SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN

PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

 

Filed by the Registrant x                            Filed by a Party other than the Registrant ¨

Check the appropriate box:

 

¨	Preliminary Proxy Statement

 

¨	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

x	Definitive Proxy Statement

 

¨	Definitive Additional Materials

 

¨	Soliciting Material Pursuant to §240.14a-12

 

 

EXELIXIS, INC.

 

(Name of the Registrant as Specified In Its Charter)

 

 

 

  

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

x	No fee required.

 

¨	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

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(2)

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(3)

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(5)

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¨	Fee paid previously with preliminary materials.

 

¨	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

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(4)

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210 East Grand Ave.

South San Francisco, CA 94080

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 22, 2013

 

 

To the Stockholders of Exelixis, Inc.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Exelixis, Inc., a Delaware corporation (“Exelixis”), will be held on Wednesday, May 22, 2013 at 8:00 a.m., local time, at Exelixis’ offices located at 210 East Grand Avenue, South San Francisco, CA 94080 for the following purposes:

 

1.

To elect the three Class II nominees for director named in the Proxy Statement accompanying this Notice to hold office until the 2016 Annual Meeting of Stockholders.

 

2.

To ratify the selection by the Audit Committee of the Board of Directors of Ernst & Young LLP as Exelixis’ independent registered public accounting firm for the fiscal year ending December 27, 2013.

 

3.

To approve, on an advisory basis, the compensation of Exelixis’ named executive officers, as disclosed in the Proxy Statement accompanying this Notice.

 

4.

To conduct any other business properly brought before the meeting.

These items of business are more fully described in the Proxy Statement accompanying this Notice.

The record date for the Annual Meeting is March 25, 2013. Only stockholders of record at the close of business on that date may vote at the meeting or any adjournment thereof.

 

 

South San Francisco, California

April 10, 2013

 

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210 East Grand Ave.

South San Francisco, CA 94080

 

 

PROXY STATEMENT

FOR THE 2013 ANNUAL MEETING OF STOCKHOLDERS

MAY 22, 2013

 

 

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

Why am I receiving these materials?

We have sent you this Proxy Statement and the enclosed proxy card because the Board of Directors (the “Board”) of Exelixis, Inc. (sometimes referred to as “we,” “us” or “Exelixis”) is soliciting your proxy to vote at the 2013 Annual Meeting of Stockholders ( the “Annual Meeting”), including at any adjournments or postponements of the meeting. You are invited to attend the Annual Meeting to vote on the proposals described in this Proxy Statement. However, you do not need to attend the meeting to vote your shares. Instead, you may simply complete, sign and return the enclosed proxy card, or follow the instructions below to submit your proxy over the telephone or on the Internet.

We intend to mail this Proxy Statement and accompanying proxy card on or about April 17, 2013 to all stockholders of record entitled to vote at the Annual Meeting.

Who can vote at the Annual Meeting?

Only stockholders of record at the close of business on March 25, 2013 will be entitled to vote at the Annual Meeting. On this record date, there were 183,789,132 shares of common stock outstanding and entitled to vote.

Stockholder of Record: Shares Registered in Your Name

If on March 25, 2013 your shares were registered directly in your name with our transfer agent, Computershare Shareowner Services LLC, then you are a stockholder of record. As a stockholder of record, you may vote in person at the meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting, we urge you to fill out and return the enclosed proxy card or vote by proxy over the telephone or on the Internet as instructed below to ensure your vote is counted.

Beneficial Owner: Shares Registered in the Name of a Broker or Bank

If on March 25, 2013 your shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the meeting unless you request and obtain a valid proxy from your broker or other agent.

 

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What am I voting on?

There are three matters scheduled for a vote:

 

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Election of the three Class II nominees for director named herein to hold office until the 2016 Annual Meeting of Stockholders;

 

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Ratification of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 27, 2013; and

 

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Advisory approval of the compensation of our named executive officers, as disclosed in this Proxy Statement.

How do I vote?

As a stockholder of Exelixis, you have a right to vote on certain business matters affecting the company. The proposals that will be presented at the Annual Meeting and upon which you are being asked to vote are discussed below in this Proxy Statement. The procedures for voting are as follows:

Stockholder of Record: Shares Registered in Your Name

If you are a stockholder of record, you may vote in person at the Annual Meeting, vote by proxy using the enclosed proxy card, vote by proxy over the telephone or vote by proxy on the Internet. Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the meeting and vote in person even if you have already voted by proxy.

 

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To vote in person, come to the Annual Meeting and we will give you a ballot when you arrive.

 

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To vote using the proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the Annual Meeting, we will vote your shares as you direct.

 

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To vote over the telephone, dial toll-free 1-800-652-VOTE (8683) from the United States using a touch-tone phone and follow the recorded instructions. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 11:59 p.m., Eastern Time, on May 21, 2013 to be counted.

 

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To vote on the Internet, go to www.investorvote.com/EXEL to complete an electronic proxy card. You will be asked to provide the company number and control number from the enclosed proxy card. Your vote must be received by 11:59 p.m., Eastern Time, on May 21, 2013 to be counted.

Beneficial Owner: Shares Registered in the Name of Broker or Bank

Most beneficial owners whose stock is held in street name receive voting instruction forms from their banks, brokers or other agents, rather than the proxy card. You must follow these instructions for your bank, broker or other agent to vote your shares per your instructions. Alternatively, many brokers and banks provide the means to grant proxies to vote shares by telephone and via the Internet. If your shares are held in an account with a broker or bank providing such a service, you may grant a proxy to vote those shares by telephone or over the Internet as instructed by your broker or bank. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.

 

We provide Internet proxy voting to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.

 

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How many votes do I have?

On each matter to be voted upon, you have one vote for each share of common stock you own as of March 25, 2013.

What if I return a proxy card but do not make specific choices?

If you are a registered stockholder and you return a signed and dated proxy card without marking any voting selections, your shares will be voted on the proposals as follows:

 

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“For” the election of Mr. Feldbaum and Drs. Garber and Marchesi in Proposal 1;

 

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“For” the ratification of our selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 27, 2013 in Proposal 2; and

 

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“For” the advisory approval of the compensation of our named executive officers in Proposal 3.

If any other matter is properly presented at the meeting, your proxyholder (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.

Who is paying for this proxy solicitation?

We will bear the entire cost of soliciting proxies, including the preparation, assembly, printing and mailing of this Proxy Statement, the proxy card and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of our common stock beneficially owned by others to forward to such beneficial owners. We may reimburse persons representing beneficial owners of our common stock for their costs of forwarding solicitation materials to such beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone, telegram or personal solicitation by our directors, officers or other regular employees. No additional compensation will be paid to directors, officers or other regular employees for such services.

What does it mean if I receive more than one proxy card?

If you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. Please complete, sign and return each proxy card to ensure that all of your shares are voted.

Can I change my vote after submitting my proxy?

Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. You may revoke your proxy in the following ways:

Stockholder of Record: Shares Registered in Your Name

 

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Your proxy may be revoked by filing with the Secretary of Exelixis at our principal executive office, Exelixis, Inc., 210 East Grand Avenue, South San Francisco, California 94080, either (1) a written notice of revocation or (2) a duly executed proxy card bearing a later date.

 

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Your proxy may also be revoked by granting a subsequent proxy by telephone or on the Internet (your latest telephone or Internet proxy is the one that is counted).

 

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Your proxy may also be revoked by attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not, by itself, revoke your proxy.

Beneficial Owner: Shares Registered in the Name of Broker or Bank

 

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If your shares are held by your broker or bank as nominee or agent, you should follow the instructions provided by your broker or bank to revoke any prior voting instructions.

 

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What happens if I do not vote?

Stockholder of Record; Shares Registered in Your Name

If you are a stockholder of record and do not vote by completing your proxy card, by telephone, over the internet or in person at the Annual Meeting, your shares will not be counted towards a quorum, and will have no effect on the vote count for Proposals 1, 2 and 3.

Beneficial Owner; Shares Registered in the Name of a Broker or Bank

If on March 25, 2013, your shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in “street name” and only your broker will be able to vote your shares. A “broker non-vote” occurs when a broker or nominee holding shares for a beneficial owner does not vote on a particular “non-routine” proposal, including the election of directors, because the broker or nominee does not have discretionary voting power with respect to that proposal and has not received instructions with respect to that proposal from the beneficial owner (despite voting on at least one other proposal for which it does have discretionary authority or for which it has received instructions). Therefore, if you do not give your broker or nominee specific instructions, your shares will not be voted on with respect to such “non-routine” proposals. Proposal 2 constitutes a “routine” management proposal, and thus, if you do not give your broker or nominee specific instructions, your broker or nominee will nevertheless have the authority to vote your shares with respect to this proposal, but will not have the authority to vote your shares with respect to Proposals 1 and 3.

What is the quorum requirement?

A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if at least a majority of the outstanding shares entitled to vote are represented by votes at the meeting or by proxy. On the record date, there were 183,789,132 shares outstanding and entitled to vote.

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the meeting. Abstentions will be counted towards the number of shares considered to be present at the meeting for quorum purposes. Shares represented by “broker non-votes” will be counted in determining whether there is a quorum present.

If there is no quorum, either the chairman of the Annual Meeting or the holders of a majority of shares present at the Annual Meeting in person or represented by proxy may adjourn the Annual Meeting to another date.

How many votes are needed to approve each proposal and how are votes counted?

 

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Proposal 1—Election of Directors: Directors are elected by majority vote. Each of the three Class II nominees must receive “For” votes from the holders of a majority of shares cast with respect to such director (number of shares voted “For” a director must exceed the number of shares voted “Against” that director). Abstentions and broker non-votes, if any, are not counted for purposes of electing directors and will have no effect on the results of this vote.

You may vote “For,” “Against” or “Abstain” for each nominee for election as a director.

 

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Proposal 2—Ratification of Ernst & Young LLP: The affirmative vote of a majority of shares present in person or by proxy at the Annual Meeting and entitled to vote on the proposal is required to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 27, 2013. Abstentions will have the effect of votes against this proposal. Brokers generally have discretionary authority to vote on the ratification of our independent accounting firm; thus we do not expect any broker non-votes on this proposal. To the extent there are any broker non-votes, they will have no effect on the results of this vote.

 

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You may vote “For,” “Against” or “Abstain” on the proposal to ratify the appointment of Ernst & Young LLP as Exelixis’ independent registered public accounting firm for the fiscal year ending December 27, 2013.

 

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Proposal 3—Advisory Vote on Executive Compensation: The affirmative vote of a majority of shares present in person or by proxy at the Annual Meeting and entitled to vote on the proposal is required to approve the non-binding, advisory vote on executive compensation. Abstentions will be counted toward the tabulation of votes cast on the proposal and will have the same effect as votes against this proposal. Broker non-votes will have no effect and will not be counted towards the vote total. Since the vote is advisory, it is not binding on the Board or on us. Nevertheless, the views expressed by our stockholders, whether through this vote or otherwise, are important to management and the Board and, accordingly, the Compensation Committee and Board intend to consider the results of this vote in making determinations in the future regarding executive compensation arrangements. Your vote will serve as an additional tool to guide the Compensation Committee and Board in continuing to improve the alignment of our executive compensation programs with business objectives and performance and with the interests of our stockholders.

You may vote “For,” “Against” or “Abstain” on the proposal to approve the compensation of our named executive officers.

Votes will be counted by the inspector of election appointed for the Annual Meeting, who will separately count “For,” “Against” and “Abstain” votes with respect to each proposal.

Do I have dissenters’ rights?

We are organized as a corporation under Delaware law. Under the Delaware General Corporation Law, our stockholders are not entitled to dissenters’ rights with respect to any of the proposals set forth in this Proxy Statement and we will not independently provide the stockholders with any such rights.

How can I find out the results of the voting at the Annual Meeting?

Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a current report on Form 8-K that we expect to file within four business days after the Annual Meeting. If final voting results are not available to us in time to file a Form 8-K within four business days after the Annual Meeting, we intend to file a Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the final results.

Will other matters be voted on at the Annual Meeting?

We are not aware of any matters to be presented at the Annual Meeting other than those described in this Proxy Statement. If any other matters not described in the Proxy Statement are properly presented at the meeting, proxies will be voted in accordance with the best judgment of the proxyholders.

What proxy materials are available on the Internet?

This Proxy Statement and our 2012 annual report to stockholders are available at http://exel-annualstockholdermeeting.com.

What is the deadline for submitting stockholder proposals for the 2014 Annual Meeting?

To be considered for inclusion in the 2014 proxy materials, your proposal must be submitted in writing by December 18, 2013 to Exelixis’ Secretary at Exelixis, Inc., 210 East Grand Avenue, South San Francisco, California 94080, and you must comply with all applicable requirements of Rule 14a-8 promulgated under the

 

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Securities Exchange Act of 1934, as amended. However, if our 2014 Annual Meeting of Stockholders is not held between April 22, 2014 and June 21, 2014, then the deadline will be a reasonable time prior to the time that we begin to print and mail our proxy materials.

If you wish to submit a proposal or nominate a director at the 2014 Annual Meeting of Stockholders, but you are not requesting that your proposal or nomination be included in next year’s proxy materials, you must submit your proposal in writing, in the manner set forth in our Bylaws, to Exelixis’ Secretary at Exelixis, Inc., 210 East Grand Avenue, South San Francisco, California 94080, to be received no earlier than the close of business on February 21, 2014, and no later than the close of business on March 23, 2014. However, if our 2014 Annual Meeting of Stockholders is not held between April 22, 2014 and June 21, 2014, then you must notify Exelixis’ Secretary, in writing, not earlier than the close of business on the 90th day prior to the date of the 2014 Annual Meeting of Stockholders and not later than the close of business on the later of (i) the 60th day prior to the date of the 2014 Annual Meeting of Stockholders or (ii) if we publicly announce the date of the 2014 Annual Meeting of Stockholders fewer than 70 days prior to the date of the 2014 Annual Meeting of Stockholders, the 10th day following the day that we first make such public announcement of the date of the 2014 Annual Meeting of Stockholders. We also advise you to review our Bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations. The chairperson of the 2014 Annual Meeting of Stockholders may determine, if the facts warrant, that a matter has not been properly brought before the meeting and, therefore, may not be considered at the meeting. In addition, if you do not also comply with the requirements of Rule 14a-4(c)(1) promulgated under the Securities Exchange Act of 1934, as amended, our management will have discretionary authority to vote all shares for which it has proxies for any such stockholder proposal or director nomination, including in opposition to such stockholder proposal or director nomination.

Where can I obtain directions to the Annual Meeting?

You may contact Investor Relations at (650) 837-7000 to obtain directions to the Annual Meeting.

 

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PROPOSAL 1

ELECTION OF CLASS II DIRECTORS

Our Certificate of Incorporation and Bylaws provide that the Board is divided into three classes, with each class having a three-year term. Vacancies on the Board may be filled only by persons elected by a majority of the remaining directors. A director elected by the Board to fill a vacancy in a class, including a vacancy created by an increase in the number of directors, shall serve for the remainder of the full term of that class and until the director’s successor is elected and qualified, or, if sooner, until such director’s death, resignation or removal.

The Board presently has eleven members. There are three directors in Class II whose term of office expires at the Annual Meeting. Each of the nominees up for election to this class is currently a director of Exelixis who was previously elected by the stockholders. If elected at the Annual Meeting, each of these nominees would serve until the 2016 Annual Meeting and until his successor is elected and has qualified, or, if sooner, until the director’s death, resignation or removal.

Directors are elected by a majority of the votes present in person or represented by proxy and entitled to vote at the Annual Meeting, except in the case of a contested election. A contested election occurs when the number of nominees up for election exceeds the number of directors to be elected, in which case directors are elected by a plurality of the votes present in person or represented by proxy and entitled to vote on the election of directors at any such meeting. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the three nominees named below. If any nominee becomes unavailable for election as a result of an unexpected occurrence, your shares will be voted for the election of such substitute nominee as the Nominating and Corporate Governance Committee of the Board may propose. Each person nominated for election has agreed to serve if elected, and we have no reason to believe that any nominee will be unable to serve.

All director nominees set forth in this Proxy Statement have tendered an irrevocable resignation as a director conditioned upon (i) such director failing to receive a majority of the votes present in person or represented by proxy and entitled to vote at the Annual Meeting and (ii) acceptance by the Board of such resignation. If a director nominee who is serving as a director at the time of the election does not receive a majority of the votes present in person or represented by proxy and entitled to vote at the Annual Meeting, the Nominating and Corporate Governance Committee will act to determine whether to accept the director’s conditional resignation and will submit such recommendation for prompt consideration by the Board. The Board will act on the Nominating and Corporate Governance Committee’s recommendation within ninety days following certification of the stockholder vote. In making their decision, the Nominating and Corporate Governance Committee will evaluate the best interests of Exelixis and its stockholders and shall consider all factors and information deemed relevant. The director who tenders his conditional resignation shall not participate in the Nominating and Corporate Governance Committee’s recommendation or Board action regarding whether to accept the conditional resignation of such director. If the Board shall determine not to accept the conditional resignation of a director, the Board shall promptly disclose its decision-making process and decision to reject the conditional resignation in a Form 8-K furnished to the Securities and Exchange Commission (the “SEC”).

Set forth below is biographical information for each person nominated and each person whose term of office as a director will continue after the Annual Meeting. Incorporated within each biography is a description of the specific experience, qualifications, attributes and skills of each director or director nominee that led our Board to conclude that the individual should serve as a director as of the date of this Proxy Statement.

 

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Class II Nominees for Election for a Three-Year Term Expiring at the 2016 Annual Meeting

Carl B. Feldbaum, Esq., age 69, has been a director since February 2007. Mr. Feldbaum is currently a member of the board of directors of Actelion, Ltd, a biopharmaceutical company, and previously served as a member of the board of directors of Connetics Corporation from 2005 until its acquisition by Stiefel Laboratories, Inc. in 2006. In 2009, Mr. Feldbaum was elected as chairman of BIO Ventures for Global Health, a non-profit organization, where he has served as a member of the board of directors since its inception in 2004. Mr. Feldbaum is president emeritus of the Biotechnology Industry Organization (BIO), which represents more than 1,000 biotechnology companies, academic institutions and state biotechnology centers internationally. Mr. Feldbaum served as president of BIO from 1993 until his retirement in 2005. Prior to joining BIO, Mr. Feldbaum was chief of staff to Senator Arlen Specter of Pennsylvania. He also was president and founder of Palomar Corporation, a national security “think tank” in Washington, D.C. Before founding Palomar Corporation, Mr. Feldbaum was Assistant to the Secretary of Energy and served as the Inspector General for defense intelligence in the U.S. Department of Defense. Mr. Feldbaum received an A.B. in Biology from Princeton University and his J.D. from the University of Pennsylvania Law School. Our Board has concluded that Mr. Feldbaum should continue to serve as a director of Exelixis as of the date of this Proxy Statement due particularly to his training as an attorney, his knowledge and experience with respect to the biotechnology, pharmaceutical and healthcare industries, his broad leadership experience resulting from service on various boards and as an executive officer and his knowledge and experience with policymaking, regulatory issues and other governmental matters.

Alan M. Garber, M.D., Ph.D., age 57, has been a director since January 2005. He became Provost of Harvard University, Mallinckrodt Professor of Health Care Policy at Harvard Medical School, and a Professor in the Harvard Kennedy School of Government and in the Department of Economics at Harvard in September 2011. Before moving to Harvard, from 1998 until August 2011, he was the Henry J. Kaiser Jr. Professor, a Professor of Medicine, and a Professor (by courtesy) of Economics, Health Research and Policy, and of Economics in the Graduate School of Business at Stanford University. Dr. Garber also served as the Director of the Center for Primary Care and Outcomes Research and the Center for Health Policy at Stanford. During his tenure at Stanford University, Dr. Garber also served as a Senior Fellow at the Freeman Spogli Institute for International Studies and as a staff physician at the VA Palo Alto Health Care System. Dr. Garber is a member of the Institute of Medicine of the National Academy of Sciences, the American Society of Clinical Investigation, the Association of American Physicians and the Board on Science, Technology, and Economic Policy at the National Academies. He is a Fellow of the American College of Physicians and the Royal College of Physicians. Dr. Garber is also a Research Associate with the National Bureau of Economic Research and served as founding Director of its Health Care Program for nineteen years. He has also served as a member of the National Advisory Council on Aging at the National Institutes of Health, as a member of the Board of Health Advisers of the Congressional Budget Office and as Chair of the Medicare Evidence Development and Coverage Advisory Committee at the Centers for Medicare and Medicaid Services. Dr. Garber is on the editorial board of acclaimed scientific journals and has received numerous awards and honors. Dr. Garber holds an A.B. summa cum laude, an A.M. and a Ph.D., all in Economics, from Harvard University, and an M.D. with research honors from Stanford University. Our Board has concluded that Dr. Garber should continue to serve as a director of Exelixis as of the date of this Proxy Statement due particularly to his training as a physician and economist, his knowledge and experience with respect to the life sciences, healthcare and pharmaceutical industries, and his knowledge and experience with policymaking, regulatory issues and other governmental matters.

Vincent T. Marchesi, M.D., Ph.D., age 77, has been a director since May 2001. Since 1973, Dr. Marchesi has been a Professor of Pathology and Cell Biology at Yale University and, since 1991, the Director of the Boyer Center for Molecular Medicine at Yale University. In 1982, Dr. Marchesi co-founded Molecular Diagnostics, Inc., a diagnostic development company. Dr. Marchesi was formerly Chair of Pathology at the Yale-New Haven Hospital. Dr. Marchesi holds an M.D. from Yale University and a Ph.D. from Oxford University, and is a member of the National Academy of Sciences and the Institute of Medicine. Our Board has concluded that Dr. Marchesi should continue to serve as director of Exelixis as of the date of this Proxy Statement due

 

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particularly to his training as a physician and scientist and his research and experience in the fields of healthcare and life sciences, with a particular focus on biotechnology.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.

Class III Directors Continuing in Office Until the 2014 Annual Meeting

Frank McCormick, Ph.D., FRS, age 62, has been a director since July 2003. Since 1998, Dr. McCormick has been Director of the University of California, San Francisco (UCSF) Helen Diller Family Comprehensive Cancer Center and he is currently the Associate Dean, School of Medicine, UCSF. Dr. McCormick is the David A. Wood Professor of Tumor Biology and Cancer Research in the Department of Microbiology and Immunology at UCSF as well as the E. Dixon Heise Distinguished Professor in Oncology. From April 2012 to April 2013, Dr. McCormick served as president of the American Association for Cancer Research, a scientific organization whose mission is to prevent and cure cancer through research, education, communication, and collaboration. From 1992 to 1998, Dr. McCormick was the founder and Chief Scientific Officer at Onyx Pharmaceuticals, Inc., a biotechnology company. From 1991 to 1992, he served as Vice President of Therapeutic Research at Chiron Corporation, a pharmaceutical company, and from 1981 to 1990, he served as Vice President of Discovery Research with Cetus Corporation, a biotechnology company. Dr. McCormick is on the editorial board of some of the most prestigious international cancer publications and serves as a board member or advisor to multiple cancer research organizations. Dr. McCormick was a Post-Doctoral Fellow with Dr. Allen Smith at the Imperial Cancer Research Fund in London, England, and with Professor Seymour S. Cohen at the State University of New York at Stony Brook. Dr. McCormick holds a B.S. in Biochemistry from the University of Birmingham, England and a Ph.D. in Biochemistry from the University of Cambridge, England. Our Board has concluded that Dr. McCormick should continue to serve as a director of Exelixis as of the date of this Proxy Statement due particularly to his training as a scientist, his knowledge and experience with respect to the biotechnology, healthcare and pharmaceutical industries, his extensive research and experience in the field of cancer and his knowledge and experience with policymaking and regulatory issues.

Michael M. Morrissey, Ph.D., age 52, has served as a director and as Exelixis’ President and Chief Executive Officer since July 2010. Dr. Morrissey has held positions of increasing responsibility at Exelixis since he joined the company in February 2000, including serving as President of Research and Development from January 2007 until July 2010. From 1991 to 2000, Dr. Morrissey held several positions at Berlex Biosciences, last holding the position of Vice President, Discovery Research. He is the author of numerous scientific publications in medicinal chemistry and drug discovery and an inventor on 70 issued U.S. patents and 25 additional published U.S. patent applications. Dr. Morrissey holds a B.S. (Honors) in Chemistry from the University of Wisconsin and a Ph.D. in Chemistry from Harvard University. Our Board has concluded that Dr. Morrissey should continue to serve as a director of Exelixis as of the date of this Proxy Statement due particularly to his leadership role as the President and Chief Executive Officer of Exelixis. Beyond his role as Exelixis’ principal executive officer, the Board also considered Dr. Morrissey’s extensive qualifications, including his training as a scientist, his significant knowledge and experience with respect to the biotechnology, healthcare and pharmaceutical industries, and comprehensive leadership background resulting from service as an executive in the biotechnology industry and his ability to bring historic knowledge and continuity to the Board.

Stelios Papadopoulos, Ph.D., age 64, a co-founder of Exelixis, has been a director since December 1994 and the Chairman of the Board since January 1998. Dr. Papadopoulos retired as Vice Chairman of Cowen & Co., LLC in August 2006 after six years as an investment banker with the firm, where he focused on the biotechnology and pharmaceutical sectors. Prior to joining Cowen & Co., he spent 13 years as an investment banker at PaineWebber, Incorporated, where he was most recently Chairman of PaineWebber Development Corp., a PaineWebber subsidiary focusing on biotechnology. He joined PaineWebber in April 1987 from Drexel Burnham Lambert, where he was a Vice President in the Equity Research Department covering the biotechnology industry. Prior to Drexel, he was a biotechnology analyst at Donaldson, Lufkin & Jenrette. Before coming to Wall Street in 1985, Dr. Papadopoulos was on the faculty of the Department of Cell Biology at New York University Medical Center. He continues his affiliation with New York University Medical Center as an

 

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Adjunct Associate Professor of Cell Biology. Dr. Papadopoulos is a co-founder of Anadys Pharmaceuticals, Inc., a publicly-held drug discovery and development company acquired by Hoffmann-La Roche Inc. in November 2011. Dr. Papadopoulos served as a member of the board of directors of Anadys Pharmaceuticals from 2000 to 2011 and as its chairman in 2011, prior to its acquisition. Dr. Papadopoulos has also served as a member of the board of directors of three publicly-held companies, BG Medicine, Inc., a diagnostics company focused on the development and commercialization of cardiovascular diagnostic tests, since 2003, Biogen Idec Inc., a biopharmaceutical company focused on the treatment of serious diseases, since 2008, and Regulus Therapeutics Inc., a biopharmaceutical company focused on the development of medicines targeting microRNAs, since 2009. Dr. Papadopoulos previously served as a member of the board of directors of GenVec, Inc., a publicly-held biotechnology company from August 2003 until October 2006 and as a member of the board of directors of SGX Pharmaceuticals, Inc. from July 2001 to September 2006 prior to its acquisition by Eli Lilly and Company. Dr. Papadopoulos is a member of the board of directors of a privately-held biotechnology company, Joule Unlimited, Inc. Dr. Papadopoulos was also co-founder and member of the board of directors of Cellzome Inc., a privately-held drug discovery company acquired by GlaxoSmithKline in May 2012. In the not-for-profit sector, Dr. Papadopoulos is a co-founder and Chairman of Fondation Santé and a member of the board of visitors of Duke University Medical Center. Dr. Papadopoulos holds a Ph.D. in Biophysics and an M.B.A. in Finance, both from New York University. Our Board has concluded that Dr. Papadopoulos should continue to serve as a director of Exelixis as of the date of this Proxy Statement due particularly to his training as a scientist, his knowledge and experience with respect to the biotechnology, healthcare and pharmaceutical industries, his broad leadership experience resulting from extensive service on various boards, his knowledge and experience with respect to finance matters and his ability to bring historic knowledge and continuity to the Board.

George A. Scangos, Ph.D., age 64, has been a director since October 1996. Since July 2010, Dr. Scangos has served as Chief Executive Officer and as a member of the board of directors of Biogen Idec Inc. From October 1996 to July 2010, Dr. Scangos served as our President and Chief Executive Officer. From September 1993 to October 1996, Dr. Scangos served as President of Biotechnology at Bayer Corporation, a pharmaceutical company, and was responsible for research, business and process development, manufacturing, engineering and quality assurance. Dr. Scangos has served as a member of the board of directors of various publicly-held companies, including Anadys Pharmaceuticals, Inc. from 2003 to 2010 and Entelos, Inc. from 1997 to 2010. Dr. Scangos also served as a member of the board of directors of our former subsidiary, TaconicArtemis GmbH (previously known as Artemis Pharmaceuticals GmbH) until 2010. Dr. Scangos previously served as the Chair of the California Healthcare Institute (CHI), as a member of the Board of the Global Alliance for TB Drug Development and as a member of the board of directors of BayBio. Dr. Scangos currently serves as a director of Fondation Santé. Dr. Scangos is also a member of the Board of Advisors of the University of California, San Francisco School of Pharmacy and the National Board of Advisors of the University of California, Davis School of Medicine. Dr. Scangos was a Jane Coffin Childs Post-Doctoral Fellow at Yale University and a faculty member at Johns Hopkins University. Dr. Scangos currently holds an appointment as Adjunct Professor of Biology at Johns Hopkins University. Dr. Scangos holds a B.A. in Biology from Cornell University and a Ph.D. in Microbiology from the University of Massachusetts. Our Board has concluded that Dr. Scangos should continue to serve as a director of Exelixis as of the date of this Proxy Statement due particularly to his prior leadership role as our President and Chief Executive Officer. Beyond his prior role as our principal executive officer, the Board also considered Dr. Scangos’ extensive qualifications, including his training as a scientist, his significant knowledge and experience with respect to the biotechnology, healthcare and pharmaceutical industries, his comprehensive leadership background resulting from service on various boards and as an executive in the biotechnology industry and his ability to bring historic knowledge and continuity to the Board.

Lance Willsey, M.D., age 51, has been a director since April 1997. Dr. Willsey was a founding partner of DCF Capital, a hedge fund focused on investing in the life sciences, from July 1998 to March 2002, and currently is a consultant to institutional investors in the field of oncology. Since 2000, Dr. Willsey has served on the Visiting Committee of the Department of Genitourinary Oncology at the Dana Farber Cancer Institute at Harvard University School of Medicine. From July 1997 to July 1998, Dr. Willsey served on the Staff Department of Urologic Oncology at the Dana Farber Cancer Institute. From July 1996 to July 1997, Dr. Willsey served on the

 

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Staff Department of Urology at Massachusetts General Hospital at Harvard University School of Medicine, where he was a urology resident from July 1992 to July 1996. From 2000 to 2010, Dr. Willsey served a member of the board of directors of Exact Sciences Corporation, a publicly-held biotechnology company. Dr. Willsey holds a B.S. in Physiology from Michigan State University and an M.S. in Biology and an M.D., both from Wayne State University. Our Board has concluded that Dr. Willsey should continue to serve as a director of Exelixis as of the date of this Proxy Statement due particularly to his skill as a physician, his knowledge and experience with respect to the life sciences and healthcare industries and his knowledge and experience with respect to finance matters.

Class I Directors Continuing in Office Until the 2015 Annual Meeting

Charles Cohen, Ph.D., age 62, has been a director since November 1995. Since May 2007, Dr. Cohen has been a managing director of Advent Healthcare Ventures, a venture capital firm. From 2003 to 2007, Dr. Cohen was Vice President of Advent International, a global private equity firm. From 2000 to 2002, Dr. Cohen was the Chief Executive Officer of Cellzome AG, a post-genomics biotechnology company. Prior to that time, Dr. Cohen co-founded Creative BioMolecules, Inc., a biotechnology company, in 1982 and was one of its directors and its Chief Executive Officer from 1985 to 1995. Dr. Cohen has served as a member of the board of directors of the following publicly-held biopharmaceutical companies: Anadys Pharmaceuticals, Inc., from 2000 to 2005, and Anesiva, Inc., from 2005 to 2007. Dr. Cohen serves on the board of directors and as a Chief Executive Officer of several Advent Healthcare Ventures privately-held portfolio companies. Dr. Cohen also served as the Chairman of the Supervisory Board of Cellzome AG, prior to its acquisition by GlaxoSmithKline in May 2012, and as the Chief Executive Officer of several other companies. Dr. Cohen received his Ph.D. from New York University School of Medicine. Our Board has concluded that Dr. Cohen should continue to serve as a director of Exelixis as of the date of this Proxy Statement due to particularly to his training as a scientist, his knowledge and experience with respect to the biotechnology, pharmaceutical and healthcare industries, his broad leadership experience resulting from service on various boards and as a chief executive officer and his knowledge and experience with respect to finance matters.

George Poste, D.V.M., Ph.D., FRS, age 68, has been a director since August 2004. Since February 2009, Dr. Poste has been the Chief Scientist at Complex Adaptive Systems Initiative and Regents’ Professor and Del E. Webb Professor of Health Innovation at Arizona State University. From May 2003 to February 2009, Dr. Poste served as the director of the Biodesign Institute at Arizona State University. Dr. Poste has served as the Chief Executive Officer of Health Technology Networks, a consulting company that specializes in the application of genomic technologies and computing in healthcare, since 2000. From 1992 to 1999, he was the Chief Science and Technology Officer and President, R&D of SmithKline Beecham Corporation, a pharmaceutical company. Dr. Poste served on the Defense Science Board of the U.S. Department of Defense from 2001 to 2010 and is a member of other organizations dedicated to advance the defense against bioweapons and biowarfare. Since February 2003, Dr. Poste has served as a member of the board of directors of Monsanto Company, a publicly-held provider of agricultural products and solutions. From April 2000 until August 2009, Dr. Poste served as the Non-Executive Chairman of Orchid Cellmark, Inc., a publicly-held DNA forensics company. Dr. Poste currently serves as a Board Member of Caris Life Sciences, a privately held medical diagnostics company. Dr. Poste is a Fellow of the Royal Society, the UK Academy of Medical Sciences, Hoover Institution, Stanford University, and various other prestigious organizations and has been awarded honorary doctorates from several universities. Dr. Poste holds a D.V.M. in veterinary medicine and a Ph.D. in Virology from the University of Bristol, England. Our Board has concluded that Dr. Poste should continue to serve as a director of Exelixis as of the date of this Proxy Statement due to particularly to his training as a scientist, his knowledge and experience with respect to the life sciences, healthcare and pharmaceutical industries, his broad leadership experience resulting from service on various boards, and his knowledge and experience with policymaking, regulatory issues and other governmental matters.

Jack L. Wyszomierski, age 57, has been a director since February 2004. From June 2004 to June 2009, Mr. Wyszomierski served as the Executive Vice President and Chief Financial Officer of VWR International, LLC, a supplier of laboratory supplies, equipment and supply chain solutions to the global research laboratory

 

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industry. From 1982 to 2003, Mr. Wyszomierski held positions of increasing responsibility within the finance group at Schering-Plough Corporation, a health care company, culminating with his appointment as Executive Vice President and Chief Financial Officer in 1996. Prior to joining Schering-Plough, he was responsible for capitalization planning at Joy Manufacturing Company, a producer of mining equipment, and was a management consultant at Data Resources, Inc. Mr. Wyszomierski has served as a member of the board of directors of XOMA Ltd., a publicly-held company that discovers, develops and manufactures novel antibody therapeutics, since August 2010, as a member of the board of directors of Athersys, Inc., a publicly-held company engaged in the discovery and development of therapeutic product candidates, since June 2010 and as a member of the board of directors of Unigene Laboratories, Inc., a publicly-held biopharmaceutical company, since April 2012. Mr. Wyszomierski previously served as a member of the board of directors of AssuraMed Holding, Inc., a privately-held distributor of home healthcare products, from January 2011 until its acquisition by Cardinal Health Inc. in March 2013. Mr. Wyszomierski holds a M.S. in Industrial Administration and a B.S. in Administration, Management Science and Economics from Carnegie Mellon University. Our Board has concluded that Mr. Wyszomierski should continue to serve as director of Exelixis as of the date of this Proxy Statement particularly due to his extensive financial reporting, accounting and finance experience, as well as his experience in the healthcare and life sciences industries. These qualities have also formed the basis for the Board’s decision to appoint Mr. Wyszomierski as a member and chairman of the Audit Committee.

 

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INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Corporate Governance

Corporate Governance Guidelines

We have adopted written corporate governance guidelines, which may be viewed at www.exelixis.com under the caption “Investors & Media—Corporate Governance.” These guidelines include guidelines for determining director independence and qualifications for directors. Our Board regularly reviews, and modifies from time to time, the corporate governance guidelines, Board committee charters and Board practices. Please note that information found on, or accessible through, our website is not a part of, and is not incorporated into, this Proxy Statement.

Code of Conduct and Ethics

We have adopted a Code of Conduct and Ethics that applies to all directors, officers and employees, including the principal executive officer, principal financial officer and principal accounting officer. The Code of Conduct and Ethics is posted on our website at www.exelixis.com under the caption “Investors & Media—Corporate Governance.” We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of this Code of Conduct and Ethics by posting such information on our website, at the address and location specified above and, to the extent required by the listing standards of the NASDAQ Stock Market, by filing a Current Report on Form 8-K with the SEC, disclosing such information.

Director Independence

We have adopted standards for director independence pursuant to NASDAQ listing standards, which require that a majority of the members of a listed company’s board of directors qualify as “independent,” as affirmatively determined by the board of directors. An “independent director” means a person other than an officer or employee of Exelixis or one of our subsidiaries, or another individual having a relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Consistent with these considerations, after review of all relevant transactions or relationships between each director, or any of his or her family members, and Exelixis, its senior management and its independent registered public accounting firm, the Board has affirmatively determined that Drs. Cohen, Garber, Marchesi, McCormick, Papadopoulos, Poste and Willsey and Messrs. Wyszomierski and Feldbaum, who are nine of the eleven members of the Board, represent a majority of the Board and are independent. Dr. Morrissey, our President and Chief Executive Officer, is not independent by virtue of his employment with Exelixis. Dr. Scangos, who served as our President and Chief Executive Officer from October 1996 to July 2010, is not an independent director by virtue of his former employment with Exelixis. In addition, the Board has also determined that: (i) all directors who serve on the Audit, Compensation and Nominating and Corporate Governance Committees are independent under applicable NASDAQ listing standards; and (ii) all members of the Audit Committee meet the independence requirements under the Securities Exchange Act of 1934, as amended.

Board Leadership Structure

The Board does not have a formal policy on whether the role of chairman and chief executive officer should be separate or combined. Our corporate governance guidelines provide that the Board will select its chairman and the chief executive officer in the manner it considers to be in the best interests of our company and those of our stockholders. Currently, we have an independent chairman of the board separate from the chief executive officer. The Board believes this bifurcated structure provides for sufficient independent oversight of management and strong Board leadership, while allowing for the effective management of company affairs. The Board believes that if the positions of chairman and chief executive officer are combined, the appointment of a lead independent director would be necessary for effective governance. Accordingly, our corporate governance guidelines provide

 

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that if the roles are combined, the independent directors of the Board must appoint a lead independent director. Our corporate governance guidelines further provide that the lead independent director would: (i) preside at all meetings of the Board at which the chairman is not present, including executive sessions of the independent directors; (ii) have the authority to call meetings of the independent directors; (iii) serve as the principal liaison on Board-wide issues between the independent directors and the chairman; and (iv) have such other authority and duties as the Board may from time to time determine. The Board believes that this flexible approach provides it with the ability to establish a leadership structure, based upon its judgment, that is in the best interests of our company and those of our stockholders at any given time.

Role of the Board in Risk Oversight

Management is responsible for identifying the various risks facing our company, including, without limitation, strategic, operational, financial and regulatory risks that may exist from time to time. Management is also charged with the responsibility of implementing appropriate risk management policies and procedures and managing our risk exposure on a day-to-day basis. While we do not have a formal risk oversight policy, the Board, as a whole and through its various committees, conducts the risk oversight function for our company. In its risk oversight role, the Board evaluates whether management has reasonable controls in place to address material risks currently facing our company and those we may face in the future. The Board and its committees meet at regularly scheduled and special meetings throughout the year at which they are presented with information regarding risks facing the company. The Board also is presented with such information during monthly teleconferences among our Board and senior management established to provide the members of our Board with more frequent business updates. Following consideration of the information provided by management, the Board provides feedback, makes recommendations and, as needed, issues directives to management to address our risk exposure.

Prohibitions on Derivative, Hedging, Monetization and Other Transactions

We maintain an insider trading policy applicable to all employees, including our directors and executive officers, which prohibits certain transactions in our stock, including short sales, puts, calls or other transactions involving derivative securities, hedging or monetization transactions, purchases of Exelixis securities on margin or borrowing against an account in which Exelixis securities are held, or pledging Exelixis stock as collateral for a loan.

Stockholder Communications with the Board

Security holders may send communications to the Board by mail at 210 East Grand Avenue, South San Francisco, California 94080, by facsimile at (650) 837-7951 or by e-mail at info@exelixis.com, each of the foregoing sent “Attn: Board of Directors.”

Board Committees and Meetings

During the fiscal year ended December 28, 2012, the Board held eight meetings. As required under applicable NASDAQ listing standards, during the fiscal year ended December 28, 2012, our independent directors met five times in executive sessions, four of which were regularly scheduled executive sessions.

During the fiscal year ended December 28, 2012, all of our directors attended at least 75% of the total meetings of the Board and of the committees on which they served during the period for which they were a director or committee member, respectively, except Dr. McCormick. Dr. McCormick’s absences were primarily due to scheduling conflicts with certain meetings of the American Association for Cancer Research, a scientific organization whose mission is to prevent and cure cancer through research, education, communication, and collaboration, of which Dr. McCormick served as president for a one-year term from April 2012 to April 2013. From 2006 through 2011, Dr. McCormick attended at least 75% of the total meetings of the Board and of the committees on which he served, and regularly participates in the monthly teleconferences among our Board and senior management established to provide the members of our Board with more frequent business updates.

 

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In 2012, the Board had four standing committees: an Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Research and Development Committee.

Audit Committee

The Audit Committee of the Board oversees our corporate accounting and financial reporting process, ensures the integrity of our financial statements and has been designated as the Qualified Legal Compliance Committee within the meaning of Rule 205.2(k) of Title 17, Chapter II of the Code of Federal Regulations. The Audit Committee performs several functions, such as evaluating the performance of, and assessing the qualifications of, the independent registered public accounting firm; determining whether to retain or terminate the existing independent registered public accounting firm or to appoint and engage a new independent registered public accounting firm; reviewing and approving the engagement of the independent registered public accounting firm to perform any proposed permissible services and appropriate compensation thereof; reviewing, providing oversight of and approving related party transactions; establishing procedures, as required under applicable law, for the receipt, retention and treatment of complaints received by Exelixis regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; reviewing the financial statements to be included in our Annual Report on Form 10-K; discussing with management and the independent registered public accounting firm the results of the annual audit and the results of our quarterly financial statement reviews; and resolving any disagreements between the independent registered public accounting firm and management. The Audit Committee also has the specific responsibilities and authority necessary to comply with the listing standards of the NASDAQ Stock Market applicable to audit committees.

During 2012, the Audit Committee was comprised of three independent directors, Drs. Cohen and Papadopoulos and Mr. Wyszomierski (chairman). Effective February 1, 2012, Dr. Papadopoulos, also an independent director, replaced Dr. Willsey as a member of the Audit Committee. The Board has determined that Mr. Wyszomierski is an “audit committee financial expert” as defined in applicable SEC rules. The Audit Committee met seven times during the fiscal year ended December 28, 2012. The Audit Committee’s report is set forth in “Report of the Audit Committee” below. The Audit Committee has a written charter, which is available on our website at www.exelixis.com under the caption “Investors & Media—Corporate Governance.”

Compensation Committee

The purpose of the Compensation Committee is to: oversee our compensation policies, plans and programs; review and determine the compensation to be paid to officers; work with management to address any conflict of interest with any compensation adviser engagement by management or the Compensation Committee; review with management our Compensation Discussion and Analysis and to consider whether to recommend that it be included in our proxy statements and other filings; and prepare and review the Compensation Committee’s report included in our annual proxy statement or Annual Report on Form 10-K, as applicable, in accordance with applicable rules and regulations of the SEC. The Compensation Committee reviews and recommends to the Board the compensation and benefits of all officers, establishes and reviews general policies relating to compensation and benefits of employees, including executive officers, and performs such other functions regarding compensation as the Board may delegate. The Compensation Committee also administers the issuance of stock options and other awards under our stock plans.

During 2012, the Compensation Committee comprised three independent directors, Drs. Cohen (chairman), Marchesi and Willsey. The Compensation Committee met nine times during the fiscal year ended December 28, 2012. The Compensation Committee’s report is set forth in “Compensation Committee Report” below. Information on the Compensation Committee’s processes and procedures for consideration of executive compensation are addressed in “—Compensation Discussion and Analysis” below. For information regarding our processes and procedures for the consideration and determination of director compensation, please see “—Compensation of Directors” below. The Compensation Committee has a written charter, which is available on our website at www.exelixis.com under the caption “Investors & Media —Corporate Governance.”

 

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The Compensation Committee retained Frederick W. Cook & Co., Inc., a national compensation consulting firm, as its external compensation consultant to assist the Compensation Committee in its duties related to executive compensation. For more detailed information regarding the services provided by Frederick W. Cook & Co., Inc., please see “—Compensation Discussion and Analysis” below. Frederick W. Cook & Co., Inc. did not perform any work for us other than the executive compensation consulting services provided to the Compensation Committee and reported directly to the Compensation Committee through its chairperson. Frederick W. Cook & Co., Inc. also provided a certification to the Compensation Committee regarding its independence and provision of services. In March 2013, the Compensation Committee assessed the independence of Frederick W. Cook & Co., Inc. pursuant to SEC rules and concluded that no conflict of interest exists that would prevent Frederick W. Cook & Co., Inc. from serving as an independent consultant to the Compensation Committee.

Management retained Radford, a compensation consulting firm serving technology and life sciences companies, as its external compensation consultant to assist with executive and non-employee director compensation. For more detailed information regarding the services provided by Radford, please see “—Compensation of Directors” and “—Compensation Discussion and Analysis” below. Radford is an Aon Hewitt Company and an affiliate of Aon plc which has provided insurance brokerage services to Exelixis since 2012. Aggregate fees paid to Aon plc for 2012 did not exceed $120,000. Radford provided a certification to the Compensation Committee regarding its independence and provision of services. In March 2013, the Compensation Committee assessed the independence of Radford pursuant to SEC rules and concluded that no conflict of interest exists that would prevent Radford from serving as an independent consultant to management.

Nominating and Corporate Governance Committee

The purpose of the Nominating and Corporate Governance Committee is to: oversee all aspects of our corporate governance functions on behalf of the Board; make recommendations to the Board regarding corporate governance issues; identify, review and evaluate candidates to serve as directors; serve as a focal point for communication between such candidates, non-committee directors and management; recommend such candidates to the Board and make such other recommendations to the Board regarding affairs relating to the directors, including director compensation; and develop a set of corporate governance principles for Exelixis. Effective September 2012, in light of emerging compliance requirements in connection with the continued development and commercialization of COMETRIQ^TM (cabozantinib), the Nominating and Corporate Governance Committee also oversees our healthcare compliance programs created to prevent fraud and abuse in federal healthcare programs and non-compliance with applicable healthcare laws. During 2012, the Nominating and Corporate Governance Committee was comprised of three independent directors, Drs. Garber (chairman) and Poste and Mr. Feldbaum. The Nominating and Corporate Governance Committee met two times during the fiscal year ended December 28, 2012. The Nominating and Corporate Governance Committee has a written charter, which is available on our website at www.exelixis.com under the caption “Investors & Media—Corporate Governance.”

Because we are a biotechnology company with rapidly evolving and expanding clinical programs, the Board does not believe that it is appropriate to adopt, and the Nominating and Corporate Governance Committee has not adopted, a formal policy with respect to a fixed set of minimum qualifications for its candidates for membership on the Board. Instead, in considering candidates for directorship, the Nominating and Corporate Governance Committee will generally consider all relevant factors, including the candidate’s applicable expertise and demonstrated excellence in his or her field, the usefulness of such expertise to us, the availability of the candidate to devote sufficient time and attention to the affairs of Exelixis, the existence of any relationship that would interfere with the exercise of the candidate’s independent judgment, and the candidate’s demonstrated character and judgment. In the review process, the Nominating and Corporate Governance Committee evaluates prospective candidates for directorship in the context of the existing membership of the Board (including the qualities and skills of the existing directors), our operating requirements and the long-term interests of our stockholders. The Board does not have a formal policy with regard to the consideration of diversity in identifying

 

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director nominees, but the Nominating and Corporate Governance Committee believes that the factors considered above enable it to identify director candidates that possess a wide range of backgrounds, industry knowledge, skills and experiences.

The Nominating and Corporate Governance Committee generally will consider and assess all candidates recommended by our directors, officers and stockholders. In previous years, we engaged an executive search firm to assist the committee in identifying and recruiting potential candidates for membership on the Board. The Nominating and Corporate Governance Committee intends to consider stockholder recommendations for directors using the same criteria as potential nominees recommended by the members of the Nominating and Corporate Governance Committee or others. The Nominating and Corporate Governance Committee has not received any recommended nominations from any of our stockholders in connection with the 2013 Annual Meeting. Evaluations of candidates generally involve a review of background materials, internal discussions and interviews with selected candidates as appropriate. If, after its review, the Nominating and Corporate Governance Committee supports a candidate, it would recommend the candidate for consideration by the full Board.

Stockholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board may do so by delivering a written recommendation to the Nominating and Corporate Governance Committee within the timeframe specified in our Bylaws that is applicable to matters to be brought before an Annual Meeting of Stockholders as set forth under “Questions and Answers About These Proxy Materials and Voting” above. Such communications should be sent to the following address: Exelixis, Inc., 210 East Grand Ave., South San Francisco, California 94080, Attn: Nominating and Corporate Governance Committee of the Board. Submissions must include the full name of the proposed nominee, a description of the proposed nominee’s business experience for at least the previous five years, complete biographical information, a description of the proposed nominee’s qualifications as a director and a representation that the nominating stockholder is a beneficial or record owner of our stock. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director, if elected.

Research and Development Committee

The Research and Development Committee, which was established effective January 1, 2006, is responsible for advising Exelixis and the Board on matters of scientific importance as the Board, in consultation with management, may designate from time to time. During 2012, the Research and Development Committee was comprised of four members, Drs. McCormick, Marchesi, Poste (chairman) and Willsey. The Research and Development Committee met two times during the fiscal year ended December 28, 2012.

Annual Meeting; Attendance

The Board does not have a formal policy with respect to the attendance of its members at Annual Meetings of Stockholders. Dr. Morrissey was the only member of the Board in attendance at the 2012 Annual Meeting of Stockholders.

 

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Compensation of Directors

Cash Compensation Arrangements

The table below provides information regarding the cash compensation arrangements for our non-employee directors for 2012 and 2013. Dr. Morrissey receives no compensation in his capacity as a member of the Board.

 

Service		Fee Type		Cash Compensation (S)
Board		Retainer Fee			20,000
		Additional Chair Retainer Fee			30,000
		Regular Meeting Fee			2,500
		Special Meeting Fee(1)			1,000
Audit Committee		Retainer Fee			6,000
		Additional Chair Retainer Fee			15,000
		Meeting Fee(2)			1,000
Compensation Committee		Retainer Fee			5,000
		Additional Chair Retainer Fee			10,000
		Meeting Fee(2)			1,000
Nominating & Corporate Governance Committee		Retainer Fee			5,000
		Additional Chair Retainer Fee			10,000
		Meeting Fee(2)			1,000
Research & Development Committee		Retainer Fee			10,000
		Additional Chair Retainer Fee			10,000
		Meeting Fee(2)			5,000

 

(1)	Meeting at which minutes are generated.

(2)	In-person meeting or teleconference at which minutes are generated.

Equity Compensation Arrangements

In January 2000, we adopted the 2000 Non-Employee Directors’ Stock Option Plan (the “Directors’ Plan”) to provide for the automatic grant of options to purchase shares of common stock to directors who are not employees of Exelixis or of any of our affiliates. Such options are granted automatically, without further action by us, the Board or our stockholders. For 2012, under the terms of the Directors’ Plan, non-employee directors were eligible to receive a one-time initial option to purchase 25,000 shares of common stock when they first join the Board and an annual option to purchase 15,000 shares of common stock on the day following each Annual Meeting of Stockholders. Effective February 5, 2013, under the terms of the Directors’ Plan, all non-employee directors receive a one-time initial option to purchase 50,000 shares of common stock when they first join the Board. In addition, all non-employee directors receive an annual option to purchase 30,000 shares of common stock on the day following each Annual Meeting of Stockholders. Options granted under the Directors’ Plan are not intended to qualify as incentive stock options under the Internal Revenue Code of 1986, as amended (the “Code”). The exercise price of options granted under the Directors’ Plan is equal to 100% of the fair market value of a share of common stock on the grant date. Under the terms of the Directors’ Plan, the initial options to purchase 50,000 shares are immediately exercisable but will vest at the rate of 25% of the shares on the first anniversary of the grant date and monthly thereafter over the next three years. The annual grants are exercisable immediately but will vest monthly over a one-year period. As long as the optionholder continues to serve with us or with an affiliate of us, the option will continue to vest and be exercisable during its term. When the optionholder’s service terminates, we will have the right to repurchase any unvested shares acquired upon exercise of the option at the original exercise price, without interest. Generally, stock options issued under the Directors’ Plan prior to May 18, 2011 have a term of ten years. However, in connection with the adoption of the

 

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Exelixis, Inc. 2011 Equity Incentive Plan (the “2011 Equity Plan”), stock options issued under the Directors’ Plan after May 18, 2011 are subject to a term that does not exceed seven years. Stock options issued under the Directors’ Plan prior to December 1, 2010 are generally set to terminate three months after a non-employee director’s service terminates, with certain extensions of the termination date to avoid violation of registration requirements under the Securities Act of 1933, as amended, or the optionholder’s death or disability. Effective December 1, 2010, all options granted under the Directors’ Plan are generally set to terminate the earlier of three years after a non-employee director’s service terminates or the remainder of the term of the option.

During fiscal 2012, we granted an option to purchase 15,000 shares of common stock to each of our non-employee directors, with the exception of Dr. Morrissey who was serving as an executive officer of Exelixis at the time of grant. The options were granted at an exercise price per share of $4.57, which equaled the fair market value of our common stock at the date of grant (based on the last reported sale price as quoted on the NASDAQ Global Select Market on the last trading day prior to the day of grant).

Reimbursement of Expenses

The members of the Board are also eligible for reimbursement of expenses incurred in connection with their attendance of Board meetings and their service on the Board in accordance with our policy. In 2012, total reimbursement for such expenses was approximately $108,324.

Processes and Procedures for Determining Director Compensation

Our Nominating and Corporate Governance Committee is responsible for recommending to the Board for approval the annual compensation for our non-employee directors. The Nominating and Corporate Committee acts on behalf of the Board in discharging the Board’s responsibilities with respect to overseeing our compensation policies with respect to non-employee directors. For non-employee director compensation decisions, the Nominating and Corporate Governance Committee considered information provided by Radford, a compensation consultant retained by Exelixis to compile benchmark and industry compensation data. Dr. Morrissey, Laura Dillard, our Vice President, Human Resources, Pamela A. Simonton, our Executive President and General Counsel, and James B. Bucher, our Vice President, Corporate Legal Affairs and Secretary, participated in a discussion with the Nominating and Corporate Governance Committee regarding the 2013 compensation decisions for non-employee directors. However, none of these officers participated in the determination of non-employee director compensation. Except as described above, no other executive officers participated in the determination or recommendation of the amount or form of non-employee director compensation for 2013. The Nominating and Corporate Governance Committee does not delegate any of its functions to others in determining non-employee director compensation, and we do not currently engage any other consultants with respect to director compensation matters.

The Nominating and Corporate Governance Committee benchmarks cash compensation as well as compensation in the form of stock options for non-employee directors. The Nominating and Corporate Governance Committee uses peer group data primarily to ensure that our compensation program for non-employee directors as a whole is competitive. For a more detailed discussion of our peer list, please see “Compensation of Executive Officers—Compensation Discussion and Analysis.”

After the Nominating and Corporate Governance Committee finalizes its recommendations regarding compensation for our non-employee directors, the Nominating and Corporate Governance Committee presents its recommendations to the full Board for consideration and approval.

 

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Director Compensation Table

The following table shows compensation information for our non-employee directors for the fiscal year ended December 28, 2012. Only one option award was made to each non-employee director in 2012, the grant date fair value of which is reflected in the table.

Director Compensation for Fiscal 2012

 

Name		Fees Earned or Paid in Cash($)				Option Awards($)(1)				Total($)
Charles Cohen, Ph.D. (2)			71,000				40,205				111,205
Carl B. Feldbaum, Esq. (2)			41,000				40,205				81,205
Alan M. Garber, M.D., Ph.D. (2)			50,000				40,205				90,205
Vincent T. Marchesi, M.D., Ph.D. (2)			68,000				40,205				108,205
Frank McCormick, Ph.D. (2)			44,500				40,205				84,705
Stelios Papadopoulos, Ph.D. (2)			75,000				40,205				115,205
George Poste, D.V.M., Ph.D. (2)			71,000				40,205				111,205
George A. Scangos, Ph.D. (2)			33,000				40,205				73,205
Lance Willsey, M.D. (2)			70,500				40,205				110,705
Jack L. Wyszomierski (2)			62,000				40,205				102,205

 

(1)

Amounts shown in this column reflect the aggregate grant date fair value for the option awards granted in fiscal 2012 as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC 718”). The assumptions used to calculate the value of option awards are set forth in Note 10 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2012, filed with the SEC on February 21, 2013. There can be no assurance that the options will ever be exercised (in which case no value will actually be realized by the director) or that the value on exercise will be equal to the grant date fair value shown in this column.

(2)

The aggregate number of shares subject to outstanding stock options held by each director listed in the table above as of December 28, 2012 was as follows: 116,250 shares for Dr. Cohen, 106,250 shares for Mr. Feldbaum, 126,250 shares for Dr. Garber, 116,250 shares for Dr. Marchesi, 136,250 shares for Dr. McCormick, 216,250 shares for Dr. Papadopoulos, 126,250 shares for Dr. Poste, 2,704,998 shares for Dr. Scangos, 116,250 shares for Dr. Willsey and 136,250 shares for Mr. Wyszomierski.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 2012, the Compensation Committee was comprised of Drs. Cohen, Marchesi and Willsey. None of the members of the Compensation Committee during 2012 has at any time been an officer or employee of Exelixis, except that Dr. Cohen (1) served as our acting Chief Scientific Officer from December 1995 to April 1997 and (2) was named as an officer of one of our former subsidiaries from 2001 through March 2005 for which he did not receive any compensation. No interlocking relationship exists between the Board or Compensation Committee and the board of directors or compensation committee of any other company, nor has any interlocking relationship existed in the past.

 

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COMPENSATION COMMITTEE REPORT⁽¹⁾

The Compensation Committee of the Board of Directors of Exelixis, Inc., comprised of independent directors, has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement and, based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into our Annual Report on Form 10-K for the year ended December 28, 2012.

Compensation Committee:

Charles Cohen, Chairman

Vincent T. Marchesi

Lance Willsey

 

 

(1)

The material in this report is not “soliciting material,” is not deemed “filed” with the Securities and Exchange Commission and is not deemed to be incorporated by reference in any filing of Exelixis under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

 

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REPORT OF THE AUDIT COMMITTEE⁽¹⁾

In connection with the audited consolidated financial statements for the fiscal year ended December 28, 2012 of Exelixis, Inc. (“Exelixis”), the Audit Committee of the Board of Directors of Exelixis has:

(1) reviewed and discussed the audited financial statements for the fiscal year ended December 28, 2012 with management of Exelixis;

(2) discussed with Ernst & Young LLP, Exelixis’ independent registered public accounting firm (“Ernst & Young”), the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T; and

(3) received the written disclosures and the letter from Ernst & Young required by applicable requirements of the PCAOB regarding Ernst & Young’s communications with the Audit Committee concerning independence, and has discussed with Ernst & Young that accounting firm’s independence.

Based on the foregoing, the Audit Committee has recommended to the Board of Directors that the audited financial statements be included in Exelixis’ Annual Report on Form 10-K for the fiscal year ended December 28, 2012.

Audit Committee:

Jack L. Wyszomierski, Chairman

Charles Cohen

Stelios Papadopoulos

 

(1)

The material in this report is not “soliciting material,” is not deemed “filed: with the Securities and Exchange Commission and is not deemed to be incorporated by reference in any filing of Exelixis under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

 

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PROPOSAL 2

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board has selected Ernst & Young LLP as Exelixis’ independent registered public accounting firm for the fiscal year ending December 27, 2013. The Board, on behalf of the Audit Committee, has further directed that management submit the selection of the independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP has audited our financial statements for each of the twelve fiscal years in the period ended December 28, 2012. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Neither our Bylaws nor other governing documents or law require stockholder ratification of the selection of Ernst & Young LLP as Exelixis’ independent registered public accounting firm. However, the Board is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee of the Board will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee of the Board in its discretion may direct the appointment of different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of Exelixis and its stockholders.

The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required to ratify the selection of Ernst & Young LLP. Abstentions will be counted toward the tabulation of votes cast on proposals presented to the stockholders and will have the same effect as a vote against this proposal. Broker non-votes are counted towards a quorum, but will have no effect on the results of this vote.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.

Principal Accountant Fees and Services

The aggregate fees billed by Ernst & Young LLP for the last two fiscal years for the services described below are as follows:

 

		Fiscal Year Ended
		December 28, 2012				December 30, 2011
Audit Fees (1)		$	915,458			$	851,044
Audit-Related Fees (2)			—				34,200
Tax Fees (3)			—				—
All Other Fees (4)			6,000				2,580
Total Fees		$	921,458			$	887,824

 

(1)

“Audit fees” consist of fees billed for professional services rendered for the audit of our consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Ernst & Young LLP in connection with statutory and regulatory filings and other engagements such as comfort letters, consents, and review of documents filed with the SEC.

(2)

“Audit-related fees” consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit fees.” During fiscal 2012 and 2011, these services included consultations relating to various transactions of Exelixis.

(3)	“Tax fees” include fees for tax compliance. No tax fees were billed during fiscal 2012 and 2011.

 

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(4)

“All other fees” consist of fees for products and services other than the services described above. During fiscal 2012, these fees consisted of professional services rendered pertaining to the filing of our registration statement on Form S-3 with the SEC in June 2012. During fiscal 2011, these fees related to an online subscription to an Ernst & Young, LLP database.

All fees described above were pre-approved by the Audit Committee. The Audit Committee has determined that the rendering of the services other than audit services by Ernst & Young LLP is compatible with maintaining the independence of the independent registered public accounting firm.

Pre-Approval of Services

During 2012 and 2011, the Audit Committee of the Board pre-approved the audit and non-audit services to be performed by Exelixis’ independent registered public accounting firm, Ernst & Young LLP. Non-audit services are defined as services other than those provided in connection with an audit or a review of our financial statements. The Audit Committee pre-approves all audit and non-audit services rendered by Ernst & Young LLP. The Audit Committee generally pre-approves specified services in the defined categories of audit services, audit-related services, tax services and all other services up to specified amounts. Pre-approval may also be given as part of the Audit Committee’s approval of the scope of the engagement of the independent registered public accounting firm or on an individual explicit case-by-case basis before the independent auditor is engaged to provide each service. The Audit Committee or its chairman, whom the Audit Committee has designated as a one-person subcommittee with pre-approval authority, pre-approved all audit fees, audit-related fees, tax fees and other fees in 2012 and 2011. Any pre-approvals by the subcommittee must be and were presented to the Audit Committee at its next scheduled meeting.

 

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PROPOSAL 3

ADVISORY VOTE ON THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS

Our stockholders are entitled to vote to approve, on an advisory basis, the compensation, as disclosed in this Proxy Statement, of our Chief Executive Officer, Chief Financial Officer and the other executive officers appearing in the table entitled “Summary Compensation Table for Fiscal 2012” later in this Proxy Statement (collectively, the “Named Executive Officers”). This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, policies and practices described in this Proxy Statement.

The compensation of our Named Executive Officers subject to the vote is disclosed in “Compensation Discussion and Analysis,” and the compensation tables and the related narrative disclosure contained in this Proxy Statement. As discussed in the “Compensation Discussion and Analysis” section of this Proxy Statement, the primary objectives of our executive compensation program are to align compensation with business objectives and performance and with the interests of our stockholders and to enable us to attract, retain and reward executive officers for extraordinary performance. In support of these objectives, our fiscal 2012 executive compensation program continues to reflect our decision to focus our proprietary resources and development and commercialization efforts exclusively on COMETRIQ^TM (cabozantinib), our wholly-owned inhibitor of multiple receptor tyrosine kinases.

The Board encourages our stockholders to read the disclosures set forth in the “Compensation Discussion and Analysis” section of this Proxy Statement to review the correlation between compensation and performance, as well as the compensation actions taken in 2012. The Board believes that our executive compensation program effectively aligns executive pay with our performance and results in the attraction and retention of highly talented executives.

Accordingly, the Board recommends that our stockholders cast a non-binding advisory vote “For” the following resolution:

“RESOLVED, that the compensation paid to the our Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.”

Required Vote and Board of Directors Recommendation

Advisory approval of Proposal 3 requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote at the Annual Meeting. Abstentions will be counted toward the tabulation of votes cast on the proposal and will have the same effect as votes against this proposal. Broker non-votes will have no effect and will not be counted towards the vote total.

Our Board believes that approval of Proposal 3 is in our best interests and the best interests of our stockholders for the reasons stated above. Because the vote is advisory, it is not binding on the Board or on us. Nevertheless, the views expressed by our stockholders, whether through this vote or otherwise, are important to management and the Board and, accordingly, the Compensation Committee and Board intend to consider the results of this vote in making determinations in the future regarding executive compensation arrangements. Your vote will serve as an additional tool to guide the Compensation Committee and Board in continuing to improve the alignment of our executive compensation programs with business objectives and performance and with the interests of our stockholders.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the ownership of our common stock as of March 1, 2013 (except as noted) by: (i) each director and nominee for director; (ii) each of the executive officers named in the Summary Compensation Table; (iii) all executive officers and directors of Exelixis as a group; and (iv) all those known by us to be beneficial owners of more than five percent of our common stock.

 

		Beneficially Owned(1)
Name of Beneficial Owner		Number of Shares of Common Stock				Percentage of Total
Executive Officers and Directors
Michael M. Morrissey, Ph.D. (2)			1,557,610				*
Frank L. Karbe (3)			1,152,849				*
J. Scott Garland (4)			76,819				*
Gisela M. Schwab (5)			777,519				*
Pamela A. Simonton (6)			774,403				*
Charles Cohen, Ph.D. (7)			286,875				*
Carl B. Feldbaum, Esq. (8)			106,250				*
Alan M. Garber, M.D., Ph.D. (9)			126,250				*
Vincent T. Marchesi, M.D., Ph.D. (10)			141,250				*
Frank McCormick, Ph.D., FRS (11)			136,250				*
Stelios Papadopoulos, Ph.D. (12)			1,370,206				*
George Poste, D.V.M., Ph.D., FRS (13)			126,250				*
George A. Scangos, Ph.D. (14)			3,603,008				1.94	%
Lance Willsey, M.D. (15)			439,950				*
Jack L. Wyszomierski (16)			136,250				*
All current directors, executive officers as a group (16 persons) (17)			11,494,157				5.99	%
5% Stockholders
Entities Associated with FMR LLC (18)			29,172,058				15.69	%
82 Devonshire Street
Boston, Massachusetts 02109
Wellington Management Company, LLP (19)			25,086,482				13.65	%
280 Congress Street
Boston, MA 02210
Capital Research Global Investors (20)			18,750,900				10.20	%
333 South Hope Street
Los Angeles, CA 90071
T. Rowe Price Associates, Inc. (21)			16,604,065				9.04	%
100 E. Pratt Street
Baltimore, Maryland 21202
Entities Associated with Deerfield Management Company (22)			14,541,177				7.33	%
780 Third Ave, 37th Floor
New York, NY 10017
BlackRock, Inc. (23)			12,728,345				6.93	%
40 East 52nd Street
New York, New York 10022

 

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		Beneficially Owned(1)
Name of Beneficial Owner		Number of Shares of Common Stock				Percentage of Total
Meditor Group Ltd. (24)			12,000,000				6.53	%
79 Front Street
Hamilton, Bermuda
The Vanguard Group (25)			9,973,612				5.43	%
100 Vanguard Blvd.
Malvern, PA 19355

 

*	Less than one percent

(1)

This table is based upon information supplied by executive officers and directors and upon information gathered by us about principal stockholders known to us. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 183,765,598 shares outstanding on March 1, 2013, adjusted as required by rules promulgated by the SEC. The percentage of beneficial ownership as to any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days of March 1, 2013, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days of March 1, 2013. Consequently, the denominator for calculating beneficial ownership percentages may be different for each beneficial owner.

(2)

Includes 94,129 shares held by Michael M. Morrissey and Meghan D. Morrissey, Trustees of the Morrissey Family Living Trust dated July 21, 1994, as amended. Also includes 1,453,124 shares Dr. Morrissey has the right to acquire pursuant to options exercisable and shares issuable upon vesting of restricted stock units within 60 days of March 1, 2013. Also includes 8,665 shares held by Mr. Morrissey under our 401(k) Retirement Plan, determined based upon information provided in plan statements.

(3)

Includes 5,440 shares held by a family member. Also includes 1,060,624 shares Mr. Karbe has the right to acquire pursuant to options exercisable and shares issuable upon vesting of restricted stock units within 60 days of March 1, 2013. Also includes 4,996 shares held by Mr. Karbe under our 401(k) Retirement Plan, determined based upon information provided in plan statements.

(4)	Includes 75,000 shares Mr. Garland has the right to acquire pursuant to options exercisable within 60 days of March 1, 2013. Also includes 1,819 shares held by Mr. Garland under our 401(k) Retirement Plan, determined based upon information provided in plan statements.

(5)

Includes 713,530 shares Dr. Schwab has the right to acquire pursuant to options exercisable and shares issuable upon vesting of restricted stock units within 60 days of March 1, 2013. Also includes 5,952 shares held by Dr. Schwab under our 401(k) Retirement Plan, determined based upon information provided in plan statements.

(6)

Includes 752,291 shares Ms. Simonton has the right to acquire pursuant to options exercisable and shares issuable upon vesting of restricted stock units within 60 days of March 1, 2013. Also includes 8,484 shares held by Ms. Simonton under our 401(k) Retirement Plan, determined based upon information provided in plan statements.

(7)	Includes 116,250 shares Dr. Cohen has the right to acquire pursuant to options exercisable within 60 days of March 1, 2013, 1,250 of which would be subject to repurchase by us, if so exercised.

(8)	Represents shares Mr. Feldbaum has the right to acquire pursuant to options exercisable within 60 days of March 1, 2013, 1,250 of which would be subject to repurchase by us, if so exercised.

(9)	Represents shares Dr. Garber has the right to acquire pursuant to options exercisable within 60 days of March 1, 2013, 1,250 of which would be subject to repurchase by us, if so exercised.

(10)	Includes 116,250 shares Dr. Marchesi has the right to acquire pursuant to options exercisable within 60 days of March 1, 2013, 1,250 of which would be subject to repurchase by us, if so exercised.

 

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(11)	Represents shares Dr. McCormick has the right to acquire pursuant to options exercisable within 60 days of March 1, 2013, 1,250 of which would be subject to repurchase by us, if so exercised.

(12)	Includes 10,000 shares held by Fondation Santé, of which Dr. Papadopoulos is a co-trustee. Also includes 216,250 shares Dr. Papadopoulos has the right to acquire pursuant to options exercisable within 60 days of March 1, 2013, 1,250 of which would be subject to repurchase by us, if so exercised.

(13)	Represents shares Dr. Poste has the right to acquire pursuant to options exercisable within 60 days of March 1, 2013, 1,250 of which would be subject to repurchase by us, if so exercised.

(14)

Includes 8,963 shares held by Dr. Scangos and Leslie S. Wilson, as Trustees of The Jennifer Wilson Scangos Trust, and 8,963 shares held by Dr. Scangos and Leslie S. Wilson, as Trustees of The Katherine Wilson Scangos Trust. Also includes 2,304,998 shares Dr. Scangos has the right to acquire pursuant to options exercisable within 60 days of March 1, 2013, 1,250 of which would be subject to repurchase by us, if so exercised. Also includes 100,000 shares held by Dr. Scangos as Trustee to the Scangos 2008 Grantor Retained Annuity Trust. Also includes 5,669 shares held by Dr. Scangos under our 401(k) Retirement Plan, determined based upon information provided in plan statements.

(15)	Includes 116,250 shares Dr. Willsey has the right to acquire pursuant to options exercisable within 60 days of March 1, 2013, 1,250 of which would be subject to repurchase by us, if so exercised.

(16)	Represents shares Mr. Wyszomierski has the right to acquire pursuant to options exercisable within 60 days of March 1, 2013, 1,250 of which would be subject to repurchase by us, if so exercised.

(17)

Total number of shares includes 3,290,709 shares of common stock held by our directors and executive officers as of March 1, 2013 and entities affiliated with such directors and executive officers. Also includes 8,203,448 shares our directors and executive officers have the right to acquire pursuant to options exercisable and shares issuable upon vesting of restricted stock units within 60 days of March 1, 2013, 12,500 of which would be subject to repurchase by us, if so exercised. Also includes 44,126 shares held by directors and executive officers under our 401(k) Retirement Plan, determined based upon information provided in plan statements.

(18)

Includes 2,209,882 shares issuable upon conversion of our outstanding convertible notes. Fidelity Management & Research Company (“Fidelity”) is a wholly owned subsidiary of FMR LLC and the beneficial owner of 29,028,999 of the shares reported in the table as a result of acting as the investment adviser to various investment companies (the “Funds”), including Fidelity Growth Company Fund which owns 17,309,781 of these shares. Each of FMR LLC and Edward C. Johnson 3rd, Chairman of FMR LLC, through their control of Fidelity and the Funds, has sole power to dispose of the shares. Neither FMR LLC nor Edward C. Johnson 3rd has the sole power to vote or direct the voting of the shares owned directly by the Funds, which power resides with the Funds’ boards of trustees. The foregoing information is based solely on a Schedule 13G/A filed with the SEC on February 14, 2013, which provides information only as of December 31, 2012, and, consequently, the beneficial ownership of above-mentioned reporting persons may have changed between December 31, 2012 and March 1, 2013.

(19)

These shares are beneficially owned by various investors for which Wellington Management Company, LLP (“Wellington”) serves as investment advisor. Wellington reported that it has shared dispositive power over such shares and shared voting power over 14,715,284 of such shares. The foregoing information is based solely on a Schedule 13G/A filed with the SEC on February 14, 2013, which provides information only as of December 31, 2012 and, consequently, the beneficial ownership of above-mentioned reporting person may have changed between December 31, 2012 and March 1, 2013.

(20)

The foregoing information is based solely on a Schedule 13G/A filed with the SEC on February 13, 2013, which provides information only as of December 31, 2012 and, consequently, the beneficial ownership of above-mentioned reporting person may have changed between December 31, 2012 and March 1, 2013.

(21)

These shares are beneficially owned by various individual and institutional investors for which T. Rowe Price Associates, Inc. (“Price Associates”) serves as investment adviser. Price Associates reported that it has sole dispositive power over such shares and sole voting power over 3,028,875 of such shares. The foregoing information is based solely on a Schedule 13G/A filed with the SEC on February 8, 2013, which provides information only as of December 31, 2012 and, consequently, the beneficial ownership of above-mentioned reporting person may have changed between December 31, 2012 and March 1, 2013.

 

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(22)

Consists of 13,741,177 shares issuable upon conversion of our outstanding convertible notes, and 800,000 shares issuable upon exercise of warrants to purchase common stock, held, by Deerfield Partners, L.P., Deerfield International Master Fund, L.P., Deerfield Special Situations Fund, L.P., Deerfield Special Situations International Master Fund, L.P., Deerfield Private Design Fund, L.P., and Deerfield Private Design International, L.P. Deerfield Management Company, L.P. (“Deerfield”), Deerfield Mgmt, L.P. and James E. Flynn reported that they have shared voting and dispositive power over these shares. The foregoing information is based solely on a Schedule 13G/A filed with the SEC on February 14, 2013, which provides information only as of December 31, 2012 and, consequently, the beneficial ownership of above-mentioned reporting persons may have changed between December 31, 2012 and March 1, 2013.

(23)	The information is based solely on a Schedule 13G/A filed with the SEC on February 6, 2013, which provides information only as of December 31, 2012 and, consequently, the beneficial ownership of the above-mentioned reporting person may have changed between December 31, 2012 and March 1, 2013.

(24)

These shares are beneficially owned by Meditor Group Ltd. (“Meditor”) and Meditor European Master Fund Ltd. (“MEMF”), an investment management client of Meditor. Meditor reported that it has shared voting and dispositive power over the shares with MEMF. The foregoing information is based solely on a Schedule 13G/A filed with the SEC on January 25, 2013, which provides information only as of December 31, 2012 and, consequently, the beneficial ownership of above-mentioned reporting person may have changed between December 31, 2012 and March 1, 2013.

(25)

Vanguard Fiduciary Trust Company and Vanguard Investments of Australia, Ltd. are wholly owned subsidiaries of The Vanguard Group (“Vanguard”) and the beneficial owners of 235,515 and 11,900 of the shares, respectively. Vanguard reported that it has sole voting power over 247,415 of such shares, sole dispositive power over 9,738,097 of such shares and shared dispositive power over 235,515 of such shares. The foregoing information is based solely on a Schedule 13G filed with the SEC on February 12, 2013, which provides information only as of December 31, 2012 and, consequently, the beneficial ownership of above-mentioned reporting person may have changed between December 31, 2012 and March 1, 2013.

 

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EXECUTIVE OFFICERS

The following chart sets forth certain information regarding our executive officers as of March 1, 2013:

 

Name		Age				Position
Michael M. Morrissey, Ph.D. (1)			52			President and Chief Executive Officer
Frank L. Karbe			44			Executive Vice President and Chief Financial Officer
J. Scott Garland			44			Executive Vice President and Chief Marketing Officer
Peter Lamb, Ph.D.			52			Executive Vice President, Discovery Research and Chief Scientific Officer
Gisela M. Schwab, M.D.			56			Executive Vice President and Chief Medical Officer
Pamela A. Simonton, J.D., LL.M.			63			Executive Vice President and General Counsel

 

(1)	Please see “Class III Directors Continuing in Office Until the 2014 Annual Meeting” in this Proxy Statement for more information about Dr. Morrissey.

Frank L. Karbe has served as Executive Vice President and Chief Financial Officer since July 2007. From February 2004 to July 2007, Mr. Karbe served as Senior Vice President, Chief Financial Officer. From 1997 to January 2004, Mr. Karbe worked as an investment banker for Goldman Sachs & Co., where he served most recently as Vice President in the healthcare group focusing on corporate finance and mergers & acquisitions in the biotechnology industry. Prior to Goldman Sachs, Mr. Karbe held various positions in the finance department of The Royal Dutch/Shell Group in Europe. Since January 2009, Mr. Karbe has served as a member of the board of directors of Tekmira Pharmaceuticals Corporation, a publicly-held biopharmaceutical company. From July 2010 to December 2011, Mr. Karbe served as a member of the board of directors of our former subsidiary, TaconicArtemis GmbH (previously known as Artemis Pharmaceuticals GmbH). Mr. Karbe holds a Diplom Kaufmann from the WHU—Otto Beisheim Graduate School of Management, Koblenz, Germany (equivalent to a U.S. Masters of Business Administration).

J. Scott Garland has served as Executive Vice President and Chief Commercial Officer since October 2011. Prior to joining Exelixis, from April 2002 to October 2011, Mr. Garland held positions of increasing responsibility at Genentech, Inc., most recently serving as Vice President of Genentech’s Avastin franchise, where he led the U.S. sales and marketing efforts for the drug. Prior to that position, he served as Vice President, Hematology Marketing and Sales, overseeing the Rituxan franchise and as a Director on the Tarceva franchise. From July 1997 to April 2002, Mr. Garland held several positions within the sales and marketing division of Amgen, Inc. and from July 1991 to July 1995 served as a professional sales representative at Merck & Co., Inc. Mr. Garland has a Masters in Business Administration from Duke University’s Fuqua School of Business and B.A. from California Polytechnic University (San Luis Obispo).

Peter Lamb, Ph.D., has served as Executive Vice President and Chief Scientific Officer since September 2009. Previously, he served as Senior Vice President, Discovery Research and Chief Scientific Officer from January 2007 until September 2009, as Vice President, Discovery Pharmacology from December 2003 until January 2007 and as Senior Director, Molecular Pharmacology and Structural Biology from October 2000 until December 2003. Prior to joining Exelixis, from June 1992 until September 2000, Dr. Lamb held positions of increasing responsibility at Ligand Pharmaceuticals, most recently serving as Director of Transcription Research. During this time, he led teams that implemented novel drug discovery approaches that led to the identification of the first small molecule activators of cytokine receptors. Dr. Lamb has held post-doctoral research fellowships at the Carnegie Institution, Department of Embryology, with Dr. S.L. McKnight and the University of Oxford with Dr. N.J. Proudfoot, working in the field of gene regulation. He has authored numerous articles in the fields of gene expression, signal transduction and oncology, and is an author on multiple issued and pending US patents. He has a Ph.D. in Molecular Biology from the ICRF/University of London and a B.A. in Biochemistry from the University of Cambridge.

 

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Gisela M. Schwab, M.D., has served as Executive Vice President and Chief Medical Officer since January 2008. She joined Exelixis in 2006 as Senior Vice President and Chief Medical Officer. From 2002 to 2006, she held the position of Senior Vice President and Chief Medical Officer at Abgenix, Inc., a human antibody-based drug development company. She also served as Vice President, Clinical Development, at Abgenix from 1999 to 2001. Prior to working at Abgenix, from 1992 to 1999, she held positions of increasing responsibility at Amgen Inc., most recently as Director of Clinical Research and Hematology/Oncology Therapeutic Area Team Leader. Since August 2011, Dr. Schwab has served as a member of the board of directors of Topotarget A/S, a publicly-held biopharmaceutical company. Since June 2012 she has served as a member of the board of directors of Cellerant Therapeutics, Inc. a privately held biopharmaceutical company. She received her Doctor of Medicine degree from the University of Heidelberg, trained at the University of Erlangen-Nuremberg and the National Cancer Institute and is board certified in internal medicine and hematology and oncology.

Pamela A. Simonton, J.D., LL.M., has served as Executive Vice President and General Counsel since January 2008. Beginning in 2011, she is also responsible for leadership of the company’s business development activities as well as oversight of facilities operations. Previously, she served as Senior Vice President, Patents and Licensing from January 2004 until December 2007. In addition, she served as Vice President of Corporate Technology Development from April 2000 through December 2003. From July 1996 to April 2000, Ms. Simonton served as Vice President, Licensing and Acquisitions for Bayer Corporation’s Pharmaceutical Division. From September 1994 to July 1996, Ms. Simonton served as Vice President of Patents and Licensing for Bayer’s Pharmaceutical Division, North America. Ms. Simonton is admitted to practice in California (RIHC), the District of Columbia and Florida and before the United States Patent and Trademark Office. Ms. Simonton holds a B.S. in Chemistry from Barry College, an M.S. in Physics from the University of Miami, a J.D. from Nova University and an LL.M. in Patent and Trade Regulation from George Washington University.

 

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COMPENSATION OF EXECUTIVE OFFICERS

Compensation Discussion and Analysis

Executive Summary

We are committed to developing small molecule therapies for the treatment of cancer. We are focusing our proprietary resources and development and commercialization efforts exclusively on COMETRIQ™ (cabozantinib), our wholly-owned inhibitor of multiple receptor tyrosine kinases. On November 29, 2012, the U.S. Food and Drug Administration, or FDA, approved COMETRIQ for the treatment of progressive, metastatic medullary thyroid cancer, or MTC, in the United States. COMETRIQ is being evaluated in a variety of other cancer indications through a broad development program, including two ongoing phase 3 pivotal trials in metastatic castration-resistant prostate cancer, or CRPC, and two additional phase 3 pivotal trials in metastatic hepatocellular cancer and metastatic renal cell cancer that we plan to initiate in 2013. We believe COMETRIQ has the potential to be a high-quality, broadly-active and differentiated anti-cancer agent that can make a meaningful difference in the lives of patients. Our objective is to develop COMETRIQ into a major oncology franchise, and we believe that the approval of COMETRIQ for the treatment of progressive, metastatic MTC provides us with the opportunity to establish a commercial presence in furtherance of this objective.

Our compensation decisions for 2012 were significantly impacted by the approval by the FDA of COMETRIQ for the treatment of patients with progressive, metastatic MTC in the United States, which was a major milestone in the history of our company, as with this approval we moved from a company solely focused on the development of product candidates to one with a commercial product. Further, our company had performed well in most of the other areas determined to be important corporate, research and development and business goals for 2012 , which was reflected in the 2012 compensation for our Named Executive Officers (the executive officers appearing in the Summary Compensation Table following this Compensation Discussion and Analysis).

The Board and Compensation Committee took the following key actions with respect to 2012 compensation for our Named Executive Officers:

 

•

Salaries for Named Executive Officers. Increased the 2012 base salaries of our Named Executive Officers by 3.5% over base salaries for 2011, consistent with increases for our other employees in 2012.

 

•

One-Time Special Bonuses. Determined to pay a one-time cash bonus, including to our Named Executive Officers, as a result of the FDA approval of COMETRIQ for the treatment of progressive, metastatic MTC in the United States.

 

•

Annual Bonuses. Determined to pay cash bonuses to our Named Executive Officers for 2012 performance at 100% of target bonus based on the Compensation Committee’s subjective assessment of the achievement of the corporate, research and development and business goals for our company in 2012, and the performance of our Named Executive Officers in the achievement of their respective departmental and individual goals.

 

•

Equity Incentive Compensation. Granted stock options to increase our Named Executive Officers equity ownership position in the company, including a portion as performance awards, in part due to the fact that many of the equity awards held by our Named Executive Officers were out-of-the-money.

Objectives of the Compensation Program

The success of development-stage biotechnology companies is significantly influenced by the quality of their work forces, and we believe that it is critical to our business that we retain our highly qualified employees, including our executive officers in particular. Despite the current economic environment, large pharmaceutical companies and strong local competitors aggressively recruit executives and other skilled employees, with the most critical positions at our company among those that are the most in demand by our competitors. In light of

 

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these circumstances, the overall objective of our compensation program is to support our business objectives by attracting, retaining and motivating the highest caliber of executives and other employees, and aligning their compensation with our business objectives and performance and with the interests of our stockholders. As discussed in further detail below, our 2012 compensation program for our Named Executive Officers consisted of, and was intended to strike a balance among, the following three principal components:

 

•

Base Salary. We pay a base salary to each of our Named Executive Officers to provide an appropriate and competitive base level of current cash income.

 

•

Bonus. We establish target annual cash bonuses for our Named Executive Officers, based on the seniority of the applicable position, as an incentive to encourage superior performance. Actual cash bonuses are discretionary but generally follow guidelines that take into account the achievement against pre-established company, department and, in some cases personal, objectives. We also paid a one-time cash bonus as a result of the approval of COMETRIQ for the treatment of progressive, metastatic MTC in the United States, given the significance of this achievement for our company.

 

•

Equity Incentive Compensation. We grant long-term equity incentive awards designed to ensure that incentive compensation is linked to our long-term performance and to align our Named Executive Officers’ performance objectives with the interests of our stockholders.

In addition, we have a Change in Control and Severance Benefit Plan in which all of our Named Executive Officers participate, as well as an employee stock purchase plan, a 401(k) Retirement Plan, and healthcare, dental and vision plans in which all of our employees are entitled to participate, including our Named Executive Officers.

The Compensation Committee has not established any formal policies or guidelines for allocating compensation between current and long-term incentive compensation, or between cash and non-cash compensation. The Compensation Committee uses its judgment to establish for each Named Executive Officer a mix of current and long-term incentive compensation, and cash and non-cash compensation, that it believes appropriate to achieve the compensation and corporate objectives described above.

Role of the Compensation Committee and Executive Officers in Compensation Decisions

The Compensation Committee is responsible for recommending to the Board approval of the compensation packages offered to our Named Executive Officers. The Compensation Committee acts on behalf of the Board in discharging the Board’s responsibilities with respect to overseeing our compensation policies, plans and programs and establishing and reviewing general policies relating to compensation and benefits of our employees. The Compensation Committee also administers our 2011 Equity Incentive Plan and our other incentive plans.

For all executive compensation decisions, the Compensation Committee considers the recommendations of Dr. Morrissey, our Chief Executive Officer, and Dr. Morrissey participates in the Compensation Committee’s deliberations about Named Executive Officer compensation matters other than his own. Dr. Morrissey, Laura Dillard, our Vice President, Human Resources, Pamela A. Simonton, our Executive Vice President and General Counsel, and James B. Bucher, our Vice President, Corporate Legal Affairs and Secretary, participated in discussions with the Compensation Committee regarding the 2012 compensation decisions for all employees, including the Named Executive Officers. However, none of these officers participated in the determination of his or her own compensation, nor did he or she participate in deliberations with respect thereto. Our Chief Executive Officer and other senior management also annually develop our research and development and other business goals, which are reviewed and, subject to their input, approved by the Compensation Committee and/or the Board. In determining Named Executive Officer compensation recommendations, our Chief Executive Officer solicited the input of, and received documentary support from, Ms. Dillard who was responsible for our human resources function in connection with compensation decisions for 2012. The Compensation Committee also received documentary support, including benchmark and industry data from third-party salary survey sources and

 

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a compensation consultant, both as provided by Ms. Dillard, with respect to base salaries, target annual cash bonuses and equity compensation. Except as described above, no other executive officers participated in the determination or recommendation of the amount or form of Named Executive Officer compensation.

The Compensation Committee retained the consulting firm Frederick W. Cook & Co., Inc. to compile benchmark and industry compensation data and to prepare an analysis of the compensation of our executive officers, which was provided to the Compensation Committee in August 2010. The Compensation Committee retained Frederick W. Cook & Co., Inc. in each of 2011 and 2012 principally to assist the Compensation Committee in establishing a new peer group for the Compensation Committee to use to benchmark executive officer compensation decisions. The Compensation Committee does not delegate any of its functions to others in determining executive compensation, and we do not currently engage any other consultants with respect to executive and/or director compensation matters, other than Radford, which was retained to provide benchmark and industry compensation data for our senior management.

After the Compensation Committee finalizes its recommendations regarding compensation for our Named Executive Officers, the Compensation Committee presents its recommendations to the full Board for consideration and approval or, in the case of equity awards, for review prior to approval by the Compensation Committee.

Compensation Committee Process

In setting the level of cash and equity compensation for our Named Executive Officers, the Compensation Committee typically considers various factors, including the performance of Exelixis and each Named Executive Officer during the prior year, the criticality of each Named Executive Officer’s skill set, each Named Executive Officer’s performance and expected future contributions, market and benchmark data for our industry and specific peer group, each Named Executive Officer’s tenure and the percentage of vested versus unvested options held by each Named Executive Officer, and the incentive value of the equity awards they hold. The Compensation Committee balances each of these factors against the company’s cash resources and equity award burn rate guidelines established by proxy advisory firms. When establishing each element of a Named Executive Officer’s compensation, the Compensation Committee also typically takes into consideration the Named Executive Officer’s historical cash and equity compensation as well as his or her total current and potential compensation.

The Compensation Committee believes that it is important when making its compensation decisions to be informed as to the current practices of comparable publicly held companies. To this end, the Compensation Committee reviews market and benchmark data, which include competitive information relating to compensation levels for comparable positions in the biotechnology and life sciences industries, as compared to the compensation levels of our Named Executive Officers.

In September 2011, Frederick W. Cook & Co., Inc. recommended to our Compensation Committee, and our Compensation Committee recommended, and our Board approved, a group of peer companies to be evaluated in connection with executive, employee and non-employee director compensation matters in late 2011 and 2012. This peer group consisted of 18 publicly-traded, U.S- based biotechnology/pharmaceutical companies that Frederick W. Cook & Co., Inc. determined to be appropriate. The market capitalizations of all of these companies ranged from 1/3 of, to 3 times, the market capitalization of Exelixis as of August 31, 2011.

This peer group comprises the following companies:

 

Alkermes, Inc.		Incyte Corp.		NPS Pharmaceuticals, Inc.
Ariad Pharmaceuticals Inc.		Intermune, Inc.		Onyx Pharmaceuticals, Inc.
AVEO Pharmaceuticals, Inc.		Ironwood Pharmaceuticals, Inc.		Questcor Pharmaceuticals, Inc.
Genomic Health, Inc.		Isis Pharmaceuticals Inc.		Rigel Pharmaceuticals Inc.
Geron Corp.		Lexicon Genetics Inc.		Seattle Genetics Inc.
ImmunoGen, Inc.		Nektar Therapeutics		Theravance, Inc.

 

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In September 2012, our Compensation Committee engaged Frederick W. Cook & Co., Inc. to revise our peer group to better align the peer group with the current development stage of our company, including a late-stage compound and as of November 29, 2012, an FDA approved drug. In January 2013, Frederick W. Cook & Co., Inc. recommended to our Compensation Committee, and our Compensation Committee recommended, and in February 2013 our Board approved, a new group of peer companies to be evaluated in connection with executive, employee and non-employee director compensation matters in 2013. This peer group consisted of 18 publicly-traded, U.S- based biotechnology/pharmaceutical companies that Frederick W. Cook & Co., Inc. determined to be appropriate. This peer group varied from the 2011 peer group, with two companies having been removed from the list due to the change in the relative the size of their market capitalization to our market capitalization, and the addition of two new companies that each had one approved drug candidate. The market capitalizations of all of these companies ranged from 40% of, to 3.8 times, the market capitalization of Exelixis as of December 31, 2012.

This new peer group comprises the following companies:

 

Alkermes, Inc.		ImmunoGen, Inc.		Nektar Therapeutics
Arena Pharmaceuticals Inc.		Incyte Corp.		NPS Pharmaceuticals, Inc.
Ariad Pharmaceuticals Inc.		Intermune, Inc.		Questcor Pharmaceuticals, Inc.
AVEO Pharmaceuticals, Inc.		Ironwood Pharmaceuticals, Inc.		Rigel Pharmaceuticals Inc.
Dendreon Corporation		Isis Pharmaceuticals Inc.		Seattle Genetics Inc.
Genomic Health, Inc.		Lexicon Genetics Inc.		Theravance, Inc.

In the past, the Compensation Committee has benchmarked both cash compensation and equity compensation. The Compensation Committee uses Frederick W. Cook & Co., Inc. to assist it in establishing the peer group, and then our management uses Radford to provide the Compensation Committee with market compensation information using that peer group. Using this process, our Compensation Committee strives to ensure that our executive compensation program as a whole is competitive. Consistent with the Compensation Committee’s philosophy of maintaining compensation levels that attract and retain the highest caliber executives, the Compensation Committee generally targets total cash and equity compensation above the 50^th percentile of the peer company market. In determining the amount and mix of compensation elements and whether each element provides the correct incentives and rewards for performance consistent with our short and long-term goals and objectives, the Compensation Committee relies on its judgment about each individual rather than adopting a formulaic approach to compensatory decisions.

The Compensation Committee also takes into account the advisory vote of the company’s stockholders on the compensation of the company’s named executive officers for the previous year. At our annual meeting of stockholders in May 2012, our stockholders voted on whether to approve, on an advisory basis, the compensation of our named executive officers as disclosed in our proxy statement for that annual meeting. Our stockholders approved the compensation of our named executive officers for 2011 by approximately 84% of the votes entitled to be cast. Our Compensation Committee considered this vote to be an endorsement of the Compensation Committee’s policies and practices and determined to continue to conduct its review of executive compensation consistent with past practice.

Elements of Compensation

Our executive compensation program consists of three principal components: base salary, annual cash bonuses, and equity incentive compensation. In 2012, we also paid a one-time special cash bonus in recognition of the special achievement of receiving FDA approval for the treatment of patients with progressive, metastatic MTC in the United States. Our Named Executive Officers are also eligible to participate, on the same basis as other employees, in our 401(k) Retirement Plan, our employee stock purchase plan and our other benefit programs generally available to all employees. Our Named Executive Officers currently do not receive any perquisites.

 

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Base Salary. The Compensation Committee annually reviews each Named Executive Officer’s base salary and generally sets such salary based on the criticality of the Named Executive Officer’s skill set, the Named Executive Officer’s performance and expected future contributions, the market and benchmark data for our industry and specific peer group, the Named Executive Officer’s tenure, and market pressures, with each of these factors balanced against consideration of our cash resources and other elements of the Named Executive Officer’s compensation.

Annual Cash Bonus. Our annual cash bonuses are intended to align the Named Executive Officers’ compensation with our business objectives and performance and with the interests of our stockholders and to enable us to retain and reward executive officers who demonstrate extraordinary performance. Annual cash bonuses are discretionary. Our Compensation Committee recommends bonus targets (expressed as a percentage of base salary) based on the seniority of the applicable position and takes into account the achievement of company-wide and, other than for our Chief Executive Officer, applicable department or personal performance objectives in determining actual cash bonuses. The bonus targets are reviewed annually by the Compensation Committee. The Compensation Committee does not rigidly follow percentage allocation or other guidelines related to the portion of each Named Executive Officer’s annual cash bonus that is tied to company-wide, department or personal performance components, but instead relies on a more discretionary approach based on the Compensation Committee’s assessment of each Named Executive Officer’s individual performance and department and company factors. Whether or not a bonus is paid for any year is within the discretion of our Board. The actual bonus awarded in any year, if any, may be more or less than the target, depending on individual performance and the achievement of our company-wide objectives, as well as other factors, including our cash resources.

The Compensation Committee has not determined whether it would attempt to recover bonuses from our executive officers if the performance objectives that led to a bonus determination were to be restated, or found not to have been met to the extent originally believed by the Compensation Committee. However, as a public company, if we are required to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws, as a result of misconduct, our Chief Executive Officer and Chief Financial Officer may be legally required to reimburse us for any bonus or other incentive-based or equity-based compensation they receive in accordance with the provisions of Section 304 of the Sarbanes-Oxley Act of 2002. Further, the Dodd-Frank Wall Street Reform and Consumer Protection Act requires that the Securities and Exchange Commission promulgate rules that would require, in the event we are required to restate our financial statements, that we “claw back” any bonuses paid based on financial performance that would not have been paid based on the restated financial performance. Because our cash bonuses are discretionary and are generally awarded based on non-financial performance, we do not believe that any such rules would be applicable to us.

Equity Incentives. We have granted, and intend to continue to grant, stock options and restricted stock units, and potentially other types of equity incentive awards, to align our Named Executive Officers’ compensation with our long-term performance, thereby linking their compensation to the interests of our stockholders. The Compensation Committee believes that stock options are an effective equity-based tool to motivate our Named Executive Officers to aggressively pursue our long-term strategic goals because options only have value if our stock price increases over time. Stock options are also the most prevalent long-term incentive instrument at our peer companies. The Compensation Committee also believes that restricted stock units are a particularly effective retention tool, and that they also have incentive value since the value of restricted stock units increases as our stock price increases over time. Further, restricted stock units continue to have incentive value even in the event of a severe stock price decline, unlike stock options that can lose their incentive value in such an event. Restricted stock units are becoming an increasingly prevalent long-term incentive instrument at our peer companies. Because of the overall importance to our success of aggressively pursuing our strategic goals, as well as to preserve our cash resources, a significant portion of the Named Executive Officers’ total compensation typically has consisted of, and is expected to continue to consist of, long-term equity-based awards.

 

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Change in Control and Severance Benefit Plan. We have adopted a Change in Control and Severance Benefit Plan, in which all of our Named Executive Officers participate, to maintain the competitiveness of our executive compensation program and to remove an executive’s potential personal bias against a takeover attempt. A description of this plan is included below under the heading “—Potential Payments Upon Termination or Change-in-Control.” This plan is a double-trigger plan, in which each plan participant receives benefits under the plan only if the plan participant is terminated without cause or resigns for good reason after a change in control, rather than a single-trigger plan, in which each plan participant would receive benefits under the plan if a change in control occurs or the plan participant resigns for any reason after a change in control. In assessing whether the plan should provide for a single or double trigger, we conducted an analysis of prevailing change in control practices at our peer companies at the time of adoption in 2005. We selected the double-trigger because it protects the plan participants from post-change in control events that are not related to the plan participants’ performance, encourages the plan participants to stay throughout a transition period in the event of a change in control and does not provide for benefits for a plan participant who remains with the surviving company in a comparable position.

Other Benefits. We have a 401(k) Retirement Plan in which substantially all of our employees, including our Named Executive Officers, are entitled to participate. Employees contribute their own funds, as salary deductions, on a pre-tax basis. Contributions may be made up to plan limits, subject to government limitations. We match 100% of the first 3% of employee contributions, in the form of Exelixis stock. Our employee stock purchase plan allows for qualified employees to purchase shares of our common stock at a price equal to the lower of 85% of the closing price at the beginning of the offering period or 85% of the closing price at the end of each six month purchase period. We provide health care, dental and vision benefits to all full-time employees, including our Named Executive Officers. These and other benefits are available to all employees, subject to applicable laws.

2012 Compensation Decisions

2012 Base Salaries. In January 2012, the Compensation Committee reviewed the base salaries of our Named Executive Officers and determined that in light of their performance in 2011 and the importance of these officers to the future of our company, the Compensation Committee would recommend to the Board that the base salary for each of the Named Executive Officers be increased by 3.5% over the base salary in 2011, consistent with increases in base salaries for the other employees of our company. In reaching this decision, the Compensation Committee did not engage in the benchmarking and review exercise described above in determining base salaries for 2012. Instead, the Compensation Committee determined that the achievements of the Named Executive Officers during 2011 were substantially team-based and viewed this to be the most effective way to reward performance. In February 2012, the Compensation Committee presented its recommendations to the Board, and the Board adopted these recommendations as being in the best interest of Exelixis.

2012 Special Cash Bonuses. In December 2012, the Compensation Committee recommended, and the Board approved, a special bonus to the employees of Exelixis in the aggregate amount of $1.0 million as a result of the approval by the FDA of COMETRIQ for the treatment of patients with progressive, metastatic MTC. This event was a major milestone in the history of our company, as with this event we moved from a company solely focused on the development of product candidates to one with a commercial product. The Compensation Committee made its subjective determination of the aggregate bonus amount and the bonus amount to each individual based on the recommendation of management as to the size of bonus that would be meaningful to employees to reward them for achieving this milestone given the magnitude of this event in our corporate history, as well as the relative contributions of each of our employees in achieving this milestone. The special bonus pool of $1.0 million was approximately 20% of the annual bonus pool for 2012.

2012 Annual Cash Bonuses. In January 2012, the Compensation Committee recommended, and in February 2012 the Board approved, 2012 target bonus percentages for each Named Executive Officer at the same levels as

 

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in 2011 and 2010 (45% of base salary for each Named Executive Officer other than Dr. Morrissey, whose target bonus was 60% of base salary in 2011 and 50% in 2010). The Compensation Committee’s decision regarding 2012 target bonuses was based on its subjective assessment that the percentage of base salaries previously established for 2010 and 2011 had functioned well and that there was no need to reassess the appropriate level of target bonus as a percentage of base salary, and its conclusion that these levels provided the appropriate level of potential cash bonus compensation. The target bonus amounts are intended to serve only as general guidelines for awarding actual bonuses and are not designed to set formulaic payout levels.

In connection with establishing the bonus program for 2012, the Compensation Committee reviewed the research and development and business goals as presented by management to the Compensation Committee and recommended them to the Board for approval. In February 2012 the Board reviewed these goals with the Compensation Committee and management, revised the goals based on this discussion and approved these goals as appropriate goals for 2012. Further, the Board determined to assess company and management performance against these goals, and determined the portion of annual target bonus to be paid to the Named Executive Officers based on company performance against these goals. These goals consisted of:

 

•

objectives related to our stock outperforming biotechnology indices by a specified percentage;

 

•

goals relating to progressing COMETRIQ for the treatment of progressive, metastatic MTC, including filing a new drug application in the United States and the European Union, initiating an expanded access program and presenting for publication MTC phase 3 results;

 

•

goals relating to cabozantinib for the treatment of metastatic CRPC and additional indications, including initiation and rapid enrollment in trials, the timing of patient screening, publications from trials, advancing a collaboration to broadly investigate cabozantinib in other indications outside of metastatic CRPC, and presenting new clinical data at major medical meetings;

 

•

goals for preparing for the commercial launch of COMETRIQ in progressive, metastatic MTC, including setting up a distribution network and launching COMETRIQ within two months of receiving FDA approval;

 

•

goals to end 2012 with greater than $200 million of cash;

 

•

legal support in connection with the above; and

 

•

other operational goals, including establishing competitive and affordable human resources programs, cultivating the company’s corporate culture, and implementing IT systems initiatives.

During 2012, management reported periodically to the Compensation Committee and the Board on the status of the company’s performance against these goals, including in formal meetings in February, May, September and December 2012. In January and February 2013, the Compensation Committee and the Board, respectively, evaluated our performance in relation to our 2012 goals, as well as the department and personal objectives applicable to each of the respective Named Executive Officers other than Dr. Morrissey, whose annual bonus is based solely on company performance goals. In particular, the Compensation Committee and the Board concluded that 2012 was good year of accomplishments, and noted the following achievements, in particular, in assessing our performance against company goals:

 

•

the success in achieving FDA approval of COMETRIQ for the treatment of progressive, metastatic MTC;

 

•

the submission to the European Medicines Agency (EMA) of a Marketing Authorization Application for COMETRIQ for the proposed indication of treatment of progressive, unresectable, locally advanced, or metastatic MTC;

 

•

the success in raising capital during 2012, including our public offering of our common stock in February 2012 and our common stock and convertible debt in August 2012, and ending the year with $634 million of cash and cash equivalents, short- and long-term investments and short- and long-term restricted cash and investments (more than triple the amount as set forth in the goals);

 

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•

our success in advancing cabozantinib for the treatment of patients with metastatic CRPC and in other indications; and

 

•

our progress on the other goals cited above.

The Compensation Committee noted that we had over performed on some company goals, especially on our major goals of achieving regulatory approval of COMETRIQ for the treatment of patients with progressive, metastatic MTC and in our capital raising goals, and did not fully perform on some of our other, lesser goals. The Compensation Committee did not assign any weighting of the specific company, departmental or personal goals in making its assessment of overall performance, but rather made its subjective assessment of performance against the goals on an overall basis. The Committee determined that each of the Named Executive Officers performed well in his or her respective area of responsibility and should share responsibility equally for the Company’s performance in 2012. In February 2013, based on these factors and assessments, the Compensation Committee determined to recommend to the Board, and the Board approved, annual bonuses to the Named Executive Officers at 100% of their target annual bonuses. These bonuses are set forth in the Summary Compensation Table following this Compensation Discussion and Analysis.

2012 Equity Incentive Awards. In September 2012 the Compensation Committee engaged in the process of reviewing and reporting to the Board, and approving, the equity compensation awards for our Named Executive Officers for 2012. In doing so, the Compensation Committee:

 

•

noted that virtually all of the stock option awards held by the Named Executive Officers were out-of-the-money, and that a significant portion of these awards had vested; as a result, the Compensation Committee concluded that these awards did not provide significant retentive or incentive value to our Named Executive Officers;

 

•

determined to grant 40% of the equity awards to the Named Executive Officers as performance-based equity awards, with the performance metrics tied to the performance of cabozantinib in our clinical trials for the treatment of patients with metastatic CRPC, to provide additional incentive to advance cabozantinib toward approval for the treatment of patients with metastatic CRPC (which is a much larger potential market than progressive, metastatic MTC), noting that performance-based awards were favored by stockholders given their additional incentive value; and

 

•

determined to target a higher percentile (75th percentile) than in previous years (60th percentile) due to (1) the performance-based aspect of the equity awards having a higher risk of not vesting than time-based equity awards, (2) the extent of the stock option awards held by the Named Executive Officers that were out-of-the-money, and (3) its desire to provide further incentive to the Named Executive Officers to advance cabozantinib toward approval for the treatment of patients with metastatic CRPC.

The Compensation Committee determined the 75^th percentile of equity awards based upon compensation survey data received from Radford and presented to the Compensation Committee by management, based on of the peer group established by our Compensation Committee in September 2011. The Compensation Committee determined the appropriate allocation of 60% time-based vesting, and 40% performance-based vesting, based on its subjective determination that this was an appropriate allocation of both incentive for performance in the advancement of cabozantinib toward approval for the treatment of patients with metastatic CRPC as well as overall retentive value.

The Compensation Committee and the Board also determined that it would be appropriate to allow the Named Executive Officers to choose to take their 2012 equity incentive grants in the form of all stock options, rather than the proposed mixture of 75% stock options and 25% restricted stock units (with each restricted stock unit assigned an equivalence of three stock options). The Compensation Committee and the Board determined to allow the Named Executive Officers to make this election for a variety of reasons, including that it would provide additional incentive to any Named Executive Officer that perceived taking all of their equity grants in stock options as being of more value. All of the Named Executive Officers elected to have the equity awards be

 

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100% stock options. Based on the Compensation Committee’s subjective assessment of all of these considerations, in September 2012 the Compensation Committee, pursuant to the authority delegated to it by the Board, granted the equity incentive awards to the Named Executive Officers as set forth in the “Grants of Plan Based Awards in Fiscal 2012” table following this Compensation Discussion and Analysis.

The stock options have an exercise price of $5.555 per share, the fair market value of our common stock on the date of grant, and expire seven years from the date of grant or earlier upon termination of service with us. The time-based stock options vest as to 1/4 of the original number of shares subject to the stock options on the one-year anniversary of the grant date and thereafter as to 1/48 of the original number of shares subject to the stock options on each monthly anniversary of the grant date. The performance-based stock options vest as to 50% of the shares on performance of cabozantinib in our COMET-1 trial for the treatment of patients with metastatic CPRC, and 50% of the shares on performance of cabozantinib in our COMET-2 trial for the treatment of patients with metastatic CPRC. If the Compensation Committee concludes that the performance objectives are not achieved by a specified date, the performance-based stock options will be forfeited. Vesting of these stock options will cease upon termination of service as an employee for any reason. The Named Executive Officers are party to our Change in Control and Severance Benefit Plan, which provides for acceleration of vesting of the award in the event of certain specified change in control events involving us, for the reasons discussed above.

Compensation of the Chief Executive Officer

The Compensation Committee and the Board considered the factors and criteria described under the heading “—2012 Compensation Decisions” above in determining Dr. Morrissey’s total compensation for 2012. As with the other Named Executive Officers, the Board, on the recommendation of the Compensation Committee, increased Dr. Morrissey’s base salary for 2012 by 3.5% over his 2011 base salary. Consistent with the Compensation Committee’s recommendation, the Board set Dr. Morrissey’s target cash bonus at 60% of base salary, which was higher than the 45% target for the other Named Executive Officers due to his position as Chief Executive Officer of the company. This percentage was unchanged from 2010 and 2011 and was consistent with our past practice, including with our prior Chief Executive Officer. This percentage is also consistent with industry practice and reflects Dr. Morrissey’s greater role in determining the course, and ability to influence the future, of the company. The Board, on the recommendation of the Compensation Committee, determined that Dr. Morrissey’s actual bonus would be 60% of target bonus for the reasons discussed above under the heading “—2012 Cash Bonuses.” The Compensation Committee granted Dr. Morrissey a stock option to purchase 402,000 shares of our common stock with time-based vesting, and 268,000 shares with performance-based vesting, which was substantially larger than our other Named Executive Officers, given his position in the company and the other factors described above.

Accounting and Tax Considerations

Under Financial Accounting Standard Board ASC Topic 718, or ASC 718, we are required to estimate and record an expense for each award of equity compensation (including stock options and restricted stock units) over the vesting period of the award. As long as stock options and restricted stock units remain as the sole components of our long-term compensation program, we expect to record stock-based compensation expense on an ongoing basis according to ASC 718. The Compensation Committee has considered, and may in the future consider, the grant of restricted stock to our executive officers in lieu of stock option grants and/or restricted stock unit awards.

Section 162(m) of the Code limits our deduction for federal income tax purposes to not more than $1 million of compensation paid to certain executive officers in a calendar year. Compensation above $1 million may be deducted if it is “performance-based compensation.” Our Compensation Committee has not yet established a policy for determining which forms of incentive compensation awarded to our executive officers should be designated to qualify as “performance-based compensation.” To maintain flexibility in compensating our executive officers in a manner designed to promote our objectives, the Compensation Committee has not

 

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adopted a policy that requires all compensation to be deductible. However, the Compensation Committee intends to evaluate the effects of the compensation limits of Section 162(m) on any compensation it proposes to grant, and the Compensation Committee intends to provide future compensation in a manner consistent with our best interests and those of our stockholders.

Conclusion

It is the opinion of the Compensation Committee that the aforementioned compensation policies and elements provide the necessary incentives to properly align our performance and the interests of our stockholders while maintaining progressive, balanced and competitive executive compensation practices that enable us to attract and retain the highest caliber of executives. The Compensation Committee further believes that the aforementioned policies and elements support the company’s objective of aggressively managing its expenses to preserve cash resources and ensure that those resources are appropriately dedicated towards the aggressive development of COMETRIQ, while not compromising the company’s ability to retain its key executives.

Compensation Policies and Practices as They Relate to Risk Management

In 2012, the Compensation Committee reviewed our compensation policies and practices and concluded that the mix and design of these policies and practices are not reasonably likely to encourage our employees to take excessive risks. In connection with its evaluation, the Compensation Committee considered, among other things, the structure, philosophy and design characteristics of our primary incentive compensation plans and programs in light of our risk management and governance procedures, as well as other factors that may calibrate or balance potential risk-taking incentives. Based on this assessment, the Compensation Committee concluded that risks arising from our compensation policies and practices for all employees, including executive officers, are not reasonably likely to have a material adverse effect on us.

 

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Summary of Compensation

The following table shows for the fiscal years ended December 28, 2012, December 30, 2011 and December 31, 2010 (referred to as years 2012, 2011 and 2010, respectively), compensation awarded to or paid to, or earned by, the following five executive officers of Exelixis, which we refer to as our Named Executive Officers.

Summary Compensation Table for Fiscal 2012

 

Name and Principal Position		Year(1)				Salary ($)				Bonus ($)(2)				Stock Awards ($)(3)				Option Awards ($)(4)				All Other Compensation ($)(5)				Total ($)
Michael M. Morrissey, Ph.D.			2012				618,682				438,286	(6)			—				2,280,412				7,500				3,344,880
President and Chief Executive Officer			2011				601,909				216,687				—				1,535,085				4,900				2,358,581
			2010				544,630				—				—				—				4,900				549,530
Frank L. Karbe			2012				438,249				232,981	(6)			—				697,738				—				1,368,968
Executive Vice President And Chief Financial Officer			2011				426,368				115,119				—				511,695				5,231				1,058,413
			2010				423,596				—				—				—				4,900				428,496
J. Scott Garland(7)			2012				370,032				197,770	(6)			—				697,738				7,500				1,273,040
Executive Vice President and Chief Commercial Officer			2011				58,154				147,200				—				668,760				—				874,114
Gisela M. Schwab, M.D.			2012				430,058				269,869	(6)			—				697,738				7,500				1,405,165
Executive Vice President And Chief Medical Officer			2011				418,399				112,968				68,750				383,771				4,900				988,788
			2010				415,678				—				—				—				4,900				420,578
Pamela A. Simonton, J.D.(8)			2012				395,884				209,485	(6)			—				697,738				7,500				1,310,607
Executive Vice President And General Counsel			2011				367,376				103,991				—				511,695				4,900				987,962

 

(1)	The compensation reflected in the Summary Compensation Table reflects a 52-week period for each of fiscal 2012, 2011 and 2010.

(2)

Bonuses for services rendered during the indicated fiscal years by the Named Executive Officers are included in the Bonus column. While the Compensation Committee has established general guidelines related to bonus target amounts and the portion of each Named Executive Officer’s annual cash bonus that is tied to company-wide, department or personal performance components, the Compensation Committee exercises broad discretion in determining the amount of cash bonuses and does not attempt to quantify the level of achievement of corporate goals or the extent to which each Named Executive Officer or his or her department contributed to the overall success of Exelixis. Whether or not a bonus is paid for any year is within the discretion of the Board or Compensation Committee upon delegation by the Board. Accordingly, we do not consider these annual bonuses to be Non-Equity Incentive Plan Compensation.

(3)

Amounts shown in this column reflect the aggregate grant date fair value in the indicated fiscal years for restricted stock unit awards as computed in accordance with ASC 718 which uses the fair market value based on the date of grant and typically vests this expense over approximately four years. The assumptions used to calculate the value of restricted stock unit awards are set forth in Note 10 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2012 filed with the SEC on February 21, 2013.

(4)

Amounts shown in this column reflect the aggregate grant date fair value in the indicated fiscal years for option awards as computed in accordance with ASC 718. The assumptions used to calculate the value of option awards are set forth in Note 10 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2012 filed with the SEC on February 21, 2013. The grant date fair values presented in the table for the performance-based option awards assume achievement of the highest level of performance conditions. There can be no assurance that

 

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the stock option awards will ever be exercised (in which case no value will actually be realized by the executive) or that the value on exercise will be equal to the ASC 718 value shown in this column.

(5)	Unless otherwise indicated, the amounts in this column consist of matching contributions made by us under our tax-qualified 401(k) Retirement Plan, which provides for broad-based employee participation.

(6)	Includes a one-time special bonus paid to the Named Executive Officers in December 2012 in connection with approval by the FDA of COMETRIQ for the treatment of progressive, metastatic medullary thyroid cancer (“MTC”) in the United States.

(7)

Mr. Garland joined Exelixis in October 2011. Pursuant to the terms of his employment agreement, Mr. Garland received a sign-on bonus of $50,000 and a stock option to purchase 200,000 shares of our common stock. Mr. Garland’s 2011 sign-on bonus was previously disclosed under the column “All Other Compensation” and is now being disclosed under the column “Bonus.” 2011 total compensation for Mr. Garland remains unchanged.

(8)	Ms. Simonton was not a Named Executive Officer for fiscal 2010.

 

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Grants of Plan-Based Awards

The following table shows for the fiscal year ended December 28, 2012, certain information regarding grants of plan-based awards to the Named Executive Officers:

Grants of Plan-Based Awards in Fiscal 2012

 

						Estimated Future Payouts Under Equity Incentive Plan Awards(1)(2)												All Other Option Awards: Number of Securities Underlying Options (#)(1)(3)				Exercise or Base Price of Option Awards ($/Sh)				Grant Date Fair Value of Option Awards ($)(4)
		Grant Date				Threshold				Target				Maximum
Michael M. Morrissey, Ph.D.			9/21/2012																402,000				5.555				1,368,247
			9/21/2012				134,000				268,000				268,000								5.555				912,165
Frank L. Karbe			9/21/2012																123,000				5.555				418,643
			9/21/2012				41,000				82,000				82,000								5.555				279,095
J. Scott Garland.			9/21/2012																123,000				5.555				418,643
			9/21/2012				41,000				82,000				82,000								5.555				279,095
Gisela M. Schwab, M.D.			9/21/2012																123,000				5.555				418,643
			9/21/2012				41,000				82,000				82,000								5.555				279,095
Pamela A. Simonton, J.D.			9/21/2012																123,000				5.555				418,643
			9/21/2012				41,000				82,000				82,000								5.555				279,095

 

(1)	Each option award was granted under our 2011 Equity Plan, expires seven years from the date of grant or earlier upon termination of service and is subject to vesting acceleration as described under the caption “—Potential Payments Upon Termination or Change-in-Control” below.

(2)

Each option award is tied to performance goals set by the Compensation Committee related to the performance of cabozantinib in two phase 3 pivotal clinical trials for the treatment of patients with metastatic castration-resistant prostate cancer (“CRPC”) and will vest in full, in part or not at all based on achievement or non-achievement of such goals by a specified date. If the Compensation Committee concludes that a performance goal has been met by the specified date, the option award will vest with respect to that performance goal. However, if the Compensation Committee has not concluded that a performance goal has been achieved by the specified date, the option award with respect to that performance goal will be forfeited.

(3)	Each option award vests as to 1/4th of the original number of shares subject to the option on the one-year anniversary of the grant date and thereafter as to 1/48th of the original number of shares subject to the option on each monthly anniversary of the grant date.

(4)

Amounts shown in this column reflect the aggregate grant date fair value in fiscal year 2012 for the option award as computed in accordance with ASC 718. The assumptions used to calculate the value of option award are set forth in Note 10 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2012, filed with the SEC on February 21, 2013. There can be no assurance that the stock option award will ever be exercised (in which case no value will actually be realized by the executive) or that the value on exercise will be equal to the ASC 718 value shown in this column.

Compensation Arrangements

Change in Control and Severance Benefit Plan. Each of our Named Executive Officers is a participant in our Change in Control and Severance Benefit Plan, a description of which is included below under the heading “—Potential Payments Upon Termination or Change-in-Control.” The Change in Control and Severance Benefit Plan supersedes all severance and stock option vesting acceleration arrangements between Exelixis and the Named Executive Officers, including all such arrangements originally provided for under their respective offer letters or employment agreements.

 

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Annual Cash Bonuses. Each year the Compensation Committee considers payment of annual cash bonuses to Named Executive Officers for services rendered in the past year. While the Compensation Committee has established general guidelines related to bonus target amounts and the portion of each Named Executive Officer’s annual cash bonus that is tied to company-wide, department or personal performance components, the Compensation Committee exercises broad discretion in determining the amount of cash bonuses and does not attempt to quantify the level of achievement of corporate goals or the extent to which each Named Executive Officer or his or her department contributed to the overall success of Exelixis. Accordingly, we do not consider these bonuses to be “Non-Equity Incentive Plan Compensation” within the meaning of SEC rules. The bonus targets for the year ended December 28, 2012 were $373,786 for Dr. Morrissey, $198,581 for Mr. Karbe, $167,670 for Mr. Garland, $194,869 for Dr. Schwab and $179,385 for Ms. Simonton. Whether or not a bonus is paid for any year is within the discretion of the Board or Compensation Committee upon delegation by the Board. The actual bonus awarded in any year, if any, may be more or less than the target, depending on individual performance and the achievement of our company-wide objectives. In awarding bonuses, the Compensation Committee also reviews total cash compensation (base salary and bonus) awarded to similarly situated executive officers at our peer companies. The actual cash bonus award earned for the year ended December 28, 2012 for each Named Executive Officer is set forth in the Summary Compensation Table above. For a description of the bonuses to Named Executive Officers under our compensation program, see “—Compensation Discussion and Analysis” above.

Special One-Time Cash Bonus. In December 2012, the Compensation Committee recommended, and the Board approved, a special bonus to the employees of Exelixis in the aggregate amount of $1.0 million as a result of the approval by the FDA of COMETRIQ for the treatment of patients with progressive, metastatic MTC. The actual special one-time cash bonus award paid to each Named Executive Officer was: $64,500 for Dr. Morrissey; $34,400 for Mr. Karbe; $30,100 for Mr. Garland; $75,000 for Dr. Schwab; and $30,100 for Ms. Simonton. For more information regarding the special one-time cash bonus award, see “—Compensation Discussion and Analysis” above.

Stock Awards and Option Awards. Our 2011 Equity Plan provides for the grant of restricted stock units and compensatory stock options to our Named Executive Officers and other employees. We have historically granted only time-based stock options to our Named Executive Officers. However, we changed this practice in 2012 by granting a combination of time-based and performance-based stock options to our Named Executive Officers to keep our management team focused on certain shorter-term objectives that we believe will further our longer-term business strategy.

The exercise price for both the time-based stock options and performance-based stock options granted on September 21, 2012 is $5.555, the closing price of Exelixis’ common stock on the grant date. The time-based options granted vest as to 1/4^th of the original number of shares subject to the option on September 21, 2013, and thereafter as to 1/48^th of the original number of shares subject to the option on each monthly anniversary thereafter until fully vested on September 21, 2016. The performance-based stock options are tied to performance goals set by the Compensation Committee related to the performance of cabozantinib in two phase 3 pivotal clinical trials for the treatment of patients with metastatic CRPC and will vest in full, in part or not at all based on achievement or non-achievement of such goals by a specified date. If the Compensation Committee concludes that a performance goal has been met by the specified date, the portion of the option award tied to that performance goal will vest. However, if the Compensation Committee does not conclude that a performance goal has been achieved by the specified date, the portion of the option award tied to that performance goal will be forfeited.

The time-based stock options and performance-based stock options expire on September 20, 2019, unless they are forfeited or expire earlier upon termination of continuous service. As a general matter, the vested portion of options granted to our Named Executive Officers will expire three months after each Named Executive Officer’s termination of continuous service, subject to extension in certain termination situations as described under “—Potential Payments Upon Termination or Change-in-Control” below.

 

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The restricted stock unit award granted on September 28, 2011 vested as to 1/4^th of the original number of shares subject to the restricted stock unit award on November 15, 2012 and will continue to vest thereafter as to 1/4^th of the original number of shares subject to the restricted stock unit award on each succeeding November 15^th thereafter until fully vested. Vested shares will be delivered on the applicable vesting date, provided that delivery may be delayed pursuant to the terms of the award agreement. There were no restricted stock unit awards granted to Named Executive Officers during 2012.

Events that can accelerate the vesting of Exelixis’ stock options and restricted stock units are also described below under “—Potential Payments Upon Termination or Change-in-Control”. For more information regarding grants of restricted stock units and stock options to our Named Executive Officers, please see “—Compensation Discussion and Analysis” above

Other Compensatory Arrangements. Please see “Compensation Discussion and Analysis—Elements of Compensation—Other Benefits” above for a description of other executive compensatory arrangements, including our 401(k) Retirement Plan and other benefits.

 

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Outstanding Equity Awards at Fiscal Year–End

The following table shows certain information regarding outstanding equity awards at December 28, 2012 for the Named Executive Officers.

Outstanding Equity Awards at December 28, 2012

 

						Option Awards																				Stock Awards
Name		Grant Date				Number of Securities Underlying Unexercised Options (#)(1)				Number of Securities Underlying Unexercised Options (#)(1)				Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)				Option Exercise Price ($)				Option Expiration Date				Number of Shares or Units of Stock That Have Not Vested (#)(2)				Market Value of Shares or Units of Stock That Have Not Vested ($)(3)
						Exercisable				Unexercisable
Michael M. Morrissey, Ph.D.			12/10/2003				150,000				0								6.27				12/9/2013
			12/13/2004				100,000				0								8.92				12/12/2014
			12/12/2005				300,000				0								8.90				12/11/2015
			12/8/2006				200,000				0								8.99				12/7/2016
			12/6/2007				200,000				0								9.91				12/5/2017
			12/16/2008				50,000				0								5.04				12/15/2018
			2/26/2009				23,958				1,042	(4)							4.42				2/25/2019
			12/9/2009				225,000				75,000	(5)							7.18				12/8/2019
			12/9/2009																								15,625	(6)			70,469
			9/28/2011				140,625				309,375	(7)							5.50				9/27/2018
			9/21/2012				0				402,000	(8)							5.555				9/20/2019
			9/21/2012												268,000	(9)			5.555				9/20/2019
Frank L. Karbe			2/15/2004				200,000				0								8.00				2/14/2014
			2/24/2004				25,000				0								8.18				2/23/2014
			12/13/2004				85,000				0								8.92				12/12/2014
			12/12/2005				200,000				0								8.90				12/11/2015
			12/8/2006				100,000				0								8.99				12/7/2016
			7/9/2007				60,000				0								11.93				7/8/2017
			12/6/2007				100,000				0								9.91				12/5/2017
			12/16/2008				50,000				0								5.04				12/15/2018
			2/26/2009				23,958				1,042	(4)							4.42				2/25/2019
			12/9/2009				140,625				46,875	(5)							7.18				12/8/2019
			12/9/2009																								9,766	(6)			40,045
			9/28/2011				46,875				103,125	(7)							5.50				9/27/2018
			9/21/2012				0				123,000	(8)							5.555				9/20/2019
			9/21/2012												82,000	(9)			5.555				9/20/2019
J. Scott Garland			10/20/2011				58,333				141,667	(10)							5.47				10/19/2018
			9/21/2012				0				123,000	(8)							5.555				9/20/2019
			9/21/2012												82,000	(9)			5.555				9/20/2019
Gisela M. Schwab, M.D.			9/1/2006				175,000				0								9.73				8/31/2016
			12/8/2006				44,000				0								8.99				12/7/2016
			12/6/2007				200,000				0								9.91				12/5/2017
			12/16/2008				50,000				0								5.04				12/15/2018
			2/26/2009				23,958				1,042	(4)							4.42				2/25/2019
			12/9/2009				157,500				52,500	(5)							7.18				12/8/2019
			12/9/2009																								10,938	(6)			49,330
			9/28/2011				35,156				77,344	(7)							5.50				9/27/2018
			9/28/2011																								9,375	(11)			42,281
			9/21/2012				0				123,000	(8)							5.555				9/20/2019
			9/21/2012												82,000	(9)			5.555				9/20/2019

 

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						Option Awards																				Stock Awards
Name		Grant Date				Number of Securities Underlying Unexercised Options (#)(1)				Number of Securities Underlying Unexercised Options (#)(1)				Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)				Option Exercise Price ($)				Option Expiration Date				Number of Shares or Units of Stock That Have Not Vested (#)(2)				Market Value of Shares or Units of Stock That Have Not Vested ($)(3)
						Exercisable				Unexercisable
Pamela A. Simonton, J.D.			12/10/2003				22,917				0								6.27				12/9/2013
			12/13/2004				70,000				0								8.92				12/12/2014
			12/12/2005				200,000				0								8.90				12/11/2015
			12/8/2006				75,000				0								8.99				12/7/2016
			12/6/2007				100,000				0								9.91				12/5/2017
			12/16/2008				50,000				0								5.04				12/15/2018
			2/26/2009				23,958				1,042	(4)							4.42				2/25/2019
			12/9/2009				135,000				45,000	(5)							7.18				12/8/2019
			12/9/2009																								9,375	(6)			42,281
			9/28/2011				46,875				103,125	(7)							5.50				9/27/2018
			9/21/2012				0				123,000	(8)							5.555				9/20/2019
			9/21/2012												82,000	(9)			5.555				9/20/2019

 

(1)

Option awards granted prior to January 26, 2010 were issued under our 2000 Equity Incentive Plan (the “2000 Equity Plan”), expire ten years from the date of grant or earlier upon termination of service and vest as to 1/4th of the original number of shares subject to the option on the one-year anniversary of the vesting commencement date and thereafter as to 1/48th of the original number of shares subject to the option on each monthly anniversary of the vesting commencement date. Option awards granted after May 18, 2011, were issued under our 2011 Equity Plan, are either subject to time-based vesting or performance-based vesting and expire seven years from the date of grant or earlier upon termination of continuous service. Option awards granted after May 18, 2011 and subject to time-based vesting, vest as to 1/4th of the original number of shares subject to the option on the one-year anniversary of the vesting commencement date and thereafter as to 1/48th of the original number of shares subject to the option on each monthly anniversary of the vesting commencement date. Option awards granted after May 18, 2011 and subject to performance-based vesting, vest in full, in part or not at all based on achievement of certain clinical goals set by the Compensation Committee as described below in Footnote 9. There were no option awards granted to Named Executive Officers between January 26, 2010 and May 18, 2011. Vesting of all options issued to our Named Executive Officers are subject to acceleration as described under the caption “—Potential Payments Upon Termination or Change-in-Control” below.

(2)

Restricted stock unit awards granted prior to January 26, 2010 were issued under our 2000 Equity Plan. Restricted stock unit awards granted after May 18, 2011, were issued under our 2011 Equity Plan. There were no restricted stock unit awards granted to Named Executive Officers between January 26, 2010 and May 18, 2011. Vested shares will be delivered to the Named Executive Officer on the applicable vesting date, provided that delivery may be delayed pursuant to the terms of the award agreement. Vesting of all restricted stock unit awards issued to our Named Executive Officers is subject to acceleration as described under the caption “—Potential Payments Upon Termination or Change-in-Control” below.

(3)	For purposes of determining market value, we assumed a stock price of $4.51, the closing sale price per share of our common stock on December 28, 2012, the last business day of our last fiscal year.

(4)	Options vest as to 1/48th of the original number of shares subject to the option on each monthly anniversary of the vesting commencement date with a final vesting date of February 26, 2013 (assuming that such options are not accelerated).

(5)	Options vest as to 1/48th of the original number of shares subject to the option on each monthly anniversary of the vesting commencement date with a final vesting date of December 9, 2013 (assuming that such options are not accelerated).

 

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(6)	Restricted stock units vest as to 1/16th of the original number of shares subject to the restricted stock unit award on each May 15th, August 15th, November 15th and February 15th, with a final vesting date of February 15, 2014 (assuming that such restricted stock units are not accelerated).

(7)	Options vest as to 1/48th of the original number of shares subject to the option on each monthly anniversary of the vesting commencement date with a final vesting date of September 28, 2015 (assuming that such options are not accelerated).

(8)

Options vest as to 1/4th of the original number of shares subject to the option on the one-year anniversary of the vesting commencement date and thereafter as to 1/48th of the original number of shares subject to the option on each monthly anniversary of the vesting commencement date with a final vesting date of September 21, 2016 (assuming that such options are not accelerated).

(9)

Options are tied to performance goals set by the Compensation Committee related to the performance of cabozantinib in two phase 3 pivotal clinical trials for the treatment of patients with metastatic CRPC and will vest in full, in part or not at all based on achievement or non-achievement of such goals by a specified date. If the Compensation Committee concludes that a performance goals has been met by a specified date, the portion of the option award tied to that performance goal option award will vest. However, if the Compensation Committee does not concluded that the performance goals has been achieved by the specified date, the portion of the option award tied to that performance goal will be forfeited.

(10)	Options vest as to 1/48th of the original number of shares subject to the option on each monthly anniversary of the vesting commencement date with a final vesting date of October 20, 2015 (assuming that such options are not accelerated).

(11)	Restricted stock units vest as to 1/4th of the original number of shares subject to the restricted stock unit award on each November 15th with a final vesting date of November 15, 2015 (assuming that such restricted stock units are not accelerated).

Option Exercises and Stock Vested Table

The following table includes certain information with respect to vested stock awards held by the Named Executive Officers during the fiscal year ended December 28, 2012. No stock options held by Named Executive Officers were exercised during the fiscal year ended December 28, 2012.

Stock Vested in Fiscal 2012

 

		Stock Awards
Name		Number of Shares Acquired on Vesting(#)				Value Realized on Vesting($)(3)
Michael M. Morrissey, Ph.D.			12,500	(1)			63,313
Frank L. Karbe			7,812	(1)			38,943
J. Scott Garland			—				—
Gisela M. Schwab, M.D.			8,750	(1)			43,619
			3,125	(2)			14,719
Pamela A. Simonton, J.D.			7,500	(1)			37,388

 

(1)	The restricted stock unit award was granted on December 9, 2009 and vested as to 1/16th of the original number of shares subject to the restricted stock unit award on February 15, 2012, May 15, 2012, August 15, 2012 and November 15, 2012.

(2)	The restricted stock unit award was granted on September 28, 2011 and vested as to 1/4th of the original number of shares subject to the restricted stock unit award on November 15, 2012.

(3)

“Value Realized on Vesting” is based on the fair market value of our common stock on the applicable vesting date and does not necessarily reflect proceeds actually received by the Named Executive officers. The market value of these awards is based on the closing price of Exelixis’ common stock on the vesting dates.

 

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Potential Payments Upon Termination or Change-in-Control

In December 2005, the Board, upon recommendation of the Compensation Committee, adopted a Change in Control and Severance Benefit Plan that provides for certain severance benefits to our officers in connection with specified termination events. Eligible plan participants may include any employee having a rank of vice president or above, which includes the Named Executive Officers. We amended our Change in Control and Severance Benefit Plan in December 2008 and again in December 2010 to bring the plan into compliance with Section 409A of the Code and other rules governing such plans.

If a Named Executive Officer’s employment terminates due to an involuntary termination without cause or a constructive termination (a “Covered Termination”) during a period starting one month prior to and ending 13 months following a change in control (a “Change in Control Termination”), then the Named Executive Officer would be entitled to the following benefits under the plan:

 

•

a cash payment paid in installments pursuant to our regularly scheduled payroll periods equal to the sum of the Named Executive Officer’s base salary and target bonus for (i) 18 months for Named Executive Officers (other than the Chief Executive Officer) and (ii) 24 months for the Chief Executive Officer;

 

•

the vesting of up to all of the Named Executive Officer’s options and restricted stock units will accelerate in full and the exercise period of such options will be extended to the later of (i) 12 months after the change in control and (ii) the post-termination exercise period provided for in the applicable option agreement; the plan also provides that any reacquisition or repurchase rights held by us in respect of common stock issued or issuable pursuant to any stock awards granted under our 2000 Equity Plan and 2011 Equity Plan shall lapse;

 

•

payment of COBRA premiums, or the cash equivalent thereof, for any health, dental or vision plan sponsored by Exelixis for a period of up to (i) 18 months for Named Executive Officers (other than the Chief Executive Officer) and (ii) 24 months for the Chief Executive Officer; and

 

•

payment of outplacement services for (i) 18 months for Named Executive Officers (other than the Chief Executive Officer), subject to a $30,000 limit and (ii) 24 months for the Chief Executive Officer, subject to a $50,000 limit.

In the event of a Covered Termination of any Named Executive Officer, including the Chief Executive Officer, that is not also a Change in Control Termination, the Named Executive Officer would be entitled to receive a cash severance benefit under the plan equal to six months of base salary paid in installments pursuant to our regularly scheduled payroll periods. In such circumstances, we would also pay for a period of up to six months the Named Executive Officer’s COBRA premiums, or the cash equivalent thereof, for any health, dental or vision plan that we sponsored and that the Named Executive Officer is enrolled in. However, the Named Executive Officer would not be entitled to any vesting acceleration benefits by virtue of such termination.

The payments and benefits described above are subject to certain reductions and offsets if, for example, the Named Executive Officer received other severance benefits from us pursuant to a written employment agreement. In addition, if any of the severance benefits payable under the plan would constitute a “parachute payment” subject to the excise tax imposed by Section 4999 of the Code, a Named Executive Officer may receive a reduced amount of the affected severance benefits (the plan does not provide for the gross up of any excise taxes imposed by Section 4999 of the Code). No Named Executive Officer would receive benefits under the plan if (i) the Named Executive Officer has entered into an individually negotiated employment agreement that provides for severance or change in control benefits, (ii) the Named Executive Officer voluntarily terminates employment with us to accept employment with another entity that is controlled by us or is otherwise affiliated with us or (iii) the Named Executive Officer does not confirm in writing that he or she is subject to agreements with us relating to proprietary and confidential information. In addition, as a general matter, to be eligible to receive benefits under the plan and if requested by Exelixis, a Named Executive Officer must execute a general waiver and release of claims, and such release must become effective in accordance with its terms.

 

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Pursuant to both our 2000 Equity Plan and 2011 Equity Plan, in the event of an asset sale, merger or consolidation in which we are not the surviving corporation, or a reverse merger in which we are the surviving corporation but our common stock is converted by virtue of the merger into other property, then any surviving or acquiring corporation may assume outstanding stock awards or substitute similar stock awards for those under the plan. If any surviving or acquiring corporation refuses to assume such outstanding stock awards or substitute similar stock awards, stock awards held by participants whose service has not terminated will be accelerated in full. In addition, if any person, entity or group acquires beneficial ownership of more than 50% of our combined voting power, then stock awards held by participants whose service has not terminated will be accelerated in full.

The following table sets forth the potential severance payments and benefits under our Change in Control and Severance Benefit Plan to which the Named Executive Officers would be entitled in connection with specified termination events, as if such Named Executive Officers’ employment terminated as of December 28, 2012, the last business day of our last fiscal year. In addition, the table sets forth the amounts to which the Named Executive Officers would be entitled under our 2000 Equity Plan and our 2011 Equity Plan either (i) in connection with a change in control transaction in which the successor corporation did not assume or substitute outstanding stock awards, or (ii) an entity or group acquired more than 50% of our combined voting power, in each case, as of December 28, 2012. There are no other agreements, arrangements or plans that entitle any Named Executive Officers to severance, perquisites or other enhanced benefits upon termination of employment, other than certain extensions of the termination date to avoid violation of registration requirements under the Securities Act of 1933, as amended, or for the Named Executive Officer’s death or disability.

 

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Potential Payments Upon Termination or Change-in-Control Table

 

Name		Benefit		Change in Control and Severance Benefit Plan								2000 Equity Plan / 2011 Equity Plan
				Involuntary Termination Without Cause or Constructive Termination in Connection with a Change of Control ($)(1)				Involuntary Termination Without Cause or Constructive Termination Not in Connection with a Change in Control ($)(2)				Certain Change  of Control Transactions without Termination ($)(3)
Michael M. Morrissey, Ph.D.		Base Salary			1,245,953				311,488
		Bonus			747,572
		Vesting Acceleration(4)			72,719								72,719
		COBRA Payments			37,892				9,473
		Outplacement Services			50,000
Benefit Total					2,154,136				320,961				72,719
Frank L. Karbe		Base Salary			661,937				220,646
		Bonus			297,872
		Vesting Acceleration(4)			46,295								46,295
		COBRA Payments			28,419				9,473
		Outplacement Services			30,000
Benefit Total					1,064,523				230,119				46,295
J. Scott Garland.		Base Salary			558,900				186,300
		Bonus			251,505
		Vesting Acceleration(4)			0								0
		COBRA Payments			48,169				16,056
		Outplacement Services			30,000
Benefit Total					888,574				202,356				0
Gisela M. Schwab, M.D.		Base Salary			649,565				216,522
		Bonus			292,304
		Vesting Acceleration(4)			93,862								93,862
		COBRA Payments			31,195				10,398
		Outplacement Services			30,000
Benefit Total					1,096,926				226,920
Pamela A. Simonton, J.D.		Base Salary			597,949				199,316
		Bonus			269,077
		Vesting Acceleration(4)			44,531								44,531
		COBRA Payments			15,338				5,113
		Outplacement Services			30,000
Benefit Total					956,895				204,429				44,531

 

(1)	These benefits would be payable under the Change in Control and Severance Benefit Plan if the involuntary termination without cause or constructive termination occurred during a period starting one month prior to and ending 13 months following the change in control.

(2)

These benefits would be payable under the Change in Control and Severance Benefit Plan if the involuntary termination without cause occurred more than one month before the change in control or if the termination without cause or a constructive termination occurred more than 13 months following the change in control.

(3)	These benefits would be payable under the 2000 Equity Plan and/or 2011 Equity Plan if either (i) a successor corporation does not assume outstanding stock awards in a change of control transaction or (ii) a

 

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person, entity or group acquires beneficial ownership of more than 50% of our combined voting power, and, in each case, the Named Executive Officers do not terminate employment in connection with such a transaction or event.

(4)

Assumes that the triggering event occurred on December 28, 2012, the last day of our last fiscal year, when the closing sale price per share of our common stock was $4.51. The amount of the vesting acceleration is determined by: (i) aggregating for all accelerated options, the amount equal to (A) the excess of $4.51 over the relevant exercise price of the option, multiplied by (B) the number of shares underlying unvested options at such exercise price as of December 28, 2012 and (ii) aggregating for all accelerated restricted stock units, the amount equal to (X) $4.51 multiplied by (Y) the number of shares underlying the unvested restricted stock units. There can be no assurance that a similar triggering event would produce the same or similar results as those estimated if such event occurs on any other date or at a time when our closing sale price is different.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Indemnification Agreements

As permitted by Delaware law, our Certificate of Incorporation provides that no director will be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:

 

•

any breach of duty of loyalty to us or our stockholders;

 

•

acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;

 

•

unlawful payment of dividends or unlawful stock repurchases or redemptions; or

 

•

any transaction from which the director derived an improper personal benefit.

Our Bylaws provide that we will indemnify our directors and executive officers and may indemnify our other officers and employees and other agents to the fullest extent permitted by law. We believe that indemnification under our Bylaws covers at least negligence and gross negligence on the part of indemnified parties. Our Bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether the Bylaws would permit indemnification.

We have entered into agreements to indemnify our directors and executive officers, in addition to the indemnification provided for in our Bylaws. These agreements, among other things, indemnify our directors and executive officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by Exelixis, arising out of such person’s services as a director or executive officer with respect to Exelixis, any of our subsidiaries or any other company or enterprise to which the person provides services at our request. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers.

Policies and Procedures with Respect to Related Party Transactions

The Board recognizes that related party transactions can present a heightened risk of potential or actual conflicts of interests. In December 2006, the Board adopted a Statement of Policy with respect to transactions entered into with related parties. Under this policy, the Audit Committee has been tasked with responsibility to review and approve related party transactions. The policy provides that management shall present related party transactions to the Audit Committee for approval. The policy does not prevent management from entering into any related party transaction without prior approval of the Audit Committee, so long as such related party transaction is thereafter presented to the Audit Committee for ratification. If ratification is not forthcoming, then management shall make all reasonable efforts to cancel or annul such transaction.

Under the policy, a “related party” includes: any senior officer (including each executive officer or officer subject to Section 16 of the Securities Exchange Act of 1934, as amended) or director of Exelixis; a person who is an immediate family member of a senior officer, director or director nominee; a security holder who is known to own of record or beneficially more than 5% percent of any class of our securities; a person who is an immediate family member of such security holder; or an entity which is owned or controlled by one of the aforementioned persons, or an entity in which one of the aforementioned persons has a substantial ownership interest in or control over such entity.

All related party transactions shall be disclosed in our applicable filings with the SEC as required under SEC rules.

 

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and persons who own more than ten percent of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities of Exelixis. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.

To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 28, 2012, all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with.

HOUSEHOLDING OF PROXY MATERIALS

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.

This year, a number of brokers with account holders who are stockholders will be “householding” proxy materials. A single proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and annual report, please notify your broker or direct your written request to Investor Relations, Exelixis, Inc., 210 East Grand Avenue, South San Francisco, California 94080 or contact Exelixis, Inc., Investor Relations at (650) 837-7000. Stockholders who currently receive multiple copies of the proxy statement at their address and would like to request “householding” of their communications should contact their broker.

FORM 10-K

A copy of our Annual Report on Form 10-K for the fiscal year ended December 28, 2012, including the consolidated financial statements, schedules and list of exhibits, and any particular exhibit specifically requested, is available without charge upon written request to: Investor Relations, Exelixis, Inc., 210 East Grand Avenue, South San Francisco, California 94080.

OTHER MATTERS

The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.

 

South San Francisco, California

April 10, 2013

 

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Exelixis, Inc.

IMPORTANT ANNUAL MEETING INFORMATION

Electronic Voting Instructions

Available 24 hours a day, 7 days a week!

Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.

VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.

Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Eastern Time, on May 21, 2013.

Vote by Internet

•     Go to www.investorvote.com/EXEL

•     Or scan the QR code with your smartphone

•     Follow the steps outlined on the secure website

Vote by telephone •     Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone •     Follow the instructions provided by the recorded message

Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas.

x

 

Annual Meeting Proxy Card

		q  IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.  q

 

		A		Proposals — The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1 and FOR Proposals 2 and 3.
		1. To elect the three Class II nominees for director named in the accompanying Proxy Statement to hold office until the 2016 Annual Meeting of Stockholders

 

For

Against

Abstain

For

Against

Abstain

For

Against

Abstain

+

01 - Carl B. Feldbaum, Esq.

¨

¨

¨

02 - Alan M. Garber,        M.D., Ph.D.

¨

¨

¨

03 - Vincent T. Marchesi,        M.D., Ph.D.

¨

¨

¨

 

For

Against

Abstain

For

Against

Abstain

2.   To ratify the selection of Ernst & Young LLP as Exelixis’ independent registered public accounting firm for the fiscal year ending December 27, 2013.

¨

¨

¨

3.   To approve, on an advisory basis, the compensation of Exelixis’ named executive officers.

¨

¨

¨

 

		B		Non-Voting Items

Change of Address — Please print your new address below.				Comments — Please print your comments below.				Meeting Attendance
								Mark the box to the right if you plan to attend the Annual Meeting.		¨

 

		C		Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
		NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.

Date (mm/dd/yyyy) — Please print date below.				Signature 1 — Please keep signature within the box.				Signature 2 — Please keep signature within the box.
/        /

¢				1  U  P  X				+

01M9IA

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Important notice regarding the Internet availability of proxy materials for the 2013 Annual Meeting of Stockholders.

The Proxy Statement and the 2012 Annual Report to Stockholders are available at:

http://exel-annualstockholdermeeting.com

 

 

q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q

 

 

 

 

Proxy — EXELIXIS, INC.

 

PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 22, 2013   The undersigned hereby appoints Michael M. Morrissey, Frank L. Karbe and James B. Bucher, and each of them, as attorneys and proxies of the undersigned, with full power of substitution, to vote all of the shares of stock of Exelixis, Inc. that the undersigned may be entitled to vote at the Annual Meeting of Stockholders of Exelixis, Inc. to be held at the offices of Exelixis, Inc. at 210 East Grand Avenue, South San Francisco, CA 94080 on Wednesday, May 22, 2013 at 8:00 a.m. (local time), and at any and all postponements, continuations and adjournments thereof, with all powers that the undersigned would possess if personally present, upon and in respect of the following matters and in accordance with the following instructions, with discretionary authority as to any and all other matters that may properly come before the meeting.   UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED “FOR” ALL NOMINEES LISTED IN PROPOSAL 1 AND “FOR” PROPOSALS 2 AND 3, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.   (Continued and to be marked, dated and signed, on the other side)