PROPOSAL 3ADVISORY VOTE ON EXECUTIVE COMPENSATION
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WHAT YOU ARE VOTING ON:
At the 2019 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 29, 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 29 for additional details about
our executive compensation programs, including information about the 2018 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."
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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 2019 Annual Meeting, in person or by proxy, and
voting on Proposal 3 vote in favor of such resolution.
Board Recommendation
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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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Jeffrey T. Elliott
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Chief Financial Officer
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Mark Stenhouse
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President, Cologuard
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D. Scott Coward
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Senior Vice President, General Counsel, Chief Administrative Officer 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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Graham P. Lidgard
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Senior Vice President and Chief Science Officer**
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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 remained a non-executive employee of the Company for a transition period through December 31, 2018 when he retired from the Company.
-
**
-
In
December 2018, Dr. Lidgard transitioned leadership of the Company's research and development function to Dr. Scott Johnson. Effective
December 28, 2018, Dr. Lidgard ceased serving as an executive officer, though he continues his work as our Chief Science Officer.
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 and Philosophy 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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»
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Focus executive behavior on achievement of our annual and long-term objectives and strategy;
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»
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Provide a competitive compensation package that enables us to attract and retain qualified executives;
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»
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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
-
»
-
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
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Table of Contents
COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS
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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.
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 does not 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.
In
early 2018, with the guidance of Radford, our Compensation and Management Development Committee conducted 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 headcount, revenue and market capitalization and (2) survey data from a broader
group of commercial stage public diagnostics, biotechnology and medical device companies with revenue between $50 million and $750 million and market capitalization between
$1.0 billion and $15.0 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 2018. In its review, Radford focused on creating a peer group
that:
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»
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Represented companies operating in the diagnostics, medical device and biotechnology industries;
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»
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Contained commercialized companies with respect to the stage of such companies' development; and
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»
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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 six 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 three companies to the prior year's peer group (Hologic, Masimo and Opko Health) 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 2018 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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Cardiovascular Systems
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Health Care Equipment
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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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Hologic
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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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Masimo
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Health Care Equipment
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Myriad Genetics
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Biotechnology
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Nektar Therapeutics
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Pharmaceuticals
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Opko Health
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Biotechnology
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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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As
part of its analysis and due to the Company's growth and significant stock price appreciation, Radford recommended a change in the methodology used by our Compensation and Management Development
Committee to determine equity grants to be based entirely on grant value instead of a combination of grant value and percent of compensation. 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 Radford's analysis, we reached the following conclusions regarding our executive compensation program relative to our peer group:
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»
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Base salary and target total cash compensation (base salary plus annual cash bonus opportunity) levels for our NEOs had fallen to approximate
the 25
th
percentile and should be increased to approximate the target 50
th
percentile per the Company's pay philosophy.
-
»
-
In light of the change in methodology for determining equity grants described above, which was expected to result in 2018 equity grants covering
a substantially lower number of shares than 2017 equity grants, the aggregate value of the long-term incentive compensation awarded to our NEOs would be based on the
90
th
percentile.
Based
on our assessment of the performance of the executives and our compensation philosophy as described in this
Compensation Discussion and Analysis,
in
early 2018 our Compensation and Management Development Committee set salaries and target bonus opportunities as follows:
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NAME
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2017 BASE
SALARY ($)
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2018 BASE
SALARY ($)
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Kevin T. Conroy
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632,500
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695,800
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Jeffrey T. Elliott
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350,000
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400,000
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Mark Stenhouse
(1)
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500,000
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D. Scott Coward
(2)
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400,300
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430,000
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Graham P. Lidgard
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430,500
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463,600
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Maneesh K. Arora
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475,900
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500,000
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(1)
-
The
Company established an initial base salary for Mr. Stenhouse of $500,000 upon his hiring in April 2018.
-
(2)
-
in
July 2018, the Compensation and Management Development Committee approved an increase in Mr. Coward's base salary from $430,000 to $470,000
in connection with his appointment as Chief Administrative Officer.
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Table of Contents
COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS
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NAME
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2017 TARGET
BONUS %
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2018 TARGET
BONUS %
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Kevin T. Conroy
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90
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%
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100
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%
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Jeffrey T. Elliott
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40
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%
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50
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%
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Mark Stenhouse
(1)
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50
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%
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D. Scott Coward
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50
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%
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50
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%
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Graham P. Lidgard
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50
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%
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50
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%
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Maneesh K. Arora
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60
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%
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60
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%
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-
(1)
-
The
Company established a target bonus opportunity for Mr. Stenhouse of 50% of base salary upon his hiring in April 2018.
As
indicated in the tables below, due to the Company's growth and significant stock price appreciation and to the above-described change in the methodology used by our Compensation and Management
Development Committee to determine equity grants, the annual equity awards made to our NEOs in 2018 covered a significantly smaller number of shares than the 2017 annual equity awards.
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NAME
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2017 OPTIONS
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2018 OPTIONS
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Kevin T. Conroy
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240,000
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68,300
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Jeffrey T. Elliott
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81,000
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16,700
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D. Scott Coward
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75,000
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16,700
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Graham P. Lidgard
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65,000
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16,700
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Maneesh K. Arora
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132,000
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40,000
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NAME
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2017 RSUS
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2018 RSUS
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Kevin T. Conroy
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137,300
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82,300
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Jeffrey T. Elliott
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37,200
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20,100
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D. Scott Coward
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51,400
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20,100
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Graham P. Lidgard
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46,300
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20,100
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Maneesh K. Arora
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75,500
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48,200
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Mr. Stenhouse
received an RSU award covering 75,000 shares upon his hiring in April 2018.
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 2018, our Compensation and Management Development Committee approved metrics to be used to determine
2018
bonuses, which included (1) continuing to strengthen our core Cologuard business, (2) preparation for future demand for Cologuard and (3) advancement of our product development
pipeline. Our NEOs were eligible to earn bonuses for 2018 performance equal to up to 147% of their target bonuses, which were target bonuses of 100% of base salary for Mr. Conroy, 50% of base
salary for Mr. Elliott, 50% of base salary for Mr. Stenhouse, 50% of base salary for Mr. Coward, 60% of base salary for Mr. Arora and 50% of base salary for
Dr. Lidgard. Our Compensation and Management Development Committee determined actual bonus payments after the end of 2018 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 2018 bonuses).
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COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS
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In
determining 2018 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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TARGET WEIGHTING
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Command of the core Cologuard business
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»
Drive demand
»
Engage and invest in health systems and
physicians
»
Develop
additional evidence and medical capabilities
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60
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%
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Preparation for future demand
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»
Invest in people,
processes, technology and systems to build capacity
»
Strengthen and build redundancy in supply chain
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20
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%
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Advance the pipeline
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»
Expand Cologuard label
for age 45-49, average risk population
»
Progress through product research phases for two new offerings
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20
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%
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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, and the development of management and talent succession plans.
After
considering the executive team's achievement of key business plan goals, our Compensation and Management Development Committee determined to award cash bonuses for 2018 performance at 114.25% of
target. Accordingly, Mr. Conroy, Mr. Elliott, Mr. Stenhouse, Mr. Coward, Mr. Arora and Dr. Lidgard received cash bonuses of $794,952, $228,500, $285,625,
$268,488, $342,750 and $264,832, respectively.
We
believe successful long-term Company performance is critical to enhancing stockholder value and aligning the interests of our executive officers with those of our stockholders.
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, 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. These time-based awards are also intended to motivate the retention of our NEOs and provide our NEOs with a market competitive long-term equity incentive opportunity.
In
January 2018, 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. These awards were issued on February 27, 2018 in accordance with our Statement of Policy with respect to Equity Award Approvals. In
connection with these annual equity awards, Mr. Conroy, Mr. Elliott, Mr. Coward, Mr. Arora and Dr. Lidgard received stock options approved in February 2018 covering
68,300, 16,700, 16,700, 40,000 and 16,700 shares, respectively. The shares underlying these options vest and become exercisable in four equal annual installments beginning on the first anniversary of
the grant date. Additionally, Mr. Conroy, Mr. Elliott, Mr. Coward, Mr. Arora and Dr. Lidgard received RSUs covering 82,300, 20,100, 20,100, 48,200 and 20,100 shares,
respectively. These RSUs vest in four equal annual installments beginning on the first anniversary of the grant date. Additionally, Mr. Stenhouse received an RSU award covering 75,000 shares
upon his hiring in April 2018.
The
Company maintains the Exact Sciences Corporation 2010 Omnibus Long-Term Incentive Plan (As Amended and Restated Effective July 27, 2017) (as amended, the "2010 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 expire on
July 16, 2020 unless earlier terminated by our Board of Directors.
In
connection with the scheduled expiration of the 2010 Plan, our Board of Directors has approved, upon the recommendation of the Compensation and Management Development Committee, and has submitted
to our stockholders for approval at the 2019 Annual Meeting under Proposal 4 of this Proxy Statement for the 2019 Annual Meeting, the Exact Sciences Corporation 2019 Omnibus Long-Term Incentive Plan
(the "2019 Plan"). The 2019 Plan, like the 2010 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. If approved by our stockholders at the 2019 Annual Meeting, the 2019 Plan will be administered by our Board of Directors or a committee of our Board of
Directors designated by our Board of Directors to administer the 2019 Plan. Our Board of Directors has designated the Compensation and Management Development Committee to administer the 2019 Plan
subject to its approval by our stockholders at the 2019 Annual Meeting.
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COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS
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If
any of the Company's financial statements are required to be restated, the Company may be entitled to recover all or a portion of any award made under the 2010 Plan or 2019 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 2010 Plan or 2019 Plan, as
applicable, 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 2018. 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
|
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 2018, approximately 89% 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.
Stock Ownership Guidelines
|
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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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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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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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.
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
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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
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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.
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 July 2018, Mr. Coward was appointed Chief Administrative Officer in addition to his
titles of Senior Vice President, General Counsel and Secretary. In April 2018, Mark Stenhouse joined us as President, Cologuard.
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 President and Chief Operating Officer.
In
December 2018, Dr. Lidgard transitioned leadership of the Company's research and development function to Dr. Scott Johnson. Effective December 28, 2018, Dr. Lidgard
ceased serving as an executive officer, though he continues his work as our Chief Science Officer.
Employment Agreements with our NEOs
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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 2018, Mr. Conroy's base salary was $695,800 and his target bonus opportunity was 100% 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 37 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.
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 2018, Mr. Elliott's base salary was $400,000 and his target bonus opportunity was 50% 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 37 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.
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Stenhouse Employment Agreement
Mr. Stenhouse's employment agreement, dated April 2, 2018, provides for a minimum base salary and for a minimum target bonus opportunity equal to
50% 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 2018, Mr. Stenhouse's base salary was $500,000 and his target bonus opportunity was 50% of his base salary.
Mr. Stenhouse also received a signing bonus and a relocation stipend in connection with the employment agreement. Pursuant to his employment agreement, Mr. Stenhouse was also granted an
RSU award covering 75,000 shares of our common stock.
Under
his agreement, Mr. Stenhouse 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 37 below. The agreement
also prohibits Mr. Stenhouse 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 2018, Mr. Coward's base salary was $430,000 (which was subsequently increased to $470,000 in July 2018 in connection with
Mr. Coward's appointment as Chief Administrative Officer), 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 vested 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 37 below. The agreement also prohibits Mr. Coward from
soliciting our customers for a 12-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 2018, Dr. Lidgard's base salary was $463,600 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 37 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.
Arora Employee Transition Agreement
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 remained 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 continued 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. Pursuant to the Arora Transition Agreement, upon the expiration of the Transition Period on December 31, 2018,
Mr. Arora received accelerated vesting of a portion of his equity awards. The
agreement also 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.
Change of Control and Severance
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We
believe that providing executives with severance and change of control protection is important for the following reasons:
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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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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.
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Potential Benefits upon Termination or Change of Control
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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
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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 remained a non-executive employee of the Company for the Transition Period. Pursuant to the Arora Transition Agreement, upon the
expiration of the Transition Period on December 31, 2018, Mr. Arora received accelerated vesting of a portion of his equity awards, as described below.
Conroy Employment Agreement
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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:
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Salary continuation for a period of 18 months 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 Mr. Conroy's employment not terminated;
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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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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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A payment of $10,000 towards the cost of an outplacement consulting package within 30 days of termination;
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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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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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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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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
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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.
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Elliott, Stenhouse, Coward and Lidgard Employment Agreements
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Under
their employment agreements, Mr. Elliott, Mr. Stenhouse, Mr. Coward and Dr. Lidgard 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. Elliott, Mr. Stenhouse, Mr. Coward and Dr. Lidgard would become
entitled to receive the following:
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Salary continuation for a period of 12 months (15 months for Dr. Lidgard) 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;
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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 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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A payment of $10,000 towards the cost of an outplacement consulting package within 30 days of termination;
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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; provided, that, solely in respect of Mr. Stenhouse, for purposes of
Performance Awards (as defined in Mr. Stenhouse's employment agreement), Mr. Stenhouse will be treated as having remained in service for an additional 12 months following actual
Separation from Service (as defined in Mr. Stenhouse's employment agreement), provided that such Performance Awards will not become earned and vested solely as a result of such treatment, and
the vesting and earning of all Performance Awards will remain subject to the attainment of all applicable performance goals, and such Performance Awards, if and to the extent they become earned and
vested, will be payable at the same time as under the applicable award agreement; and
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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
Dr. Lidgard's employment agreement, in connection with a change of control, Dr. Lidgard would become entitled to receive the following:
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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 Dr. Lidgard
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 Dr. Lidgard's pro rata target bonus through the
effective date of the change of control; provided, that any payments previously made to Dr. Lidgard in connection with the termination of his employment by the Company without cause or by
Dr. Lidgard 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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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 Dr. Lidgard'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
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In the event Dr. Lidgard's employment is terminated by the Company without cause or by Dr. Lidgard 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, Dr. Lidgard
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 Dr. Lidgard's employment agreement as though he remained an employee of the Company as of the effective date of such change of control.
Under
our employment agreements with Mr. Elliott, Mr. Stenhouse and Mr. Coward, all such executives 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 his employment for good reason, (2) a change of control happens within four months after the
Company terminates him without cause or he terminates his employment for good reason or (3) solely with respect to Mr. Elliott and Mr. Coward, he remains employed by the Company
(or any successor) for at least six months following a change of control. Solely with respect to Mr. Stenhouse and any Performance Awards held by him as of such change of control, such
Performance Awards will be deemed to have been fully vested and earned based upon the greater of (A) an assumed achievement of all relevant performance goals at the "target" level or
(B) the "actual" level of achievement of all relevant performance goals as of the change of control.
With
respect to each of Mr. Elliott, Mr. Stenhouse and Mr. Coward, pursuant to the terms of the 2010 Plan, upon a change of control, and regardless of whether such executive
incurs a separation from service from the Company whether four months before or within twelve months following such change of control, the vesting of the then unvested equity awards granted to such
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.
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Conditions to Receipt of Severance and Change of Control Benefits
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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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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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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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Mr. Conroy's compliance with his Employee Confidentiality and Assignment Agreement with the Company;
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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. Elliott's, Mr. Stenhouse's, Mr. Coward's and Dr. Lidgard's employment agreements, the Company's obligations to provide the severance benefits described above are
contingent on:
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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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The executive's compliance with the terms of his Employee Confidentiality and Assignment Agreement with the Company;
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The executive's compliance with the 12-month (18-month for Dr. Lidgard) non-competition covenant set forth in the executive's employment
agreement; and
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The executive's compliance with the 12-month (18-month for Dr. Lidgard) 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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The executive's employment and the executive's employment agreement will immediately and automatically terminate;
and
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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.
Change in Control Benefits under 2010 Plan and 2019 Plan
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Under
both the 2010 Plan and 2019 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 each of the 2010 Plan and 2019 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, the time vesting and exercisability of all outstanding awards will immediately accelerate by a period of twelve months, provided that, with respect to Performance Awards
(as defined in each of the 2010 Plan and 2019 Plan), such acceleration will apply to Performance Awards such that if the applicable performance period is scheduled to end within 12 months
following the Change in Control, the Performance Award will be deemed to have been fully vested and earned as of the Change in Control based upon the greater of (A) an assumed achievement of
all relevant performance goals at the "target" level or (B) the actual level of achievement of all relevant performance goals as of the Change in Control. 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 each of the 2010 Plan and 2019 Plan) or terminates his or her own employment for good reason (as defined
in each of the 2010 Plan and 2019 Plan) prior to the first anniversary of the consummation of the change in control: (1) all options and SARs 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 vested in full and free of all repurchase provisions; (3) all restricted stock units that are not Performance Awards outstanding on the date the grantee's employment is terminated
will become vested in full, and if the shares of common stock subject to such Restricted Stock Units are subject to repurchase provisions then such repurchase provisions will immediately lapse;
(4) all other stock-based awards (as defined in each of the 2010 Plan and 2019 Plan) that are not Performance Awards will become exercisable, realizable or vested in full, and will be free of
all repurchase provisions, as the case may be; and (5) all restricted stock awards, restricted stock units and other stock-based awards that are Performance Awards will become fully vested and
earned based upon the greater of (A) an assumed achievement of all relevant performance goals at the "target" level or (B) the actual level of achievement of all relevant performance
goals as of the change in control.
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The
summary of the foregoing benefits arising out of a change in control under the 2010 Plan and the 2019 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 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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|
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|
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|
PORTION OF EQUITY VALUE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NAME
|
|
FROM $100 MILLION
TO $500 MILLION
|
|
EACH INCREMENTAL
$50 MILLION FROM
$500 MILLION TO
$1 BILLION
|
|
EACH INCREMENTAL
$50 MILLION FROM
$1 BILLION TO
$2 BILLION
|
|
ANY AMOUNT OVER
$2 BILLION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin T. Conroy
|
|
|
1.00
|
%
|
|
0.50
|
%
|
|
0.25
|
%
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Graham P. Lidgard
|
|
|
0.50
|
%
|
|
0.25
|
%
|
|
0.125
|
%
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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40
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Exact
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2019
Proxy
Statement
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Table of Contents
PROPOSAL 4APPROVAL OF EXACT SCIENCES CORPORATION 2019 OMNIBUS LONG-TERM INCENTIVE PLAN
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PROPOSAL 4APPROVAL OF EXACT SCIENCES CORPORATION 2019 OMNIBUS LONG-TERM INCENTIVE PLAN
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WHAT YOU ARE VOTING ON:
At the 2019 Annual Meeting, stockholders are being asked to approve the Exact Sciences Corporation 2019 Omnibus Long-Term
Incentive Plan.
On
April 24, 2019, our Board of Directors approved, subject to stockholder approval, the Exact Sciences Corporation 2019 Omnibus Long-Term Incentive Plan (the "2019 Plan"). If the 2019 Plan is
approved by our stockholders, it will authorize the issuance of a number of shares of our common stock equal to 13,829,582. The 2019 Plan will replace the Company's 2010 Omnibus Long-Term Incentive
Plan (As Amended and Restated Effective July 27, 2017) (the "2010 Plan"), and no new awards will be granted under the 2010 Plan. Any awards outstanding under the 2010 Plan on the date of
stockholder approval of the 2019 Plan will remain subject to and be paid under the 2010 Plan, and any shares subject to outstanding awards under the 2010 Plan that subsequently expire, terminate, or
are surrendered or forfeited for any reason without issuance of shares will automatically become available for issuance under the 2019 Plan.
Our
Board of Directors recommends that stockholders approve the 2019 Plan. The purposes of the 2019 Plan are to enhance the Company's ability to attract and retain highly qualified officers,
non-employee directors, key employees, and consultants, and to motivate such service providers to serve the Company and to expend maximum effort to improve the business results and earnings of the
Company, by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. The 2019 Plan also allows the Company to
promote greater ownership in the Company by such service providers in order to align their interests more closely with the interests of our stockholders. Stockholder approval of the 2019 Plan will
also enable the Company to grant awards under the 2019 Plan that are designed to qualify for special tax treatment under Section 422 of the Internal Revenue Code. Before the 2019 Plan may be
effective, stockholder approval is required under NASDAQ Rule 5635(c).
Vote Required for Approval
The 2019 Plan will be approved if holders of a majority of the shares present or represented at the 2019 Annual Meeting, in person or by proxy, and voting on
Proposal 4 vote in favor of the 2019 Plan.
We
use equity compensation awards to provide long-term incentive compensation and to attract and retain our key employees and non-employee directors. Our Board believes that our
equity compensation program is an integral part of our approach to long-term incentive compensation, focused on stockholder return, and our continuing efforts to align stockholder and management
interests. We believe that growth in stockholder value depends on, among other things, our continued ability to attract and retain employees, in a competitive workplace market, with the experience and
capacity to perform at the highest levels.
The
Company currently maintains the 2010 Plan, which was approved by our stockholders at the 2017 annual meeting. As of March 31, 2019, there were about 6.5 million shares available for
future grants under the 2010 Plan.
Due
to the pending expiration of the 2010 Plan in July 2020, on the recommendation of the Compensation and Management Development Committee, the Board unanimously adopted, subject to approval of
Company stockholders, the 2019 Plan. The stockholders are being asked to vote on this Proposal 4 to approve the 2019 Plan.
The
2019 Plan authorizes equity compensation awards for up to 13,829,582 shares of our common stock, plus shares added to the reserve in connection with the expiration, forfeiture or termination of
outstanding awards under the 2010 Plan. If stockholders approve the 2019 Plan, no further awards will be made under the 2010 Plan. If, however, stockholders do not approve the 2019 Plan, the 2010 Plan
will remain in effect in accordance with its terms until it expires in July 2020.
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PROPOSAL 4APPROVAL OF EXACT SCIENCES CORPORATION 2019 OMNIBUS LONG-TERM INCENTIVE PLAN
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Summary of Material Features of 2019 Plan
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The
2019 Plan includes a number of provisions that promote best practices by reinforcing the alignment between equity compensation arrangements for eligible employees, non-employee
directors and other service providers and stockholders' interests. These provisions include, but are not limited to, the following:
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»
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Minimum Vesting Requirements.
The
2019 Plan includes minimum vesting requirements. Equity-based awards generally cannot vest earlier than one year after grant. Certain limited exceptions are permitted.
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»
-
Fungible Share Pool.
The plan uses a
"fungible share" concept under which awards of options and SARs cause one share per covered share to be removed from the available share pool, while the award of restricted stock, RSUs or other
stock-based awards generally will be counted against the pool as 1.61 shares.
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No Discounted Options or
SARs.
Stock options and SARs may not be granted with exercise prices lower than the market value of the underlying shares on the grant date.
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»
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No Repricing without Stockholder
Approval.
Other than in connection with a change in the Company's capitalization, at any time when the purchase price of a stock option or SAR is
above the market value of a share, the Company will not, without stockholder approval, reduce the purchase price of the stock option or SAR and will not exchange the stock option or SAR for a new
award with a lower (or no) purchase price or for cash.
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No Reload Grants.
Reload grants, or
the granting of stock options conditioned upon delivery of shares to satisfy the exercise price and/or tax withholding obligation under another employee stock option, are not permitted.
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»
-
No Liberal Share Recycling.
Shares
used to pay the exercise price or withholding taxes related to an outstanding award and unissued shares resulting from the net settlement of outstanding options and SARs do not become available for
issuance as future awards under the plan.
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»
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No Transferability.
Awards generally
may not be transferred, except by will or the laws of descent and distribution, unless approved by the Compensation and Management Development Committee.
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»
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No Evergreen Provision.
The plan
does not contain an "evergreen" feature pursuant to which the shares authorized for issuance under the plan can be automatically replenished.
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»
-
No Automatic Grants.
The plan does
not provide for automatic grants to any individual.
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»
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No Tax Gross-Ups.
The plan does not
provide for any tax gross-ups.
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»
-
280G Cutback.
If any payment under
the plan would cause a grantee to become subject to the excise tax imposed under Code Section 4999, then payments and benefits will be reduced to the amount that would cause the grantee not to
be subject to the excise tax if the reduction would put the grantee in a better after tax position than if the grantee were to pay the tax.
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Multiple Award Types.
The plan
permits the issuance of nonqualified stock options (NSOs), incentive stock options (ISOs), stock appreciation rights (SARs), restricted stock units (RSUs), restricted stock and other stock-based
awards. This breadth of award types will enable the Company to tailor awards in light of the accounting, tax, and other standards applicable at the time of grant. Historically, these standards have
changed over time.
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»
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Clawback Policy.
If any of the
Company's financial statements are required to be restated, the Company may be entitled to recover all or a portion of any award made under the 2019 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.
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»
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Independent Oversight.
The plan is
administered by a committee of independent members of the Board of Directors.
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»
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Director Limits.
The 2019 Plan
contains annual limits on the amount of awards that may be granted to non-employee directors.
Information on Equity Compensation Plans as of March 31, 2019
|
The
information included in this Proxy Statement and our Annual Report on Form 10-K for the fiscal year ending December 31, 2018 is updated by the following information
regarding all existing equity compensation plans as of March 31, 2019:
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»
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Number of shares of common stock relating to outstanding stock options: 2,482,143 shares
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»
-
Weighted average remaining term of outstanding options: 6.8608 years
-
»
-
Weighted average exercise price of outstanding options: $23.6849
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»
-
Number of shares of common stock relating to outstanding restricted stock, RSUs, and performance-vesting RSUs (PRSUs): 4,216,368 shares
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»
-
Shares available for issuance under the 2010 Plan: 6,660,944 shares
-
»
-
Common shares outstanding: 129,083,822 shares
-
»
-
If the 2019 Plan is approved by the stockholders, no new awards may be made under the 2010 Plan, and 13,829,582 shares would be available for
grant under the 2019 Plan.
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PROPOSAL 4APPROVAL OF EXACT SCIENCES CORPORATION 2019 OMNIBUS LONG-TERM INCENTIVE PLAN
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Material Features of the 2019 Plan
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The
material terms of the 2019 Plan are summarized below. This summary of the 2019 Plan is not intended to be a complete description of the 2019 Plan and is qualified in its entirety
by the actual text of the 2019 Plan, which is attached as Annex A to this Proxy Statement.
Eligibility and Participation.
Awards may be granted under the 2019 Plan to officers, employees, and consultants of the Company and its subsidiaries and to
non-employee directors of the Company. Incentive stock options may be granted only to employees of the Company or its subsidiaries. As of March 31, 2019, approximately 2,300 individuals were
eligible to receive awards under the 2019 Plan, including 6 executive officers and 8 non-employee directors.
Plan Administration.
The Board of Directors has powers and authority related to the administration of the 2019 Plan as are consistent with our corporate governance
documents and applicable law. Pursuant to its charter, the Compensation and Management Development Committee administers the 2019 Plan.
Type of Awards.
The following types of awards are available for grant under the 2019 Plan: ISOs, NSOs, SARs, restricted stock, RSUs, and other stock-based awards.
Number of Authorized Shares.
Subject to adjustment (in connection with certain changes in capitalization), 13,829,582 shares of our common stock are reserved for
issuance under the 2019 Plan, all of which may be granted as ISOs. In addition, as of the date of stockholder approval of the 2019 Plan, any awards then outstanding under the 2010 Plan will remain
subject to and be paid under the 2010 Plan and any shares then subject to outstanding awards under the 2010 Plan that subsequently expire, terminate, or are surrendered or forfeited for any reason
without issuance of shares will automatically become available for issuance under the 2019 Plan. The shares of common stock issuable under the 2019 Plan will consist of authorized and unissued shares,
treasury shares, or shares purchased on the open market or otherwise.
Share Counting
Fungible Share Pool.
The 2019 Plan uses a "fungible share" concept under which awards of options and SARs cause one share per covered share to be removed from the
available share pool, while awards of restricted stock, RSUs, or other stock-based awards where the price charged for the award is less than 100% of the fair market value of our common stock will be
counted against the pool as 1.61 shares. This number is known as the "fungible share ratio."
Share Recycling.
If any award is canceled, terminates, expires or lapses for any reason prior to the issuance of shares or if shares are issued under the 2019 Plan
and thereafter are forfeited to the Company, the shares subject to such awards and the forfeited shares will again be available for grant under the 2019 Plan. In addition, the following items will not
count against the aggregate number of shares of common stock available for grant under the 2019 Plan: (a) any award that is settled in cash rather than by issuance of shares of common stock, or
(b) awards granted in assumption of or in substitution for awards previously granted by an acquired company. Shares tendered or withheld to pay the exercise price for an option or tax
withholding for any type of award will continue to count against the aggregate number of shares of common stock available for grant under the 2019 Plan. In addition, the total number of shares
covering stock-settled SARs or net-settled options will be counted against the pool of available shares, not just the net shares issued upon exercise. Any shares of common stock repurchased by us with
cash proceeds from the exercise of options will not be added back to the pool of shares available for grant under the 2019 Plan.
Stock Options and SARs
Grant of Options and SARs.
The Compensation and Management Development Committee may award ISOs, NSOs (together, "options"), and SARs to grantees under the 2019
Plan. SARs may be awarded either in tandem with or as a component of other awards or alone.
Exercise Price of Options and SARs.
The exercise price per share of an option will be at least 100% of the fair market value per share of our stock underlying the
award on the grant date. A SAR will confer on the grantee a right to receive, upon exercise, a payment of the excess of (1) the fair market value of one share of our stock on the date of
exercise over (2) the grant price of the SAR as determined by the Compensation and Management Development Committee. The grant price will be fixed at the fair market value of a share of stock
on the grant date. SARs granted in tandem with an outstanding option following the grant date of such option will have a grant price that is equal to the option's exercise price, except that the SAR's
grant price may not be less than the fair market value of a share of stock on the grant date of the SAR.
Vesting of Options and SARs.
The Compensation and Management Development Committee will determine the terms and conditions (including any performance requirements)
under which an option or SAR will become exercisable and will include that information in the award agreement, subject to the 2019 Plan requirement that awards generally may not become vested or
exercisable in less than one year.
Special Limitations on ISOs.
In the case of a grant of an option intended to qualify as an ISO to a grantee that owns more than 10% of the total combined voting
power of all classes of our outstanding stock (a "10% Stockholder"), the exercise price of the option will not be less than 110% of the fair market value of a share of our stock on the grant date.
Additionally, an option will constitute an ISO only (1) if the grantee is an employee of the Company or a subsidiary of the Company, (2) to the extent the option is specifically
designated as an ISO in the related award agreement, and (3) to the extent that the aggregate fair market value (determined at the time the option is granted) of the shares of stock with
respect to which all ISOs held by the grantee become exercisable for the first time during any calendar year (under the 2019 Plan and all other plans of the grantee's employer and its affiliates) does
not exceed $100,000.
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Exercise of Options and SARs.
An option may be exercised by the delivery to us of written notice of exercise and payment in full of the exercise price (plus the
amount of any taxes which we may be required to withhold). The Compensation and Management Development Committee has the discretion to determine the method or methods by which a SAR may be exercised.
Expiration of Options and SARs.
Options and SARs will expire at the time the Compensation and Management Development Committee determines, except that no option may
be exercised more than 10 years from its grant date, or in the case of an ISO held by a 10% Stockholder, not more than five years from its grant date.
Restricted Stock and RSUs
Restricted Stock.
At the time a grant of restricted stock is made, the Compensation and Management Development Committee may establish the applicable "restricted
period" and prescribe restrictions in addition to or other than the expiration of the restricted period, including the satisfaction of corporate or individual performance objectives, subject to the
2019 Plan requirement that awards generally may not become vested or exercisable in less than one year. Unless the Compensation and Management Development Committee otherwise provides in an award
agreement, holders of restricted stock will have the right to vote the stock and the right to receive any dividends declared or paid with respect to the stock. The Compensation and Management
Development Committee may provide that any dividends paid must be reinvested in shares of stock, which may or may not be subject to the same vesting conditions and restrictions applicable to the
restricted stock. All distributions, if any, received by a grantee with respect to restricted stock as a result of any stock split, stock dividend, combination of shares, or other similar transaction
will be subject to the restrictions applicable to the original grant.
The
grantee will be required, to the extent required by applicable law, to purchase the restricted stock at a price equal to the greater of (1) the aggregate par value of the shares of stock
represented by the restricted stock or (2) the price, if any, specified in the award agreement relating to the restricted stock. If specified in the award agreement, the price may be deemed
paid by services already rendered.
RSUs.
An RSU is a bookkeeping entry representing the equivalent of shares of stock awarded to a grantee. At the time a grant of RSUs is made, the Compensation and
Management Development Committee may establish the applicable "restricted period" and prescribe restrictions in addition to or other than the expiration of the restricted period, including the
satisfaction of corporate or individual performance objectives, subject to the 2019 Plan requirement that awards generally may not become vested or exercisable in less than one year. RSUs will not
confer stockholder rights to grantees. The Compensation and Management Development Committee may provide that the holder of RSUs will be entitled to receive dividend equivalent rights, which may be
deemed reinvested in additional RSUs.
Other Stock-Based Awards
The Compensation and Management Development Committee may, in its discretion, grant other stock-based awards, consisting of stock units or other awards, valued
in whole or in part by reference to, or otherwise based upon, our common stock. The terms of other stock-based awards will be set forth in the applicable award agreements, subject to the 2019 Plan
requirement that awards generally may not become vested or exercisable in less than one year.
Performance Awards
The Compensation and Management Development Committee may condition the grant, exercise, vesting, or settlement of any award on such performance conditions as
it may specify. We refer to these awards as "performance awards." The Compensation and Management Development Committee may select such business criteria or other performance measures as it may deem
appropriate in establishing any performance conditions. Business criteria include, but are not limited to, any of the following:
-
»
-
net sales;
-
»
-
revenue;
-
»
-
revenue growth or product revenue growth;
-
»
-
operating income (before or after taxes);
-
»
-
pre-or after-tax income (before or after allocation of corporate overhead and bonuses);
-
»
-
net earnings;
-
»
-
earnings per share;
-
»
-
net income (before or after taxes);
-
»
-
return on equity;
-
»
-
total stockholder return;
-
»
-
return on assets or net assets;
-
»
-
appreciation in, and/or maintenance of, share price;
-
»
-
market share;
-
»
-
gross profits;
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earnings (including earnings before taxes, earnings before interest and taxes or earnings before interest, taxes, depreciation and
amortization);
-
»
-
economic value-added models or equivalent metrics;
-
»
-
comparisons with various stock market indices;
-
»
-
reduction in costs;
-
»
-
cash flows or cash flows per share (before or after dividends);
-
»
-
return on capital (including return on total capital or return on invested capital);
-
»
-
cash flow return on investment;
-
»
-
improvement in or attainment of expense levels or working capital levels;
-
»
-
operating margins;
-
»
-
gross margins or cash margin;
-
»
-
year-end cash;
-
»
-
debt reductions;
-
»
-
stockholder equity;
-
»
-
regulatory performance;
-
»
-
implementation, completion or attainment of measurable objectives with respect to research, development, products or projects and recruiting and
maintaining personnel; or
-
»
-
any other business criteria as determined by the Compensation and Management Development Committee.
Effect of Certain Transactions
Adjustments for Changes in Capitalization.
If changes in the common stock occur by reason of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend or other distribution payable in stock, or other increase or decrease in the common stock without receipt of consideration by the Company, or
if there occurs any spin-off, split-up, extraordinary cash dividend or other distribution of assets by the Company, the number and kind of securities for which stock options and other stock-based
awards may be made under the 2019 Plan will be equitably adjusted by the Company. In addition, if there occurs any spin-off, split-up, extraordinary cash dividend or other distribution of assets by
the Company, the number and kind of securities subject to any outstanding awards and the exercise price of any outstanding stock options or SARs will be equitably adjusted by the Company.
Adjustments for Certain Transactions.
Except as otherwise provided in an award agreement, in the event of the liquidation or dissolution of the Company or a
reorganization, merger, exchange or consolidation of the Company or involving the shares of our common stock (a "transaction"), the 2019 Plan and the awards issued pursuant to the plan will continue
in effect in accordance with their respective terms, except that following a transaction either (1) each outstanding award will be treated as provided for in the agreement entered into in
connection with the transaction or (2) if not so provided in the agreement, each grantee will be entitled to receive in respect of each share of our common stock subject to any outstanding
awards, upon exercise or payment or transfer in respect of any award, the same number and kind of stock, securities, cash, property or other consideration that each holder of a share of our common
stock was entitled to receive in the transaction in respect of a share of common stock, except that, unless otherwise determined by the Compensation and Management Development Committee, such stock,
securities, cash, property or other consideration will remain subject to all of the conditions, restrictions and performance criteria which were applicable to the awards prior to the transaction. The
treatment of outstanding options and SARs in connection with a transaction in which the consideration paid or distributed to our stockholders is not entirely shares of common stock of the acquiring or
resulting corporation may include the cancellation of outstanding options and SARs upon consummation of the transaction as long as, at the election of the Compensation and Management Development
Committee, (1) the holders of affected options and SARs have been given a period of at least 15 days prior to the date of the consummation of the transaction to exercise the options or
SARs (whether or not they were otherwise exercisable) or (2) the holders of the affected options and SARs are paid (in cash or cash equivalents) in respect of each share covered by the option
or SAR being canceled an amount equal to the excess, if any, of the per share price paid or distributed to our stockholders in the transaction (the value of any non-cash consideration to be determined
by the Compensation and Management Development Committee in its sole discretion) over the option or SAR exercise price, as applicable.
Change in Control.
Except as otherwise specifically provided in the applicable award agreement, upon the consummation of a change in control (as defined in the 2019
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 2019 Plan) or terminates his or her own employment for good reason
(as defined in the 2019 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
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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.
Term of Plan.
Unless earlier terminated by the Board of Directors, the authority to make grants under the 2019 Plan will terminate on July 25, 2029, the
tenth anniversary of the 2019 Plan's effective date if the 2019 Plan is approved by the Company's stockholders at the 2019 Annual Meeting.
Amendment and Termination.
The Board of Directors may, at any time and from time to time, amend, suspend, or terminate the 2019 Plan as to any shares of stock as to
which awards have not been made. An amendment will be contingent on approval of our stockholders to the extent stated by the Board of Directors, required under the terms of the 2019 Plan regarding
certain repricing transactions (as described below), required by applicable law or required by applicable stock exchange listing requirements. No awards will be made after termination of the 2019
Plan. No amendment, suspension or termination of the 2019 Plan will, without the consent of the grantee, impair rights or obligations under any award theretofore awarded under the 2019 Plan.
No Repricing.
Without stockholder approval, the Compensation and Management Development Committee is not authorized to (a) lower the exercise or grant price
of a stock option or SAR after it is granted, except in connection with certain adjustments to our corporate or capital structure permitted by the 2019 Plan, such as stock splits, (b) take any
other action that is treated as a repricing under generally accepted accounting principles or (c) cancel a stock option or SAR at a time when its exercise or grant price exceeds the fair market
value of the
underlying stock, in exchange for cash, another stock option or SAR, restricted stock, restricted stock units or other equity award, unless the cancellation and exchange occur in connection with a
change in capitalization or other similar change.
Minimum Vesting.
Equity-based awards granted under the 2019 Plan will have a one-year minimum vesting requirement. This requirement does not apply to
(1) substitute awards resulting from acquisitions, (2) shares delivered in lieu of fully vested cash awards, or (3) awards to non-employee directors that vest on the earlier of
the one year anniversary of the date of grant or the next annual meeting of stockholders (but not sooner than 50 weeks after the grant date). Also, the Committee may grant equity-based awards
without regard to the minimum vesting requirement with respect to a maximum of five percent of the available share reserve authorized for issuance under the 2019 Plan. In addition, the minimum vesting
requirement does not apply to the Committee's discretion to provide for accelerated exercisability or vesting of any award, including in cases of retirement, death, disability or a change in control,
in the terms of the award or otherwise.
Clawback Policy.
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 2019
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 2019 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.
New Plan Benefits.
A new plan benefits table for the 2019 Plan and the benefits or amounts that would have been received by or allocated to participants for the
last completed fiscal year under the 2019 Plan if the 2019 Plan was then in effect, as described in the federal proxy rules, are not provided because all awards made under the 2019 Plan will be made
at the Compensation and Management Development Committee's discretion, subject to the terms of the 2019 Plan. Therefore, the benefits and amounts that will be received or allocated under the 2019 Plan
are not determinable at this time. The equity grant program for our non-employee directors is described under the Director Compensation section in this proxy statement.
Director Limits.
The maximum value of plan awards granted during any calendar year to any non-employee director, taken together with any cash fees paid to such
non-employee director during the calendar year and the value of awards granted to the non-employee director under any other equity compensation plan of the Company or an affiliate during the calendar
year, may not exceed $600,000 (calculating the value of any equity compensation plan awards based on the grant date fair market value for financial reporting purposes). However, awards granted to
non-employee directors upon their initial election to the Board of Directors or the board of directors of an affiliate will not be counted towards this limit, and certain other limited exceptions may
apply.
Federal Income Tax Consequences
|
The
following is a brief summary of the U.S. federal income tax consequences of the 2019 Plan generally applicable to the Company and to participants in the 2019 Plan who are subject
to U.S. federal taxes. The summary is based on the Internal Revenue Code, applicable Treasury Regulations and administrative and judicial interpretations thereof, each as in effect on the date of this
proxy statement, and is, therefore, subject to future changes in the law, possibly with retroactive effect. The summary is general in nature and does not purport to be legal or tax advice.
Furthermore, the summary does not address issues relating to any U.S. gift or estate tax consequences or the consequences of any state, local or foreign tax laws.
Nonqualified Stock Options.
A participant generally will not recognize taxable income upon the grant or vesting of a nonqualified stock option with an exercise
price at least equal to the fair market value of our common stock on the date of grant and no additional deferral feature. Upon the exercise of a nonqualified stock option, a participant generally
will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the shares underlying the stock option on the date of exercise and the
exercise price of the stock option. When a participant sells the shares, the participant will have short-term or long-term capital gain or loss, as the case may be, equal to the difference between the
amount the participant received from the sale and the tax basis of the shares sold. The tax basis of the shares generally will be equal to the greater of the fair market value of the shares on the
exercise date or the exercise price of the stock option.
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PROPOSAL 4APPROVAL OF EXACT SCIENCES CORPORATION 2019 OMNIBUS LONG-TERM INCENTIVE PLAN
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Incentive Stock Options.
A participant generally will not recognize taxable income upon the grant of an incentive stock option. If a participant exercises an
incentive stock option during employment or within three months after employment ends (12 months in the case of permanent and total disability), the participant will not recognize taxable
income at the time of exercise for regular U.S. federal income tax purposes (although the participant generally will have taxable income for alternative minimum tax purposes at that time as if the
stock option were a nonqualified stock option). If a participant sells or otherwise disposes of the shares acquired upon exercise of an incentive stock option after the later of (a) one year
from the date the participant exercised the option and (b) two years from the grant date of the stock option, the participant generally will recognize long-term capital gain or loss equal to
the difference between the amount the participant received in the disposition and the exercise price of the stock option. If a participant sells or otherwise disposes of shares acquired upon exercise
of an incentive stock option before these holding period requirements are satisfied, the disposition will constitute a "disqualifying disposition," and the participant generally will recognize taxable
ordinary income in the year of disposition equal to the excess of the fair market value of the shares on the date of exercise over the exercise price of the stock option (or, if less, the excess of
the amount realized on the disposition of the shares over the exercise price of the stock option). The balance of the participant's gain on a disqualifying disposition, if any, will be taxed as
short-term or long-term capital gain, as the case may be.
With
respect to both nonqualified stock options and incentive stock options, special rules apply if a participant uses shares of common stock already held by the participant to pay the exercise price
or if the shares received upon exercise of the stock option are subject to a substantial risk of forfeiture by the participant.
Stock Appreciation Rights.
A participant generally will not recognize taxable income upon the grant or vesting of a SAR with a grant price at least equal to the
fair market value of our common stock on the date of grant and no additional deferral feature. Upon the exercise of a SAR, a participant generally will recognize compensation taxable as ordinary
income in an amount equal to the difference between the fair market value of the shares underlying the SAR on the date of exercise and the grant price of the SAR.
Restricted Stock Awards, RSUs, and Performance Awards.
A participant generally will not have taxable income upon the grant of restricted stock, restricted stock
units or performance awards. Instead, the participant will recognize ordinary income at the time of vesting or payout equal to the fair market value (on the vesting or payout date) of the shares or
cash received minus any amount paid. For restricted stock only, a participant may instead elect to be taxed at the time of grant.
Other Stock-Based Awards.
The U.S. federal income tax consequences of other stock or cash- based awards will depend upon the specific terms of each award.
Tax Consequences to the Company.
In the foregoing cases, we generally will be entitled to a deduction at the same time, and in the same amount, as a participant
recognizes ordinary income, subject to certain limitations imposed under the Internal Revenue Code.
Section 409A.
We intend that awards granted under the 2019 Plan comply with, or otherwise be exempt from, Section 409A of the Internal Revenue Code,
but make no representation or warranty to that effect.
Tax Withholding.
We are authorized to deduct or withhold from any award granted or payment due under the 2019 Plan, or require a participant to remit to us, the
amount of any withholding taxes due in respect of the award or payment and to take such other action as may be necessary to satisfy all obligations for the payment of applicable withholding taxes. We
are not required to issue any shares of common stock or otherwise settle an award under the 2019 Plan until all tax withholding obligations are satisfied.
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SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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The
following table sets forth certain information regarding beneficial ownership of our common stock as of April 30, 2019 by:
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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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»
-
each executive officer included in the Summary Compensation Table above;
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each of our directors;
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each person nominated to become a director; and
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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 30, 2019 and options which may be exercised within 60 days after
April 30, 2019 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 30, 2019 is based upon 129,138,780 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
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|
|
|
|
|
|
|
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|
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|
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Thomas D. Carey
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41,483
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15,620
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57,103
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*
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Eli Casdin
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6,262
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3,367
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9,629
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*
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Kevin T. Conroy
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1,029,628
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(2)
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694,733
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(3)
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1,724,361
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1.3%
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D. Scott Coward
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106,978
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(4)
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100,425
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(3)
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207,403
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*
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James E. Doyle
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35,093
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18,477
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53,570
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*
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Jeffrey T. Elliott
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41,604
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(5)
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36,675
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(3)
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78,279
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*
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John A. Fallon, M.D.
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33,767
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84,589
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118,356
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*
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Daniel J. Levangie
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9,674
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55,812
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65,486
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*
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Graham P. Lidgard
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38,347
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(6)
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(3)
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38,347
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*
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Mark Stenhouse
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14,471
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(7)
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14,471
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*
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David A. Thompson
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166,671
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166,171
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*
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Michael S. Wyzga
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8,612
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25,865
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34,477
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*
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Katherine S. Zanotti
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77,102
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25,637
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102,739
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*
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All directors and executive officers as a group (16 persons)
(8)
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1,694,293
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1,107,200
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2,801,493
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2.2%
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Stockholders
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The Vanguard Group
(9)
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10,794,516
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10,794,516
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8.4%
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T. Rowe Price
(10)
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9,858,322
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9,858,322
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7.6%
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-
*
-
Less
than one percent.
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(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 30, 2019. 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 30, 2019.
-
(2)
-
Includes
25,913 shares held through our 401(k) plan.
-
(3)
-
Does
not include shares of common stock issuable on May 1, 2019 upon purchase pursuant to the Company's 2010 Employee Stock Purchase Plan. The
number of shares to be purchased on May 1, 2019 was indeterminable as of April 30, 2019.
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SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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-
(4)
-
Includes
3,882 shares held through our 401(k) plan.
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(5)
-
Consists
of 960 shares held through our 401(k) plan.
-
(6)
-
Includes
12,534 shares held through our 401(k) plan.
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(7)
-
Includes
163 shares held through our 401(k) plan.
-
(8)
-
Amount
includes shares of common stock beneficially owned by each of Dr. Scott Johnson, our Senior Vice President, Research and Development,
and Ana Hooker, our Senior Vice President, Operations, who became executive officers on January 1, 2019 and April 24, 2019, respectively. As of April 30, 2019, Dr. Johnson
beneficially owned 11,052 shares of common stock, which includes 193 shares held through our 401(k) plan and options to purchase 2,925 shares which may be exercised within 60 days after
April 30, 2019. As of April 30, 2019, Dr. Johnson did not hold any shares of common stock issuable by us pursuant to restricted stock unit awards expected to vest within
60 days of April 30, 2019. As of April 30, 2019, Ms. Hooker beneficially owned 119,549 shares of common stock, which includes 1,369 shares held through our 401(k) plan and
options to purchase 43,075 shares which may be exercised within 60 days after April 30, 2019. As of April 30, 2019, Ms. Hooker did not hold any shares of common stock
issuable by us pursuant to restricted stock unit awards expected to vest within 60 days of April 30, 2019.
-
(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 66,463 shares, the shared power to vote or to direct the
vote of 17,417 shares, the sole power to dispose or to direct the disposition of 10,722,710 shares and shared power to dispose or to direct the disposition of 71,806 shares. Vanguard Fiduciary Trust
Company, a wholly-owned subsidiary of Vanguard, is the beneficial owner of 54,659 shares, and Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of Vanguard, is the beneficial
owner of 28,591 shares. The principal address of Vanguard is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. This information has been obtained from Amendment No. 6 to Schedule 13G
filed by Vanguard with the SEC on February 11, 2019.
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(10)
-
T.
Rowe Price Associates, Inc., a Maryland corporation ("T. Rowe Price"), has the sole power to vote or to direct the vote of 3,411,456 shares
and the sole power to dispose or to direct the disposition of 9,858,322 shares. As disclosed by T. Rowe Price, these securities are owned by various individual and institutional investors for which T.
Rowe Price serves as an investment advisor. For purposes of reporting requirements of the Exchange Act, T. Rowe Price is deemed to be the beneficial owner of such securities. The principal address of
T. Rowe Price is 100 E. Pratt Street, Baltimore, MD 21202. This information has been obtained from Schedule 13G filed by T. Rowe Price with the SEC on February 14, 2019.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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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, 2018.
Our
Board of Directors knows of no business that will be presented for consideration at the 2019 Annual Meeting other than those items stated above. If any other business should come
before the 2019 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 25, 2019
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The
proxy statement and annual report to stockholders are available at http://www.astproxyportal.com/ast/11534/.
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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:
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»
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the proxy statement for the annual meeting;
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»
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a proxy card for the annual meeting; and
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»
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the 2019 Annual Report to Stockholders, which includes our Annual Report on Form 10-K for the year ended December 31, 2018.
What items will be voted on at the Annual Meeting?
There are four proposals scheduled to be voted on at the annual meeting:
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»
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the election of the nominees to our Board of Directors nominated by our Board of Directors as Class I directors to serve until the 2022
annual meeting of stockholders;
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»
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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, 2019;
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»
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the advisory vote on the compensation paid to our named executive officers; and
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»
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the approval of the Exact Sciences Corporation 2019 Omnibus Long-Term Incentive Plan.
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:
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»
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FOR
the nominees to our Board of Directors as Class I directors to serve until the 2022
annual meeting of stockholders;
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»
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FOR
the ratification of our Audit and Finance Committee's appointment of BDO as our independent
registered public accounting firm for 2019;
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»
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FOR
the approval of the advisory vote regarding the compensation paid to our executive officers;
and
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»
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FOR
the approval of the Exact Sciences Corporation 2019 Omnibus Long-Term Incentive Plan.
Who can attend the annual meeting?
Admission to the annual meeting is limited to:
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»
-
stockholders as of the close of business on May 30, 2019;
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»
-
holders of valid proxies for the annual meeting; and
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»
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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.
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When is the record date and who is entitled to vote?
Our Board of Directors set May 30, 2019 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 shares of common stock outstanding.
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:
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»
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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.
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»
-
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.
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»
-
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:
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»
-
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 24, 2019.
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»
-
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"), the advisory vote on the compensation paid to our executive officers ("Proposal 3") and the approval of
the Exact Sciences Corporation 2019 Omnibus Long-Term Incentive Plan ("Proposal 4") 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, 3 and 4.
The
ratification of the appointment of BDO as our independent registered public accounting firm for 2019 ("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.
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What is the voting requirement to approve each of the proposals?
The following are the voting requirements for each proposal:
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»
-
Proposal 1, Election of Directors.
The nominees receiving the highest number
of votes will be elected as Class I directors to serve until the 2022 annual meeting of stockholders. Under the majority voting policy contained in our Corporate Governance Guidelines, any
nominee for director in an 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 and Nominating Committee of our Board of Directors. Upon receipt of this offer of resignation, our Corporate Governance and 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.
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»
-
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 2019 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.
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»
-
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.
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»
-
Proposal 4, Approval of Exact Sciences Corporation 2019 Omnibus Long-Term Incentive
Plan.
The Exact Sciences Corporation 2019 Omnibus Long-Term Incentive Plan will be approved if a majority of the votes of stockholders present in person or by proxy
with respect to 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, the advisory vote on the compensation of our named
executive officers and the approval of the Exact Sciences Corporation 2019 Omnibus Long-Term Incentive Plan. We expect no broker non-votes on the appointment of BDO as our independent registered
public accounting firm for 2019. Abstentions will have no effect on the proposal ratifying the appointment of BDO as our independent registered public accounting firm for 2019.
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 2020 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 2020 annual meeting of stockholders must be received no later than February 16, 2020. 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 2020 Annual Meeting of Stockholders.
Notice of any director nomination or other
proposal that you intend to present at the 2020 annual meeting of stockholders, but do not intend to have included in the proxy statement and form of proxy relating to the 2020 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 27, 2020 and not later than the
close of business on April 26, 2020. 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 2020 annual meeting of stockholders.
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ANNEX AEXACT SCIENCES CORPORATION 2019 OMNIBUS LONG-TERM INCENTIVE PLAN
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EXACT SCIENCES CORPORATION
2019 OMNIBUS LONG-TERM INCENTIVE PLAN
Exact
Sciences Corporation, a Delaware corporation (the "
Company
"), sets forth herein the terms of its 2019 Omnibus Long-Term Incentive Plan (the
"
Plan
"), as follows:
-
1.
-
PURPOSE
The Plan is intended to enhance the Company's and its Affiliates' (as defined herein) ability to attract and retain highly qualified officers, non-employee members of the Board,
key employees, consultants and advisors, and to motivate such officers, non-employee members of the Board, key employees, consultants and advisors to serve the Company and its Affiliates and to expend
maximum effort to improve the business
results and earnings of the Company, by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. To this end,
the Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, and other stock-based awards. Any of these awards may, but
need not, be made as performance incentives to reward attainment of performance goals in accordance with the terms hereof. Stock options granted under the Plan may be non-qualified stock options or
incentive stock options, as provided herein. Upon becoming effective, the Plan replaces, and no further awards shall be made under, the Predecessor Plan (as defined herein).
-
2.
-
DEFINITIONS
For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply:
2.1.
"
Affiliate
" means any company or other trade or business that "controls,"
is "controlled by" or is "under common control" with the Company within the meaning of Rule 405 of Regulation C under the Securities Act, including, without limitation, any Subsidiary.
2.2.
"
Award
" means a grant of an Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, or Other Stock-based Award.
2.3.
"
Award Agreement
" means a written agreement between the Company and a
Grantee, or notice from the Company or an Affiliate to a Grantee that evidences and sets out the terms and conditions of an Award.
2.4.
"
Board
" means the Board of Directors of the Company.
2.5.
"
Cause
" shall be defined as that term is defined in a Grantee's offer
letter, other applicable employment agreement, or an applicable Award Agreement with the Company or Affiliate; or, if there is no such definition "Cause" means, as determined by the Company:
(i) engaging in any act, or failing to act, or misconduct that in any such case is injurious to the Company or its Affiliates; (ii) gross negligence or willful misconduct in connection
with the performance of duties; (iii) conviction of (or entering a plea of guilty or nolo contendere to) a criminal offense (other than a minor traffic offense); (iv) fraud, embezzlement
or misappropriation of funds or property of the Company or an Affiliate; (v) material breach of any term of any employment, consulting or other services, confidentiality, intellectual property
or non-competition agreement, if any, between the Service Provider and the Company or an Affiliate; (vi) the entry of an order duly issued by any regulatory agency (including federal, state and
local regulatory agencies and self-regulatory bodies) having jurisdiction over the Company or an Affiliate requiring the removal from any office held by the Service Provider with the Company or
prohibiting or materially limiting a Service Provider from participating in the business or affairs of the Company or any Affiliate; or (vii) the revocation or threatened revocation of any of
the Company's or any Affiliate's government licenses, permits or approvals, which is primarily due to the Service Provider's action or inaction and such revocation or threatened revocation would be
alleviated or mitigated in any material respect by the termination of the Service Provider's Services.
2.6.
"
Change in Contro
l" shall have the meaning set forth in
Section 15.3.2
hereof.
2.7.
"
Code
" means the Internal Revenue Code of 1986, as now in effect or
as hereafter amended.
2.8.
"
Committee
" means one or more committees or subcommittees of the Board. The
Board will cause the Committee to satisfy the applicable requirements of any stock exchange on which the Common Stock may then be listed. For purposes of Awards to Grantees who are subject to
Section 16 of the Exchange Act, Committee means all of the members of the Committee who are "non-employee directors" within the meaning of Rule 16b-3 adopted under the Exchange Act. All
references in the Plan to the Board shall mean such Committee or the Board.
2.9.
"
Company
" means Exact Sciences Corporation, a Delaware corporation, or any
successor corporation.
2.10.
"
Common Stock
" or "
Stock
"
means a share of common stock of the Company, par value $.01 per share.
2.11.
"
Effective Date
" means
, 2019,
the date the Plan was approved by the Company's stockholders.
2.12.
"
Exchange Act
" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.13.
"
Fair Market Value
" of a share of Common Stock as of a particular date
shall mean (1) if the Common Stock is listed on a national securities exchange, the closing or last price of the Common Stock on the composite tape or other comparable reporting system for the
applicable date, or if the applicable date is not a trading day, the trading day immediately preceding the applicable date, or (2) if the shares of Common Stock are not then listed on a
national securities exchange, the closing or last price of the Common Stock quoted by an established quotation service for over-the-counter securities, or (3) if the shares of Common Stock are
not then listed on a national securities exchange or
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quoted
by an established quotation service for over-the-counter securities, or the value of such shares is not otherwise determinable, such value as determined by the Board in good faith in its sole
discretion (but in any event not less than fair market value within the meaning of Section 409A).
2.14.
"
Family Member
" means a person who is a spouse, former spouse, child,
stepchild, grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law, or sister-in-law, including adoptive
relationships, of the applicable individual, any person sharing the applicable individual's household (other than a tenant or employee), a trust in which any one or more of these persons have more
than fifty percent of the beneficial interest, a foundation in which any one or more of these persons (or the applicable individual) control the management of assets, and any other entity in which one
or more of these persons (or the applicable individual) own more than fifty percent of the voting interests.
2.15.
"
Full-Value Award
" means an Award of Restricted Stock, Restricted Stock
Units or Other Stock-based Award with a per share price or per unit purchase price lower than 100% of Fair Market Value on the date of grant.
2.16.
"
Good Reason
" means, provided that the Grantee subsequently complies with
the Good Reason Process, any of the following events that occur without the Grantee's consent: (i) a material diminution in Grantee's responsibility, authority or duty; (ii) a material
diminution in the Grantee's base salary except for across-the-board salary reductions based on the Company's financial performance similarly affecting all or substantially all management employees of
the Company; or (iii) a material change in the geographic location at which the Grantee provides services to the Company.
2.17.
"
Good Reason Process
" means that (i) the Grantee reasonably
determines in good faith that a Good Reason condition has occurred; (ii) the Grantee notifies the Company in writing of the occurrence of the Good Reason condition within sixty (60) days
of such occurrence; (iii) the Grantee cooperates in good faith with the Company's efforts, for a period of not less than thirty (30) days following such notice (the
"
Cure Period
"), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist following the Cure Period;
and (v) the Grantee terminates his or her employment for Good Reason within sixty (60) days after the end of the Cure Period. If the Company cures the Good Reason condition during the
Cure Period, and the Grantee terminates his or her employment with the Company due to such condition (notwithstanding its cure), then the Grantee will not be deemed to have terminated his or her
employment for Good Reason.
2.18.
"
Grant Date
" means, as determined by the Board, the latest to occur of
(i) the date as of which the Board approves an Award, (ii) the date on which the recipient of an Award first becomes eligible to receive an Award under Section 6 hereof, or
(iii) such other date as may be specified by the Board in the Award Agreement.
2.19.
"
Grantee
" means a person who receives or holds an Award under the Plan.
2.20.
"
Incentive Stock Option
" means an "incentive stock option" within the
meaning of Section 422 of the Code, or the corresponding provision of any subsequently enacted tax statute, as amended from time to time.
2.21.
"
Non-qualified Stock Option
" means an Option that is not an Incentive
Stock Option.
2.22.
"
Option
" means an option to purchase one or more shares of Stock pursuant
to the Plan.
2.23.
"
Option Price
" means the exercise price for each share of Stock subject to
an Option.
2.24.
"
Other Stock-based Awards
" means Awards consisting of Stock units, or
other Awards, valued in whole or in part by reference to, or otherwise based on, Common Stock.
2.25.
"
Performance Award
" means an Award made subject to the attainment of
performance goals (as described in Section 12 hereof).
2.26.
"
Plan
" means this Exact Sciences Corporation 2019 Omnibus Long-Term
Incentive Plan, as now in effect or as hereafter amended.
2.27.
"
Predecessor Plan
" means the Exact Sciences Corporation 2010 Omnibus
Long-Term Incentive Plan.
2.28.
"
Purchase Price
" means the purchase price for each share of Stock pursuant
to a grant of Restricted Stock.
2.29.
"
Restricted Stock
" means shares of Stock, awarded to a Grantee pursuant to
Section 10
hereof.
2.30.
"
Restricted Stock Unit
" means a bookkeeping entry representing the
equivalent of shares of Stock, awarded to a Grantee pursuant to
Section 10
hereof.
2.31.
"
SAR Exercise Price
" means the per share exercise price of a SAR granted
to a Grantee under Section 9 hereof.
2.32.
"
SEC
" means the United States Securities and Exchange Commission.
2.33.
"
Section 409A
" shall mean Section 409A of the Code and all
formal guidance and regulations promulgated thereunder.
2.34.
"
Securities Act
" means the Securities Act of 1933, as now in effect
or as hereafter amended.
2.35.
"
Separation from Service
" means a termination of Service of a Service
Provider, as determined by the Board, which determination shall be final, binding and conclusive; provided that if any Award governed by Section 409A is to be distributed on a Separation from
Service, then the definition of Separation from Service for such purposes shall comply with the definition provided in Section 409A.
2.36.
"
Service
" means service as a Service Provider to the Company or an
Affiliate. Unless otherwise stated in the applicable Award Agreement, a Grantee's change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee continues
to be a Service Provider to the Company or an Affiliate.
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2.37.
"
Service Provider
" means an employee, officer, non-employee member of the
Board, consultant or advisor of the Company or an Affiliate.
2.38.
"
Stock Appreciation Right
" or
"
SAR
" means a right granted to a Grantee under
Section 9
hereof.
2.39.
"
Subsidiary
" means any "subsidiary corporation" of the Company within the
meaning of Section 424(f) of the Code.
2.40.
"
Substitute Award
" means any Award granted in assumption of or in
substitution for an award of a company or business acquired by the Company or a Subsidiary or with which the Company or an Affiliate combines.
2.41.
"
Ten Percent Stockholder
" means an individual who owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding stock of the Company, its parent or any of its Subsidiaries. In determining stock ownership, the attribution rules of
Section 424(d) of the Code shall be applied.
2.42.
"
Termination Date
" means the date that is ten (10) years after the
Effective Date, unless the Plan is earlier terminated by the Board under
Section 5.2
hereof.
2.43.
"
Transaction
" shall have the meaning set forth in
Section 15.2
hereof.
-
3.
-
ADMINISTRATION OF THE PLAN
3.1. General.
The
Board shall have such powers and authorities related to the administration of the Plan as are consistent with the Company's certificate of incorporation and bylaws and applicable law. The Board
shall have the power and authority to delegate its responsibilities hereunder to the Committee, which shall have full authority to act in accordance with its charter, and with respect to the authority
of the Board to act hereunder, all references to the Board shall be deemed to include a reference to the Committee, to the extent such power or responsibilities have been delegated. Except as
specifically provided in
Section 14
hereof or as otherwise may be required by applicable law, regulatory requirement or
the certificate of incorporation or the bylaws of the Company, the Board shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan,
any Award or any Award Agreement, and shall have full power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and provisions
of the Plan that the Board deems to be necessary or appropriate to the administration of the Plan. The Committee shall administer the Plan; provided that, the Board shall retain the right to exercise
the authority of the Committee to the extent consistent with applicable law and the applicable requirements of any securities exchange on which the Common Stock may then be listed. The interpretation
and construction by the Board of any provision of the Plan, any Award or any Award Agreement shall be final, binding and conclusive. Without limitation, the Board shall have full and final authority,
subject to the other terms and conditions of the Plan, to:
(i) designate
Grantees;
(ii) determine
the type or types of Awards to be made to a Grantee;
(iii) determine
the number of shares of Stock to be subject to an Award;
(iv) establish
the terms and conditions of each Award (including, but not limited to, the Option Price of any Option, the nature and duration of any restriction or
condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of an Award or the shares of Stock subject thereto, and any terms or conditions that may be
necessary to qualify Options as Incentive Stock Options);
(v) prescribe
the form of each Award Agreement; and
(vi) amend,
modify, or supplement the terms of any outstanding Award; and, in order to effectuate the purposes of the Plan, modify Awards to foreign nationals or
individuals who are employed outside the United States to recognize differences in local law, tax policy, or custom.
To
the extent permitted by applicable law, the Board may delegate its authority as identified herein to any individual or committee of individuals (who need not be directors), including without
limitation the authority to make Awards to Grantees who are not subject to Section 16 of the Exchange Act. To the extent that the Board delegates its authority to make Awards as provided by
this Section, all references in the Plan to the Board's authority to make Awards and determinations with respect thereto shall be deemed to include the Board's delegate. Any such delegate shall serve
at the pleasure of, and may be removed at any time by the Board.
3.2. Restrictions; No Repricing.
Notwithstanding the foregoing, no amendment or modification may be made to an outstanding Option or SAR that causes the Option or SAR to become subject to Section 409A,
without the Grantee's written prior approval. Notwithstanding any provision herein to the contrary, the repricing of Options or SARs is prohibited without prior approval of the Company's stockholders.
For this purpose, a "repricing" means any of the following (or any other action that has the same effect as any of the following): (A) changing the terms of an Option or SAR to lower its Option
Price or SAR Exercise Price; (B) any other action that is treated as a "repricing" under generally accepted accounting principles; and (C) repurchasing for cash or canceling an Option or
SAR at a time when its Option Price or SAR Exercise Price is greater than the Fair Market Value of the underlying shares in exchange for another Award, unless the cancellation and exchange occurs in
connection with a change in capitalization or similar change under
Section 15
hereof. A cancellation and exchange under clause (C) would be
considered a "repricing" regardless of whether it is treated as a "repricing" under generally accepted accounting principles and regardless of whether it is voluntary on the part of the Grantee.
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3.3. Award Agreements; Breach of Covenants; Cause.
The grant of any Award may be contingent upon the Grantee executing the appropriate Award Agreement. The Company may retain the right in an Award Agreement to cause a forfeiture
of the gain realized by a Grantee on account of actions taken by the Grantee in violation or breach of or in conflict with any employment agreement, non-competition agreement, any agreement
prohibiting solicitation of employees or clients of the Company or any Affiliate thereof or any confidentiality obligation with respect to the Company or any Affiliate thereof or otherwise in
competition with the Company or any Affiliate thereof, to the extent specified in such Award Agreement applicable to the Grantee. Furthermore, the Company may annul an Award if the Grantee is
terminated for Cause.
3.4. Deferral Arrangement.
The Board may permit or require the deferral of any Award payment into a deferred compensation arrangement, subject to such rules and procedures as it may establish and in
accordance with Section 409A, which may include provisions for the payment or crediting of interest or dividend equivalents, including converting such credits into deferred Stock units.
3.5. No Liability.
No member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan, any Award or Award Agreement.
3.6. Book Entry.
Notwithstanding any other provision of this Plan to the contrary, the Company may elect to satisfy any requirement under this Plan for the delivery of stock certificates through
the use of book-entry.
3.7. Minimum Vesting Conditions.
Notwithstanding any other provision of the Plan to the contrary, equity-based Awards granted under the Plan shall vest no earlier than the first anniversary of the date the
Award is granted, excluding, for this purpose, any (i) Substitute Awards, (ii) shares delivered in lieu of fully vested cash incentive compensation under any applicable plan or program
of the Company, and (iii) Awards to non-employee members of the Board that vest on the earlier of the one-year anniversary of the date of grant or the next annual meeting of stockholders
(provided that such vesting period under this clause (iii) may not be less than 50 weeks after grant); provided, that, the Board may grant equity-based Awards without regard to the
foregoing minimum vesting requirement with respect to a maximum of five percent (5%) of the available share reserve authorized for issuance under the Plan pursuant to
Section 4.1
(subject to
adjustment under
Section 15
); and, provided further, for the avoidance
of doubt, that the foregoing restriction does not apply to the Board's discretion to provide for accelerated exercisability or vesting of any Award, including in cases of retirement, death, disability
or a Change in Control, in the terms of the Award or otherwise.
-
4.
-
STOCK SUBJECT TO THE PLAN
4.1. Authorized Number of Shares.
Subject
to adjustment as provided in
Section 15
hereof, the maximum number of shares of Stock available for issuance under the Plan shall be
13,829,582. Subject to adjustments in accordance with
Section 15
hereof, all 13,829,582 of such shares of Stock available for issuance under the
Plan shall be available for issuance pursuant to Incentive Stock Options. In addition, shares of Stock underlying any outstanding award granted under the Predecessor Plan that, following the Effective
Date, expires, or is terminated, surrendered or forfeited for any reason without issuance of such shares shall be available for the grant of new Awards under this Plan. As provided in
Section 1
, no
new awards shall be granted under the Predecessor Plan following the Effective Date. Shares issued under the Plan may consist in
whole or in part of authorized but unissued shares, treasury shares, or shares purchased on the open market or otherwise, all as determined by the Company from time to time.
4.2. Fungible Share Pool.
Subject
to adjustment under
Section 15
hereof, any Award that is not a Full-Value Award shall be counted against the share limits specified in
Section 4.1
hereof as one share for each share of Common Stock subject to such Award and any Award that is a Full-Value Award shall be counted
against the share limits specified in
Section 4.1
hereof as 1.61 shares for each one share of Common Stock subject to such Full-Value Award. To the
extent a share that was subject to an Award that counted as one share is returned to the Plan pursuant to
Section 4.3
hereof, each applicable share
reserve will be credited with one share. To the extent that a share that was subject to an Award that counts as 1.61 shares is returned to the Plan pursuant to
Section 4.3
hereof, each applicable
share reserve will be credited with 1.61 shares.
4.3. Share Counting.
The
number of shares of Common Stock available for the purpose of Awards under the Plan shall be reduced by: (i) the total number of SARs exercised, regardless of whether any of the shares of
Common Stock underlying such Awards are not actually issued to the Grantee as the result of a net settlement; and (ii) any shares of Common Stock used to pay any exercise price or tax
withholding obligation with respect to any Award. Any Award settled in cash shall not be counted as shares of Common Stock for any purpose under this Plan. If any Award under the Plan expires, or is
terminated, surrendered or forfeited, in whole or in part, the unissued Common Stock covered by such Award shall again be available for the grant of Awards under the Plan. If shares of Common Stock
issued pursuant to the Plan are repurchased by, or are surrendered or forfeited to the Company at no more than cost, such shares of Common Stock shall again be available for the grant of Awards under
the Plan. In addition, in the case of any Substitute Award, such Substitute Award shall not be counted against the number of shares reserved under the Plan. Any shares of Common Stock repurchased by
the Company with cash proceeds from the exercise of Options shall not be added back to the pool of shares available for grant under the Plan set forth in
Section 4.1
above.
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5.
-
EFFECTIVE DATE, DURATION AND AMENDMENTS
5.1. Term.
The
Plan becomes effective as of the Effective Date. The Plan shall terminate automatically on the ten (10) year anniversary of the Effective Date and may be terminated on any earlier date as
provided in
Section 5.2
hereof.
5.2. Amendment and Termination of the Plan.
The
Board may, at any time and from time to time, amend, suspend, or terminate the Plan as to any Awards which have not been made. An amendment shall be contingent on approval of the Company's
stockholders to the extent stated by the Board, required by applicable law or required by applicable stock exchange listing requirements. Notwithstanding the foregoing, any amendment to
Section 3.2
hereof shall be contingent upon the approval of the Company's stockholders. No Awards shall be made after the Termination Date. The
applicable terms of the Plan, and any terms and conditions applicable to Awards granted prior to the Termination Date shall survive the termination of the Plan and continue to apply to such Awards. No
amendment, suspension, or termination of the Plan shall, without the consent of the Grantee, materially impair rights or obligations under any Award theretofore awarded.
-
6.
-
AWARD ELIGIBILITY AND LIMITATIONS
6.1. Service Providers.
Subject
to this Section, Awards may be made to any Service Provider, including any Service Provider who is an officer, non-employee member of the Board, consultant or advisor of the Company or of any
Affiliate, as the Board shall determine and designate from time to time in its discretion.
6.2. Successive Awards.
An
eligible person may receive more than one Award, subject to such restrictions as are provided herein.
6.3. Stand-Alone, Additional, Tandem, and Substitute Awards.
Awards
may, in the discretion of the Board, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of
the Company, any Affiliate, or any business entity to be acquired by the Company or an Affiliate, or any other right of a Grantee to receive payment from the Company or any Affiliate. Such additional,
tandem, and substitute or exchange Awards may be granted at any time. If an Award is granted in substitution or exchange for another Award, the Board shall have the right to require the surrender of
such other Award in consideration for the grant of the new Award. Subject to
Section 3.2
hereof, the Board shall have the right, in its discretion,
to make Awards in substitution or exchange for any other award under another plan of the Company, any Affiliate, or any business entity to be acquired by the Company or an Affiliate. In addition,
Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Company or any Affiliate, in which the value of Stock subject to the Award is
equivalent in value to the cash compensation (for example, Restricted Stock Units or Restricted Stock).
6.4. Limits on Awards to Non-Employee Directors
The
maximum value of Awards granted during any calendar year to any non-employee member of the Board, taken together with any cash fees paid to such non-employee member of the Board during the
calendar year and the value of awards granted to the non-employee member of the Board under any other equity compensation plan of the Company or an Affiliate during the calendar year, shall not exceed
$600,000 (calculating the value of any Awards or other equity compensation plan awards based on the grant date fair value for financial reporting purposes); provided, however, that Awards granted to a
non-employee member of the Board upon his or her initial election to the Board or the board of directors of an Affiliate shall not be counted towards the limit under this
Section 6.4
. The Board may
make exceptions to the limit in this paragraph in extraordinary circumstances for an individual non-employee member of
the Board; provided that the director receiving such additional compensation may not participate in the decision to award such compensation.
-
7.
-
AWARD AGREEMENT
Each
Award shall be evidenced by an Award Agreement, in such form or forms as the Board shall from time to time determine. Without limiting the foregoing, an Award Agreement may be provided in the
form of a notice which provides that acceptance of the Award constitutes acceptance of all terms of the Plan and the notice. Award Agreements granted from time to time or at the same time need not
contain similar provisions but shall be consistent with the terms of the Plan. Each Award Agreement evidencing an Award of Options shall specify whether such Options are intended to be Non-qualified
Stock Options or Incentive Stock Options, and in the absence of such specification such options shall be deemed Non-qualified Stock Options.
-
8.
-
TERMS AND CONDITIONS OF OPTIONS
8.1. Option Price.
The
Option Price of each Option shall be fixed by the Board and stated in the related Award Agreement. The Option Price of each Option (except those that constitute Substitute Awards) shall be at
least the Fair Market Value on the Grant Date of a share of Stock; provided, however, that in the event that a Grantee is a Ten Percent Stockholder as of the Grant Date, the Option Price of an Option
granted to such Grantee that is intended to be an Incentive Stock Option shall be not less than 110 percent of the Fair Market Value of a share of Stock on the Grant Date. In no case shall the
Option Price of any Option be less than the par value of a share of Stock.
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8.2. Vesting.
Subject
to
Section 8.3
hereof, each Option shall become exercisable at such times and under such conditions (including, without limitation,
performance requirements) as shall be determined by the Board and stated in the Award Agreement.
8.3. Term.
Each
Option shall terminate, and all rights to purchase shares of Stock thereunder shall cease, upon the expiration of ten (10) years from the Grant Date, or under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the related Award Agreement; provided, however, that in the event that the Grantee is a Ten Percent
Stockholder, an Option granted to such Grantee that is intended to be an Incentive Stock Option at the Grant Date shall not be exercisable after the expiration of five (5) years from its Grant
Date.
8.4. Limitations on Exercise of Option.
Notwithstanding
any other provision of the Plan, in no event may any Option be exercised, in whole or in part, (i) prior to the date the Plan is approved by the stockholders of the Company as
provided herein or (ii) after the occurrence of an event which results in termination of the Option.
8.5. Method of Exercise.
An
Option that is exercisable may be exercised by the Grantee's delivery of a notice of exercise to the Company, setting forth the number of shares of Stock with respect to which the Option is to be
exercised, accompanied by full payment for the shares. To be effective, notice of exercise must be made in accordance with procedures established by the Company from time to time.
8.6. Rights of Holders of Options.
An
individual holding or exercising an Option shall have none of the rights of a stockholder (for example, the right to receive cash or dividend payments or distributions attributable to the subject
shares of Stock or to direct the voting of the subject shares of Stock) until the shares of Stock covered thereby are fully paid and issued to him. Except as provided in
Section 15
hereof or the
related Award Agreement, no adjustment shall be made for dividends, distributions or other rights for which the record
date is prior to the date of such issuance.
8.7. Delivery of Stock Certificates.
Promptly
after the exercise of an Option by a Grantee and the payment in full of the Option Price, such Grantee shall be entitled to the issuance of a stock certificate or certificates evidencing his
or her ownership of the shares of Stock subject to the Option.
8.8. Limitations on Incentive Stock Options.
An
Option shall constitute an Incentive Stock Option only (i) if the Grantee of such Option is an employee of the Company or any Subsidiary of the Company; (ii) to the extent
specifically provided in the related Award Agreement; and (iii) to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) of the shares of Stock with
respect to which all Incentive Stock Options held by such Grantee become exercisable for the first time during any calendar year (under the Plan and all other plans of the Grantee's employer and its
Affiliates) does not exceed $100,000. This limitation shall be applied by taking Options into account in the order in which they were granted.
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TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS
9.1. Right to Payment.
A
SAR shall confer on the Grantee a right to receive, upon exercise thereof, the excess of (i) the Fair Market Value of one share of Stock on the date of exercise over (ii) the SAR
Exercise Price, as determined by the Board. The Award Agreement for an SAR shall specify the SAR Exercise Price, which shall be fixed at the Fair Market Value of a share of Stock on the Grant Date.
SARs may be granted alone or in conjunction with all or part of an Option or at any subsequent time during the term of such Option or in conjunction with all or part of any other Award. A SAR granted
in tandem with an outstanding Option following the Grant Date of such Option shall have a grant price that is equal to the Option Price; provided, however, that the SAR's grant price may not be less
than the Fair Market Value of a share of Stock on the Grant Date of the SAR.
9.2. Other Terms.
The
Board shall determine at the Grant Date or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the time or times at which SARs shall cease to be or become exercisable following Separation from Service or upon other conditions, the method of
exercise, whether or not a SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR.
9.3. Term of SARs.
The
term of a SAR granted under the Plan shall be determined by the Board, in its sole discretion; provided, however, that such term shall not exceed ten (10) years.
9.4. Payment of SAR Amount.
Upon
exercise of a SAR, a Grantee shall be entitled to receive payment from the Company (in cash or Stock, as determined by the Board) in an amount determined by multiplying:
(i) the
difference between the Fair Market Value of a share of Stock on the date of exercise over the SAR Exercise Price; by
(ii) the
number of shares of Stock with respect to which the SAR is exercised.
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TERMS AND CONDITIONS OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS
10.1. Restrictions.
At
the time of grant, the Board may, in its sole discretion, establish a period of time (a "restricted period") and any additional restrictions including the satisfaction of corporate or individual
performance objectives applicable to an Award of Restricted Stock or Restricted Stock Units in accordance with
Section 12.1
and
12.2
hereof. Each
Award of Restricted Stock or Restricted Stock Units may be subject to a different restricted period and additional restrictions. Neither
Restricted Stock nor Restricted Stock Units may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the restricted period or prior to the satisfaction of any other
applicable restrictions.
10.2. Restricted Stock Certificates.
The
Company shall issue stock, in the name of each Grantee to whom Restricted Stock has been granted, stock certificates or other evidence of ownership representing the total number of shares of
Restricted Stock granted to the Grantee, as soon as reasonably practicable after the Grant Date. The Board may provide in an Award Agreement that either (i) the Secretary of the Company shall
hold such certificates for the Grantee's benefit until such time as the Restricted Stock is forfeited to the Company or the restrictions lapse, or (ii) such certificates shall be delivered to
the Grantee; provided, however, that such certificates shall bear a legend or legends that comply with the applicable securities laws and regulations and make appropriate reference to the restrictions
imposed under the Plan and the Award Agreement.
10.3. Rights of Holders of Restricted Stock.
Unless
the Board otherwise provides in an Award Agreement, holders of Restricted Stock shall have rights as stockholders of the Company, including voting and dividend rights.
10.4. Rights of Holders of Restricted Stock Units.
Restricted
Stock Units may be settled in cash or Stock, as determined by the Board and set forth in the Award Agreement. The Award Agreement shall also set forth whether the Restricted Stock Units
shall be settled (i) within the time period specified in
Section 17.9.1
hereof for short term deferrals or (ii) otherwise within the
requirements of Section 409A, in which case the Award Agreement shall specify upon which events such Restricted Stock Units shall be settled.
Unless
otherwise stated in the applicable Award Agreement, holders of Restricted Stock Units shall not have rights as stockholders of the Company, including no voting or dividend or dividend
equivalents rights.
A
holder of Restricted Stock Units shall have no rights other than those of a general creditor of the Company. Restricted Stock Units represent an unfunded and unsecured obligation of the Company,
subject to the terms and conditions of the applicable Award Agreement.
10.5. Purchase of Restricted Stock.
The
Grantee shall be required, to the extent required by applicable law, to purchase the Restricted Stock from the Company at a Purchase Price equal to the greater of (i) the aggregate par
value of the shares of Stock represented by such Restricted Stock or (ii) the Purchase Price, if any, specified in the related Award Agreement. If specified in the Award Agreement, the Purchase
Price may be deemed paid by Services already rendered. The Purchase Price shall be payable in a form described in Section 11 hereof or, in the discretion of the Board, in consideration for past
Services rendered.
10.6. Delivery of Stock.
Upon
the expiration or termination of any restricted period and the satisfaction of any other conditions prescribed by the Board, the restrictions applicable to shares of Restricted Stock or
Restricted Stock Units settled in Stock shall lapse, and, unless otherwise provided in the Award Agreement, a stock certificate for such shares shall be delivered, free of all such restrictions, to
the Grantee or the Grantee's beneficiary or estate, as the case may be.
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11.
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FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK
11.1. General Rule.
Payment
of the Option Price for the shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock shall be made in cash or in cash equivalents acceptable to the
Company, except as provided in this
Section 11
.
11.2. Surrender of Stock.
To the extent the Award Agreement so provides, payment of the Option Price for shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock
may be made all or in part through the tender to the Company of shares of Stock, which shares shall be valued, for purposes of determining the extent to which the Option Price or Purchase Price for
Restricted Stock has been paid thereby, at their Fair Market Value on the date of exercise or surrender. Notwithstanding the foregoing, in the case of an Incentive Stock Option, the right to make
payment in the form of already owned shares of Stock may be authorized only at the time of grant.
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11.3. Cashless Exercise.
With respect to an Option only (and not with respect to Restricted Stock), to the extent permitted by law and to the extent the Award Agreement so provides, payment of the
Option Price may be made all or in part by delivery (on a form acceptable to the Company) of an irrevocable direction to a licensed securities broker acceptable to the Company to sell shares of Stock
and to deliver all or part of the sales proceeds to the Company in payment of the Option Price and any withholding taxes described in
Section 17.3
hereof.
11.4. Other Forms of Payment.
To the extent the Award Agreement so provides, payment of the Option Price or the Purchase Price for Restricted Stock may be made in any other form that is consistent with
applicable laws, regulations and rules, including, but not limited to, the Company's withholding of shares of Stock otherwise due to the exercising Grantee.
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12.
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TERMS AND CONDITIONS OF PERFORMANCE AWARDS
12.1. Performance Conditions.
The right of a Grantee to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such performance conditions as may be specified by
the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions. Such Awards are referred to as
"Performance Awards."
12.2. Performance Goals Generally.
The performance goals for Performance Awards shall consist of one or more business or other criteria and a targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee consistent with this
Section 12
. The Committee may determine that Performance Awards shall be granted,
exercised and/or settled upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to grant, exercise and/or settlement of such
Performance Awards. Performance goals may, in the discretion of the Committee, be established on a Company-wide basis, or with respect to one or more business units, divisions, subsidiaries or
business segments, as applicable. Performance goals may be absolute or relative (to the performance of one or more comparable companies or indices). The Committee may determine the extent to which
measurement of performance goals may exclude the impact of charges for restructuring, discontinued operations, extraordinary items, debt redemption or retirement, asset write downs, litigation or
claim judgments or settlements, acquisitions or divestitures, foreign exchange gains and losses, and other unusual non-recurring items, and the cumulative effects of tax or accounting changes (each as
defined by generally accepted accounting principles and as identified in the Company's financial statements or other SEC filings). Performance goals may differ for Performance Awards granted to any
one Grantee or to different Grantees.
12.3. Business Criteria.
For purposes of Performance Awards, the Committee may select any business criteria for the Company, on a consolidated basis, and/or specified subsidiaries or business units of
the Company (except with respect to the total stockholder return and earnings per share criteria), including any of the following: net sales; revenue; revenue growth or product revenue growth;
operating income (before or after taxes); pre-or after-tax income (before or after allocation of corporate overhead and bonuses; net earnings; earnings per share; net income (before or after taxes);
return on equity; total shareholder return; return on assets or net assets; appreciation in and/or maintenance of, share price; market share; gross profits; earnings (including earnings before taxes,
earnings before interest and taxes or earnings before interest, taxes depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices;
reduction in costs; cash flow or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment;
improvement in or attainment of expense levels or working capital levels; operating margins; gross margins or cash margin; year-end cash; debt reductions; shareholder equity; regulatory performance;
implementation, completion or attainment of measurable objectives with respect to research, development, products or projects and recruiting and maintaining personnel; and any other business criteria
established by the Committee.
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13.
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OTHER STOCK-BASED AWARDS
13.1. Grant of Other Stock-based Awards.
Other Stock-based Awards may be granted either alone or in addition to or in conjunction with other Awards under the Plan. Other Stock-based Awards may be granted in lieu of
other cash or other compensation to which a Service Provider is entitled from the Company or may be used in
the settlement of amounts payable in shares of Common Stock under any other compensation plan or arrangement of the Company, including without limitation, the Company's incentive compensation plan.
Subject to the provisions of the Plan, the Committee shall have the sole and complete authority to determine the persons to whom and the time or times at which such Awards shall be made, the number of
shares of Common Stock to be granted pursuant to such Awards, and all other conditions of such Awards. Unless the Committee determines otherwise, any such Award shall be confirmed by an Award
Agreement, which shall contain such provisions as the Committee determines to be necessary or appropriate to carry out the intent of this Plan with respect to such Award.
13.2. Terms of Other Stock-based Awards.
Any Common Stock subject to Awards made under this
Section 13
may not be sold, assigned, transferred, pledged or otherwise
encumbered prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses.
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14.
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REQUIREMENTS OF LAW
14.1. General.
The Company shall not be required to sell or issue any shares of Stock under any Award if the sale or issuance of such shares would constitute a violation by the Grantee, any
other individual exercising an Option, or the Company of any provision of any law or regulation of any governmental authority, including without limitation any federal or state securities laws or
regulations. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any shares subject to an Award upon any securities exchange or under any
governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance or purchase of shares hereunder, no shares of Stock may be issued or sold to the Grantee
or any other individual exercising an Option pursuant to such Award unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Award. Specifically, in connection with the Securities Act, upon the exercise of any
Option or the delivery of any shares of Stock underlying an Award, unless a registration statement under such Act is in effect with respect to the shares of Stock covered by such Award, the Company
shall not be required to sell or issue such
shares unless the Board has received evidence satisfactory to it that the Grantee or any other individual exercising an Option may acquire such shares pursuant to an exemption from registration under
the Securities Act. Any determination in this connection by the Board shall be final, binding, and conclusive. The Company may, but shall in no event be obligated to, register any securities covered
hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative action in order to cause the exercise of an Option or the issuance of shares of Stock pursuant to the
Plan to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that an Option shall not be exercisable until the shares of Stock
covered by such Option are registered or are exempt from registration, the exercise of such Option (under circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned upon
the effectiveness of such registration or the availability of such an exemption.
14.2. Rule 16b-3.
During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is the intent of the Company that Awards and the
exercise of Options granted to officers and directors hereunder will qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any provision of the Plan or
action by the Board or Committee does not comply with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent permitted by law and deemed advisable by the Board, and shall
not affect the validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the Board may exercise its discretion to modify this Plan in any respect necessary to satisfy the
requirements of, or to take advantage of any features of, the revised exemption or its replacement.
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15.
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EFFECT OF CHANGES IN CAPITALIZATION
15.1. Changes in Stock.
If (i) the number of outstanding shares of Stock is increased or decreased or the shares of Stock are changed into or exchanged for a different number or kind of shares
or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution
payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Company occurring after the Effective Date or (ii) there occurs any
spin-off, split-up, extraordinary cash dividend or other distribution of assets by the Company, the number and kinds of shares for which grants of Options and Other Stock-based Awards may be made
under the Plan (including the per-Grantee maximums set forth in
Section 4
hereof) shall be equitably adjusted by the Company; provided that any
such adjustment shall comply with Section 409A. In addition, in the event of any such increase or decrease in the number of outstanding shares or other transaction described in
clause (ii) above, the number and kind of shares for which Awards are outstanding and the Option Price per share of outstanding options and SAR Exercise Price per share of outstanding SARs
shall be equitably adjusted; provided that any such adjustment shall comply with Section 409A.
15.2. Effect of Certain Transactions.
Except as otherwise provided in an Award Agreement and subject to the provisions of
Section 15.3
hereof, in the event of
(a) the liquidation or dissolution of the Company or (b) a reorganization, merger, exchange or consolidation of the Company or involving the shares of Common Stock (a
"
Transaction
"), the Plan and the Awards issued hereunder shall continue in effect in accordance with their respective terms, except that following a
Transaction either (i) each outstanding Award shall be treated as provided for in the agreement entered into in connection with the Transaction or (ii) if not so provided in such
agreement, each Grantee shall be entitled to receive in respect of each share of Common Stock subject to any outstanding Awards, upon exercise or payment or transfer in respect of any Award, the same
number and kind of stock, securities, cash, property or other consideration that each holder of a share of Common Stock was entitled to receive in the Transaction in respect of a share of Common
stock; provided, however, that, unless otherwise determined by the Committee, such stock, securities, cash, property or other consideration shall remain subject to all of the conditions, restrictions
and performance criteria which were applicable to the Awards prior to such Transaction. Without limiting the generality of the foregoing, the treatment of outstanding Options and Stock Appreciation
Rights pursuant to this
Section 15.2
in connection with a Transaction in which the consideration paid or distributed to the Company's stockholders
is not entirely shares of common stock of the acquiring or resulting corporation may include the cancellation of outstanding Options and Stock Appreciation Rights upon consummation of the Transaction
as long as, at the election of the Committee, (i) the holders of affected Options and SARs have been given a period of at least fifteen days prior to the date of the consummation of the
Transaction to
exercise the Options or SARs (whether or not they were otherwise exercisable) or (ii) the holders of the affected Options and SARs are paid (in cash or cash equivalents) in respect of each
Share covered by the Option or SAR being canceled an amount equal to the excess, if any, of the per share price paid or distributed to stockholders in the Transaction (the value of any non-cash
consideration to be determined by the Committee in its sole discretion) over the Option Price or SAR Exercise Price, as applicable. For avoidance of doubt, (1) the cancellation of Options and
SARs pursuant to clause (ii) of the preceding sentence may be effected notwithstanding anything to the contrary contained in this Plan or any Award Agreement and (2) if the amount
determined pursuant to clause (ii) of the preceding sentence is zero or less, the affected
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Option
or SAR may be cancelled without any payment therefore. The treatment of any Award as provided in this
Section 15.2
shall be conclusively
presumed to be appropriate for purposes of
Section 15.1
.
15.3. Change in Control
Except as otherwise specifically provided in the applicable Award Agreement and notwithstanding any provision herein to the contrary, upon the consummation of a Change in
Control: (i) all outstanding Awards shall remain the obligation of the Company or be assumed by the surviving or acquiring entity, and there shall be automatically substituted for the shares of
Common Stock then subject to such Awards the consideration payable with respect of the outstanding shares of Common Stock in connection with the Change in Control and (ii) the time vesting and
exercisability of all outstanding Awards shall immediately accelerate by a period of 12 months, provided that this clause (ii) shall apply to Performance Awards such that if the
applicable performance period is scheduled to end within 12 months following the Change in Control, the Performance Award shall be deemed to have been fully vested and earned as of the Change
in Control based upon the greater of (A) an assumed achievement of all relevant performance goals at the "target" level or (B) the actual level of achievement of all relevant performance
goals as of the Change in Control. In addition to the foregoing, with respect to Awards granted prior to the consummation of the Change in Control, in the event that any such 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 or terminates his or her own employment for
Good Reason prior to the first anniversary of the consummation of the Change in Control: (1) all Options and SARs outstanding on the date such Grantee's employment is terminated, shall become
immediately exercisable in full and will terminate, to the extent unexercised, on their scheduled expiration date, and if the shares of Common Stock subject to such Options and SARs are subject to
repurchase provisions then such repurchase provisions shall immediately lapse; (2) all Restricted Stock Awards that are not Performance Awards outstanding on the date such Grantee's employment
is
terminated, shall become vested in full and free of all repurchase provisions; (3) all Restricted Stock Units that are not Performance Awards outstanding on the date such Grantee's employment
is terminated, shall become vested in full, and if the shares of Common Stock subject to such Restricted Stock Units are subject to repurchase provisions then such repurchase provisions shall
immediately lapse; (4) all Other Stock-based Awards that are not Performance Awards shall become exercisable, realizable or vested in full, and shall be free of all repurchase provisions, as
the case may be; and (5) all Restricted Stock Awards, Restricted Stock Units and Other Stock-based Awards that are Performance Awards shall become fully vested and earned based upon the greater
of (A) an assumed achievement of all relevant performance goals at the "target" level or (B) the actual level of achievement of all relevant performance goals as of the Change in
Control.
A Change in Control shall mean: (i) any merger, consolidation or purchase of outstanding capital stock of the Company after which the voting securities of the Company
outstanding immediately prior thereto represent (either by remaining outstanding or by being converted into voting securities of the surviving or acquiring entity) less than 50% of the combined voting
power of the voting securities of the Company or such surviving or acquiring entity outstanding immediately after such event (other than as a result of a financing transaction) or (ii) any sale
of all or substantially all of the assets or capital stock of the Company (other than in a spin-off or similar transaction).
Notwithstanding
the foregoing, if it is determined that an Award hereunder is subject to the requirements of Section 409A, the Company will not be deemed to have undergone a Change in Control
unless the Company is deemed to have undergone a "change in control event" pursuant to the definition of such term in Section 409A.
Except as otherwise specifically provided in the applicable Award Agreement, notwithstanding the provisions of
Section 15.3.1
hereof, if, in connection with an Change in Control
described therein, a tax under Section 4999 of the Code would be imposed on the Grantee (after taking into account the
exceptions set forth in Sections 280G(b)(4) and 280(G)(b)(5) of the Code), then the number of Awards which shall become exercisable, realizable or vested as provided in such section shall be
reduced (or delayed), to the minimum extent necessary, so that no such tax would be imposed on the Grantee (the Awards not becoming so accelerated, realizable or vested, the "Parachute Awards");
provided, however, that if the "aggregate present value" of the Parachute Awards would exceed the tax that, but for this sentence, would be imposed on the Grantee under Section 4999 of the Code
in connection with the Change in Control, then the Awards shall become immediately exercisable, realizable, and vested without regard to the provisions of this sentence. For purposes of the preceding
sentence, the "aggregate present value" of an Award shall be calculated on an after-tax basis (other than taxes imposed by Section 4999 of the Code) and shall be based on economic principles
rather than the principles set forth under Section 280G of the Code and the regulations promulgated thereunder. All determinations required to be made under this
Section 15.3.3
shall be made
by the Company.
15.4. Adjustments.
Adjustments under this
Section 15
related to shares of Stock or securities of the Company shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. No fractional shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any
such adjustment shall be eliminated in each case by rounding downward to the nearest whole share.
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NO LIMITATIONS ON COMPANY
The making of Awards pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or
changes of its capital or business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets.
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TERMS APPLICABLE GENERALLY TO AWARDS GRANTED UNDER THE PLAN
17.1. Disclaimer of Rights.
No provision in the Plan or in any Award Agreement shall be construed to confer upon any individual the right to remain in the employ or service of the Company or any Affiliate,
or to interfere in any way with any contractual or other right or authority of the Company either to increase or decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the Company. In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the
applicable Award Agreement, no Award granted under the Plan shall be affected by any change of duties or position of the Grantee, so long as such Grantee continues to be a Service Provider. The
obligation of the Company to pay any benefits pursuant to this Plan shall be interpreted as a contractual obligation to pay only those amounts described herein, in the manner and under the conditions
prescribed herein. The Plan shall in no way be interpreted to require the Company to transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to any
Grantee or beneficiary under the terms of the Plan.
17.2. Nonexclusivity of the Plan.
Neither the adoption of the Plan nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations upon the right and
authority of the Board to adopt such other incentive compensation arrangements (which arrangements may be
applicable either generally to a class or classes of individuals or specifically to a particular individual or particular individuals), including, without limitation, the granting of stock options as
the Board in its discretion determines desirable.
17.3. Withholding Taxes.
The Company or an Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal, state, or local taxes of any
kind required by law to be withheld (i) with respect to the vesting of or other lapse of restrictions applicable to an Award, (ii) upon the issuance of any shares of Stock upon the
exercise of an Option or SAR, or (iii) otherwise due in connection with an Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay to the Company or the Affiliate, as the
case may be, any amount that the Company or the Affiliate may reasonably determine to be necessary to satisfy such withholding obligation. Subject to the prior approval of the Company or the
Affiliate, which may be withheld by the Company or the Affiliate, as the case may be, in its sole discretion, the Grantee may elect to satisfy such obligations, or the Company may require such
obligations (up to maximum statutory rates) to be satisfied, in whole or in part, (i) by causing the Company or the Affiliate to withhold the number of shares of Stock otherwise issuable to the
Grantee as may be necessary to satisfy such withholding obligation or (ii) by delivering to the Company or the Affiliate shares of Stock already owned by the Grantee. The shares of Stock so
delivered or withheld shall have an aggregate Fair Market Value equal to such withholding obligations (up to maximum statutory rates). The Fair Market Value of the shares of Stock used to satisfy such
withholding obligation shall be determined by the Company or the Affiliate as of the date that the amount of tax to be withheld is to be determined. A Grantee who has made an election pursuant to this
Section 17.3
may satisfy his or her withholding obligation only with shares of Stock that are not subject to any repurchase, forfeiture,
unfulfilled vesting, or other similar requirements.
17.4. Captions.
The use of captions in this Plan or any Award Agreement is for the convenience of reference only and shall not affect the meaning of any provision of the Plan or any Award
Agreement.
17.5. Other Provisions.
Each Award Agreement may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Board, in its sole discretion. In the event of any
conflict between the terms of an employment agreement and the Plan, the terms of the employment agreement govern.
17.6. Number and Gender.
With respect to words used in this Plan, the singular form shall include the plural form, the masculine gender shall include the feminine gender, etc., as the context requires.
17.7. Severability.
If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof
and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.
17.8. Governing Law.
The Plan shall be governed by and construed in accordance with the laws of the State of Wisconsin without giving effect to the principles of conflicts of law, provided that the
provisions set forth herein that are required to be governed by the Delaware General Corporation Law shall be governed by such law.
17.9. Section 409A.
For each Award intended to comply with the short-term deferral exception provided for under Section 409A, the related Award Agreement shall provide that such Award shall
be paid out by the later of (i) the 15th day of the third month following the Grantee's first taxable year in which the Award is no longer subject to a substantial risk of forfeiture or
(ii) the 15th day of the third month following the end of the Company's first taxable year in which the Award is no longer subject to a substantial risk of forfeiture.
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Proxy
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Table of Contents
ANNEX AEXACT SCIENCES CORPORATION 2019 OMNIBUS LONG-TERM INCENTIVE PLAN
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To the extent that the Board determines that a Grantee would be subject to the additional 20% tax imposed on certain deferred compensation arrangements pursuant to
Section 409A as a result of any provision of any Award, to the extent permitted by Section 409A, such provision shall be deemed amended to the minimum extent necessary to avoid
application of such additional tax. The Board shall determine the nature and scope of such amendment.
17.10. Separation from Service.
The Board shall determine the effect of a Separation from Service upon Awards, and such effect shall be set forth in the appropriate Award Agreement. Without limiting the
foregoing, the Board may provide in the Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee, the actions that will be taken upon the occurrence of a
Separation from Service, including, but not limited to, accelerated vesting or termination, depending upon the circumstances surrounding the Separation from Service.
17.11. Transferability of Awards.
Except as provided in
Section 17.11.2
hereof, no Award shall be assignable or transferable by the Grantee to whom it is
granted, other than by will or the laws of descent and distribution, and, during the lifetime of the Grantee, only the Grantee personally (or the Grantee's personal representative) may exercise rights
under the Plan.
If authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or part of an Award (other than Incentive Stock Options) to any Family Member. For
the purpose of this
Section 17.11.2
, a "not for value" transfer is a transfer which is (i) a gift, (ii) a transfer under a domestic
relations order in settlement of marital property rights; or (iii) a transfer to an entity in which more than fifty percent of the voting interests are owned by Family Members (or the Grantee)
in exchange for an interest in that entity. Following a transfer under this
Section 17.11.2
, any such Award shall continue to be subject to the
same terms and conditions as were applicable immediately prior to transfer. Subsequent transfers of transferred Awards are prohibited except to Family Members of the original Grantee in accordance
with this
Section 17.11.2
or by will or the laws of descent and distribution.
17.12. Dividends and Dividend Equivalent Rights.
If specified in the Award Agreement, the recipient of an Award under this Plan may be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents
with respect to the Common Stock or other securities covered by an Award. The terms and conditions of a dividend equivalent right may be set forth in the Award Agreement. Dividend equivalents credited
to a Grantee may be paid currently or may be deemed to be reinvested in additional shares of Stock or other securities of the Company at a price per unit equal to the Fair Market Value of a share of
Stock on the date that such dividend was paid to shareholders, as determined in the sole discretion of the Committee.
17.13. Clawback.
17.13.1.
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 to any Grantee with respect to any fiscal year of the Company the financial results of which are negatively affected by such restatement. The amount to be
recovered shall be the amount, as determined by the Committee, by which the affected Award exceeds the amount that would have been payable had the financial statements been initially filed as
restated. In no event shall the amount to be recovered by the Company be less than the amount required to be repaid or recovered as a matter of law.
17.13.2.
Any Award, amount or benefit received under the Plan shall 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. A Grantee's receipt of an Award
shall be deemed to constitute the Grantee's acknowledgment of and consent to the Company's application, implementation and enforcement of any applicable Company clawback policy and any provision of
applicable law relating to cancellation, recoupment, rescission or payback of compensation that may apply to the Grantee, whether adopted prior to or following the date of the Award. The Company may
take such actions as may be necessary to effectuate any such policy or applicable law, without further consideration or action.
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ANNUAL MEETING OF STOCKHOLDERS OF EXACT SCIENCES CORPORATION July 25, 2019 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. IN PERSON - 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. 20233300000000001000 0 072519 independent registered public accounting firm for 2019. the Company's named executive officers. Omnibus Long-Term Incentive Plan. 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, 3 AND 4. 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 two members of the board of directors to serve for three-year terms as Class I 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 Kevin T. Conroy O Katherine S. Zanotti WITHHOLD AUTHORITY 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. Proposal to approve the Exact Sciences Corporation 2019 5. 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, 3 AND 4. PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. MARKX 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 25, 2019. THE PROXY STATEMENT AND ANNUAL REPORT TO STOCKHOLDERS ARE AVAILABLE AT http://www.astproxyportal.com/ast/11534/. COMPANY NUMBER ACCOUNT NUMBER PROXY VOTING INSTRUCTIONS
ANNUAL MEETING OF STOCKHOLDERS OF EXACT SCIENCES CORPORATION July 25, 2019 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 25, 2019. 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. 20233300000000001000 0 072519 independent registered public accounting firm for 2019. the Company's named executive officers. Omnibus Long-Term Incentive Plan. 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, 3 AND 4. 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 two members of the board of directors to serve for three-year terms as Class I 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 Kevin T. Conroy O Katherine S. Zanotti WITHHOLD AUTHORITY 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. Proposal to approve the Exact Sciences Corporation 2019 5. 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, 3 AND 4. PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. MARKX 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 25, 2019 SOLICITED BY THE BOARD OF DIRECTORS The undersigned hereby appoints Kevin T. Conroy and D. Scott Coward 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 25, 2019, 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 15, 2019, a copy of which has been received by the undersigned. CONTINUED AND TO BE SIGNED ON REVERSE SIDE 14475 1.1