PROPOSAL 3ADVISORY VOTE ON EXECUTIVE COMPENSATION
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WHAT YOU ARE VOTING ON:
At the 2018 Annual Meeting, stockholders are being asked to approve the
compensation of our NEOs as disclosed in this Proxy Statement.
This
Proposal 3 enables our stockholders to cast a non-binding, advisory vote to approve the compensation of our named executive officers as disclosed in this Proxy Statement.
As
described in detail under the heading "
Compensation and Other Information Concerning Named Executive OfficersCompensation Discussion and
Analysis
" beginning on page 25, our executive compensation program is designed to attract, motivate and retain our executive officers, who are critical to our success.
Please read the "
Compensation and Other Information Concerning Named Executive Officers
" section beginning on page 25 for additional details about
our executive compensation programs, including information about the 2017 compensation of our named executive officers.
We
are asking our stockholders to indicate their support for our executive compensation programs as described in this Proxy Statement. This vote is not intended to address any specific term of
compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we are asking our
stockholders to vote FOR the following resolution at the annual meeting:
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"RESOLVED, that the compensation paid to the Company's named executive officers, as disclosed pursuant to the SEC's compensation
disclosure rules, including the "
Compensation Discussion and Analysis
", the compensation tables and any related material disclosed in the proxy statement
for the Company's 2018 annual meeting, is hereby APPROVED."
Although
the vote on this Proposal 3 regarding the compensation of our named executive officers is not binding on our Board of Directors, we value the opinions of our stockholders and will consider
the result of the vote when determining future executive compensation arrangements.
Vote Required for Approval
The foregoing resolution will be approved if holders of a majority of the shares present or represented at the 2018 annual meeting, in person
or by proxy, and voting on Proposal 3 vote in favor of such resolution.
Board Recommendation
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2018
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Table of Contents
COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS
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COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS
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Compensation Discussion and Analysis
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This
Compensation Discussion and Analysis
explains our executive compensation program as it relates to our named executive officers
("NEOs"), whose compensation information is presented in the following tables and discussion in accordance with SEC rules:
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NAME
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POSITION
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Kevin T. Conroy
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Chairman, President and Chief Executive Officer
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Graham P. Lidgard
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Senior Vice President and Chief Science Officer
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Jeffrey T. Elliott
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Chief Financial Officer
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D. Scott Coward
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Senior Vice President, General Counsel and Secretary
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Maneesh K. Arora
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Former Senior Vice President and Chief Operating Officer*
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*
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In
April 2018, Mr. Arora resigned from his positions as Senior Vice President and Chief Operating Officer and a member of our Board of Directors.
Mr. Arora will remain a non-executive employee of the Company for a transition period through December 31, 2018 unless such arrangement is terminated earlier.
Our
executive compensation program is designed to focus executive behavior on achievement of both our annual and long-term objectives and strategy as well as align the interests of management with
those of our stockholders. To that end, executive compensation consists of three primary elements: salary, long-term equity interests and an annual cash bonus opportunity based on individual and
corporate performance.
Objectives of Our Executive Compensation Program
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Our
compensation program for our executive officers is intended to achieve the following objectives:
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Focus executive behavior on achievement of our annual and long-term objectives and strategy;
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Provide a competitive compensation package that enables us to attract and retain qualified executives;
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Provide a total compensation structure that our Compensation and Management Development Committee believes is comparable to similarly-sized
companies in the life sciences industry with which we may compete for talent and which consists of a mix of base salary, equity and cash incentives; and
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Align the interests of management and stockholders by providing management with long-term incentives through equity ownership.
Elements of Executive Compensation
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Our
executive compensation program consists of three primary elements: salary, long-term equity interests and an annual cash bonus opportunity based on both corporate and individual
performance. Pursuant to their employment agreements, certain of our executive officers participate in a long-term incentive plan that provides for certain cash payments upon certain changes of
control of the Company. All of our executive officers are also eligible for certain benefits offered to employees generally, including, life, health, disability, dental and vision insurance, as well
as participation in our 401(k) plan and 2010 Employee Stock Purchase Plan. We do not currently believe it is necessary for the attraction or retention of management talent to provide executive
officers with compensation in the form of perquisites (other than housing and relocation benefits from time to time).
Determining Executive Compensation
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It
is the responsibility of our Compensation and Management Development Committee to administer our compensation practices, to ensure that they are competitive and financially
prudent and that they include incentives that are designed to appropriately drive performance. To achieve this, our Compensation and Management Development Committee periodically reviews
commercially-available, industry-specific compensation data for companies of generally similar employee size, stage of development and market capitalization in the diagnostic, biotechnology and
medical device industries as a general guide for establishing our pay and equity practices and structures. Our Compensation and Management Development Committee, along with our Board of Directors,
also reviews and approves corporate objectives used in our executive compensation program to confirm that appropriate goals have been established and tracks performance against them. On an annual
basis, our Compensation and Management Development Committee reviews tally sheets reflecting each executive officer's compensation history with respect to each element of compensation, as well as
projected payouts that would come due in connection with a termination or change of control.
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Table of Contents
COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS
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Our
Compensation and Management Development Committee conducts an annual review of performance and compensation during the first quarter of each year for the purpose of determining the compensation of
executive officers other than the Chief Executive Officer. As part of this review, the Chief Executive Officer submits recommendations to our Compensation and Management Development Committee relating
to the compensation of these officers. Following a review of these recommendations, our Compensation and Management Development Committee approves the compensation of these officers, with such
modifications to the Chief Executive Officer's recommendations as our Compensation and Management Development Committee considers appropriate.
Our
Compensation and Management Development Committee's review of the Chief Executive Officer's compensation is subject to additional procedures. With input from the independent directors, the Lead
Independent Director, along with our Compensation and Management Development Committee, evaluates the Chief Executive Officer's performance and reviews the evaluation with him. Based on that
evaluation and review and consultation with its independent compensation consultant, our Compensation and Management Development Committee then determines the Chief Executive Officer's compensation.
The Chief Executive Officer is not permitted to attend the portions of meetings of our Compensation and Management Development Committee where the Committee votes or deliberates on his compensation.
Our
Compensation and Management Development Committee has engaged Radford as its independent executive compensation consultant. Our Compensation and Management Development Committee has assessed the
independence of Radford pursuant to SEC and listing exchange rules and
concluded that no conflict of interest exists that would prevent Radford from serving as an independent consultant to our Compensation and Management Development Committee.
Analysis of Executive Compensation
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Pursuant
to its engagement, in early 2017 Radford provided our Compensation and Management Development Committee an annual review of the competitiveness of our executive
compensation program, including the competitiveness of our base salaries, target total cash compensation, long-term incentives and target total direct compensation.
Radford
analyzed the components of our executive compensation program against information blended from (1) proxy statement data from a peer group of companies that consisted of publicly-traded
diagnostic, biotechnology and medical device companies that were similar to the Company in terms of stage of development, headcount, revenue and market capitalization and (2) survey data from a
broader group of commercial stage public diagnostics, medical device and biotechnology companies with revenue between $30 million and $275 million and market capitalization between
$700 million and $2.1 billion.
Our
Compensation and Management Development Committee seeks to identify an executive compensation peer group of approximately 20 companies in the diagnostic, biotechnology and medical device
industries at a similar stage of development and comparable financial profile that may compete with the Company for executive talent. Based on Radford's review and recommendations regarding the
Company's executive compensation peer group, our Compensation and Management Development Committee approved a new peer group for 2017. In its review, Radford focused on creating a peer group
that:
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Represented companies operating in the diagnostics, medical device and biotechnology industries;
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Contained commercialized companies with respect to the stage of such companies' development; and
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Captured comparable companies in terms of headcount, revenue and market capitalization.
Based
on Radford's recommendations, our Compensation and Management Development Committee (1) removed four companies from the prior year's peer group either because they were acquired or no
longer met the targeted market capitalization level and (2) added six companies to the prior year's peer group (ABIOMED, Acorda Therapeutics, Meridian Bioscience, Myriad Genetics, Natera and
Tesaro) that met the stated criteria.
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COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS
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The
companies in our peer group for 2017 were:
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COMPANY
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INDUSTRY
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Abaxis
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Health Care Equipment
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ABIOMED
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Health Care Equipment
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Acorda Therapeutics
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Biotechnology
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AMAG Pharmaceuticals
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Biotechnology
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ARIAD Pharmaceuticals
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Biotechnology
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Cardiovascular Systems
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Health Care Equipment
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DepoMed
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Pharmaceuticals
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DexCom
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Health Care Equipment
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Foundation Medicine
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Biotechnology
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Genomic Health
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Biotechnology
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Halozyme Therapeutics
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Biotechnology
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Heartware International
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Health Care Equipment
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Insulet
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Health Care Equipment
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Ionis Pharmaceuticals
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Biotechnology
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Ironwood Pharmaceuticals
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Biotechnology
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Meridian Bioscience
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Health Care Equipment
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Myriad Genetics
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Biotechnology
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Natera
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Biotechnology
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Nektar Therapeutics
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Pharmaceuticals
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Pacira Pharmaceuticals
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Pharmaceuticals
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Quidel
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Health Care Equipment
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Tesaro
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Biotechnology
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Based
on Radford's analysis, we reached the following conclusions regarding our executive compensation program relative to our peer group:
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Base salary levels for our NEOs would remain targeted between the 25
th
percentile and
50
th
percentile.
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Total cash compensation (base salary plus annual cash bonus opportunity) levels for our NEOs would remain targeted between the
40
th
and 50
th
percentile.
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The aggregate value of the long-term incentive compensation awarded to our NEOs would generally remain targeted between the 50
th
and 75
th
percentile.
Radford
also provided us with an assessment of our annual equity award burn rate and the expected retentive value of equity awards held by our executives, as well as an analysis of the alignment of
Company performance and CEO compensation.
Based
on our assessment of the performance of the executives and our compensation philosophy as described in this
Compensation Discussion and Analysis,
in
early 2017 our Compensation and Management Development Committee took the following actions:
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Increased the base salaries of Mr. Conroy, Mr. Arora, Dr. Lidgard and Mr. Coward from $575,000 to $632,500, $453,200
to $475,900, $391,400 to $430,500 and $370,800 to $400,300, respectively, to recognize continued contributions of these individuals to the Company. Our Compensation and Management Development
Committee elected not to increase Mr. Elliott's base salary for 2017 as Mr. Elliott had received an increase in base salary from $270,000 to $350,000 in November 2016 upon
his appointment as Chief Financial Officer;
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Increased Mr. Conroy's target bonus opportunity from 75% to 80% of base salary bringing Mr. Conroy's total target cash
compensation to approximately the 42nd market percentile, increased Dr. Lidgard's target bonus opportunity from 40% to 50% of base salary bringing Dr. Lidgard's total target cash
compensation to approximately the 50th percentile, and increased Mr. Coward's target bonus opportunity from 45% to 50% of base salary
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COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS
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bringing
Mr. Coward's total target cash compensation to approximately the market 50th percentile. Our Compensation and Management Development Committee maintained Mr. Arora's and
Mr. Elliott's target bonus opportunities at 60% and 40% of base salary, respectively; and
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Granted annual equity awards with time-based vesting terms to Mr. Conroy, Mr. Arora, Dr. Lidgard, Mr. Elliott and
Mr. Coward at the market 60th percentile (with Mr. Conroy, Mr. Arora, Dr. Lidgard and Mr. Coward each receiving additional equity awards equal to 20% of the
market 60th percentile in recognition of exceptional 2017 performance), consisting of stock options covering 240,000, 132,000, 81,000, 75,000 and 65,000 shares, respectively, and RSUs covering
137,300, 75,500, 46,300, 42,900 and 37,200 shares, respectively. Mr. Coward received an additional 8,500 RSUs to compensate for a shortfall in the number of performance share
units he was awarded in 2016.
Our
Compensation and Management Development Committee believes that a meaningful portion of our executives' compensation should be "at risk"in other words, contingent
upon successful implementation of our strategy and goals. Accordingly, one component of our executive compensation program is an annual cash bonus opportunity under which each of our executive
officers is eligible to earn an annual cash bonus with a specified target amount equal to a percentage of base salary, with the actual bonus awarded to be based upon the achievement of corporate goals
determined by our Compensation and Management Development Committee in its discretion. In January 2017, our Compensation and Management Development Committee approved metrics to be used to
determine 2017 bonuses, which included (1) improvement of the Cologuard customer experience, (2) the growth of Cologuard revenue and profitability, (3) innovation in product
development and (4) employee engagement (which was used as an additional bonus weighting only for Company management at the Vice President level and above). Our NEOs were eligible to earn
bonuses for 2017 performance equal to up to 206% of their target bonuses, which were target bonuses of 80% of base salary for Mr. Conroy, 60% of base salary for Mr. Arora, 50% of
base salary for each of Mr. Coward and Dr. Lidgard and 40% of base salary for Mr. Elliott. Our Compensation and Management Development Committee determined actual bonus payments
after the end of 2017 based on the Committee's assessment of the performance of the Company relative to the business goals and weightings as described in the chart below.
Performance
against the applicable goals is expected to be used by our Compensation and Management Development Committee in determining annual bonus payments. However, in determining actual bonus
payments our Compensation and Management Development Committee ultimately relies on its judgment after a comprehensive review of Company performance, as well as consideration of qualitative and other
factors, without being tied to any formulas or pre-established weightings. Our Compensation and Management Development Committee has ultimate discretion to modify the matrix and may periodically
revisit goals and weightings as circumstances change (though our Compensation and Management Development Committee did not make any such modifications with respect to 2017 bonuses).
In
determining 2017 bonus awards, our Compensation and Management Development Committee considered the executive team's achievement of a variety of business plan goals, as follows:
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GOAL
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PERFORMANCE MEASURES
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WEIGHTING
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Improve customer experience
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Patient and provider
satisfaction
Compliance
rate
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20%
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Grow Cologuard revenue and profitability
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Achievement of a target of
online-based orders of Cologuard
Revenue targets
Increase number of ordering physicians
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60%
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Product innovation
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Product study completions
Product research
submissions
Development of
international expansion potentials
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20%
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In
addition, our Compensation and Management Development Committee provided each member of the executive team an opportunity to earn an additional 10% of his or her target bonus amount upon
satisfactory levels of employee engagement, as measured by certain employee survey satisfaction results.
After
considering the executive team's achievement of key business plan goals, which included achievement of 2017 revenue well in excess of target, our Compensation and Management Development
Committee determined to award cash bonuses for 2017 performance at 182% of target. Accordingly, Mr. Conroy, Mr. Arora, Dr. Lidgard, Mr. Coward and Mr. Elliott
of $920,920, $519,683, $391,755, $364,273 and $254,800, respectively.
We
believe successful long-term Company performance is critical to enhancing stockholder value. For this reason and to conserve cash and better align the interests of management and
stockholders, we emphasize long-term equity compensation, with the performance of each NEO primarily governing the Compensation and Management Development Committee's considerations in determining
long-term equity awards to each of them.
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COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS
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In
January 2017, our Compensation and Management Development Committee approved annual equity awards to our NEOs consisting of time-vesting RSUs and stock options, including the approval of the
number of shares of our common stock subject to each award. Customarily, these equity awards would have been issued on February 23, 2017 in accordance with our Statement of Policy with respect
to Equity Award Approvals. However, the issuance of these awards was contingent upon receipt of stockholder approval of the First Amendment to the 2010 Omnibus Long-Term Incentive Plan (As Amended and
Restated Effective April 28, 2015) at the 2017 Annual Meeting of Stockholders, which increased the number of shares reserved under our Omnibus Plan (the "2017 Plan Amendment").
Pursuant
to and in accordance with FASB ASC Topic 718, the grant date fair value of each equity award was calculated as of July 27, 2017, the date on which the contingency of each such
equity award (stockholder approval of the 2017 Plan Amendment) was satisfied. The closing price of our common stock on July 27, 2017 was $37.93. This $37.93 closing price was significantly
higher than the $21.68 closing price of our common stock on February 23, 2017, the date on which such equity awards would otherwise have been granted to our NEOs, and the date on which the FASB
ASC Topic 718 grant date fair value would have been determined, had such equity awards not been subject to the contingency of stockholder approval of the 2017 Plan Amendment, which resulted in
meaningfully higher grant date fair values than if such grant date fair values would have been calculated as of February 23, 2017. Please refer to Footnote 3 of the Summary Compensation Table
below for additional information on the calculation of the grant date fair value of the equity awards discussed in this section.
Upon
receipt of the required stockholder approval in July 2017, Mr. Conroy, Mr. Arora, Dr. Lidgard, Mr. Coward and Mr. Elliott received stock options approved
in January 2017 covering 240,000, 132,000, 81,000, 75,000 and 65,000 shares, respectively. The shares underlying these options vest and become exercisable in four equal annual installments
beginning on the first anniversary of the February 2017 grant date. Additionally, Mr. Conroy, Mr. Arora, Mr. Coward, Dr. Lidgard, and Mr. Elliott received
RSUs covering 137,300, 75,500, 51,400, 46,300 and 37,200 shares, respectively. These RSUs vest in four equal annual installments beginning on the first anniversary of the February 2017
grant date.
These
awards were intended to motivate the retention of our NEOs and provide our NEOs with a market competitive long-term equity incentive opportunity. Our Compensation and Management Development
Committee believes that annual equity awards provide executive officers with the opportunity to acquire long-term stock ownership positions, which motivates them to focus on long-term stockholder
value, and that time-based vesting of these awards helps us to retain our leadership team in a competitive environment.
The
Company maintains the Exact Sciences Corporation 2010 Omnibus Long-Term Incentive Plan (As Amended and Restated Effective July 27, 2017) (as amended, the "Omnibus Plan"),
under which we may grant cash and equity incentive awards to eligible service providers in order to attract, motivate and retain the talent for which we compete. The plan is scheduled to terminate on
July 16, 2020 unless earlier terminated by our Board of Directors. The Omnibus Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights,
restricted stock awards, restricted stock units and other stock-based awards. Incentive stock options may be granted only to employees, and all other awards may be granted to our and our affiliates'
employees, non-employee directors, consultants and other service providers. The Omnibus Plan is administered by our Board of Directors or a committee of our Board of Directors designated by our Board
of Directors to administer the Omnibus Plan. Our Board of Directors has designated the Compensation and Management Development Committee to administer the Omnibus Plan.
If
any of the Company's financial statements are required to be restated, the Company may recover all or a portion of any award made under the Omnibus Plan with respect to any fiscal
year of the Company the financial results of which are negatively affected by the restatement. The amount to be recovered will be the amount by which the affected award exceeds the amount that would
have been payable had the financial statements been initially filed as restated. Moreover, any award, amount or benefit received under the Omnibus Plan will be subject to potential cancellation,
recoupment, rescission, payback or other action in accordance with the terms of any applicable Company clawback policy or any applicable law, as may be in effect from time to time, whether adopted
prior to or following the date of the award.
We
permit executive officers to purchase common stock at a discount through our 2010 Employee Stock Purchase Plan on the same terms and conditions as our other employees. Executive
officers may also participate in our 401(k) Plan, which allows for the investment of a portion of plan assets in shares of our common stock. Our Compensation and Management Development Committee
approved a discretionary matching Company contribution to our 401(k) Plan for 2017. The matching contribution was made using Company stock in an amount equal to 100% of an employee's total
deferrals into the plan up to a limit of 6% of the employee's total compensation (subject to IRS limits).
Role of Stockholder Say-on-Pay Votes
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We
provide our stockholders with the opportunity to cast an annual advisory vote on executive compensation (a "say-on-pay proposal"). At the Company's annual meeting of stockholders
held in July 2017, approximately 87% of the votes cast on the say-on-pay proposal at the meeting were voted in favor of the proposal. Our Compensation and Management Development Committee
believes this vote affirms our stockholders' support of the Company's approach to executive compensation and did not make specific changes to our executive compensation program in response to the
vote. However, our Compensation and Management Development Committee continues to review and refine the design and administration of our executive pay practices. Our Compensation and Management
Development Committee also will continue to consider the outcome of the Company's say-on-pay votes when making future compensation decisions for our NEOs.
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COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS
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Stock Ownership Guidelines
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We
maintain Stock Ownership Guidelines to encourage ownership of shares of the Company's common stock by our directors and senior executives, to further align their interests with
the long-term interests of our stockholders and to further promote the Company's commitment to sound corporate governance. Under these guidelines, directors and senior executives have until the later
of (1) April 21, 2019 and (2) three years from the date the director or senior executive becomes subject to the guidelines, to achieve an ownership target determined as follows:
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POSITION
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OWNERSHIP TARGETS:
LOWER OF:
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Base Salary Multiple
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Fixed Share Target
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Board of Directors
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Number of shares with a stock value equal to or greater than 3 times annual retainer
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Number of shares equal to or greater than annual retainer, divided by stock value, multiplied by 3
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CEO
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Number of shares with a stock value equal to or greater than 6 times base salary
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Number of shares equal to or greater than base salary, divided by stock value, multiplied by 6
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Senior Executive Officers
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Number of shares with a stock value equal to or greater than 2 times base salary
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Number of shares equal to or greater than base salary, divided by stock value, multiplied by 2
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Under
the Base Salary Multiple, "stock value" is calculated annually at the end of each fiscal year based on the average of the closing prices of our common stock for the last 30 trading days of the
fiscal year.
Under
the Fixed Share Target, "stock value" is calculated as of the later of (1) January 1, 2012, and (2) the date the director or senior executive originally becomes subject to
the Stock Ownership Guidelines, as the case may be, based on the average of the closing prices of our common stock for the 30 days leading up to, and inclusive of, the applicable date.
Under
both the Base Salary Multiple and Fixed Share Target, "annual retainer" or "base salary" is the director's annual retainer or the executive's base salary, as applicable, at the end of each
fiscal year (at which time each director's and senior executive's compliance will be assessed).
Each
director and senior executive is expected to continuously own sufficient shares to satisfy either the Base Salary Multiple or the Fixed Share Target ownership target once attained for as long as
he or she remains subject to the Stock Ownership Guidelines. If an individual's ownership target increases because of a change in position or compensation, the individual will have a three-year period
to achieve the incremental amount of shares beginning on the effective date of the change in position or compensation.
Following
the initial three-year period that the director or senior executive is afforded to achieve his or her individual ownership target under the Stock Ownership Guidelines, until a director or
senior executive has satisfied the applicable ownership target, the director or senior executive is required to retain an amount equal to 50% of the net shares received as the result of the exercise,
vesting or payment of any Company equity awards granted to the director or executive. This amount is calculated using the closing price of our common stock on the trading day immediately preceding the
date of exercise, vesting or payment of the equity award. Once a director or senior executive achieves his or her individual ownership target, the retention requirements as described above no longer
will apply to such director or senior executive unless a disposition by such director or senior executive would cause such individual's stock ownership to fall below his or her ownership target.
Restrictions on Hedging and Pledging of Company Securities
|
Our
Insider Trading Policy prohibits short sales of our securities, including a "sale against the box," by our directors and executives. Our Insider Trading Policy also prohibits
directors and employees from engaging in hedging or monetization transactions, such as zero-cost collars and forward sale contracts, as they involve the establishment of a short position in our
securities. Our Insider Trading Policy also prohibits directors and executives from holding our securities in a margin account or pledging such securities as collateral for a loan.
Employment Agreements with NEOs
|
In
April 2009, Kevin T. Conroy and Maneesh K. Arora joined us as our President & Chief Executive Officer and Senior Vice President & Chief Financial Officer,
respectively. In November 2016, Jeffrey T. Elliott became our Chief Financial Officer. In August 2009, Graham P. Lidgard joined us as our Senior Vice President & Chief Science Officer. In
January 2015, D. Scott Coward joined us as Senior Vice President, General Counsel & Secretary. In February 2012, Mr. Arora was promoted to Chief Operating Officer in addition to his
title of Chief Financial Officer. In August 2013, Mr. Arora dropped the title of Chief Financial Officer upon the Company's appointment of a new Senior Vice President, Finance. In April 2018,
Mr. Arora resigned as our Senior Vice
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President
and Chief Operating Officer. In connection with each of these appointments we have entered into an employment agreement under which we have agreed to certain compensation arrangements and
severance and change of control benefits. At this time, our Board of Directors does not intend to provide any additional tax gross-up payments to employees it may hire in the future.
Each
of these packages was determined based on negotiations with the applicable NEO and taking into account his background and qualifications and the nature of his position. We believe that these
compensation packages are appropriate in light of the competition for top executives in the biotechnology field and among similarly-situated companies, and that the terms of these arrangements are
consistent with our executive compensation goals, including the balancing of short-term and long-term compensation to properly motivate our NEOs.
Conroy Employment Agreement
Mr. Conroy's employment agreement, dated March 18, 2009, provides for a minimum base salary and for a minimum target bonus
opportunity equal to at least 50% of his base salary, with the exact amount of any such bonus to be based upon the achievement of corporate and
individual performance goals to be determined by our Compensation and Management Development Committee. For 2017, Mr. Conroy's base salary was $632,500 and his target bonus opportunity was 80%
of his base salary. Pursuant to his employment agreement, Mr. Conroy was also granted an option to purchase 2.5 million shares of our common stock at an exercise price of $0.83 (the
closing price of our common stock on the date Mr. Conroy was hired).
Under
his agreement, Mr. Conroy would be entitled to certain payments and benefits in connection with certain termination events or a change of control as described under
"
Potential Benefits upon Termination or Change of Control
" beginning on page 32 below. The agreement also prohibits Mr. Conroy from engaging
in certain activities involving competition with us and from soliciting our employees for an 18-month period following termination of his employment with the Company.
Lidgard Employment Agreement
Dr. Lidgard's employment agreement, dated August 1, 2009, provides for a minimum base salary and for a minimum target bonus
opportunity equal to at least 40% of his base salary, with the exact amount of any such bonus to be based upon the achievement of corporate and individual performance goals to be determined by our
Compensation and Management Development Committee. For 2017, Dr. Lidgard's base salary was $430,500 and his target bonus opportunity was 50% of his base salary. Pursuant to his employment
agreement, Dr. Lidgard was also granted an option to purchase 600,000 shares of our common stock, at an exercise price of $2.88 (the closing price of our common stock on the date
Dr. Lidgard was hired).
Under
his agreement, Dr. Lidgard would be entitled to certain payments and benefits in connection with certain termination events or a change of control as described under
"
Potential Benefits upon Termination or Change of Control
" beginning on page 32 below. The agreement also prohibits Dr. Lidgard from
engaging in certain activities involving competition with us and from soliciting our employees for an 18-month period following termination of his employment with the Company.
Elliott Employment Agreement
Mr. Elliott's employment agreement, dated November 8, 2016, provides for a minimum base salary and for a minimum target bonus
opportunity equal to 40% of his base salary, with the exact amount of any such bonus to be based upon the achievement of certain goals, including corporate and individual goals, to be determined by
the Chief Executive Officer and our Compensation and Management Development Committee. For 2017, Mr. Elliott's base salary was $350,000 and his target bonus opportunity was 40% of his base
salary. Mr. Elliott also received a signing bonus and a relocation stipend in connection with the employment agreement.
Under
his agreement, Mr. Elliott would be entitled to certain payments and benefits in connection with certain termination events or a change of control as described under
"
Potential Benefits upon Termination or Change of Control
" beginning on page 32 below. The agreement also prohibits Mr. Elliott from
engaging in certain activities involving competition with us and from soliciting our employees or certain of our customers for a 12-month period following termination of his employment with the
Company.
Coward Employment Agreement
Mr. Coward's employment agreement, dated October 30, 2014, provides for a minimum base salary and for a minimum target bonus
opportunity equal to 40% of his base salary, with the exact amount of any such bonus to be based upon the achievement of certain goals, including corporate and individual goals, to be determined by
the Chief Executive Officer and our Compensation and Management Development Committee. For 2017, Mr. Coward's base salary was $400,300, and his target bonus opportunity was 50% of this base
salary. Mr. Coward also received a relocation stipend in connection with the employment agreement. Pursuant to his employment agreement, Mr. Coward was granted RSUs covering 75,000
shares of our common stock, which vest as follows: 25% on the first anniversary of the grant date and the balance on a ratable quarterly basis over a three-year period beginning on the first
anniversary of the grant date.
Under
his agreement, Mr. Coward would be entitled to certain payments and benefits in connection with certain termination events or a change of control as described under
"
Potential Benefits upon Termination or Change of Control
" beginning on page 32 below. The agreement also prohibits Mr. Coward from
soliciting our customers for a 12-month period following termination of his employment with the Company.
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Arora Employment Agreement
Mr. Arora's employment agreement, dated March 18, 2009, was terminated on April 25, 2018, when Mr. Arora resigned
as our Senior Vice President and Chief Operating Officer and transitioned to a non-executive employee position. Mr. Arora's employment agreement provided for a minimum base salary and for a
minimum target bonus opportunity equal to at least 40% of his base salary, with the exact amount of any such bonus to be based upon the achievement of corporate and individual performance goals to be
determined by our Compensation and Management Development Committee. For 2017, Mr. Arora's base salary was $475,900 and his target bonus opportunity was 60% of his base salary. Pursuant to his
employment agreement, Mr. Arora was also granted an option to purchase 1.25 million shares of our common stock, at an exercise price of $0.83 (the closing price of our common stock on
the date Mr. Arora was hired).
Under
his agreement, Mr. Arora was entitled to certain payments and benefits in connection with certain termination events or a change of control as described under
"
Potential Benefits upon Termination or Change of Control
" below. The agreement also prohibited, and the Arora Transition Agreement (defined below)
prohibits, Mr. Arora from engaging in certain activities involving competition with us and from soliciting our employees for an 18-month period following termination of his employment with the
Company.
In
connection with Mr. Arora's resignation as Senior Vice President and Chief Operating Officer and his transition into a non-executive employee role, on April 25, 2018, we entered into
an Employee Transition Agreement with Mr. Arora (the "Arora Transition Agreement") pursuant to which Mr. Arora will remain a non-executive employee of the Company for a transition period
through December 31, 2018 (the "Transition Period"). The Arora Transition Agreement terminated our employment agreement with Mr. Arora. Pursuant to the Arora Transition Agreement,
Mr. Arora will continue to receive during the Transition Period the same compensation he was receiving prior to his change in roles, in exchange for a release of claims and his continued
compliance with all restrictive covenants.
Change of Control and Severance
|
We
believe that providing executives with severance and change of control protection is important for the following reasons:
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»
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to allow executives to value the forward looking elements of their compensation packages, and therefore limit retention risk; and
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»
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to provide compensation assurances which are competitive with those of other similarly-situated companies.
Accordingly,
the Company's employment agreements and equity awards generally provide for salary continuation in the event of certain employment terminations beyond the control of the executive, as
well as varying degrees of accelerated vesting of equity awards in the event of a change of control of the Company.
For
further information see
"Potential Benefits upon Termination or Change of Control"
below.
Potential Benefits upon Termination or Change of Control
|
This
"Potential Benefits upon Termination or Change of Control" section should be read in conjunction with the "Potential Payments upon Termination or Change of Control" section
below, which provides a table that quantifies the benefits described in this section.
Severance and Change of Control Arrangements in General
|
We
have entered into employment agreements and maintain certain plans that will require us to provide compensation and other benefits to our executive officers in connection with
certain events related to a termination of employment or change of control. In connection with Mr. Arora's resignation as Senior Vice President and Chief Operating Officer and his transition
into a non-executive employee role, on April 25, 2018, we entered into the Arora Transition Agreement, pursuant to which Mr. Arora will remain a non-executive employee of the Company for
the Transition Period. The Arora Transition Agreement terminated our employment agreement with Mr. Arora, certain terms of which are summarized below. Pursuant to the Arora Transition
Agreement, Mr. Arora will continue to receive during the Transition Period the same compensation he was receiving prior to his change in roles, in exchange for a release of claims and his
continued compliance with all restrictive covenants.
Conroy Employment Agreement
|
Under
his employment agreement, Mr. Conroy would, upon termination without "cause," resignation for "good reason" or certain "change of control" events (in each case as
defined in Mr. Conroy's agreement), be entitled to receive certain benefits, as described below.
Under
Mr. Conroy's employment agreement, upon termination without cause or resignation for good reason, Mr. Conroy would become entitled to receive the
following:
-
»
-
Salary continuation for a period of 18 months at his then current base salary;
-
»
-
Any accrued but unpaid bonus, including any performance-based bonus, as of the termination date, on the same terms and at the same times as
would have applied had Mr. Conroy's employment not terminated;
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»
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The pro rata portion of a target bonus or any other performance-based bonus, provided that an annual incentive bonus is paid to other senior
executives of the Company at the end of the applicable period within which Mr. Conroy's employment was terminated;
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»
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If Mr. Conroy elects COBRA coverage for health and/or dental insurance, Company-paid monthly premium payments for such coverage until the
earliest of: (1) 12 months from the termination date; (2) the date Mr. Conroy obtains employment offering health and/or dental coverage comparable to that offered by the
Company; or (3) the date COBRA coverage would otherwise terminate;
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»
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A payment of $10,000 towards the cost of an outplacement consulting package within 30 days of termination;
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»
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The vesting of the then unvested equity awards granted to Mr. Conroy (whether stock options, restricted stock or stock purchase rights
under the Company's equity compensation plan, or other equity awards) will immediately accelerate by a period of 12 months; and
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»
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A change in the exercise period for vested equity awards such that vested equity awards become exercisable until the earlier of (1) two
years from the date of termination of employment and (2) the latest date on which those equity awards expire or are eligible to be exercised under the grant agreements, determined without
regard to such termination or resignation.
Under
Mr. Conroy's employment agreement, in connection with a change of control, Mr. Conroy would become entitled to receive the following:
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»
-
In the event of termination by the Company without cause or by Mr. Conroy for good reason, within 12 months before, or if
Mr. Conroy remains employed with the Company on the effective date of, a change of control, a lump-sum payment equal to 24 months of base salary and his pro rata target bonus through the
effective date of the change of control; provided, that any payments previously made to Mr. Conroy in connection with the termination of his employment by the Company without cause or by
Mr. Conroy with good reason within the 12 months preceding a change of control would be credited against any such lump-sum payment;
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»
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Accelerated vesting of all outstanding unvested equity awards (whether stock options, restricted stock or stock purchase rights under the
Company's equity compensation plans, or other equity awards), subject to Mr. Conroy's agreement to remain employed by the Company or any successor, if requested, for a period of at least six
months following the change of control at his then current base salary;
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»
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In the event Mr. Conroy's employment is terminated by the Company without cause or by Mr. Conroy for good reason in anticipation
or contemplation of a pending or potential change of control or while a potential change of control is under consideration or being negotiated by the Company's Board of Directors, Mr. Conroy
will be deemed to remain an employee for purposes of the incentive plan to which he is entitled to participate under his employment agreement (the "Long Term Incentive Plan") as of the effective date
of the change of control and will receive a full payout under the Long Term Incentive Plan as described in his employment agreement as though he remained an employee of the Company as of the effective
date of such change of control; and
-
»
-
A tax gross-up payment in an amount sufficient to cause the net amount retained by him, after deduction of any parachute payment excise taxes,
to equal the amounts payable as described above. At this time, our Board of Directors does not intend to provide any additional tax gross-up payments to employees it may hire in the future.
Arora, Lidgard, Elliott and Coward Employment Agreements
|
Under
their employment agreements, Mr. Arora, Dr. Lidgard, Mr. Elliott and Mr. Coward would, upon termination without "cause," resignation for "good
reason" or certain "change of control" events (in each case as defined in their respective agreements), receive certain benefits, as described below.
Under
their employment agreements, upon termination without cause or resignation for good reason, Mr. Arora, Dr. Lidgard, Mr. Elliott and Mr. Coward would become entitled
to receive the following:
-
»
-
Salary continuation for a period of 15 months (12 months for Mr. Elliott and Mr. Coward) at his then current base
salary;
-
»
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Any accrued but unpaid bonus, including any performance-based bonus, as of the termination date, on the same terms and at the same times as
would have applied had the executive's employment not terminated;
-
»
-
The pro rata portion of a target bonus or any other performance-based bonus, provided that an annual incentive bonus is paid to other senior
executives of the Company at the end of the applicable period within which the executive's employment was terminated;
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»
-
If the executive elects COBRA coverage for health and/or dental insurance, Company-paid monthly premium payments for such coverage until the
earliest of: (1) 12 months from the termination date; (2) the date the executive obtains employment offering health and/or dental coverage comparable to that offered by the
Company; or (3) the date COBRA coverage would otherwise terminate;
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»
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A payment of $10,000 towards the cost of an outplacement consulting package within 30 days of termination;
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»
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The vesting of the then unvested equity awards granted to the executive (whether stock options, restricted stock or stock purchase rights under
the Company's equity compensation plan, or other equity awards) will immediately accelerate by a period of 12 months; and
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»
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A change in the exercise period for vested equity awards such that vested equity awards become exercisable until the earlier of (1) two
years from the date of termination of employment and (2) the latest date on which those equity awards expire or are eligible to be exercised under the grant agreements, determined without
regard to such termination or resignation.
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COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS
|
Under
their employment agreements, in connection with a change of control, Mr. Arora and Dr. Lidgard would become entitled to receive the following:
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»
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In the event of termination by us without cause or by the executive for good reason within 12 months before, or if the executive remains
employed with the Company on the effective date of, a change of control, a lump-sum payment equal to 18 months base salary and the executive's pro rata target bonus through the effective date
of the change of control; provided, that any payments previously made to the executive in connection with the termination of his employment by the Company without cause or by the executive with good
reason within the 12 months preceding a change of control will be credited against any such lump-sum payment;
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»
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Accelerated vesting of all outstanding unvested equity awards (whether stock options, restricted stock or stock purchase rights under the
Company's equity compensation plan, or other equity awards), subject to the executive's agreement to remain employed by the Company or any successor, if requested, for a period of at least six months
following the change of control at his then current base salary; and
-
»
-
In the event the executive's employment is terminated by the Company without cause or by the executive for good reason in anticipation or
contemplation of a pending or potential change of control or while a potential change of control is under consideration or being negotiated by the Company's Board of Directors, the executive will be
deemed to remain an employee for purposes of the Long Term Incentive Plan as of the effective date of the change of control and will receive a full payout under the Long Term Incentive Plan as
described in his respective employment agreement as though he remained an employee of the Company as of the effective date of such change of control.
Under
Mr. Elliott's and Mr. Coward's employment agreements, Mr. Elliott and Mr. Coward would become entitled to accelerated vesting of all outstanding unvested equity
awards (whether stock options, restricted stock, RSUs or stock purchase rights under the Company's equity compensation plans, or other equity awards) if (1) within 12 months after a
change of control, he is terminated by the Company (or any successor) without cause or he terminates for good reason, (2) a change of control happens within four months after the Company
terminates him without cause or he terminates for good reason or (3) he remains employed by the Company (or any successor) for at least six months following a change of control.
Conditions to Receipt of Severance and Change of Control Benefits
|
Under
Mr. Conroy's employment agreement, the Company's obligations to provide Mr. Conroy with the severance benefits described above are contingent
on:
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»
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Mr. Conroy's resignation from our Board of Directors in the event of any termination of Mr. Conroy's employment with the Company
or upon the request of our Board of Directors in connection with any change of control;
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»
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Mr. Conroy's delivery and non-revocation of a signed waiver and release in a form reasonably satisfactory to the Company of all claims he
may have against the Company;
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»
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Mr. Conroy's compliance with his Employee Confidentiality and Assignment Agreement with the Company;
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»
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Mr. Conroy's compliance with the 18-month non-competition covenant in his employment agreement; and
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Mr. Conroy's compliance with the 18-month non-solicitation covenant in his employment agreement.
Under
Mr. Arora's, Dr. Lidgard's, Mr. Elliott's and Mr. Coward's employment agreements, the Company's obligations to provide the severance benefits described above are
contingent on:
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»
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The executive's delivery and non-revocation of a signed waiver and release in a form reasonably satisfactory to the Company of all claims he may
have against the Company;
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»
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The executive's compliance with the terms of his Employee Confidentiality and Assignment Agreement with the Company;
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»
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The executive's compliance with the 18-month (12-month for Mr. Elliott) non-competition covenant set forth in the executive's employment
agreement; and
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»
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The executive's compliance with the 18-month (12-month for Mr. Elliott and Mr. Coward) non-solicitation covenant set forth in the
executive's employment agreement.
In
accordance with each NEO's employment agreement, in the event of the death or disability of the executive during the executive's employment term, the following will
occur:
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»
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The executive's employment and the executive's employment agreement will immediately and automatically terminate; and
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»
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All equity awards granted to the executive, whether stock options or stock purchase rights under the Company's equity compensation plans, or
other equity awards, that are unvested at the time of termination will immediately become fully vested and exercisable upon such termination.
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Change in Control Benefits under Omnibus Plan
|
Except
as otherwise specifically provided in the applicable award agreement or in an executive's employment agreement, upon the consummation of a change in control (as defined in the
Omnibus Plan): all outstanding awards will remain the obligation of the Company or be assumed by the surviving or acquiring entity, and there will be automatically substituted for the shares of our
common stock then subject to the awards the consideration payable with respect of the outstanding shares of our common stock in connection with the change in control and all outstanding awards will
vest as if the vesting start date with respect to the award was one year prior to the vesting start date set forth in the award agreement relating to the award. In addition to the foregoing, with
respect to awards granted prior to the consummation of the change in control, in the event that any grantee who remains an employee of the Company or the acquiring or surviving entity immediately
following the consummation of the change in control is terminated without cause (as defined in the Omnibus Plan) or terminates his or her own employment for good reason (as defined in the Omnibus
Plan) prior to the first anniversary of the consummation of the change in control: (1) all options outstanding on the date the grantee's employment is terminated, will become immediately
exercisable in full and will terminate, to the extent unexercised, on their scheduled expiration date, and if the shares of our common stock subject to the options are subject to repurchase provisions
then the repurchase restrictions will immediately lapse; (2) all restricted stock awards outstanding on the date the grantee's employment is terminated, will become free of all repurchase
provisions; and (3) all other stock-based awards will become exercisable, realizable or vested in full, or will be free of all repurchase provisions, as the case may be.
The
summary of the foregoing benefits arising out of a change in control under the Omnibus Plan are subject to and qualified by the terms and conditions of all applicable award agreements and
employment agreements to which our named executive officers are a party, in each case, as described in this Proxy Statement.
As
part of their employment agreements, we have established a Long Term Incentive Plan pursuant to which Mr. Conroy, Mr. Arora and Dr. Lidgard would be entitled
to receive a cash payment upon a change of control based on the equity value of the Company as reflected in the following table.
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LONG TERM INCENTIVE PLAN
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PORTION OF EQUITY VALUE
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NAME
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FROM $100 MILLION
TO $500 MILLION
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EACH INCREMENTAL
$50 MILLION FROM
$500 MILLION TO
$1 BILLION
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EACH INCREMENTAL
$50 MILLION FROM
$1 BILLION TO
$2 BILLION
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ANY AMOUNT OVER
$2 BILLION
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Kevin T. Conroy
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1.00
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%
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0.50
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%
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0.25
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%
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0.00
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%
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Maneesh K. Arora
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0.50
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%
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0.25
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%
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0.125
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%
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0.00
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%
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Graham P. Lidgard
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0.50
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%
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0.25
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%
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0.125
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%
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0.00
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%
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SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
The
following table sets forth certain information regarding beneficial ownership of our common stock as of April 27, 2018 by:
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»
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each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of our common stock;
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»
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each executive officer included in the Summary Compensation Table above;
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»
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each of our directors;
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»
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each person nominated to become a director; and
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»
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all executive officers, directors and nominees as a group.
Unless
otherwise noted below, the address of each person listed on the table is c/o Exact Sciences Corporation at 441 Charmany Drive, Madison, Wisconsin 53719. To our knowledge, each person listed
below has sole voting and investment power over the shares shown as beneficially owned except to the extent jointly owned with spouses or otherwise noted below.
Beneficial
ownership is determined in accordance with the rules of the SEC. The information does not necessarily indicate ownership for any other purpose. Under these rules, shares of common stock
issuable by us to a person pursuant to restricted stock unit awards expected to vest within 60 days of April 27, 2018 and options which may be exercised within 60 days after
April 27, 2018 are deemed to be beneficially owned and outstanding for purposes of calculating the number of shares and the percentage beneficially owned by that person. However, these shares
are not deemed to be beneficially owned and outstanding for purposes of computing the percentage beneficially owned by any other person. The applicable percentage of common stock outstanding as of
April 27, 2018 is based upon 121,898,280 shares outstanding on that date.
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AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
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NAME AND ADDRESS OF BENEFICIAL OWNER
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NUMBER OF
ISSUED
SHARES
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NUMBER OF
SHARES
ISSUABLE
(1)
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TOTAL SHARES
BENEFICIALLY
OWNED
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PERCENTAGE OF
COMMON STOCK
OUTSTANDING
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Directors and Executive Officers
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|
|
|
|
|
|
|
|
|
Maneesh K. Arora
|
|
|
|
658,613
|
(2)
|
|
|
250,100
|
|
|
|
908,713
|
|
|
|
*
|
|
|
|
|
Thomas D. Carey
|
|
|
|
52,410
|
|
|
|
15,620
|
|
|
|
68,030
|
|
|
|
*
|
|
|
|
|
Eli Casdin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
|
|
Kevin T. Conroy
|
|
|
|
973,208
|
(3)
|
|
|
701,597
|
(4)
|
|
|
1,674,805
|
|
|
|
1.4
|
%
|
|
|
|
D. Scott Coward
|
|
|
|
70,690
|
(5)
|
|
|
59,375
|
(4)
|
|
|
130,065
|
|
|
|
*
|
|
|
|
|
James E. Doyle
|
|
|
|
35,181
|
|
|
|
18,477
|
|
|
|
53,658
|
|
|
|
*
|
|
|
|
|
Jeffrey T. Elliott
|
|
|
|
21,793
|
(6)
|
|
|
16,250
|
4)
|
|
|
38,043
|
|
|
|
*
|
|
|
|
|
John A. Fallon, M.D.
|
|
|
|
32,910
|
|
|
|
56,393
|
|
|
|
89,303
|
|
|
|
*
|
|
|
|
|
Daniel J. Levangie
|
|
|
|
73,597
|
|
|
|
55,812
|
|
|
|
129,409
|
|
|
|
*
|
|
|
|
|
Graham P. Lidgard
|
|
|
|
213,452
|
(7)
|
|
|
|
(4)
|
|
|
213,452
|
|
|
|
*
|
|
|
|
|
Lionel N. Sterling
|
|
|
|
127,575
|
|
|
|
56,709
|
|
|
|
184,284
|
|
|
|
*
|
|
|
|
|
David A. Thompson
|
|
|
|
196,444
|
|
|
|
|
|
|
|
196,444
|
|
|
|
*
|
|
|
|
|
Michael S. Wyzga
|
|
|
|
18,376
|
|
|
|
20,592
|
|
|
|
38,968
|
|
|
|
*
|
|
|
|
|
Katherine S. Zanotti
|
|
|
|
105,814
|
|
|
|
33,304
|
|
|
|
139,118
|
|
|
|
*
|
|
|
|
|
All directors and executive officers as a group (15 persons)
|
|
|
|
2,580,063
|
|
|
|
1,284,229
|
|
|
|
3,864,292
|
|
|
|
3.2
|
%
|
|
|
|
Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BlackRock, Inc.
(8)
|
|
|
|
7,658,145
|
|
|
|
|
|
|
|
7,658,145
|
|
|
|
6.3
|
%
|
|
|
|
The Vanguard Group
(9)
|
|
|
|
10,055,319
|
|
|
|
|
|
|
|
10,055,319
|
|
|
|
8.3
|
%
|
|
|
|
Wellington Management Group
(10)
|
|
|
|
6,816,167
|
|
|
|
|
|
|
|
6,816,167
|
|
|
|
5.6
|
%
|
|
|
|
Lone Pine Capital
(11)
|
|
|
|
6,395,857
|
|
|
|
|
|
|
|
6,395,857
|
|
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
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Exact
Sciences
2018
Proxy
Statement
|
Table of Contents
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
-
(1)
-
Represents
shares of our common stock issuable pursuant to option, restricted stock unit and deferred stock unit awards exercisable or issuable within
60 days of April 27, 2018. Does not include shares of stock issuable pursuant to option, restricted stock unit and deferred stock unit awards not exercisable or issuable within
60 days of April 27, 2018.
-
(2)
-
Includes
13,524 shares held through our 401(k) plan.
-
(3)
-
Includes
25,580 shares held through our 401(k) plan.
-
(4)
-
Does
not include shares of common stock issuable on May 1, 2018 upon purchase pursuant to the Company's 2010 Employee Stock Purchase Plan. The
number of shares to be purchased on May 1, 2018 was indeterminable as of April 27, 2018.
-
(5)
-
Includes
3,689 shares held through our 401(k) plan.
-
(6)
-
Consists
of 781 shares held through our 401(k) plan.
-
(7)
-
Includes
12,340 shares held through our 401(k) plan.
-
(8)
-
BlackRock, Inc.,
a Delaware corporation ("BlackRock"), beneficially owns these shares through its subsidiaries, BlackRock Investment
Management, LLC, BlackRock Investment Management (UK) Ltd, BlackRock Institutional Trust Company, N.A., BlackRock Fund Advisors, BlackRock Asset Management Canada Limited, BlackRock
Asset Management Schweiz AG, BlackRock Financial Management, Inc., BlackRock Advisors, LLC, BlackRock Asset Management Ireland Limited, BlackRock Investment Management (Australia)
Limited, BlackRock Japan Co, Ltd, BlackRock (Netherlands) B.V., BlackRock (Luxembourg) S.A. and BlackRock International Limited, and has the sole power to vote or to direct the
vote of 7,393,535 shares and has the sole power to dispose or to direct the disposition of 7,658,145 shares. The principal address of BlackRock is 55 East 52
nd
Street, New York,
New York 10055. This information has been obtained from Amendment No. 6 to Schedule 13G filed by BlackRock with the SEC on January 29, 2018.
-
(9)
-
The
Vanguard Group, Inc., a Pennsylvania corporation ("Vanguard"), beneficially owns these shares directly and through its subsidiaries,
Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd. Vanguard has the sole power to vote or to direct the vote of 228,979 shares, the shared power to vote or to direct the
vote of 16,423 shares, the sole power to dispose or to direct the disposition of 9,819,121 shares and shared power to dispose or to direct the disposition of 236,198 shares. Vanguard Fiduciary Trust
Company, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 219,775 shares, and Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of Vanguard, is the beneficial
owner of 25,627 shares. The principal address of Vanguard is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. This information has been obtained from Amendment No. 5 to Schedule 13G
filed by Vanguard with the SEC on February 9, 2018.
-
(10)
-
Wellington
Management Group, LLP, a Massachusetts limited liability partnership ("Wellington"), beneficially owns these shares directly and
through its subsidiaries, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP and Wellington Management Company LLP. Wellington has the shared power to vote
or to direct the vote of 5,591,765 shares and the shared power to dispose or to direct the disposition of 6,816,167 shares. The principal address of Wellington is c/o Wellington Management
Company LLP, 280 Congress Street, Boston, MA 02210. This information has been obtained from Schedule 13G filed by State Street with the SEC on February 8, 2018.
-
(11)
-
Lone
Pine Capital LLC, a Delaware limited liability company ("Lone Pine") owns these shares directly. Stephen F. Mandel, Jr., managing member
of Lone Pine's managing member, owns these shares indirectly as the indirect managing member of Lone Pine. Lone Pine has the shared power to vote or to direct the vote of 6,395,857 shares and the
shared power to dispose or to direct the disposition of 6,395,857 shares. The principal address of Lone Pine and Mr. Mandel is Two Greenwich Plaza, Greenwich, CT 06830. This information has
been obtained from Schedule 13G filed by Lone Pine and Mr. Mandel with the SEC on March 5, 2018.
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Exact
Sciences
2018
Proxy
Statement
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45
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Table of Contents
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
|
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
|
Section 16(a)
of the Exchange Act requires our directors, executive officers and persons who own more than ten percent of a registered class of our equity securities to file
reports of ownership and changes in ownership with the SEC. Such persons are required by SEC regulations to furnish us with copies of all such filings. Based solely on our review of copies of such
filings, we believe that all reporting persons complied on a timely basis with all Section 16(a) filing requirements during the year ended December 31, 2017, except that Scott Coward
filed one late Form 4 with respect to the vesting of restricted stock units.
Our
Board of Directors knows of no business that will be presented for consideration at the 2018 Annual Meeting other than those items stated above. If any other business should come
before the 2018 Annual Meeting, votes may be cast pursuant to proxies in respect to any such business in the best judgment of the person or persons acting under the proxies.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JULY 26, 2018
|
The
proxy statement and annual report to stockholders are available at http://www.astproxyportal.com/ast/11534/.
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46
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Exact
Sciences
2018
Proxy
Statement
|
Table of Contents
Why am I receiving these materials?
You have received these proxy materials because our Board of Directors is soliciting your proxy to vote your shares at
the annual meeting.
The proxy statement includes information that we are required to provide you under Securities and Exchange Commission ("SEC") rules and is designed to assist
you in voting your shares.
What is a proxy?
Our Board of Directors is asking for your proxy. This means you authorize persons selected by us to vote your shares at the annual meeting in
the way that you instruct. All shares represented by valid proxies received before the annual meeting will be voted in accordance with the stockholder's specific voting instructions.
What is included in these materials?
These materials include:
-
-
the proxy statement for the annual meeting;
-
-
a proxy card for the annual meeting; and
-
-
the 2018 Annual Report to Stockholders, which includes our Annual Report on Form 10-K for the year ended December 31, 2017.
What items will be voted on at the Annual Meeting?
There are three proposals scheduled to be voted on at the annual meeting:
-
-
the election of the nominees to our Board of Directors nominated by our Board of Directors as Class III directors to serve until the 2021
annual meeting of stockholders;
-
-
the ratification of our Audit and Finance Committee's appointment of BDO USA, LLP ("BDO") as our independent registered public accounting
firm for the fiscal year ending December 31, 2018; and
-
-
the advisory vote on the compensation paid to our named executive officers.
Our
Board of Directors is not aware of any other matters to be brought before the meeting. If other matters are properly raised at the meeting, the proxy holders may vote any shares represented by
proxy in their discretion.
What are our Board of Directors' voting recommendations?
Our Board of Directors recommends that you vote your shares:
-
-
FOR
the nominees to our Board of Directors as Class III directors to serve until the 2021
annual meeting of stockholders;
-
-
FOR
the ratification of our Audit and Finance Committee's appointment of BDO as our independent
registered public accounting firm for 2018; and
-
-
FOR
the approval of the advisory vote regarding the compensation paid to our executive officers.
Who can attend the annual meeting?
Admission to the annual meeting is limited to:
-
-
stockholders as of the close of business on May 31, 2018;
-
-
holders of valid proxies for the annual meeting; and
-
-
our invited guests.
Each
stockholder may be asked to present valid picture identification such as a driver's license or passport and proof of stock ownership as of the record date.
When is the record date and who is entitled to vote?
Our Board of Directors set May 31, 2018 as the record date. All record holders of Exact common stock as of the close of business on that
date are entitled to vote. Each share of common stock is entitled to one vote. As of the record date, there were 122,290,448 shares of common stock outstanding.
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Exact
Sciences
2018
Proxy
Statement
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47
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Table of Contents
What is a stockholder of record?
A stockholder of record or registered stockholder is a stockholder whose ownership of Exact stock is reflected directly on the books and
records of our transfer agent, American Stock Transfer and Trust Company, LLC. If you hold stock through an account with a bank, broker or similar organization, you are considered the
beneficial owner of shares held in "street name" and are not a stockholder of record. For shares held in street name,
the stockholder of record is your bank, broker or similar organization. We only have access to ownership records for the registered shares. If you are not a stockholder of record, we will require
additional documentation to evidence your stock ownership as of the record date, such as a copy of your brokerage account statement, a letter from your broker, bank or other nominee or a copy of your
notice or voting instruction card. As described below, if you are not a stockholder of record, you will not be able to vote your shares unless you have a proxy from the stockholder of record
authorizing you to vote your shares.
How do I vote?
You may vote by any of the following methods:
-
-
In person.
Stockholders of record and beneficial stockholders with shares held in street name may
vote in person at the meeting. If you hold shares in street name, you must also obtain a proxy from the stockholder of record authorizing you to vote your shares.
-
-
By mail, Internet or telephone.
Stockholders of record may vote by (i) signing and
returning the proxy card provided; (ii) accessing the website 'www.voteproxy.com' and following the on-screen instructions or (iii) calling 1-800-776-9437 with the control number
included on your proxy card.
-
-
Beneficial owners of shares held in "street name."
You may vote by following the voting
instructions provided to you by your bank or broker.
How can I change or revoke my vote?
You may change or revoke your vote as follows:
-
-
Stockholders of record.
You may change or revoke your vote by submitting a written notice of
revocation to Exact Sciences Corporation c/o Secretary at 441 Charmany Drive, Madison, Wisconsin 53719 or by submitting another vote on or before July 25, 2018.
-
-
Beneficial owners of shares held in "street name."
You may change or revoke your voting
instructions by following the specific directions provided to you by your bank or broker.
What happens if I do not give specific voting instructions?
Stockholders of record.
If you are a stockholder of record and you sign and return a proxy card
without giving specific voting instructions then the proxy holders will vote your shares in the manner recommended by our Board of Directors on all matters presented in this proxy statement and as the
proxy holders may determine in their discretion for any other matters properly presented for a vote at the meeting.
Beneficial owners of shares held in "street name."
If you are a beneficial owner of shares held in street name and do not provide the organization that
holds your shares with specific voting instructions, the organization that holds your shares may generally vote on routine matters but cannot vote on non-routine matters. If the organization that
holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization that holds your shares will inform the inspector of election that it does
not have the authority to vote on this matter with respect to your shares. This is referred to as a "broker non-vote."
What ballot measures are considered "routine" or "non-routine?"
The election of directors ("Proposal 1") and the advisory vote on the compensation paid to our executive officers ("Proposal 3")
are considered to be non-routine matters under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore there may be broker non-votes on
Proposals 1 and 3.
The
ratification of the appointment of BDO as our independent registered public accounting firm for 2018 ("Proposal 2") is considered to be a routine matter under applicable rules. A broker or
other nominee may generally vote on routine matters, and we do not expect there to be any broker non-votes with respect to Proposal 2.
What is the quorum for the annual meeting?
The presence, in person or by proxy, of the holders of a majority of the shares entitled to vote is necessary for the transaction of business
at the annual meeting. This is called a quorum.
What is the voting requirement to approve each of the proposals?
The following are the voting requirements for each proposal:
-
-
Proposal 1, Election of Directors.
The nominees receiving the highest number of votes will
be elected as Class III directors to serve until the 2021 annual meeting of stockholders. Under the majority voting policy contained in our Corporate Governance Guidelines, any nominee for
director in an
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48
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|
Exact
Sciences
2018
Proxy
Statement
|
Table of Contents
uncontested
election who receives a greater number of votes "withheld" from his or her election than votes "for" such election must offer his or her resignation as a director to our Corporate
Governance & Nominating Committee of our Board of Directors. Upon receipt of this offer of resignation, our Corporate Governance & Nominating Committee will consider the offer of
resignation and recommend to our Board of Directors action to be taken with respect to the offer of resignation, including whether or not to accept such offer of resignation. Our Board of Directors
will then act upon such recommendation and promptly disclose its decision, together with an explanation of the reasons behind such decision.
-
-
Proposal 2, Ratification of Appointment of Independent Registered Public Accounting Firm.
The ratification of our Audit and Finance Committee's appointment of BDO as our independent registered public accounting firm for 2018 will be approved if a majority of stockholders present or
represented, in person or by proxy, and voting on this matter are cast in favor of the proposal.
-
-
Proposal 3, Advisory Vote on Executive Compensation.
The compensation paid to our named
executive officers will be considered approved if a majority of the votes of stockholders present or represented, in person or by proxy, and voting on this matter, are cast in favor of the proposal.
How are abstentions and broker non-votes treated?
Broker non-votes and abstentions are counted for purposes of determining whether a quorum is present. Broker non-votes and abstentions are not
counted as votes cast on any proposal considered at the annual meeting and, therefore, will have no effect on the proposals regarding the election of directors and the advisory vote on the
compensation of our named executive officers. We expect no broker non-votes on the appointment of BDO as our independent registered public accounting firm for 2018. Abstentions will have no effect on
the proposal ratifying the appointment of BDO as our independent registered public accounting firm for 2018.
Who pays for solicitation of proxies?
We are paying the cost of soliciting proxies. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses for sending proxy materials to stockholders and obtaining their votes. In addition to soliciting the proxies by mail, certain of our directors, officers and regular
employees, without compensation, may solicit proxies personally or by telephone, facsimile and email.
Where can I find the voting results of the annual meeting?
We will announce preliminary or final voting results at the annual meeting and publish final results in a Form 8-K filed with the SEC
within four business days following the meeting.
What is the deadline to propose actions for consideration or to nominate individuals to serve as directors at
the 2019 annual meeting of stockholders?
Requirements for Stockholder Proposals to Be Considered for Inclusion in the Company's Proxy
Materials.
Stockholder proposals to be considered for inclusion in the proxy statement and form of proxy relating to the 2019 annual meeting of stockholders must be received no
later than February 29, 2019. In addition, all proposals will need to comply with Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which lists the
requirements for the inclusion of stockholder proposals in company-sponsored proxy materials. Stockholder proposals must be delivered to the Company's Secretary at 441 Charmany Drive, Madison,
Wisconsin 53719.
Requirements for Stockholder Nominations or Proposals to Be Brought Before the 2019 Annual Meeting of Stockholders.
Notice of any director nomination or
other proposal that you intend to present at the 2019 annual meeting of stockholders, but do not intend to have included in the proxy statement and form of proxy relating to the 2019 annual meeting of
stockholders, must be delivered to the Company's Secretary at 441 Charmany Drive, Madison, Wisconsin 53719 not earlier than the close of business on March 28, 2019 and not later than the
close of business on April 27, 2019. In addition, your notice must set forth the information required by our bylaws with respect to each director nomination or other proposal that you intend to
present at the 2019 annual meeting of stockholders.
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|
Exact
Sciences
2018
Proxy
Statement
|
|
49
|
ANNUAL MEETING OF STOCKHOLDERS OF EXACT SCIENCES CORPORATION July 26, 2018 GO GREEN e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JULY 26, 2018. THE PROXY STATEMENT AND ANNUAL REPORT TO STOCKHOLDERS ARE AVAILABLE AT http://www.astproxyportal.com/ast/11534/. Please sign, date and mail your proxy card in the envelope provided as soon as possible. Please detach along perforated line and mail in the envelope provided. 20333000000000001000 5 072618 independent registered public accounting firm for 2018. the Company's named executive officers. meeting and any adjournment thereof. changes to the registered name(s) on the account may not be submitted via Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES FOR DIRECTOR AND "FOR" PROPOSALS 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x 1. To elect three members of the board of directors to serve for three-year terms as Class III Directors, each such director to serve for such term and until his or her respective successor has been duly elected and qualified, or until his or her earlier death, resignation or removal. The Board recommends a vote FOR all nominees. NOMINEES: FOR ALL NOMINEESO Thomas D. Carey O Daniel J. Levangie WITHHOLD AUTHORITYO Michael S. Wyzga FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish to withhold, as shown here: FOR AGAINST ABSTAIN 2. Proposal to ratify the selection of BDO USA, LLP as our 3. Proposal to approve on an advisory basis the compensation of 4. To transact such other business as may properly come before the annual THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ELECTION OF ALL NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2 AND 3. PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. MARK X HERE IF YOU PLAN TO ATTEND THE MEETING. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that this method. Signature of Stockholder Date: Signature of StockholderDate:
0 EXACT SCIENCES CORPORATION Proxy for Annual Meeting of Stockholders July 26, 2018 SOLICITED BY THE BOARD OF DIRECTORS The undersigned hereby appoints Kevin T. Conroy and Jeffrey T. Elliott together, and each of them singly, proxies, with full power of substitution to vote all shares of stock of Exact Sciences Corporation (the "Company") which the undersigned is entitled to vote at the Annual Meeting of Stockholders of Exact Sciences Corporation to be held on Thursday, July 26, 2018, at 10:00 a.m. local time, at The Edgewater, Grand Ballrooms A and B, 1001 Wisconsin Place, Madison, Wisconsin 53703 and at any adjournments or postponements thereof, upon matters set forth in the Notice of Annual Meeting of Stockholders and Proxy Statement dated June 27, 2018, a copy of which has been received by the undersigned. CONTINUED AND TO BE SIGNED ON REVERSE SIDE 14475 1.1
ANNUAL MEETING OF STOCKHOLDERS OF EXACT SCIENCES CORPORATION July 26, 2018 INTERNET - Access www.voteproxy.com and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call. Vote online/phone until 11:59 PM EST the day before the meeting. MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible. INPERSON - You may vote your shares in person by attending the Annual Meeting. GO GREEN - e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet. 20333000000000001000 5 072618 independent registered public accounting firm for 2018. the Company's named executive officers. meeting and any adjournment thereof. changes to the registered name(s) on the account may not be submitted via Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES FOR DIRECTOR AND "FOR" PROPOSALS 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x 1. To elect three members of the board of directors to serve for three-year terms as Class III Directors, each such director to serve for such term and until his or her respective successor has been duly elected and qualified, or until his or her earlier death, resignation or removal. The Board recommends a vote FOR all nominees. NOMINEES: FOR ALL NOMINEESO Thomas D. Carey O Daniel J. Levangie WITHHOLD AUTHORITYO Michael S. Wyzga FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark FOR ALL EXCEPT and fill in the circle next to each nominee you wish to withhold, as shown here: FOR AGAINST ABSTAIN 2. Proposal to ratify the selection of BDO USA, LLP as our 3. Proposal to approve on an advisory basis the compensation of 4. To transact such other business as may properly come before the annual THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ELECTION OF ALL NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2 AND 3. PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. MARK X HERE IF YOU PLAN TO ATTEND THE MEETING. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that this method. Signature of Stockholder Date: Signature of StockholderDate: IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JULY 26, 2018. THE PROXY STATEMENT AND ANNUAL REPORT TO STOCKHOLDERS ARE AVAILABLE AT http://www.astproxyportal.com/ast/11534/. COMPANY NUMBER ACCOUNT NUMBER PROXY VOTING INSTRUCTIONS