that led the Board of Directors to conclude that
the individual should serve as a director.
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Principal Occupation
|
|
Director
Since
|
|
|
|
|
|
Stephen P.A. Fodor, Ph.D.
|
|
|
59
|
|
|
Founder and Chairman of Affymetrix, Inc. and founder and Chief Executive Officer of Cellular Research, Inc.
|
|
|
1993
|
|
|
|
|
|
Frank Witney, Ph.D.
|
|
|
59
|
|
|
President and Chief Executive Officer of Affymetrix, Inc.
|
|
|
2011
|
|
|
|
|
|
Nelson C. Chan
|
|
|
51
|
|
|
Chief Executive Officer (Retired), Magellan Navigation, Inc.
|
|
|
2010
|
|
|
|
|
|
Gary S. Guthart, Ph.D.
|
|
|
47
|
|
|
President and Chief Executive Officer, Intuitive Surgical, Inc.
|
|
|
2009
|
|
|
|
|
|
Jami Dover Nachtsheim
|
|
|
54
|
|
|
Corporate Vice President of the Sales and Marketing Group and Director of Worldwide Marketing (Retired), Intel Corporation
|
|
|
2010
|
|
|
|
|
|
Robert H. Trice, Ph.D.
|
|
|
66
|
|
|
Senior Vice President for Strategy and Business Development (Retired), Lockheed Martin Corporation
|
|
|
2006
|
|
|
|
|
|
Robert P. Wayman
|
|
|
67
|
|
|
Executive Vice President and Chief Financial Officer (Retired), Hewlett-Packard Company
|
|
|
2007
|
|
Stephen P.A. Fodor, Ph.D.
is our Founder and Chairman. Dr. Fodor has served as director since
1993. He served as Chief Executive Officer from 1997 to 2008 and as Chairman from 1999 to present. At various times between 1993 and 1997, Dr. Fodor served as President, Chief Operating Officer and Chief Technology Officer. Dr. Fodor was
Vice President and Director of Physical Sciences at the Affymax Research Institute from 1989 to 1993. Dr. Fodor is the founder and Chief Executive Officer of Cellular Research, Inc. and serves as a Trustee of the Carnegie Institution of Science
and as a member of the National Academy of Engineering. Dr. Fodor also serves on a variety of scientific advisory boards. The Board of Directors selected Dr. Fodor as a director nominee because he is the founder of the Company and our
former Chief Executive Officer. The Board of Directors values Dr. Fodors extensive knowledge of the Company and our industry, his scientific vision and his perspective on emerging technologies and markets.
11
Frank Witney, Ph.D.
has served as President, Chief Executive Officer and a director
since July 2011. Dr. Witney served as President and Chief Executive Officer of Dionex Corporation from April 2009 to May 2011. Between December 2008 and April 2009, Dr. Witney served as our Executive Vice President and Chief Commercial
Officer. Previously, Dr. Witney served as President and Chief Executive Officer of Panomics, Inc. from July 2002 to December 2008. The Board of Directors selected Dr. Witney as a director nominee because the Board values
Dr. Witneys industry experience and his perspective as the Chief Executive Officer of the Company.
Nelson C.
Chan
has served as a director since March 2010 and is the Chairman of the Audit Committee and a member of the Compensation Committee. Mr. Chan served as Chief Executive Officer of Magellan Navigation, Inc. from 2006 to 2008. From 1992
through 2006, Mr. Chan served in various senior management positions with SanDisk Corporation, including most recently as Executive Vice President and General Manager, Consumer Business. Mr. Chan is a member of the Board of Directors of
Coinstar, Inc. and Synaptics Incorporated. The Board of Directors selected Mr. Chan as a director nominee because of his substantial experience with public and private companies, both as an executive and as a board member, and his expertise in
building profitable technology companies. Mr. Chan also qualifies as a financial expert and serves as Chairman of the Audit Committee.
Gary S. Guthart, Ph.D.
has served as a director since May 2009 and is a member of the Compensation Committee. Dr. Guthart has served as the Chief Executive Officer of Intuitive Surgical, Inc.
since January 2010. Dr. Guthart joined Intuitive Surgical, Inc. in April 1996, became Chief Operating Officer in 2006, and was promoted to President in 2007. Prior to joining Intuitive Surgical, Inc., Dr. Guthart was part of the core team
developing foundation technology for computer enhanced-surgery at SRI International (formally Stanford Research Institute). Dr. Guthart serves on the Board of Directors of Intuitive Surgical, Inc. The Board of Directors selected
Dr. Guthart as a director nominee because of his experience in the management of complex, high-growth businesses. The Board values Dr. Gutharts contribution to the Companys strategic planning and business development efforts
and his insights as a member of the Compensation Committee.
Jami Dover Nachtsheim
has served as a director since March
2010 and is the Chairwoman of the Compensation Committee. Ms. Nachtsheim served in a variety of positions with Intel Corporation from 1980 until her retirement in 2000, most recently as Corporate Vice President of the Sales and Marketing Group
and Director of Worldwide Marketing. Ms. Nachtsheim is a member of the Board of Directors of FEI Company and The Tech Museum of Innovation. The Board of Directors selected Ms. Nachtsheim as a director nominee because of her extensive
experience in bringing high technology products to market and her service as a board member of numerous public and private organizations. The Board values the guidance she provides with respect to market strategies and her contributions as the
Chairwoman of the Compensation Committee.
Robert H. Trice, Ph.D.
has served as a director since 2006, is the Chairman
of the Nominating and Corporate Governance Committee and a member of the Audit Committee. Dr. Trice served as Senior Vice President for Business Development at Lockheed Martin Corporation from October 1998, and assumed additional duties as
Senior Vice President for Strategy and Business Development at Lockheed Martin Corporation from March 2009 until his retirement in January 2011. The Board of Directors selected Dr. Trice as a director nominee because of his broad experience in
government relationships (many of our large customers are government institutions) and his extensive background as a business development leader. The Board values his financial literacy and wide-ranging business competencies, which qualify him to
serve on the Audit Committee and the Nominating and Corporate Governance Committee.
Robert P. Wayman
has served as a
director since 2007, is our lead independent director and a member of the Audit Committee and the Nominating and Corporate Governance Committee. Mr. Wayman served as Executive Vice President and Chief Financial Officer of Hewlett-Packard
Company from 1984 until his retirement in December 2006. Mr. Wayman also served as Interim Chief Executive Officer of Hewlett-Packard Company from February 2005 through March 2005 and served on the Board of Directors of Hewlett-Packard Company
from
12
February 2005 to March 2007 and from 1993 to 2002. Mr. Wayman has served as a director of CareFusion Corp. since 2009. The Board of Directors selected Mr. Wayman as a director nominee
because of his broad-based financial expertise and business experience. The Board of Directors values Mr. Waymans background in finance and company operations, corporate governance and compliance, and the leadership that he has provided
as the lead independent director and as a member of the Audit Committee and the Nominating and Corporate Governance Committee.
There are no family relationships among our directors or executive officers.
Board Leadership Structure
The Board of Directors is committed to strong,
independent leadership and believes that objective oversight of management performance is a critical aspect of effective corporate governance. A substantial majority of our Board members are independent directors, under both NASDAQ listing standards
and our
Corporate Governance Guidelines
; our standing Board committeesAudit, Compensation and Nominating and Corporate Governanceare comprised solely of and chaired by independent directors; and, at least four times per year, the
independent directors meet in executive session without management directors.
Our
Corporate Governance Guidelines
state that the Board believes that the positions of the Chairman of the Board and CEO should be held by separate persons as a way to aid the Boards execution of its duties. We have separated the roles of Chairman and Chief
Executive Officer. In addition, unless our Chairman is an independent director, our
Corporate Governance Guidelines
require the independent directors to annually elect by secret ballot a lead independent director. The lead independent
director coordinates the activities of the other non-management directors, presides at executive sessions, functions as a principal liaison on Board-wide issues between the independent directors and the Chairman and performs such other duties and
responsibilities set forth in our
Corporate Governance Guidelines
and as the Board of Directors may determine from time to time. Robert P. Wayman has served as our lead independent director since May 2010.
The Board of Directors regularly deliberates and discusses its appropriate leadership structure and the role and responsibilities of the
Chairman and the lead independent director based upon the needs of the Company to provide effective, independent oversight of management performance.
Boards Role in Risk Oversight
While the Board of Directors has the
ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk management. In particular, the Audit Committee is specifically mandated by its Charter to discuss with financial
management and the independent registered public accounting firm the adequacy and effectiveness of the accounting and financial controls, including the Companys system to monitor and manage business risk where material financial exposure
exists. Our internal auditors and ethics compliance officer report regularly and directly to the Audit Committee on risks relating to the Companys operations, compliance and internal controls. The Compensation Committee is responsible for
overseeing and evaluating the management of risks relating the Companys compensation plans and arrangements.
The
Board unanimously recommends that the stockholders vote FOR the election of the nominees named above.
13
PROPOSAL NO. 2
ADVISORY VOTE RATIFYING APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board has appointed Ernst & Young LLP, independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending December 31, 2013.
Ernst & Young LLP has audited our consolidated financial statements since our inception. Representatives of Ernst & Young LLP are expected to be present at the annual meeting, will have the opportunity to make a statement
if they desire to do so, and are expected to be available to respond to questions. Services provided to us by Ernst & Young LLP are described under Fees Paid to Ernst & Young LLP below.
Stockholder ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm is
not required by our by-laws or otherwise. The Board, however, is submitting the appointment of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the
appointment, the Audit Committee and the Board will reconsider whether or not to retain the firm. Even if the appointment is ratified, the Audit Committee or the Board in its discretion may direct the appointment of a different independent
registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of Affymetrix and its stockholders.
The Board unanimously recommends a vote FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending
December 31, 2013.
Fees Paid to Ernst & Young LLP
During fiscal years 2012 and 2011, the aggregate fees billed by Ernst & Young LLP for professional services were as
follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
2012 ($)
|
|
|
December 31,
2011 ($)
|
|
Audit Fees(1)
|
|
|
1,517,672
|
|
|
|
1,298,349
|
|
Audit-Related Fees(2)
|
|
|
430,100
|
|
|
|
28,250
|
|
Tax Fees(3)
|
|
|
77,032
|
|
|
|
136,502
|
|
All Other Fees(4)
|
|
|
1,995
|
|
|
|
1,970
|
|
|
(1)
|
Audit fees include fees associated with the audits of (i) our consolidated financial statements and (ii) effectiveness of our internal control over financial
reporting, the reviews of our financial statements included in our quarterly reports on Form 10-Q, and statutory audits required internationally. Audit fees also include amounts associated with SEC registration statements and consents and
related comfort letters.
|
|
(2)
|
Audit-related fees consist primarily of fees associated with accounting consultations on one transaction.
|
|
(3)
|
Tax fees consist primarily of tax consultation services.
|
|
(4)
|
The amount listed as All Other Fees consists of fees for products and services other than those services reported above.
|
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
As required by the Audit Committee charter, the Audit Committee pre-approves the engagement of Ernst & Young LLP for all
audit and permissible non-audit services. The Audit Committee annually reviews the audit and permissible non-audit services performed by Ernst & Young LLP and reviews and approves the fees charged by
14
Ernst & Young LLP. The Audit Committee has considered the role of Ernst &Young LLP in providing tax and audit services and other permissible non-audit services to
Affymetrix and has concluded that the provision of such services was compatible with the maintenance of Ernst & Young LLPs independence in the conduct of its auditing functions.
PROPOSAL NO. 3
ADVISORY VOTE APPROVING THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS
The Compensation Committees approach to executive compensation underscores its commitment to pay for performance and the importance
that it places on the opinions of our stockholders, while recognizing the need to attract, retain and motivate qualified executives to execute on our long-term transformation plan in challenging business conditions.
The following actions highlight the Compensation Committees approach to executive compensation:
|
|
|
No Cash Bonus or Salary Increase for 2012
. Reflecting our commitment to pay only for successful performance, there were no
executive cash bonuses or salary increases for 2012.
|
|
|
|
Restructured Equity Compensation to Include Performance-Based Awards
.
No equity was granted to executive officers in 2012 as we
worked on optimizing the organizational structure of the Company for future growth and profitability. The structure of 2013 equity compensation for all executive officers was changed to reflect a 50/50 split in value between time-based awards and
performance-based awards. Performance-based awards can be earned upon achievement of revenue and EBITDAO (earnings before interest expense, taxes, depreciation, amortization, option expenses and restructuring and one-time charges) goals for 2013.
The revenue and EBITDAO goals were each given a weighting of 50%, consistent with financial expectations based on our business transformation strategy.
|
|
|
|
Robust CEO PRSUs Criteria
. Our CEO earned 42% of his 2012 PRSUs granted in connection with his hire in 2011, with 58% forfeited.
As further explained below, this is as a result of his achieving the operating income target, partially meeting his organization optimization goal, and missing the key product revenue growth and overall revenue growth targets. Our CEOs 2013
PRSUs criteria are as follows: (1) 45% may be earned upon achieving target milestones in new business areas; (2) 45% may be earned upon achieving total shareholder return that is benchmarked against the Russell 2000 Index; and (3) 10%
may be earned upon achieving organizational development goals set by the Compensation Committee that includes the recruitment of a new CFO.
|
|
|
|
Affirmation of Claw-Back Policy
.
We affirmed our policy for recoupment (or claw-back) of performance-based
compensation if we restate our reported financial results.
|
|
|
|
Engagement in Substantial Stockholder Dialogue
.
Following our 2012 annual meeting, we engaged in a
substantial ongoing dialogue with our stockholders, including our major institutional stockholders who in the aggregate hold more than 50% of our common stock outstanding, to gain a better understanding of their views about our executive
compensation program.
|
|
|
|
Affirmed Policy to Seek Say-On-Pay Vote Annually
.
Since 2011, we have been seeking an advisory say-on-pay
vote from stockholders every year with respect to approval of our executive compensation.
|
Say-on-Pay Vote
on 2011 Compensation and Subsequent Changes
Although our stockholders approved the 2011 compensation of our named
executive officers, with approximately 53% of shares cast in favor of our say-on-pay resolution, our Compensation Committee and senior management believed it was important to understand the concerns of our stockholders. Therefore, following our 2012
annual meeting, we engaged in a substantial ongoing dialogue with our stockholders, including our major institutional stockholders who in the aggregate hold more than 50% of our common stock outstanding, to gain a better understanding of their views
about our executive compensation program.
15
Many of the stockholders we spoke to were supportive of the new hire compensation package
our Compensation Committee put in place for our CEO in 2011, but wanted to see changes in three major areas: (1) more robust criteria for Dr. Witneys PRSUs granted in connection with his new hire, which in 2011 was the submission to,
and approval by the Board, of a long-term strategic plan; (2) a more significant portion of our executive compensation being tied to performance, and not just with respect to our CEO, but also other executive officers; and (3) disclosure
of the general framework for our executive compensation for the current year, i.e. the year the proxy statement is filed.
The
following is a summary of significant actions taken by the Compensation Committee intended to address stockholders concerns:
|
|
|
The Compensation Committee set more robust performance criteria for the 2012 tranche of Dr. Witneys PRSUs that were granted in connection
with his hire, with 25% earned upon achieving each of the following (1) overall revenue growth; (2) key product revenue growth; (3) operating income target; and (4) optimization of organization structure. These criteria were
publicly filed and shared with our stockholders, who were supportive of the general framework. The Compensation Committee also committed to setting robust criteria for the remaining performance periods for his PRSUs.
|
|
|
|
We did not grant any equity awards in 2012. The structure of 2013 equity compensation for all executive officers was changed to reflect a 50/50 split
in value between time-based awards and performance-based awards. Performance awards can be earned upon achievement of revenue and EBITDAO goals for 2013 (each with a weighting of 50%) consistent with financial expectations based on our business
transformation strategy.
|
|
|
|
We are providing enhanced disclosure on our 2013 executive compensation program in this proxy statement.
|
Please refer to the sections of this proxy statement entitled Compensation Discussion and Analysis and Executive
Compensation for a detailed discussion of Affymetrix executive compensation principles and practices and the fiscal 2012 compensation of our named executive officers. This advisory vote is not intended to address any specific item of
compensation, but rather the overall compensation principles and practices and the fiscal 2012 compensation of Affymetrix named executive officers.
The affirmative vote of a majority of the shares of common stock present in person or represented by proxy and entitled to vote on the item will be required to approve, by an advisory vote, the
compensation of our named executive officers. Abstentions will have the same effect as negative votes for this proposal.
The Board of Directors recommends a vote FOR the approval of the compensation of the named executive officers as disclosed
pursuant to the compensation disclosure rules of the Securities and Exchange Commission (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and other narrative executive compensation disclosures
in this proxy statement).
REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee does not constitute soliciting material and is not deemed to be filed with the Securities
and Exchange Commission, or the SEC, and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of
this proxy statement and irrespective of any general incorporation language in such filing.
The Audit Committee has an
established charter that specifies that the function of the Audit Committee is to assist the Board in fulfilling its oversight responsibility relating to our financial statements and our financial
16
reporting process and our system of internal control over financial reporting. The full text of the Audit Committee charter is available on our website at
www.affymetrix.com
in the
Corporate Governance
section under the
Investors
link.
Management has the primary responsibility for our
financial statements and our reporting process, including our system of internal control over financial reporting. The independent registered public accounting firm is responsible for auditing financial statements and expressing an opinion as to
(1) their conformity with generally accepted accounting principles; (2) managements assessment; and (3) the effectiveness of internal control over financial reporting.
As part of its oversight of our financial reporting process, the Audit Committee reviewed and discussed both with management and our
independent registered public accounting firm, the annual and quarterly financial statements prior to their issuance. These reviews included discussion with the independent registered public accounting firm of matters required to be discussed under
Statement of Auditing Standards No. 61
, as amended (AICPA,
Professional Standards
, Vol. 1. AU Section 380) as adopted by the Public Company Accounting Oversight Board in Rule 3200T, including discussions of the accounting
principles, the reasonableness of significant judgments, the clarity of disclosures in the financial statements and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards. In addition,
the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered
public accounting firms communications with the Audit Committee concerning independence and has discussed with the independent registered public accounting firm their independence from our Company. Finally, the Audit Committee has considered
and concluded that the provision of audit-related and tax services, which are comprised of tax consultations, preparation of tax returns, and audit-related accounting consultations on various transactions by the independent registered public
accounting firm, is compatible with maintaining the registered public accounting firms independence.
The Audit
Committee met five times during the fiscal year ended December 31, 2012. The Audit Committee schedules its meetings with a view to ensuring that it devotes appropriate attention to all of its responsibilities. The Audit Committee meetings
include, whenever appropriate, executive sessions with our independent registered public accounting firm and with our internal auditor, in each case without the presence of our management. The Audit Committee discussed with our independent
registered public accounting firm the overall scope and plans for their audits. The Audit Committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of their audits and
reviews, their evaluations of our system of internal control over financing reporting, and the overall quality of our financial reporting.
In reliance on the reviews and discussions referred to above, and subject to the limitations on the role and responsibilities of the Audit Committee referred to above and in the Audit Committee charter,
the Audit Committee unanimously recommended to the Board of Directors (and the Board has approved) that the audited consolidated financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2012 for filing
with the Securities and Exchange Commission. The Audit Committee has also recommended the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31,
2013.
Respectfully submitted on March 27, 2013 by the members of the Audit Committee of the Board of Directors:
Nelson Chan,
Chairman
Robert H. Trice, Ph.D.
Robert P. Wayman
17
STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the beneficial ownership of our shares of common stock as of March 1, 2013 by:
|
|
|
each person known to us to beneficially own more than five percent of our outstanding shares of common stock;
|
|
|
|
each director and nominee for director;
|
|
|
|
each of the officers named in the Summary Compensation Table below; and
|
|
|
|
all directors and executive officers as a group.
|
Unless otherwise indicated, the address of each of the individuals named below is: c/o Affymetrix, Inc., 3420 Central Expressway, Santa Clara, California 95051.
The Company does not permit hedging transactions involving Company stock by executive officers and directors.
|
|
|
|
|
|
|
|
|
Name and Address of Beneficial Owner
|
|
Shares
Beneficially
Owned(1)
|
|
|
Percentage of
Shares
Beneficially Owned(1)(2)
|
|
Greater than 5%
|
|
|
|
|
|
|
|
|
|
|
|
BlackRock, Inc.(3)
40 East 52
nd
Street
New York, NY 10022
|
|
|
9,981,918
|
|
|
|
14.05
|
%
|
|
|
|
OrbiMed Advisors LLC(4)
601 Lexington Avenue, 54
th
Floor
New York, NY 10022
|
|
|
7,528,131
|
|
|
|
10.59
|
%
|
|
|
|
PRIMECAP Management Company(5)
225 South Lake Ave., #400
Pasadena, CA 91101
|
|
|
6,991,040
|
|
|
|
9.84
|
%
|
|
|
|
WHV Investment Management, Inc.(6)
301 Battery Street, Suite 400
San Francisco, CA 94111
|
|
|
4,704,919
|
|
|
|
6.62
|
%
|
|
|
|
The Vanguard Group, Inc.(7)
100 Vanguard Blvd.
Malvern, PA 19355
|
|
|
4,218,924
|
|
|
|
5.94
|
%
|
|
|
|
Stichting Pensioenfonds ABP(8)
APG Asset Management US Inc.
APG Group
APG All Pensions Group NV
666 Third Avenue, 2nd
Floor
New York, NY 10017
|
|
|
3,776,100
|
|
|
|
5.31
|
%
|
|
|
|
Dimensional Fund Advisors LP(9)
Palisades West, Building One
6300 Bee Cave Road
Austin, TX 78746
|
|
|
3,647,124
|
|
|
|
5.13
|
%
|
|
|
|
Levin Capital Strategies, L.P.(10)
595 Madison Avenue, 17th Floor
New York, NY 10022
|
|
|
3,594,397
|
|
|
|
5.06
|
%
|
18
|
|
|
|
|
|
|
|
|
Name and Address of Beneficial Owner
|
|
Shares
Beneficially
Owned(1)
|
|
|
Percentage of
Shares
Beneficially Owned(1)(2)
|
|
Directors and Executive Officers
|
|
|
|
|
|
|
|
|
Timothy C. Barabe(11)
|
|
|
262,810
|
|
|
|
*
|
|
Nelson C. Chan(12)
|
|
|
42,674
|
|
|
|
*
|
|
John D. Diekman, Ph.D.(13)
|
|
|
253,247
|
|
|
|
*
|
|
Stephen P.A. Fodor, Ph.D.(14)
|
|
|
802,366
|
|
|
|
1.12
|
%
|
Gary S. Guthart, Ph.D.(15)
|
|
|
86,619
|
|
|
|
*
|
|
Andrew J. Last, Ph.D.(16)
|
|
|
191,599
|
|
|
|
*
|
|
Jami Dover Nachtsheim(17)
|
|
|
39,138
|
|
|
|
*
|
|
John F. Runkel, Jr.(18)
|
|
|
143,246
|
|
|
|
*
|
|
Robert H. Trice, Ph.D.(19)
|
|
|
82,904
|
|
|
|
*
|
|
Robert P. Wayman(20)
|
|
|
88,701
|
|
|
|
*
|
|
Frank Witney, Ph.D.(21)
|
|
|
151,736
|
|
|
|
*
|
|
All current directors and executive officers as a group (12 persons)
(22)
|
|
|
2,174,540
|
|
|
|
3.00
|
%
|
*
|
Represents beneficial ownership of less than one percent of the common stock.
|
(1)
|
Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage of
ownership of that person, shares of common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of March 1, 2013 are deemed outstanding. Those shares, however, are not deemed outstanding
for the purpose of computing the percentage ownership of other persons. The persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community
property laws where applicable and except as indicated in the other footnotes to this table.
|
(2)
|
Percentage of beneficial ownership is based on 71,059,610 shares of common stock outstanding as of March 1, 2013.
|
(3)
|
BlackRock, Inc. (BlackRock), as set forth on Schedule 13G/A filed with the SEC on January 11, 2013, has sole voting power and sole dispositive power
with respect to 9,981,918 shares. The shares were held by the following subsidiaries of BlackRock: BlackRock Advisors LLC, BlackRock Asset Management Australia Limited, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland
Limited, BlackRock Japan Co. Ltd., BlackRock Fund Advisors, BlackRock Institutional Trust Company, N.A., BlackRock Investment Management, LLC, BlackRock (Luxembourg) S.A., and BlackRock Advisors (UK) Limited.
|
(4)
|
OrbiMed Advisors LLC (OrbiMed), as set forth on Schedule 13G/A filed with the SEC on February 14, 2013, has shared voting power and shared dispositive
power with respect to 1,715,500 shares. OrbiMeds affiliate, OrbiMed Capital LLC has shared voting power and shared dispositive power with respect to 5,812,631 shares. Samuel D. Isaly, a control person of OrbiMed, has shared voting power and
shared dispositive power with respect to 7,528,131 shares.
|
(5)
|
PRIMECAP Management Company, as set forth on Schedule 13G/A filed with the SEC on February 14, 2013, has sole voting power with respect to 3,749,840 shares and
sole dispositive power with respect to 6,991,040 shares.
|
(6)
|
WHV Investment Management, Inc., as set forth on Schedule 13G/A filed with the SEC on February 6, 2013, has sole voting power with respect to 1,776,494 shares
and shared dispositive power with respect to 4,704,919 shares.
|
(7)
|
The Vanguard Group, Inc., as set forth on Schedule 13G/A filed with the SEC on February 22, 2013, has sole voting power with respect to
119,116 shares, sole dispositive power with respect to 4,104,108 shares
|
19
|
and shared dispositive power with respect to 114,816 shares. The shares were held by The Vanguard Group, Inc. and the following subsidiaries: Vanguard Fiduciary Trust Company and Vanguard
Investments Australia, Ltd.
|
(8)
|
We have received copies of separate Schedules 13G as filed with the SEC by (i) APG Asset Management US Inc. (referred to as APG US) and Stichting
Pensioenfonds ABP (referred to as Stichting) and (ii) APG Groep NV (referred to as APG Group) and APG All Pensions Group NV (referred to as APG NL) reporting ownership of these shares. As reported by APG US
and Stichting in their Schedule 13G filed with the SEC on February 12, 2013, APG and Stichting has sole dispositive and voting power for all such shares, which shares include those reported by APG US, APG Group, and APG NL in their respective
Schedule 13G by virtue of Stichtings ownership of APG US, APG Group, and APG NL. As reported by APG Group and APG NL in their Schedule 13G/A filed with the SEC on February 20, 2013, APG Group, and APG NL all have sole dispositive and
voting power for all such shares. APG NL is the exclusive investment manager with the power to vote and make all investment decisions for all such shares. APG NL has delegated its investment and voting power with respect to these shares to APG US.
|
(9)
|
Dimensional Fund Advisors LP, as set forth on Schedule 13G filed with the SEC on February 11, 2013, has sole voting power with respect to 3,600,195 shares and sole
dispositive power with respect to 3,647,124 shares. The reporting person reports that the shares are held by various investment companies, trusts and accounts and the reporting person disclaims beneficial ownership.
|
(10)
|
Levin Capital Strategies, L.P., as set forth on Schedule 13G/A filed with the SEC on January 10, 2013, has sole voting power and sole dispositive power with
respect to 422,300 shares, shared voting power with respect to 3,172,097 shares and shared dispositive power with respect to 3,594,397 shares.
|
(11)
|
Includes 140,500 shares issuable upon exercise of options exercisable within 60 days of March 1, 2013.
|
(12)
|
Includes 38,841 shares issuable upon exercise of options exercisable within 60 days of March 1, 2013.
|
(13)
|
Includes 122,618 shares issuable upon exercise of options exercisable within 60 days of March 1, 2013, 46,398 shares held by John D. Diekman and Susan P.
Diekman, as trustees of a revocable trust dated June 30, 1995, and 400 shares held in Mr. Diekmans retirement account.
|
(14)
|
Includes 609,250 shares issuable upon exercise of options exercisable within 60 days of March 1, 2013 and 30,000 shares held by The Fodor Family Trust.
|
(15)
|
86,619 shares are issuable upon exercise of options exercisable within 60 days of March 1, 2013.
|
(16)
|
Includes 143,000 shares issuable upon exercise of options exercisable within 60 days of March 1, 2013.
|
(17)
|
Includes 30,000 shares issuable upon exercise of options exercisable within 60 days of March 1, 2013.
|
(18)
|
Includes 106,500 shares issuable upon exercise of options exercisable within 60 days of March 1, 2013.
|
(19)
|
Includes 57,778 shares issuable upon exercise of options exercisable within 60 days of March 1, 2013.
|
(20)
|
Includes 70,254 shares issuable upon exercise of options exercisable within 60 days of March 1, 2013.
|
(21)
|
Includes 75,000 shares issuable upon exercise of options exercisable within 60 days of March 1, 2013.
|
(22)
|
Includes shares beneficially owned by David Weber and 1,502,860 shares issuable upon exercise of options exercisable within 60 days of March 1, 2013.
|
20
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who beneficially own
more than ten percent of our common stock to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership of common stock. Executive officers, directors and ten percent stockholders are required by SEC
regulations to furnish us with copies of all Section 16(a) forms they file. During the year ended December 31, 2012, all executive officers, directors and ten percent stockholders complied with all Section 16(a) filing requirements.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information regarding our stock incentive plans as of December 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Plan Category
|
|
Number of securities to
be issued
upon exercise
of outstanding options,
warrants and rights
|
|
|
Weighted-average
exercise price
of
outstanding options,
warrants and rights(1)
|
|
|
Number of securities
remaining available for
future
issuance
under equity
compensation plans
(excluding securities
reflected in column (a))
|
|
Equity compensation plans approved by security holders
|
|
|
7,017,926
|
(2)
|
|
|
8.62
|
|
|
|
10,976,049
|
(3)
|
Equity compensation plans not approved by security holders
|
|
|
2,649,061
|
(4)
|
|
|
5.12
|
|
|
|
914,926
|
(5)
|
Total
|
|
|
9,666,987
|
|
|
|
7.75
|
|
|
|
11,890,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The calculation of the weighted average exercise price does not include 2,240,399 shares subject to restricted stock units that are exercisable for no consideration.
|
(2)
|
Includes (a) the Amended and Restated 1996 Non-Employee Directors Stock Option Plan, which has expired, and (b) the Amended and Restated 2000 Equity Incentive
Plan. Includes 180,000 performance based awards that have not been earned or vested.
|
(3)
|
Includes 6,694,731 shares available under the 2011 Employee Stock Purchase Plan.
|
(4)
|
Includes (a) 1,428,256 options under the 1998 Stock Plan, (b) 338,900 time based awards and 876,500 performance based awards that have not been earned or
vested under the 2012 Inducement Plan, and (c) options to purchase 5,405 shares outstanding under acquired plans under which no future awards will be issued.
|
(5)
|
Includes 130,326 shares available under the 1998 Stock Plan and 784,600 shares under the 2012 Inducement Plan.
|
2012 Inducement Plan
The Compensation Committee approved this plan for new hire awards in connection with our acquisition of eBioscience in June 2012. The plan may be used only for inducement grants to new hires. Options,
RSUs or other awards may be granted.
1998 Stock Incentive Plan
In 1998, the Board adopted the non-stockholder-approved Affymetrix 1998 Stock Incentive Plan, or the 1998 Stock Plan. Our directors and
officers are not eligible to receive grants under the 1998 Stock Plan. Options granted under the 1998 Stock Plan expire no later than ten years from the date of grant. The option price is required to be at least 100% of the fair market value of the
common stock on the date of grant. Vesting terms of options or restricted stock granted under the 1998 Stock Plan from time to time are determined by the Board.
21
MANAGEMENT
Our executive officers, and their ages as of the record date and positions, are as follows:
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Position
|
Frank Witney, Ph.D.
|
|
|
59
|
|
|
President and Chief Executive Officer
|
Timothy C. Barabe.
|
|
|
59
|
|
|
Executive Vice President and Chief Financial Officer
|
Andrew J. Last, Ph.D.
|
|
|
53
|
|
|
Executive Vice President, Genetic Analysis Business Unit
|
John F. Runkel, Jr.
|
|
|
57
|
|
|
Executive Vice President, General Counsel and Secretary
|
David Weber.
|
|
|
59
|
|
|
Executive Vice President, Global Commercial Operations
|
Frank Witney, Ph.D.
See Election of Directors.
Timothy C. Barabe
joined us in March 2010 as Executive Vice President and Chief Financial Officer. Mr. Barabe previously
worked at Human Genome Sciences, Inc., where he served as Senior Vice President and Chief Financial Officer from July 2006 until March 2010. From September 2004 to June 2006, Mr. Barabe was at Molnlycke Health Care, a privately owned surgical
supply company, most recently as its U.K. Managing Director. Mr. Barabe was with Novartis AG from 1982 to 2004 in several senior executive positions. Mr. Barabe is a member of the Board of Directors of ArQule, Inc. Mr. Barabe will
retire from Affymetrix in 2013.
Andrew J. Last, Ph.D.
, joined us in December 2009 and currently serves as Executive
Vice President, Genetic Analysis Business Unit. Prior to joining Affymetrix, Dr. Last served on the leadership team of BD Biosciences Cell Analysis Unit, a segment of Becton Dickinson and Company, from 2004 to 2009, where he was Vice President,
Global Marketing & Strategic Planning and General Manager of the San Diego-based Pharmingen business. Before joining Becton Dickinson, Dr. Last was a member of Applera Corporations Applied Biosystems unit leadership team from
2002 to 2004 as Vice President & General Manager of the Gene Expression business.
John F. Runkel, Jr.
joined
us in October 2008 as Executive Vice President, General Counsel and Secretary. Mr. Runkel served as Senior Vice President, General Counsel and Secretary of Intuitive Surgical, Inc., a provider of minimally-invasive robotic surgery technology,
from 2006 to 2007. From 2004 to 2005, Mr. Runkel served as Senior Vice President of Business Development and General Counsel of VISX Incorporated, a provider of laser vision correction technology, and as Vice President, General Counsel and
Secretary from 2001 to 2004. Mr. Runkel will retire from Affymetrix at the end of March 2013.
David Weber
joined us in December 2011 and currently serves as Executive Vice President, Global Commercial Operations. Between December 2011 and February 2013, he served as our Senior Vice President, Global Commercial Operations. From June 2010 to
December 2011, Mr. Weber was a consultant to various biotechnology companies. Mr. Weber was at Cyntellect Inc. as its Vice President, Sales from July 2009 to June 2010. Mr. Weber was with The Linus Group from February 2008 to June
2009 as its Vice President of the Life Sciences Practice. Previously, Mr. Weber served as President and CEO of Eksigent Technologies, Senior Vice President of Marketing and Business Development of Stratagene Corp., and President, Americas
Region, for Amersham Biosciences (GE Healthcare).
22
COMPENSATION DISCUSSION AND ANALYSIS
Company in Transformation
In order to understand our executive compensation program, it is essential to consider it in relation to the status of our business plan, which is focused on transforming the company to profitable growth.
In the past several years, we have faced declining sales. Historically, we sold our well-established GeneChip
®
Expression product line primarily in the basic research market, where we face declining sales and intense competition from newer technologies such as next generation sequencing. Our strategy is to transform the company from one that is highly
dependent on its GeneChip
®
Expression products to one with diversified revenue streams and a broad reach into
the growing markets for translational medicine, molecular diagnostics and applied markets such as agricultural biotechnology.
We hired Dr. Frank Witney as our President and Chief Executive Officer in July 2011. Under Dr. Witneys leadership, we are
focusing on realigning our product portfolio, stabilizing our core business and positioning our company for growth and profitability. We expect our transformation will take several years, and we are executing on a strategic plan that consists of
three phases:
|
|
|
Phase 1 (2011-2012)Portfolio Realignment.
During this phase, we reorganized into business units to sharpen our
focus on target markets. We also launched CytoScan
®
, our growing cytogenetic microarray product line, became
more competitive in the genotyping market through full implementation of our Axiom genotyping product line and acquired eBioscience Holdings, Inc. (eBioscience). Through eBioscience, we now offer flow cytometry and immunoassay reagents
and kits that enable us to broaden our reach into the translational medicine and molecular diagnostics markets. We believe these actions will lead to a stabilization of our core business and the realignment of our product portfolio, which in turn
will position us for growth.
|
|
|
|
Phase II (2013-2014)Profitability, Strengthen Balance Sheet, Development of Newer Product Lines.
In the beginning
of 2013, we implemented a corporate restructuring with a goal of accelerating our path to profitability through significant annualized savings and reduced cost of goods sold. Our priorities for this phase are to achieve profitability, repay our
senior secured debt, successfully commercialize our newer product lines (CytoScan
®
, Axiom
®
and QuantiGene
®
lines, as well as our eBioscience products) and invest in new product offerings.
|
|
|
|
Phase III (2015 -2016)Strategic Flexibility; Expansion of Product Lines; Growth.
Our goal for this phase is to
have a strong balance sheet that will provide us with the flexibility to make strategic acquisitions. In addition, we aim to grow revenues with developed product lines and new product offerings in the translational medicine, molecular diagnostic and
applied markets.
|
Summary of Our Approach to Executive Compensation
The Compensation Committees approach to executive compensation underscores its commitment to pay for performance and the importance
that it places on the opinions of our stockholders, while recognizing the need to attract, retain and motivate qualified executives to execute on our long-term transformation plan in challenging business conditions.
The following actions highlight the Compensation Committees approach to executive compensation:
|
|
|
No Cash Bonus or Salary Increase for 2012
. Reflecting our commitment to pay only for successful
performance, there were no executive cash bonuses or salary increases for 2012.
|
|
|
|
Restructured Equity Compensation to Include Performance-Based Awards
.
No equity was granted to executive
officers in 2012 as we worked on optimizing the organizational structure of the Company for future growth and profitability. The structure of 2013 equity compensation for all executive officers was
|
23
|
changed to reflect a 50/50 split in value between time-based awards and performance-based awards. Performance-based awards can be earned upon achievement of revenue and EBITDAO (earnings before
interest expense, taxes, depreciation, amortization, option expenses and restructuring and one-time charges) goals for 2013. The revenue and EBITDAO goals were each given a weighting of 50%, consistent with financial expectations based on our
business transformation strategy.
|
|
|
|
Robust CEO PRSUs Criteria
. Our CEO earned 42% of his 2012 PRSUs granted in connection with his hire in
2011, with 58% forfeited. As further explained below, this is as a result of his achieving the operating income target, partially meeting his organization optimization goal, and missing the key product revenue growth and overall revenue growth
targets. Our CEOs 2013 PRSUs criteria are as follows: (1) 45% may be earned upon achieving target milestones in new business areas; (2) 45% may be earned upon achieving total shareholder return that is benchmarked against the Russell
2000 Index; and (3) 10% may be earned upon achieving organizational development goals set by the Compensation Committee that includes the recruitment of a new CFO.
|
|
|
|
Affirmation of Claw-Back Policy
.
We affirmed our policy for recoupment (or claw-back) of
performance-based compensation if we restate our reported financial results.
|
|
|
|
Engagement in Substantial Stockholder Dialogue
.
Following our 2012 annual meeting, we engaged in a
substantial ongoing dialogue with our stockholders, including our major institutional stockholders who in the aggregate hold more than 50% of our common stock outstanding, to gain a better understanding of their views about our executive
compensation program.
|
|
|
|
Affirmed Policy to Seek Say-On-Pay Vote Annually
.
Since 2011, we have been seeking an advisory
say-on-pay vote from stockholders every year with respect to approval of our executive compensation.
|
Say-on-Pay Vote on 2011 Compensation and Subsequent Changes
Although our stockholders approved the 2011 compensation of our named executive officers, with approximately 53% of shares cast in favor
of our say-on-pay resolution, our Compensation Committee and senior management believed it was important to understand the concerns of our stockholders. Therefore, following our 2012 annual meeting, we engaged in a substantial ongoing dialogue with
our stockholders, including our major institutional stockholders who in the aggregate hold more than 50% of our common stock outstanding, to gain a better understanding of their views about our executive compensation program.
Many of the stockholders we spoke to were supportive of the new hire compensation package our Compensation Committee put in place for our
CEO in 2011, but wanted to see changes in three major areas: (1) more robust criteria for Dr. Witneys PRSUs granted in connection with his new hire, which in 2011 was the submission to, and approval by the Board, of a long-term
strategic plan; (2) a more significant portion of our executive compensation being tied to performance, and not just with respect to our CEO, but also other executive officers; and (3) disclosure of the general framework for our executive
compensation for the current year, i.e. the year the proxy statement is filed.
The following is a summary of significant
actions taken by the Compensation Committee intended to address stockholders concerns:
|
|
|
The Compensation Committee set more robust performance criteria for the 2012 tranche of Dr. Witneys PRSUs that were granted in connection
with his hire, with 25% earned upon achieving each of the following (1) overall revenue growth; (2) key product revenue growth; (3) operating income target; and (4) optimization of organization structure. These criteria were
publicly filed and shared with our stockholders, who were supportive of the general framework. The Compensation Committee also committed to setting robust criteria for the remaining performance periods for his PRSUs.
|
24
|
|
|
We did not grant any equity awards in 2012. The structure of 2013 equity compensation for all executive officers was changed to reflect a 50/50 split
in value between time-based awards and performance-based awards. Performance awards can be earned upon achievement of revenue and EBITDAO goals for 2013 (each with a weighting of 50%) consistent with financial expectations based on our business
transformation strategy.
|
|
|
|
We are providing enhanced disclosure on our 2013 executive compensation program in this proxy statement.
|
Compensation Principles and Practices
The Companys current executive compensation programs are intended to achieve three fundamental objectives: (1) attract, retain and motivate qualified executives; (2) link compensation to
executive performance and the Companys operating objectives and strategic direction; and (3) align executives interests with the interests of our stockholders. In structuring our current executive compensation programs, the
Compensation Committee is guided by the following basic principles:
|
|
|
Align compensation with financial and strategic goals that will deliver stockholder value.
|
|
|
|
Offer competitive total direct compensation opportunities at approximately the 50
th
percentile of market.
|
The material elements of our executive compensation programs for named executive officers consist of a combination of a base salary, an annual cash incentive opportunity, a long-term equity incentive
opportunity, and health, welfare and retirement benefits. We believe that each element of executive compensation and the relative mixture of the elements help us to achieve all of our compensation objectives.
2012 Executive Compensation Program
In addition to soliciting feedback from our major stockholders, the Compensation Committee also conducted its own detailed review of our executive compensation program, in particular, the following
issues:
|
|
|
appropriate performance metrics while we are going through a significant transformation;
|
|
|
|
the results of our say-on-pay vote on 2011 executive compensation;
|
|
|
|
feedback from major proxy advisory firms based on their analysis of our 2011 executive compensation program;
|
|
|
|
data regarding market practice among companies in our peer group;
|
|
|
|
recommendation from its compensation consultant; and
|
|
|
|
views and concerns of senior management.
|
The following is a summary of our 2012 executive compensation program intended to address stockholders concerns and our business needs, as well as affirm our commitment to align executive
compensation with company performance:
|
|
|
No base salary increases in 2012.
|
|
|
|
No cash bonus payments for 2012 because we fell short of our financial goals.
|
|
|
|
No new equity awards in 2012 while we worked on optimizing the organizational structure of the Company.
|
25
|
|
|
Robust performance criteria for the 2012 tranche of Dr. Witneys PRSUs that were granted in 2011 in connection with his hire. The
Compensation Committee also committed to setting robust criteria for the remaining performance periods for his PRSUs.
|
|
|
|
Determined that Dr. Witney met some but not all of his 2012 performance criteria, resulting in 42% of his PRSUs earned for the 2012 performance
period, and the remainder forfeited.
|
|
|
|
Simplified the peer group we use to compare executive compensation by eliminating the reference peer group of larger companies in our industry and
limiting the peer group to companies that are closer to ours in revenue and market capitalization.
|
|
|
|
Affirmed our policy for recoupment of performance-based compensation if we restate our reported financial results.
|
2013 Executive Compensation Program
In conjunction with our organizational restructuring, two of our 2012 executive officers, our Chief Financial Officer and our General Counsel, will retire in 2013. We promoted David Weber, our Executive
Vice President of Global Commercial Operations, to an executive officer in 2013.
The following are key components of our 2013
executive compensation program:
|
|
|
No Salary Increase in 2013
.
The Compensation Committee did not raise the base salaries
of our executive officers for 2013.
|
|
|
|
Cash Bonus Dependent on Revenue and EBITDAO Achievement
. The Compensation Committee affirmed the use of
revenue and EBITDAO as the bases for determining cash bonus payments for our executive officers. The revenue and EBITDAO goals were each given a weighting of 50%, with different levels of funding dependent upon the different levels of achievement.
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|
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|
Restructured Equity Compensation to Include Performance Based Awards
.
The structure of 2013 equity
compensation for all executive officers was changed to reflect a 50/50 split in value between time-based awards and performance-based awards. Performance awards can be earned upon achievement of revenue and EBITDAO goals for 2013 (each with a
weighting of 50%) consistent with financial expectations based on our business transformation strategy.
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|
|
|
Robust CEO PRSUs Criteria
. Our CEOs PRSUs (which were granted in connection with his new hire) have
the following criteria for 2013: (1) 45% may be earned upon achieving target milestones in new business areas; (2) 45% may be earned upon achieving total shareholder return that is benchmarked against the Russell 2000 Index; and
(3) 10% may be earned upon achieving organizational development goals set by the Compensation Committee that includes the recruitment of a new CFO.
|
Process for Determining Executive Compensation
The Compensation
Committee retained the outside compensation consulting firm Compensia, Inc. to inform the Compensation Committee on market practices, programs and compensation levels; evaluate our compensation practices; and assist in developing and implementing
the executive compensation program. Meetings attended by a Compensia consultant typically contain a period of time for the Compensation Committee to meet with the Compensia representative without management present. In addition, Compensia
occasionally meets alone with the Committee Chair for direction and/or review of particular material. The Compensation Committee determined that the retainer of Compensia did not raise any conflict of interest.
The compensation for our CEO is approved by the Compensation Committee and ratified by the full Board. In considering other aspects of
executive compensation, the Compensation Committee may give weight to the
26
views of members of senior management, particularly our CEO. The Compensation Committee believes involvement of management is appropriate because management understands the daily contributions of
other officers and the overall employee environment.
The Compensation Committee does not believe that it is appropriate to
establish compensation levels based solely on benchmarking. However, the Compensation Committee recognizes that information regarding pay practices at other companies is useful to ensure that our compensation practices are competitive in the market
place; and independent marketplace information is one of several factors the Compensation Committee considers in assessing the reasonableness of compensation. In 2012, because the Compensation Committee did not increase the base salaries of our
executive officers and did not grant any equity awards to them, market data was considered and discussed by the Compensation Committee, but was not a critical factor for the Compensation Committees actions.
The Compensation Committee did, however, simplify the peer group it used for 2012 and going forward to compare executive compensation. It
refined the peer group by eliminating the reference peer group of larger companies, despite their being in our industry, and limiting the peer group to companies that are closer to ours in revenue and market capitalization.
The following criteria were used to establish our Peer Group for 2012:
|
2.
|
Ownership: Publicly traded
|
|
3.
|
Industry: Life Science industry
|
|
4.
|
Revenues of approximately 1/3 to 2x of ours
|
|
5.
|
Market capitalization of 1.5x revenue or greater
|
In 2012, our Peer Group consisted of the following companies:
|
9.
|
Gen-Probe Incorporated;
|
|
12.
|
Myriad Genetics, Inc.
|
Elements of Executive
Compensation
Our executive officers compensation currently has the following primary components:
|
|
|
annual cash bonuses based on corporate and individual performance;
|
|
|
|
long-term incentives in the form of stock options and restricted stock awards; and
|
|
|
|
health, welfare and retirement benefits.
|
27
In determining compensation for our executive officers, the Compensation Committee considers
a variety of factors. For 2012 compensation, the most important factor was whether we achieved our specific financial goals.
Other factors that may be taken into account by the Compensation Committee include:
|
|
|
extraordinary performance by an individual during the year;
|
|
|
|
the executives tenure and experience;
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|
|
|
the executives historical compensation; and
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|
|
|
market data and internal equity.
|
Risk Considerations in Our Compensation Program
The Compensation
Committee believes that the structure of our executive compensation program mitigates inappropriate risk-taking for the following reasons:
|
|
|
Our recoupment policy allows us to recoup executive officers performance-based compensation in the event of a restatement of our financial
results, as described below.
|
|
|
|
Our program consists of both fixed and variable compensation. The fixed (or salary) portion of compensation is designed to provide a steady income so
that executives do not feel pressured to focus exclusively on stock price performance or other financial metrics to the detriment of other important operational and strategic objectives.
|
|
|
|
Our time-based equity awards encourage long-term, sustainable performance of the overall business because they vest over four years and their value
increases with the increase in our stock price over time.
|
|
|
|
By using a mixture of options and restricted stock, executives have a combination of incentives rather than being solely focused on a short-term stock
price increase.
|
Fiscal 2012 Executive Compensation
Base Salary
Base salaries for our executive officers are established based on the scope of their responsibilities and are intended to be competitive with the compensation paid to executives with comparable
qualifications, experience and responsibilities in similar businesses of comparable size. Base salaries are reviewed annually and adjusted from time to time to realign salaries with market levels. Although they do not target a specific percentile,
the Compensation Committee believes that base salaries should be at competitive levels compared to the Peer Group. For 2012, the base salary of our CEO was slightly below the 50
th
percentile of the Peer Group while the salaries of our other executive officers were between the 50
th
and 75
th
percentile of the Peer Group. The Compensation Committee did not increase the base salaries of our executive officers
in 2012 because it believed these rates were competitive.
Cash Bonus Program
Our bonus program is designed to align individual performance with organizational objectives. It rewards participants based on attainment
of specified levels of corporate financial and strategic goals as well as subjective factors related to the individuals performance. Each named executive officer has an assigned target bonus level at 50% of base salary, except for our CEO, who
has an assigned target bonus level at 75% of base salary. As with our base salary levels, our CEO has the greatest level of responsibility and accountability and so has the highest
28
bonus target level in order to place a significant portion of his total compensation at risk to reflect the impact he has on our overall corporate performance. For 2012, although he was eligible
to do so, our CEO chose not to participate in the cash bonus program.
Generally the Compensation Committee establishes a
general funding level for our bonus program after review of the corporate financial and strategic performance for the year, and then reviews individual factors in approving the actual bonus payment for each named executive officer.
For 2012, any bonus payout for executive officers was conditioned upon meeting both the minimum financial thresholds for revenue and
operating income with respect to the Affymetrix business, excluding eBioscience. These targets were set prior to the closing of our acquisition of eBioscience and were based on plans generated by the new business unit structure. The operating income
threshold was only used to determine if the executive officers were eligible for a bonus payout and thus should be considered as an eligibility threshold. If both the revenue and operating income thresholds were met, the level of bonus payout will
depend on the level of revenue achievement in 2012. The Compensation Committee believed that achieving both thresholds was important because they were tied to our goals of stabilizing the core business and returning the Company to profitability. The
minimum threshold for revenue was $268 million, excluding revenue from eBioscience, and the minimum threshold for operating income was a net loss of $8.1 million or less, excluding the effect of the eBioscience acquisition. We did not meet either
threshold for 2012, and therefore no bonus was paid to our executive officers for 2012.
Equity Incentives
Overview.
Our equity awards program is intended to align the long-term interests of
executives with the interests of stockholders by offering potential gains if our stock price increases. Our equity program is designed to retain and incent employees to work towards the long-term success of Affymetrix by imposing vesting schedules
over several years. The equity award pool for the year is typically proposed by the Senior VP of Human Resources and CEO and includes expected awards to all employees based on certain assumptions on our stock price over time. In approving the equity
award pool, the Compensation Committee considers our burn rate and equity usage. In approving grants of equity awards to executive officers, the Compensation Committee then considers data provided by Compensia as well as the performance of each
individual executive.
Types of Equity Awards.
We use a combination of (1) time-based stock
options; (2) time-based restricted stock awards; and (3) performance-based restricted stock awards. Because of the direct relationship between the value of an option and the increased market price of our common stock after the grant date,
we feel that stock options continue to be important to motivate our executive officers and employees to manage Affymetrix in a manner that is consistent with both the long-term interests of our stockholders and our business objectives. In addition,
we grant restricted stock awards, which we feel have two primary benefits. First, because restricted stock awards have no exercise price, we can grant smaller amounts of restricted stock awards that have an initial value equivalent to a larger
number of options, meaning the restricted stock awards have less impact on stockholder dilution. Second, we believe they help retain our executive officers and key employees in both good and bad market conditions. We have also begun adding
performance criteria to some restricted stock awards in order to better align them with the interests of our stockholders. If our executive officers do not meet the performance criteria for these restricted stock awards, the restricted stock awards
will be forfeited. The Compensation Committee regularly reviews the appropriate mix of these types of awards.
Grants
during 2012.
The Compensation Committee did not grant any equity awards to our executive team in 2012 as we worked on optimizing the organizational structure of the Company. In early 2013, we implemented a restructuring to
position us for future growth and profitability.
Stock Option Grant Policy.
We have adopted a
stock option grant policy to ensure consistent practices in the administration of stock option grants. You can obtain a copy of our Stock Option Grant Policy at the
Investors
section of our website (
www.affymetrix.com
). The
Compensation Committee may decide on one or two
29
refresher grants every fiscal year, taking into account factors such as attrition rates, the retentive value of outstanding equity awards and the number of shares available for grant under our
equity incentive plans. The option grant date for refresher grants to executive officers must be during an open window and is no earlier than the date on which the option is approved.
CEOs 2012 PRSUs Performance Goals and Achievement Level.
In connection with
Dr. Witneys hire in 2011, the Compensation Committee granted Dr. Witney 240,000 performance based restricted stock units, of which 60,000 would be eligible to be earned in each year based on performance criteria, but would not vest
until 12 months following the end of the applicable performance year. In setting the 2012 criteria, the Compensation Committee also took into consideration that Dr. Witney chose not to participate in the 2012 cash bonus program.
Dr. Witneys 2012 tranche of PRSUs was subject to him meeting criteria that were tied to our corporate goals of stabilizing our
core business, reducing our operating losses and returning the Company to profitability, achieving growth targets in our newer product lines, and building a strong team while optimizing the organizational structure of the Company.
(1) 15,000 shares upon Affymetrix achieving revenues of $268 million or more, excluding revenue from eBioscience. This
goal was not achieved.
(2) 15,000 shares upon Affymetrix achieving operating loss of $16.6 million or less,
equal or smaller losses than those realized in 2011, excluding one-time items relating to the eBioscience acquisition. This goal was achieved for 2012.
(3) 15,000 shares upon achieving sales growth targets in three out of four product lines. This goal was not achieved. While all of these product lines achieved sales growth, they did not meet the targets
set for vesting of the PRSUs.
(4) 15,000 shares upon the Compensation Committees assessment of
Dr. Witneys ability to identify and develop talent to execute on the Companys plan for transformation, retain key employees and optimize our organizational structure. The Compensation Committee determined that Dr. Witney
partially met this goal in that he was able to identify and develop key employees, and optimized our organizational structure, but we also lost some valued employees in 2012. Therefore, the Committee determined that he earned 10,000 of these shares.
As a result, 25,000 of Dr. Witneys 2012 tranche of PRSUs were earned and will vest on December 31, 2013,
while the remaining 35,000 of such tranche were forfeited.
Other Benefit Plans
Retirement Plans
. Executive officers are eligible to participate in all of our employee benefit plans, such
as medical, dental, vision, group life, and accidental death and dismemberment insurance and our 401(k) plan (with matching contributions from Affymetrix), in each case on the same basis as other employees, subject to applicable law. Executive
officers are also eligible to participate in our long-term disability plan on the same basis as other employees except that the long-term disability benefit for executive officers is 66.67% of their monthly salary whereas the benefit for all other
employees is 60% of their monthly salary.
Recoupment Policy for Performance-Based Compensation (Claw-Back Policy)
We have a policy for recoupment of performance-based compensation. The policy provides that if we restate our
reported financial results for periods beginning after the date of adoption, the Board of Directors will review the bonus and other awards made to executive officers based on financial results during the period subject to the restatement. To the
extent practicable and in the best interests of stockholders, the Board of Directors will seek to recover or cancel any such awards that were based on having met or exceeded performance targets that would not have been met under the restated
financial results.
30
Change in Control and Severance Arrangements
We have a change in control severance policy that provides for the treatment of outstanding equity awards and the receipt of severance
benefits for employees (including all of our named executive officers) who are terminated, or whose jobs are materially adversely affected, as a result of a change in control, as described in detail below under Executive
CompensationExecutive Severance Policy and Change in Control Arrangements. Our Board of Directors may amend or terminate this policy at any time prior to a change in control, and the Compensation Committee periodically evaluates the
benefits provided and other terms of the policy. The purpose of this policy is to mitigate some of the risk that exists for executives working in a company of our size while there remains significant acquisition activity in the biotechnology
industry. We believe the policy helps attract and retain qualified executives who could have other job alternatives that may appear to them to be less risky absent this policy. In addition, in the event there was a potential change in control that
could be beneficial to stockholders, we believe these severance packages would provide an incentive for these executives and other employees to continue to help successfully execute the acquisition from its early stages until closing while providing
reasonable protection to our executives and other employees against a significant downsizing or restructuring that could result from the acquisition.
We have an executive severance policy in order to standardize our severance practices (outside of a change in control period) and provide potential severance benefits that we believe are reasonable to
protect an executive from an arbitrary termination. The Board may amend or terminate this policy at any time.
Accounting and Tax
Considerations
For proposed equity awards, the Compensation Committee reviews the estimated employee stock-based
compensation expenses in accordance with FASB ASC 718. This valuation is one of the considerations used in reviewing the market competitiveness of individual equity awards.
Section 162(m) of the Internal Revenue Code limits the deductibility of compensation paid to certain executives that is not performance-based which exceeds $1,000,000 in any year.
Although this tax deduction limitation is not a material issue for our company at this time, we have granted certain equity awards that are intended to meet the conditions of Section 162(m). However, the Compensation Committee has the full
discretion to grant cash and equity awards that do not meet the criteria under Section 162(m) and may not be fully deductible as a result. The Compensation Committee, when determining executive compensation programs, considers various relevant
factors, which may include the potential tax deductions, but also weighs our need to attract, retain and reward high-performing executives. We have paid, and will continue to pay, compensation to executive officers that may not be fully deductible
if we believe that is necessary to attract, retain and reward high-performing executives.
31
COMPENSATION COMMITTEE REPORT
We have reviewed and discussed the Compensation Discussion and Analysis in this proxy statement with management. Based on our review and
discussion with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and in Affymetrix Annual Report on Form 10-K for the year ended December 31,
2012.
|
|
|
Submitted by:
|
|
Jami Dover Nachtsheim, Chairwoman
Nelson C. Chan
Gary S. Guthart, Ph.D.
Members of the Compensation Committee
|
Notwithstanding anything to the contrary set forth in any of the Companys previous filings under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that incorporate future filings, including this proxy statement, in whole or in part, the foregoing Compensation Committee Report shall not be incorporated
by reference into any such filings.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation, for the most recent three fiscal years, for each person who served as our principal executive or financial officer during 2012 and our other executive
officers for fiscal year 2012 (collectively referred to as the named executive officers in this proxy).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
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|
|
|
Name and
Principal Position
|
|
Year
|
|
|
Salary
($)(1)
|
|
|
Stock
Awards
($)*
|
|
|
Option
Awards
($)*
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
Change in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
($)(2)
|
|
|
Total
($)
|
|
Frank Witney, Ph.D.(3)
|
|
|
2012
|
|
|
|
529,041
|
|
|
|
115,750
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
657,291
|
|
President and Chief
|
|
|
2011
|
|
|
|
248,077
|
|
|
|
1,409,100
|
(5)
|
|
|
1,081,110
|
|
|
|
|
|
|
|
|
|
|
|
1,548
|
|
|
|
2,739,835
|
|
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Timothy C. Barabe(6)
|
|
|
2012
|
|
|
|
423,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
436,137
|
|
Executive Vice President and
Chief Financial Officer
|
|
|
2011
|
|
|
|
390,000
|
|
|
|
271,350
|
|
|
|
277,201
|
|
|
|
|
|
|
|
|
|
|
|
74,777
|
(7)
|
|
|
1,013,328
|
|
|
|
2010
|
|
|
|
306,923
|
|
|
|
213,300
|
|
|
|
556,901
|
|
|
|
85,500
|
|
|
|
|
|
|
|
118,321
|
(7)
|
|
|
1,280,945
|
|
|
|
|
|
|
|
|
|
|
Andrew J. Last, Ph.D
|
|
|
2012
|
|
|
|
412,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
425,403
|
|
Executive Vice President,
|
|
|
2011
|
|
|
|
375,000
|
|
|
|
53,100
|
|
|
|
303,049
|
|
|
|
|
|
|
|
|
|
|
|
14,294
|
|
|
|
745,443
|
|
Genetic Analysis Business Unit
|
|
|
2010
|
|
|
|
365,000
|
|
|
|
63,300
|
|
|
|
167,489
|
|
|
|
82,130
|
|
|
|
|
|
|
|
12,914
|
|
|
|
690,833
|
|
|
|
|
|
|
|
|
|
|
John F. Runkel, Jr.(8).
|
|
|
2012
|
|
|
|
404,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
417,436
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|
Executive Vice President and
General Counsel and Secretary
|
|
|
2011
|
|
|
|
370,000
|
|
|
|
247,986
|
|
|
|
191,747
|
|
|
|
|
|
|
|
|
|
|
|
15,854
|
|
|
|
825,587
|
|
|
|
2010
|
|
|
|
360,000
|
|
|
|
42,200
|
|
|
|
124,420
|
|
|
|
110,000
|
|
|
|
|
|
|
|
15,604
|
|
|
|
652,224
|
|
*
|
The reported dollar value of stock awards and option awards is equal to the full aggregate grant date fair value under FASB ASC 718 with respect of restricted stock
awards and stock options, respectively, made to the named executive officers during the applicable fiscal year. See Note 14Stockholders Equity and Share-Based Compensation Expense of our Annual Report on Form 10-K for the year
ended December 31, 2012, regarding assumptions underlying valuation of our stock options. The actual value of an option, if any, will depend on the future market price of our common stock and the option holders individual exercise and
sale decisions. The grant date fair value of stock awards is based on the fair market value of our common stock on the grant date. For a description of restricted stock and option awards made, exercised and vested during fiscal 2012, and outstanding
at the end of fiscal 2012, see the tables set forth below.
|
32
(1)
|
The Compensation Committee did not increase the base salaries of our executive officers in 2012. The higher amounts shown for 2012 reflect a one-time payment for
accrued paid time off hours that were over the maximum accrual cap that we set in 2012.
|
(2)
|
Includes discretionary matching contributions made under our 401(k) plan.
|
(3)
|
Dr. Witney was appointed our President and Chief Executive Officer in July 2011. His compensation for 2011 reflects this partial year of service.
|
(4)
|
Reflects the grant date fair value of the 25,000 performance awards earned by Dr. Witney for 2012 from his 2011 new hire grant; does not include 35,000 performance
awards that were forfeited. The grant date fair value of the maximum 60,000 performance awards that Dr. Witney was eligible to earn for 2012 was $277,800.
|
(5)
|
Includes the 60,000 performance awards earned by Dr. Witney for 2011, which was the maximum that could be earned in that year. Does not include 180,000 performance
awards that Dr. Witney was eligible to earn over the following three years, starting in 2012, subject to achievement of performance criteria to be set annually at the beginning of each year. The grant date fair value of each tranche of the
additional 180,000 performance awards will only be determined on the date the performance criteria with respect to such tranche is set.
|
(6)
|
In March 2010, Mr. Barabe was appointed our Executive Vice President and Chief Financial Officer. His compensation for 2010 reflects this partial year of service.
Mr. Barabe will retire from Affymetrix in 2013.
|
(7)
|
Includes the amount described in footnote (2) and relocation benefits totaling $58,923 in 2011 and $115,612 in 2010. The relocation benefits represent
reimbursement of relocation expenses, temporary housing and tax reimbursement payments of $20,748 in 2011 and $25,024 in 2010 for taxes owed by Mr. Barabe as a result of income imputed to him for his relocation benefits.
|
(8)
|
Mr. Runkel will retire from Affymetrix at the end of March 2013.
|
Grants of Plan-Based Awards
The following table sets forth information
regarding stock options, restricted stock awards and incentive plan awards granted to our named executive officers during fiscal 2012.
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|
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|
|
Name
|
|
Grant
Date
|
|
Estimated Possible
Payouts Under
Non-Equity
Incentive Plan
Awards(1)
|
|
|
Estimated Future
Payouts Under
Equity Incentive
Plan Awards
Maximum
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
|
|
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(2)
|
|
|
Exercise
of Base
Price of
Option
Awards
($/sh)
|
|
|
Grant
Date Fair
Value of
Stock and
Option
Awards
($)(3)
|
|
|
|
Target
($)
|
|
|
|
|
|
|
Frank Witney, Ph.D
|
|
|
|
|
375,000
|
|
|
|
|
|
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy C. Barabe
|
|
|
|
|
195,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew J. Last, Ph.D.
|
|
|
|
|
187,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John F. Runkel, Jr.
|
|
|
|
|
185,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
There is no threshold or maximum bonus amount with respect to any named executive officer. Our Chief Executive Officer has a target bonus at 75% of his annual base
salary and our other named executive officers have target bonuses at 50% their annual base salaries. The amount of the bonus actually paid is based on the performance factors described in Compensation Discussion and Analysis above, and
no cash bonus was actually paid for 2012 performance.
|
(2)
|
Does not include 25,000 (out of a maximum 60,000) performance awards that were earned by Dr. Witney for 2012. These awards were granted to him in connection with
his new hire in 2011.
|
(3)
|
This column represents the full grant date fair value of each equity award. See Note 14Stockholders Equity and Share-Based Compensation Expense to the
financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012 for information regarding assumptions underlying valuation of our equity awards.
|
33
Outstanding Equity Awards at Fiscal Year End
The following table sets forth information regarding outstanding stock options and restricted stock awards as of December 31, 2012
for the named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options:
Exercisable
(#)
|
|
|
Number of
Securities
Underlying
Unexercised
Options:
Unexercisable
(#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock that
Have Not
Vested
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock that
Have
Not
Vested
($)(1)
|
|
|
Equity
Incentive Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#)
|
|
|
Equity
Incentive Plan
Awards:
Market or
Payout Value
of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)(1)
|
|
Frank Witney, Ph.D.
|
|
|
75,000
|
|
|
|
225,000
|
(2)
|
|
|
6.71
|
|
|
|
07/21/2018
|
|
|
|
137,500
|
(3)
|
|
|
435,875
|
|
|
|
120,000
|
(4)
|
|
|
380,400
|
|
|
|
|
|
|
|
|
|
|
Timothy C. Barabe
|
|
|
45,000
|
|
|
|
45,000
|
(2)
|
|
|
7.50
|
|
|
|
03/18/2017
|
|
|
|
58,750
|
(5)
|
|
|
186,238
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
35,000
|
(2)
|
|
|
4.22
|
|
|
|
08/19/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,750
|
|
|
|
38,250
|
(2)
|
|
|
5.31
|
|
|
|
02/17/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
37,500
|
(2)
|
|
|
4.85
|
|
|
|
11/17/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew J. Last, Ph.D.
|
|
|
67,500
|
|
|
|
22,500
|
(2)
|
|
|
5.29
|
|
|
|
12/17/2016
|
|
|
|
20,000
|
(6)
|
|
|
63,400
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
35,000
|
(2)
|
|
|
4.22
|
|
|
|
08/19/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,750
|
|
|
|
38,250
|
(2)
|
|
|
5.31
|
|
|
|
02/17/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
45,000
|
(2)
|
|
|
4.85
|
|
|
|
11/17/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John F. Runkel, Jr.
|
|
|
|
|
|
|
30,000
|
(2)
|
|
|
5.05
|
|
|
|
10/20/2015
|
|
|
|
44,950
|
(7)
|
|
|
142,492
|
|
|
|
|
|
|
|
|
|
|
|
|
26,250
|
|
|
|
8,750
|
(2)
|
|
|
8.29
|
|
|
|
08/20/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,000
|
|
|
|
26,000
|
(2)
|
|
|
4.22
|
|
|
|
08/19/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,500
|
|
|
|
19,500
|
(2)
|
|
|
5.31
|
|
|
|
02/17/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,250
|
|
|
|
33,750
|
(2)
|
|
|
4.85
|
|
|
|
11/17/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Assumes a stock price of $3.17 a share, which was the closing market price of the Companys stock on December 31, 2012 (the last trading day of fiscal 2012).
|
(2)
|
Options vest in four equal, annual installments from the grant date, which is seven years before the Option Expiration Date.
|
(3)
|
Of 150,000 restricted stock units granted on July 21, 2011 that would vest in four equal annual installments from the grant date, 112,500 of these restricted stock
units have not vested. Also includes 25,000 performance based restricted stock units earned with respect to fiscal year 2012 performance, which will vest on December 31, 2013.
|
(4)
|
On July 21, 2011, 240,000 performance-based restricted stock units were granted to Dr. Witney: For 2011, 60,000 shares were earned, and those awards vested on
December 31, 2012. For 2012, 25,000 shares were earned and will vest on December 31, 2013 if Dr. Witney is employed on the vest date, and 35,000 shares were forfeited. For fiscal 2013 and fiscal 2014, 60,000 shares are eligible to be
earned for each year if performance criteria for that year are met and Dr. Witney is employed on the vest date, with vesting (to the extent earned) on December 31 of the following year.
|
(5)
|
The following restricted stock awards vest in four equal annual installments from the grant date: 20,000 restricted stock awards granted on March 18, 2010, 15,000
restricted stock units granted on August 19, 2010, 10,000 restricted stock units granted on February 17, 2011 and 45,000 restricted stock units granted on November 17, 2011.
|
(6)
|
The following restricted stock awards vest in four equal annual installments from the grant date: 20,000 restricted stock awards granted on December 17, 2009,
15,000 restricted stock units granted on August 19, 2010 and 10,000 restricted stock units granted on February 17, 2011.
|
(7)
|
The following restricted stock awards vest in four equal annual installments from the grant date: 30,000 restricted stock awards granted on October 20, 2008; 8,000
restricted stock awards granted on August 20, 2009, 10,000 restricted stock units granted on August 19, 2010, 5,600 restricted stock units granted on February 17, 2011 and 45,000 restricted stock units granted on November 17,
2011.
|
34
Options Exercised and Stock Vested
The following table sets forth certain information regarding options and stock awards exercised and vested, respectively, during 2012 for
the named executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares
Acquired
on Exercise
(#)
|
|
|
Value Realized
on Exercise
|
|
|
Number of
Shares
Acquired
on Vesting
(#)
|
|
|
Value Realized
on Vesting
($)(1)
|
|
Frank Witney, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
97,500
|
|
|
|
354,825
|
|
Timothy C. Barabe
|
|
|
|
|
|
|
|
|
|
|
22,500
|
|
|
|
82,063
|
|
Andrew J. Last, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
11,250
|
|
|
|
42,600
|
|
John F. Runkel, Jr.
|
|
|
|
|
|
|
|
|
|
|
24,650
|
|
|
|
84,352
|
|
|
(1)
|
The amount in this column reflects the closing price of our common stock on the date of vesting multiplied by the number of shares vesting.
|
35
Executive Severance Policy and Change in Control Arrangements
Executive Severance Policy.
The Company has an executive severance policy, which would only apply to
involuntary terminations outside a change in control situation. A change in control situation is covered by the change in control policy described below. This policy applies to officers of the Company holding a Senior Vice President or more senior
position. The Companys executive severance policy may be amended or terminated by the Board at any time.
Subject to
signing a release of claims, upon an involuntary termination, a named executive officer will receive:
|
|
|
12 months of base salary; and
|
|
|
|
12 months of continued health benefits (unless the named executive officer earlier becomes eligible for group benefits from another employer).
|
An involuntary termination means the unilateral termination of the named executive
officers employment by the Company without cause.
The following table shows the severance benefits that would be
received by each named executive officer upon an involuntary termination, assuming the individual was terminated on December 31, 2012 and based on the individuals base salary for fiscal 2012.
|
|
|
|
|
|
|
|
|
Name
|
|
Cash
Severance
($)
|
|
|
Other Benefits
Value ($)(1)
|
|
Frank Witney, Ph.D.
|
|
|
500,000
|
|
|
|
21,341
|
|
Timothy C. Barabe
|
|
|
390,000
|
|
|
|
14,756
|
|
Andrew J. Last, Ph.D.
|
|
|
375,000
|
|
|
|
26,592
|
|
John F. Runkel, Jr.
|
|
|
370,000
|
|
|
|
21,341
|
|
|
(1)
|
Represents the estimated value of 12 months of continued health benefits.
|
Change in Control Severance.
The Company has a change in control policy. The policy applies to all employees, but our named executive officers receive greater benefits.
The Companys change in control policy may be amended or terminated by the Board at any time prior to a change in
control. However, the policy may not be terminated or amended in a manner adversely to any person covered by the policy for 12 months following a change in control (which includes such transactions as a change in at least 50% of the voting power of
our stock through a merger or acquisition by a person or a group). The termination or amendment of the policy at any time shall not affect any benefits to which a person covered by the policy previously has become entitled.
Subject to signing a release of claims, upon a qualifying termination or if not offered comparable employment, a named executive officer
will receive:
|
|
|
full vesting of all equity awards;
|
|
|
|
24 months of base salary plus 200% of target bonus (none of our named executives will receive a cash payment that exceeds three times his base
salary plus target bonus under this payout);
|
|
|
|
24 months of continued health benefits (unless the named executive officer earlier becomes eligible for group benefits from another employer); and
|
|
|
|
6 months of outplacement services.
|
36
A qualifying termination means (i) an involuntary termination without cause
in connection with, or within 12 months following, a change in control, (ii) resignation of employment within 6 months following a change in control due to a material reduction in base salary, target bonus opportunity or job duties and
responsibilities, or movement of work location more than 45 miles from the principal work location, from those in effect immediately prior to the change in control.
Upon a change in control, outstanding equity awards may be assumed by the acquirer, become fully vested or be cashed out, as determined by the Company and the acquirer.
The following table shows the severance benefits that would be received by each named executive officer who is an employee upon a
qualifying termination following a change in control, assuming the individual was terminated on December 31, 2012 and based on the individuals base salary for fiscal 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Cash
Severance
($)
|
|
|
Accelerated
Equity
Value ($)(1)
|
|
|
Other Benefits
Value ($)(2)
|
|
Frank Witney, Ph.D.
|
|
|
1,750,000
|
|
|
|
737,025
|
|
|
|
56,222
|
|
Timothy C. Barabe
|
|
|
1,170,000
|
|
|
|
186,238
|
|
|
|
44,814
|
|
Andrew J. Last, Ph.D.
|
|
|
1,125,000
|
|
|
|
63,400
|
|
|
|
56,104
|
|
John F. Runkel, Jr.
|
|
|
1,110,000
|
|
|
|
142,492
|
|
|
|
56,222
|
|
|
(1)
|
The value of unvested restricted stock or restricted stock units is based on $3.17 per share, the closing price of our common stock on December 31, 2012. The value
of accelerated vesting of the options is based solely on the excess, if any, of $3.17 per share over the exercise price of the unvested portion (as of December 31, 2012) of the individuals stock options.
|
|
(2)
|
Represents the estimated value of health, dental and vision insurance coverage and outplacement services.
|
Compensation Committee Interlocks and Insider Participation
During 2012, none of our executive officers served on the compensation committee or board of any other company whose executive officers
serve as a member of our board or compensation committee, and no compensation committee member had any relationship requiring disclosure under Item 404 of Regulation S-K.
CERTAIN TRANSACTIONS
Related Person Transaction Policy
Under a written policy that has been adopted by our Board of Directors, we review all transactions involving us in which any of our
directors, director nominees, significant stockholders and executive officers or their immediate family members are participants to determine whether such person has a direct or indirect material interest in the transaction. All directors, director
nominees and executive officers are required to promptly notify our Secretary of any proposed transaction involving us and in which such person has a direct or indirect material interest. Such proposed transaction is then reviewed by either our
Board as a whole or a designated committee thereof consisting of a majority of independent directors to determine whether or not to approve or ratify the transaction based on the following criteria:
|
|
|
The character and materiality of the related persons interest in the transaction;
|
|
|
|
The commercial reasonableness of the terms of the transaction;
|
|
|
|
The benefit or lack thereof to the Company;
|
|
|
|
The opportunity costs of alternate transactions;
|
37
|
|
|
The actual or apparent conflict of interest of the related person; and
|
|
|
|
Any other matters the reviewing body deems appropriate.
|
After such review, the reviewing body approves or ratifies the transaction only if it determines that the transaction is in, or not inconsistent with, the best interests of the Company and our
stockholders. On an annual basis, the reviewing body reviews previously approved transactions with related parties under the standard described above to determine whether such transactions should continue.
In December 2011, we entered into an agreement under which we assigned one patent application and related know-how to Cellular Research,
Inc. (Cellular Research), a company founded by Dr. Fodor, our Chairman. Dr. Fodor is a significant shareholder of Cellular Research. Pursuant to the agreement, Cellular Research shall pay single digit royalties to us on sales
of products covered by the assigned technology, and starting in December 2015, an annual minimum fee of $100,000. We have a right of first refusal to collaborate with Cellular Research for the development of certain new products and to supply arrays
to Cellular Research under certain terms and conditions. As of December 31, 2012, no royalties were earned pertaining to this agreement.
Director and Executive Officer Indemnification Agreements
We have
entered into indemnification agreements with each of our directors and executive officers. These agreements require us to indemnify our directors and executive officers to the fullest extent permitted by Delaware law.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON MAY 7, 2013
The proxy statement and the annual report to stockholders are available at www.proxyvote.com.
OTHER MATTERS
We are not aware of any matters that are expected to come
before the 2013 annual meeting other than those referenced in this proxy statement. If any other matters properly come before the meeting, it is the intention of the persons named as proxy holders in the proxy card to vote the shares they represent
as the Board may recommend.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be included in our proxy statement for our 2014 annual meeting must be received by us no
later than November 27, 2013 in order that they may be included in the proxy statement and form of proxy relating to that meeting.
Stockholders intending to present a proposal at the 2014 annual meeting, but not to include the proposal in our proxy statement, must comply with the requirements set forth in our bylaws. The bylaws
require, among other things, that a stockholder must submit a written notice of intent to present such a proposal to the Secretary at our principal executive offices not less than 75 days prior to the first anniversary of the preceding
years annual meeting of stockholders (as long as the date of the annual meeting is not advanced more than 30 days or delayed more than 75 days after the anniversary date). Therefore, we must receive notice of such proposal for the
2014 annual meeting no later than February 21, 2014. If the notice is received after February 21, 2014, it will be considered untimely and we will not be required to present it at the 2014 annual meeting.
BY ORDER OF THE BOARD OF DIRECTORS
JOHN F. RUNKEL, JR.
Secretary
March 27, 2013
38
affymetrix
Biology for a better world
AFFYMETRIX, INC.
3420 CENTRAL EXPRESSWAY
SANTA CLARA, CA 95051
ATTN: DOUG FARRELL
VOTE BY INTERNET -
www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction
form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all
future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to
receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION ONLY
The Board of
Directors recommends you vote FOR the following:
For Against Abstain
1. Election of Directors
01 Stephen P.A. Fodor
02 Frank Witney
03 Nelson C. Chan
04 Gary S. Guthart
05 Jami Dover Nachtsheim
06 Robert H. Trice
07 Robert P. Wayman
The Board of Directors
recommends you vote FOR proposals 2 and 3.
For Against Abstain
2. To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the
fiscal year ending December 31, 2013.
For Against Abstain
3. To approve, by an advisory vote, the compensation of Affymetrix named executive officers as disclosed in our
proxy statement for the 2013 Annual Meeting of Stockholders.
NOTE: Such other business as may properly come
before the meeting or any adjournment thereof.
Please sign exactly as your name(s) appear(s) hereon. When
signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by
authorized officer.
Signature [PLEASE SIGN WITHIN BOX] Date
Signature (Joint Owners) Date
0000166951_1 R1.0.0.51160
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual Report is/ are available at www.proxyvote.com .
AFFYMETRIX, INC.
Annual Meeting of Stockholders
May 7, 2013 at 8:00 AM
This proxy is solicited on behalf of the Board of Directors
The undersigned stockholder of Affymetrix, Inc., revoking all prior proxies, hereby appoints Stephen P.A. Fodor, Frank Witney and Siang H. Chin and each of them, with full power of
substitution, the true and lawful attorneys, agents and proxy holders of the undersigned, and hereby authorizes each of them to represent the undersigned at the Annual Meeting of Stockholders of the Company to be held on May 7, 2013 beginning
at 8:00 a.m., Pacific Daylight Time, at 3380 Central Expressway, Santa Clara, California and any adjournments or postponements; and to vote all of the shares of common stock held of record by the undersigned on March 11, 2013 upon all matters
that may properly come before the meeting, includng the matters described in the proxy statement, and in accordance with my instructions on the reverse side of this proxy card.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted FOR all director nominees, and
FOR proposals 2 and 3 and in accordance with the Board of Directors recommendations upon such other matters as may properly come before the Annual Meeting of Stockholders.
Continued and to be signed on reverse side
0000166951_2 R1.0.0.51160
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