Item 5.02
Departure of Directors or Certain Officers; Compensatory Arrangements of Certain Officers
(e) Compensation Arrangements of Certain Officers
On July 25, 2018, Gilead Sciences, Inc. (Gilead) announced the planned transition of President and Chief Executive Officer John F. Milligan, Ph.D., by the end of 2018 and the decision of Board Chairman John C. Martin, Ph.D., to step down from the Board when a new Chief Executive Officer is appointed. The process for selecting a new Chief Executive Officer is ongoing.
In light of this important ongoing leadership transition, on September 12, 2018, the Compensation Committee (the Committee) of the Board of Directors (the Board) of Gilead approved a one-time retention program for Gilead officers and key employees, including Gileads Chief Financial Officer and other executive officers. The retention program is designed to promote continuity and stability through the Chief Executive Officer succession process. Under the program, on September 12, 2018, participants were granted a performance-based retention award and, if a participants employment is terminated without cause during the transition period described below, the participant may be eligible for an enhanced severance benefit.
For executive officers, the performance-based retention award will vest and be payable, subject to the executive officers continued employment with Gilead through the applicable measurement date, based on the achievement of total shareholder return (TSR) performance targets either (i) one-half following the first anniversary after of the grant date and one-half following the second anniversary of the date of grant, with each conditioned on TSR for the period being at or above 10%, or (ii) if not already vested pursuant to section (i), in full, if TSR performance over the 24 months following the date of grant is at or above 21%. The amount that can be earned under the retention award varies based on position, with the Chief Financial Officers maximum award being $2 million, and will be paid in cash at the end of the relevant performance period.
Under the retention program, if an executive officers employment is terminated involuntarily during the next 24 months (a Qualifying Termination), the executive officers severance benefit will be calculated as 2.0 times base salary (instead of 1.5 times base salary as otherwise provided for in the Gilead Sciences, Inc. Severance Plan (the Severance Plan). This amount is in addition to (and the program does not affect the amount of) the bonus, health care and outplacement service payments as calculated under the Severance Plan. In addition, under the program, the executive officers retention award and equity awards generally will be treated as if his or her termination of employment occurred 12 months after the Qualifying Termination for purposes of vesting, exercisability, and/or settlement, with a pro-rata portion of any performance share units earned based on the actual level of achievement of applicable performance goals at the end of the awards original performance period.
2