Genomic Health, Inc.
GENOMIC HEALTH INC (Form: DEF 14A, Received: 04/28/2017 17:08:09)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.          )

 

 

Filed by the Registrant ☒

 

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))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a‑12

 

 

 

 

Genomic Health, Inc.

(Name of Registrant as Specified In Its Charter)

 

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

 

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PICTURE 1

Genomic Health, Inc.

301 Penobscot Drive

Redwood City, California 94063

(650) 556‑9300

April 28, 2017

Dear Stockholder:

You are cordially invited to attend the 2017 Annual Meeting of Stockholders of Genomic Health, Inc. The meeting will be held at 10:00 a.m., Pacific Time, on Thursday, June 15, 2017. We are pleased to announce that this year’s annual meeting will be held completely virtual via live interactive webcast on the internet. You will be able to attend, vote and submit your questions during the meeting at www.virtualshareholdermeeting.com/GHDX.

The formal notice of the Annual Meeting and the Proxy Statement has been made a part of this invitation.

Whether or not you attend the Annual Meeting, it is important that your shares be represented and voted at the Annual Meeting. After reading the Proxy Statement, please promptly vote. Your shares cannot be voted unless you sign, date and return the enclosed proxy, vote by telephone or the Internet, vote as instructed by your broker, or attend the Annual Meeting and vote virtually at www.virtualshareholdermeeting.com/GHDX.

We have also enclosed a copy of our 2016 Annual Report to Stockholders.

We look forward to you attending the meeting.

 

 

 

Sincerely,

 

PICTURE 2

 

Kimberly J. Popovits

 

President and Chief Executive Officer and

 

Chairman of the Board

 

 

 


 

Genomic Health, Inc.

301 Penobscot Drive

Redwood City, California 94063


NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held on Thursday, June 15, 2017


To our Stockholders:

Genomic Health, Inc. will hold its Annual Meeting of Stockholders at 10:00 a.m., Pacific Time, on Thursday, June 15, 2017 virtually at www.virtualshareholdermeeting.com/GHDX.

We are holding this Annual Meeting:

·

to elect seven directors to serve until the 2018 Annual Meeting or until their successors are duly elected and qualified;

·

to vote on the approval of an amendment to our Amended and Restated 2005 Stock Incentive Plan to increase the number of shares available for issuance under the plan by 1,500,000 shares;

·

to vote on the approval of an amendment to our Employee Stock Purchase Plan to increase the number of shares available for issuance under the plan by 1,250,000 shares;

·

to approve, on a non‑binding advisory basis, the compensation of our named executive officers;

·

to approve, on a non-binding advisory basis, the frequency of holding an advisory vote on named executive officer compensation;

·

to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2017;

·

to consider a stockholder proposal concerning proxy access, if properly presented at the Annual Meeting of Stockholders; and

·

to transact such other business as may properly come before the Annual Meeting and any adjournments or postponements of the Annual Meeting.

Stockholders of record at the close of business on April 18, 2017 are entitled to notice of and to vote at this meeting and any adjournments or postponements of the Annual Meeting.

It is important that your shares be represented at this meeting. Even if you plan to attend the virtual meeting, we hope that you will vote promptly. Please review the instructions on pages 2 and 3 of the attached Proxy Statement regarding your voting options.

 

 

 

By Order of the Board of Directors

 

PICTURE 5

 

Jason W. Radford

 

Chief Legal Officer and Secretary

Redwood City, California

 

April 28, 2017

 

Important Notice Regarding the Availability of Proxy Materials for the

Annual Meeting of Stockholders to be held on June 15, 2017.

The Proxy Statement and Annual Report are available at

www.proxydocs.com/ghdx 

 

 


 

Genomic Health, Inc.

301 Penobscot Drive

Redwood City, California 94063


PROXY STATEMENT


Information Concerning Voting and Solicitation

This Proxy Statement is being furnished to you in connection with the solicitation by the board of directors of Genomic Health, Inc., a Delaware corporation (“we,” “us,” “our,” “Genomic Health” or the “Company”), of proxies in the accompanying form to be used at the Annual Meeting of Stockholders of the Company to be held virtually via live interactive webcast at www.virtualshareholdermeeting.com/GHDX on Thursday, June 15, 2017, at 10:00 a.m., Pacific Time, and any postponement or adjournment thereof (the “Annual Meeting”).  To participate in the Annual Meeting, you will need the unique control number we have provided on the proxy card or that is contained in your voting instruction form. Additional directions for participating in the Annual Meeting are available at www.virtualshareholdermeeting.com/GHDX.

This Proxy Statement and the accompanying form of proxy are being mailed to stockholders on or about May 1, 2017.

Questions and Answers About

the Proxy Materials and the Annual Meeting

What proposals will be voted on at the Annual Meeting?

Seven proposals will be voted on at the Annual Meeting:

·

The election of directors;

·

The approval of the amendment to our Amended and Restated 2005 Stock Incentive Plan to increase the number of shares available for issuance;

·

The approval of the amendment to our Employee Stock Purchase Plan to increase the number of shares available for issuance;

·

A non‑binding advisory vote on the compensation of our executive officers;

·

A non-binding advisory vote on the frequency of holding an advisory vote on named executive officer compensation;

·

The ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for 2017; and

·

A stockholder proposal concerning proxy access, if properly presented at the Annual Meeting.

What are the Board’s recommendations?

Our board recommends that you vote:

·

“FOR” election of each of the nominated directors;

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·

“FOR” approval of the amendment to our Amended and Restated 2005 Stock Incentive Plan to increase the number of shares available for issuance;

·

“FOR” approval of the amendment to our Employee Stock Purchase Plan to increase the number of shares available for issuance;

·

“FOR” approval, on a non‑binding advisory basis, of the compensation of our named executive officers;

·

“FOR” the “EVERY YEAR” option, on a non-binding advisory basis, as the frequency of a non-binding advisory stockholder vote on the compensation of our named executive officers;

·

“FOR” ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for 2017; and

·

“AGAINST” the stockholder proposal concerning proxy access.

Will there be any other items of business on the agenda?

We do not expect any other items of business because the deadline for stockholder proposals and nominations has already passed. Nonetheless, in case there is an unforeseen need, the accompanying proxy gives discretionary authority to the persons named on the proxy with respect to any other matters that might be properly brought before the meeting. Those persons intend to vote that proxy in accordance with their best judgment.

How can I attend the Annual Meeting?

You are invited to attend the Annual Meeting if you are a stockholder of record or a beneficial owner as of April 18, 2017, live via the Internet at www.virtualshareholdermeeting.com/GHDX. You may vote and submit questions while attending the meeting on the Internet. Instructions on how to attend and participate in the Annual Meeting via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/GHDX. You must have your control number in order to attend the Annual Meeting, which is provided on the proxy card.

 

Who is entitled to vote?

Stockholders of record at the close of business on April 18, 2017 (the “Record Date”) may vote at the Annual Meeting. Each stockholder is entitled to one vote for each share of the Company’s common stock held as of the Record Date.

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

Stockholder of Record.   If your shares are registered directly in your name with Genomic Health’s transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, the stockholder of record. The Proxy Statement, Annual Report and proxy card, including control number, have been sent directly to you by Genomic Health.

Beneficial Owner.   If your shares are held in a brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name. The Proxy Statement, Annual Report and voting instructions, including control number, have been forwarded to you by your broker, bank or nominee who is considered, with respect to those shares, the stockholder of record.

How do I vote?  

Stockholder of Record

If you are a stockholder of record, you may vote directly at the Annual Meeting by going to www.virtualshareholdermeeting.com/GHDX and using the unique control number that has been provided to you on your

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proxy card or other voting instructions, vote by signing and returning the enclosed proxy card, vote by telephone, or vote by the Internet. Whether or not you plan to attend the Annual Meeting, we urge you to vote to ensure your vote is counted. You may still attend the Annual Meeting and vote even if you have already voted.

·

To vote virtually during the Annual Meeting, go to  www.virtualshareholdermeeting.com/GHDX  and provide the unique control number that has been provided to you.

·

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

·

To vote by telephone, follow the telephone voting instructions on the enclosed proxy card. You will be asked to provide the company number and control number from the proxy card. Your vote must be received by 11:59 p.m., Eastern Time, on June 14, 2017 to be counted.

·

To vote by the Internet, follow the Internet voting instructions on the enclosed proxy card. You will be asked to provide the company number and control number from the proxy card. Your vote must be received by 11:59 p.m., Eastern Time, on June 14, 2017 to be counted.

We provide Internet voting to allow you to vote online. 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.

Beneficial Owner

If you are a beneficial owner of shares registered in the name of your broker, bank, or other nominee, you have the right to direct your broker, bank or nominee how to vote your shares by following the voting instruction form included in the mailing from that entity. Complete and mail the voting instruction form to ensure that your vote is counted. Alternatively, you may vote by telephone or over the Internet as instructed by your broker, bank or other nominee. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank or other nominee. Follow the instructions from your broker, bank or other nominee included with these proxy materials, or contact your broker, bank or other nominee to request a proxy.

Can I change my vote or revoke my proxy?

If you are a stockholder of record, you may change your vote or revoke your proxy at any time prior to the vote at the Annual Meeting. If you submitted your proxy by mail, you must file with the Secretary of the Company a written notice of revocation or deliver, prior to the vote at the Annual Meeting, a valid, later‑dated proxy. If you submitted your proxy by telephone or by the Internet, you may change your vote or revoke your proxy with a later telephone or Internet proxy, as the case may be. Attendance at the Annual Meeting will not have the effect of revoking a proxy unless you give written notice of revocation to the Secretary before the proxy is voted or you vote directly at the virtually-held Annual Meeting.

If you are a beneficial owner of shares held in street name and you wish to change or revoke your vote, please consult the instructions provided with this proxy statement or contact your broker, bank or nominee.

How are votes counted?

In the election of directors, you may vote “FOR” all of the nominees or your vote may be “WITHHELD” with respect to one or more of the nominees. For each of Proposals 2, 3, 4,  6 and 7, you may vote “FOR” or “AGAINST” or “ABSTAIN.” If you “ABSTAIN” as to any of these Proposals, the abstention has the same effect as a vote “AGAINST.” For Proposal 5, you may vote “EVERY YEAR,” “EVERY TWO YEARS,” “EVERY THREE YEARS” or “ABSTAIN.” If you provide specific instructions, your shares will be voted as you instruct. If you sign your proxy card or voting instruction form with no further instructions and you are a stockholder of record, your shares will be voted in accordance with the recommendations of the board (“FOR” all of the nominees to the board, “FOR” each of Proposals 2, 3,  4 and 6, for the “EVERY YEAR” option on Proposal 5, and “AGAINST” Proposal 7) and in the discretion of the proxy holders on

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any other matters that properly come before the meeting. If you hold your shares in street name, please see the next section for important information regarding voting of your shares.

What vote is required to approve each item?

In Proposal 1, the election of directors, the seven persons receiving a majority of “FOR” votes at the Annual Meeting will be elected. Our Board has adopted a policy governing what will occur in the event that a director does not receive a majority of the votes cast. A majority of the votes cast means that the number of votes cast “FOR” a director nominee exceeds the number of votes “WITHHELD.” Abstentions and broker non‑votes will not be counted to determine whether a nominee receives a majority of the votes cast. Additional information concerning our policy for the election of directors is set forth under the heading “Majority Voting in Uncontested Director Elections.”

The vote for each of Proposal 2, Proposal 3, Proposal 6 and Proposal 7 requires the affirmative “FOR” vote of a majority of the common stock present in person or by proxy at the Annual Meeting and entitled to vote.

The vote presented in each of Proposals 4 and 5 is advisory and therefore is not binding on us, our board of directors, or our Compensation Committee of the board of directors.

If you hold shares beneficially in street name and do not provide your broker, bank or nominee with voting instructions, your shares may constitute “broker non‑votes.” Generally, broker non‑votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. In the event you do not provide instructions and your broker does not have authority to vote without your instructions, your shares will not be voted on any such proposal, and will not be voted regarding the election of directors. In tabulating the voting results for any particular proposal, shares that constitute broker non‑votes are not considered entitled to vote on that proposal. Thus, broker non‑votes will not affect the outcome of any matter being voted on at the Annual Meeting, assuming that a quorum is obtained. Abstentions have the same effect as votes against a matter, except as noted above with respect to the election of directors.

Is cumulative voting permitted for the election of directors?

Stockholders may not cumulate votes in the election of directors, which means that each stockholder may vote no more than the number of shares he or she owns for a single director candidate.

What constitutes a quorum?

The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of common stock outstanding on the Record Date will constitute a quorum. As of the close of business on the Record Date, 34,327,231 shares of our common stock were outstanding. Both abstentions and broker non‑votes are counted for the purpose of determining the presence of a quorum.

How are proxies solicited?

Our employees, officers and directors may solicit proxies. We will bear the cost of soliciting proxies and will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out‑of‑pocket expenses for forwarding proxy and solicitation material to the owners of common stock.

IMPORTANT

Please promptly vote by signing, dating and returning the enclosed proxy card in the postage‑prepaid return envelope provided, voting by telephone or the Internet, or voting following the instructions provided by your bank, broker or nominee, so that your shares can be voted.

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Proposal 1

Election of Directors

Directors and Nominees

At the Annual Meeting, our stockholders will be asked to elect seven persons as members of your board of directors, each for a one‑year term or until their successors are elected and qualified. The Nominating and Corporate Governance Committee of the board of directors has recommended, and the board of directors has designated, the seven persons listed below for election at the Annual Meeting. The proxies given to the proxy holders will be voted or not voted as directed and, if no direction is given, will be voted “FOR” each of the nominees. Your board of directors knows of no reason why any of these nominees should be unable or unwilling to serve. However, if for any reason any nominee should be unable or unwilling to serve, the proxies will be voted for any nominee designated to fill the vacancy by your board of directors, taking into account the recommendations of the Nominating and Corporate Governance Committee.

The names of the board of directors’ nominees, their ages as of March 15, 2017, and certain biographical information about the nominees are set forth below.

 

 

 

 

 

 

 

Name

    

Age

    

Position with Company

    

Director
Since

Kimberly J. Popovits

 

58

 

Chairman of the Board, President and Chief Executive Officer

 

2002 

Julian C. Baker

 

50

 

Lead Independent Director

 

2001 

Felix J. Baker, Ph.D.

 

47

 

Director

 

2012 

Fred E. Cohen, M.D., D.Phil.

 

60

 

Director

 

2002 

Henry J. Fuchs, M.D.

 

59

 

Director

 

2013 

Ginger L. Graham

 

61

 

Director

 

2008 

Geoffrey M. Parker

 

52

 

Director

 

2016 

 

Kimberly J. Popovits has served as our President and Chief Executive Officer since January 2009, and as Chairman of the Board since March 1, 2012. Prior to that, Ms. Popovits served as President and Chief Operating Officer from February 2002 to January 2009. From November 1987 to February 2002, Ms. Popovits served in various roles at Genentech, Inc., a biotechnology company, most recently serving as Senior Vice President, Marketing and Sales from February 2001 to February 2002, and as Vice President, Sales from October 1994 to February 2001. Prior to joining Genentech, Ms. Popovits served as Division Manager, Southeast Region, for American Critical Care, a Division of American Hospital Supply, a supplier of healthcare products to hospitals. Ms. Popovits serves as a director of MyoKardia, Inc., a precision medicine company. Ms. Popovits holds a B.A. in Business from Michigan State University.

Julian C. Baker is a Managing Partner of Baker Brothers Investments, which he and his brother, Felix J. Baker, Ph.D., founded in 2000. Mr. Baker’s firm manages long‑term investment funds, focused on publicly traded life sciences companies, for major university endowments and foundations. Mr. Baker’s career as a fund‑manager began in 1994 when he and his brother co‑founded a biotechnology investing partnership with the Tisch Family. Previously, Mr. Baker was employed from 1988 to 1993 by the private equity investment arm of Credit Suisse First Boston Corporation. Mr. Baker is also a director of Acadia Pharmaceuticals, Inc.,  Idera Pharmaceuticals, Inc. and Incyte Corporation,  where he serves as lead independent director. Mr. Baker served as a director of Trimeris, Inc. from April 2004 until November 2011. Mr. Baker holds an A.B. in Social Studies from Harvard University.

Felix J. Baker, Ph.D. is a Managing Partner of Baker Brothers Investments, which he and his brother, Julian C. Baker, founded in 2000. Dr. Baker’s firm manages long‑term investment funds, focused on publicly traded life sciences companies, for major university endowments and foundations. Dr. Baker’s career as a fund‑manager began in 1994 when he and his brother co‑founded a biotechnology investing partnership with the Tisch Family. Dr. Baker is also a director of Seattle Genetics, Inc., where he serves as lead independent director, and Alexion Pharmaceuticals, Inc. Dr. Baker served as a director of Ardea Biosciences, Inc. from February 2010 until its acquisition in June 2012, a director of Synageva BioPharma Corp. from October 2000 until its acquisition in June 2015. Dr. Baker holds a B.S. and Ph.D. in Immunology from Stanford University, where he also completed two years of medical school.

Fred E. Cohen, M.D., D.Phil. is a senior advisor at TPG, a private equity firm. From 2001 to 2016,  he served as co‑head of TPG’s biotechnology group, a venture capital effort that he founded in 2001. From 1988 through December 2014, Dr. Cohen was an Adjunct Professor of Cellular and Molecular Pharmacology at the University of

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California, San Francisco. Dr. Cohen serves as a director of BioCryst Pharmaceuticals, Inc., CareDx, Inc., Five Prime Therapeutics, Inc., Roka Bioscience, Inc., Tandem Diabetes Care, Inc., Veracyte, Inc. and a number of privately held companies. Dr. Cohen served as a director of Quintiles Transnational Holdings Inc. from May 2007 until November 2015. Dr. Cohen holds a B.S. in Molecular Biophysics and Biochemistry from Yale University, a D.Phil. in Molecular Biophysics from Oxford University and an M.D. from Stanford University.

Henry J. Fuchs, M.D. has served as the Executive Vice President and Chief Medical Officer of BioMarin Pharmaceutical Inc., a biopharmaceutical company since December 2009. Dr. Fuchs was Executive Vice President and Chief Medical Officer of Onyx Pharmaceuticals, Inc., a biopharmaceutical company from September 2005 to December 2008 and served in multiple roles of increasing responsibility at Ardea Biosciences, Inc., a biotechnology company, first as Vice President, Clinical Affairs, then as President and Chief Operating Officer, and finally as President and Chief Executive Officer, from October 1996 until June 2005. From 1987 to 1996, Dr. Fuchs held various positions at Genentech Inc., a biotechnology company. Dr. Fuchs serves as a director of Mirati Therapeutics, Inc. and served as a director of Ardea Biosciences, Inc. from November 2001 to June 2012. Dr. Fuchs holds a B.A. in Biochemical Sciences from Harvard University, and an M.D. from George Washington University.

Ginger L. Graham served as President and Chief Executive Officer of Two Trees Consulting, a healthcare and executive leadership consulting firm, from November 2007 to December 2016.  Ms. Graham served as Faculty at Harvard Business School from October 2009 to June 2012 and was Chief Executive Officer of Amylin Pharmaceuticals, Inc., a biopharmaceutical company, from September 2003 to March 2007, and served as Amylin’s President from September 2003 to June 2006. From 1994 to 2003, Ms. Graham held various positions with Guidant Corporation, including Group Chairman, Office of the President, President of the Vascular Intervention Group, and Vice President. From 1979 to 1994, Ms. Graham held various positions with Eli Lilly and Company, including President and Chief Executive Officer of Advanced Cardiovascular Systems, Inc. Ms. Graham currently serves as a director of Clovis Oncology, Inc., Walgreen Co. and a number of privately held companies. Ms. Graham holds a B.S. in Agricultural Economics from the University of Arkansas and an M.B.A. from Harvard University.

Geoffrey M. Parker  is the Senior Vice President and Chief Financial Officer of Tricida, Inc., a privately-held biopharmaceutical company. Mr. Parker also served as the Chief Financial Officer of Anacor Pharmaceuticals, Inc. from September 2010 to May 2015 and as the Vice President, Managing Director and Partner at the global investment banking and securities firm Goldman, Sachs & Co., leading their west coast Healthcare Investment Banking practice from April 1997 to April 2009. Mr. Parker is a  director of ChemCentryx, Inc., Perrigo Company plc and Sunesis Pharmaceuticals, Inc. Mr. Parker holds an A.B. from Dartmouth College in Engineering Sciences and Economics and an M.B.A. from the Stanford Graduate School of Business.

Vote Required

In an uncontested election, our bylaws require our directors to be elected by a majority of the shares of common stock present or represented and voting at the Annual Meeting with respect to that nominee. In a contested election, the nominees are elected by a plurality vote.

Your board of directors recommends a vote FOR the election of the nominees set forth above as directors of Genomic Health.

Director Independence

Our board of directors has determined that, except for Ms. Popovits, each individual who currently serves as a member of the board is, and each individual who served as a member of the board in 2016 was, an “independent director” within the meaning of Rule 5605 of The NASDAQ Stock Market. Ms. Popovits is not independent because she is employed by the Company. All of the nominees are members of the board standing for reelection as directors. For Messrs. Baker and Parker,  Drs. Baker, Cohen and Fuchs, and Ms. Graham, the board of directors considered their relationship and transactions with the Company as directors and securityholders of the Company.

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Board Meetings

Our board of directors held nine meetings in 2016. Each director attended at least 75% of the aggregate number of meetings of the board of directors held during the period for which such director served on our board of directors and of the committees on which such director served. The independent directors meet in regularly scheduled executive sessions at in‑person meetings of the board of directors without the participation of Ms. Popovits or the other members of management. We do not have a policy that requires the attendance of directors at the Annual Meeting. No directors attended our 2016 annual meeting.

Committees of the Board of Directors 

Below is a description of each committee of the board of directors. The board of directors has determined that each director who serves on the Audit, Compensation, and Nominating and Corporate Governance Committees is “independent,” as that term is defined by applicable listing standards of The NASDAQ Stock Market and rules of the Securities and Exchange Commission, or SEC, and has adopted written charters for these committees. These charters are available on the investor section of our website (www.genomichealth.com).

Audit Committee

 

 

Current Members:

Geoffrey M. Parker (Chair and Audit Committee Financial Expert)

 

Fred E. Cohen, M.D., D.Phil.

 

Ginger L. Graham

Number of Meetings in 2016:

6

Functions:

The Audit Committee provides assistance to the board of directors in fulfilling its oversight responsibilities relating to the Company’s financial statements, system of internal control over financial reporting, auditing, accounting and financial reporting processes, and regulatory compliance. Other specific duties and responsibilities of the Audit Committee are to appoint, compensate, evaluate and, when appropriate, replace the Company’s independent registered public accounting firm; review and pre‑approve audit and permissible non‑audit services; review the scope of the annual audit; monitor the independent registered public accounting firm’s relationship with the Company; and meet with the independent registered public accounting firm and management to discuss and review the Company’s financial statements, internal control over financial reporting, and auditing, accounting and financial reporting processes.

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Compensation Committee

 

 

Current Members:

Felix J. Baker, Ph.D. (Chair)

 

Fred E. Cohen, M.D., D.Phil.

 

Henry J. Fuchs, M.D.

Number of Meetings in 2016:

7

Functions:

The Compensation Committee’s primary functions are to assist the board of directors in meeting its responsibilities with regard to oversight and determination of executive compensation and to review and make recommendations with respect to major compensation plans, policies and programs of the Company. Other specific duties and responsibilities of the Compensation Committee are to review and make recommendations for approval by the independent members of the board of directors regarding compensation of our Executive Chairman of the Board, our President and Chief Executive Officer and other executive officers, and administer our stock plans and other equity‑based compensation plans.

 

The board of directors has established a Non‑Management Stock Option Committee, the members of which are Kimberly J. Popovits and G. Bradley Cole. The Committee has been delegated the authority to make awards or grants under our Stock Incentive Plan (including shares, options, or restricted stock) to new employees, other than to any member of our board of directors, individuals designated by our board of directors as “Section 16 officers,” and employees who hold the title of Vice President or above. This Committee may not make any awards or grants to any new employee that total more than 50,000 shares of common stock. In addition, in connection with the Company’s annual compensation review, this Committee is authorized to grant and issue to employees who hold titles below the Vice President level restricted stock units, or RSUs, that total no more than 10,000 shares of common stock per employee.

 

Nominating and Corporate Governance Committee

 

 

Current Members:

Julian C. Baker (Chair)

 

Ginger L. Graham

 

Henry J. Fuchs, M.D.

Number of Meetings in 2016:

3

Functions:

The Nominating and Corporate Governance Committee’s primary functions are to identify qualified individuals to become members of the board of directors, determine the composition of the board and its committees and monitor a process to assess board effectiveness. Other specific duties and responsibilities of the Nominating and Corporate Governance Committee are to recommend nominees to fill vacancies on the board of directors, review and make recommendations to the board of directors with respect to candidates for director proposed by stockholders, and review on an annual basis the functioning and effectiveness of the board and its committees.

 

Science and Technology Advisory Committee

 

 

Current Members:

Henry J. Fuchs, M.D. (Chair)

 

Felix J. Baker, Ph.D.

 

Fred E. Cohen, M.D., D.Phil.

Number of Meetings in 2016:

2

Functions:

The Science and Technology Advisory Committee’s primary function is to assist the board of directors and management in providing strategic direction for the Company’s research and development activities.

 

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Director Nominations

The board of directors nominates directors for election at each annual meeting of stockholders and elects new directors to fill vacancies when they arise. The Nominating and Corporate Governance Committee has the responsibility to identify, evaluate, recruit and recommend qualified candidates to the board of directors for nomination or election.

The board of directors has as an objective that its membership be composed of experienced and dedicated individuals with diversity of backgrounds, perspectives and skills. The Nominating and Corporate Governance Committee will select candidates for director based on their character, judgment, diversity of experience, business acumen and ability to act on behalf of all stockholders. The Nominating and Corporate Governance Committee believes that nominees for director should have experience, such as experience in management or accounting and finance, or industry and technology knowledge, that may be useful to Genomic Health and the board of directors, high personal and professional ethics, and the willingness and ability to devote sufficient time to carry out effectively their duties as directors. Although the Company has no formal diversity policy for board members, the board and the Nominating and Corporate Governance Committee consider diversity of backgrounds and experiences and other forms of diversity when selecting nominees. The Nominating and Corporate Governance Committee also believes that service as director of other public companies provides experience and perspective that may be useful to Genomic Health and the board of directors, and several of our directors have served as directors of other public companies. The Nominating and Corporate Governance Committee believes it appropriate for at least one, and, preferably, multiple, members of the board of directors to meet the criteria for an “audit committee financial expert” as defined by rules of the SEC, and for a majority of the members of the board of directors to meet the definition of “independent director” under the rules of The NASDAQ Stock Market. The Nominating and Corporate Governance Committee also believes it appropriate for key members of our management to participate as members of the board of directors.

Prior to each annual meeting of stockholders, the Nominating and Corporate Governance Committee identifies nominees by first evaluating the current directors whose term will expire at the annual meeting and who are willing to continue in service. These candidates are evaluated based on the criteria described above, including as demonstrated by the candidate’s prior service as a director, and the needs of the board of directors with respect to the particular talents and experience of its directors. In the event that a director does not wish to continue in service, the Nominating and Corporate Governance Committee determines not to re‑nominate the director, or a vacancy is created on the board of directors as a result of a resignation, an increase in the size of the board or other event, the Nominating and Corporate Governance Committee will consider various candidates for board membership, including those suggested by the committee members, by other board of directors members, by any executive search firm engaged by the committee or by stockholders. The Nominating and Corporate Governance Committee recommended all of the nominees for election included in this Proxy Statement.

A stockholder who wishes to suggest a prospective nominee for the board of directors should notify Genomic Health’s Secretary or any member of the Nominating and Corporate Governance Committee in writing with any supporting material the stockholder considers appropriate.

In addition, our Bylaws contain provisions that address the process by which a stockholder may nominate an individual to stand for election to the board of directors at our annual meeting of stockholders. In order to nominate a candidate for director, a stockholder must give timely notice in writing to Genomic Health’s Secretary and otherwise comply with the provisions of our Bylaws. To be timely, our Bylaws provide that we must have received the stockholder’s notice not less than 90 days nor more than 120 days prior to the first anniversary date of the preceding year’s annual meeting; however, if we have not held an annual meeting in the previous year or the date of the annual meeting is called for a date that is more than 30 days before or more than 60 days after the first anniversary date of the preceding year’s annual meeting, we must have received the stockholder’s notice not later than the close of business on the later of the 90th day prior to the date of the scheduled annual meeting or the 7th day following the earlier of the day on which notice of the annual meeting date was mailed or the day of the first public announcement of the annual meeting date. An adjournment or postponement of an annual meeting will not commence a new time period or extend any time period for the giving of the stockholder’s notice described above. Information required by the Bylaws to be in the notice includes the name and contact information for the candidate and the person making the nomination, and other information about the nominee that must be disclosed in proxy solicitations under Section 14 of the Securities Exchange Act of 1934 and the related rules and regulations under that Section.

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Stockholder nominations must be made in accordance with the procedures outlined in, and include the information required by, our Bylaws and must be addressed to: Secretary, Genomic Health, Inc., 301 Penobscot Drive, Redwood City, California 94063. You can obtain a copy of our Bylaws by writing to the Secretary at this address.

Majority Voting in Uncontested Director Elections

Our Bylaws contain a majority voting standard for the election of directors in an uncontested election. An “uncontested election” is one in which the number of nominees equals the number of directors to be elected in such election. In an uncontested election, each nominee must be elected by the vote of a majority of the votes cast by the shares present in person or represented by proxy. A “majority of the votes cast” means that the number of shares voted “for” a director’s election must exceed the number of votes to withhold authority or votes against, excluding abstentions and broker non‑votes.

In addition, our board of directors has adopted a policy that the board will nominate or elect as a director only candidates who agree to tender, promptly following his or her election or re‑election to the board, an irrevocable resignation that will be effective upon (i) the failure of the candidate to receive the required vote at the next annual meeting at which he or she faces re‑election and (ii) the acceptance by our board of such resignation.

If an incumbent director fails to receive the required vote for re‑election in an uncontested election, the Nominating and Governance Committee will evaluate and make a recommendation to the board with respect to whether such director’s resignation should be accepted. The board must take action on the recommendation within 90 days following certification of the stockholder vote. The director whose resignation is under consideration cannot participate in any decision regarding his or her resignation. The Nominating and Corporate Governance Committee and the board of directors may consider any factors they deem relevant in deciding whether to accept a director’s resignation. If a director’s resignation is accepted by the board, then the board may fill the resulting vacancy or may decrease the size of the board.

Director Qualifications

Set forth below is a summary of the specific experience, qualifications, attributes or skills of the nominees for the board of directors that, in addition to the experience of those nominees described in their biographies above, led our Nominating and Corporate Governance Committee and board to conclude that the nominee should serve as a member of the board:

Ms. Popovits’ role as President and Chief Executive Officer of the Company gives her strong knowledge of the Company’s strategy, markets, competitors and operations. She also brings significant experience in commercial operations, sales and marketing and experience as a public company director.

Mr. Baker is an experienced investor in many life sciences companies. Mr. Baker brings to the board significant strategic and financial expertise and leadership experience in the life sciences field as a result of his investments in and service as a director of other publicly and privately held life sciences companies.

Dr. Baker is an experienced investor in many life sciences companies. Dr. Baker brings to the board significant strategic and financial expertise and leadership experience in the life sciences field as a result of his investments in and service as a director of other publicly and privately held life sciences companies.

Dr. Cohen brings significant leadership experience in the medical and finance fields through his background as an M.D. and a venture capitalist. He has extensive technical expertise relevant to the Company’s business and has served as an investor in and on the boards of numerous publicly and privately held life sciences and healthcare companies.

Dr. Fuchs brings extensive experience in senior management roles in the life sciences and biopharmaceutical industries, including experience leading companies in drug and product development and commercialization. He also brings medical expertise and significant experience as a director of other publicly held life sciences and biopharmaceutical companies.

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Ms. Graham has extensive experience in senior management roles in the life sciences and healthcare industries, including experience leading companies in drug, device and product development and commercialization. She also brings significant experience as a director of publicly and privately held life sciences companies.

Mr. Parker brings significant experience in financial matters and extensive experience in working with emerging growth companies in the life sciences, healthcare and technology industries. Mr. Parker also has experience as a director of publicly and privately held companies.

Board Leadership Structure and Role in Risk Oversight

The roles of chief executive officer and chairman of the board of directors are currently combined, at the board of directors’ discretion. The board believes that Ms. Popovits is the director best suited to identify strategic opportunities and focus the activities of the board due to her extensive understanding of our business. The board also believes that the combined role of chairman of the board and chief executive officer promotes the effective execution of strategic initiatives and facilitates the flow of information between management and the board. While the board believes it is important to retain the organizational flexibility to determine whether the roles of chairman of the board and chief executive officer should be separated or combined in one individual, or whether to elect an independent non‑executive chairman, the board currently believes that the interests of the Company and its stockholders are better served with the chief executive officer serving both roles. The board believes that the appointment of a strong lead independent director and the use of regular executive sessions of the independent, non‑management directors, along with the board’s strong committee system and substantial majority of independent directors, allow it to maintain effective oversight of management. In connection with the appointment of Ms. Popovits to the role of chairman of the board, the board appointed Julian C. Baker as the board’s lead independent director. The independent directors meet in an executive session after each regular board meeting, at which time the independent directors have the opportunity to discuss management performance.

Our board of directors is responsible for overseeing the overall risk management process at the Company. The responsibility for managing risk rests with executive management while the committees of the board and the board of directors as a whole participate in the oversight process. The board’s risk oversight process builds upon management’s risk assessment and mitigation processes, which include reviews of long‑term strategic and operational planning, executive development and evaluation, regulatory and legal compliance, and financial reporting and internal controls. The board considers strategic risks and opportunities and regularly receives reports from executive management regarding specific aspects of risk management.

Stockholder Communications with the Board of Directors

If you wish to communicate with the board of directors, you may send your communication in writing to: Secretary, Genomic Health, Inc., 301 Penobscot Drive, Redwood City, California 94063. You must include your name and address in the written communication and indicate whether you are a stockholder of Genomic Health. The Secretary will review any communication received from a stockholder, and all material communications from stockholders will be forwarded to the appropriate director or directors or committee of the board of directors based on the subject matter.

Certain Relationships and Related Transactions

It is our policy that all employees, officers and directors must avoid any activity that is or has the appearance of conflicting with the interests of the Company. This policy is included in our Code of Business Conduct and Ethics. We conduct a review of all related party transactions for potential conflict of interest situations on an ongoing basis and all such transactions relating to executive officers and directors must be approved by the independent and disinterested members of our board of directors or an independent and disinterested committee of the board.

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Director Compensation

The following table sets forth cash amounts and the value of other compensation earned by our outside directors for their service in 2016:

 

 

 

 

 

 

 

 

 

 

    

Fees Earned

    

 

    

 

    

 

 

 

or Paid

 

Stock Awards

 

Option Awards

 

 

Name

 

in Cash ($)

 

($)(2)

 

($)(3)(4)

 

Total ($)

Julian C. Baker

 

5,000

 

40,000

 

114,773

 

159,773

Felix J. Baker, Ph.D.

 

20,000

 

40,000

 

114,773

 

174,773

Fred E. Cohen, M.D., D.Phil.

 

13,500

 

40,000

 

114,773

 

168,273

Henry J. Fuchs, M.D.

 

22,000

 

40,000

 

114,773

 

176,773

Ginger L. Graham

 

9,000

 

40,000

 

114,773

 

163,773

Randall S. Livingston (1)

 

60,000

 

 

114,773

 

174,773

Geoffrey M. Parker

 

23,500

 

 

229,054

 

252,554


(1)

Mr. Livingston resigned from our board of directors effective December 14, 2016.

(2)

Value of restricted stock awards issued at the election of the director in lieu of some or all of his or her annual retainer, other than retainers related to serving as a committee chair or member.

(3)

Represents the aggregate fair value of options to purchase our common stock computed as of the grant date of each option in accordance with the Financial Accounting Standards Board Accounting Standard Codification Topic 718, Stock Compensation , or FASB ASC Topic 718, rather than amounts paid to or realized by the named individual. See Note 9 of Notes to our Consolidated Financial Statements set forth in our Annual Report on Form 10‑K for the year ended December 31, 2016 for the assumptions made in determining these values. There can be no assurance that options will be exercised (in which case no value will be realized by the individual) or that the value on exercise will approximate the fair value as computed in accordance with FASB ASC Topic 718.

(4)

The following table sets forth the aggregate number of shares of common stock underlying option awards outstanding at December 31, 2016:

 

 

 

 

    

Number of

Name

 

Shares

Felix J. Baker, Ph.D.

 

56,265

Julian C. Baker

 

89,265

Fred E. Cohen, M.D., D.Phil.

 

89,265

Henry J. Fuchs, M.D.

 

50,000

Ginger L. Graham

 

89,265

Randall S. Livingston

 

79,265

Geoffrey M. Parker

 

20,000

 

Directors who are our employees do not receive any fees for their service on our board of directors. During 2016,  Ms. Popovits was our only employee director.

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For 2016, our outside directors received an annual retainer of $40,000. Directors other than committee chairs receive annual fees paid prospectively on a quarterly basis for membership on committees as follows: Audit Committee members—$7,000; Compensation Committee members—$5,000; Nominating and Corporate Governance Committee members—$2,000; and Science and Technology Committee members—$5,000. The annual fees paid for service as a committee chair are as follows: Audit Committee chair—$20,000; Compensation Committee chair—$15,000; Nominating and Corporate Governance Committee chair—$5,000; and Science and Technology Committee chair—$15,000. Outside directors have the option to elect to receive some or all of their retainers (other than retainers for serving as committee chair or committee membership) in the form of restricted stock that vests immediately when the associated quarterly retainer amount is paid. We also provide reimbursement to our outside directors for reasonable expenses in connection with attendance at board of director and committee meetings.

In addition to cash compensation for services as a member of the board, outside directors also are eligible to receive nondiscretionary, automatic grants of stock options under our 2005 Stock Incentive Plan. An outside director who joins our board is automatically granted an initial option to purchase 20,000 shares upon first becoming a member of our board of directors. The initial option vests and becomes exercisable over four years, with the first 25% of the shares subject to the initial option vesting on the first anniversary of the date of grant and the remainder vesting monthly thereafter. On the first business day following each regularly scheduled annual meeting of stockholders, each outside director is automatically granted a nonstatutory option to purchase 10,000 shares of our common stock, provided the director has served on our board of directors for at least six months. These options vest and become exercisable on the first anniversary of the date of grant or immediately prior to our next annual meeting of stockholders, if earlier. The options granted to outside directors under our 2005 Stock Incentive Plan have a per share exercise price equal to 100% of the fair market value of the underlying shares on the date of grant, a term of 10 years, and become fully vested in the event of a change in control. At December 31, 2016, options granted to outside directors with respect to an aggregate of 73,750 shares would automatically accelerate upon a change of control.

Executive Compensation

Compensation Discussion and Analysis

Our Compensation Philosophy and Objectives

We believe that compensation of our executive officers should:

·

encourage creation of stockholder value and achievement of strategic corporate objectives;

·

attract and retain qualified, skilled and dedicated executives on a long‑term basis;

·

reward past performance and provide incentives for future performance; and

·

provide fair compensation consistent with our internal compensation programs.

Our philosophy is to align the interests of our stockholders and management by linking compensation with our annual and long‑term corporate and financial objectives, including through equity ownership by management. In order to attract and retain qualified personnel, we strive to offer a total compensation package competitive with select companies in the life sciences industry, taking into account relative company size, performance and geographic location as well as individual responsibilities and performance. Our compensation philosophy with respect to our executive officers currently focuses on the use of a combination of cash and equity‑based compensation to recruit and retain qualified, skilled and dedicated executives, although our philosophy with respect to Kimberly J. Popovits, our President and Chief Executive Officer, or CEO, has continued to focus more on equity‑based compensation.

Implementing Our Objectives

The Compensation Committee of our board of directors administers and interprets our executive compensation and benefits policies, including our stock incentive plan, and reviews and makes recommendations to the independent members of the board of directors with respect to major compensation plans, policies and programs.

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For 2016 compensation, the Compensation Committee evaluated the performance in 2015 of our CEO and made recommendations to the independent members of the board regarding Ms. Popovits’s compensation in light of the goals and objectives of our compensation program, the Company’s financial results and progress towards its strategic goals, and compensation levels of peer companies. Ms. Popovits and the Compensation Committee together assessed the performance of our executive officers, other than Ms. Popovits, and other members of our management team, based on initial recommendations from Ms. Popovits. This assessment took into account the Company’s financial results, its progress towards its strategic goals, compensation levels of peer companies, and the goals and objectives of the Company’s compensation program. The Committee’s recommendations were then submitted to the independent members of the board for their consideration and approval.

Market Reference Data.   While the Compensation Committee did not use market benchmarks to determine its recommendations for executive compensation for 2016, the Committee reviewed market reference data to evaluate the competitiveness of our executive officers’ compensation and to determine whether the total compensation paid to each of our named executive officers was reasonable in the aggregate. However, the Compensation Committee did not limit its decision to or target any particular range or level of total compensation paid to executive officers at these companies. In connection with its analysis, the Committee reviewed information prepared by Compensia Inc., an independent executive compensation consultant, comparing the compensation for members of our management team, which includes our executive officers, with data from the Radford Global Life Sciences Compensation Survey with respect to companies with revenues between $130 million and $800 million and with 400 to 1,600 employees and data from SEC filings for a peer group comprised of the following 17 diagnostics and biotechnology companies:

 

 

 

Abaxis

ICU Medical

NeoGenomics

ABIOMED

Insulet

Omnicell

Cepheid

Luminex

Quidel

Exact Sciences

Meridian Biosciences

Bio-Techne

Fluidigm

Myriad Genetics

Veracyte

Foundation Medicine

Natera

 

 

 

 

 

The peer group used for 2016 compensation was revised from the peer group used for 2015 primarily to delete companies that had been or were to be acquired by another company. Additions to the list were made primarily based upon similar industry companies whose market capitalizations were between 3.0 and 3.8 times our Company’s revenues.    

The analysis indicated that, while positioning varied by individual, on average, target total cash compensation (salary plus target bonus) for our executives other than our CEO approximated the 60th percentile, and that our CEO’s base salary approximated the 40th percentile, with her target total cash compensation approximating the 45th percentile. The analysis also noted that, while positioning varied by individual, on average, the annual equity values of stock grants for our executives other than our CEO approximated the 45th percentile, and that our CEO’s equity grant value approximated the 65th percentile. According to the analysis, on average, target total direct compensation approximated the 50th percentile for our executives other than our CEO and approximated the 55th percentile for our CEO. For purposes of this analysis, target total direct compensation generally equaled target total cash compensation plus the Black‑Scholes value of options and the market value of RSUs awarded in 2015.

Equity Grant Practices.   The Compensation Committee administers our stock incentive plan for executive officers, employees and consultants, under which it grants RSUs and options to purchase our common stock. Options are granted with an exercise price equal to the fair market value of a share of our common stock on the date of grant, which is the closing price of our common stock on the date of grant. For purposes of determining grant amounts, RSUs are valued based on the fair market value of a share of our common stock on the date of grant. We do not coordinate the timing of equity award grants with the release of financial results or other material announcements by the Company; our annual equity grants are made at regularly scheduled board and Compensation Committee meetings.

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Under our equity incentive guidelines, most employees receive grants of RSUs in lieu of stock options. Employees with titles of vice president and above, including our executive officers, are eligible to receive stock options and RSUs. The target percentages of equity grant value for employees with titles of vice president and above other than our CEO, Chief Operating Officer & Chief Financial Officer, Chief Business and Product Development Officer, Chief Scientific Officer and Chief Commercial Officer are 50% stock options and 50% RSUs, and the target percentages for our other executive officers are 75% stock options and 25% RSUs. The stock options generally vest over four years and no shares vest before the one‑year anniversary of the option grant. We spread the vesting of our options over four years to compensate executives and other employees receiving options for their contribution over a period of time and to provide an incentive to focus on our longer term goals. The RSUs generally vest in three equal annual installments. The Compensation Committee has also approved awards of performance‑based vesting RSUs to our executive officers, as discussed below, and may in the future consider awarding additional or alternative forms of equity incentives, such as grants of restricted stock and other performance‑based awards.

Employee Stock Purchase Plan.   The Company adopted an Employee Stock Purchase Plan in 2011. Executive officers are eligible to purchase shares of our common stock at a discount to market price on the same terms as made available to all eligible employees.

Miscellaneous.   We do not enter into employment or severance contracts with our executive officers as we do not believe these types of arrangements facilitate our compensation goals and objectives. In 2016, we made up to a $4,000 matching 401(k) plan contribution for all eligible employees and executive officers.

Tax Deductibility of Compensation.   We generally intend to qualify executive compensation for deductibility without limitation under Section 162(m) of the Internal Revenue Code of 1986, as amended. The Compensation Committee, however, has not adopted a policy requiring all executive compensation to be deductible and may choose, to support varying corporate objectives, not to make certain elements deductible. Section 162(m) places a limit of $1,000,000 on the amount of compensation we may deduct in any one year with respect to our CEO and each of the next three most highly compensated executive officers other than our Chief Financial Officer.

Stock Ownership Guidelines.   We do not have a stock ownership or stock retention policy that requires executive officers to own stock in Genomic Health or retain shares of common stock underlying options they exercise.

Elements of Executive Compensation

Our compensation structure for executive officers consists of a combination of base salary, bonus and equity‑based compensation. Except for a commuter allowance provided to an officer, we do not have any programs specifically providing for personal benefit perquisites to officers. The Compensation Committee makes recommendations with respect to executive officer compensation. Compensation other than grants under our stock incentive plan are approved by the independent members of our board of directors.

Base Salary.   The Compensation Committee reviews base salaries for executive officers on an annual basis, adjusting salaries based on individual and Company performance and other factors discussed below.

The Compensation Committee and independent members of our board of directors will consider adjustments to base salaries for our executives, which may be implemented over time and will depend on the Company’s operating results and comparative market data. In February 2016, the independent members of our board of directors, based on the recommendation of the Compensation Committee, did not approve any salary increases for our named executive officers, including Ms. Popovits, as the Committee chose to focus on performance‑based cash compensation through the annual corporate bonus plan and equity‑based compensation.

In February 2017, the independent members of our board of directors, based on the recommendation of the Compensation Committee, approved salary increases of 2% for our named executive officers other than Ms. Popovits.  Ms. Popovits’ base salary was not increased.

 

For both years, salary amounts were established after considering job performance and responsibilities, internal pay alignment and marketplace competitiveness, among other things.

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Annual Bonus.   We have an annual bonus pool for our employees that is tied to corporate and operational goals. The potential for actual awards under the plan could either exceed or be less than the funding target depending on corporate and individual performance.

For 2016, the eligible bonus targets for all employees other than members of our management team ranged from 10% to 35% of base salary, with bonus targets for our named executive officers other than our CEO at 55%. The target bonus percentage for our CEO was 90%, which was lower than the market 50th percentile. The corporate performance objectives for the 2016 bonus pool for our non‑executive employees were approved by the Compensation Committee and our board of directors with the Company’s full‑year results determining the funding pool for employees and members of our management team, including our executive officers.

The corporate performance objectives for members of our management team for 2016 were the same as the objectives applicable to the remainder of our employees. In each case, minimum and target achievement levels were defined for certain of the financial and business performance objectives, and for certain objectives overachievement or achievement of additional objectives enabled the addition of a fixed number of bonus percentage points for such objectives.

The corporate bonus objectives for 2016 were achieved at the 104% level. The corporate performance objectives for 2016 had minimum, target, and maximum levels of achievement, and potential payout percentages in 2016 based on achievement of the corporate performance objectives that ranged from 0% to 178%, subject in any case to potential adjustment for individual performance. Financial and business performance objectives, representing aggregate potential payout percentages at target levels of achievement of 66%, were achieved at the 61% level. Commercial objectives, representing aggregate potential payout percentages at target levels of achievement of 20%, were achieved at the 25% level. Product development related objectives, representing aggregate potential payout percentages at target levels of achievement of 22%, were achieved at the 18% level. Other specific corporate bonus objectives are not disclosed because we consider the information to be confidential and believe it would be competitively harmful if disclosed.

While bonuses for non‑executive employees were based in part on achievement of corporate goals established by our executive officers and board of directors and other factors, bonuses for executive officers were determined by the Compensation Committee and independent members of our board of directors at the time of their annual compensation review based on their assessment of corporate and individual achievements. For 2016, the Committee and the independent members of our board of directors determined to award bonuses to each executive officer based on an annual goal achievement level of 104%. Bonus amounts were calculated by multiplying that achievement level of 104% by the respective target bonus percentage of base salary for each such executive officer. The Committee and the independent members of our board of directors believed the executive team should be treated equally because corporate accomplishments were judged largely based on team performance and performance within their respective domains was relatively level among executive team members.

In February 2017, the independent members of our board of directors approved, on the recommendation of the Compensation Committee, our 2017 corporate bonus plan. The 2017 bonus plan applies to all non‑commission‑based employees, including our executive officers, and objectives will be measured on an annual basis for all employees. The funding targets as a percentage of base salary for our named executive officers other than our CEO remained at 55% and our CEO’s bonus target percentage remained at 90%. Corporate performance objectives for the 2017 bonus plan have minimum, target and maximum levels of achievement, and potential payout percentages under the bonus plan based on achievement of the corporate performance objectives can range from 0% to 174%, subject in any case to potential adjustment for individual performance. Performance objectives under the 2017 bonus plan include financial and business performance objectives, representing aggregate potential payout percentages at maximum levels of achievement of 114%, commercial objectives, representing aggregate potential payout percentages at maximum levels of achievement of 24%, and product development related objectives, representing aggregate potential payout percentages at maximum levels of achievement of 36%.

Equity‑Based Compensation.   We believe that providing executive officers who have responsibility for our management and growth with an opportunity to increase their stock ownership aligns the interests of the executive officers with those of our stockholders. Accordingly, the Compensation Committee considers stock option and RSU grants to be an important aspect in compensating and providing incentives to management. The Compensation Committee sets annual grants as part of its and the independent members of the board’s annual compensation review process. The Compensation Committee determined the number of shares underlying each stock option or RSU grant based upon the executive officer’s  

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and the Company’s performance, the executive officer’s role and responsibilities, the executive officer’s base salary, comparison with comparable awards to individuals in similar positions in our industry using the survey data described above and previously determined stock grant guidelines for all employees.

In February 2016, the Compensation Committee approved grants of stock options and RSUs to our executive officers in connection with the evaluation of our executive officers’ 2015 performance by the Compensation Committee and the independent members of our board. Option grants ranging from 10,520 to 61,700 shares were made to our executive officers other than Ms. Popovits, and a grant of an option to purchase 153,860 shares of our common stock was made to Ms. Popovits. The Compensation Committee also granted to our executive officers other than Ms. Popovits RSUs to acquire between 5,280 and 10,550 shares of our common stock, and granted RSUs to acquire 26,300 shares of our common stock to Ms. Popovits. In addition , in April 2016, the Compensation Committee approved performance-based criteria relating to grants of 75,531 stock options and 11,720 RSUs to Ms. Popovits which were subject to our standard time‑based vesting of options and RSUs.  Vesting of these grants was subject to the achievement by the Company of a specified level of product revenue in 2016. The performance-based criteria was not met and, accordingly, those stock options and RSUs were cancelled.

In February 2017, the Compensation Committee approved grants of stock options and RSUs to our executive officers in connection with the evaluation of our executive officers’ 2016 performance by the Compensation Committee and the independent members of our board. Option grants ranging from 12,170 to 56,120 shares were made to our executive officers other than Ms. Popovits, and a grant of an option to purchase 191,500 shares of our common stock was made to Ms. Popovits. The Compensation Committee also granted to our executive officers other than Ms. Popovits RSUs to acquire between 5,290 and 11,440 shares of our common stock, and granted RSUs to acquire 27,760 shares of our common stock to Ms. Popovits.

Other Compensation.   All of our full‑time employees, including our executive officers, may participate in our health programs, such as medical, dental and vision care coverage, and our 401(k) and life and disability insurance programs.

Compensation Committee Report

The following report of the Compensation Committee shall not be deemed to be “soliciting material” or “filed” with the SEC or to be incorporated by reference into any other filing by Genomic Health under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate it by reference into a document filed under those Acts.

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with our management. Based on its review and those discussions, the Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference into our Annual Report on Form 10‑K for the year ended December 31, 2016.

 

 

 

Compensation Committee

 

Felix J. Baker, Ph.D.

 

Fred E. Cohen, M.D., D.Phil.

 

Henry J. Fuchs, M.D.

 

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Named Executive Officers

The tables that follow provide compensation information for our named executive officers.

Summary Compensation Table

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

 

    

 

    

Non-Equity

    

 

 

 

 

 

 

 

Stock

 

Option

 

Incentive Plan

 

 

 

 

 

 

Salary

 

Awards

 

Awards

 

Compensation

 

Total

Name and Principal Position

 

Year

 

($)

 

($)(1)

 

($)(1)

 

($)(2)

 

($)

Kimberly J. Popovits

 

2016

 

686,400

 

710,100

 

1,812,668

 

642,470

 

3,851,638

President and Chief Executive

 

2015

 

686,400

 

 

 

297,900

 

984,300

Officer

 

2014

 

660,000

 

467,040

 

1,441,622

 

462,800

 

3,031,462

G. Bradley Cole(3)

 

2016

 

520,000

 

284,850

 

726,905

 

297,440

 

1,829,195

Chief Operating Officer and

 

2015

 

520,000

 

280,080

 

753,523

 

132,600

 

1,686,203

Chief Financial Officer

 

2014

 

500,000

 

248,059

 

613,555

 

206,300

 

1,567,914

Frederic Pla, Ph.D.(4)

 

2016

 

500,000

 

284,850

 

726,905

 

286,000

 

1,797,755

Chief Business and Product

 

2015

 

500,000

 

374,997

 

1,124,988

 

127,500

 

2,127,485

Development Officer

 

 

 

 

 

 

 

 

 

 

 

 

Steven Shak, M.D.(5)

 

2016

 

489,300

 

224,370

 

545,238

 

279,880

 

1,538,788

Chief Scientific Officer

 

2015

 

489,300

 

264,520

 

679,567

 

124,800

 

1,558,187

 

 

2014

 

475,000

 

212,920

 

512,497

 

195,900

 

1,396,317

James Vaughn(6)

 

2016

 

400,000

 

284,850

 

726,905

 

228,800

 

1,640,555

Chief Commercial Officer

 

2015

 

400,000

 

233,400

 

611,609

 

102,000

 

1,347,009


(1)

Represents the aggregate fair value of stock and option awards computed as of the grant date of each RSU or option in accordance with the FASB ASC Topic 718, rather than amounts paid to or realized by the named individual. There can be no assurance that options will be exercised (in which case no value will be realized by the individual), that the value on exercise of options will approximate the compensation expense we recognized, or that the price of our common stock when RSUs vest will equal or exceed the price of our common stock on the date of the applicable RSU award.

(2)

Represents bonuses paid pursuant to our cash bonus plan for each of the years 2015, 2014 and 2013. These amounts are not reported in a separately identified bonus column because payments are tied to achievement of corporate bonus goals.

(3)

Mr. Cole was appointed our Chief Financial Officer on June 13, 2014.

(4)

Dr. Pla joined Genomic Health on January 1, 2015.

(5)

Dr. Shak served as our Executive Vice President of Research and Development until December 31, 2014, when he became our Chief Scientific Officer.

(6)

Mr. Vaughn served as our Senior Vice President, Worldwide Commercial until December 31, 2014 when he became our Chief Commercial Officer.

18


 

Grants of Plan‑based Awards—2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All Other

 

All Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock

 

Option

 

 

 

Grant Date

 

 

 

 

 

 

 

 

 

 

Awards:

 

Awards:

 

Exercise

 

Fair Value

 

 

 

 

Estimated Future Payouts

 

Number

 

Number of

 

or Base

 

of Stock

 

 

 

 

Under Non‑Equity Incentive

 

of Shares

 

Securities

 

Price of

 

and

 

 

 

 

Plan Awards(1)

 

of Stock

 

Underlying

 

Option

 

Option

 

 

Grant

 

Threshold

 

Target

 

Maximum

 

or Units

 

Options

 

Awards

 

Awards

Name

    

Date

    

($)

    

($)

    

($)

    

(#)(2)

    

(#)(3)

    

($/Sh)

    

($)(4)

Kimberly J. Popovits

 

2/16/16

 

 

 

 

26,300

 

 

 

710,100

 

 

2/16/16

 

 

 

 

 

153,860

 

27.00

 

1,812,668

 

 

4/26/16

(5)

 

 

 

11,720

 

 

 

329,215

 

 

4/26/16

(5)

 

 

 

 

75,531

 

31.12

 

876,052

 

 

 

 —

 

617,760

 

1,099,613

 

 

 

 

G. Bradley Cole

 

2/16/16

 

 

 

 

10,550

 

 

 

284,850

 

 

2/16/16

 

 

 

 

 

61,700

 

27.00

 

726,905

 

 

 

 —

 

286,000

 

509,080

 

 

 

 

Frederic Pla, Ph.D.

 

2/16/16

 

 

 

 

10,550

 

 

 

284,850

 

 

2/16/16

 

 

 

 

 

61,700

 

27.00

 

726,905

 

 

 

 —

 

275,000

 

489,500

 

 

 

 

Steven Shak, M.D.

 

2/16/16

 

 

 

 

8,310

 

 

 

224,370

 

 

2/16/16

 

 

 

 

 

46,280

 

27.00

 

545,238

 

 

 

 —

 

269,115

 

479,025

 

 

 

 

James Vaughn

 

2/16/16

 

 

 

 

10,550

 

 

 

284,850

 

 

2/16/16

 

 

 

 

 

61,700

 

27.00

 

726,905

 

 

 

 —

 

220,000

 

391,600

 

 

 

 


(1)

The maximum represents the potential payout if certain pre‑established performance objectives are exceeded. The potential for actual awards under the plan could either exceed or be less than the funding target. Amounts are not guaranteed and are determined at the discretion of the independent members of the board of directors, which may consider an individual’s performance during the period. For additional information, please refer to “Compensation Discussion and Analysis.” Actual bonus plan payouts are reflected in the Non‑Equity Incentive Plan Compensation column of the Summary Compensation Table.

(2)

RSUs vest over a three year period with one third of the shares vesting on each of February 15, 2017, 2018 and 2019.

(3)

Options vest over a four year period, becoming exercisable as to 25% of the shares on the first anniversary of the grant date with the remaining shares vesting monthly thereafter over the following 36 months. The options have a term of ten years, subject to earlier termination in specified events related to termination of employment.

(4)

Represents the aggregate fair value of stock and option awards computed as of the grant date of each RSU or option award in accordance with the FASB ASC Topic 718, rather than amounts paid to or realized by the named individual. There can be no assurance that options will be exercised (in which case no value will be realized by the individual), that the value on exercise of options will approximate the compensation expense we recognized, or that the price of our common stock when RSUs vest will equal or exceed the price of our common stock on the date of the applicable RSU award.

(5)

Performance‑based awards, subject to the achievement by the Company of a specified level of product revenue in 2016. As of December 31, 2016, the achievement of the performance criteria was estimated to be remote and the awards were cancelled.

19


 

Outstanding Equity Awards at Fiscal Year‑End

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards(1)

 

Stock Awards

 

 

Number of

 

Number of

 

 

 

 

 

Number of

 

Market Value

 

 

Securities

 

Securities

 

 

 

 

 

Shares or

 

of Shares or

 

 

Underlying

 

Underlying

 

 

 

 

 

Units of

 

Units of

 

 

Unexercised

 

Unexercised

 

Option

 

 

 

Stock That

 

Stock That

 

 

Options—

 

Options—

 

Exercise

 

Option

 

Have Not

 

Have Not

 

 

Exercisable

 

Unexercisable

 

Price

 

Expiration

 

Vested

 

Vested

Name

    

(#)

    

(#)

    

($)

    

Date

    

(#)

    

($)(5)

Kimberly J. Popovits

 

7,900

 

 

23.31

 

12/06/17

 

 

 

 

60,000

 

 

17.33

 

12/04/18

 

 

 

 

125,000

 

 

17.18

 

02/18/20

 

 

 

 

90,000

 

 

22.98

 

01/27/21

 

 

 

 

90,000

 

 

29.34

 

02/03/22

 

 

 

 

66,093

 

1,407

 

28.05

 

01/31/23

 

 

 

 

72,916

 

27,084

 

30.84

 

01/28/24

 

 

 

 

 

153,860

 

27.00

 

02/16/26

 

 

 

 

 

 

 

 

4,334

(2)

127,376

 

 

 

 

 

 

26,300

(4)

772,957

G. Bradley Cole

 

15,710

 

 

23.31

 

12/06/17

 

 

 

 

50,000

 

 

17.33

 

12/04/18

 

 

 

 

65,000

 

 

17.18

 

02/18/20

 

 

 

 

60,000

 

 

22.98

 

01/27/21

 

 

 

 

60,000

 

 

29.34

 

02/03/22

 

 

 

 

44,062

 

938

 

28.05

 

01/31/23

 

 

 

 

31,033

 

11,527

 

30.84

 

01/28/24

 

 

 

 

25,208

 

29,792

 

31.12

 

02/13/25

 

 

 

 

 

61,700

 

27.00

 

02/16/26

 

 

 

 

 

 

 

 

2,140

(2)

62,895

 

 

 

 

 

 

6,000

(3)

176,340

 

 

 

 

 

 

10,550

(4)

310,065

Frederic Pla, Ph.D.

 

38,413

 

41,754

 

31.98

 

01/01/25

 

 

 

 

 

61,700

 

27.00

 

02/16/26

 

 

 

 

 

 

 

 

7,818

(3)

229,771

 

 

 

 

 

 

10,550

(4)

310,065

Steven Shak, M.D.

 

30,000

 

 

23.31

 

12/06/17

 

 

 

 

40,000

 

 

17.33

 

12/04/18

 

 

 

 

55,000

 

 

17.18

 

02/18/20

 

 

 

 

40,000

 

 

22.98

 

01/27/21

 

 

 

 

50,000

 

 

29.34

 

02/03/22

 

 

 

 

36,718

 

782

 

28.05

 

01/31/23

 

 

 

 

25,921

 

9,629

 

30.84

 

01/28/24

 

 

 

 

22,916

 

27,084

 

31.12

 

02/13/25

 

 

 

 

 

46,280

 

27.00

 

02/16/26

 

 

 

 

 

 

 

 

 

 

 

1,787

(2)

52,520

 

 

 

 

 

 

5,667

(3)

166,553

 

 

 

 

 

 

8,310

(4)

244,231

James Vaughn

 

6,500

 

 

23.31

 

12/06/17

 

 

 

 

7,000

 

 

17.33

 

12/04/18

 

 

 

 

10,000

 

 

17.18

 

02/18/20

 

 

 

 

9,000

 

 

22.98

 

01/27/21

 

 

 

 

12,000

 

 

29.34

 

02/03/22

 

 

 

 

19,583

 

417

 

28.05

 

01/31/23

 

 

 

 

13,205

 

4,905

 

30.84

 

01/28/24

 

 

 

 

20,625

 

24,375

 

31.12

 

02/13/25

 

 

 

 

 

61,700

 

27.00

 

02/16/26

 

 

 

 

 

 

 

 

2,730

(2)

80,235

 

 

 

 

 

 

5,000

(3)

146,950

 

 

 

 

 

 

10,550

(4)

310,065


20


 

(1)

Options vest over a four year period, becoming exercisable as to 25% of the shares on the first anniversary of the grant date with the remaining shares vesting monthly thereafter over the following 36 months and have a term of ten years, subject to earlier termination in specified events related to termination of employment. The option exercise price is equal to the fair market value of our common stock on the date of grant.

(2)

RSUs vest on February 15, 2017.

(3)

RSUs vest as to one half of the shares on each of February 15, 2017 and 2018.

(4)

RSUs vest as to one third of the shares on each of February 15, 2017, 2018 and 2019.

(5)

Market value is based on the market price of our common stock on December 31, 2016.

Option Exercises and Stock Vested—2016

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

Stock Awards

 

 

Number of Shares

 

 

 

Number of Shares

 

 

 

 

Acquired on

 

Value Realized on

 

Acquired on

 

Value Realized on

Name

 

Exercise (#)

 

Exercise ($)(1)

 

Vesting (#)

 

Vesting ($)(2)

Kimberly J. Popovits

    

15,313

    

143,840

    

8,549

    

226,805

G. Bradley Cole

 

46,290

 

401,121

 

8,061

 

213,858

Frederic Pla, Ph.D.

 

 

 

3,908

 

103,679

Steven Shak, M.D.

 

40,000

 

341,404

 

7,162

 

190,008

James Vaughn

 

6,000

 

63,798

 

8,597

 

228,078


(1)

Value realized is based on the market price of our common stock on the date of exercise minus the exercise price and does not necessarily reflect proceeds actually received by the individual.

(2)

Value realized is based on the market price of our common stock on the vesting date and does not necessarily reflect proceeds actually received by the individual.

Potential Payments Upon Change‑in‑Control and Termination

On April 2, 2015, our board of directors adopted the Genomic Health, Inc. Severance Plan for Executive Management (the “Severance Plan”), which is intended to secure the continued services, dedication, and objectivity of the executive officers without concern as to whether the officers or employees might be hindered or distracted by personal uncertainties and risks in connection with a Change of Control of our Company.  On January 31, 2017, our board of directors amended and restated the Severance Plan to clarify that substantially similar terms of the Severance Plan were also applicable to equivalent employees of our international subsidiaries.

Benefits are payable to our executive officers under the Severance Plan under “double trigger” conditions if (1) there is a Change of Control of our Company and (2) during the period beginning with the execution of a definitive agreement providing for a Change of Control within three months (or, if there is no such definitive agreement, the date of the Change of Control), and ending one year after the Change of Control (plus any applicable cure period) (the “Termination Period”), the participant’s employment is terminated (a) by the participant’s employer other than for Cause or disability, or (b) by the participant for Good Reason, as these various terms are defined in the Severance Plan (a

21


 

“Qualifying Termination”). The benefits so payable consist of the following (in addition to amounts accrued but unpaid at the time of termination and payable by law or pursuant to applicable documents):

 

 

Chief Executive Officer

A single lump sum payment equal to 200% of annual base salary

 

24 months of premiums of the participant’s medical, dental, and vision benefits

 

100% accelerated vesting of the participant’s outstanding equity awards (other than awards subject to performance‑based vesting)

Executive and Senior Vice Presidents and equivalents

A single lump sum payment equal to 150% of annual base salary

 

18 months of premiums of the participant’s medical, dental, and vision benefits

 

100% accelerated vesting of the participant’s outstanding equity awards (other than awards subject to performance‑based vesting)

Vice Presidents and equivalents

A single lump sum payment equal to 100% of annual base salary

 

12 months of premiums of the participant’s medical, dental, and vision benefits

 

100% accelerated vesting of the participant’s outstanding equity awards (other than awards subject to performance‑based vesting)

 

The foregoing amounts are reduced by any other severance payments executive management are entitled to receive.

Among other definitions, the Severance Plan includes the following:

·

“Change of Control” means the occurrence of any one of the following events (subject to certain customary exceptions):

·

A change in the composition of our board of directors as a result of which fewer than half of the incumbent directors have either (1) been directors of the Company 24 months prior to the Change of Control or (2) were elected or nominated by a majority of the directors serving 24 months prior to the Change of Control.

·

The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if persons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization own immediately after such merger, consolidation or other reorganization a majority of the voting power of the outstanding securities of (1) the continuing or surviving entity and (2) any direct or indirect parent corporation of such continuing or surviving entity.

·

The sale, transfer or other disposition of all or substantially all of the Company’s assets.

·

If any person (excluding affiliates of Julian C. Baker and Felix J. Baker) by the acquisition or aggregation of securities, becomes the “beneficial owner” (as defined in Rule 13d‑3 under the Securities Exchange Act of 1934), directly or indirectly, of securities representing a majority of the voting power of the Company.

·

“Company” means Genomic Health, Inc., a Delaware corporation, and any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by operation of law, or otherwise.

22


 

·

“Cause” means (1) the willful and deliberate failure by a participant to perform his or her duties and responsibilities (other than as a result of incapacity due to physical or mental illness) which is not remedied in a reasonable period of time after receipt of written notice from the Company specifying such failure, (2) willful misconduct by a participant which is demonstrably and materially injurious to the business or reputation of the Company or any of its Subsidiaries, or (3) a participant’s conviction of, or plea of guilty or nolo contendere to, a felony or other crime involving moral turpitude.

·

“Good Reason” means the occurrence of any of the following which occurs during the Termination Period without the participant’s express written consent: (1) material diminution in the participant’s authority, duties or responsibilities, causing the participant’s position to be of materially lesser rank or responsibility within the Company; (2) a material decrease in the participant’s Base Salary, (3) the relocation of the participant’s principal location of work to a location that is in excess of fifty (50) miles from such location immediately prior to the Termination Period, or (4) the successor company does not assume the Company’s obligations under the Severance Plan.

·

A participant’s Qualifying Termination shall not be considered to be for Good Reason unless (1) within ninety (90) days after the initial existence of the applicable event or condition that is purported to give rise to a basis for termination for Good Reason, the participant provides written notice of the existence of such event or condition to the Company or employing Subsidiary,  (2) such event or condition is not cured within thirty (30) days after the date of the written notice from the participant to the Company or employing Subsidiary, and (3) the participant terminates employment no later than thirty (30) days after the expiration of the applicable cure period.

Benefits are subject to withholding and other potential requirements of applicable income tax law. Participants are not entitled to any tax “gross up” in respect of excise taxes, if any, that might arise under the “golden parachute” sections of the federal income tax law (Section 280G of the Internal Revenue Code), and may be subject to a reduction in benefits if any such excise tax were applicable and the reduced benefit would maximize the after‑tax payment to the participant.

The following table shows the hypothetical amounts of cash severance payments and benefits and the value of accelerated vesting of equity awards (other than awards subject to performance‑based vesting) for each of the named executive officers under the Severance Plan had a Change of Control of our Company occurred on December 31, 2016, with a price per share equal to $29.39, the closing market price as of that date, and each executive officer’s employment was terminated without Cause or for Good Reason immediately thereafter (based on salary and other compensation arrangements in effect on March 31, 2017).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

 

 

    

Hypothetical

    

 

 

 

 

Hypothetical Cash

 

 

 

 

“Spread” of

 

 

 

 

 

Severance Payment

 

 

 

 

Accelerated Vesting

 

 

 

 

 

in respect of Salary

 

Hypothetical Value

 

of Equity Awards in

 

Total Hypothetical

Named Executive Officer

 

and Bonus ($)