NOTICE OF 2020 ANNUAL MEETING AND
PROXY STATEMENT
ANNUAL MEETING
Friday, May 15, 2020
11:00 a.m. at Seattle Genetics
Corporate Headquarters Building 3
21823 – 30th Drive SE
Bothell, Washington 98021 seattle genetics
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒þ Filed by a Party other than the Registrant ☐¨
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Preliminary Proxy Statement |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material |
SEATTLE GENETICS, INC.
(Name of Registrant as Specified Inin Its Charter)
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
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NOTICE OF 2020 ANNUAL MEETING AND
PROXY STATEMENT
ANNUAL MEETING
Friday, May 15, 2020
11:00 a.m. at Seattle Genetics
Corporate Headquarters Building 3
21823 – 30th Drive SE
Bothell, Washington 98021 seattle genetics
Dear Fellow Shareholders:
Seattle Genetics had a remarkable year in 2019 and entered 2020 as a multi-product oncology company. First, in collaboration with our partner Takeda, ADCETRIS® global sales exceeded $1 billion for the first time. ADCETRIS is an important medicine around the world for the treatment of patients with certain types of lymphoma. Second, we and our collaborator Astellas received FDA accelerated approval of PADCEVTM (enfortumab vedotin-ejfv) for adult patients with previously treated locally advanced or metastatic urothelial cancer, potentially changing the treatment paradigm for these patients with a high unmet need. The approval expanded our commercial portfolio and will diversify our revenues from product sales, adding to a strong ADCETRIS base. And third, we reported positive results from our tucatinibHER2CLIMB-01 pivotal trial, which supported marketing applications in the United States, Europe and other countries to treat patients with metastatic HER2-positive breast cancer. These submissions position tucatinib to be our third commercial product, if approved, and allow us to offer a new treatment option to thousands of patients globally who are in need of better therapies. In addition, we believe ADCETRIS, PADCEV and tucatinib have other therapeutic opportunities and are investing in broad development programs.
We also continue to invest in research and development as it is the engine for our future growth. We are advancing a robust pipeline of new product candidates in clinical trials, with a focus onfirst-in-class orbest-in-class targeted therapies for cancer. The investment and execution of our strategy to develop and bring innovative therapies to market benefit patients and are the foundation for a sustainable business that we believe will result in long-term shareholder value.
In 2019, we augmented our investor relations activities with a proactive shareholder engagement effort focused on corporate governance and executive compensation. Our discussions and the feedback we received from investors provided valuable information for senior management and our Board of Directors in their planning and decision making. The discussions led to several changes to our executive compensation and corporate governance practices, which are described in this proxy statement. We look forward to continuing this valuable dialogue.
We hope that you will participate in the Annual Meeting, either by attending and voting in person or by voting via the internet, by telephone or by mail as described in this proxy statement as promptly as possible. Your vote is important.
| Sincerely, | ||
 | Clay B. Siegall, Ph.D. Chairman, President and Chief Executive Officer April 2, 2020 | |
2020 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS | ||||||||||
| Meeting Date: | May 15, 2020 | Meeting Place:* | Seattle Genetics, Inc. Building 3, 21823 – 30th Drive SE Bothell, WA 98021 | |||||||
 | Meeting Time: | 11:00 a.m. (Pacific) | ||||||||
| Record Date: | March 19, 2020 | |||||||||
VOTING METHODS
Your vote at the Annual Meeting and at any adjournment or postponement thereof.
 |  |  | ||
| Via the Internet: | Call Toll-Free: | Mail Signed Proxy Card | ||
| www.envisionreports.com/SGEN | 1-800-652-VOTE (8683) | Using the Provided Postage-Paid Envelope | ||
If you are a beneficial owner of shares held through a broker, bank or other owner of record, you must follow the telephone or by sending in your proxy card or voting instruction form, but then decide to attendinstructions you receive from the Annual Meetingowner of record to vote your shares in person, you may still do so. Your proxy is revocable in accordance withshares.
MEETING AGENDA
The purposes of the procedures describedmeeting are to:
| 1. | Elect the three nominees for Class I director named in the accompanying proxy statement to hold office until Seattle Genetics’ 2023 Annual Meeting of Shareholders. |
| 2. | Approve, on an advisory basis, the compensation of Seattle Genetics’ named executive officers as disclosed in the accompanying proxy statement. |
| 3. | Approve the amendment and restatement of the Seattle Genetics, Inc. Amended and Restated 2007 Equity Incentive Plan to, among other things, increase the aggregate number of shares of common stock authorized for issuance thereunder by 6,000,000 shares. |
| 4. | Ratify the appointment of PricewaterhouseCoopers LLP as Seattle Genetics’ independent registered public accounting firm for the fiscal year ending December 31, 2020. |
| 5. | Transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof. |
You can find more information about each of these items, including the nominees for directors, in the accompanying proxy statement. Please note that if your shares are held in an account by your broker, bank, or other nominee and you wish to vote at the Annual Meeting, you must notify your broker, bank or other nominee and obtain the proper documentation.
| By Order of the Board of Directors, | |||
 | Jean I. Liu CORPORATE SECRETARY APRIL 2, 2020 | ||
*We are monitoring the emerging public health impact of the coronavirus outbreak (COVID-19). The health andwell-being of our employees and shareholders are paramount. If public health developments warrant, we may need to change the location of the Annual Meeting or switch to a virtual meeting format. Any such change will be announced via press release and the filing of additional soliciting materials with the SEC.
YOUR VOTE IS IMPORTANT TO US.
PLEASE EXERCISE YOUR SHAREHOLDER RIGHT TO VOTE.
| Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on May 15, 2019: The proxy statement and annual report to shareholders are available at http://www.edocumentview.com/SGEN. | ||||||||
| PROXY STATEMENT SUMMARY | 1 | |||
PROPOSAL NO. 1 | 8 | |||
| NOMINEES FOR THE BOARD OF DIRECTORS AND CONTINUING DIRECTORS | 9 | |||
| CORPORATE GOVERNANCE | 14 | |||
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Prohibitions on Hedging, Pledging and Short-Term Speculative Trading | 22 | |||
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| DIRECTOR COMPENSATION | 24 | |||
| EXECUTIVE OFFICERS | 28 | |||
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| PROPOSAL NO. 2 | ||||
| ADVISORY VOTE ON EXECUTIVE COMPENSATION | 29 | |||
| COMPENSATION OF EXECUTIVE OFFICERS | 30 | |||
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The following summary highlights certain information contained elsewhere in Building 3 at 21823 – 30
2020 MEETING INFORMATION | ||||||||||
| Meeting Date: | May 15, 2020 | Meeting Place: | Seattle Genetics, Inc. Building 3, 21823 – 30th Drive SE Bothell, WA 98021 | |||||||
| Meeting Time: | 11:00 a.m. (Pacific) | |||||||||
| Record Date: | March 19, 2020 | |||||||||
VOTING MATTERS
Proposals | Board Vote Recommendation | See Page Number for More Detail | ||||
PROPOSAL NO. 1 | Election of Class I directors | FOR EACH | Page 8 | |||
PROPOSAL NO. 2 | Advisory vote on the compensation of our named executive officers | FOR | Page 29 | |||
PROPOSAL NO. 3 | Amendment and restatement of the Seattle Genetics, Inc. Amended and Restated 2007 Equity Incentive Plan, or the 2007 Equity Plan, to, among other things, increase the aggregate number of shares of common stock authorized for issuance thereunder by 6,000,000 shares | FOR | Page 75 | |||
PROPOSAL NO. 4 | Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm | FOR | Page 86 | |||
Our proxy materials, which include this proxy statement and our 20182019 annual report, are first being mailed or made available to stockholdersshareholders on or about April 5,2, 2020.
COMPANY OVERVIEW
Seattle Genetics is a global, multi-product biotechnology company that discovers, develops and commercializes transformative medicines targeting cancer to make a meaningful difference in people’s lives. We are commercializing ADCETRIS® for the treatment of several types of CD30-expressing lymphomas and PADCEVTM for the treatment of certain metastatic urothelial cancers. In addition, we have submitted marketing applications for tucatinib, our small molecule tyrosine kinase inhibitor, for patients with metastatic HER2-positive breast cancer. We are also advancing a pipeline of novel therapies for solid tumors and blood-related cancers designed to address unmet medical needs and improve treatment outcomes for patients. Many of our programs, including ADCETRIS and PADCEV, are based on our proprietary antibody-drug conjugate, or ADC, technology that utilizes the targeting ability of monoclonal antibodies to deliver cell-killing agents directly to cancer cells.
| 2020 PROXY STATEMENT | 1 | |||||||
PROXY STATEMENT SUMMARY | ||||
BUSINESS HIGHLIGHTS 2019 was a transformational year during which Seattle Genetics achieved record revenues driven by continued growth of ADCETRIS product sales, increasing royalty revenues and significant progress by our collaborators that triggered several milestone payments. ADCETRIS product sales in the U.S. and Canada were $628 million in 2019, an increase of 32% over 2018, and more than double product sales in 2017. In 2020, we expect continued net sales growth of ADCETRIS, and are continuing to invest in clinical trials to further expand this important global brand. We also realized our goal of becoming a multi-product company. In December 2019, approximately three months before the target action date, we and our partner Astellas received FDA accelerated approval of PADCEV for the treatment of previously treated metastatic urothelial cancer. Prior to approval, these patients had limited treatment options. We are also conducting additional trials to potentially expand PADCEV’s use to first-line metastatic disease and to earlier stages of bladder cancer as well as outside of bladder cancer in a range of other solid tumors. PADCEV received Breakthrough Therapy designation, or BTD, from the FDA for previously treated metastatic urothelial cancer prior to its approval and more recently received BTD for its use in combination with Merck’s Keytruda® in the first-line setting. Additionally, in late 2019 and early 2020, we submitted marketing applications for tucatinib in the United States, Europe and other countries for the treatment of patients with metastatic HER2-positive breast cancer based on positive results from the HER2CLIMB-01 trial. The results demonstrated that the tucatinib-containing regimen improved progression-free survival, or PFS, |
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overall survival and PFS in patients with brain metastases, along with a manageable safety profile in patients with previously treated locally advanced or metastatic HER2-positive breast cancer. TheHER2CLIMB-01 data supported BTD from the FDA and the PDUFA target action date is August 20, 2020. This positions tucatinib to be our third commercial product, if approved. We are also conducting a broad tucatinib development program, including the phase 3HER2CLIMB-02 trial for first- or second-line metastatic HER2-positive breast cancer and a potentially pivotal phase 2 trial in metastatic HER2-positive colorectal cancer.
We also continue to advance our pipeline, and in 2019 we and our partner Genmab completed enrollment in a pivotal trial of tisotumab vedotin for patients with metastatic cervical cancer. We expect to report topline data in the first half of 2020 that, if positive, could support an accelerated approval pathway with the FDA.
We continue to invest in the development of our earlier-stage pipeline with ongoing clinical trials and advancement of several new product candidates into clinical development in 2019. ThisWe have also licensed our ADC technology to other companies, which generates milestone payments and royalties to us. In 2019 and early 2020, Genentech/Roche received approval in the U.S. and the European Union for their product PolivyTM, an ADC using our technology, in the U.S. and the European Union for which we receive royalties on global sales.
As we enter 2020, we are well-positioned to continue our progress. And, while the global impact of the COVID-19 pandemic is evolving, we remain committed to delivering innovative medicines that improve outcomes for people living with cancer.
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PROXY STATEMENT SUMMARY | ||||
BOARD OF DIRECTORS AND NOMINEES SNAPSHOT | ||||||||||||||
The names of the nominees and of the directors whose terms of office will continue after the Annual Meeting, their ages as of April 2, 2020, and certain other information about them are set forth below. For more detailed information about the background of each of our directors, please see “Nominees for the Board of Directors and Continuing Directors”, below. | ||||||||||||||
Director Nominee | Age | Director Since | Term Expires | Principal Occupation | Audit | Compensation | Nominating & Corporate Governance | |||||||
David W. Gryska | 64 | 2005 | 2020 | Former Executive Vice President and Chief Financial Officer of Incyte Corporation | ¡ | |||||||||
John A. Orwin | 55 | 2014 | 2020 | President and Chief Executive Officer of Atreca, Inc. | ● | ● | ||||||||
Alpna H. Seth, Ph.D. | 56 | 2018 | 2020 | Chief Executive Officer and President of Proneurotech Inc. | ● | |||||||||
Director | ||||||||||||||
Felix J. Baker, Ph.D. Lead Independent Director | 51 | 2003 | 2021 | Founder andCo-Managing Member of Baker Bros. Advisors LP | ¡ | ● | ||||||||
Srinivas Akkaraju, M.D., Ph.D. | 52 | 2003 | 2022 | Founder and Managing General Partner of Samsara BioCapital | ||||||||||
Marc E. Lippman, M.D. | 75 | 2000 | 2022 | Professor of Oncology at Georgetown University Medical Center’s Lombardi Comprehensive Cancer Center | ● | |||||||||
Clay B. Siegall, Ph.D. | 59 | 1997 | 2021 | President, Chief Executive Officer and Chairman of the Board of Seattle Genetics, Inc. | ||||||||||
Nancy A. Simonian, M.D. | 59 | 2012 | 2021 | Chief Executive Officer of Syros Pharmaceuticals, Inc. | ¡ | |||||||||
Daniel G. Welch | 62 | 2007 | 2022 | Former Chairman, Chief Executive Officer and President of InterMune, Inc. | ● | |||||||||
¡ = Committee Chair | ||||||||||||||
BOARD COMPOSITION
| 2020 PROXY STATEMENT | 3 | |||||||
PROXY STATEMENT SUMMARY | ||||
GOVERNANCE HIGHLIGHTS
Our Board of Directors is committed to building long-term shareholder value and maintaining sound corporate governance practices. We highlight some of our corporate governance practices below.
Number of directors | 9 | |||
Percentage of directors who are independent | 89% | |||
Directors who attended at least 75% of board and committee meetings | ALL | |||
Strong and active lead independent director | ✓ | |||
100% independent audit, compensation and nominating and corporate governance committees | ✓ | |||
Board and committees may engage outside advisors independent of management | ✓ | |||
Annual Board self-evaluations | ✓ | |||
Active shareholder engagement program | ✓ | |||
Corporate governance guidelines | ✓ | |||
Majority voting in uncontested elections | ✓ | |||
Corporate governance guidelines formalize the consideration of diversity factors for director nominees | ✓ | |||
All employees, officers and directors must adhere to a Code of Conduct and Business Ethics | ✓ | |||
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PROXY STATEMENT SUMMARY | ||||
SHAREHOLDER ENGAGEMENT
In 2019, we conducted a proactive shareholder outreach program to solicit feedback and better understand investor perspectives on operational, governance and executive compensation matters. We held discussions with a number of our shareholders in the spring before the Annual Meeting and once again in late fall. Our cross-functional team that participated in these discussions to address investors’ specific focus areas included executives from our Investor Relations, Human Resources and Legal departments as well as our Chief Financial Officer. In addition, Dr. Baker, our Lead Independent Director, who also serves as Chair of the Compensation Committee, participated in some of these discussions. Feedback from these engagement activities was shared with management and our Board of Directors to inform our goal of aligning Company interests with those of our shareholders. Investor feedback is important to us, and we are committed to continuing to engage with our shareholders in the future to understand and consider their views.
2019 SHAREHOLDER ENGAGEMENT EFFORT
SHAREHOLDER FEEDBACK
In 2019, these discussions covered a wide range of topics, including:
OUTCOMES OF ENGAGEMENT
The feedback from thesay-on-pay vote and discussions with shareholders led to changes in 2019 to our executive compensation program and corporate governance practices, as described below.
| Executive Compensation | • Incorporated performance-based equity awards into our CEO’s long-term incentive program • Adopted a clawback policy for executives • Enhanced our scrutiny ofpay-for-performance alignment in making compensation decisions | |
| Corporate Governance | • Adopted majority vote standard in uncontested director elections • Revised our policy on outside board commitments • Enhanced the authority and responsibilities of our lead independent director • Increased our disclosure on diversity at the Company • Enhanced the information provided in our proxy statement | |
| 2020 PROXY STATEMENT | 5 | |||||||
PROXY STATEMENT SUMMARY | ||||
2019 COMPENSATION HIGHLIGHTS
We endeavor to maintain sound executive compensation policies and practices consistent with our executive compensation philosophy. The following table highlights some of our executive compensation policies and practices, which are structured to drive performance and align our executives’ interests with our shareholders’ long-term interests. For more detailed information, please see the discussion under “Compensation Discussion and Analysis—Our Executive Compensation Practices.”
| WHAT WE DO | WHAT WE DON’T DO | |||||||||
| Pay for Performance |
| No Special Health or Welfare Benefits for Executives | |||||||
| Significant Portion of Compensation is at Risk |
| No Post-Employment TaxGross-Ups | |||||||
| Double-Trigger Vesting |
| Prohibition on Hedging and Pledging | |||||||
| Independent Compensation Committee |
| No Stock Option Repricing | |||||||
| Independent Compensation Advisor Reports Directly to the Compensation Committee | |||||||||
| Annual Market Review of Executive Compensation | |||||||||
| Stock Ownership Guidelines for Directors and Executive Officers | |||||||||
| Multi-Year Vesting Requirements | |||||||||
| AnnualSay-on-Pay Vote | |||||||||
| Active Shareholder Engagement Program | |||||||||
| Clawback Policy | |||||||||
| Cap on Annual Cash Bonuses | |||||||||
| Minimize Inappropriate Risk Taking | |||||||||
| Competitive Peer Group | |||||||||
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PROXY STATEMENT SUMMARY | ||||
ALIGNMENT OF CEO PAY TO TOTAL SHAREHOLDER RETURN
We design our executive compensation program to align pay with company performance, and as highlighted in the charts below, there is strong alignment between the two. The charts below compare our CEO’s total compensation and our annual total shareholder return, or TSR, over theone-year and three-year periods ended December 31, 2019 to the CEO total compensation and annual TSR of our compensation peer group over theone-year and three-year periods ended December 31, 2018, annual reportwhich are the most recent periods for which data was available to the Compensation Committee when making pay decisions in August 2019. For more information on the Internet at http://www.edocumentview.com/SGEN.
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CERTAIN DEFINED TERMS
In this proxy statement:
“We,” “us,” “our”, the “Company” and “Seattle Genetics” refer to Seattle Genetics, Inc.; and its wholly-owned subsidiaries on a consolidated basis;
“Annual Meeting” means our 20192020 Annual Meeting of Stockholders;Shareholders;
“Board of Directors” or “Board” means our Board of Directors; and
“SEC” means the Securities and Exchange Commission.
| 2020 PROXY STATEMENT | 7 | |||||||
PROPOSAL NO. 1
Our Fourth Amended and Restated Certificate of Incorporation provides that the Board of Directors is divided into three approximately equal classes with staggered three-year terms. As a result, approximately one-thirdterms, as shown in the table below:
Director Nominee
| Class
| Age*
| Position
| Director
| Current
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Expiration
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David W. Gryska | I | 64 | Director | 2005 | 2020 | 2023 | ||||||
John A. Orwin | I | 55 | Director | 2014 | 2020 | 2023 | ||||||
Alpna H. Seth, Ph.D. | I | 56 | Director | 2018 | 2020 | 2023 | ||||||
Director | ||||||||||||
Felix J. Baker, Ph.D. | II | 51 | Lead Independent Director | 2003 | 2021 | |||||||
Clay B. Siegall, Ph.D. | II | 59 | President, CEO and Chairman of the Board | 1997 | 2021 | |||||||
Nancy A. Simonian, M.D. | II | 59 | Director | 2012 | 2021 | |||||||
Srinivas Akkaraju, M.D., Ph.D. | III | 52 | Director | 2003 | 2022 | |||||||
Marc E. Lippman, M.D. | III | 75 | Director | 2000 | 2022 | |||||||
Daniel G. Welch | III | 62 | Director | 2007 | 2022 | |||||||
| * | Ages as of April 2, 2020 |
If elected at the Annual Meeting, each of the total numberabove director nominees would serve until the 2023 Annual Meeting of directors will beShareholders and until the director’s successor is elected every year.
As this is an uncontested election, each nominee for director must receive a majority of the remaining directors or by the affirmative vote of the holders of a majority of the voting power of the then outstanding shares of our voting stock, provided that newly created directorships resulting from any increasevotes cast in order to be elected, meaning the number of directors will, unless the Board determines by resolution that any such directorships shall be filled by stockholders, be filled only by a majority of the remaining directors. A director elected by the Board to fill a vacancy (including a vacancy created by an increase inshares voted “for” each nominee must exceed the number of directors) will serve for the remainder of the full term of the class of directors in which the vacancy occurred.
In addition, under our Corporate Governance Guidelines, any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election is required to submit an offer of resignation for consideration by the Nominating and Corporate Governanace Committee, or the Governance Committee if such nominee for director (in an uncontested election) receives a greater number of votes “withheld” from his or her election than votes “for” such election.Committee. In such case, the Nominating and Corporate Governance Committee will then consider all of the relevant facts and circumstances and recommend to the full Board the action to be taken with respect to such offer of resignation. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the three nominees named herein. In the event that
If any nominee should beis unavailable for election as a result ofdue to an unexpected occurrence, such shares will be voted for the election of such substitute nominees as the Nominating and Corporate Governance Committee may propose. Proxies may not be voted for a greater number of persons than the number of nominees named. Each person nominated for election has consented to being named as a nominee in this proxy statement and has agreed to serve if elected, and management has no reason to believe that any nominee will be unable to serve.
| The Board recommends a voteFOR all three of the nominees for director named above. | |
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NOMINEES FOR THE BOARD OF DIRECTORS AND CONTINUING DIRECTORS |
The names of the nominees and of the directors whose terms of office will continue after the Annual Meeting, their ages as of April NOMINEES FOR THE BOARD OF DIRECTORS AND CONTINUING DIRECTORS5, 2019,2, 2020, and certain other information about them are set forth below. The Nominating and Corporate Governance Committee seeks to assemble a Board that, as a group, provides a significant composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities. To that end, the Nominating and Corporate Governance Committee has identified and evaluated nominees in the broader context of the Board’s overall composition, with the goal of recruiting and retaining members who complement and strengthen the skills of the other members of the Board and who also exhibit integrity, collegiality, sound business judgment and other qualities that the Nominating and Corporate Governance Committee views as critical to effective functioning of the Board. The brief biographies below includeSuch information as of the date of this proxy statement, regardingincludes the specific and particular experience, qualifications, attributes or skills of each nominee and continuing director that led the Nominating and Corporate Governance Committee and the Board to believe that such nominee or continuing director should continue to serve on the Board as of the date of this proxy statement.Director Nominee Age Company Positions/Offices Director Since Term Expires Srinivas Akkaraju, M.D., Ph.D. 51 Director July 2003 2019 Marc E. Lippman, M.D. (1) 74 Director June 2000 2019 Daniel G. Welch (2) 61 Director June 2007 2019 Continuing Directors Age Company Positions/Offices Director Since Term Expires David W. Gryska (3) 63 Director March 2005 2020 John A. Orwin (2) (3) 54 Director January 2014 2020 Alpna Seth, Ph.D. (3) 55 Director March 2018 2020 Felix Baker, Ph.D. (1) (2) 50 Lead Independent Director July 2003 2021 Clay B. Siegall, Ph.D. 58 President, Chief Executive Officer and Chairman of the Board December 1997 2021 Nancy A. Simonian, M.D. (1) 58 Director March 2012 2021 _____________________
DIRECTOR NOMINEE PROFILES
DAVID W. GRYSKA INDEPENDENT | ||||||||
| KEY QUALIFICATIONS | RECENT EXPERIENCE | |||||||||
Age: 64 Director Since: Term Expires: Committees: • Audit (Chair) | ||||||||||
Mr. Gryska has years of experience as Chief Financial Officer at Incyte Corporation, Celgene Corporation, Scios, Inc., and Cardiac Pathways Corporation. He brings to the Board valuable and relevant experience as a senior financial executive at life sciences and biotechnology companies engaged in financings, global expansion and other strategic transactions. He also has extensive knowledge of accounting principles and financial reporting rules and regulations, tax compliance and oversight of the financial reporting processes of several large, publicly-traded corporations, which assists Mr. Gryska in fulfilling his duties as chair of our Audit Committee. | Incyte Corporation, a publicly-traded biopharmaceutical company • Executive Vice President and Chief Financial Officer (2014-2018; retired) Myrexis, Inc., a publicly-traded biotechnology company • Chief Operating Officer and Interim Chief Executive Officer (2012) Celgene Corporation, a publicly-traded biopharmaceutical company • Senior Vice President and Chief Financial Officer (2006-2010) OTHER PUBLIC COMPANY BOARDS • PDL BioPharma, Inc. • Aerie Pharmaceuticals, Inc. | |||||||||
| 2020 PROXY STATEMENT | 9 | |||||||
NOMINEES FOR THE BOARD OF DIRECTORS AND CONTINUING DIRECTORS |
DIRECTOR NOMINEE PROFILES
JOHN A. ORWIN INDEPENDENT | ||||||||
| KEY QUALIFICATIONS | RECENT EXPERIENCE | |||||||||
Age: 55 Director Since: Term Expires: Committees: • Compensation • Audit | ||||||||||
Mr. Orwin has many years of experience as a senior executive at leading pharmaceutical and biotechnology companies, including Atreca, Inc., Relypsa, Inc., Affymax, Inc., Genentech, Inc., and Johnson & Johnson. This gives him a strong understanding of the biotechnology industry and the challenges we must meet in order to continue developing and commercializing ADCETRIS, PADCEV and our product candidates. | Atreca, Inc., a publicly-traded biopharmaceutical company • President and Chief Executive Officer(2018-present) Relypsa, Inc., now an affiliate of Vifor Pharma AG, a Swiss-listed public company • Chief Executive Officer (2013-2017) Affymax, Inc., a biotechnology company • Board member (2011-2014) • Chief Executive Officer (2011-2013) • President and Chief Operating Officer (2010-2011) Genentech, Inc., now a member of the • Vice President and OTHER PUBLIC COMPANY BOARDS Current • Atreca, Inc. • Retrophin, Inc. Past 5 Years • Array BioPharma Inc. | |||||||||
ALPNA H. SETH, PH.D. INDEPENDENT | ||||||||
| KEY QUALIFICATIONS | RECENT EXPERIENCE | |||||||||
Age: 56 Director Since: Term Expires: Committees: • Audit | ||||||||||
Dr. Seth has over 20 years of global experience in the biotechnology industry. Having held a range of leadership roles around the globe, Dr. Seth brings a breadth of experience in drug development, commercial, international operations and general management. | Proneurotech Inc., a private biotechnology company • Chief Executive Officer and President(2019-present) Vir Biotechnology, Inc., a private biopharmaceutical company • Chief Operating Officer (2017-2019) Biogen, Inc., a publicly-traded biotechnology company • Senior Vice President and Global Head of the Biosimilars Global Business Unit (2014-2017) • Range of leadership roles in business development, drug development and commercial (1998-2014) OTHER PUBLIC COMPANY BOARDS • Bio-Techne Corporation | |||||||||
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NOMINEES FOR THE BOARD OF DIRECTORS AND CONTINUING DIRECTORS |
CONTINUING DIRECTOR PROFILES
FELIX J. BAKER, PH.D. LEAD INDEPENDENT DIRECTOR | ||||||||
| KEY QUALIFICATIONS | RECENT EXPERIENCE | |||||||
Age: 51 Director Since: Term Expires: Committees: • Compensation (Chair) • Governance | ||||||||
As a board member and investor in many successful biotechnology companies, Dr. Baker is able to draw on his experience and vision in investing in and building companies to add significant value to Board of Directors discussions and company strategy. | Baker Bros. Advisors LP, a biotechnology investment firm • Founder andCo-Managing Member(2000-present) OTHER PUBLIC COMPANY BOARDS Current • Alexion Pharmaceuticals, Inc. • Kiniksa Pharmaceuticals, Ltd. • Kodiak Sciences Inc. Past 5 Years • Synageva BioPharma Corp. • Genomic Health, Inc. | |||||||
SRINIVAS AKKARAJU, M.D., PH.D. INDEPENDENT | ||||||||
| KEY QUALIFICATIONS | RECENT EXPERIENCE | |||||||
Age: 52 Director Since: Term Expires: | ||||||||
Dr. Akkaraju has a strong scientific background coupled with extensive experience in private equity and venture capital investing from his work at J.P. Morgan, Panorama Capital, New Leaf Venture Partners, Sofinnova Ventures and Samsara BioCapital. This combination allows for Dr. Akkaraju to thoroughly understand our technology and provide strong business and strategic expertise. | Samsara BioCapital, a venture capital firm • Founder and Managing General Partner(2017-present) Sofinnova Ventures, a venture capital firm • General Partner (2013-2016) New Leaf Venture Partners, an investment firm • Managing Director (2009-2013) OTHER PUBLIC COMPANY BOARDS Current • Intercept Pharmaceuticals, Inc. • Syros Pharmaceuticals, Inc. • Aravive, Inc. Past 5 Years • Principia Biopharma, Inc. • aTyr Pharma, Inc. • ZS Pharma Inc. | |||||||
| 2020 PROXY STATEMENT | 11 | |||||||
NOMINEES FOR THE BOARD OF DIRECTORS AND CONTINUING DIRECTORS |
CONTINUING DIRECTOR PROFILES
MARC E. LIPPMAN, M.D. INDEPENDENT | ||||||||
| KEY QUALIFICATIONS | RECENT EXPERIENCE | |||||||
Age: 75 Director Since: Term Expires: Committees: • Governance | ||||||||
Dr. Lippman’s extensive experience in treating patients and conducting oncology research at the National Cancer Institute and at the medical schools of the University of Miami, the University of Michigan and Georgetown University provides an important patient perspective and focus on innovation in our development of targeted oncology therapies. | Georgetown University Medical Center’s Lombardi Comprehensive Cancer Center • Professor of Oncology (2018-present) University of Miami Leonard M. Miller School of Medicine • Kathleen and Stanley Glaser Professor of Medicine and Chairman of the Department of Medicine (2017-2018) • Deputy Director of the Sylvester Comprehensive Cancer Center (2008-2017) OTHER PUBLIC COMPANY BOARDS • None | |||||||
CLAY B. SIEGALL, PH.D. CHAIRMAN OF THE BOARD | ||||||||
| KEY QUALIFICATIONS | RECENT EXPERIENCE | |||||||
Age: 59 Director Since: Term Expires: | ||||||||
Dr. Siegall’s experience in founding and building Seattle Genetics is integral to our success and our mission. His scientific understanding along with his corporate vision and operational knowledge provide strategic insights to our Board of Directors. | Seattle Genetics, Inc. • Chairman of the Board (2004-present) • Chief Executive Officer (2002-present) • President (2000-present) • Chief Scientific Officer (1997-2002) • Co-founder (1997-present) OTHER PUBLIC COMPANY BOARDS Current • Ultragenyx Pharmaceutical Inc. Past 5 Years • Alder BioPharmaceuticals, Inc. • Mirna Therapeutics, Inc. | |||||||
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NOMINEES FOR THE BOARD OF DIRECTORS AND CONTINUING DIRECTORS |
CONTINUING DIRECTOR PROFILES
NANCY A. SIMONIAN, M.D. INDEPENDENT | ||||||||
| KEY QUALIFICATIONS | RECENT EXPERIENCE | |||||||
Age: 59 Director Since: Term Expires: Committees: • Governance (Chair) | ||||||||
As a current and former senior executive of several other biotechnology companies, including Syros Pharmaceuticals, Inc., Millennium Pharmaceuticals, Inc. and Biogen, Dr. Simonian possesses a strong understanding of the biotechnology industry and the development and commercialization of our product candidates. Her knowledge of late-stage product development, as former Chief Medical Officer of Millennium Pharmaceuticals, Inc., and her understanding of patient perspectives, as a medical doctor, bring important insights to our Board of Directors. | Syros Pharmaceuticals, Inc., a publicly-traded life sciences company • Chief Executive Officer (2012-present) Millennium Pharmaceuticals, Inc., an affiliate of The Takeda Oncology Company • Chief Medical Officer (2006-2011) OTHER PUBLIC COMPANY BOARDS Current • Evelo Biosciences • Syros Pharmaceuticals | |||||||
DANIEL G. WELCH INDEPENDENT | ||||||||
| KEY QUALIFICATIONS | RECENT EXPERIENCE | |||||||
Age: 62 Director Since: Term Expires: Committees: • Compensation | ||||||||
Mr. Welch’s global commercial background and strong senior executive experience at a wide range of biotechnology companies, including previously serving as Chairman and Chief Executive Officer of two publicly-traded biotechnology companies, InterMune, Inc. and Triangle Pharmaceuticals, Inc. gives him insight into strategy and planning for a biopharmaceutical company that is valuable to our senior management and our Board of Directors. | Sofinnova Ventures, a venture capital firm • Executive Partner (2015-2018; retired) InterMune, Inc., a publicly-traded biotechnology company • Chief Executive Officer and President(2003-2014) • Chairman of the Board (2007-2014) OTHER PUBLIC COMPANY BOARDS Current • Intercept Pharmaceuticals, Inc. • Ultragenyx Pharmaceuticals, Inc. (Chairman of the Board) Past 5 Years • Hyperion Therapeutics • Avexis, Inc. | |||||||
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Our Board of Directors is committed to building long-term shareholder value and maintaining sound corporate governance practices. In furtherance of this commitment, we regularly monitor developments in the area of corporate governance and review our processes, policies and procedures in light of such developments.
DIRECTOR INDEPENDENCE; AUDIT COMMITTEE FINANCIAL EXPERT
Our Board of Directors has determined that all of our directors are independent directors within the meaning of Rule 5605(a)(2) Current memberof the Nasdaq listing standards, except for Clay B. Siegall, our President and Chief Executive Officer. In making this determination, our Board of Directors considered Dr. Baker’s role as aCo-Managing Member of Baker Brothers Investments, and the relationship Seattle Genetics has with Baker Brothers Investments and affiliated entities as significant shareholders in making the determination that Dr. Baker is independent.
Our Board of Directors has also determined that all of the members of the Compensation Committee.
Our Board of Directors has chosen to combine the principal executive officer and Board chairman positions and, in addition, has appointed a separate lead independent director. Dr. AkkarajuSiegall has served as oneour principal executive officer and Board chairman since 2004. At the present time, the independent directors believe that Dr. Siegall’sin-depth knowledge of our operations and vision for our development make him the best-qualified director to serve as Board chairman. We believe that combining the positions of chief executive officer and Board chairman provides a single, clear chain of command to execute our strategic initiatives and business plans. In addition, we believe that a combined chief executive officer/Board chairman is better positioned to act as a bridge between management and the Board, facilitating the regular flow of information. We also believe that it is advantageous to have a Board chairman with an extensive history with and knowledge of Seattle Genetics (as is the case with our chief executive officer) as compared to an independent Board chairman with less direct involvement.
Under our Corporate Governance Guidelines, when the Board chairman also serves as our chief executive officer or as another executive officer of Seattle Genetics, the Board may designate an independent director who acts as a lead independent director. The position of lead independent director has been structured to serve as an effective balance to a combined chief executive officer/Board chairman. In addition, we believe that having a lead independent director, who is independent of management, creates an environment that is more conducive to objective evaluation and oversight of management’s performance, increasing management accountability and improving the ability of the Board of Directors to monitor whether management’s actions are in the best interests of Seattle Genetics and its shareholders. Since February 2005, Felix J. Baker has served as the lead independent director of the Board. His formal and informal duties include, among others:
providing leadership to the Board complementary to the Board chairman;
working with the Board chairman and Corporate Secretary to set the agenda for Board meetings;
serving as the principal liaison between the independent directors and the Board chairman;
calling meetings of the independent directors;
chairing meetings of independent directors without management present;
chairing Board meetings if the Board chairman is not in attendance;
if requested by shareholders, ensuring that he is available, when appropriate, for consultation and direct communication; and
reviewing and providing input on Board meeting schedules.
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In addition, as chair of our Compensation Committee, Dr. Baker provides additional oversight of management by leading the annual evaluation of the pay and performance of our chief executive officer and our other executive officers.
Our Board believes that all members of the Board must have sufficient time and attention to devote to Board duties and to otherwise fulfill the responsibilities required of directors. Over the past year, our Governance Committee reviewed institutional and proxy advisory firms’ policies on director time commitments and reviewed the policies of peers and other public companies. We also discussed this topic during investor engagements.
Based on this information, our Governance Committee and Board revised our Corporate Governance Guidelines as outlined below. All of our directors since July 2003. Dr. Akkaraju is a founder and Managing General Partner of Samsara BioCapital. Previously,are in compliance with our policy.
Director who also serves as a Section 16 executive officer of a public company | £2 public company boards in addition to our Board unless approved in advance by our Board | |
| Director who is not an Executive Officer | £4 public company boards in addition to our Board unless approved in advance by the Board | |
Non-employee directors are required to notify the Governance Committee if they:
retire from April 2013 to February 2016, Dr. Akkaraju served as a General Partner of Sofinnova Ventures. From January 2009 to April 2013, Dr. Akkaraju served as Managing Director of New Leaf Venture Partners. From August 2006 to December 2008, Dr. Akkaraju served as a Managing Directortheir executive positions at Panorama Capital, LLC, a private equity firm founded byoutside companies
change the former venture capital investment team of J.P. Morgan Partners, LLC, a private equity division of JPMorgan Chase & Co. Panorama Capital advised J.P. Morgan Partners as to its investment in Seattle Genetics. Prior to co-founding Panorama Capital, he was with J.P. Morgan Partners, which he joined in April 2001 and of which heposition they held when they became a Partner in January 2005. From October 1998 to April 2001, he was in Business and Corporate Development at Genentech, Inc. (now a member of the Roche Group),Board
join the board of a biotechnology company, most recentlyprivate or public company.
The Governance Committee will review the appropriateness of continued Board membership under the circumstances and the affected director will be expected to act in accordance with the Governance Committee’s recommendation.
In recommending to the full Board the re-election of Mr. Orwin, the members of the Governance Committee considered the Company’s policy as Senior Manager. Prior to joining Genentech, Dr. Akkaraju waswell as the policies at a graduate student at Stanford University, where he receivedfew of the Company’s major shareholders regarding the number of outside boards on which an M.D. and a Ph.D. in Immunology. He received his undergraduate degrees in Biochemistry and Computer Science from Rice University.active CEO should participate. In addition to Seattle Genetics, Dr. Akkarajuour Board, Mr. Orwin serves as a director of Intercept Pharmaceuticals, Inc., Syros Pharmaceuticals, Inc., Principia Biopharma, Inc. and Aravive, Inc., publicly-traded biotechnology companies. Previously, Dr. Akkaraju served as a director on the boards of aTyr Pharma, Inc., Barrier Therapeutics, Inc., Eyetech Pharmaceuticals, Inc., ZS Pharma Inc., Versartis, Inc., which merged with Aravive Biologics, Inc.directors of two other public companies: Retrophin and formed Aravive, Inc., and Synageva Biopharma Corp., all publicly-traded biotechnology companies, and Amarin Corporation plc, a foreign publicly-traded biotechnology company. Dr. Akkaraju has a strong scientific background coupled with extensive experience in private equity and venture capital investing from his work at J.P. Morgan, Panorama Capital, New Leaf, Sofinnova and Samsara. This combination allows for Dr. Akkaraju to thoroughly understand our technology and provide strong business and strategic expertise.
Our Governance Committee and Board believe that Mr. Orwin has demonstrated, and will continue to Alpha Omega Alpha. Dr. Lippman’s extensive experience in treating patientsdemonstrate, the ability to dedicate sufficient time to carry out his Board duties effectively and conducting oncology research at the National Cancer Institute and at the medical schools of the University of Miami, the University of Michigan and Georgetown University provides an important patient perspective and focus on innovation in our development of antibody-based therapies.
Mr. Orwin has served as oneon our Board for over six years and has assured our Board that he is fully committed to continuing to dedicate the appropriate amount of our directors since January 2014. Mr. Orwin currently serves as the President and Chief Executive Officer of Atreca, Inc., a private biotechnology company. From June 2013time to June 2017, he served as Chief Executive Officer and member of the board of Relypsa, Inc., now an affiliate of Vifor Pharma AG, a Swiss-listed public company. Prior to Relypsa, Mr. Orwin served as President and Chief Operating Officer of Affymax, Inc., a biotechnology company, from April 2010 to January 2011, as its Chief Executive Officer from February 2011 through May 2013 and as a member of its board of directors from February 2011 to November 2014. From 2005 to April 2010, Mr. Orwin served as Vice President and then Senior Vice President of the BioOncology Business Unit at Genentech, Inc. (now a member of the Roche Group), a biotechnology company, where he was responsible for all marketing, sales, business unit operations and pipeline brand management for Genentech’s oncology portfolio in the United States. From 2001 to 2005, Mr. Orwin served in various executive-level positions at Johnson & Johnson, a life sciences company, overseeing oncology therapeutic commercial and portfolio expansion efforts in the U.S. Prior to such roles, Mr. Orwin held senior marketing and sales positions at various life sciences and pharmaceutical companies, including Alza Corporation (acquired by Johnson & Johnson), Sangstat Medical Corporation (acquired by Genzyme), Rhone-Poulenc Rorer Pharmaceuticals, Inc. (merged with Sanofi-Aventis) and Schering-Plough Corporation (merged with Merck). Mr. Orwin servesfulfill his duties as a member of the Board and Compensation Committee.
Mr. Orwin’s experience in senior management positions in the pharmaceutical industry provides significant industry knowledge and commercial, operational and management expertise to our Board. His experience on the boards of directors of Array BioPharma Inc.other public companies will continue to benefit us by providing him with insight and experience that enhances his value to our Board.
Mr. Orwin’s attendance record demonstrates his commitment to our board, participating in 100% of Retrophin, Inc., both publicly-traded biopharmaceutical companies. Board meetings and 100% of Compensation committee meetings for the past three years.
Mr. Orwin is consistently prepared and has exemplary participation at meetings of the Board and Compensation Committee, and he contributes significantly to discussions and decision making. He is also s served onappropriately engaged with management and the boardother members of directorsthe Board outside of NeurogesX, Inc.,meetings of the Board and Compensation Committee.
Each of Atreca and Retrophin is a biopharmaceuticalpharmaceutical company until July 2013.headquartered in California. Mr. Orwin received an M.B.A. from New York University and a B.A. from Rutgers University. Mr. Orwin’s many years of experience as a senior executive gives him a strong understanding of the biotechnology industry and the challenges we must meet in order to continue developing and commercializing ADCETRIS and our product candidates.
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Mr. Orwin does not serve on the boards of any privately-held companies and conducted her post-doctoral research at Harvard University in Immunology and Structural Biology, both as a Howard Hughes Medical Institute Fellow. She is also a 2002 graduateresult his only other director commitments are limited to Atreca and Retrophin.
Based on all of the Advanced Management Program at Harvard Business School. Dr. Seth brings a breadthabove considerations, our Governance Committee and Board believe that Mr. Orwin’s re-election is in the best interest of experience in drug development, commercial, international operations and general management.
In addition to Seattle Genetics, Dr. Siegall serves as a director of Ultragenyx Pharmaceutical Inc. and Alder BioPharmaceuticals, Inc., both publicly-traded biotechnology companies. He served as a director of Mirna Therapeutics, Inc., also a publicly-traded biotechnology company from 2013 to 2016. Dr. Siegall’s experience in founding and building Seattle Genetics is integral to our success and our mission. His scientific understanding along with his corporate vision and operational knowledge provide strategic guidance to our management team and the Board, of Directors.
The Board has a standing Audit Committee, Compensation Committee and Governance Committee, each of which is made up solely of independent directors. Each of these committees operates under a written charter setting forth the functions and responsibilities of the committee, which is available on our website at www.seattlegenetics.com.
AUDIT COMMITTEE | ||||||
Chair: David W. Gryska Other Members: John A. Orwin Alpna H. Seth | KEY FUNCTIONS | |||||
• appoint and establish the fees for our independent registered public accounting firm; • review and approve the procedures we use to prepare our periodic and annual reports; • review and discuss with management and our independent auditor our quarterly earnings release, financial statements, and related periodic SEC filings; • review our critical accounting policies and critical audit matters; • review the independence of the independent registered public accounting firm in accordance with the Public Company Accounting Oversight Board; • monitor the effectiveness of the audit effort; and • oversee our financial and accounting organization and our system of internal accounting controls. | ||||||
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COMPENSATION COMMITTEE | ||||||
Chair: Felix J. Baker Other Members: John A. Orwin Daniel G. Welch | KEY FUNCTIONS | |||||
• review and advise the Board regarding the performance of the CEO and other executive officers; • review overall corporate performance against goals and determine corporate payout factor used for annual executive and nonexecutive bonuses; • review and determine the compensation to be paid to the Company’s executive officers; • establish and administer our policies regarding annual executive salaries, cash incentives and long-term equity incentives; • oversee our equity plans, long-term incentive plans, executive bonus plan and other compensation policies, plans and programs; • review with management our Compensation Discussion and Analysis; and • review the compensation paid to our directors. | ||||||
GOVERNANCE COMMITTEE | ||||||
Chair: Nancy A. Simonian Other Members: Felix J. Baker Marc E. Lippman | KEY FUNCTIONS | |||||
• identify and evaluate individuals qualified to serve as members of the Board of Directors and consider board composition, including evaluating incumbent directors forre-election; • recommend nominees to the Board for election as directors of Seattle Genetics and appointment as members of the committees of the Board of Directors; • develop and make recommendations to the Board regarding the Company’s Corporate Governance Guidelines and provide oversight with respect to corporate governance and ethical conduct; and • oversee an annual evaluation of the performance of the Board. | ||||||
BOARD AND COMMITTEE MEETINGS AND ATTENDANCE
The Board met seven times and acted by written consent one time during 2019. On at least a quarterly basis, the Board meets in executive sessions of independent directors without management present. During 2019, the Audit Committee held six meetings, the Compensation Committee held seven meetings and acted by written consent three times and the Governance Committee met once and acted by written consent one time. Each of our directors attended at least 75% of the aggregate of Board and applicable committee meetings on which he or she served during 2019.
Although we do not have a formal policy regarding attendance by members of the Board of Directors at our Annual Meetings of Shareholders, directors are encouraged to attend. However, due to scheduling conflicts we held a meeting of the Board of Directors two weeks prior to our 2019 annual meeting of shareholders and as a result, with the exception of Dr. Siegall, none of our directors then serving attended the 2019 annual meeting of shareholders.
Our Board of Directors has overall responsibility for risk oversight with a focus on the facultymost significant risks facing Seattle Genetics. Throughout the year, the Board and the committees to which it has delegated responsibility dedicate a portion of Massachusettstheir meetings to reviewing and discussing specific risk topics in greater detail. Strategic and operational risks are presented and discussed in the context of the Chief Executive Officer’s report on operations to the Board at regularly scheduled Board meetings and at presentations to the Board and its committees by the respective
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committee chairs, our Chief Financial Officer, our General HospitalCounsel and Harvard Medical SchoolExecutive Vice President, Legal Affairs, and other officers. In addition, management periodically reports to the Board on enterprise risk management. Our Board also retains responsibility for assessment of succession-related risks and succession planning.
The Board has delegated responsibility for the oversight of specific risks to Board committees as follows:
| Audit Committee | • Reviews and oversees risks related to cybersecurity and compliance matters, including but not limited to, Foreign Corrupt Practices Act compliance. • Reviews and oversees related-party transactions on behalf of Seattle Genetics. | |
Compensation Committee | • Evaluates the risks and rewards associated with our compensation philosophy and programs. • Reviews and approves compensation programs with features that mitigate risk without diminishing the incentive nature of the compensation. For more detail see “Compensation of Executive Officers—Compensation Discussion and Analysis—Compensation and Risk,” below in this proxy statement. • Discusses with management the procedures that have been put in place to identify and mitigate potential risks in compensation. | |
Governance Committee | • Oversees risks related to Seattle Genetics’ governance structure and processes, board composition, refreshment and committee leadership. | |
In addition, our General Counsel and Executive Vice President, Legal Affairs works with our committees and Board to develop risk identification, risk management and risk mitigation strategies and reports periodically to the Board and the committees on Seattle Genetics’ risk profile and various management and mitigation strategies.
COMPENSATION COMMITTEE PROCESS AND PROCEDURES
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 “Director Compensation” below. In accordance with its charter, the Compensation Committee may delegate any of its authority or responsibility as appropriate, except to the extent inconsistent with any applicable laws and rules, including the Nasdaq listing standards. Our compensation committee does not, however, delegate any of its functions to others in determining or recommending executive or director compensation.
Under our Corporate Governance Guidelines, our Governance Committee is responsible for assessing the appropriate balance of experience, skills and characteristics required of the Board. In this regard, our Governance Committee identifies and evaluates individuals qualified to serve as Board members, including evaluating incumbent directors forre-election, and recommends to the Board nominees for election as directors. On an assistant professorannual basis, our Governance Committee assesses the qualities, experiences, skills and attributes that qualify each director to be a member of neurology. She receivedthe Board in light of our business structure and long-term strategy and assesses the committee’s effectiveness in diversifying the Board. Our Governance Committee also oversees an annual Board self-evaluation process. Director responses are collated into a B.A.summary by an outside third party, and the results are discussed with the full Board.
CRITERIA FOR BOARD MEMBERSHIP AND NOMINATION PROCESS
The Governance Committee assesses many characteristics and diversity considerations when reviewing director candidates and these characteristics are set forth in Biology from Princeton Universityour Corporate Governance Guidelines. Among the characteristics to be considered are:
professional background,
depth and an M.D. from the Universitybreadth of Pennsylvania Medical School. As a current and former senior executive of several other biotechnology companies, Dr. Simonian possesses a strong experience,
wisdom,
sound business judgment,
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integrity,
collegiality,
ability to make independent analytical inquiries,
understanding of the Company’s business environment,
familiarity with the biotechnology industry,
willingness to devote adequate time to Board duties,
the interplay of the candidate’s experience and skills with those of other Board members, and
the extent to which a candidate would be a desirable addition to the Board and any committees of the Board.
In determining whether to recommend a director forre-election, the Governance Committee also considers the director’s past attendance at meetings and participation in and contributions to the activities of the Board and its committees, as well as the nature and time involved in a director’s service on other boards. In 2019, we amended our Corporate Governance Guidelines to provide that the Governance Committee seeks nominees with:
a broad range of experience, viewpoints, professions, skills, geographic representations and backgrounds and
a diversity of race, ethnicity, gender, age and culture.
We believe that the backgrounds and qualifications of our directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities and should represent an appropriate balance between institutional knowledge and fresh perspectives.
The Governance Committee identifies nominees by first evaluating the current members of the Board willing to continue in service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered forre-nomination. If there is a vacancy on the Board as a result of a resignation or otherwise, or if the Board decides not to nominate a member forre-election or decides to add a member to the Board, the Governance Committee identifies the desired skills and experience of a new nominee in light of the criteria above and the Board’s needs. Current members of the Board are asked to submit suggestions as to individuals meeting the criteria described above.
SHAREHOLDER DIRECTOR NOMINATIONS AND RECOMMENDATIONS
In accordance with our bylaws and applicable law, nominations for directors may be made by any shareholder of record entitled to vote for the election of directors at shareholder meetings held for such purpose. The requirements a shareholder must follow for nominating persons for election as directors are set forth in our bylaws and under the heading “Frequently Asked Questions and Other Information—When are proposals and nominations due for the 2021 Annual Meeting?” below in this proxy statement.
The Governance Committee will also consider director candidates recommended by shareholders. In order to recommend director candidates to the Governance Committee, shareholders should follow the procedures in our bylaws for director nominations. If a shareholder complies with these procedures for recommending persons for
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election as directors, the Governance Committee will conduct the appropriate and necessary inquiries into the backgrounds, qualifications and skills of the recommended candidates and, in the exercise of the Governance Committee’s independent judgment in accordance with the policies and procedures adopted in the Governance Committee’s charter, will determine whether to recommend the candidate(s) recommended by the shareholders to the Board for inclusion in the list of candidates for election as directors at the next shareholder meeting held to elect directors. The Governance Committee does not intend to alter the manner in which it evaluates director candidates based on whether or not the candidate was recommended by a shareholder.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Our Board of Directors currently does not have a formal process for shareholders to send communications to the Board of Directors. Nevertheless, efforts are made to ensure that the views of shareholders are heard by the Board or individual directors, as applicable, and that appropriate responses are provided to shareholders on a timely basis. The Board does not recommend that formal communication procedures be adopted at this time because it believes that informal communications are sufficient to communicate questions, comments and observations that could be useful to the Board. Shareholders wishing to formally communicate with the Board of Directors may send communications directly to Seattle Genetics, Inc., Attention: Investor Relations, 21823 – 30th Drive SE, Bothell, Washington 98021, and the communication will be forwarded, as appropriate. If the communication regards a shareholder proposal to be considered at an annual meeting of shareholders, the methods and timing for submitting a shareholder proposal are covered under the heading “Frequently Asked Questions and Other Information—When are proposals and nominations due for the 2021 Annual Meeting?”
MAJORITY VOTING IN UNCONTESTED ELECTIONS
In January 2020, the Board amended and restated our bylaws to implement a majority voting standard in uncontested director elections, instead of plurality voting. Under the Amended and Restated Bylaws, in uncontested elections, a director must be elected by a majority of the votes cast with respect to the election of such director (meaning the number of shares voted “for” such nominee’s election must exceed the number of votes cast “against” his or her election) at any meeting for the election of directors at which a quorum is present. However, in the event of a contested election of directors, directors shall be elected by the highest number of votes, or a plurality of votes, cast.
In addition, under our Corporate Governance Guidelines, any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election is required to submit an offer of resignation for consideration by the Governance Committee. In such case, the Governance Committee will then consider all of the relevant facts and circumstances and recommend to the full Board the action to be taken with respect to such offer of resignation.
The Board believes that there is no single approach to corporate governance that is appropriate for all companies and that the key consideration in determining whether to implement a particular governance practice is whether that practice promotes the interests of shareholders, taking into account the specific circumstances of Seattle Genetics. While the Board acknowledges that declassification proposals have received popular support, the Board has reviewed the rationale for its current classified structure and continues to believe that a classified board is the appropriate board structure for Seattle Genetics at this time and is in the best interest of our shareholders for the reasons set forth below:
Long-Term Focus. The Board believes that a classified board encourages directors to look to the long-term best interest of Seattle Genetics and our shareholders by strengthening the independence ofnon-employee directors against the often short-term focus of certain investors and special interests.
Continuity of Board Leadership. A classified board allows for a greater amount of stability and continuity, providing institutional perspective and knowledge both to management and other directors in a time of rapid growth and transformation for Seattle Genetics. In addition, the development and commercialization of pharmaceuticals is complex and requires significant expertise. By its very nature, a classified board ensures that at any given time there will be experienced directors serving on our Board who are fully immersed in and knowledgeable about our highly technical business, including our relationships with our current and potential strategic partners, as well as the competition, opportunities, risks and challenges that exist in the biotechnology and pharmaceutical industries. Each year the Governance Committee reviews the qualifications and performance of the directors prior to nominating
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them to stand forre-election. We believe the benefit of a classified board to Seattle Genetics and our shareholders comes not from continuity alone—but rather from the continuity of highly qualified, engaged and knowledgeable directors focused on long-term shareholder interests. |
Unsolicited Takeover Protection. A classified board can reduce vulnerability to potential abusive takeover tactics by encouraging persons seeking control of Seattle Genetics to negotiate with the Board and thereby better positioning the Board to negotiate effectively on behalf of all shareholders. Because less than a majority of directors stand for election at each annual meeting under a classified board structure, a hostile bidder could not simply replace a majority of the Board at a single annual meeting with directors aligned with the hostile bidder’s own interests, thereby gaining control of Seattle Genetics without paying a fair market price to all shareholders. Rather, in the interests of fairness to shareholders as a whole, having a classified board encourages the hostile bidder to negotiate directly with the Board on a potential transaction.
In sum, Seattle Genetics has benefited from the independence and continuity of experienced leadership provided by our Board of Directors under the classified structure, and we must meetbelieve these factors have been critical drivers of the significant growth in shareholder value that Seattle Genetics has generated over time.
Succession planning is an important part of planning for the long-term success of our business. Under our Corporate Governance Guidelines, our Board is responsible for CEO succession planning, and they discuss CEO and executive officer performance and succession in executive session. In addition, our CEO and senior executives discuss future candidates for leadership positions at all levels within our organization.
CORPORATE GOVERNANCE GUIDELINES
As a part of the Board’s commitment to building long-term shareholder value and maintaining sound corporate governance, the Board has adopted a set of Corporate Governance Guidelines, which guides the operation of the Board and its committees. Our Corporate Governance Guidelines cover, among other topics, Board composition, structure and functioning, including our director resignation policy, Board membership criteria, director independence, Board self-evaluations, committees of the Board, Board access to management and independent advisers, stock ownership guidelines for members of the Board and our executive officers, and succession and leadership development. A copy of the Corporate Governance Guidelines can be viewed on our website at www.seattlegenetics.com.
Our Corporate Governance Guidelines include stock ownership guidelines for our directors and executive officers. For more information about these guidelines, please see “Director Compensation—Director Stock Ownership Guidelines” and “Compensation of Executive Officers—Compensation Discussion and Analysis—Stock Ownership Guidelines” below.
CODE OF CONDUCT AND BUSINESS ETHICS
The Board of Directors has adopted a Code of Conduct and Business Ethics, or the Code of Ethics, for all directors, officers and employees of Seattle Genetics, Inc. A copy of the Code of Ethics can be viewed on our website at www.seattlegenetics.com. We intend to satisfy the disclosure requirement under Item 5.05 of Form8-K regarding an amendment to, or waiver from, a provision of the Code of Ethics by posting such information on our website at the website address specified above.
Seattle Genetics has adopted a Whistleblower Policy applicable to its employees that provides for protection from retaliation or discrimination by Seattle Genetics due to reporting issues relating to concerns involving questionable accounting or auditing matters and compliance with applicable laws and regulations.
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CORPORATE GOVERNANCE |
PROHIBITIONS ON HEDGING, PLEDGING AND SHORT-TERM SPECULATIVE TRANSACTIONS
Under the terms of our insider trading policy, no employees (including executive officers) of Seattle Genetics or its subsidiaries, members of our Board or consultants who know or have access to material information regarding Seattle Genetics that has not been fully disclosed to the public may engage in any hedging or monetization transactions relating to Seattle Genetics or its securities, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds, nor may any of these persons engage in short-term speculative transactions involving Seattle Genetics securities (or derivatives of Seattle Genetics securities), including short sales and the buying and selling of put or call options. In addition, none of these persons may hold Seattle Genetics securities in a margin account or otherwise pledge Seattle Genetics securities as collateral for a loan.
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CORPORATE GOVERNANCE |
At Seattle Genetics, we are committed to developing transformative medicines for patients with cancer in a socially responsible and sustainable manner. We are dedicated to providing patients access to our medicines and education about their disease. We also believe that fostering a culture of inclusion with diverse perspectives and operating with integrity are key to our success. We continue to support the community both locally and through nonprofits that are dedicated to patients and advancing research. Finally, as grow, we are striving to limit our environmental impact and operate in an increasingly sustainable manner.
| PATIENTS | | EMPLOYEES & COMMUNITY | | ENVIRONMENT | |||||||||||||||||
| Providing patients with safe and effective medicines as well as supporting patient advocacy and education through philanthropic donations | Continuing to be an employer of choice by promoting an inclusive and rewarding workplace and being a good corporate citizen in the communities where we operate | Seeking to operate our business in a sustainable manner and aligning with suppliers that we believe share our vision | ||||||||||||||||||||
✓ Assisting patients with access to our medicines through financial reimbursement support through our SeaGen Secure program ✓ Supporting patient advocacy organizations to help patients learn more about their disease states and find a community ✓ Improving patients’ lives through scientific excellence by seeking to develop therapies for areas of significant unmet need ✓ Working to ensure that our supply chain meets or exceeds good manufacturing practices (GMP) as well as U.S. Food & Drug Administration, European Medicines Agency, Occupational Health and Safety Act (OHSA) and Environmental Protection Agency (EPA) standards | ✓ Continuing to foster a diverse and inclusive workforce at all levels. As of the end of 2019: o 57% of our workforce was female and 30% were racially/ethnically diverse o 38% of our leadership (Executive Director and above) were female and 18% were racially/ethnically diverse ✓ Proactively seeking feedback from employees, including a 97% completion rate of the 2019 Employee Engagement survey o 97% of those responding agreed that the Company’s values are important for achieving our mission of improving lives of people with cancer and 94% are personally committed to fulfilling our vision ✓ Expanding philanthropic and volunteer opportunities in support of environmental, cancer and other nonprofits through our Employee Impact Committee ✓ Educating our employees on adherence to our Code of Conduct and Business Ethics and seeking partners who share our Standards for Suppliers | ✓ Focusing on improving energy, water and waste management practices ✓ Enhancing a sustainability reporting framework with specific targets for reducing our water and energy use, carbon emissions and waste ✓ Continuing to make available and promote to employees environmentally friendly options such as alternative commute options and electric vehicle charging stations ✓ Implementing and maintaining a risk management process and internal controls designed to comply with our policy on Environmental, Health and Safety (EHS) management. Identifying and seeking to manage EHS risks and issues in line with principles of good governance and tiered accountability. | ||||||||||||||||||||
| 2020 PROXY STATEMENT | 23 | |||||||
DIRECTOR COMPENSATION |
The responsibility for reviewing director compensation and recommending changes to the Board is vested in the Compensation Committee per its charter. The Compensation Committee reviews our director compensation against the director compensation of our peer group companies annually, as described below under “—Processes and Procedures for Determining Director Compensation”.
CASH COMPENSATION
Ournon-employee directors receive an annual cash retainer for service on the Board, plus reimbursement forout-of-pocket expenses incurred in connection with attendance at Board and Board committee meetings, as well as additional retainers for service as our Lead Independent Director or service on committees of the Board. In March 2019, on the recommendation of the Compensation Committee based on a review of our peer group companies, the retainers for service on the Board and Board committees were revised as follows:
Service | Previous Annual Cash Compensation |
| New Annual Cash Compensation | |||||||
Non-Employee Director | $50,000 | $55,000 | ||||||||
Lead Independent Director | $25,000 | $37,500 | ||||||||
| Chair | Member | Chair | Member | |||||||||||||||
Audit Committee | $ | 20,000 | $ | 10,000 | $ | 25,000 | $ | 12,000 | ||||||||||
Compensation Committee | $ | 15,000 | $ | 8,000 | $ | 20,000 | $ | 10,000 | ||||||||||
Governance Committee | $ | 10,000 | $ | 5,000 | $ | 15,000 | $ | 6,500 | ||||||||||
In January 2020, on the recommendation of the Compensation Committee based on a review of our peer group companies, the annual cash retainer for service as anon-employee director was further revised from $55,000 to $60,000 and the annual retainer for service as Chair of the Compensation Committee was further revised from $20,000 to $22,000.
If anon-employee director has not served on the Board or a Board committee for the full year, the Board and any applicable Board committee retainers will be prorated for the portion of the year served.
EQUITY COMPENSATION
Our Board has established a policy of providing each newnon-employee director of Seattle Genetics an initial grant of stock options and restricted stock units, or RSUs, under our 2007 Equity Plan. These initial awards are granted effective on the date on which a recipient first becomes anon-employee director of Seattle Genetics. In addition, effective on the date of each annual meeting of shareholders, eachnon-employee director receives an annual grant of stock options and RSUs under the 2007 Equity Plan if, on such date, he or she has served on the Board for at least six months prior to such date. In 2019, on the recommendation of the Compensation Committee based on a review of our peer group companies, our Board revised its policy regarding the initial and annual grants tonon-employee directors to provide value-based awards instead of share-based awards, which we provided in the past.
| Target Value of Option Award (1) | Target Value of RSU Award(2) | Total Target Value of Award | ||||||||||
Initial grant | $300,000 | $300,000 | $600,000 | |||||||||
Annual grant | $200,000 | $200,000 | $400,000 | |||||||||
| (1) | The actual number of shares underlying each option grant is calculated based on an approximation of the target award value based on the average stock price during the 30 calendar days preceding the effective date of the grant and using the Black Scholes methodology for stock option valuation. |
| (2) | The actual number of shares underlying each RSU grant is calculated by dividing the target value of the RSU award by the average stock price during the 30 calendar days preceding the effective date of the grant. |
In 2019, each of ournon-employee directors received an annual option grant to purchase 7,038 shares of common stock and an annual RSU grant covering 2,963 shares of common stock, effective on the date of our 2019 annual meeting.
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DIRECTOR COMPENSATION |
The exercise price of options granted to our directors is equal to the fair market value of our common stock on the Nasdaq Global Select Market on the effective date of grant. Options granted tonon-employee directors under the 2007 Equity Plan and the 2000 Directors’ Stock Option Plan, or the Directors’ Plan, have ten year terms and remain exercisable for up to three months following the grantee’s termination of service, unless such termination is a result of death or disability, in which case the options remain exercisable for up to a twelve-month period (or such lesser period as is determined by the Board).
The initial option grants vest as to 25% of the underlying shares on the first anniversary of the grant date and ratably thereafter on a monthly basis until such grant is fully vested on the fourth anniversary of the grant date, and the initial RSU grant vests as to 25% per year over a four year period on the anniversaries of the vesting commencement date, subject in both cases to continued service. The annual option and RSU awards made to each of our eligible directors in 2019 will vest on May 20, 2020. In addition, allnon-employee directors would receive full acceleration of vesting of any outstanding options or RSU awards under the 2007 Equity Plan and the Directors’ Plan, as applicable, immediately prior to a change in control of Seattle Genetics.
DIRECTOR STOCK OWNERSHIP GUIDELINES
In order to developalign the interests of the directors with Seattle Genetics’ shareholders, our Corporate Governance Guidelines state that allnon-employee directors should, not later than December 31st of the year during which the applicable director achieves his or her fifth anniversary as anon-employee director, own, directly or indirectly, a number of shares of Seattle Genetics common stock with a value not less than three times the annual cash retainer paid by Seattle Genetics to such director for service on the Board, and commercializethereafter such director should continue to own a number of shares with such value until he or she is no longer a director. The Compensation Committee used December 31, 2019 as the date to assess compliance with these director ownership guidelines. All of our product candidates.non-employee directors serving as of such date were in compliance with these guidelines or had not yet reached the applicable deadline for compliance.
PROCESSES AND PROCEDURES FOR DETERMINING DIRECTOR COMPENSATION
In January 2019, Compensia, Inc., or Compensia, our Compensation Committee’s compensation consultant at that time, conducted an analysis to compare our director compensation to the director compensation of the peer group of companies approved by our Compensation Committee, with input from senior management and Compensia, in August 2018. For additional information on this peer group, please see “Compensation of Executive Officers—Compensation Discussion and Analysis—Compensation-Setting Process—Competitive Positioning”.
Compensia concluded that cash compensation paid to ournon-employee directors was generally below the 50th percentile of our peer group medians. As a result of this analysis, in February 2019, our Compensation Committee recommended that the cash compensation for ournon-employee directors be increased to approximate the 50th percentile of cash compensation received by members of the boards of directors of our peer companies, and in March 2019, the Board approved this recommended change, resulting in the revised cash compensation effective in March 2019 described above.
With regard to equity compensation for ournon-employee board of directors, Compensia concluded that the practice of delivering initial and annual board grants by denominating the number of shares to be delivered can lead to variance in the value of these grants year to year based on our share price at the time of grant, and can result in grants to Board members that vary from the intended 50th percentile of equity compensation paid by peer group companies. Following this review, our Compensation Committee recommended to the Board that equity grants tonon-employee directors be determined based on a target value and that such target values approximate the 50th percentile of equity compensation paid to directors of our peer companies. In March 2019, the Board adopted these recommendations, resulting in the revised equity grant policies described above.
In December 2019, Radford, our Compensation Committee’s new compensation consultant, conducted an analysis to compare our director compensation to the director compensation of the peer group of companies approved by our Compensation Committee, with input from senior management and Radford in July 2019. For additional information on this peer group, please see “Compensation of Executive Officers—Compensation Discussion and Analysis—Compensation-Setting Process—Competitive Positioning”. Radford concluded that the annual cash retainer paid to our non-employee directors and the annual cash retainer for service as Chair of the Compensation Committee were below the 50th percentile of our peer group medians. As a result of this analysis, in December 2019, our Compensation Committee recommended that these annual cash retainers be increased to approximate the 50th
| 2020 PROXY STATEMENT | 25 | |||||||
DIRECTOR COMPENSATION |
percentile of cash compensation received by members of the boards of directors of our peer companies, and in January 2020, the Board approved this recommended change, resulting in the revised cash compensation effective in January 2020 described above.
In addition, as further described in Proposal No. 3, the 2007 Equity Plan as amended by the Board in March 2020, or the Restated 2007 Equity Plan, includes a limit on the amount ofnon-employee director compensation under the Restated 2007 Equity Plan. Under the Restated 2007 Equity Plan, the aggregate value of all compensation granted or paid to any individual solely for service as anon-employee director of the Board of Directors with respect to any calendar year may not exceed $1,000,000 in total value, calculating the value of any stock awards based on the grant date fair value of such awards for financial reporting purposes), or, with respect to the calendar year in which anon-employee director is first appointed or elected to the Board, $1,500,000. This limit is not intended to serve as an increase in the annual amount ofnon-employee director compensation; rather, it is proposed for the purpose of limiting the amount of compensation the Board can approve fornon-employee directors each year.
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DIRECTOR COMPENSATION |
DIRECTOR COMPENSATION TABLE
The following table sets forth all of the compensation awarded to or earned by each person who served as anon-employee director during 2019. Dr. Siegall, our only employee director, receives no compensation for Board service but is reimbursed for reasonable and customary travel expenses. Dr. Siegall’s compensation is described under “Compensation of Executive Officers” below.
Name | Fees Earned or Paid in Cash in 2019(1) $ | Stock Awards(2) $ | Option Awards(3) $ | Total $ | ||||||||||||
Srinivas Akkaraju, M.D., Ph.D.(4)(12) | 54,325 | 190,758 | 176,223 | 421,306 | ||||||||||||
Felix J. Baker, Ph.D.(5)(12) | 115,760 | 190,758 | 176,223 | 482,741 | ||||||||||||
David W. Gryska(6)(12) | 78,650 | 190,758 | 176,223 | 445,631 | ||||||||||||
Marc E. Lippman, M.D.(7)(12) | 60,623 | 190,758 | 176,223 | 427,604 | ||||||||||||
John A. Orwin(8)(12) | 75,785 | 190,758 | 176,223 | 442,766 | ||||||||||||
Alpna H. Seth, Ph.D.(9)(12) | 66,055 | 190,758 | 176,223 | 433,036 | ||||||||||||
Nancy A. Simonian, M.D.(10)(12) | 68,650 | 190,758 | 176,223 | 435,631 | ||||||||||||
Daniel G. Welch(11)(12) | 64,055 | 190,758 | 176,223 | 431,036 | ||||||||||||
| (1) | Fees paid in cash for Board and Committee services reflect a portion paid at the current fee retainers, reflecting the changes made during March 2019 as discussed above, and a portion paid at the fee retainers paid prior to the change. |
| (2) | The amounts in this column represent the aggregate full grant date fair value of RSU awards granted during 2019 in accordance with FASB ASC Topic 718 with no estimate for future forfeitures, which value is based on the closing price of our common stock on the date of grant of May 20, 2019. |
| (3) | The amounts in this column represent the aggregate full grant date fair value of options granted during 2019 calculated in accordance with FASB ASC Topic 718 with no estimate for future forfeitures. For information regarding the assumptions used in calculating these amounts, see Note 16 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form10-K for the year ended December 31, 2019. The option awards amounts represent the grant date fair value of options granted on May 20, 2019. |
| (4) | The fees earned by Dr. Akkaraju consisted of a $54,325 retainer for Board service. |
| (5) | Dr. Baker served as our lead independent director, chairman of our Compensation Committee and a member of our Governance Committee in 2019. The fees earned included a $54,325 retainer for Board service, a $35,812 retainer for service as the lead independent director, a $19,325 retainer for service as the chairman of our Compensation Committee, and a $6,298 retainer for service as a member of our Governance Committee. |
| (6) | Mr. Gryska served as chairman of our Audit Committee in 2019. The fees earned included a $54,325 retainer for Board service and a $24,325 retainer for service as chairman of our Audit Committee during 2019. |
| (7) | Dr. Lippman served as a member of our Governance Committee in 2019. The fees earned included a $54,325 retainer for Board service and a $6,298 retainer for service as a member of our Governance Committee. |
| (8) | Mr. Orwin served as a member of our Audit Committee and our Compensation Committee in 2019. The fees earned included a $54,325 retainer for Board service, a $11,730 retainer for service as a member of the Audit Committee, and a $9,730 retainer for service as a member of the Compensation Committee. |
| (9) | Dr. Seth served as a member of our Audit Committee in 2019. The fees earned included a $54,325 retainer for Board service and $11,730 retainer for service as a member of the Audit Committee. |
| (10) | Dr. Simonian served as chair of our Governance Committee in 2019. The fees earned included a $54,325 retainer for Board service and a $14,325 retainer for service as chair of our Governance Committee. |
| (11) | Mr. Welch served as a member of our Compensation Committee in 2019. The fees earned included a $54,325 retainer for Board service and a $9,730 retainer for service as a member of our Compensation Committee. |
| (12) | As of December 31, 2019, ournon-employee directors listed in the table above held outstanding stock awards and options, as follows: |
Name | Number of Shares Underlying Outstanding Restricted Stock Units | Number of Shares Subject to Outstanding Options | ||||||
Srinivas Akkaraju, M.D., Ph.D. | 2,963 | 79,078 | ||||||
Felix J. Baker, Ph.D. | 2,963 | 114,078 | ||||||
David W. Gryska | 2,963 | 94,078 | ||||||
Marc E. Lippman, M.D. | 2,963 | 79,078 | ||||||
John A. Orwin | 2,963 | 56,578 | ||||||
Alpna H. Seth, Ph.D. | 8,713 | 21,288 | ||||||
Nancy A. Simonian, M.D. | 2,963 | 86,578 | ||||||
Daniel G. Welch | 2,963 | 111,078 | ||||||
| 2020 PROXY STATEMENT | 27 | |||||||
The executive officers of Seattle Genetics who are not also directors of Seattle Genetics, their ages as of April 5, 2019,2, 2020, and certain other information about them are set forth below:
Non-Director Executive Officers | Age | Company Positions/Offices | |||
Todd E. Simpson | 59 | Chief Financial Officer | |||
Roger D. Dansey, M.D. | 63 | Chief Medical Officer | |||
Vaughn B. Himes, Ph.D. | 59 | Chief Technical Officer | |||
Jean I. Liu | 51 | Executive Vice President, Legal Affairs, and General Counsel | |||
Todd E. Simpson Mr. Simpson has served as our Chief Financial Officer since October 2005. Previously, Mr. Simpson served from October 2001 to October 2005 as Vice President, Finance & Administration and Chief Financial Officer of Targeted Genetics Corporation, a biotechnology company. From January 1996 to October 2001, Mr. Simpson served as Vice President, Finance & Administration and CFO of Aastrom Biosciences, Inc., a biotechnology company. From August 1995 to December 1995, he served as Treasurer of Integra LifeSciences Corporation, a biotechnology company, which acquired Telios Pharmaceuticals, Inc., in August 1995. From 1992 until its acquisition by Integra, he served as Vice President of Finance and CFO of Telios and in various other finance-related positions. Mr. Simpson is a certified public accountant (inactive), and from 1983 to
Roger D. Dansey, M.DDr. Dansey has served as our Chief Medical Officer since May 2018. Prior to that, Dr. Dansey served as Senior Vice President, Clinical Oncology Research at Merck & Co. from January 2015 through April 2018. While at Merck, Dr. Dansey was Therapeutic Area Head for Late Stage Oncology and was responsible for the ongoing registration efforts for KEYTRUDA®KEYTRUDA® (pembrolizumab) across multiple tumor types. Prior to Merck, from August 2013 to December 2014, Dr. Dansey served as the Vice President, Oncology Clinical Research at Gilead Sciences, Inc. Dr. Dansey previously worked at Amgen in roles of increasing responsibility in Amgen'sAmgen’s oncology and hematology therapeutic areas, including as the Global Development Leader for XGEVA®. Dr. Dansey received his Medical Degrees from the University of Witwatersrand, Johannesburg, South Africa.
Vaughn B. Himes, Ph.D. Dr. Himes has served as our Chief Technical Officer since August 2016. Dr. Himes joined Seattle Genetics as Executive Vice President, Technical Operations in April 2009 and served as our Executive Vice President, Technical Operations and Process Science from July 2012 until August 2016. Previously, Dr. Himes was with ZymoGenetics, Inc. from November 2005 to March 2009, most recently as Senior Vice President, Technical Operations where his responsibilities included commercial and clinical manufacturing, supply chain and logistics, quality control and process development. From March 2003 to October 2005, he was Vice President, Manufacturing at Corixa, Inc. Prior to that, he held Vice President positions in manufacturing and development at Targeted Genetics and Genovo,Inc. Dr. Himes received a B.A. in Chemistry from Pomona College in California and a Ph.D. in Chemical Engineering from the University of Minnesota.
Jean I. Liu, J.D. Ms. Liu has served as our General Counsel, Executive Vice President, Legal Affairs and Corporate Secretary since November 2014. Prior to that, she served as Vice President and General Counsel of Halozyme Therapeutics, Inc., a publicly-traded biotechnology company, from November 2011 to November 2014. From 1998 to 2011, she was with Durect Corporation, a publicly-traded biotechnology company, where she served in positions of increasing responsibility, including most recently Chief Legal Officer and Corporate Secretary. Prior to Durect, Ms. Liu was with the law firms of Pillsbury, Madison & Sutro (now Pillsbury Winthrop) and Venture Law Group where she focused on broad areas of legal advisory for early stage companies, including technology transfer, licensing, patents, and copyright and trademark litigation. Ms. Liu received her B.S. in Cellular and Molecular Biology with highest distinction from the University of Michigan, her M.S. in Biology from Stanford University and her J.D. from Columbia University where she was a Harlan Fiske Stone Scholar.
| Committee | Chair | Member | ||||||
| Audit Committee | $ | 20,000 | $ | 10,000 | ||||
| Compensation Committee | $ | 15,000 | $ | 8,000 | ||||
| Nominating and Corporate Governance Committee | $ | 10,000 | $ | 5,000 | ||||
| Committee | Chair | Member | ||||||
| Audit Committee | $ | 25,000 | $ | 12,000 | ||||
| Compensation Committee | $ | 20,000 | $ | 10,000 | ||||
| Nominating and Corporate Governance Committee | $ | 15,000 | $ | 6,500 | ||||
| ||||||||
| Name | Fees Earned or Paid in Cash in 2018 | Stock Awards (1) | Option Awards (2) | Total | ||||||||||||
Srinivas Akkaraju, M.D., Ph.D. (3) (11) | $ | 50,000 | $ | 210,049 | $ | 204,627 | $ | 464,676 | ||||||||
Felix Baker, Ph.D. (4) (11) | $ | 95,000 | $ | 210,049 | $ | 204,627 | $ | 509,676 | ||||||||
David W. Gryska (5) (11) | $ | 70,000 | $ | 210,049 | $ | 204,627 | $ | 484,676 | ||||||||
Marc E. Lippman, M.D. (6) (11) | $ | 55,000 | $ | 210,049 | $ | 204,627 | $ | 469,676 | ||||||||
John A. Orwin (7) (11) | $ | 68,000 | $ | 210,049 | $ | 204,627 | $ | 482,676 | ||||||||
Alpna Seth, Ph.D. (8) (11) | $ | 45,810 | $ | 331,660 | $ | 351,177 | $ | 728,647 | ||||||||
Nancy A. Simonian, M.D. (9) (11) | $ | 60,000 | $ | 210,049 | $ | 204,627 | $ | 474,676 | ||||||||
Daniel G. Welch (10) (11) | $ | 62,148 | $ | 210,049 | $ | 204,627 | $ | 476,824 | ||||||||
| Name | Number of Shares Underlying Outstanding Restricted Stock Units | Number of Shares Subject to Outstanding Options | ||||
| Srinivas Akkaraju, M.D., Ph.D. | 3,700 | 89,540 | ||||
| Felix Baker, Ph.D. | 3,700 | 117,040 | ||||
| David W. Gryska | 3,700 | 107,040 | ||||
| Marc E. Lippman, M.D. | 3,700 | 109,540 | ||||
| John A. Orwin | 3,700 | 49,540 | ||||
| Alpna Seth, Ph.D. | 5,750 | 14,250 | ||||
| Nancy A. Simonian, M.D. | 3,700 | 79,540 | ||||
| Daniel G. Welch | 3,700 | 104,040 | ||||
| Name and Address | Total Common Stock Equivalents (1) | Percent of Common Stock Equivalents (2) | ||||
Felix J. Baker, Ph.D. (3) Baker Bros. Advisors LP and Affiliates (3) 667 Madison Avenue, 21st Floor New York, NY 10065 | 51,399,776 | 31.9 | % | |||
Wellington Management Company (4) 280 Congress Street Boston, MA 02210 | 15,139,436 | 9.4 | % | |||
PRIMECAP Management Company (5) 177 E. Colorado Blvd., 11th Floor Pasadena, CA 91105 | 14,141,275 | 8.8 | % | |||
Capital International Investors (6) 11100 Santa Monica Blvd., 16th Floor Los Angeles, CA 90025 | 14,696,952 | 9.1 | % | |||
The Vanguard Group (7) 100 Vanguard Blvd Malvern, PA 19355 | 9,244,948 | 5.7 | % | |||
BlackRock, Inc. (8) 55 East 52nd Street New York, NY 10055 | 9,104,981 | 5.7 | % | |||
T. Rowe Price Associates, Inc (9) 100 E. Pratt Street Baltimore, MD 21202 | 8,074,740 | 5.0 | % | |||
Clay B. Siegall, Ph.D. (10) | 2,095,655 | 1.3 | % | |||
Todd E. Simpson (11) | 385,147 | * | ||||
| Roger D. Dansey, M.D. | — | * | ||||
Vaughn B. Himes, Ph.D. (12) | 394,767 | * | ||||
Darren Cline (13) | 132,236 | * | ||||
Srinivas Akkaraju, M.D., Ph.D. (14) | 113,785 | * | ||||
David W. Gryska (15) | 134,130 | * | ||||
Marc E. Lippman, M.D. (16) | 222,430 | * | ||||
John A Orwin (17) | 58,380 | * | ||||
Alpna Seth, Ph.D. (18) | 3,859 | * | ||||
Nancy A. Simonian, M.D. (19) | 88,380 | * | ||||
Daniel G. Welch (20) | 160,880 | * | ||||
All directors and executive officers as a group (21) | 55,347,041 | 33.8 | % | |||
PROPOSAL NO. 2
ON BEHALF OF THE AUDIT COMMITTEE, THE BOARD RECOMMENDS A VOTE FOR
| Type of Fees | 2018 | 2017 | ||||||
| Audit Fees | $ | 1,543,000 | $ | 1,418,000 | ||||
| Audit-Related Fees | — | 70,000 | ||||||
| Tax Fees | — | — | ||||||
| All Other Fees | 2,700 | 2,700 | ||||||
| Total Fees | $ | 1,545,700 | $ | 1,490,700 | ||||
Pursuant to Section 14A of the Exchange Act, our stockholders are entitled to vote to approve, on an advisory (non-binding) basis, the compensation of our Chief Executive Officer, Chief Financial Officer and our three other most highly compensated executive officers during the year ended December 31, 2018, or,collectively, the named executive officers, as disclosed in this proxy statement in accordance with the SEC’s rules. This non-binding advisory vote is commonly referred to as a “say-on-pay” vote.
We are asking our stockholdersshareholders to indicate their support for our Named Executive Officernamed executive officer compensation as described in this proxy statement. This proposal gives our stockholdersshareholders the opportunity to express their views on our named executive officers’ compensation. 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. Accordingly, we are asking our stockholdersshareholders to cast anon-binding advisory vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the compensation paid to the named executive officers, as disclosed in the Company’s Proxy Statementproxy statement for the 20192020 Annual Meeting of StockholdersShareholders pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.”
Unless our Board of Directors modifies its policy on the frequency of future advisory votes on the compensation of our named executive officers, the next advisory vote on the compensation of our named executive officers will be held at the 20202021 Annual Meeting of Stockholders.Shareholders. In addition, our stockholdersshareholders will be able to indicate by advisory vote at our 2023 Annual Meeting of StockholdersShareholders their preference as to the frequency of future advisory votes.
Shareholder approval of this Proposal No. 42 will require the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting.
| The Board recommends a voteFOR this Proposal No. 2. | |
| 2020 PROXY STATEMENT | 29 | |||||||
COMPENSATION OF EXECUTIVE OFFICERS |
THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL NO. 4
A MESSAGE FROM THE COMPENSATION COMMITTEE
We are committed to ensuring that our compensation programs help support and drive the Company’s focus to discover, develop and commercialize transformative medicines targeting cancer to make a meaningful difference in people’s lives.
2019 was a tremendous year for Seattle Genetics and we believe the Company’s future is bright. In determining compensation, we wanted to make sure that the compensation of the executive team reflected their solid performance and the need to retain them for the long term to deliver on our key, strategic objectives over the next several years.
Additionally, we received an approval of 73% on thesay-on-pay vote at our 2019 Annual Meeting of Shareholders, a significant decrease from the nearly 99% support level we received in 2018. We took the message conveyed by that vote very seriously. In response, we conducted a comprehensive review of our advisors, programs, and processes to ensure alignment of our programs to our business strategy and industry best practices.
During this review, we met with shareholders and different compensation consulting firms. Our Compensation Discussion and Analysis describes the feedback we received and specific program design changes made in 2019 based on this feedback, as well as the individual compensation decisions for our 2019 named executive officers and the reasons for them. We remain committed to listening to shareholder feedback as we continue to evaluate and refine the Company’s compensation programs.
Sincerely,
This compensation discussionCompensation Discussion and analysisAnalysis describes how the Compensation Committee of our Board of Directors determined the total compensation for the following executive officers during the year ended December 31, 2018,2019, whom we refer to as our named executive officers:
Clay B. Siegall, Ph.D., our President and Chief Executive Officer, or CEO;
Todd Simpson, our Chief Financial Officer;
Roger Dansey, M.D., our Chief Medical Officer;
Jean I. Liu, General Counsel and
Robin G. Taylor, Ph.D., former Chief Commercial Officer who served until February 2019.2020.
This compensation discussionCompensation Discussion and analysisAnalysis also describes our overall executive compensation philosophy, objectives and practices, as well as the Compensation Committee’s decisions and determinations regarding executive compensation for 2018.2019.
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COMPENSATION DISCUSSION AND ANALYSIS |
In 2019, we conducted a proactive shareholder outreach program to solicit feedback and better understand investor perspectives on operational, highlightsgovernance and executive compensation matters. We held discussions with a number of our company performance for 2018 were as follows:
2019 SHAREHOLDER ENGAGEMENT EFFORT
SHAREHOLDER FEEDBACK
In 2019, these discussions covered a wide range of topics, including:
Special Long-Term Performance-Based Compensation AwardsOUTCOMES OF ENGAGEMENT
The feedback from the – They are eligiblesay-on-pay vote and discussions with shareholders led to receive certain equity awards under the Long-Term Incentive Plan for Tucatinib, or the Tucatinib LTIP, a special program intendedchanges in 2019 to incentivize the achievement of FDA approval of tucatinib, which is anticipated to require performance over a multiple year period to attain. While the grant date fair value of these awards is reflected as 2018 compensation in the “Summary Compensation Table,” these awards will not be earned if the performance goal is not achieved.
Executive Compensation | • Incorporated performance-based equity awards into our CEO’s long-term incentive program • Adopted a clawback policy for executives • Enhanced our scrutiny ofpay-for-performance alignment in making compensation decisions | |
Corporate Governance | • Adopted majority vote standard in uncontested director elections • Revised our policy on outside board commitments • Enhanced the • Increased our disclosure on diversity at the Company • Enhanced the information provided in our | |
| 2020 PROXY STATEMENT | 31 | |||||||
COMPENSATION DISCUSSION AND ANALYSIS |
• | Implemented a new performance-based RSU, or PSU, program for our CEO’s equity award | • | In response to investor feedback and the results of the“say-on-pay” vote at our 2019 Annual Meeting of Shareholders, we granted approximately 33% of our CEO’s annual equity award in the form of PSU awards to align our equity program with market practices and shareholder expectations. The performance goals for the PSU awards are based on 2022 adjusted revenues and relative TSR over a three-year period. | |||||||
| • | Implemented a clawback policy for executives, including our CEO and other named executive officers | • | This new policy is an important step to address shareholder feedback. It provides for the recoupment of certain cash and equity incentive compensation paid to any of our executives if we are required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under securities laws and it is determined that the executive’s misconduct contributed to that noncompliance. | |||||||
| • | Revised our Executive Bonus Plan to ensure only strongly performing executives receive the upside of the corporate performance component | • | Starting in 2019, if an executive’s individual performance is determined to be less than 100%, then when calculating the bonus payout, the executive’s corporate performance percentage will be capped at such individual performance percentage, regardless of actual corporate performance. This change enhances properpay-for-performance alignment and covers not only executive officers, but also all employees at the vice president level and above within the Company. | |||||||
| • | New independent advisor for the Compensation Committee | • | In July 2019, the Compensation Committee engaged Radford as its new independent compensation consultant to obtain a different voice and perspective as we evolved from a single-product to a multiple-product company and from a U.S.-focused to a globally-focused, commercial biotechnology company. Radford is a leading compensation consulting firm with extensive expertise in biotechnology and has broad client relationships with many of our commercial biotechnology peers. | |||||||
Our compensation philosophy is to provide overall compensation that is competitive with biotechnology peers to attract and retain the highest caliber executive officers. In particular, we believe that, when targeted levels of performance are achieved, the resulting compensation should approximate the 50
supporting our business strategy,
aligning pay with company performance driving the achievement of key business goals that increase stockholder value over theand shareholder interests,
ensuring competitiveness when compared to companies with whom we compete for talent,
rewarding success in building both short- and long-term and growth,
weighting pay deliberately toward “at risk” performance-based compensation.compensation,
ensuring that our pay practices are executed consistently and fairly for all executives, regardless of ethnicity or gender, and
motivating performance that aligns with our corporate values of integrity, scientific excellence, teamwork, innovation and mutual respect.
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COMPENSATION DISCUSSION AND ANALYSIS |
OUR EXECUTIVE COMPENSATION PRACTICES
We endeavor to maintain sound executive compensation policies and practices consistent with our executive compensation philosophy. The following table highlights some of our executive compensation policies and practices, which are structured to drive performance and align our executives’ interests with our shareholders’ long-term interests:
| WHAT WE DO | ||||||
 | Pay for Performance. We design our executive compensation program to align pay with company performance. | |||||
| Significant Portion of Compensation is at Risk. Under our executive compensation program, a significant portion of compensation is “at risk” based on our performance, including short-term cash incentives and long-term cash and equity incentives, to align the interests of our executive officers and shareholders. | |||||
| Double-Trigger Vesting. We use double-trigger accelerated vesting of equity awards in the event of a change in control. Cash amounts payable upon a change in control are also subject to a double trigger. | |||||
| Independent Compensation Committee. The Compensation Committee is comprised solely of independent directors. | |||||
| Independent Compensation Advisor Reports Directly to the Compensation Committee. The Compensation Committee engages its own compensation consultant to assist with making compensation decisions. | |||||
| Annual Market Review of Executive Compensation. The Compensation Committee and its compensation consultant annually assess competitiveness and market alignment of our compensation plans and practices. | |||||
| Stock Ownership Guidelines for Directors and Executive Officers. We maintain a policy that requires minimum ownership of shares of our common stock by our CEO and other executive officers. | |||||
| Multi-Year Vesting Requirements. The equity awards granted to our executive officers generally vest over multi-year periods, consistent with current market practice and our retention objectives. | |||||
| AnnualSay-on-Pay Vote. We hold an annualsay-on-pay advisory vote for shareholders. | |||||
| Active Shareholder Engagement Program. We proactively engage with our shareholders throughout the year. | |||||
| Clawback Policy. In December 2019, we adopted a policy that provides for the recoupment of certain incentive compensation paid to any of our executives if we are required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under securities laws and it is determined that such noncompliance was due in whole or in part to such executive’s misconduct. | |||||
| Cap on Annual Cash Bonuses. Each executive officer’s annual bonus is capped at 200% of the target award amount. | |||||
| Minimize Inappropriate Risk Taking. Our compensation program is weighted toward long-term incentive compensation to discourage short-term risk taking, and it includes goals that are quantifiable with objective criteria, multiple performance measures and caps on short-term incentive compensation. | |||||
| Competitive Peer Group. Our Compensation Committee selects our peers from biotechnology and pharmaceutical companies that are similar to us with respect to market capitalization, revenue, headcount and commercialization stage, while also taking into account a number of qualitative criteria. | |||||
| 2020 PROXY STATEMENT | 33 | |||||||
COMPENSATION DISCUSSION AND ANALYSIS |
| WHAT WE DON’T DO | ||||||
 | No Special Health or Welfare Benefits for Executives. Our executive officers participate in broad-based, company-sponsored health and welfare benefits programs on the same basis as our other full-time, salaried employees. Executives do not have access to special benefits programs. | |||||
| No Post-Employment TaxGross-Ups. We do not provide any post-employment tax reimbursement payments (including“gross-ups”) on any severance orchange-in-control payments or benefits. | |||||
| Prohibition on Hedging and Pledging. Our insider trading policy prohibits our employees (including executive officers) and directors from engaging in hedging or short-term speculative transactions involving our securities. In addition, none of these persons may hold Seattle Genetics securities in a margin account or otherwise pledge Seattle Genetics securities as collateral for a loan. | |||||
| No Stock Option Repricing. Our equity plan does not permit repricing underwater stock options without shareholder approval. | |||||
Seattle Genetics is a global, multi-product biotechnology company that discovers, develops and commercializes transformative medicines targeting cancer to make a meaningful difference in people’s lives. We are commercializing ADCETRIS for the treatment of several types of CD30-expressing lymphomas and PADCEV for the treatment of certain metastatic urothelial cancers. In addition, we have submitted marketing applications for tucatinib, our small molecule tyrosine kinase inhibitor, for patients with metastatic HER2-positive breast cancer. We are also advancing a pipeline of novel therapies for solid tumors and blood-related cancers designed to address unmet medical needs and improve treatment outcomes for patients. Many of our programs, including ADCETRIS and PADCEV, are based on our proprietary ADC technology that utilizes the targeting ability of monoclonal antibodies to deliver cell-killing agents directly to cancer cells.
2019 was a transformational year during which Seattle Genetics achieved record revenues driven by continued growth of ADCETRIS product sales, increasing royalty revenues and significant progress by our collaborators that triggered several milestone payments. ADCETRIS product sales in the U.S. and Canada were $628 million in 2019, an increase of 32% over 2018, and more than double net sales in 2017. In 2020, we expect continued product sales growth of ADCETRIS, and are continuing to invest in clinical trials to further expand this important global brand. We also realized our goal of becoming a multi-product company. In December 2019, approximately three months before the target action date, we and our partner Astellas received FDA accelerated approval of PADCEV for the treatment of previously treated metastatic urothelial cancer. Prior to approval, these patients had limited treatment options. We are also conducting additional trials to potentially expand PADCEV’s use to first-line metastatic disease and to earlier stages of bladder cancer as well as outside of bladder cancer in a range of other solid tumors. PADCEV received BTD from the FDA for previously treated metastatic urothelial cancer prior to its approval and more recently received BTD for its use in combination with Merck’s Keytruda® in the first-line setting. |  |
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COMPENSATION DISCUSSION AND ANALYSIS |
Additionally, in late 2019 and early 2020, we submitted marketing applications for tucatinib in the United States, Europe and other countries for the treatment of patients with metastatic HER2-positive breast cancer based on positive results from theHER2CLIMB-01 trial. The results demonstrated that the tucatinib-containing regimen improved PFS, overall survival and PFS in patients with brain metastases, along with a manageable safety profile in patients with previously treated locally advanced or metastatic HER2-positive breast cancer. TheHER2CLIMB-01 data supported BTD from the FDA and the PDUFA target action date is August 20, 2020. This positions tucatinib to be our third commercial product, if approved. We are also conducting a broad tucatinib development program, including the phase 3HER2CLIMB-02 trial for first- or second-line metastatic HER2-positive breast cancer and a potentially pivotal phase 2 trial in metastatic HER2-positive colorectal cancer.
We also continue to advance our pipeline, and in 2019 we and our partner Genmab completed enrollment in a pivotal trial of tisotumab vedotin for patients with metastatic cervical cancer. We expect to report topline data in the first half of 2020 that, if positive, could support an accelerated approval pathway with the FDA.
We continue to invest in the development of our earlier-stage pipeline with ongoing clinical trials and advancement of several new product candidates into clinical development in 2019. We have also licensed our ADC technology to other companies, which generates milestone payments and royalties to us. In 2019 and early 2020, Genentech/Roche received approval in the U.S. and the European Union for their product Polivy, an ADC using our technology, in the U.S. and the European Union for which we receive royalties on global sales.
As we enter 2020, we are well-positioned to continue our progress. And, while the global impact of theCOVID-19 pandemic is evolving, we remain committed to delivering innovative medicines that improve outcomes for people living with cancer.
ALIGNMENT OF CEO PAY TO TOTAL SHAREHOLDER RETURN
We design our executive compensation program to align pay with company performance, and as highlighted in the charts below, there is strong alignment between the two. The charts below compare our CEO’s total compensation and our annual TSR over theone-year and three-year periods ended December 31, 2019 to the CEO total compensation and annual TSR of our compensation peer group over theone-year and three-year periods ended December 31, 2018, which are the most recent periods for which data was available to the Compensation Committee
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| 2020 PROXY STATEMENT | 35 | |||||||
COMPENSATION DISCUSSION AND ANALYSIS |
Our 2019 executive compensation program generally consisted of three principal components, as further described below. We also provide other forms of compensation, including discretionary and other cash bonuses and equity awards and long-term incentive plans or awards. In addition, we provide retirement and benefits plans to executives on the requirementssame basis as our other employees and we provide certain other limited remuneration to them. For additional information, please see “Compensation-Setting Process” and “Summary Compensation Table” below.
| Percentage of 2019 Target Compensation(1) | ||||||
| President and CEO | Average of Other Named Executive Officers | Description and Purpose | ||||
Base Salary |  |
| Competitive fixed cash compensation used to attract and retain talented executives. | |||
Annual Cash Incentive Awards |  | | Cash incentives designed to reward executive officers for successful corporate performance against Board approved annual bonus targets and individual performance toward achieving corporate goals. | |||
Annual Long-Term Equity Awards |  |
| Stock option, RSU and PSU awards subject to time-based and/or performance-based vesting designed to align each executive officer’s incentives with shareholder value creation. | |||
| (1) | For purposes of |
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COMPENSATION DISCUSSION AND ANALYSIS |
The Compensation Committee oversees, reviews, and approves our executive compensation program.
Compensation Committee seeks to establish a mix between cash compensation and long-term equity incentives similar to the mix used by the companies in our compensation peer group. For example, generally, and for 2018, the Compensation Committee set a significant portion of compensation to be “at risk” based on our performance, in the form of both cash and equity, with heavier weight towards equity incentives that directly align the interests of our executives with our stockholders. Calendar
| February – March | July – August | December | ||
• Assess Company and individual performance in the prior year and determine corporate payout factor for corporate performance • Approve annual bonus awards for the prior year and base salary adjustments based on prior year’s performance and market data on compensation for the executive’s position • Finalize corporate and strategic goals for the upcoming year • Set annual bonus award targets for the upcoming year • Review director compensation against the market • Review Compensation Committee charter • Conduct compensation risk assessment • Review director and executive officer share ownership against corporate ownership guidelines • Review and approve Compensation Discussion and Analysis | • Update compensation peer group • Conduct market assessment of base salaries, annual bonuses and long-term equity incentive compensation using new peer group • Approve long-term RSU, stock option and PSU equity awards • Prepare performance-based equity plans and metrics for annual equity grants • Make market-based adjustments to base salaries and annual bonus award opportunities when appropriate | • Review feedback from investor outreach • Assess compensation governance practices • Prepare for incentive plans for the following year • Prepare for annual compensation decisions | ||
The Compensation Committee also believes that it is important to align compensation levels and the mix and levels of compensation we offer to thatthose offered by our peers in order to retain and incentivize the talented executive officers whose efforts are key to our long-term success.
| 2020 PROXY STATEMENT | 37 | |||||||
COMPENSATION DISCUSSION AND ANALYSIS |
2019 TARGET COMPENSATION AT RISK(1)
| (1) | For purposes of these charts, target compensation consists of base salary and target annual incentive awards as set by the Compensation Committee in February 2019 and target annual equity awards determined based on market data. It does not include other forms of compensation the executive officers received. Target compensation for Dr. Taylor, who joined the Company in May 2019, consists of annualized amounts to represent a full year of compensation for his position. |
ROLE OF EXECUTIVE OFFICERS
Our CEO makes recommendations to the Compensation Committee with respect to base salary levels, annual cash incentive awards, individual performance assessments, and the amount of long-term equity awards to be granted to our executive officers (other than with respect to his own compensation) in consultation with CompensiaRadford and our Executive Vice President, Human Resources. In addition, our Executive Vice President, Human Resources supports the Compensation Committee in its work, including preparation of historical and prospective executive compensation data, review of peer group data and biotechnology market practices, and research in response to technical Compensation Committee inquiries. Other than as described above, neither the CEO nor any other executive officers take part in the Compensation Committee’s decisions regarding executive officer compensation.
ROLE OF COMPENSATION CONSULTANT
In early 2019, the Compensation Committee has the authority, in its sole discretion, to retain (or obtain the advice of) any compensation consultant, legal counsel or other adviser to assist it in the performance of its duties and responsibilities. Pursuant to this authority, the Compensation Committee has engaged Compensia, Inc., a national compensation consulting firm, for support on matters related to the compensation of our executive officers.
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COMPENSATION DISCUSSION AND ANALYSIS |
COMPETITIVE POSITIONING
The Compensation Committee reviews our peer group periodicallyannually to reflect changes in market capitalization and other factors, including acquisitions, and revises the companies included in the peer group accordingly. The compensation peer group used by the Compensation Committee to review compensation in August 2019 and February 2020 was approved by the Compensation Committee, with input provided by senior management and Radford, in July 2019. The criteria used to select this peer group are described below:
CORE CRITERIA | ||
| Market Capitalization | 25%-300% of our market cap as of April 30, 2019($3B-$36B) to capture a wide array of commercially successful or very promising emerging biotechnology companies | |
| Commercial | As a company that has been commercial for seven years, a peer company should also be commercial. Breakthrough companies on the cusp of becoming commercial may also be considered | |
| Revenue | 25%-500% of last four quarters’ reported revenue (~$200M-$3B) to capture companies becoming like us and directionally where we are heading | |
| Global Headcount | 25%-300% of our current headcount (~300 to 4,000) to capture our market segment | |
OTHER QUALITATIVE CRITERIA | ||
Cutting Edge Research and Development | Innovative, research based research and development companies with cutting edge science and a preference for oncology focus | |
Headquarters Location | Primarily focused on U.S. based headquartered companies | |
| Past Peer | Preference would be given to a past peer company in order to ensure year-over-year stability | |
| Recruiting | Based on initial quantitative screen, where the Company loses talent to and recruits from will be considered to help narrow the list | |
| Cross-Pollination | Peers of peers will also be considered, including those companies that consider us a peer company | |
| 2020 PROXY STATEMENT | 39 | |||||||
COMPENSATION DISCUSSION AND ANALYSIS |
Based on this analysis, the Compensation Committee arrived at the following peer group in July 2019:
Peer Group Companies ACADIA Pharmaceuticals Inc. Alexion Pharmaceuticals, Inc. Alkermes plc Alnylam Pharmaceuticals, Inc. BeiGene Ltd. BioMarin Pharmaceutical Inc. bluebird bio, Inc. Exelixis, Inc. Incyte Corporation Ionis Pharmaceuticals, Inc. Jazz Pharmaceuticals Public Limited Company Nektar Therapeutics Neurocrine Biosciences, Inc. Sarepta Therapeutics Corporation United Therapeutics, Inc. Vertex Pharmaceuticals Incorporated |
(1) Based on data used by the Compensation Committee in July 2019 when selecting the peer group. (2) Market capitalization of the peer group is as of June 21, 2019. (3) Revenue for the peer group reflects the trailing twelve months ended March 31, 2019. (4) Global headcount for the peer group is as of December 31, 2018. |
Changes from Prior Peer Group | Added: ACADIA Pharmaceuticals Inc. | Deleted: Agios Pharmaceuticals, Inc. | ||
The peer group used by the Compensation Committee when making salary bonus and bonus target compensation decisions in January 2018 was our peer group that resulted from Compensia’s analysis in August 2017 that2019 was approved by the Compensation Committee, with input provided by senior management and Compensia, at that time. As ofin August 2018. The criteria used to select this peer group were similar to the date this analysis was performed, these twentycriteria used to select the new peer companies had a mediangroup in July 2019, as described above, except as follows:
The criterion for market capitalization was25%-500%of approximately $6.8 billion, as compared to our market capitalization as of approximately $9 billion, median 12-month revenue through June 30, 2017May 31, 2018; and
The criterion for global headcount was25%-500% of approximately $89 million, as compared to our 12-month revenue through June 30, 2017 of approximately $429 million, and a median of 456 employees, as compared to our 890 employees. This peer group consisted of:then-current headcount.
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COMPENSATION DISCUSSION AND ANALYSIS |
As of the Compensation Committee to review compensationdate the analysis was performed in August 2018, was approved by the Compensation Committee, with input provided by senior management and Compensia, and included biotechnology and pharmaceutical companies that were similar to the Company with respect to revenue, market capitalization, headcount, development and commercialization stage and number of employees. In each case, as of the date this analysis was performed, these prior peer group companies had a median market capitalization of approximately $8 billion, as compared to our market capitalization of approximately $9.5 billion, median12-month revenue of approximately $452 million, as compared to our12-month revenue of approximately $482 million, and a median of 715 employees, as compared to our 1,100 employees. This peer group consisted of:
BASE SALARY
In considering the Named Executive Officers
| Named Executive Officer | 2017 Base Salary | 2018 Base Salary Approved in January 2018 | Revised 2018 Base Salary Approved in August 2018 | Total Percentage Increase | ||||
| Dr. Siegall | $890,000 | $921,150 | No adjustment | 3.50% | ||||
| Mr. Simpson | $493,600 | $510,900 | $540,900 | 9.58% | ||||
Dr. Dansey (1) | — | — | No adjustment | — | ||||
| Dr. Himes | $478,400 | $507,500 | No adjustment | 6.10% | ||||
| Mr. Cline | $454,300 | $482,500 | No adjustment | 6.20% | ||||
Named Executive Officer | 2019 Base Salary Approved in February 2019 | Percentage Increase | ||||||||
Dr. Siegall | $ | 967,208 | 5.0% | |||||||
Mr. Simpson | $ | 575,200 | 6.34% | |||||||
Dr. Dansey | $ | 672,800 | 3.51% | |||||||
Ms. Liu | $ | 522,200 | 4.5% | |||||||
Dr. Taylor(1) | — | — | ||||||||
| (1) | Dr. Taylor began employment with us in May 2019. |
ANNUAL CASH INCENTIVE AWARDS
We maintain an annual cash incentive bonus plan, or the commercial organization.
| Named Executive Officer | Target Annual Cash Incentive Award Opportunity (percentage of base salary) | Target Annual Cash Incentive Award Opportunity | ||
| Dr. Siegall | 100% | $921,150 | ||
| Mr. Simpson | 50% | $270,450 | ||
| Dr Dansey | 50% | $200,330(1) | ||
| Dr. Himes | 50% | $253,750 | ||
| Mr. Cline | 45% | $217,125 | ||
| 2020 PROXY STATEMENT | 41 | |||||||
COMPENSATION DISCUSSION AND ANALYSIS |
CORPORATE PERFORMANCE GOALS
The corporate performance goals under the Executive Bonus Plan for 20182019 were approved in March 2018 and were not subsequently modified. The performance goals were primarily based on sales of ADCETRIS, the advancement of development and clinical activities related to ADCETRIS, advancement of EV, TV and tucatinib and additional product candidates with the goal of becoming a multi-product company, goals related to antibody-drug conjugate, or ADC, leadership goals relating to scaling our operations, and business and operations goals related to expense management, hiring and retention and stock performance, all of whichby the Compensation Committee believes strongly relate to the creation of stockholder value.in February 2019. The weighting of these goals as approved in March 2018 is set forth in the chart below:
The specific target performance goals, and their relative weightings, established
ADCETRIS Sales and Development | Goals(30%) • Canada • |
PADCEV Development Goals(20%) • Submit a Biologics License Application to the • Achieve commercial launch readiness by year end • Initiate at least one study for potential label expansion | |
Tucatinib Development • Submit a New Drug Application to the FDA and • Prepare for first quarter 2020 commercial launch readiness • Initiate at least one study for potential label expansion | |
Hiring and Business Infrastructure Goals(12.5%) • Achieve hiring and business infrastructure goals | |
Tisotumab Vedotin and Ladiratuzumab Vedotin Development Goals(7.5%) • Complete enrollment in tisotumab vedotin pivotal study • Determine at least one additional solid tumor registration opportunity • Determine a potential regulatory approval path for ladiratuzumab vedotin | |
Pipeline Development Goals(5%) • Achieve goals | |
Stock Performance Goals(5%) • Stock performance relative to |
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COMPENSATION DISCUSSION AND ANALYSIS |
CORPORATE PERFORMANCE LEVELS
The Compensation Committee considered 2019 to be an exceptional year for our Company. In making its assessment regarding the extentaddition to which the corporatemeeting or exceeding most of our 2019 performance objectives for 2018 were achieved,goals, the Compensation Committee consideredbelieved that the Company had outstanding overall performance on the PADCEV and tucatinib development goals, hiring and infrastructure goals, pipeline development goals and stock performance goals. To determine our corporate performance percentage for 2019, the Compensation Committee employed a holistic analysis that took into account both the extent to which the objectivesperformance goals had been achieved or exceeded as well as the relative difficulty of each objective that was achieved compared to any objectivesachieving the goals that were not achieved.met and that were only partially met. In light of our strong performance in meeting or exceeding most of our corporate performance goals and the challenging nature of the goals, the Compensation Committee, in its discretion, determined our corporate performance percentage to be 130%160% of the target performance level for 2018.2019. The table below provides additional details about the Compensation Committee’s assessment of our actual performance against our 2019 corporate performance goals:
2019 Corporate Performance Goal | Relative Weighting | Highlights | 2019 Performance | |||
ADCETRIS Sales and Development Goals | 30% | • Developed an updated ADCETRIS label expansion strategy • Determined development paths and study concepts for multiple potential indications • Obtained approval of the majority of protocols for label expansion trials • Began enrollment in multiple potentially registration-enabling trials • Obtained label expansion in Canada for use as frontline therapy for patients with CD30-expressing peripheralT-cell lymphoma based on theECHELON-2 trial results • Achieved an annual net sales increase of 32% in the U.S. and Canada, resulting in record annual sales and partially achieving an aggressive sales goal. | Met or exceeded most goals | |||
PADCEV Development Goals | 20% | • Achieved positive results from the first cohort of theEV-201 trial, providing the basis for a Biologics License Application to the FDA • Received FDA accelerated approval of our second product, PADCEV, with Astellas, three months prior to the PDUFA target action date based on the results from the first cohort of theEV-201 trial, transforming us from a single-product, into a multi-product, oncology company • Established cross-functional commercial launch readiness and achieved the first sale of PADCEV • Achieved encouraging initial results from the phase 1/2EV-103 trial as a frontline treatment in combination with pembrolizumab for patients with advanced urothelial cancer and presented these initial results at the 2019 European Society for Medical Oncology conference • Expanded theEV-103 trial, and submitted protocols to the FDA for two additional trials, to inform potential label expansion, including in frontline indications | Outstanding overall performance; met or exceeded all goals | |||
| 2020 PROXY STATEMENT | 43 | |||||||
COMPENSATION DISCUSSION AND ANALYSIS |
2019 Corporate Performance Goal | Relative Weighting | Highlights | 2019 Performance | |||
Tucatinib Development Goals | 20% | • Achieved positive results in theHER2CLIMB-01 trial • Expedited the submission of a New Drug Application to the FDA • Obtained Breakthrough Therapy Designation for tucatinib from the FDA and participated in the FDA Oncology Center of Excellence’s, or OCE’s, Real Time Oncology Review pilot program, which allows the FDA to review much of the data earlier, before the application is formally submitted, so that by the time of submission, the agency’s review team is in a better position to conduct a more efficient review • Participated in the FDA OCE’s Project Orbis initiative which provides a framework for concurrent submission and review of oncology products among Australia, Canada, Singapore, Switzerland and the U.S. • Prepared a Marketing Authorization Application for submission to the European Medicines Agency. Although the submission occurred in January 2020, the Compensation Committee determined that this goal was exceeded as no submission date was available in December. • Engaged in preparations for launch readiness • Finalized plans to expand the therapeutic potential of tucatinib • Began enrollment in the phase 3HER2CLIMB-02 trial, which could potentially provide the basis for the use of tucatinib in an earlier line of therapy for metastatic HER2-positive breast cancer • Expanded the phase 2 MOUNTAINEER trial of tucatinib to support potential accelerated approval of tucatinib in HER2-positive colorectal cancer | Outstanding overall performance; met or exceeded all goals | |||
Hiring and Business Infrastructure Goals | 12.5% | • Hired 454 new employees, including 7 key executives, increasing the size of the work force by 23% • Maintained a turnover rate of approximately 10% compared to a benchmark of approximately 16% among life sciences companies • Expanded our footprint in the U.S. and European Union • Undertook infrastructure build plans to enable tucatinib submissions in other geographies, including Project Orbis countries • Expanded product supply and quality functions to scale up commercial manufacturing and potential distribution of tucatinib in Europe | Outstanding overall performance; exceeded all goals | |||
Tisotumab Vedotin and Ladiratuzumab Vedotin Development Goals | 7.5% | • Completed enrollment in the innovaTV 204 trial • Certain goals relating to clinical development actions for tisotumab vedotin and ladiratuzumab vedotin were only partially achieved. | Met or partially met all goals | |||
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COMPENSATION DISCUSSION AND ANALYSIS |
2019 Corporate Performance Goal | Relative Weighting | Highlights | 2019 Performance | |||
Pipeline Development Goals | 5% | • Began enrollment of new product candidates in phase 1 trials • Added new development-stage programs • Filed three Investigational New Drug, or IND, applications with the FDA and assumed an additional IND application | Outstanding overall performance; met or exceeded all goals | |||
Stock Performance Goals | 5% | • In addition to achieving TSR of 102% in 2019, the Company exceeded goals related to stock performance relative to appropriate biotechnology indices. | Outstanding overall performance; exceeded all goals | |||
INDIVIDUAL PERFORMANCE LEVELS
Our CEO assessed the other executive officers’ contributions to the 20182019 corporate goals and made a recommendation to the Compensation Committee with respect to the individual performance percentagepercentages for the other executive officers for 2018.2019. The factors considered by the CEO in making this determination included a holistic,non-formulaic evaluation of individual officer’s performance the criticality of the executive officer’s role in achieving corporate deliverables,and the executive officer’s contribution to achieving corporate goals and the achievement of individual or departmental goals. The Compensation Committee reviewed the CEO’s recommendations on individual performance factors for each executive officer for 20182019 and then made a final determination of the 20182019 individual performance percentage for each executive officer as follows: 140% for Dr. Himes, 130% for Mr. Simpson, 150% for Dr. Dansey and 80% for Mr. Cline. Noofficer. The factors considered by the Compensation Committee in determining the individual performance factor was determinedpercentage of each executive officer are described below under “2019 Key Compensation Decisions for Named Executive Officers.” The individual performance percentages for each of our executive officers are set forth in under “Annual Cash Incentive Payout Formula” below.
ANNUAL CASH INCENTIVE PAYOUT FORMULA
Named Executive Officer | Target Cash Incentive Award for 2019 | Corporate Performance Weighting | Corporate Performance Percentage | Annual Cash Incentive Award for 2019 | ||||||||||||||||||||||||
Percentage of Base | Dollar Amount | Individual Performance Weighting | Individual Performance Percentage | |||||||||||||||||||||||||
Dr. Siegall | 100% | $ | 967,208 | 100% | 160% | 0% | — | $ | 1,547,500 | |||||||||||||||||||
Mr. Simpson | 50% | $ | 287,600 | 60% | 160% | 40% | 130% | $ | 425,700 | |||||||||||||||||||
Dr. Dansey | 50% | $ | 336,400 | 60% | 160% | 40% | 175% | $ | 558,400 | |||||||||||||||||||
Ms. Liu | 50% | $ | 261,100 | 60% | 160% | 40% | 130% | $ | 386,500 | |||||||||||||||||||
Dr. Taylor | 50% | $ | 154,800 | (1) | 60% | 80% | (2) | 40% | 80% | $ | 123,800 | |||||||||||||||||
| (1) | Dr. Taylor’s bonus reflects a pro rata amount of his $250,000 annual bonus target to reflect his hiring date in May 2019. |
| (2) | Dr. Taylor’s corporate performance percentage was capped at his individual performance percentage, because his individual performance percentage was less than 100%. |
With the exception of Ms. Liu, the target cash incentive awards of our executive officers as a percentage of base salary remained unchanged from 2018. For 2019, Ms. Liu’s target cash incentive award changed from 45% to 50% of base salary to more closely align with similarly situated peers.
Each executive officer’s annual cash incentive award is targeted at 100%, and capped at 200%, of the target award amount. Each executive officer (other than our CEO since hiswhose annual cash incentive award is based entirelysolely on the achievement of corporate performance factor discussed above.
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then regardless ofwhen calculating the actual Company performance percentage, in calculating such participant’s final bonus payout, the Companyexecutive officer’s corporate performance percentage will be capped at the participant’ssuch individual performance percentage. These changes are effective aspercentage, regardless of February 2019 and will apply toactual corporate performance.
DISCRETIONARY AND OTHER CASH BONUS AWARDS
Historically, the determination of executiveCompensation Committee has approvedsign-on bonuses for new executives as an inducement to joining Seattle Genetics and to compensate the executive for forgone compensation with a previous employer. In 2019, which willDr. Taylor was paid a $360,000sign-on bonus in connection with the commencement of his employment with us. The Compensation Committee viewed thissign-on bonus as appropriate as part of a package to recruit Dr. Taylor in light of the importance of Dr. Taylor’s skill and experience to our commercialization efforts and the competitiveness of the market for top talent. In addition, in 2019, Dr. Dansey received the portion of hissign-on bonus payable after 18 months of employment in the amount of $150,000. The Compensation Committee viewed thissign-on bonus as appropriate as part of a package to recruit and retain Dr. Dansey in May 2018, particularly in light of the importance of his skills and experience in late stage drug development to our efforts to become a multi-product oncology company. Discretionary bonuses may also be madeawarded for an anniversary with Seattle Genetics. In 2019, Ms. Liu was awarded a five-year work anniversary bonus in early 2020.
ANNUAL LONG-TERM EQUITY AWARDS
We offer long-term incentive compensation in the form of equity awards to our executive officers to align their incentives with stockholder value creation.officers. Generally, a significant equity award is granted aton the timedate an executive officer commences employment, with the grant date occurring on the fifteenth day of the month following the month he or she commences employment (or the first business day thereafter).employment. Thereafter, equity awards may be granted at varying times and in varying amounts in the discretion of the Compensation Committee, but are generally granted once a year at the Compensation Committee’s regularly scheduled meeting held in August unless such executive officer is promoted, provided with a retention grant, recognized for outstanding performance or granted a performance-based incentive award. We do not have any program, plan or practice to time stock awards to our executive officers or other employees in coordination with the release of material,non-public information.
Annual equity awards are granted and RSU awards comprising the other approximately 50%. Specifically, anunder our 2007 Equity Plan, using mix of different equity grant value is determined for each executive officer role after the Compensation Committee reviews peer group data and the performance of the executive. This total value is then divided in half, and approximately 50% of the value is allocatedinstruments to be granted in the form of options and approximately 50% of the value is allocated to be granted in the form of RSUs. The number of shares underlying each option grant will be based on an approximation of 50% of grant date fair value, using the Black Scholes methodology for stock options. The number of shares underlying each RSU grant will be calculated by dividing 50% of the value by the average stock price over the 30 calendar days leading up to the date of grant. This 50/50 mix is based on thefurther its goal of attracting and retaining top performers and reflects a balanced approach that includes both options and RSUs. to balance the relative advantages of different instruments.
Stock options are grantedan important vehicle for tying executive pay to performance, because they deliver future value only if the value of our common stock increases above the exercise price and therebyprice. As a result, they provide strong incentives for our executive officers to increase the value of our common stock over the long term. The Compensation Committee grants term, and they tightly align the interests of our executives with those of our shareholders.
RSU awards are granted because they are less dilutive to our stockholders,shareholders, as fewer shares of our common stock are granted to achieve an equivalent value relative to stock options, and because relative to options, RSUsRSU awards are an effective retention tool that maintain value even in a case in which our tradingcases where the share price is low as compared with option exercise prices. Thetrading lower than the initial grant price.
In 2019, our Compensation Committee continuesalso granted PSU awards, including to believe that this mix is appropriate for our current stage of development and is effective in aligningCEO to further align the interestscompensation of our executivesCEO with those of our stockholders.
In August 2018,ALLOCATION OF ANNUAL EQUITY AWARDS
Generally, the Compensation Committee considered and approveddetermines the grantvalue of each executive officer’s annual equity awards to our executive officers after reviewinggrant using a holistic evaluation that takes into account a competitive market analysis prepared by Compensia and referencing the 50th percentileour independent compensation consultant with market data for each role, the recommendations of our CEO based on his evaluation of their individual performance (except with respect to the CEO'sCEO’s performance), the executive officer’s prior grant levels and the extent to which the executive officer is currently vested in his or her stock awards, scope and criticality of the executive’s role and parity in targets among executives in roles of a given level. In cases of outstanding performance, theThe Compensation Committee will approvedoes not target a specific percentile within our peer group to determine annual equity awards targetingfor the 75th percentile. Based on Dr. Siegall's crucial leadershipnamed executive officers. Instead, we review the practices of our peer group and outstanding performance,the general biotechnology market as merely a reference point to assist us in 2018,developing programs designed to attract and retain exceptional talent and drive company performance.
In August 2019, the Compensation Committee approved anthe annual equity awards for our named executive officers (other than our CEO) in a combination of options and RSU awards with approximately 50% of the value allocated in the form of options and approximately 50% of the value allocated in the form of RSU awards.
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In the case of the annual equity awards granted to our CEO, based on investor feedback and to further align equity compensation of our CEO with company performance and market practice among peer companies, we granted approximatelyone-third of the overall value of our CEO’s 2019 equity grant at approximatelyin the 75th percentileform of PSU awards,one-third in the form of RSUs andone-third in the form of stock options.
2019 TARGET ANNUAL LONG-TERM EQUITY AWARDS
The number of shares underlying each stock option grant was calculated by dividing the target value of the option award by the product of the average stock price for the 30 calendar days prior to Dr. Siegall.
Each RSU award granted as part of the annual equity awards in 2019 vests in four equal installments on the anniversary of the grant vesting commencement date. Each option award granted as part of the annual equity awards in 2019 have a ten year term and vest as to 1/4th of the shares subject to the stock options and RSU awards granted to our named executive officers in the 2018 annual equity grant (other than pursuant to the special performance-based incentive awards described separately above and below), as well as the total grant date fair value of these awards on the applicable date of grant.
| Named Executive Officer | Options to Purchase Shares of our Common Stock | RSU Awards for Shares of our Common Stock | Aggregate Grant Date Fair Value (1) | |||
| Dr. Siegall | 227,984 | 95,981 | $14,916,892 | |||
| Mr. Simpson | 49,205 | 20,715 | $3,219,442 | |||
Dr. Dansey (2) | 17,199 | 7,241 | $1,131,657 | |||
| Dr. Himes | 42,644 | 17,953 | $2,790,176 | |||
| Mr. Cline | 44,285 | 18,644 | $2,897,553 | |||
RSUCEO PSU AWARDS
The PSU awards granted to our CEO were allocated among two separate awards and are not earned unless certainpre-specified long-term performance goals are achieved, as shown in the table below.
Percentage of Total CEO PSU Grant, by Target Number of Shares | Type of Target | Factors Considered to Establish Rigorous Targets | Performance Period | |||
| Adjusted Revenue—designed to only include revenues tied to products, program candidates or research programs that we owned at the time of grant, to incentivize organic revenue growth in our core business rather than revenue from acquisitions | Target value is based on an internal benchmark for revenue growth and long-range goals that incorporate optimistic assumptions regarding contributions from the commercialization of PADCEV and the potential commercialization of one or more of our product candidates. In order to achieve the target, the Company must achieve significant revenue growth. | Fiscal Year 2022 | |||
| Relative TSR—designed to measure our relative TSR performance compared to a group of other public biotechnology companies, or the PSU Index Companies(1) | Based on relative performance as compared to other public biotechnology companies. | Three years, beginning September 1, 2019 | |||
| (1) | The other public biotechnology companies are ACADIA Pharmaceuticals Inc.; Agios Pharmaceuticals, Inc.; Alexion Pharmaceuticals, Inc.; Alkermes plc; Alnylam Pharmaceuticals, Inc.; Amgen Inc.;Bio-Techne Corporation; Biogen Inc.; BioMarin Pharmaceutical Inc.; bluebird bio, Inc.; Charles River Laboratories International, |
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| Inc.; Exact Sciences Corporation; Exelixis, Inc.; FibroGen Inc.; Gilead Sciences, Inc.; Grifols SA ADR; Illumina, Inc.; Incyte Corporation; Intercept Pharmaceuticals Inc.; Ionis Pharmaceuticals, Inc.; IQVIA Holdings Inc.; Nektar Therapeutics; Neurocrine Biosciences, Inc.; QIAGEN N.V.; Regeneron Pharmaceuticals, Inc.; Sarepta Therapeutics, Inc.; Ultragenyx Pharmaceuticals Inc.; United Therapeutics Corporation; and Vertex Pharmaceuticals Incorporated. The list of companies is subject to adjustment in certain circumstances such as a bankruptcy, acquisition of the reference company or going private transaction. |
Each PSU award granted in 2019 will vest upon the Compensation Committee’s certification as to the level of achievement of the performance target. Depending on the adjusted revenue and relative TSR results actually achieved, the payout on each of these PSU awards may vary from 0% to 200% of target. In addition, for each PSU award, a threshold level of performance must be achieved or no stock units will be earned.
At the time the Compensation Committee set the 2022 Adjusted Revenue target, the Company was a single-product oncology company, with only ADCETRIS approved for marketing. Nevertheless, the target was set at a level that the Compensation Committee believed would only be achievable if the Company expanded into a multi-product oncology company. The Compensation Committee set the target at a level that it believed challenging and that presented significant risk of not being achieved in light of the competitive nature of our industry, pricing pressures, the stage of our pipeline candidates and the degree of execution required to expand into a multi-product oncology company on the scale necessary to meet the target. In addition, for a single product company to adequately forecast its revenues three years in the future for multiple products involves a significant amount of challenge, uncertainty and risk of loss.
The PSU award based on Relative TSR, or the Relative TSR PSU award, vests based on the Company’s TSR performance relative to the PSU Index Companies over a three-year performance period. To calculate the Company’s relative TSR performance, the cumulative three-year TSR performance for the Company and each of the PSU Index Companies is calculated and then the Company’s discrete percentile rank is calculated. The potential payouts for the TSR PSU are set forth below.
Company’s Relative TSR Ranking | Percentage of Target Shares | ||||
90th percentile or above | 200% | ||||
75th percentile | 150% | ||||
50th percentile | 100% | ||||
25th percentile | 25% | ||||
Below 25th percentile | 0% | ||||
Vesting of the PSU awards granted as part of the annual equity awards in 2019 will cease upon termination of service as an employee for any reason other than death or disability. The PSU awards provide for acceleration of vesting in the event of certain specified change in control events involving us or the termination of our CEO’s employment due to death or disability. Vesting of the PSU awards granted in 2019 will cease upon termination of service as an employee for any reason other than death or disability. The PSU awards provide for acceleration of vesting in the event of certain specified change in control events wherein the PSU awards are assumed by the surviving entity, the PSU awards will convert to time-based vesting and cliff vest on the last day of the applicable performance period, subject to our CEO’s continued service through the applicable vesting date; provided, however, that if our CEO is involuntarily terminated immediately prior to or within 12 months after any such change in control event, the PSU awards will vest effective as of the date of such involuntary termination.
PARTIALLY EARNED EV/TV LTIP AWARDS
In September 2017, the Compensation Committee approved a long-term incentive plan, or the EV/TV LTIP, for the purpose of incentivizing the Company’s employees to achieve regulatory approval of PADCEV and potentially achieve regulatory approval of tisotumab vedotin, or TV, a product candidate currentlybeing co-developed by the Company and Genmab A/S, or Genmab, under the Company’s collaboration and license agreement with Genmab. The EV/TV LTIP provides that each eligible employee, including each named executive officer, is eligible to receive a cash award and, depending on the participant’s position with the Company, may also be eligible for an RSU award, subject to the participant’s (i) continued employment with the Company and (ii) good standing as of each applicable payment and grant date. A portion of each cash award was payable and a portion of each RSU award was to be granted upon certification by the Compensation Committee that the FDA approved PADCEV. PADCEV received FDA accelerated approval on December 18, 2019. As a result, the Compensation Committee approved cash awards and the grant of RSU awards to eligible employees, including our named executive officers, under the EV/TV LTIP in December 2019. The EV/TV LTIP RSU awards that were granted will vest on the second anniversary of the date of FDA approval, subject to continuous service with the Company through the vesting date. A portion of the award remains earnable based on performance against goals related to TV.
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PSU AWARDS DEEMED ELIGIBLE TO VEST
In August 2018, (other thanthe Compensation Committee also approved a PSU grant to Dr. Dansey with a target and maximum number of shares equal to 17,263. The PSU awards vest in tranches contingent on the FDA’s approval of PADCEV, tucatinib and TV but will not vest prior to December 31, 2021, subject to Dr. Dansey’s new hire RSU award andcontinued employment on the awards granted undervesting date. Upon the Tucatinib LTIP, as described below)Compensation Committee’s certification that PADCEV received FDA accelerated approval, the EV portion of the PSU was deemed eligible to vest. The EV portion will vest 25% per year over a four year period,on December 31, 2021, subject to Dr. Dansey’s continued employment on the vesting acceleration as described under “—Post-Employment Compensation” below.date.
EV FRONTLINE PSU AWARDS
From time to time we grant long-term cash or equity incentive opportunities intended to drive attainment of key performance goals over a multi-year period.
The target number of stock units in the First Tranche granted on November 1, 2018 equaled 50% of the target award value applicable tovalues for each executive officer divided by the average closing price of our common stock for the 30 calendar day period ending on October 31, 2018. The First Tranche will only vest upon certification by the Compensation Committee of the first approval by the FDA for the commercial sale and marketing of tucatinib in the United States by us or any of our partners for any indication, based on the clinical trial data from the pivotal HER2CLIMB trial (such achievement, the Tucatinib Milestone, and the date on which the Compensation Committee certifies achievement, the Certification Date), provided that the executive officer is still employed by us as of the date of vesting. If the First Tranche vests due to achievement of the Tucatinib Milestone, the number of shares that vest will be determined by multiplying the target number of RSUs subject to each RSU award by the applicable earn out percentage. An earn out percentage, on a sliding scale from 0% to 144%, will be determined based on the date of achievement of the Tucatinib Milestone and the breadth of the indication or indications, as the case may be, for which tucatinib is approved by the FDA for commercial sale and marketing in the United States on the date that the Tucatinib Milestone occurs.
None of the Tucatinib LTIP are as follows:
Each of the Accelerated Approval Milestone and the Regular Approval Milestone has a deadline by which it must be achieved. If it is not achieved by its deadline, then the associated number of stock units will be forfeited. Neither the Accelerated Approval Milestone nor the Regular Approval Milestone can be achieved within one year of the date of grant.
DISCRETIONARY AND OTHER EQUITY AWARDS
Discretionary equity awards may be granted for special recognition of achievement and to provide an additional long-term retention and other incentives to top performing employees. In February 2019, Dr. Dansey received a special-recognition RSU award valued at $412,297 in recognition of his leadership in connection with a target and maximumthe FDA accelerated approval of ADCETRIS for the treatment of peripheralT-cell lymphoma patients based on the results of theECHELON-2 trial. The number of shares equalsubject to 17,263 and a grant date fairthis RSU award was determined by dividing the target value of $1,337,019. The RSU will vest in tranches contingent on FDA approval of EV, FDA approval of tucatinib and FDA approval of TV, subjectthe award by the average stock price for the thirty days prior to Dr. Dansey’s continued employment on the vesting date. The performance-based RSU was granted to Dr. Dansey in order to enhance retention and further incentivize his efforts in support of key late stage drug development programs. The vesting of Dr. Dansey’s performance-basedan including January 31, 2019. This RSU award is subject to partial accelerationvesting in the event an acquirer in a change of control of the Company fails to assume the RSU award or Dr. Dansey is terminated in certain circumstances following a change in control.
| Named Executive Officer | Earned Cash Award | Options for Shares of our Common Stock | ||||
| Dr. Siegall | $212,500 | 37,280 | ||||
| Mr. Simpson | 60,000 | 10,526 | ||||
Dr. Dansey(1) | — | — | ||||
| Dr. Himes | 47,500 | 8,333 | ||||
| Mr. Cline | 47,500 | 8,333 | ||||
Historically, the Compensation Committee has also approvedsign-on bonuses equity grants for new executives as an inducement to joining Seattle Genetics, and to compensate the executive for forgone compensation with a previous employer.employer and to provide long-term retention incentive. In 2018,2019, Dr.
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COMPENSATION DISCUSSION AND ANALYSIS |
The Compensation Committee viewed this sign on bonusthesesign-on equity grants as appropriate as part of a package to recruit Dr. DanseyTaylor in light of the importance of Dr. Dansey'sTaylor’s skill and experience to our late stage drug development efforts. In addition, Dr. Siegall was paid a twenty year employee anniversary bonus of $2,000commercialization efforts and Mr. Simpson received a $13,300 CEO award, which included a $3,300 gross up for taxes, that the Compensation Committee and Dr. Siegall awarded as partcompetitiveness of the Company’s CEO award program to recognize Mr. Simpson's outstanding performance in connection with our acquisition of Cascadian and follow-on equity financing in the first quarter of 2018.
HEALTH AND WELFARE AND RETIREMENT BENEFITS
All of our named executive officers are eligible to receive our standard employee benefits, such as our 401(k) plan, medical, dental and vision coverage, short-term disability, long-term disability, group life insurance, cafeteriaand employee stock purchase plan, and the ESPP, in each case on the same basis as our other employees, including the matching contributions provided under our Section 401(k) plan. For 2018,2019, we made a matching contribution equal to 75%100% of each employee’s salary deferral contribution up to 6%5% of the employee’s compensation, subject to the applicable statutory limit. For 2019,2020, the match has changed to 100% of each employee'semployee’s deferral up to 5%5.5% of eligible compensation. The matched contribution is not subject to a vesting period.
OTHER BENEFITS
In 2019, Dr. Dansey withreceived reimbursement of the cost of hisfor commuting expenses incurred in connection with his travel from his California residence to our headquarters in Bothell, Washington, including airfare and the cost of a corporate apartment. The Compensation Committee approved this benefit toapartment, grossed up for related payroll taxes. These commuting benefits were negotiated with Dr. Dansey in orderat the time of his initial employment and were deemed a reasonable expense and necessary inducement to induce his commencement of employment with us, particularly in light of the importance of his skills and experience in late stage drug development to our efforts to become a multi-product oncology company. In addition, Dr. Taylor received reimbursement for relocation costs in connection with the commencement of his employment with us, grossed up for related payroll taxes. This benefit was deemed a reasonable expense and necessary inducement to his commencement of employment with us.
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2019 KEY COMPENSATION DECISIONS FOR NAMED EXECUTIVE OFFICERS
The table below highlights performance factors and key compensation decisions for our named executive officers for 2019. It includes decisions regarding base salary, annual cash incentive awards and annual equity awards. It does not include other forms of compensation the executive officers received, including EV Frontline PSU awards, earned awards under the EV/TV LTIP, discretionary or other cash or equity awards, retirement and benefits plans or other remuneration. For additional information, please see “Compensation-Setting Process” above and “Summary Compensation Table” below.
| Named Executive Officer Performance | 2019 Key Compensation Decisions | |||
Dr. Siegall | 2019 was an exceptional year for the Company and the patients we serve. We became a multi-product company with the FDA accelerated approval of PADCEV, filed our New Drug Application for tucatinib, and served more patients than ever before with ADCETRIS. Specifically: FINANCIAL PERFORMANCE • Under Dr. Siegall’s leadership in 2019, revenue grew by more than 40% in 2019 to over $916M. ADCETRIS net sales in the U.S. and Canada were strong, growing by more than 32% when compared to 2018. • Additionally, the Company’s one-year TSR was at the 88th percentile when compared to our peers for 2019. PRODUCTS • During 2019, under Dr. Siegall’s leadership, the Company transformed into a multi-product company with PADCEV’s accelerated approval for patients suffering with metastatic urothelial cancer. • Additionally, the Company submitted marketing applications to the FDA and EMA for tucatinib in HER2+ breast cancer. This product candidate met all primary and secondary endpoints and would, if approved, expand our commercial reach from just the U.S. & Canada to other countries around the globe. • In addition, the Company filed three IND applications with the FDA, and assumed an additional IND application, to bring new potential therapies into the clinic. PEOPLE • During 2019, Dr. Siegall oversaw the continued evolution of the Company into a global, multi-product oncology company and the integration of hundreds of new employees to deliver on the vision of serving more patients. • He oversaw the hiring and onboarding of seven new key executive leaders. • He was heavily engaged in discussions around our global commercial strategy and the footprint the Company should have as it prepares to commercialize tucatinib. • He remains very involved in overseeing the work to drive cultural changes that support the creation of an environment where each employee can thrive, do their best work and support the Company’s mission. • He also continues to be involved in work promoting diversity, inclusion and pay equity. |
Base Salary: Effective February 1, 2019 Dr. Siegall’s base salary increased by 5.0% to $967,208 due to performance and to maintain competitive positioning in the market. Annual Cash Incentive Award: Dr. Siegall’s annual bonus was 160% of target and reflected the corporate performance percentage. To ensure absolute alignment between the CEO’s bonus and corporate performance, Dr. Siegall’s bonus percentage is equal to the corporate performance percentage. Annual Equity Awards: Dr. Siegall’s annual equity awards granted August 30, 2019 had a grant date fair value of $10,675,042, which consisted of approximately 1/3 options, 1/3 RSU awards and 1/3 PSU awards. Of the PSU awards, 20% of the target number of shares were based on TSR relative to the PSU Index Companies, and 80% were based on 2022 Adjusted Revenue, or the Adjusted Revenue PSU award. | ||
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COMPENSATION DISCUSSION AND ANALYSIS |
| Named Executive Officer Performance | 2019 Key Compensation Decisions | |||
Mr. Simpson | FINANCIAL PERFORMANCE • Mr. Simpson provided leadership in multiple transactions, including raising approximately $550M in new capital and multiple licensing and collaboration arrangements. The Company ended 2019 with over $2B in assets and no debt. PRODUCTS • Under Mr. Simpson’s leadership, the Company invested over $719M into research and development, and made investments to prepare for the commercialization of the Company’s second and potentially third products in 2020. PEOPLE • During 2019, Mr. Simpson oversaw the scaling of the finance team, and the hiring and onboarding of a new head of global real estate and facilities, to support multiple products and our expanding global operations. • Mr. Simpson also assumed the leadership and oversight of our European expansion. |
Base Salary: Effective February 1, 2019, Mr. Simpson’s salary increased by 6.34% to $575,200 due to performance, an expanding role, and to align with the market. Annual Cash Incentive Award: Mr. Simpson’s annual bonus was 148% of target and reflected an individual performance factor of 130%. Annual Equity Awards: Mr. Simpson’s annual equity awards granted August 30, 2019 had a grant date fair value of $3,098,483, which consisted of approximately 50% options and 50% RSU awards. | ||
Dr. Dansey | PRODUCTS • With the support of Dr. Dansey’s leadership, the Company completed two pivotal studies and released positive results for both PADCEV and tucatinib paving the way for the Company to become a multi-product, global oncology company. • Under Dr. Dansey’s leadership in 2019, the Company obtained FDA accelerated approval for PADCEV and submitted a New Drug Application for tucatinib to the FDA under the Real Time Oncology Review program in less than three months following topline results from theHER2CLIMB-01 trial. • Dr. Dansey also oversaw a large expansion of the scope of development efforts for ADCETRIS, PADCEV and tucatinib to potentially expand the labels for these drugs and bring these drugs to more patients in need. • Under Dr. Dansey’s leadership in 2019, the Company filed three IND applications with the FDA, and assumed an additional IND application, to bring new potential therapies into the clinic. PEOPLE • During 2019, Dr. Dansey oversaw the continued solidification of his leadership team. • In addition, he added a new head of Global Medical Affairs and oversaw the growth of his global development team, as we prepare to expand into multiple products and geographies. |
Base Salary: Effective February 1, 2019, Dr. Dansey’s salary increased by 3.51% to $672,800 due to performance and to maintain competitive positioning in the market. Annual Cash Incentive Award: Dr. Dansey’s annual bonus was 166% of target and reflected an individual performance factor of 175%. Annual Equity Awards: Dr. Dansey’s annual equity award granted August 30, 2019 had a grant date fair value of $4,290,155, which consisted of approximately 50% options and 50% RSU awards. | ||
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| Named Executive Officer Performance | 2019 Key Compensation Decisions | |||
Ms. Liu | FINANCIAL PERFORMANCE • With the support of Ms. Liu’s leadership, the Company executed multiple transactions, including raising over $700M in new capital and thein-licensing of new technology such as the partnership with BeiGene to develop an advanced preclinical product for the treatment of cancer. PRODUCTS • With the support of Ms. Liu’s leadership, we believe that the Company is positioned to support multiple products globally. • In addition, Ms. Liu was instrumental in the Company’s efforts to protect and maximize its intellectual property assets and in managing the Company’s litigation matters. PEOPLE • During 2019, Ms. Liu oversaw the expansion of her legal team and its capabilities in transactional law, securities law, compliance and the Company’s European expansion. |
Base Salary: Effective February 1, 2019, Ms. Liu’s salary increased by 4.5% to $522,200 due to performance and to maintain competitive positioning in the market. Annual Cash Incentive Award: Ms. Liu’s annual bonus was 148% of target and reflected an individual performance factor of 130%. Annual Equity Award: Ms. Liu’s annual equity award granted August 30, 2019 had a grant date fair value of $2,764,754, which consisted of approximately 50% options and 50% RSU awards. | ||
Dr. Taylor | FINANCIAL PERFORMANCE • The Compensation Committee considered the level of ADCETRIS net sales in the U.S. and Canada in reviewing Dr. Taylor’s performance. PRODUCTS • During 2019, Dr. Taylor oversaw the meetings and discussions to determine our global commercial strategy and the product launches for PADCEV and tucatinib (if approved) while also leading our ADCETRIS sales organization. PEOPLE • After joining the Company in May of 2019, Dr. Taylor supported the build out and launch readiness for two potential new products: enfortumab vedotin (PADCEV, which has since been approved) and tucatinib. |
Base Salary: Dr. Taylor joined the Company in May 2019 with a base salary of $500,000. Annual Cash Incentive Award(1): Dr. Taylor’s annual bonus was 80% of target and reflected an individual performance factor of 80%. Annual Equity Award(1): Dr. Taylor’s annual equity award granted August 30, 2019 had a grant date fair value of $679,140, which consisted of approximately 50% options and 50% RSU awards. (1) The chart above reflects annualized amounts to represent full-year awards for Dr. Taylor’s position. | ||
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COMPENSATION DISCUSSION AND ANALYSIS |
We provide severance benefit protection to our named executive officers through our individual employment agreements with each such individual. The Compensation Committee reviewed the employment agreements against our updated peer group in August 2018, and approved the following revisions to the severance benefit terms of the employment agreements to more closely conform our severance benefit practices to those of our peer group. These revised employment agreement terms became effective in October 2018.
The Compensation Committee believes these severance payments and benefits are important from a retention perspective to provide some level of protection to our executive officers from having their employment terminated without cause or constructively terminated prior to or after a change in control of the Company, or from experiencing a life-changing disability, and that the amounts are reasonable when compared with similar arrangements adopted by other biotechnology companies. In addition, the Compensation Committee believes that these severance payments and benefits align our executive officer and stockholdershareholder interests by enabling them to consider corporate objectives and possible transactions that are in the best interests of the stockholdersshareholders and other constituents of the Company without undue concern over whether such objectives or transactions may jeopardize their own employment.
With these arrangements, the Compensation Committee sought uniformity of terms among our executive officers based on their positions at the Company. In addition, the Compensation Committee believes that the payment-triggering event outside of the death or disability context, namely, being terminated without cause or constructively terminated, and then only when there is no misconduct by the executive officer, is a fair hurdle for the corresponding compensation.
More information regarding these arrangements is provided under the heading “
—Potential Payments Upon Termination orChange-in-Control—Employment Agreements.”In December 2019, we adopted a policy that provides for the recoupment of certain cash and Accounting Considerations
TAX AND ACCOUNTING CONSIDERATIONS
DEDUCTION LIMITATION
Under Section 162(m) of the Internal Revenue Code, or Section 162(m),the Code, compensation paid to any publicly held corporation’s “covered employees” that exceeds $1 million per taxable year for any covered employee is generallynon-deductible.
Prior to the enactment of the Tax Cuts and Jobs Act, Section 162(m) of the Code provided a performance-based compensation exception, pursuant to which the deduction limit under Section 162(m) of the Code did not apply to any compensation that qualified as “performance-based compensation” under Section 162(m). of the Code. Pursuant to the Tax Cuts and Jobs Act, the performance-based compensation exception under Section 162(m) of the Code was repealed with respect to taxable years beginning after December 31, 2017, except that certain transition relief is provided for compensation paid pursuant to a written binding contract which was in effect on November 2, 2017 and which is not modified in any material respect on or after such date.
Compensation paid to anyeach of the Company’s “covered employees” in excess of $1 million per taxable year generally will not be deductible unless it qualifies for the performance-based compensation exception under Section 162(m) of the Code pursuant to the transition relief provided by the Tax Cuts and Jobs Act.described above. Because of certain ambiguities and uncertainties as to the application and interpretation of Section 162(m), of the Code, as well as other factors beyond the control of the Compensation Committee, no assurance can be given that any compensation paid by the Company will be eligible for such transition relief and qualify forbe deductible by the performance-based compensation exception under Section 162(m).Company in the future. Although the Compensation Committee will continue to monitor the applicability of Section 162(m) to the Company’s ongoingconsider tax implications as one factor in determining executive compensation, arrangements, the Compensation Committee also intends to continuelooks at other factors in making its decisions and retains flexibility to provide compensation for the Company’s named executive officers in a manner consistent with the goals of the Company’s executive compensation program and the best interests of the Company and its stockholdersshareholders (which may include providing for compensation that is non-deductiblenot deductible by the Company due to the deduction limit under Section 162(m)) of the Code). The Compensation Committee also retains the flexibility to modify compensation that was initially intended to be exempt from the deduction limit under Section 162(m) of the Code if it determines that such modifications are consistent with the Company’s business needs.
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COMPENSATION DISCUSSION AND ANALYSIS |
ACCOUNTING CONSIDERATIONS
We follow Financial Accounting Standards Board ASC Topic 718 for our stock-based compensation awards. In accordance with ASC Topic 718, stock-based compensation cost is measured at the grant date, or with respect to performance-based awards, the service inception date, based on the estimated fair value of the awards using a variety of assumptions. This calculation is performed for accounting purposes and, as applicable, reported in the compensation tables, even though recipients may never realize any value from their awards. We expect to record this expense on an ongoing basis over the requisite employee service period. For performance-based stock options, we expect to record compensation expense over the estimated service period once the achievement of the performance-based milestone is considered probable. At each reporting date, we assess whether achievement of a milestone is considered probable, and if so, record compensation expense based on the portion of the service period elapsed to date with respect to that milestone, with a cumulative catch-up, net of estimated forfeitures. We will recognize remaining compensation expense with respect to a milestone, if any, over the remaining estimated service period. Accounting rules also require us to record cash compensation as an expense at the time the obligation is incurred.
On the recommendation of the Nominating and CorporateGovernance Committee, or the Governance Committee, our Board has adopted the following stock ownership guidelines for our named executive officers:
Role | Stock Ownership Guidelines | |
CEO | 5x base salary | |
Executive Officers | 1.5x base salary | |
Our executives are required to be in compliance with the stock ownership requirement by December 31st of the fifth year following the year during which such individual becomes subject to these ownership guidelines. As of December 31, 2018,2019, our CEO was in compliance with this stock ownership requirement. With the exception of Dr. Dansey, our currently serving executive officers first became subject to thesethe guidelines duringin 2017, when we first adopted stock ownership guidelines for executive officers other than our CEO, and will be required to be in compliance by December 31, 2022. Dr. Dansey first became subject to these guidelines on the datein 2018 when he commenced employment with us and will be required to be in compliance with the guidelines by December 31, 2023.
PROHIBITIONS ON HEDGING, PLEDGING AND SHORT-TERM SPECULATIVE TRANSACTIONS
Under the terms of our insider trading policy, we prohibit ourno employees (including executive officers and theofficers) of Seattle Genetics or its subsidiaries, members of our Board or consultants who know or have access to material information regarding Seattle Genetics that has not been fully disclosed to the public may engage in any hedging or monetization transactions relating to Seattle Genetics or its securities, including through the use of Directors from engagingfinancial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds, nor may any of these persons engage in short-term speculative transactions involving Seattle Genetics securities (or derivatives of Seattle Genetics securities), including short sales and further prohibit them from hedgingthe buying and selling of put or pledging ourcall options. In addition, none of these persons may hold Seattle Genetics securities in a margin account or otherwise pledge Seattle Genetics securities as collateral.
We believe that the risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. In addition, the Compensation Committee believes that the mix and design of the elements of executive compensation do not encourage our employees to assume excessive risks.
The Compensation Committee periodically reviews the elements of executive compensation to determine whether any portion of executive compensation encourages excessive risk taking. The Compensation Committee most recently conducted this review in March 20192020 and concluded that it does not. Among the factors that the Compensation Committee considered were:
significant weighting towards long-term incentive compensation discourages short-term risk taking;
goals are appropriately set to provide meaningful target levels that enhance stockholdershareholder value but that are quantifiable using objective criteria and include multiple performance measures; and
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COMPENSATION DISCUSSION AND ANALYSIS |
short-term incentive awards are capped by the Compensation Committee.Committee; and
sales incentive plans and associated award programs for the Company’s sales team are aligned with market practice and support performance towards appropriate business objectives.
The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis required by Item 402(b) of RegulationS-K with management and, based on such review and discussions, the Compensation Committee has recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statementproxy statement and incorporated into our Annual Report onForm 10-K for the fiscal year ended December 31, 2018.
Submitted by the members of the Compensation Committee:
| (1) | The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Seattle Genetics under the Securities Act or the Exchange Act, other than in Seattle Genetics’ Annual Report on Form10-K where it shall be deemed to be furnished, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. |
During During COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION2018,2019, the Compensation Committee consisted of Felix J. Baker (chair), John A. Orwin and Daniel G. Welch, none of whom is a current or former officer or employee of Seattle Genetics. Please refer to the section of this proxy statement entitled “Certain Relationships and Related Party Transactions” for information concerning certain transactions involving entities affiliated with Dr. Baker.2018,2019, no member of the Compensation Committee or executive officer of Seattle Genetics has or had a relationship that would constitute an interlocking relationship with executive officers or directors of another entity.56 
COMPENSATION DISCUSSION AND ANALYSIS |
The following table sets forth all of the compensation awarded to, or earned by, our named executive officers.SUMMARY COMPENSATION TABLEName and Principal Position Year Salary Bonus (1) StockAwards(2) (3) OptionAwards(2) (4) Non-EquityIncentive PlanCompensation(5) All OtherCompensation(6) Total Clay B. Siegall, Ph.D. 2018 $ 918,554 $ 2,000 $ 8,217,394 (7) $ 7,539,792 $ 1,409,995 (9 ) $ 19,302 $ 18,107,037 President and CEO 2017 $ 887,146 $ — $ 3,561,064 $ 3,217,921 $ 934,500 $ 15,713 $ 8,616,344 2016 $ 852,354 $ — $ 3,686,600 $ 4,015,160 $ 985,000 $ 20,283 $ 9,559,397 Todd E. Simpson 2018 $ 519,458 $ 13,300 $ 1,847,912 (7) $ 1,627,287 $ 411,550 (10 ) $ 12,855 $ 4,432,362 Chief Financial Officer 2017 $ 492,208 $ — $ 1,191,510 $ 1,101,374 $ 264,076 $ 12,630 $ 3,061,798 2016 $ 475,371 $ — $ 935,400 $ 1,026,148 $ 269,500 $ 12,405 $ 2,718,824 Roger D. Dansey, M.D. 2018 $ 399,479 $ 300,000 $ 6,804,499 (7)(8) $ 1,970,275 $ 276,455 $ 176,312 $ 9,927,020 Chief Medical Officer Vaughn B. Himes, Ph.D. 2018 $ 505,075 $ — $ 1,635,625 (7) $ 1,410,308 $ 387,525 (11 ) $ 12,855 $ 3,951,388 Chief Technical Officer 2017 $ 476,867 $ — $ 1,052,400 $ 957,716 $ 260,728 $ 12,630 $ 2,760,341 2016 $ 441,138 $ — $ 1,292,780 $ 939,330 $ 246,900 $ 12,405 $ 2,932,553 Darren Cline 2018 $ 480,150 $ — $ 1,615,653 (7) $ 1,464,575 $ 286,338 (12 ) $ 18,500 $ 3,865,216 Former Executive Vice President, Commercial 2017 $ 453,108 $ — $ 888,290 $ 814,060 $ 222,834 $ 16,709 $ 2,395,001 2016 $ 436,667 $ 200,000 $ 1,088,180 $ 893,161 $ 221,700 $ 20,211 $ 2,859,919 ________________
Name and Principal Position | Year | Salary ($) | Bonus(1) ($) | Stock Awards(2) ($) | Option Awards(3) ($) | Non-Equity Incentive Plan Compensation(4) ($) | All Other Compensation(5) ($) | Total ($) | ||||||||||||||||||||||||
Clay B. Siegall, Ph.D. | 2019 | 963,369 | — | 8,137,179 | (6)(7) | 3,502,217 | 1,903,500 | (8) | 15,230 | 14,521,495 | ||||||||||||||||||||||
President and CEO | 2018 | 918,554 | 2,000 | 8,217,394 | 7,539,792 | 1,409,995 | 19,302 | 18,107,037 | ||||||||||||||||||||||||
| 2017 | 887,146 | — | 3,561,064 | 3,217,921 | 934,500 | 15,713 | 8,616,344 | |||||||||||||||||||||||||
Todd E. Simpson | 2019 | 572,342 | — | 1,824,697 | (7) | 1,552,123 | 525,700 | (9) | 15,230 | 4,490,092 | ||||||||||||||||||||||
Chief Financial Officer | 2018 | 519,458 | 13,300 | 1,847,912 | 1,627,287 | 411,550 | 12,855 | 4,432,362 | ||||||||||||||||||||||||
| 2017 | 492,208 | — | 1,191,510 | 1,101,374 | 264,076 | 12,630 | 3,061,798 | |||||||||||||||||||||||||
Roger D. Dansey, M.D. | 2019 | 670,900 | 150,000 | 2,831,698 | (7) | 2,149,091 | 622,675 | (10) | 294,460 | 6,718,824 | ||||||||||||||||||||||
Chief Medical Officer | 2018 | 399,479 | 300,000 | 6,804,499 | 1,970,275 | 276,455 | 176,312 | 9,927,020 | ||||||||||||||||||||||||
Jean I. Liu | 2019 | 520,325 | 500 | 1,578,609 | (7) | 1,384,957 | 466,500 | (11) | 15,230 | 3,966,121 | ||||||||||||||||||||||
General Counsel and Executive Vice President, Legal Affairs | 2018 | 485,017 | 13,300 | 1,536,026 | 1,383,188 | 330,802 | 12,855 | 3,761,188 | ||||||||||||||||||||||||
| 2017 | 461,788 | — | 888,290 | 814,060 | 223,175 | 12,630 | 2,399,943 | |||||||||||||||||||||||||
Robin G. Taylor, Ph.D.(13) | 2019 | 309,028 | 360,000 | 2,439,100 | (7) | 1,855,402 | 130,762 | (12) | 144,205 | 5,238,497 | ||||||||||||||||||||||
Former Chief Commercial Officer | ||||||||||||||||||||||||||||||||
| (1) | For |
| (2) | The amounts in |
| (3) | |
The amounts in this column represent the aggregate grant date fair value of stock options granted during the relevant year in accordance with FASB ASC Topic 718 with no estimate for future forfeitures. For information regarding the assumptions used in calculating these amounts, see Note 16 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form10-K for the year ended December 31, |
| (4) | |
The amounts in this column reflect the cash bonus awards to the named executive officers under our Executive Bonus Plans, as well as cash payments earned under the |
| (5) | |
The amounts in this column consist of life insurance premiums and company matching contributions to our 401(k) plan for all named executive |
| (6) | |
Amount includes the fair value of |
| (7) | Amount includes the fair value of the EV Frontline PSU awards. Please see “—Compensation Discussion and Analysis” above and “Grants of Plan-Based Awards” below for more information regarding the RSUs we granted to the named executive officers. |
Amount includes Dr. Siegall’s |
| (9) | |
Amount includes Mr. Simpson’s |
| (10) | |
Amount includes Dr. |
| (11) | |
Ms. Liu’s 2019 annual bonus of |
| (12) | Amount includes Dr. Taylor’s 2019 pro rata portion of his annual bonus of $123,800 pursuant to the Executive Bonus Plan and a cash payment earned under the EV/TV LTIP in the amount of $6,962. |
| (13) | Dr. Taylor was appointed Chief Commercial Officer in May 2019 and left the Company in February 2020. |
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COMPENSATION DISCUSSION AND ANALYSIS |
The following table sets forth each equity andnon-equity award granted to our named executive officers during GRANTS OF PLAN-BASED AWARDS2018. GrantDate(1) Estimated FuturePayouts Under Non-EquityIncentive Plan Awards Estimated FuturePayouts Under EquityIncentive Plan Awards All OtherStock Awards:Number ofShares ofStock orUnits All OtherOptionAwards:Number ofSecuritiesUnderlyingOptions Exercise orBase Priceof OptionAwards(per share) Grant DateFair Value ofStock Optionsand Awards(2)Name Target Maximum Target Maximum Clay B. Siegall, Ph.D. Executive Bonus Plan (3) N/A $ 921,150 $ 1,381,725 — — — — — — Discretionary Stock Option Award (4) 8/30/2018 — — — — — 227,984 $ 76.86 $ 7,539,792 Discretionary RSU Award (5) 8/30/2018 — — — — 95,981 — — $ 7,377,100 Tucatinib LTIP First Tranche RSU Award (6) 11/1/2018 — — 6,541 9,419 — — — $ 380,294 Tucatinib LTIP Second Tranche RSU Target (7) 11/1/2018 — — $ 460,000 $ 662,400 — — — $ 460,000 Todd E. Simpson Executive Bonus Plan (3) N/A $ 270,450 $ 405,675 — — — — — — Discretionary Stock Option Award (4) 8/30/2018 — — — — — 49,205 $ 76.86 $ 1,627,287 Discretionary RSU Award (5) 8/30/2018 — — — — 20,715 — — $ 1,592,155 Tucatinib LTIP First Tranche RSU Award (6) 11/1/2018 — — 1,991 2,867 — — — $ 115,757 Tucatinib LTIP Second Tranche RSU Target (7) 11/1/2018 — — $ 140,000 $ 201,600 — — — $ 140,000 Roger D. Dansey, M.D. Executive Bonus Plan (3) N/A $ 325,000 $ 487,500 — — — — — — New Hire Stock Option Award (8) 6/15/2018 — — — — — 50,000 $ 65.11 $ 1,398,640 New Hire RSU Award (9) 6/15/2018 — — — — 70,000 — — $ 4,557,700 Discretionary Stock Option Award (4) 8/30/2018 — — — — — 17,199 $ 76.86 $ 571,635 Discretionary RSU Award (5) 8/30/2018 — — — — 7,241 — — $ 560,023 Performance-Based RSU Award (10) 9/7/2018 — — — — 17,263 — — $ 1,337,019 EV/TV LTIP - Cash Award (11) N/A $ 94,000 $ 104,000 — — — — — — EV/TV LTIP - RSU Award (12) 5/21/2018 — — $ 94,000 $ 104,000 — — — $ 94,000 Tucatinib LTIP First Tranche RSU Award (6) 11/1/2018 — — 1,991 2,867 — — — $ 115,757 Tucatinib LTIP Second Tranche RSU Target (7) 11/1/2018 — — $ 140,000 $ 201,600 — — — $ 140,000 Vaughn B. Himes, Ph.D. Executive Bonus Plan (3) N/A $ 253,750 $ 380,625 — — — — — — Discretionary Stock Option Award (4) 8/30/2018 — — — — — 42,644 $ 76.86 $ 1,410,308 Discretionary RSU Award (5) 8/30/2018 — — — — 17,953 — — $ 1,379,868 Tucatinib LTIP First Tranche RSU Award (6) 11/1/2018 — — 1,991 2,867 — — — $ 115,757 Tucatinib LTIP Second Tranche RSU Target (7) 11/1/2018 — — $ 140,000 $ 201,600 — — — $ 140,000 Darren Cline Executive Bonus Plan (3) N/A $ 217,125 $ 325,688 — — — — — — Discretionary Stock Option Award (4) 8/30/2018 — — — — — 44,285 $ 76.86 $ 1,464,575 Discretionary RSU Award (5) 8/30/2018 — — — — 18,644 — — $ 1,432,978 Tucatinib LTIP First Tranche RSU Award (6) 11/1/2018 — — 1,422 2,047 — — — $ 82,675 Tucatinib LTIP Second Tranche RSU Target (7) 11/1/2018 — — $ 100,000 $ 144,000 — — — $ 100,000 2019._____________________
| Estimated Future Payouts under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts under Equity Incentive Plan Awards | |||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Target | Maximum ($) | Target | Maximum | All Other Stock ($) | All Other Option ($) | Exercise or Base ($) | Grant ($)(2) | |||||||||||||||||||||||||||||||
Clay B. Siegall, Ph.D. | ||||||||||||||||||||||||||||||||||||||||
Executive Bonus Plan | N/A | 967,208 | 1,934,416 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Discretionary Stock Option Award(3) | 8/30/2019 | — | — | — | — | — | 114,095 | 72.64 | 3,502,217 | |||||||||||||||||||||||||||||||
Discretionary RSU Award(4) | 8/30/2019 | — | — | — | — | 48,034 | — | — | 3,489,190 | |||||||||||||||||||||||||||||||
Adjusted Revenue PSU Award(5) | 8/30/2019 | — | — | 38,427 | 76,854 | — | — | — | 2,791,337 | |||||||||||||||||||||||||||||||
Relative TSR PSU Award(6) | 8/30/2019 | — | — | 9,607 | 19,214 | — | — | — | 892,298 | |||||||||||||||||||||||||||||||
EV Frontline PSU Award(7) | 12/31/2019 | — | — | 8,440 | 8,440 | — | — | — | 964,354 | |||||||||||||||||||||||||||||||
Todd E. Simpson | ||||||||||||||||||||||||||||||||||||||||
Executive Bonus Plan | N/A | 287,600 | 575,200 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Discretionary Stock Option Award(3) | 8/30/2019 | — | — | — | — | — | 50,565 | 72.64 | 1,552,123 | |||||||||||||||||||||||||||||||
Discretionary RSU Award(4) | 8/30/2019 | — | — | — | — | 21,288 | — | — | 1,546,360 | |||||||||||||||||||||||||||||||
EV Frontline PSU Award(7) | 12/31/2019 | — | — | 2,436 | 2,436 | — | — | — | 278,337 | |||||||||||||||||||||||||||||||
Roger D. Dansey, M.D. | ||||||||||||||||||||||||||||||||||||||||
Executive Bonus Plan | N/A | 336,400 | 672,800 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Discretionary RSU Award(4) | 2/15/2019 | — | — | — | — | 5,768 | — | — | 412,297 | |||||||||||||||||||||||||||||||
Discretionary Stock Option Award(3) | 8/30/2019 | — | — | — | — | — | 70,013 | 72.64 | 2,149,091 | |||||||||||||||||||||||||||||||
Discretionary RSU Award(4) | 8/30/2019 | — | — | — | — | 29,475 | — | — | 2,141,064 | |||||||||||||||||||||||||||||||
EV Frontline PSU Award(7) | 12/31/2019 | — | — | 2,436 | 2,436 | — | — | — | 278,337 | |||||||||||||||||||||||||||||||
Jean I. Liu | ||||||||||||||||||||||||||||||||||||||||
Executive Bonus Plan | N/A | 261,100 | 522,200 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Discretionary Stock Option Award(3) | 8/30/2019 | — | — | — | — | — | 45,119 | 72.64 | 1,384,957 | |||||||||||||||||||||||||||||||
Discretionary RSU Award(4) | 8/30/2019 | — | — | — | — | 18,995 | — | — | 1,379,797 | |||||||||||||||||||||||||||||||
EV Frontline PSU Award(7) | 12/31/2019 | — | — | 1,740 | 1,740 | — | — | — | 198,812 | |||||||||||||||||||||||||||||||
Robin G. Taylor, Ph.D. | ||||||||||||||||||||||||||||||||||||||||
Executive Bonus Plan | N/A | 154,800 | 309,600 | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Discretionary Stock Option Award(3) | 5/20/2019 | — | — | — | — | 54,491 | 64.38 | 1,515,200 | ||||||||||||||||||||||||||||||||
Discretionary Stock Option Award(3) | 8/30/2019 | — | — | — | — | — | 11,083 | 72.64 | 340,202 | |||||||||||||||||||||||||||||||
Discretionary RSU Award(4) | 5/20/2019 | — | — | — | — | 23,557 | — | — | 1,516,600 | |||||||||||||||||||||||||||||||
Discretionary RSU Award(8) | 5/20/2019 | — | — | — | — | 4,741 | — | — | 305,225 | |||||||||||||||||||||||||||||||
Discretionary RSU Award(4) | 8/30/2019 | — | — | — | — | 4,666 | — | — | 338,938 | |||||||||||||||||||||||||||||||
EV Frontline PSU Award(7) | 12/31/2019 | — | — | 2,436 | 2,436 | — | — | — | 278,337 | |||||||||||||||||||||||||||||||
| (1) |
The dollar amounts represent the target and maximum amounts of each named executive officer’s potential annual cash bonus award for the year ended December 31, |
| (2) | The amounts in this column do not represent amounts the named executive officers received or are entitled to receive. Rather, the reported amounts represent the fair value of each award as computed in accordance with FASB ASC Topic 718 on the applicable grant date, as required to be disclosed under SEC rules. |
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COMPENSATION DISCUSSION AND ANALYSIS |
| (3) | Discretionary stock options were granted under our 2007 Equity Plan. Vesting of all of these discretionary options occurs 1/ |
| (4) | |
Discretionary RSUs were granted under our 2007 Equity Plan. Vesting of all of these discretionary RSUs vests 25% per year over a |
| (5) | A performance-based RSU was approved by the Compensation Committee and granted to Dr. Siegall on August 30, 2019, the vesting of such is based on Adjusted Revenue in fiscal year 2022 as described under the heading “Compensation Discussion and Analysis—CEO PSU Awards”. The share amounts reported represent the target and maximum number of shares to be issued upon the vesting of this performance-based RSU. The payout of this award may vary from 0% to 200% of the target number of shares. |
| (6) | A performance-based RSU was approved by the Compensation Committee and granted to Dr. Siegall on August 30, 2019, the vesting of such is based on Relative TSR for the 3 years beginning September 1, 2019 as described under the heading “Compensation Discussion and Analysis—CEO PSU Awards”. The |
| (7) | EV Frontline PSU awards were granted on |
| (8) | Discretionary RSU was granted under our 2007 Equity Plan. Vesting of this |
EMPLOYMENT AGREEMENTS Each of our named executive officers has entered into a written employment agreement with Seattle Genetics. For a description of these employment agreements, please see the section of this proxy statement under the heading ANNUAL CASH BONUS AWARDS We have adopted our Executive Bonus Plan that provides for annual bonus awards to reward executive officers based on our achievement of specific corporate goals and TIME-BASED STOCK AWARDS Discretionary andnew-hireEMPLOYMENT AGREEMENTS AND ARRANGEMENTSEmployment Agreements.“Potential“—Potential Payments Upon Termination orChange-In-Control—Employment Agreements” below.Annual Cash Bonus Awards.their achievementa holistic evaluation of individualseveral factors, including the executive’s performance and contribution toward achieving corporate goals. For more information regarding our Executive Bonus Plan, please see the section of this proxy statement under the heading “—Compensation Discussion and Analysis—Principal Elements of Compensation—Annual Compensation-Setting Process—Cash Incentive Awards” and footnote (3)(1) to the Grants“Grants of Plan-Based AwardsAwards” table above.Stock Awards. Discretionary options that we granted in 20182019 under the 2007 Equity Plan have a ten year term and vest as to 1/4th4th of the shares subject to the options on the one year anniversary of the grant date and 1/36th36th of the remaining shares each month thereafter until such option is fully vested on the four year anniversary of the grant date, subject to the accelerated vesting of such options under the terms of each executive’s employment agreement with us and pursuant to the 2007 Equity Plan. Performance-based stock options that we granted in 2016 vest in accordance with the terms set forth in the ECHELON-1 LTIP (as defined below) and were also granted under the 2007 Equity Plan. Options granted under the 2007 Equity Plan carry an exercise price equal to the fair market value on the date of grant (the closing price of our common stock on the grant date on the Nasdaq Global Select Market),Market, and the 2007 Equity Plan permits the exercise price of stock options to be paid by cash, check, wire transfer, other shares of our common stock (with some restrictions), broker assistedsame-day sales, cancellation of debt, cashless “net exercise” arrangements, and any other form of consideration permitted by applicable law. If an executive’s service with us terminates for any reason other than cause, death, disability or, with respect to options granted on or after August 30, 2018, retirement, then options held by the executive under the 2007 Equity Plan generally will be exercisable to the extent they are vested on the termination date for a period of three months after the termination (if an executive’s service with us terminates for cause, then the Board or the Compensation Committee has the authority to terminate all options held by the executive under the 2007 Equity Plan immediately), however, an executive terminated under the involuntary termination provision of the employment agreements will be eligible for one year of acceleration of such executive'sexecutive’s equity awards as further described in the section below. Generally, if an executive’s service with us terminates as a result of the executive’s death or in the event of the executive’s death within 30 days following the executive’s termination of service, all outstanding options that were vested and exercisable as of the date of the executive’s death or termination of service, if earlier, may be exercised for six months following the executive'sexecutive’s death for options granted on or prior to May 18, 2018 and may be exercised for twelve months following the executive'sexecutive’s death for options granted after May 18, 2018, but in no event after the expiration date of such option. Generally, if an executive'sexecutive’s service with us terminates as a result of the executive’s disability or, with respect to options granted on or after August 30, 2018, retirement, then all options to the extent they are vested and exercisable on the termination date may be exercised for one year following the termination date but in no event after the expiration date of such option. Each RSU represents a right to receive one share of our common stock (subject to adjustment for certain specified changes in our capital structure). In the event that RSUsRSU awards vest, we will deliver one share of our common stock for each RSU2020 PROXY STATEMENT 59
COMPENSATION DISCUSSION AND ANALYSIS |
that has vested. Discretionary RSUsandnew-hire RSU awards that we granted in or after August 20182019 generally vest in four equal tranches on the anniversary of the vesting commencement date until vested in full, provided that vesting will cease if an executive’s service with us terminates for any reason. A portion of the RSUs that Dr. Taylor received as part of hissign-on
Under the 2007 Equity Plan, in the event of (i) an acquisition of Seattle Genetics by means of any reorganization, merger or consolidation but excluding any merger effected exclusively for the purpose of changing the domicile of the company,Company, (ii) any sale of all or substantially all of our assets or (iii) any other event specified by the plan administrator, so long as in either (i) or (ii), our stockholdersshareholders of record immediately prior to the transaction hold less than 50% of the voting power of the surviving entity and, so long as in (iii) that no change in control shall be deemed to occur upon announcement or commencement of a tender offer or upon a “potential” takeover or upon stockholdershareholder approval of a merger or other transaction, in each case without a requirement that the change in control actually occur, then the Board or the compensation committeeCompensation Committee may, in its discretion: (i) provide for the assumption or substitution of, or adjustment (including to the number and type of shares and exercise price applicable) to, each outstanding equity award; (ii) accelerate the vesting of equity awards; and/or (iii) provide for termination of awards as a result of the change in control on such terms and conditions as it deems appropriate, including providing for the cancellation of awards for a cash or other payment to the executive.
Additionally, (i) if the successor corporation does not assume or substitute equivalent awards for all outstanding equity awards granted pursuant to the 2007 Equity Plan, then as of the date of completion of the acquisition or merger, the vesting of such equity awards will be accelerated in full; and (ii) if outstanding equity awards are assumed or equivalent awards are substituted by the successor corporation and if at the time of, immediately prior to or within twelve months after the effective time of the change ofin control, an equity awardee’s service as an employee or consultant is terminated without cause or due to constructive termination, then the vesting of such substituted equity award will be accelerated in full.
LONG-TERM INCENTIVE PLANS AND PSU AWARDS
In May 2016, the Compensation Committee approved theECHELON-1 LTIP. LTIP, a performance-based long-term incentive plan, or LTIP, to incentivize our executive officers and other employees to achieve FDA regulatory approval of a label expansion of ADCETRIS based on the phase 3ECHELON-1 trial. Under theECHELON-1 LTIP, each eligible employee, including each named executive officer other than Dr. Dansey and Dr. Taylor, was eligible to receive a cash award and an option to purchase shares of our common stock, with the amount of each cash and option award based on the participant’s position with the Company. The cash awards were paid to participants in theECHELON-1 LTIP following the Compensation Committee’s certification of the achievement of the FDA approval milestone in March 2018. TheECHELON-1 LTIP options, which were granted to our named executive officer participants inECHELON-1 LTIP on May 9, 2016 with an exercise price of $34.20 per share (the fair market value of our common stock on the date of grant), commenced vesting upon the Compensation Committee’s certification of the achievement of the FDA approval milestone, and vest in four equal annual installments on the first four anniversaries of the date the FDA approval milestone was achieved, subject to continuous service with the Company as of each vesting date.
In September 2017, the Compensation Committee approved the EV/TV LTIP. Under theThe EV/TV LTIP provides that each eligible employee, including each named executive officer, is eligible to receive a cash award and, and depending on the participant’s position with the company,Company, may also be eligible for an RSU award.award, subject to the participant’s (i) continued employment with the Company and (ii) good standing as of each applicable payment and grant date. A portion of each cash award will becomewas payable and a portion of each RSU award willwas to be granted only upon certification by the Compensation Committee that the FDA has approved EV,PADCEV. PADCEV received FDA accelerated approval on December 18, 2019. As a result, the Compensation Committee approved cash awards and the grant of RSU awards to eligible employees, including our named executive officers, under the EV/TV LTIP in December 2019. The remaining portion of each cash award will become payable, and the remaining portion of each RSU award will be granted only upon certification by the Compensation Committee that the FDA has approved TV, provided thatsubject to the participant is still actively employed byparticipant’s (i) continued employment with the Company and is in(ii) good standing as of eachthe applicable payment and grant date. The portion of the EV/TV LTIP RSU awards that were granted will vest on the second anniversary of the date of FDA approval of PADCEV, subject to continuous service with the Company through the vesting date. Any additional RSU awardawards that may by granted due to achievement of athe TV milestone, will vest on the second anniversary of the occurrence of suchthe TV milestone, subject to continuous service with the Company through the vesting date. If a particularthe TV milestone is not achieved by a specified date, with respect to such milestone, then no cash award will be made nor will an RSU award be granted with respect to suchthat milestone.
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COMPENSATION DISCUSSION AND ANALYSIS |
In October 2018, the Compensation Committee approved the Tucatinib LTIP for the purpose of incentivizing the Company’s employees to potentially achieve the FDA approval of tucatinib. Under the Tucatinib LTIP, our named executive officers, other than Dr. Taylor, are eligible to receive grants of equity awards relating to our common stock, which consist of a “First Tranche” and a “Second Tranche” as set forth in the Tucatinib LTIP, each of which is granted as a separate stock unit award on the applicable date of grant. Any stock unit awards provided under the Tucatinib LTIP are granted under, and subject to the terms of, our 2007 Equity Plan and our standard forms of Stock Unit Grant Notice and Stock Unit Agreement for United States employees andnon-United States employees. The target number of stock units granted in the First Tranche granted on November 1, 2018 equaled 50% of the target award value applicable to each executive officer divided by the average closing sales price of our common stock for the 30 calendar day period ending on October 31, 2018. The First Tranche will only vest upon certification by the Compensation Committee of the first approval by the FDA for the commercial sale and marketing of tucatinib in the United States by us or any of our partners for any indication, which such approval is based on the clinical trial data from the pivotal HER2CLIMBHER2CLIMB-01 trial (such achievement, the Tucatinib Milestone, and the date on which the Compensation Committee certifies achievement, the Certification Date), provided that the executive officer is still employed by us as of the date of vesting. If the First Tranche vests due to achievement of the Tucatinib Milestone, the number of shares that vest will be determined by multiplying the target number of stock units subject to each stock unit award by the applicable earn out percentage. An earn out percentage, on a sliding scale from 0% to 144%, will be determined based on the date of achievement of the Tucatinib Milestone and the breadth of the indication or indications, as the case may be, for which tucatinib is approved by the FDA for commercial sale and marketing in the United States on the date that the Tucatinib Milestone occurs. The Second Tranche will be granted upon certification by the Compensation Committee of achievement of the Tucatinib Milestone provided that the executive officer is still employed by us as of the date of grant. The number of stock units granted, if any, with respect to the Second Tranche will be equal to 50% of the target award value applicable to each executive officer multiplied by the applicable earn out percentage determined by the Compensation Committee on the Certification Date, with the product of these numbers then divided by the average closing sales price of our common stock for the 30 calendar day period ending on the calendar day prior to the date of grant of the Second Tranche. If the Second Tranche is granted due to achievement of the Tucatinib Milestone, it will vest on the second anniversary of the Certification Date, provided that the executive officer’s continuous service with us has not terminated prior to the vesting date. The vesting of each outstanding stock unit award is subject to partial or full acceleration in the event of a termination of service (without cause or due to constructive termination) immediately prior to, or within twelve months after, a change of control of Seattle Genetics, or in the event an acquirer in a change of control of Seattle Genetics fails to assume the stock unit awards. If the Tucatinib Milestone is not achieved by a specified date, then the First Tranche will not vest, the Second Tranche will not be granted and the Tucatinib LTIP will automatically terminate. In addition, in the event that we cease to have rights to tucatinib, the Tucatinib LTIP shall automatically terminate.
In August 2018, the Compensation Committee also approved a performance-based RSUPSU grant to Dr. Dansey with a target and maximum number of shares equal to 17,263. The RSU willPSU awards vest in tranches contingent on the achievement of regulatory milestones, the FDA'sFDA’s approval of EV,PADCEV, tucatinib and TV but will not vest prior to December 31, 2021, subject to Dr. Dansey'sDansey’s continued employment on the vesting date. Upon the Compensation Committee’s certification that PADCEV received FDA accelerated approval, the EV portion of the PSU was deemed eligible to vest. The EV portion will vest on December 31, 2021, subject to Dr. Dansey’s continued employment on the vesting date.
In August 2019, the Compensation Committee approved two PSU grants to Dr. Siegall:
A grant with vesting contingent on the achievement of certainpre-specified 2022 adjusted revenue goals, subject to Dr. Siegall’s continued employment on the vesting date, which has a target number of shares equal to 38,427 and a maximum number of shares equal to 76,854; and
A grant with vesting contingent on the achievement of certainpre-specified three-year TSR goals, subject to Dr. Siegall’s continued employment on the vesting date, which has a target number of shares equal to 9,607 and a maximum number of shares equal to 19,214.
In December 2019, the Compensation Committee approved the issuance of EV Frontline PSU awards to eligible employees, including each of our named executive officers, as part of a company-wide long-term incentive grant. The EV Frontline PSU awards were granted under, and are subject to the terms of, our 2007 Equity Plan and our standard forms of performance-based Stock Unit Grant Notice and Stock Unit Agreement. The target number of stock units for each executive officer was calculated by dividing a target award value by the average closing price of our common stock during the month of December 2019. None of the EV Frontline PSU awards will vest unless the Compensation Committee certifies that a milestone has been met under the EV Frontline PSU awards. Upon certification of the Accelerated Approval Milestone, 25% of the target number of stock units will vest, provided that the applicable executive officer is still employed by us as of the date of vesting. Upon certification of the Regular Approval Milestone, 75% of the target number of stock units will vest, provided that the applicable executive officer is still employed by us
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COMPENSATION DISCUSSION AND ANALYSIS |
as of the date of vesting. Each of the Accelerated Approval Milestone and the Regular Approval Milestone has a deadline by which it must be achieved. If it is not achieved by its deadline, then the associated number of stock units will be forfeited. Neither the Accelerated Approval Milestone nor the Regular Approval Milestone can be achieved within one year of the date of grant. The vesting of outstanding EV
For more information regarding these performance-based incentive plans,grants of equity awards to our executive officers, please see the sections of this proxy statement under the headings “—Compensation Discussion and Analysis—Compensation-Setting Process—Long-Term Equity Awards” and the “Grants of Plan-Based Awards” table above. For more information regarding the acceleration of equity awards held by our executive officers, please see the section of this proxy statement under the “Compensation Discussion and Analysis—Principal Elements of Compensation—Long-Term Equity Awards” and the Grants of Plan-Based Awards table above.
OTHER COMPENSATORY ARRANGEMENTS
Seattle Genetics pays the life insurance premium for all of its employees, including the executive officers. In addition, in 20182019 Seattle Genetics matched 75%100% of the first 6%5% of salary contributed to Seattle Genetics’ 401(k) plan by employees, including the executive officers. For 2019,2020, the match has changed to 100% of each employee's deferral up to 5%the first 5.5% of eligible compensation.salary contributed. The matched contribution is not subject to a vesting period. From time to time, individual executives negotiate other compensatory arrangements in connection with their initial hire.
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The following table sets forth certain information regarding equity awards granted to the named executive officers that were outstanding as of December 31, 2018.
| Option Awards | Stock Awards(1) | Equity Incentive Plan Awards(1) | ||||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable(2) | Option ($) | Vesting Start Date | Expiration Date | Number Shares of Stock Have Not | Market Shares or Have Not Vested(3) ($) | Number of Unearned Shares, Units or Other Rights That Have Not Vested | Market or ($) | |||||||||||||||||||||||||||||||||||
Clay B. Siegall, Ph.D. | 227,779 | — | 12.00 | 8/27/2010 | 8/27/2020 | |||||||||||||||||||||||||||||||||||||||
| 300,000 | — | 15.46 | 8/24/2011 | 8/24/2021 | ||||||||||||||||||||||||||||||||||||||||
| 185,625 | — | 26.10 | 8/20/2012 | 8/20/2022 | ||||||||||||||||||||||||||||||||||||||||
| 137,500 | — | 41.04 | 8/19/2013 | 8/19/2023 | ||||||||||||||||||||||||||||||||||||||||
| 150,000 | — | 44.09 | 8/26/2014 | 8/26/2024 | ||||||||||||||||||||||||||||||||||||||||
| 160,000 | — | 39.15 | 8/25/2015 | 8/25/2025 | ||||||||||||||||||||||||||||||||||||||||
| 150,000 | 30,000 | 45.30 | 8/27/2016 | 8/27/2026 | ||||||||||||||||||||||||||||||||||||||||
| 98,000 | 70,000 | 46.37 | 8/17/2017 | 8/17/2027 | ||||||||||||||||||||||||||||||||||||||||
| 75,994 | 151,990 | 76.86 | 8/30/2018 | 8/30/2028 | ||||||||||||||||||||||||||||||||||||||||
| 9,320 | 27,960 | 34.20 | 3/20/2018 | 5/9/2026 | ||||||||||||||||||||||||||||||||||||||||
| — | 114,095 | 72.64 | 8/30/2019 | 8/30/2029 | ||||||||||||||||||||||||||||||||||||||||
| 67,200 | (4) | 7,678,272 | ||||||||||||||||||||||||||||||||||||||||||
| 71,985 | (5) | 8,225,006 | ||||||||||||||||||||||||||||||||||||||||||
| 6,541 | (6) | 747,375 | ||||||||||||||||||||||||||||||||||||||||||
| 48,034 | (7) | 5,488,365 | ||||||||||||||||||||||||||||||||||||||||||
| 38,427 | (8) | 4,390,669 | ||||||||||||||||||||||||||||||||||||||||||
| 9,607 | (9) | 1,097,696 | ||||||||||||||||||||||||||||||||||||||||||
| 3,100 | (10) | 354,206 | ||||||||||||||||||||||||||||||||||||||||||
| 8,440 | (11) | 964,354 | ||||||||||||||||||||||||||||||||||||||||||
Total | 1,494,218 | 394,045 | 190,319 | 21,745,849 | 63,015 | 7,200,094 | ||||||||||||||||||||||||||||||||||||||
Todd E. Simpson | 14,167 | — | 12.00 | 8/27/2010 | 8/27/2020 | |||||||||||||||||||||||||||||||||||||||
| 26,867 | — | 15.46 | 8/24/2011 | 8/24/2021 | ||||||||||||||||||||||||||||||||||||||||
| 37,500 | — | 26.10 | 8/20/2012 | 8/20/2022 | ||||||||||||||||||||||||||||||||||||||||
| 36,000 | — | 41.04 | 8/19/2013 | 8/19/2023 | ||||||||||||||||||||||||||||||||||||||||
| 42,500 | — | 44.09 | 8/26/2014 | 8/26/2024 | ||||||||||||||||||||||||||||||||||||||||
| 42,500 | — | 39.15 | 8/25/2015 | 8/25/2025 | ||||||||||||||||||||||||||||||||||||||||
| 37,500 | 7,500 | 45.30 | 8/27/2016 | 8/27/2026 | ||||||||||||||||||||||||||||||||||||||||
| 33,541 | 23,959 | 46.37 | 8/17/2017 | 8/17/2027 | ||||||||||||||||||||||||||||||||||||||||
| 16,402 | 32,803 | 76.86 | 8/30/2018 | 8/30/2028 | ||||||||||||||||||||||||||||||||||||||||
| 2,632 | 7,894 | 34.20 | 3/20/2018 | 5/9/2026 | ||||||||||||||||||||||||||||||||||||||||
| — | 50,565 | 72.64 | 8/30/2019 | 8/30/2029 | ||||||||||||||||||||||||||||||||||||||||
| 23,000 | (4) | 2,627,980 | ||||||||||||||||||||||||||||||||||||||||||
| 15,536 | (5) | 1,775,143 | ||||||||||||||||||||||||||||||||||||||||||
| 1,991 | (6) | 227,492 | ||||||||||||||||||||||||||||||||||||||||||
| 21,288 | (7) | 2,432,367 | ||||||||||||||||||||||||||||||||||||||||||
| 871 | (10) | 99,520 | ||||||||||||||||||||||||||||||||||||||||||
| 2,436 | (11) | 278,337 | ||||||||||||||||||||||||||||||||||||||||||
Total | 289,609 | 122,721 | 60,695 | 6,935,010 | 4,427 | 505,829 | ||||||||||||||||||||||||||||||||||||||
| Option Awards | Stock Awards (1) | ||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable (2) | Option Exercise Price | Vesting Start Date | Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested (3) | ||||||||||||||
| Clay B. Siegall, Ph.D. | 169,408 | — | $ | 12.16 | 8/25/2009 | 8/25/2019 | |||||||||||||||
| 350,000 | — | $ | 12.00 | 8/27/2010 | 8/27/2020 | ||||||||||||||||
| 300,000 | — | $ | 15.46 | 8/24/2011 | 8/24/2021 | ||||||||||||||||
| 185,625 | — | $ | 26.10 | 8/20/2012 | 8/20/2022 | ||||||||||||||||
| 137,500 | — | $ | 41.04 | 8/19/2013 | 8/19/2023 | ||||||||||||||||
| 150,000 | — | $ | 44.09 | 8/26/2014 | 8/26/2024 | ||||||||||||||||
| 133,333 | 26,667 | $ | 39.15 | 8/25/2015 | 8/25/2025 | ||||||||||||||||
| 105,000 | 75,000 | $ | 45.30 | 8/27/2016 | 8/27/2026 | ||||||||||||||||
| 56,000 | 112,000 | $ | 46.37 | 8/17/2017 | 8/17/2027 | �� | |||||||||||||||
| — | 227,984 | $ | 76.86 | 8/30/2018 | 8/30/2028 | ||||||||||||||||
| — | 37,280 | $ | 34.20 | 3/20/2018 | 5/9/2026 | ||||||||||||||||
| 72,000 | (4) | $ | 4,079,520 | ||||||||||||||||||
| 67,200 | (5) | 3,807,552 | |||||||||||||||||||
| 95,981 | (6) | 5,438,283 | |||||||||||||||||||
| 6,541 | (7) | 370,613 | |||||||||||||||||||
| Total | 1,586,866 | 478,931 | 241,722 | $ | 13,695,968 | ||||||||||||||||
| Todd E. Simpson | 14,167 | — | $ | 12.00 | 8/27/2010 | 8/27/2020 | |||||||||||||||
| 26,867 | — | $ | 15.46 | 8/24/2011 | 8/24/2021 | ||||||||||||||||
| 37,500 | — | $ | 26.10 | 8/20/2012 | 8/20/2022 | ||||||||||||||||
| 36,000 | — | $ | 41.04 | 8/19/2013 | 8/19/2023 | ||||||||||||||||
| 42,500 | — | $ | 44.09 | 8/26/2014 | 8/26/2024 | ||||||||||||||||
| 35,416 | 7,084 | $ | 39.15 | 8/25/2015 | 8/25/2025 | ||||||||||||||||
| 26,250 | 18,750 | $ | 45.30 | 8/27/2016 | 8/27/2026 | ||||||||||||||||
| 19,166 | 38,334 | $ | 46.37 | 8/17/2017 | 8/17/2027 | ||||||||||||||||
| — | 49,205 | $ | 76.86 | 8/30/2018 | 8/30/2028 | ||||||||||||||||
| — | 10,526 | $ | 34.20 | 3/20/2018 | 5/9/2026 | ||||||||||||||||
| 18,000 | (4) | $ | 1,019,880 | ||||||||||||||||||
| 23,000 | (5) | 1,303,180 | |||||||||||||||||||
| 20,715 | (6) | 1,173,712 | |||||||||||||||||||
| 1,991 | (7) | 112,810 | |||||||||||||||||||
| Total | 237,866 | 123,899 | 63,706 | $ | 3,609,582 | ||||||||||||||||
| Option Awards | Stock Awards (1) | ||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable (2) | Option Exercise Price | Vesting Start Date | Expiration Date | Number of Shares or Units of Stock That Have Not Vested | Market Value of Shares or Units of Stock That Have Not Vested (3) | ||||||||||||||
| Roger D. Dansey, M.D. | — | 50,000 | $ | 65.11 | 6/15/2018 | 6/15/2028 | |||||||||||||||
| — | 17,199 | (8) | $ | 76.86 | 8/30/2018 | 8/30/2028 | |||||||||||||||
| 50,000 | (9) | $ | 2,833,000 | ||||||||||||||||||
| 20,000 | (10) | 1,133,200 | |||||||||||||||||||
| 7,241 | (6), (11) | 410,275 | |||||||||||||||||||
| 17,263 | (12) | 978,122 | |||||||||||||||||||
| 1,991 | (7) | 112,810 | |||||||||||||||||||
| Total | — | 67,199 | 96,495 | $ | 5,467,407 | ||||||||||||||||
| Vaughn B. Himes, Ph.D. | 36,498 | — | $ | 12.00 | 8/27/2010 | 8/27/2020 | |||||||||||||||
| 50,199 | — | $ | 15.46 | 8/24/2011 | 8/24/2021 | ||||||||||||||||
| 36,169 | — | $ | 26.10 | 8/20/2012 | 8/20/2022 | ||||||||||||||||
| 36,000 | — | $ | 41.04 | 8/19/2013 | 8/19/2023 | ||||||||||||||||
| 37,500 | — | $ | 44.09 | 8/26/2014 | 8/26/2024 | ||||||||||||||||
| 31,250 | 6,250 | $ | 39.15 | 8/25/2015 | 8/25/2025 | ||||||||||||||||
| 24,791 | 17,709 | $ | 45.30 | 8/27/2016 | 8/27/2026 | ||||||||||||||||
| 16,666 | 33,334 | $ | 46.37 | 8/17/2017 | 8/17/2027 | ||||||||||||||||
| — | 42,644 | $ | 76.86 | 8/30/2018 | 8/30/2028 | ||||||||||||||||
| — | 8,333 | $ | 34.20 | 3/20/2018 | 5/9/2026 | ||||||||||||||||
| 17,000 | (4) | $ | 963,220 | ||||||||||||||||||
| 9,600 | (13) | 543,936 | |||||||||||||||||||
| 20,000 | (5) | 1,133,200 | |||||||||||||||||||
| 17,953 | (6) | 1,017,217 | |||||||||||||||||||
| 1,991 | (7) | 112,810 | |||||||||||||||||||
| Total | 269,073 | 108,270 | 66,544 | $ | 3,770,383 | ||||||||||||||||
| Darren Cline | 3,241 | — | $ | 26.10 | 8/20/2012 | 8/20/2022 | |||||||||||||||
| 16,000 | — | $ | 41.04 | 8/19/2013 | 8/19/2023 | ||||||||||||||||
| 16,125 | — | $ | 44.09 | 8/26/2014 | 8/26/2024 | ||||||||||||||||
| 1,583 | 417 | $ | 31.37 | 2/3/2015 | 2/3/2025 | ||||||||||||||||
| 25,000 | 5,000 | $ | 39.15 | 8/25/2015 | 8/25/2025 | ||||||||||||||||
| 23,333 | 16,667 | $ | 45.30 | 8/27/2016 | 8/27/2026 | ||||||||||||||||
| 14,166 | 28,334 | $ | 46.37 | 8/17/2017 | 8/17/2027 | ||||||||||||||||
| — | 44,285 | $ | 76.86 | 8/30/2018 | 8/30/2028 | ||||||||||||||||
| — | 8,333 | $ | 34.20 | 3/20/2018 | 5/9/2026 | ||||||||||||||||
| 8,400 | (14) | $ | 475,944 | ||||||||||||||||||
| 16,000 | (4) | 906,560 | |||||||||||||||||||
| 17,000 | (5) | 963,220 | |||||||||||||||||||
| 18,644 | (6) | 1,056,369 | |||||||||||||||||||
| 1,422 | (7) | 80,571 | |||||||||||||||||||
| Total | 99,448 | 103,036 | 61,466 | $ | 3,482,664 | ||||||||||||||||
| Total | 2,193,253 | 881,335 | |||||||||||||||||||
| 2020 PROXY STATEMENT | 63 | |||||||
COMPENSATION DISCUSSION AND ANALYSIS |
| Option Awards | Stock Awards(1) | Equity Incentive Plan Awards(1) | ||||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable(2) | Option ($) | Vesting Start Date | Expiration Date | Number Shares of Stock Have Not | Market Shares or Have Not Vested(3) ($) | Number of Unearned Shares, Units or Other Rights That Have Not Vested | Market or ($) | |||||||||||||||||||||||||||||||||||
Roger D. Dansey, M.D. | 9,791 | 30,209 | 65.11 | 6/15/2018 | 6/15/2028 | |||||||||||||||||||||||||||||||||||||||
| 1,063 | 2,126 | 76.86 | 8/30/2018 | 8/30/2028 | ||||||||||||||||||||||||||||||||||||||||
| 4,670 | 9,340 | 77.45 | 9/7/2018 | 9/7/2028 | ||||||||||||||||||||||||||||||||||||||||
| — | 70,013 | 72.64 | 8/30/2019 | 8/30/2029 | ||||||||||||||||||||||||||||||||||||||||
| 50,000 | (12) | 5,713,000 | ||||||||||||||||||||||||||||||||||||||||||
| 10,000 | (13) | 1,142,600 | ||||||||||||||||||||||||||||||||||||||||||
| 1,007 | (5) | 115,060 | ||||||||||||||||||||||||||||||||||||||||||
| 4,423 | (5) | 505,372 | ||||||||||||||||||||||||||||||||||||||||||
| 6,905 | (14) | 788,965 | 10,358 | (15) | 1,183,505 | |||||||||||||||||||||||||||||||||||||||
| 1,991 | (6) | 227,492 | ||||||||||||||||||||||||||||||||||||||||||
| 5,768 | (16) | 659,052 | ||||||||||||||||||||||||||||||||||||||||||
| 29,475 | (7) | 3,367,814 | ||||||||||||||||||||||||||||||||||||||||||
| 560 | (10) | 63,986 | ||||||||||||||||||||||||||||||||||||||||||
| 2,436 | (11) | 278,337 | ||||||||||||||||||||||||||||||||||||||||||
Total | 15,524 | 111,688 | 108,138 | 12,355,849 | 14,785 | 1,689,334 | ||||||||||||||||||||||||||||||||||||||
Jean I. Liu | 56,000 | — | 35.95 | 12/01/2014 | 12/1/2024 | |||||||||||||||||||||||||||||||||||||||
| 35,000 | — | 39.15 | 8/25/2015 | 8/25/2025 | ||||||||||||||||||||||||||||||||||||||||
| 31,250 | 6,250 | 45.30 | 8/27/2016 | 8/27/2026 | ||||||||||||||||||||||||||||||||||||||||
| 24,791 | 17,709 | 46.37 | 8/17/2017 | 8/17/2027 | ||||||||||||||||||||||||||||||||||||||||
| 13,941 | 27,883 | 76.86 | 8/30/2018 | 8/30/2028 | ||||||||||||||||||||||||||||||||||||||||
| 2,084 | 6,249 | 34.20 | 3/20/2018 | 5/9/2026 | ||||||||||||||||||||||||||||||||||||||||
| — | 45,119 | 72.64 | 8/30/2019 | 8/30/2029 | ||||||||||||||||||||||||||||||||||||||||
| 17,000 | (4) | 1,942,420 | ||||||||||||||||||||||||||||||||||||||||||
| 13,206 | (5) | 1,508,918 | ||||||||||||||||||||||||||||||||||||||||||
| 1,422 | (6) | 162,478 | ||||||||||||||||||||||||||||||||||||||||||
| 18,995 | (7) | 2,170,369 | ||||||||||||||||||||||||||||||||||||||||||
| 697 | (10) | 79,639 | ||||||||||||||||||||||||||||||||||||||||||
| 1,740 | (11) | 198,812 | ||||||||||||||||||||||||||||||||||||||||||
Total | 163,066 | 103,210 | 49,898 | 5,701,346 | 3,162 | 361,290 | ||||||||||||||||||||||||||||||||||||||
Robin G. Taylor, Ph.D. | — | 54,491 | 64.38 | 5/20/2019 | 5/20/2029 | |||||||||||||||||||||||||||||||||||||||
| — | 11,083 | 72.64 | 8/30/2019 | 8/30/2029 | ||||||||||||||||||||||||||||||||||||||||
| 23,557 | (17) | 2,691,623 | ||||||||||||||||||||||||||||||||||||||||||
| 4,741 | (18) | 541,707 | ||||||||||||||||||||||||||||||||||||||||||
| 4,666 | (7) | 533,137 | ||||||||||||||||||||||||||||||||||||||||||
| 61 | (10) | 6,970 | ||||||||||||||||||||||||||||||||||||||||||
| 2,436 | (11) | 278,337 | ||||||||||||||||||||||||||||||||||||||||||
Total | — | 65,574 | 33,025 | 3,773,437 | 2,436 | 278,337 | ||||||||||||||||||||||||||||||||||||||
Total | 1,962,417 | 797,238 | 442,075 | 50,511,491 | 87,825 | 10,034,884 | ||||||||||||||||||||||||||||||||||||||
| (1) | The number of shares or units that have not vested and the market value of shares or units that have not vested does not include the potential RSUs to be granted under the Tucatinib LTIP or the EV/TV |
| (2) | All of the unexercisable options set forth in this column (other than the options with a vesting start date of March 20, 2018) vest at a rate of 1/ |
| (3) | The market value of the RSU awards is based on the closing stock price of |
| (4) | RSU awards vest in full on August |
| (5) | RSU awards vests 25% per year until fully vested on August 30, 2022. |
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COMPENSATION DISCUSSION AND ANALYSIS |
| (6) | The First Tranche of the |
| (7) | RSU awards vests 25% per year |
| (8) | The Adjusted Revenue PSU awards were granted on August 30, 2019 and will vest after December 31, 2022 upon certification by the |
| (9) | The Relative TSR PSU awards were granted on August 30, 2019 and will vest after August 31, 2022 upon certification by the Compensation Committee of the market-based performance metric, as further described above under the heading “Employment Agreements and Arrangements—Stock Awards.” Number of unearned shares and market value represent achievement of the performance metric at target. Maximum number of shares under the Relative TSR PSU awards is 19,214. |
| (10) | Upon the Compensation Committee’s certification that PADCEV received FDA approval, the EV portion of the RSU award was deemed eligible to vest and will vest on December 18, 2021, subject to the named executive officer’s continued employment on the vesting date, as further described under the heading “Employment Agreements and Arrangements—Long Term Incentive Plans and PSU Awards.” |
| (11) | The EV Frontline PSU awards were granted on December 31, 2019 and will vest upon certification by the Compensation Committee of certain milestones, as further described above under the heading “Employment Agreements and Arrangements—Long-Term Incentive Plans and Programs.” |
| (12) | RSU awards vest in full on June 15, 2021. |
| (13) | RSU awards vest 50% per year until fully vested on June 15, 2020. |
| (14) | Upon the Compensation Committee’s certification that PADCEV received FDA approval, the EV portion of Dr. Dansey’s PSU award was deemed eligible to vest and will vest on December 31, 2021, subject to Dr. Dansey’s continued employment on the vesting date, as further described under the heading “Employment Agreements and Arrangements—Long Term Incentive Plans and PSU Awards.” |
| (15) | The remaining portion of Dr. Dansey’s PSU awards will vest in tranches contingent on the FDA approval of tucatinib and FDA approval of TV, subject to Dr. Dansey’s continued employment on the vesting date, as further described under the heading “Employment Agreements and Arrangements—Long Term Incentive Plans and PSU Awards.” |
| (16) | RSU awards vests 25% per year until fully vested on February 1, 2023. |
| (17) | RSU awards vests 25% per year until fully vested on May 20, 2023. |
| (18) | RSU awards vest in full on May 20, 2020. |
The following table sets forth information regarding exercises of stock options and vesting of RSU awards by our named executive officers for the year ended December 31, OPTION EXERCISES AND STOCK VESTED2018. Option Awards Stock Awards Name Numberof SharesAcquiredon Exercise Value Realizedon Exercise (1) Numberof SharesAcquiredon Vesting Value Realizedon Vesting (2)Clay B. Siegall, Ph.D. 231,247 $ 11,741,863 64,000 $ 4,773,760 Todd E. Simpson — $ — 17,000 $ 1,268,030 Roger D. Dansey, M.D. — $ — — $ — Vaughn B. Himes, Ph.D. 20,000 $ 1,051,000 15,000 $ 1,118,850 Darren Cline 19,086 $ 757,852 17,400 $ 1,196,940 2019._____________________
| Option Awards | Stock Awards | |||||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise | Value Realized on Exercise(1) $ | Number of Shares Acquired on Vesting | Value Realized on Vesting(2) $ | ||||||||||||||||||||||||
Clay B. Siegall, Ph.D. | 291,629 | 19,575,954 | 95,996 | 7,127,229 | ||||||||||||||||||||||||
Todd E. Simpson | — | — | 23,179 | 1,722,243 | ||||||||||||||||||||||||
Roger D. Dansey, M.D. | 10,000 | 535,650 | 11,811 | 816,551 | ||||||||||||||||||||||||
Jean I. Liu | — | — | 19,402 | 1,441,461 | ||||||||||||||||||||||||
Robin G. Taylor, Ph.D. | — | — | — | — | ||||||||||||||||||||||||
| (1) | The value realized on exercise is calculated based on the difference between the exercise price of each option exercised and the closing price of our common stock on the date of exercise multiplied by the number of shares underlying each option exercised, and does not represent actual amounts received by the named executive officers as a result of the option exercises. |
| (2) | The value realized on vesting is calculated based on the closing price of our common stock on the date of vest multiplied by the number of shares underlying each award vested. |
Under SEC regulations, we are required to calculate and disclose the total annual compensation paid to our median employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to our CEO, or the CEO Pay Ratio. Set forth below is a description of the methodology, including material assumptions, adjustments and estimates, we used to identify the median employee for purposes of calculating the CEO Pay Ratio:
We identified the median employee using our employee population as of October 31, 2018.2019. For this purpose, we identified all company employees on payroll and all individuals who would receive an IRS Form 1099 from the Company but who did not meet the following exclusion criteria: (i) receipt of annual payments from the Company that totaled less than twenty thousand dollars ($20,000); (ii) employment by another entity, such as employment as faculty of a university; (iii) 1099 recipient constituted a generally recognizable, bona fide third-party service provider such as a law firm or accounting firm; and (iv) 1099 recipient employed more than two or more employees and has two or more other bona fide clients.
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COMPENSATION DISCUSSION AND ANALYSIS |
faculty of a university; (iii) 1099 recipient constituted a generally recognizable, bona fide third-party service provider such as a law firm or accounting firm; and (iv) 1099 recipient employed more than two or more employees and has two or more other bona fide clients. |
In determining compensation for purposes of the median calculation, we used each employee’s annual base pay, target annual bonus and regular annual equity awards (at grant date fair value). For individuals receiving 1099s and not excluded based on the criteria above, the amount of compensation reflected in the individual’s Form 1099 was the annual compensation number utilized.
We annualized the base salary earned in 20182019 by permanent employees (full-time and part-time) hired after January 1, 2018.2019.
Using this approach, we selected the median of our employee population. Once the median employee was identified, we then calculated annual total compensation for this employee in accordance with the requirements of the Summary Compensation Table.
For 2018,2019, the median of the annual total compensation of our employees (other than our CEO) was $198,658$222,352 and the annual total compensation of our CEO was $18,107,037.$14,521,495. The ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees other than the CEO was 91:65:1.
The pay ratio above represents the Company’s reasonable estimate calculated in a manner consistent with the rule and applicable guidance. The rule and guidance provide significant flexibility in how companies identify the median employee, and each company may use a different methodology and make different assumptions particular to that company. As a result, as the SEC explained when it adopted the rule, in considering thepay-ratio disclosure, stockholdersshareholders should keep in mind that the rule was not designed to facilitate comparisons of pay ratios among different companies, even companies within the same industry, but rather to allow stockholdersshareholders to better understand and assess each particular company’s compensation practices andpay-ratio disclosures. Neither the Compensation Committee nor our management used our CEO Pay Ratio measure in making compensation decisions.
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The following table reflects the potential payments and benefits to which the named executive officers would be entitled under each individual’s employment agreement with Seattle Genetics and ourECHELON-1 LTIP, the EV/TV LTIP, the Tucatinib LTIP and any performance-based RSU granted to a named executive officer, in the event of termination orchange-in-control of the Company. The amounts shown in the table below assume that each termination or event was effective as of December 31, POTENTIAL PAYMENTS UPON TERMINATION ORCHANGE-IN-CONTROL20182019 and that all eligibility requirements under the respective agreement were satisfied. Involuntary Termination (1) Name and Principal Position Before ormore than 12months after aChange inControl Immediately before or within 12months after aChange inControl Terminationdue toDeath orDisability (2)Clay B. Siegall, Ph.D. President and CEO Base salary continuation $ 1,381,725 $ 1,842,300 $ — Lump sum bonus award payment 1,381,725 2,763,450 921,150 Health benefit continuation 23,411 23,411 — Vacation payout 85,173 85,173 85,173 Stock award acceleration (3) 7,058,723 17,004,696 — Total $ 9,930,757 $ 21,719,030 $ 1,006,323 Todd E. Simpson Chief Financial Officer Base salary continuation $ 540,900 $ 811,350 $ — Lump sum bonus award payment 270,450 405,675 270,450 Health benefit continuation 26,672 40,009 — Vacation payout 52,008 52,008 52,008 Stock award acceleration (3) 1,772,139 4,577,494 — Total $ 2,662,169 $ 5,886,536 $ 322,458 Roger D. Dansey, M.D. Chief Medical Officer Base salary continuation $ 650,000 $ 975,000 $ — Lump sum bonus award payment 325,000 487,500 325,000 Health benefit continuation 26,672 40,009 — Vacation payout 27,079 27,079 27,079 Stock award acceleration (3) 102,498 5,467,407 — Total $ 1,131,249 $ 6,996,995 $ 352,079 Vaughn B. Himes, Ph.D. Chief Technical Officer Base salary continuation $ 507,500 $ 761,250 $ — Lump sum bonus award payment 253,750 380,625 253,750 Health benefit continuation 26,672 40,009 — Vacation payout 46,926 46,926 46,926 Stock award acceleration (3) 2,167,015 4,498,351 — Total $ 3,001,863 $ 5,727,161 $ 300,676 Darren Cline Former Executive Vice President, Commercial Base salary continuation $ 482,500 $ 723,750 $ — Lump sum bonus award payment 217,125 325,688 217,125 Health benefit continuation 26,672 40,009 — Vacation payout 6,853 6,853 6,853 Stock award acceleration (3) 2,014,430 4,168,242 — Total $ 2,747,580 $ 5,264,542 $ 223,978 _______________
Involuntary Termination(1) | ||||||||||||||||||||||||
Name and Principal Position | Before or more than 12 months after a Change in Control | Immediately months after a Change in Control | Termination due to Death or Disability(2) | |||||||||||||||||||||
Clay B. Siegall, Ph.D. | ||||||||||||||||||||||||
President and CEO | ||||||||||||||||||||||||
Base salary continuation | $ | 1,450,812 | $ | 1,934,416 | $ | — | ||||||||||||||||||
Lump sum bonus award payment | 1,450,812 | 2,901,624 | 967,208 | |||||||||||||||||||||
Health benefit continuation | 38,691 | 51,588 | — | |||||||||||||||||||||
Vacation payout | 83,697 | 83,697 | 83,697 | |||||||||||||||||||||
Stock award acceleration(3) | 21,172,872 | 48,438,581 | 8,398,533 | |||||||||||||||||||||
Total | $ | 24,196,884 | $ | 53,409,906 | $ | 9,449,438 | ||||||||||||||||||
Todd E. Simpson | ||||||||||||||||||||||||
Chief Financial Officer | ||||||||||||||||||||||||
Base salary continuation | $ | 575,200 | $ | 862,800 | $ | — | ||||||||||||||||||
Lump sum bonus award payment | 287,600 | 431,400 | 287,600 | |||||||||||||||||||||
Health benefit continuation | 18,615 | 27,922 | — | |||||||||||||||||||||
Vacation payout | 49,775 | 49,775 | 49,775 | |||||||||||||||||||||
Stock award acceleration(3) | 6,693,195 | 13,547,957 | 2,361,379 | |||||||||||||||||||||
Total | $ | 7,624,385 | $ | 14,919,854 | $ | 2,698,754 | ||||||||||||||||||
Roger D. Dansey, M.D. | ||||||||||||||||||||||||
Chief Medical Officer | ||||||||||||||||||||||||
Base salary continuation | $ | 672,800 | $ | 1,009,200 | $ | — | ||||||||||||||||||
Lump sum bonus award payment | 336,400 | 504,600 | 336,400 | |||||||||||||||||||||
Health benefit continuation | 25,794 | 38,691 | — | |||||||||||||||||||||
Vacation payout | 55,628 | 55,628 | 55,628 | |||||||||||||||||||||
Stock award acceleration(3) | 5,153,239 | 17,947,409 | 4,409,955 | |||||||||||||||||||||
Total | $ | 6,243,861 | $ | 19,555,528 | $ | 4,801,983 | ||||||||||||||||||
Jean I. Liu | ||||||||||||||||||||||||
General Counsel and Executive Vice President, Legal Affairs | ||||||||||||||||||||||||
Base salary continuation | $ | 522,200 | $ | 783,300 | $ | — | ||||||||||||||||||
Lump sum bonus award payment | 261,100 | 391,650 | 261,100 | |||||||||||||||||||||
Health benefit continuation | 25,794 | 38,691 | — | |||||||||||||||||||||
Vacation payout | 43,264 | 43,264 | 43,264 | |||||||||||||||||||||
Stock award acceleration(3) | 5,324,059 | 11,116,872 | 2,062,543 | |||||||||||||||||||||
Total | $ | 6,176,417 | $ | 12,373,777 | $ | 2,366,907 | ||||||||||||||||||
| (1) | Each employment agreement with a named executive officer provides that in the case of involuntary termination occurring not in connection with a change in control, such individual is entitled to receive either alump-sum payment equal to 12 months of monthly base salary or payment of such amount in accordance with Seattle Genetics’ standard payroll schedule, at our discretion, such individual’s annual target bonus, 12 months of continued health benefits and 12 months of accelerated vesting of outstanding equity awards (i.e., stock options and |
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COMPENSATION DISCUSSION AND ANALYSIS |
| (2) | Upon termination due to death or disability, each employment agreement provides for payment of the portion of any annual bonus earned prior to the date of termination at target and any accrued but unused |
| (3) | The value of equity award vesting acceleration is based on the closing stock price of |
EMPLOYMENT AGREEMENTS
We are a party to an amended and restated employment agreement with Dr. Siegall entered into in October 2018. This agreement provides that he receive an annual base salary, which is currently set at $967,208$1,050,600 effective February 1, 2019,5, 2020, and he may receive an annual bonus based upon performance criteria and financial and operational results of Seattle Genetics as determined by the Compensation Committee of the Board of Directors under our Executive Bonus Plan. Dr. Siegall is also eligible to receive additional grants of stock options or other equity awards from time to time in the future as determined by the Compensation Committee of the Board of Directors. In the event Dr. Siegall’s employment is constructively terminated or terminated by Seattle Genetics without cause, he will be entitled to receive his monthly base salary and COBRA premium benefits for an additional 18 months (or 24 months if he is constructively terminated or terminated by Seattle Genetics without cause immediately prior to or within 12 months after a change in control of Seattle Genetics), payable in either alump-sum payment or in accordance with Seattle Genetics’ standard payroll schedule, at Seattle Genetics’ discretion, and to stock award vesting acceleration equal to an additional 12 months of vesting, as well as his annual bonus at target multiplied by 1.5. The employment agreement additionally provides that if Dr. Siegall’s employment is constructively terminated or terminated by Seattle Genetics without cause immediately prior to or within 12 months after a change in control of Seattle Genetics, all of Dr. Siegall’s stock awards will become fully vested and, in the case of stock options, exercisable, and he will be entitled to his pro rata bonus at target for the year in which the change in control occurs, and to his target bonus at target multiplied by two. Such severance benefits are conditioned upon Dr. Siegall’s resignation from all positions held by Dr. Siegall and execution of a full release and waiver of claims. Dr. Siegall’s employment is for no specified length of time, and either he or Seattle Genetics has the right to terminate his employment at any time with or without cause.
We are a party to an amended and restated employment agreement with Mr. Simpson entered into in October 2018. This agreement provides that he receive an annual base salary, which is currently set at $575,200$604,000 effective February 1, 2019,5, 2020, and is eligible to receive an annual bonus at a target percentage of his base salary as determined by the Compensation Committee. Mr. Simpson is also eligible to receive additional grants of stock options or other equity awards from time to time in the future as determined by the Compensation Committee of the Board of Directors.
We are a party to an amended and restated employment agreement with Dr. Dansey entered into in October 2018. This agreement provides that he receive an annual base salary, which is currently set at $672,800$706,400 effective February 1, 2019,5, 2020, and is eligible to receive an annual bonus at a target percentage of his base salary as determined by the Compensation Committee. Dr. Dansey is also eligible to receive additional grants of stock options or other equity awards from time to time in the future as determined by the Compensation Committee of the Board of Directors.
We are a party to an amended and restated employment agreement with Dr. HimesMs. Liu entered into in October 2018. This agreement provides that heshe receive an annual base salary, which is currently set at $530,300$548,300 effective February 1, 2019,5, 2020, and is eligible to receive an annual bonus at a target percentage of hisher base salary as determined by the Compensation Committee.
We were a party to an amended and restated employment agreement, entered into in May 2019, with Mr. Cline,Dr. Taylor, our former Executive Vice President, Commercial.Chief Commercial Officer. This agreement provided that he would receive an annual base salary, which was set at $482,500$507,000 effective February 1, 2019,5, 2020, and was eligible to receive an annual bonus at a target percentage of his base salary as determined by the Compensation Committee. Under the agreement, Mr. ClineDr. Taylor was also eligible to receive additional grants of stock options or other equity awards from time to time in the future as determined by the Compensation Committee of the Board of Directors.
Each of Mr. Simpson,Simpson’s, Dr. DanseyDansey’s and Dr. Himes’Ms. Liu’s amended and restated employment agreements provide that if such executive'sexecutive’s employment is constructively terminated or terminated by us without cause, such executive will be entitled to 12 months of base salary, his or her annual bonus at target, COBRA premium benefits and equity award vesting acceleration equal to 12 months of vesting. Their employment agreements additionally provide that in the event such executive is involuntarily terminated immediately prior to or within 12 months after a change in control, all of such
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executive’s stock awards will become fully vested and, in the case of stock options, exercisable, and he or she will be entitled to 18 months of base salary and his or her annual bonus at target, multiplied by 1.5. Such severance benefits are conditioned upon such executive’s resignation from all positions held by such executive and execution of a full release and waiver of claims. Each such executive’s employment is for no specified length of time, and either such executive or we have the right to terminate such executive’s employment at any time with or without cause. Mr. Cline’s amended and restatedDr. Taylor’s employment agreement contained the same terms as those of Mr. Simpson, Dr. Dansey and Ms. Liu. When Dr. Himes.
OTHER BENEFITS ON TERMINATION OR CHANGE IN CONTROL
We do not provide any “gross-ups”“gross-ups” or other payments based on taxes attributable to any of the severance payments and benefits described above.
Upon a termination of employment due to death or disability, each employment agreement also provides for payment of the portion of any annual bonus earned prior to the date of termination and any accrued but unused vacation. In addition, the 2007 Equity Plan provides that all outstanding options to purchase shares of our common stock that are vested and exercisable as of the date of the executive officer’s death or, in the event of the executive officer’s death within 30 days following the termination of service or his or her disability, may be exercised for six months following his or her death or, in the event of termination of service due to the executive officer’s disability, one year following the termination date but in no event after the expiration date of such option.
OTHER TERMINATION BENEFITS
Other than as set forth in each named executive officer’s employment agreement and except as otherwise provided by applicable law, the named executive officers are generally not entitled to any additional benefits upon a termination or change in control of Seattle Genetics. However, under the 2007 Equity Plan, and our Amended and Restated 1998 Stock Option Plan, or 1998 Equity Plan, in the event of a change in control of Seattle Genetics, (i) if the successor corporation does not assume or substitute equivalent awards for all outstanding equity awards granted pursuant to the 2007 Equity Plan or the 1998 Equity Plan, then as of the date of completion of the acquisition or merger, the vesting of such equity awards shall be accelerated in full; and (ii) if outstanding equity awards are assumed or equivalent awards are substituted by the successor corporation and if at the time of, immediately prior to or within twelve months after the effective time of the change ofin control, an equity awardee’s service as an employee or consultant is terminated without cause or due to constructive termination, then the vesting of such substituted equity award shall be accelerated in full. The value of such stock option acceleration in full for each named executive officer, assuming such termination or event was effective as of December 31, 2018,2019, is set forth in the Potential“Potential Payments Upon Termination or Change-In-ControlChange-In-Control” table above under the column “Involuntary Termination—Within 12 months after a Change in Control.”
Under the 2007 Equity Plan, if a named executive officer’s service with us is terminated as a result of death or disability, the period of time in which options may be exercised following termination is extended as described in more detail under the heading “Employment Agreements and Arrangements—Stock Awards.” The terms of the 1998 Equity Plan are substantially similar to the 2007 Equity Plan with respect to the extension of the post-termination exercise period in the case of a termination due to death or disability.
Under theECHELON-1 LTIP, the payment of the cash awards payable to a named executive officer and the vesting of the stock options held by a named executive officer are subject to full acceleration in the event of a termination of service (without cause or due to constructive termination) immediately prior to or within 12 months after, a change ofin control of the Company, or in the event an acquirer in a change ofin control of the Company fails to assume the cash award or stock option. The value of such cash award and stock option acceleration in full for each named executive officer, assuming such termination or event was effective as of December 31, 2018,2019, is set forth in the Potential“Potential Payments Upon Termination or Change-In-ControlChange-In-Control” table above.
Under the EV/TV LTIP, the vesting of any RSU awards held by a named executive officer is subject to full acceleration in the event of a termination of service (without cause or due to constructive termination) immediately prior to or within 12 months after, a change ofin control of the Company, or in the event an acquirer in a change ofin control of the Company fails to assume the awards. The value of the acceleration of the portion of such RSU award that was granted upon approval of PADCEV is included in the “Potential Payments Upon Termination orChange-In-Control” table above. The value of the remaining portion of such RSU award acceleration is not included in the Potential“Potential Payments Upon Termination or Change-In-ControlChange-In-Control” table above, as those awards wereit was not outstanding as of December 31, 2018.2019.
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COMPENSATION DISCUSSION AND ANALYSIS |
Under the Tucatinib LTIP, the vesting of any RSU awards held by a named executive officer is subject to partial or full acceleration in the event of a termination of service (without cause or due to constructive termination) immediately prior to, or within twelve months after, a change ofin control of the Company, or in the event an acquirer in a change ofin control of the Company fails to assume the stock unit awards. The value of such acceleration applicable to the First Tranche of stock unit awards in full for each named executive officer, assuming such termination or event was effective as of December 31, 2018,2019, is set forth in the Potential“Potential Payments Upon Termination or Change-In-ControlChange-In-Control” table above. The value of such acceleration applicable to the Second Tranche of stock unit awards is not included in the Potential“Potential Payments Upon Termination or Change-In-ControlChange-In-Control” table above, as those awards were not outstanding as of December 31, 2018.
Under the terms of the performance-based RSU award granted to Dr. Dansey in September 2018, the vesting of such award is subject to partial acceleration in the event an acquirer in a change ofin control of the Company fails to assume the RSU award. The portion of the RSU award eligible to vest upon such change ofin control will be determined based on the level of achievement of the relevant performance conditions and the applicable remaining period preceding the scheduled deadline for achieving any remaining performance conditions not yet satisfied, in each case as of the change ofin control. In addition, the event of a termination of service with the Company (or an acquirer, if such termination occurs within twelve months after the date of a change ofin control and the acquirer has continued or assumed the award) without cause, due to constructive termination or due to death or disability, the number of shares deemed eligible to vest, as determined pursuant to the terms of the RSU award, will vest on the later of the date of the termination and the date that the Compensation Committee certifies achievement of the relevant performance conditions, which shall be no later than 60 days following the termination. The value of such RSU award acceleration in full for Dr. Dansey, assuming such termination or event was effective as of December 31, 2018,2019, is set forth in the Potential“Potential Payments Upon Termination or Change-In-ControlChange-In-Control” table above.
Under the terms of the PSU awards granted to Dr. Siegall in August 2019, the vesting of such PSU awards will cease upon termination of service as an employee for any reason other than death or disability. The PSU awards provide for acceleration of vesting in the event of certain specified change in control events involving us or the termination of our CEO’s employment due to death or disability. In addition, following certain change in control events wherein the PSU awards are assumed by the surviving entity, the PSU awards convert to time-based vesting and cliff vest on the last day of the applicable performance period, subject to our CEO’s continued service through the applicable vesting date; provided, however, that if our CEO is involuntarily terminated immediately prior to or within 12 months after any such change in control event, the PSU awards will vest effective as of the date of such involuntary termination. The value of such PSU award acceleration is included in the “Potential Payments Upon Termination orChange-In-Control” table above.
Under the terms of the EV Frontline PSU awards held by our named executive officers, the vesting of such awards is subject to partial acceleration in the event of a termination of service (without cause or due to constructive termination) immediately prior to or within 12 months after, a change in control of the Company, or in the event an acquirer in a change in control of the Company fails to assume the awards. The value of such EV Frontline PSU award acceleration, assuming such termination or event was effective as of December 31, 2019, is included in the “Potential Payments Upon Termination orChange-In-Control” table above.
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POLICIES AND PROCEDURES FOR REVIEW OF RELATED PARTY TRANSACTIONS
Pursuant to the Audit Committee Charter, the Audit Committee is responsible for the review, oversight and approval of any transaction with an executive officer, director, principal stockholdershareholder or any of such persons’ immediate family members or affiliates in which the amount involved exceeds $120,000 or is otherwise required to be disclosed by Seattle Genetics under applicable rules and regulations of the SEC. The Audit Committee will consider the relevant facts and circumstances available and deemed relevant, including, but not limited to, the risks, costs and benefits to Seattle Genetics, the terms of the transaction, and the availability of other sources for comparable services or products.
CERTAIN TRANSACTIONS WITH OR INVOLVING RELATED PERSONS
Since January 1, 2019, we have not engaged in any transactions, nor are any such transactions currently proposed, in which we were a participant and the amount involved exceeded $120,000, and in which any related person had or Involving Related Persons
BeiGene License Agreement. In November 2019, we entered into a license agreement with BeiGene, Ltd., or BeiGene, for the advancement of Shares
INDEMNIFICATION AGREEMENTS
Seattle Genetics has entered into indemnification agreements with its directors and certain officers for the indemnification of and advancement of expenses to these persons to the fullest extent permitted by law. Seattle Genetics also intends to enter into these agreements with our future directors and certain future officers.
| 2020 PROXY STATEMENT | 71 | |||||||
EQUITY COMPENSATION PLAN INFORMATION |
The following table provides information as of December 31, EQUITY COMPENSATION PLAN INFORMATION20182019 with respect to the shares of our common stock that may be issued under our existing equity compensation plans: our 2007 Equity Plan, our 1998 Equity Plan, our 2000 Directors’ Stock Option Plan and our ESPP.Plan Category Number of securitiesto be issued upon exercise of outstanding options and rights(a) Weighted average exercise price of outstanding options and rights(b) Number of securitiesremaining availablefor future issuance underequity compensation plans(excluding securitiesreflected in Column (a))(c) Equity compensation plans approved by stockholders: Amended and Restated 2007 Equity Incentive Plan (1) 13,712,666 $ 40.61 6,775,642 (2) Amended and Restated 1998 Stock Option Plan — $ — — (3) 2000 Directors’ Stock Option Plan 82,500 $ 12.10 — (4) Amended and Restated 2000 Employee Stock Purchase Plan — $ — 382,789 (5) Equity compensation plans not approved by stockholders — $ — — Total 13,795,166 7,158,431 Amended and Restated 2000 Employee Stock Purchase Plan._______________
Plan Category | Number of securities to be issued upon exercise of outstanding options and rights (a) | Weighted average exercise price of outstanding options and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column (a)) (c) | |||||||||||||
Equity compensation plans approved by shareholders: | ||||||||||||||||
Amended and Restated 2007 Equity Incentive Plan(1)
|
| 13,133,711
|
| $
|
|
|
| 47.19
|
|
| 4,072,747(2)
|
| ||||
2000 Directors’ Stock Option Plan
|
| 35,000
|
| $
|
|
|
| 12.76
|
|
| —(3)
|
| ||||
Amended and Restated 2000 Employee Stock Purchase Plan
|
| —
|
| $
|
|
|
| —
|
|
| 1,194,180(4)
|
| ||||
Equity compensation plans not approved by shareholders | — | $ | — | — | ||||||||||||
Total | 13,168,711 | 5,266,927 | ||||||||||||||
| (1) | The number of securities to be issued upon exercise of outstanding options and rights (column (a)) includes shares subject to RSU awards granted under the 2007 Equity Plan, which RSU awards do not carry an exercise price. Accordingly, the weighted average exercise price of outstanding options and rights (column (b)) excludes the grant of RSU awards. |
| (2) | As of December 31, |
| (3) |
The 2000 Directors’ Stock Option Plan expired on March 7, 2011. |
| (4) | |
As of December 31, |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 1, 2020 (except as noted) regarding the beneficial ownership of our common stock by each director (including each nominee for director), by each person or group of affiliated persons known to us to beneficially own five percent or more of our outstanding common stock, by each named executive officer and by all executive officers and directors as a group. Unless otherwise indicated, the address of the individuals and entities below is c/o Seattle Genetics, Inc., 21823 – 30th Drive SE, Bothell, WA 98021.
Name and Address | Total Common Stock Equivalents(1) | Percent of Common Stock Equivalents(2) | ||||||
Felix J. Baker, Ph.D.(3) Baker Bros. Advisors LP and Affiliates(3) 667 Madison Avenue, 21st Floor New York, NY 10065 | 50,595,325 | 29.3% | ||||||
Capital International Investors(4) 11100 Santa Monica Blvd., 16th Floor | 20,996,099 | 12.2% | ||||||
PRIMECAP Management Company(5) 177 E. Colorado Blvd., 11th Floor Pasadena, CA 91105 | 10,951,717 | 6.4% | ||||||
The Vanguard Group(6) 100 Vanguard Blvd Malvern, PA 19355 | 10,916,170 | 6.3% | ||||||
Wellington Management Company(7) 280 Congress Street Boston, MA 02210 | 10,307,338 | 6.0% | ||||||
BlackRock, Inc.(8) 55 East 52nd Street New York, NY 10055 | 9,837,619 | 5.7% | ||||||
T. Rowe Price Associates, Inc.(9) 100 E. Pratt Street Baltimore, MD 21202 | 9,828,030 | 5.7% | ||||||
Clay B. Siegall, Ph.D.(10) | 2,063,058 | 1.2% | ||||||
Todd E. Simpson(11) | 402,626 | * | ||||||
Roger D. Dansey, M.D.(12) | 28,992 | * | ||||||
Vaughn Himes, Ph.D.(13) | 427,429 | * | ||||||
Jean I. Liu(14) | 196,788 | * | ||||||
Robin G. Taylor, Ph.D.(15) | 38,427 | * | ||||||
Srinivas Akkaraju, M.D., Ph.D.(16) | 109,245 | * | ||||||
David W. Gryska(17) | 132,090 | * | ||||||
Marc E. Lippman, M.D.(18) | 200,390 | * | ||||||
John A. Orwin(19) | 71,340 | * | ||||||
Alpna H. Seth, Ph.D.(20) | 7,422 | * | ||||||
Nancy A. Simonian, M.D.(21) | 101,340 | * | ||||||
Daniel G. Welch(22) | 173,840 | * | ||||||
All directors and executive officers as a group (12 persons)(23) | 54,509,885 | 31.1% | ||||||
| * | Less than one percent |
| (1) | Beneficial ownership is determined in accordance with SEC rules. In computing the beneficial ownership, we have included shares for which the named person has sole or shared power over voting or investment decisions. The number of shares of common stock beneficially owned includes common stock which the named person has the right to acquire, through option exercise or otherwise, within 60 days after March 1, 2020. |
| (2) | Percentage of common stock equivalents is based on a total of 172,466,090 shares of common stock outstanding as of March 1, 2020. For each named person, the percentage ownership includes common stock that the person has the right to acquire within 60 days after March 1, 2020, as described in Footnote 1. However, such shares are not deemed outstanding with respect to the calculation of ownership percentage for any other person. In some cases, beneficial ownership calculations for five percent or greater shareholders are based solely on publicly-filed Schedules 13D or 13G, which five percent or greater shareholders are required to file with the SEC, and which generally set forth ownership interests as of December 31, 2019 unless otherwise provided. |
| (3) | The shares reported in the table as beneficially owned by the reporting persons includes 45,757,886 shares held by Baker Brothers Life Sciences, L.P. , or Life Sciences, 4,217,591 shares held by 667, L.P., or 667, 18,243 shares held by FBB2, LLC, or FBB2, 49,292 shares held by FBB3, LLC, or FBB3, 181,740 shares |
| 2020 PROXY STATEMENT | 73 | |||||||
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
| held by Felix J. Baker, 181,733 shares held by Julian C. Baker, 60,000 shares issued to Felix J. Baker as a result of the exercise of options and 21,800 shares issued to Felix J. Baker upon the vesting of restricted stock units. This number also includes 107,040 shares of common stock issuable upon exercise of options held by Felix J. Baker that are exercisable within 60 days of March 1, 2020 held by Felix J. Baker that vest within 60 days of March 1, 2020. According to a Schedule 13D/A filed with the SEC by the reporting persons on May 1, 2019 and a Form 4 filed with the SEC by the reporting persons on June 7, 2019, Baker Bros. Advisors LP, or the Adviser, serves as the Investment Adviser to Life Sciences and 667, or collectively the Baker Funds. Baker Bros. Advisors (GP) LLC, or the Adviser GP, is the Adviser’s sole general partner. Julian C. Baker and Felix J. Baker are principals of the Adviser GP. The Adviser has complete and unlimited discretion and authority with respect to the investment and voting power of the securities held by the Baker Funds, and may be deemed to have the power to vote or direct the vote of and the power to dispose or direct the disposition of such securities. In addition, according to the Schedule 13D/A, the Adviser has voting and investment power over the options, RSU awards and common stock held by Felix J. Baker, and the Adviser GP, as well as Felix J. Baker and Julian C. Baker as principals of the Adviser GP, may be deemed to have the power to vote or direct the vote of and the power to dispose or direct the disposition of, the options, RSU awards and common stock held by Felix J. Baker. In addition, according to the Schedule 13D/A, Julian C. Baker and Felix J. Baker are also the sole managers of FBB2 and FBB3 and as such may be deemed to be beneficial owners of shares of common stock held by FBB2 and FBB3 and may be deemed to have the power to vote or direct the vote and dispose or direct the disposition of those shares. |
| (4) | The indicated ownership is based solely on a Schedule 13G/A filed with the SEC by the reporting person on February 14, 2020. According to the Schedule 13G/A, Capital International Investors has sole voting power over 20,081,588 shares of common stock and sole dispositive power over 20,996,099 shares of common stock. The Schedule 13G/A filed by the reporting person provides information as of December 31, 2019 and, consequently, the beneficial ownership of the reporting person may have changed between December 31, 2019 and March 1, 2020. |
| (5) | The indicated ownership is based solely on a Schedule 13G/A filed with the SEC by the reporting person on February 12, 2020. According to the Schedule 13G/A, PRIMECAP Management Company has sole voting power over 10,814,992 shares of common stock and sole dispositive power over 10,951,717 shares of common stock. The Schedule 13G/A filed by the reporting person provides information as of December 31, 2019 and, consequently, the beneficial ownership of the reporting person may have changed between December 31, 2019 and March 1, 2020. |
| (6) | The indicated ownership is based solely on a Schedule 13G/A filed with the SEC by the reporting person on February 12, 2020. According to the Schedule 13G/A, The Vanguard Group has sole voting power over 93,043 shares of common stock and sole dispositive power over 10,803,019 shares of common stock. The Schedule 13G/A filed by the reporting person provides information as of December 31, 2019 and, consequently, the beneficial ownership of the reporting person may have changed between December 31, 2019 and March 1, 2020. |
| (7) | The indicated ownership is based solely on a Schedule 13G filed with the SEC by the reporting person on January 27, 2020. Wellington Management Group LLP, Wellington Group Holdings LLP, Wellington Investment Advisors Holdings LLP and Wellington Management Company LLP, or collectively, Wellington, beneficially own 10,307,338 shares of our common stock that are owned of record by clients of one or more investment advisers directly or indirectly owned by Wellington Management Group LLP. The Schedule 13G filed by the reporting person provides information as of December 31, 2019 and, consequently, the beneficial ownership of the reporting person may have changed between December 31, 2019 and March 1, 2020. |
| (8) | The indicated ownership is based solely on a Schedule 13G filed with the SEC by the reporting person on February 7, 2020. According to the Schedule 13G, BlackRock Inc, has sole voting power over 9,186,748 shares of common stock and sole dispositive power over 9,837,619 shares of common stock. The Schedule 13G filed by the reporting person provides information as of December 31, 2019 and, consequently, the beneficial ownership of the reporting person may have changed between December 31, 2019 and March 1, 2020. |
| (9) | The indicated ownership is based solely on a Schedule 13G/A filed with the SEC by the reporting person on February 14, 2020. According to the Schedule 13G/A, T. Rowe Price Associates, Inc. has sole voting power over 2,627,959 shares of common stock and sole dispositive power over 9,828,030 shares of common stock. The Schedule 13G/A filed by the reporting person provides information as of December 31, 2019 and, consequently, the beneficial ownership of the reporting person may have changed between December 31, 2019 and March 1, 2020. |
| (10) | Includes 1,494,593 shares of common stock issuable upon exercise of options that are exercisable within 60 days of March 1, 2020. |
| (11) | Includes 304,883 shares of common stock issuable upon exercise of options that are exercisable within 60 days of March 1, 2020. |
| (12) | Includes 21,124 shares of common stock issuable upon exercise of options that are exercisable within 60 days of March 1, 2020. |
| (13) | Includes 291,388 shares of common stock issuable upon exercise of options that are exercisable within 60 days of March 1, 2020. |
| (14) | Includes 175,301 shares of common stock issuable upon exercise of options that are exercisable within 60 days of March 1, 2020. |
| (15) | Dr. Taylor, our former Chief Commercial Officer, left the Company in February 2020. He received 38,427 shares of equity award vesting acceleration equal to 12 months of vesting from the date of his separation. |
| (16) | Includes 72,040 shares of common stock issuable upon exercise of options that are exercisable within 60 days of March 1, 2020. |
| (17) | Includes 87,040 shares of common stock issuable upon exercise of options that are exercisable within 60 days of March 1, 2020. |
| (18) | Includes 72,040 shares of common stock issuable upon exercise of options that are exercisable within 60 days of March 1, 2020. |
| (19) | Includes 49,540 shares of common stock issuable upon exercise of options that are exercisable within 60 days of March 1, 2020. |
| (20) | Includes 7,422 shares of common stock issuable upon exercise of options that are exercisable within 60 days of March 1, 2020. |
| (21) | Includes 79,540 shares of common stock issuable upon exercise of options that are exercisable within 60 days of March 1, 2020. |
| (22) | Includes 86,540 shares of common stock issuable upon exercise of options that are exercisable within 60 days of March 1, 2020. |
| (23) | Includes 2,848,491 shares of common stock issuable upon exercise of options that are exercisable within 60 days of March 1, 2020. Dr. Taylor’s shares are not included in the total since he is no longer an executive officer. |
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PROPOSAL NO. 3
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF
THE SEATTLE GENETICS, INC.
AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN
The Board approved an amendment and restatement of the 2007 Equity Plan in March 2020, subject to shareholder approval. Throughout this proxy statement, we refer to the 2007 Equity Plan, as amended and restated by the Board in March 2020, as the “Restated 2007 Equity Plan”.
In this Proposal No. 3, we are requesting shareholder approval of the Restated 2007 Equity Plan in order to:
increase the number of shares of common stock authorized for issuance under the Restated 2007 Equity Plan beyond those remaining available for future grant under the 2007 Equity Plan by an additional 6,000,000 shares, subject to adjustment for certain changes in our capitalization;
increase the limit on the number of shares that may be issued in settlement of incentive stock options granted under the Restated 2007 Equity Plan to 78,000,000 shares, subject to adjustment for certain changes in our capitalization; and
make certain additional changes under the Restated 2007 Equity Plan, as described below under the section entitled “Summary of Material Changes and Terms in the Restated 2007 Equity Plan.”
WHY WE RECOMMEND THAT YOU VOTE FOR THE RESTATED 2007 EQUITY PLAN
EQUITY AWARDS ARE AN IMPORTANT PART OF OUR COMPENSATION PHILOSOPHY
The Restated 2007 Equity Plan is critical to our ongoing effort to build shareholder value. As discussed in this proxy statement under the heading “Compensation of Executive Officers—Compensation Discussion and Analysis”, equity awards are central to our compensation program. Equity compensation represents a significant percentage ofthe at-risk, or variable, portion of our executive officers’ compensation arrangements. We believe that it is appropriate to align the interests of our executive officers with those of our shareholders to achieve and sustain long-term stock price growth. Additionally, equity awards represent a significant portion of the compensation we payto non-employee members of the Board, as well as employees below the executive officer level.
The Board believes we must continue to offer a competitive equity compensation program in order to attract, retain and motivate the extraordinarily talented employees necessary for our continued growth and success. The share reserve of the Restated 2007 Equity Plan is structured to ensure that we have a sufficient number of shares to continue to utilize a broad array of equity incentives in order to secure and retain the services of our and our affiliates’ employees and directors, and to provide incentives for such persons to exert maximum efforts toward our success.
In the event that our shareholders do not approve this Proposal No. 3, the Restated 2007 Equity Plan will not become effective and the 2007 Equity Plan will continue in its current form. However, without the Restated 2007 Equity Plan, we believe that the shares available for grant under the 2007 Equity Plan will be insufficient to meet our anticipated employee recruiting and retention needs.
WE MANAGE OUR EQUITY AWARD USE CAREFULLY AND DILUTION IS REASONABLE
We manage our long-term shareholder dilution by limiting the number of equity awards granted annually. The Board carefully monitors our annual burn rate, dilution, and equity expense to ensure that we maximize shareholders’ value by granting only the appropriate number of equity awards necessary to attract, reward, and retain employees.
| 2020 PROXY STATEMENT | 75 | |||||||
PROPOSAL NO. 3: APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE SEATTLE GENETICS, INC. AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN |
The following table shows our responsible burn rate history.
| Seattle Genetics | ||||||||||||||||
| Peer group FY19 | FY19 | FY18 | FY17 | |||||||||||||
Gross Burn Rate as a % of Outstanding(1) | 2.74% | 2.04% | 2.05% | 2.13% | ||||||||||||
Adjusted Burn Rate as a % of Outstanding(2) | 1.79% | 1.74% | 1.57% | |||||||||||||
| (1) | Gross Burn Rate is calculated as: (shares subject to options granted + shares subject to full value awards granted)/weighted average common shares outstanding. |
| (2) | Adjusted Burn Rate is calculated as: (shares subject to options granted + shares subject to full value awards granted—shares subject to options and full value awards that expired, terminated or were forfeited)/weighted average common shares outstanding. |
As of March 1, 2020, there were 172,466,090 shares of our common stock outstanding. The closing price of our common stock as reported on the Nasdaq Global Select Market as of February 28, 2020, the last trading day prior to March 1, 2020, was $113.86 per share.
THE SIZE OF OUR SHARE RESERVE REQUEST IS REASONABLE
If our request to increase the share reserve of the 2007 Equity Plan is approved, we will add 6,000,000 shares to the 4,138,239 shares that were available for grant under the Restated 2007 Equity Plan as of March 1, 2020. Based on our current award targets and headcount as well as our hiring as we expand into multiple products and new countries, we anticipate this will provide a pool of shares adequate to cover the next two years. Our equity program encourages ownership, incentivizes long-term thinking aligned with the interests of our shareholders, and is based on performance and retention of top talent. In addition, we continually monitor our practices and policies to ensure the continued sustainability of our rate of share utilization as shown in our burn rate when compared to our peers.
THE RESTATED 2007 EQUITY PLAN COMBINES COMPENSATION AND GOVERNANCE BEST PRACTICES
The Restated 2007 Equity Plan includes provisions that are designed to protect our shareholders’ interests and to reflect corporate governance best practices including:
| • | Repricing is not allowed. The Restated 2007 Equity Plan prohibits the repricing of outstanding stock options and stock appreciation rights and the cancellation of any outstanding stock options or stock appreciation rights that have an exercise or strike price greater than the then-current fair market value of our common stock in exchange for cash or other awards under the Restated 2007 Equity Plan without prior shareholder approval. |
| • | Shareholderapproval is required for additional shares. The Restated 2007 Equity Plan does not contain an annual “evergreen” provision. The Restated 2007 Equity Plan authorizes a fixed number of shares, so that shareholder approval is required to issue any additional shares, allowing our shareholders to have direct input on our equity compensation programs. |
| • | Responsible change in control provisions. The definition of change in control in the Restated 2007 Equity Plan requires the consummation of an actual transaction so that no vesting acceleration benefits may occur without an actual change in control transaction occurring. In addition, if awards are assumed or equivalent awards are substituted by the successor corporation, vesting acceleration benefits would only occur if the recipient’s service is involuntarily terminated. |
| • | Independent Compensation Committee. Our Compensation Committee consists entirely of independent directors. Our Board currently consists of eight independent directors and Dr. Siegall, our President and Chief Executive Officer. |
SUMMARY OF MATERIAL CHANGES AND TERMS IN THE RESTATED 2007 EQUITY PLAN
The Restated 2007 Equity Plan contains the following material changes from the 2007 Equity Plan, each as further described below under “Summary of the Restated 2007 Equity Plan”:
increases the maximum aggregate number of shares of common stock authorized for issuance under the Restated 2007 Equity Plan to 39,000,000 shares, subject to adjustment for certain changes in our capitalization (the maximum aggregate number of shares of common stock authorized for issuance under the 2007 Equity Plan is 33,000,000 shares);
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PROPOSAL NO. 3: APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE SEATTLE GENETICS, INC. AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN |
increases the maximum aggregate number of shares that may be issued under the Restated 2007 Equity Plan through incentive stock options to 78,000,000 shares, subject to adjustment for certain changes in our capitalization (the maximum aggregate number of shares that may be issued under the 2007 Equity Plan through incentive stock options is 66,000,000 shares);
extends the term of the Restated 2007 Equity Plan through May 14, 2030 (the term of the 2007 Equity Plan ends on May 18, 2028);
provides the following additional performance objectives called “qualifying performance criteria” that may determine the grant, issuance, retention, vesting and/or settlement of awards under the Restated 2007 Equity Plan: implementation or completion of projects or processes (including, without limitation, clinical trial initiation, clinical trial enrollment and dates, clinical trial results, regulatory filing submissions, regulatory filing acceptances, regulatory or advisory committee interactions, regulatory approvals, presentation of studies and launch of commercial plans, compliance programs or education campaigns); and
provides that the aggregate value of all compensation granted or paid to any individual for service as anon-employee director with respect to any calendar year, including awards granted under the Restated 2007 Equity Plan and cash fees paid by us to suchnon-employee director, will not exceed (i) $1,000,000 in total value or (ii) in the event suchnon-employee director is first appointed or elected to the Board during such calendar year, $1,500,000 in total value, in each case calculating the value of any equity awards based on the grant date fair value of such equity awards for financial reporting purposes.
The other material terms of the Restated 2007 Equity Plan will remain the same as in the 2007 Equity Plan as follows:
the types of awards that may be granted are stock options (including incentive stock options and nonstatutory stock options), restricted stock, restricted stock units, stock appreciation rights and other similar types of awards;
shares subject to awards that are canceled, expired or are forfeited (including with respect to any shares that have been issued under an award) will be availablefor re-grant under the Restated 2007 Equity Plan;
if an awardee pays the exercise or purchase price of an award through the tendering of shares, the number of shares tendered will become availablefor re-grant under the Restated 2007 Equity Plan;
no awardee may be granted, in any calendar year under the Restated 2007 Equity Plan, awards covering more than 1,000,000 shares, subject to adjustment for certain changes in our capitalization;
in the event of any stock split, reverse stock split, stockdividend, spin-off, combination or reclassification of our common stock, or similar change to our capital structure (effected without receipt of consideration by us), the plan administrator will make proportionate adjustments to (1) the number and kind of shares covered by each outstanding award under the Restated 2007 Equity Plan, (2) the exercise or purchase (including repurchase) price per share subject to each outstanding award under the Restated 2007 Equity Plan and (3) each of the share limitations under the Restated 2007 Equity Plan; and
shareholder approval is required for certain types of amendments to the Restated 2007 Equity Plan.
SHAREHOLDER APPROVAL
The Restated 2007 Equity Plan will not become effective unless this Proposal No. 3 is approved by our shareholders. If this Proposal No. 3 is approved by our shareholders, the Restated 2007 Equity Plan will become effective upon the date of the 2020 Annual Meeting. In the event that our shareholders do not approve this Proposal No. 3, the Restated 2007 Equity Plan will not become effective and the 2007 Equity Plan will continue in its current form.
SUMMARY OF THE RESTATED 2007 EQUITY PLAN
GENERAL
A copy of the Restated 2007 Equity Plan is attached to this proxy statement as Appendix A. The following description of the Restated 2007 Equity Plan is a summary and so is qualified by reference to the complete text of the Restated 2007 Equity Plan. This Proxy Statement contains forward-looking statementssummary reflects the terms set forth above.
The purpose of the Restated 2007 Equity Plan is to enhance the long-term shareholder value of Seattle Genetics by offering opportunities to eligible individuals to participate in the growth in value of our equity. Stock options and stock
| 2020 PROXY STATEMENT | 77 | |||||||
PROPOSAL NO. 3: APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE SEATTLE GENETICS, INC. AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN |
awards, including restricted stock, restricted stock units, stock appreciation rights and similar types of awards, may be granted under the Restated 2007 Equity Plan. Options granted under the Restated 2007 Equity Plan may be either “incentive stock options,” as defined in Section 422 of the Code, or nonstatutory stock options.
ADMINISTRATION
The Restated 2007 Equity Plan may be administered by the Board, a committee of the Board, or one or more of our officers delegated by the Board or the Board committee in accordance with the terms of the Restated 2007 Equity Plan. We refer to the group or person that administers the Restated 2007 Equity Plan from time to time below as the plan administrator.
ELIGIBILITY
Awards may be granted under the Restated 2007 Equity Plan to our employees, directors and consultants and the employees, directors and consultants of our affiliates. Incentive stock options may be granted only to our employees or the employees of our subsidiaries. As of March 1, 2020, we (including our affiliates) had approximately 1,730 employees andeight non-employee directors. The plan administrator, with direction from the Compensation Committee as appropriate, selects the employees and directors to whom awards may be granted, the time or times at which such awards are granted, and the terms of such awards.
SHARE RESERVE
If this Proposal No. 3 is approved, the total number of shares of our common stock authorized for issuance under the Restated 2007 Equity Plan will be 39,000,000 shares, subject to adjustment for certain changes in our capitalization.
Shares subject to awards that are canceled, expired or are forfeited (including with respect to any shares that have been issued under an award) will be availablefor re-grant under the Restated 2007 Equity Plan. If an awardee pays the exercise or purchase price of an award through the tendering of shares, the number of shares tendered will become availablefor re-grant under the Restated 2007 Equity Plan.
SHARE LIMITS
If this Proposal No. 3 is approved, the total number of shares of our common stock that may be issued under the Restated 2007 Equity Plan pursuant to the exercise of incentive stock options will be 78,000,000 shares, subject to adjustment for certain changes in our capitalization.
Under the Restated 2007 Equity Plan, no awardee may be granted awards covering more than 1,000,000 shares in any calendar year, subject to adjustment for certain changes in our capitalization.
NON-EMPLOYEE DIRECTOR COMPENSATION LIMIT
The aggregate value of all compensation granted or paid to any individual for service as anon-employee director with respect to any calendar year, including awards granted under the Restated 2007 Equity Plan and cash fees paid by us to suchnon-employee director, will not exceed (i) $1,000,000 in total value or (ii) in the event suchnon-employee director is first appointed or elected to the Board during such calendar year, $1,500,000 in total value, in each case calculating the value of any equity awards based on the grant date fair value of such equity awards for financial reporting purposes.
SECTION 162(m) TRANSITION RELIEF FOR PERFORMANCE-BASED COMPENSATION
Under Section 162(m) of the Code, compensation paid to any publicly held corporation’s “covered employees” (as defined under Section 162(m) of the Code) that exceeds $1 million per taxable year for any covered employee is generallynon-deductible. Certain provisions in the Restated 2007 Equity Plan refer to the “performance-based compensation” exception to the $1 million deductibility limit under Section 162(m) of the Code. Pursuant to the Tax Cuts and Jobs Act, this exception was repealed with respect to taxable years beginning after December 31, 2017. However, an award may still be eligible for this exception if, among other requirements, it is intended to qualify, and is eligible to qualify, as “performance-based compensation” under Section 162(m) of the Code pursuant to the transition relief provided by the Tax Cuts and Jobs Act for remuneration provided pursuant to a written binding contract which
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was in effect on November 2, 2017 and which was not modified in any material respect on or after such date. For purposes of this Proposal No. 3, the term “Section 162(m) Transition Relief” refers to such transition relief. Accordingly, the provisions in the Restated 2007 Equity Plan which refer to the “performance-based compensation” exception under Section 162(m) of the Code will only apply to any award that is intended to qualify, and is eligible to qualify, as “performance-based compensation” under Section 162(m) of the Code pursuant to the Section 162(m) Transition Relief and, therefore, such provisions are not applicable to any other awards granted under the Restated 2007 Equity Plan. However, even if an award is intended to qualify as “performance-based compensation” under Section 162(m) of the Code, no assurance can be given that the award will in fact qualify for the Section 162(m) Transition Relief or the “performance-based compensation” exception under Section 162(m) of the Code.
TERMS AND CONDITIONS OF OPTIONS
Each option is evidenced by a stock option agreement between us and the optionee and is subject to the following additional terms and conditions.
Exercise Price. The plan administrator determines the exercise price of options at the time the options are granted. The exercise price of an incentive stock option or a nonstatutory stock option may not be less than 100% of the fair market value of our common stock on the date the option is granted, provided that the exercise price of an incentive stock option granted to an employee who holds more than 10% of the voting power of all classes of our stock may not be less than 110% of the fair market value of our common stock on the date the option is granted. However, we may grant options with exercise prices less than the fair market value of our common stock on the date of grant in connection with an acquisition by us of another company. The fair market value of our common stock is the closing price for the shares as reported on the Nasdaq Global Select Market as of the applicable date. As of February 28, 2020, the closing price of our common stock as reported on the Nasdaq Global Select Market was $113.86 per share.
Exercise of Option; Form of Consideration. The plan administrator determines when options vest and become exercisable and in its discretion may accelerate the vesting of any outstanding option;provided, however, that (i) each option must have a minimum vesting period of one year from the earlier of the date of grant or vesting commencement date, if any, and (ii) in the event of an optionee’s termination due to death or disability, the vesting and exercisability of each outstanding time-based option granted to the optionee under the Restated 2007 Equity Plan will be accelerated for an additional 12 months. The means of payment for shares issued upon exercise of an option are specified in each option agreement. The Restated 2007 Equity Plan permits payment to be made by cash, check, wire transfer, other shares of our common stock (with some restrictions), brokerassisted same-day sales, cashless “net exercise” arrangements, any other form of consideration permitted by applicable law and the plan administrator, or any combination thereof.
Term of Option. The term of an option may be no more than ten years from the date of grant, provided that the term of an incentive stock option granted to an employee who holds more than 10% of the voting power of all classes of our stock may be no more than five years from the date of grant. No option may be exercised after the expiration of its term.
Termination of Service. If an optionee’s service as an employee, director or consultant (referred to in this Proposal No. 3 as “service”) terminates for any reason other than cause, death or disability, then options held by the optionee under the Restated 2007 Equity Plan generally will be exercisable to the extent they are vested and exercisable on the termination date for a period (as specified by the plan administrator) after the termination date but not after the options’ expiration date. If an optionee’s service terminates for cause, then the plan administrator has the authority to terminate all options held by the optionee under the Restated 2007 Equity Plan immediately.
Generally, if an optionee’s service terminates as a result of the optionee’s death or in the event of an optionee’s death within 30 days following the optionee’s termination of service, all outstanding options that were vested and exercisable as of the date of the optionee’s death may be exercised for twelve months following the optionee’s death but in no event after the options’ expiration date. Generally, if an optionee’s service terminates as a result of the optionee’s disability, then all options to the extent they are vested and exercisable on the termination date may be exercised for twelve months following the termination date but in no event after the options’ expiration date. The plan administrator has the authority to extend the period of time for which an option is to remain exercisable following an optionee’s termination (taking into account limitations and consequences under the Code) but not beyond the expiration of the term of the option.
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PROPOSAL NO. 3: APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE SEATTLE GENETICS, INC. AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN |
TERMS AND CONDITIONS OF STOCK AWARDS
Stock awards may be restricted stock grants, restricted stock units, stock appreciation rights or other similar awards. Restricted stock grants are awards of a specific number of shares of our common stock. Restricted stock units represent a promise to deliver shares of our common stock, or an amount of cash or property equal to the value of the underlying shares, at a future date. Stock appreciation rights are rights to receive cash and/or shares of our common stock based on the amount by which the exercise date fair market value of a specific number of shares exceeds the grant date fair market value of the exercised portion of the stock appreciation right.
Each stock award agreement will contain provisions regarding (i) the number of shares subject to the stock award, (ii) the purchase price of the shares, if any, and the means of payment for the shares, (iii) the performance criteria (including qualifying performance criteria), if any, and level of achievement versus these criteria that will determine the number of shares granted, issued, retainable and vested, as applicable, (iv) such terms and conditions on the grant, issuance, vesting, settlement, and forfeiture of the shares, as applicable, as may be determined from time to time by the plan administrator, (v) restrictions on the transferability of the stock award, and (vi) such further terms and conditions, in each case not inconsistent with the Restated 2007 Equity Plan, as may be determined from time to time by the plan administrator; provided, however, that (i) each stock award must have a minimum vesting period of one year from the earlier of the date of grant or the vesting commencement date, if any, and (ii) in the event of an awardee’s termination due to death or disability, the vesting (and exercisability, if applicable) of each outstanding time-based stock award granted to the awardee under the Restated 2007 Equity Plan will be accelerated for an additional 12 months. The term of a stock appreciation right may be no more than ten years from the date of grant.
REPRICING; CANCELLATIONAND RE-GRANT OF AWARDS
No option or stock appreciation right may be repriced to reduce the exercise or strike price of such option or stock appreciation right without shareholder approval (except in connection with a change in our capitalization—see “Adjustments upon Changes in Capitalization, Change in Control or Dissolution” below). Additionally, the plan administrator will not have the authority to cancel any outstanding option or stock appreciation right that has an exercise or strike price greater than the then-current fair market value of our common stock in exchange for cash or other awards under the Restated 2007 Equity Plan, unless our shareholders have approved such an action within twelve months prior to such an event.
NONTRANSFERABILITY
Generally, awards granted under the Restated 2007 Equity Plan are not transferable other than by will or the laws of descent and distribution or to a designated beneficiary upon the awardee’s death. The plan administrator may in its discretion make an award transferable to an awardee’s family member or any other person or entity as it deems appropriate.
QUALIFYING PERFORMANCE CRITERIA
The Restated 2007 Equity Plan permits us to grant awards incorporating performance objectives called “qualifying performance criteria”. Qualifying performance criteria means any one or more of the performance criteria listed below, either individually, alternatively or in combination, applied to either Seattle Genetics as a whole or to a business unit, affiliate or business segment, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative toa pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the plan administrator in the award agreement: (i) cash flow; (ii) earnings (including gross margin, earnings before interest and taxes, earnings before taxes, and net earnings); (iii) earnings per share; (iv) growth in earnings or earnings per share; (v) stock price; (vi) return on equity or average shareholders’ equity; (vii) total shareholder return; (viii) return on capital; (ix) return on assets or net assets; (x) return on investment; (xi) revenue; (xii) income or net income; (xiii) operating income or net operating income, in aggregate or per share; (xiv) operating profit or net operating profit; (xv) operating margin; (xvi) return on operating revenue; (xvii) market share; (xviii) growth in shareholder value relative to the moving average of a peer group index; (xix) strategic plan development and implementation (including individual performance objectives that relate to achievement of the Company’s or any business unit’s strategic plan); (xx) improvement in workforce diversity; (xxi) growth of revenue, operating income or net income; (xxii) approval by the U.S. Food and Drug Administration or other regulatory body of a product candidate; and (xxiii) implementation or completion of projects or processes
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(including, without limitation, clinical trial initiation, clinical trial enrollment and dates, clinical trial results, regulatory filing submissions, regulatory filing acceptances, regulatory or advisory committee interactions, regulatory approvals, presentation of studies and launch of commercial plans, compliance programs or education campaigns) and (xxiv) any other similar criteria.
The Compensation Committee may appropriately adjust any evaluation of performance under a qualifying performance criteria to exclude any of the following events that occurs during a performance period: (A) asset write-downs; (B) litigation or claim judgments or settlements; (C) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results; (D) accruals for reorganization and restructuring programs and/or other nonrecurring charges; and (E) any gains or losses that are “unusual” in nature or occur “infrequently” under generally accepted accounting principles or discontinued operations in our financial statements.
DEFERRAL OF AWARD BENEFITS
The plan administrator may permit awardees whom it selects to defer compensation payable pursuant to the terms of an award or defer compensation arising outside the terms of the Restated 2007 Equity Plan pursuant to a program that provides for deferred payment in satisfaction of other compensation amounts through the issuance of one or more awards under the Restated 2007 Equity Plan and in a manner that complies with Section 409A of the Code.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, CHANGE IN CONTROL OR DISSOLUTION
In the event of any stock split, reverse stock split, combination or reclassification of common stock, stockdividend, spin-off, or similar change to our capital structure effected without receipt of consideration by us, the plan administrator will make proportionate adjustments to (i) the number and kind of shares covered by each outstanding award under the Restated 2007 Equity Plan, (ii) the exercise or purchase (including repurchase) price per share subject to each outstanding award under the Restated 2007 Equity Plan and (iii) each of the share limitations under the Restated 2007 Equity Plan.
In the event of (i) an acquisition of us by means of any transaction or series of related transactions, including any reorganization, merger or consolidation but excluding any merger effected exclusively for the purpose of changing our domicile, (ii) any sale of all or substantially all of our assets or (iii) any other event specified by the plan administrator, so long as in either (i) or (ii), our shareholders of record immediately prior to the transaction hold less than 50% of the voting power of the surviving entity and, so long as in (iii) that no change in control will be deemed to occur upon announcement or commencement of a tender offer or upon a “potential” takeover or upon shareholder approval of a merger or other transaction, in each case without a requirement that the change in control actually occur (each, a “change in control”), then:
if the successor corporation does not assume or substitute equivalent awards for an awardee’s outstanding equity awards granted pursuant to the Restated 2007 Equity Plan and the awardee’s service has not terminated as of, or has terminated without cause immediately prior to, the effective time of the change in control, then as of immediately prior to the effective time of the change in control, the vesting of such awards will be accelerated in full; and
if the awardee’s outstanding equity awards are assumed or equivalent awards are substituted by the successor corporation and if at the time of, immediately prior to or within twelve months after the effective time of the change in control, the awardee’s service is terminated without cause or due to constructive termination, then as of the date of such termination, the vesting of such awards will be accelerated in full.
In the event of a liquidation or dissolution, any options or stock awards that have not been exercised will terminate immediately prior to the transaction.
The plan administrator has the authority to accelerate vesting of outstanding awards under the Restated 2007 Equity Plan at any time in its sole discretion.
AMENDMENT AND TERMINATION OF THE RESTATED 2007 EQUITY PLAN
The plan administrator may amend, alter or discontinue the Restated 2007 Equity Plan at any time. However, we will obtain shareholder approval for any amendment to the Restated 2007 Equity Plan if shareholder approval is necessary or desirable to comply with any applicable law or listing requirements. In addition, we will obtain shareholder approval of any of the following: (i) an increase to the shares reserved for issuance under the Restated 2007 Equity Plan other
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PROPOSAL NO. 3: APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE SEATTLE GENETICS, INC. AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN |
than an increase in connection with a change in our capitalization as described in “Adjustments upon Changes in Capitalization, Change in Control or Dissolution” above; (ii) a change of the class of persons eligible to receive awards under the Restated 2007 Equity Plan; (iii) a reduction in the minimum exercise prices at which options or stock appreciation rights may be granted; or (iv) any amendment of outstanding options or stock appreciation rights that results in a repricing of such awards. No amendment of the Restated 2007 Equity Plan will impair the rights of an outstanding award without the consent of the awardee, except as otherwise provided in the Restated 2007 Equity Plan. If the Restated 2007 Equity Plan is approved by our shareholders, then unless sooner terminated, the Restated 2007 Equity Plan will automatically terminate on May 15, 2030, which is the date ten years from the date of shareholder approval of the Restated 2007 Equity Plan.
RESTATED 2007 NEW PLAN BENEFITS
RESTATED 2007 EQUITY PLAN
Name and Position | Dollar Value $ | Number of Shares Subject to Awards | ||||||
Clay B. Siegall, Ph.D.(1) | * | * | ||||||
President and Chief Executive Officer | ||||||||
Todd E. Simpson(1) | * | * | ||||||
Chief Financial Officer | ||||||||
Roger Dansey, M.D.(1) | * | * | ||||||
Chief Medical Officer | ||||||||
Jean I. Liu(1) | * | * | ||||||
General Counsel and Executive Vice President, Legal Affairs | ||||||||
Robin G. Taylor, M.B.A., Ph.D.(1) | * | * | ||||||
Former Chief Commercial Officer | ||||||||
All current executive officers as a group(1) | * | * | ||||||
All current directors who are not executive officers as a group(2) | $3,200,000 per calendar year | * | ||||||
All employees, including all current officers who are not executive officers, as a group(1) | * | * | ||||||
| (1) | Awards granted under the Restated 2007 Equity Plan to our executive officers and other employees are discretionary and are not subject to set benefits or amounts under the terms of the Restated 2007 Equity Plan, and the Compensation Committee and Board have not granted any awards under the Restated 2007 Equity Plan subject to shareholder approval of this Proposal No. 3. Accordingly, the benefits or amounts that will be received by or allocated to our executive officers and other employees under the Restated 2007 Equity Plan, as well as the benefits or amounts which would have been received by or allocated to our executive officers and other employees for 2019 if the Restated 2007 Equity Plan had been in effect, are not determinable. |
| (2) | Awards granted under the Restated 2007 Equity Plan toour non-employee directors are discretionary and are not subject to set benefits or amounts under the terms of the Restated 2007 Equity Plan. However, ourcurrent non-employee director compensation policy establishes certain target values for initial and annual awards that automatically will be granted toour non-employee directors under the Restated 2007 Equity Plan if this Proposal No. 3 is approved by our shareholders. Pursuant to such policy, if this Proposal No. 3 is approved by our shareholders, then on the date of the 2020 Annual Meeting and each annual meeting of our shareholders thereafter, each of ourcurrent non-employee directors will be granted annual awards under the Restated 2007 Equity Plan consisting of an option and a restricted stock unit award, each with a target value of $200,000 (resulting in a total value of $400,000 for each of our currentnon-employee directors individually and an aggregate total value of $3,200,000 for all of ourcurrent non-employee directors as a group). The actual number of shares of our common stock subject to each such option is calculated based on an approximation of the target award value based on the average stock price during the 30 calendar days preceding the effective date of the grant and using the Black Scholes methodology for stock option valuation, and the actual number of shares of our common stock subject to each such restricted stock unit award is calculated by dividing the target value of such restricted stock unit award by the average stock price during the 30 calendar days preceding the effective date of the grant. Therefore, the actual number of shares of our common stock subject to such options and restricted stock unit awards is not determinable at this time. For additional information regarding ourcurrent non-employee director compensation policy, see “Director Compensation—Equity Compensation” above. |
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2007 EQUITY PLAN BENEFITS
The following table sets forth, for each of the individuals and the various groups indicated, the total number of shares of our common stock subject to awards that have been granted (even if not currently outstanding) under the 2007 Equity Plan since its approval by our shareholders in 2007 through March 1, 2020.
2007 EQUITY PLAN
Name and Position | Number of Shares Subject to Awards | |||
Clay B. Siegall, Ph.D. | 3,176,201 | |||
President and Chief Executive Officer | ||||
Todd E. Simpson | 868,384 | |||
Chief Financial Officer | ||||
Roger Dansey, M.D. | 271,946 | |||
Chief Medical Officer | ||||
Vaughn B. Himes, Ph.D. | 841,504 | |||
Chief Technical Officer | ||||
Jean I. Liu | 375,138 | |||
General Counsel and Executive Vice President, Legal Affairs | ||||
Robin G. Taylor, M.B.A., Ph.D. | 101,035 | |||
Former Chief Commercial Officer | ||||
All current executive officers as a group | 5,533,173 | |||
All current directors who are not executive officers as a group | 1,119,888 | |||
Each nominee for election as a director: | ||||
David W. Gryska | 178,841 | |||
John A. Orwin | 79,341 | |||
Alpna H. Seth, Ph.D. | 30,001 | |||
Each associate of any executive officers, current directors or director nominees | — | |||
Each other person who received or is to receive 5% of awards | — | |||
All employees, including all current officers who are not executive officers, as a group | 13,876,255 | |||
EQUITY COMPENSATION PLAN INFORMATION
Please see the section of this proxy statement entitled “Equity Compensation Plan Information” for certain information with respect to compensation plans under which equity securities of Seattle Genetics are authorized for issuance.
FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A GENERAL SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE ISSUANCE AND EXERCISE OF OPTIONS OR OTHER AWARDS UNDER THE RESTATED 2007 EQUITY PLAN. IT DOES NOT DESCRIBE STATE OR OTHER TAX CONSEQUENCES OF THE ISSUANCE AND EXERCISE OF OPTIONS OR OTHER AWARDS. THE INFORMATION SET FORTH BELOW IS A SUMMARY ONLY AND DOES NOT PURPORT TO BE COMPLETE. THE INFORMATION IS BASED UPON CURRENT FEDERAL INCOME TAX RULES AND THEREFORE IS SUBJECT TO CHANGE WHEN THOSE RULES CHANGE. THE RESTATED 2007 EQUITY PLAN IS NOT QUALIFIED UNDER THE PROVISIONS OF SECTION 401(A) OF THE CODE AND IS NOT SUBJECT TO ANY OF THE PROVISIONS OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974. OUR ABILITY TO REALIZE THE BENEFIT OF ANY TAX DEDUCTIONS DESCRIBED BELOW DEPENDS ON OUR GENERATION OF TAXABLE INCOME, AS WELL AS THE REQUIREMENT OF REASONABLENESS, THE PROVISIONS OF SECTION 162(M) OF THE CODE AND THE SATISFACTION OF OUR TAX REPORTING OBLIGATIONS.
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OPTIONS
The grant of an incentive stock option has no federal income tax effect on the optionee. Upon exercise the optionee does not recognize income for “regular” tax purposes. However, the excess of the fair market value of the stock subject to an option over the exercise price of such option (which is often referred to as the “option spread”) is included in the optionee’s “alternative minimum taxable income” for purposes of the alternative minimum tax. If the optionee does not dispose of the stock acquired upon exercise of an incentive stock option until more than two years after the option grant date and more than one year after exercise of the option, any gain (or loss) upon sale of the shares will be a long-term capital gain (or loss). If shares are sold or otherwise disposed of before these periods have expired, which is referred to as a disqualifying disposition, the option spread at the time of exercise of the option (but not more than the amount of the gain on the sale or other disposition) is ordinary income in the year of such sale or other disposition. If gain on a disqualifying disposition exceeds the amount treated as ordinary income, the excess is taxable as capital gain (which will be long-term capital gain if the shares have been held more than one year after the date of exercise of the option). We are not entitled to a federal income tax deduction in connection with incentive stock options, except to the extent that the optionee has taxable ordinary income on a disqualifying disposition (unless limited by Section 162(m)).
The grant of a nonstatutory stock option having an exercise price equal to the grant date fair market value of our common stock has no federal income tax effect on the optionee. Upon the exercise of a nonstatutory stock option, the optionee has taxable ordinary income (and unless limited by Section 162(m), we are entitled to a corresponding deduction) equal to the option spread on the date of exercise. Upon the disposition of stock acquired upon exercise of a nonstatutory stock option, the optionee recognizes either long-term or short-term capital gain or loss, depending on how long such stock was held, on any difference between the sale price and the exercise price, to the extent not recognized as taxable income on the date of exercise. We may allow nonstatutory stock options to be transferred subject to conditions and restrictions imposed by the plan administrator; special tax rules may apply on such a transfer. In the case of both incentive stock options and nonstatutory stock options, special federal income tax rules apply if our common stock is used to pay all or part of the option price, and different rules than those described above will apply if unvested shares are purchased on exercise of the option.
STOCK AWARDS
Stock Awards. Stock awards will generally be taxed in the same manner as nonstatutory stock options. Shares issued under a restricted stock award are subject to a “substantial risk of forfeiture” within the meaning of Section 27A83 of the Code to the extent the shares will be forfeited in the event that the participant ceases to provide services to us and are not transferable. As a result of this substantial risk of forfeiture, the participant will not recognize ordinary income at the time the award shares are issued. Instead, the participant will recognize ordinary income on the dates when the stock is no longer subject to a substantial risk of forfeiture, or when the stock becomes transferable, if earlier. The participant’s ordinary income is measured as the difference between the amount paid for the stock, if any, and the fair market value of the stock on the date the stock is no longer subject to forfeiture.
The participant may accelerate his or her recognition of ordinary income, if any, and begin his or her capital gains holding period by timely filing (i.e., within thirty days of the share issuance date) an election pursuant to Section 83(b) of the Code. In such event, the ordinary income recognized, if any, is measured as the difference between the amount paid for the stock, if any, and the fair market value of the stock on the date of such issuance, and the capital gain holding period commences on such date. The ordinary income recognized by an employee will be subject to tax withholding by us. We are entitled to a deduction in the same amount as and at the time the employee recognizes ordinary income.
Stock Appreciation Rights. We may grant under the Restated 2007 Equity Plan stock appreciation rights separate from any other award or in tandem with other awards under the Restated 2007 Equity Plan. Where the stock appreciation rights are granted with a strike price equal to the fair market value of the underlying stock on the grant date, the participant will recognize ordinary income equal to the fair market value of the stock or cash received upon such exercise. Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code, and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the participant in connection with the stock appreciation right.
Restricted Stock Units. Generally, the recipient of a stock unit structured to conform to the requirements of Section 409A of the Code or an exception to Section 409A of the Code will recognize ordinary income at the time the stock is delivered equal to the excess, if any, of the fair market value of the shares of our common stock received over any amount paid by the participant in exchange for the shares of our common stock. To conform to the requirements
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of Section 409A of the Code, the shares of our common stock subject to a stock unit award may generally only be delivered upon one of the following events: a fixed calendar date (or dates), separation from service, death, disability or a change in control. If delivery occurs on another date, unless the stock units otherwise comply with or qualify for an exception to the requirements of Section 409A of the Code, in addition to the tax treatment described above, the participant will owe an additional 20% federal tax and interest on any taxes owed.
The participant’s basis for the determination of gain or loss upon the subsequent disposition of shares acquired from stock units, will be the amount paid for such shares plus any ordinary income recognized when the stock is delivered.
Subject to the requirement of reasonableness, the provisions of Section 162(m) of the Code and the satisfaction of a tax reporting obligation, we will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the participant.
SECTION 409A OF THE CODE
The American Jobs Creation Act of 2004 added Section 409A to the Code, generally effective January 1, 2005. Section 409A covers most programs that defer the receipt of compensation to a succeeding year. It provides rules for elections to defer, if any, and for timing of payouts. There are significant penalties placed on the individual participant for failure to comply with Section 409A. However, it does not impact our ability to deduct deferred compensation.
Section 409A does not apply to incentive stock options, nonstatutory stock options that have an exercise price that is at least equal to the grant date fair market value and restricted stock provided there is no deferral of income beyond the vesting date. Section 409A also does not cover stock appreciation rights if the exercise price is not less than the fair market value of the underlying stock on the date of grant, the rights are settled in such stock and no features defer the recognition of income beyond the exercise date.
SECTION 162(M) OF THE CODE
Under Section 162(m) of the Code, compensation paid to any publicly held corporation’s “covered employees” (as defined under Section 162(m) of the Code) that exceeds $1 million per taxable year for any covered employee is generallynon-deductible. Prior to the enactment of the Tax Cuts and Jobs Act, compensation that qualified as “performance-based compensation” under Section 162(m) of the Code was not subject to this deduction limitation. Pursuant to the Tax Cuts and Jobs Act, this exception for “performance-based compensation” under Section 162(m) of the Code was repealed with respect to taxable years beginning after December 31, 2017, except that certain transition relief is provided for remuneration provided pursuant to a written binding contract which was in effect on November 2, 2017 and which was not modified in any material respect on or after such date. As a result, compensation paid to any of our “covered employees” in excess of $1 million per taxable year generally will not be deductible unless, among other requirements, it is intended to qualify, and is eligible to qualify, as “performance-based compensation” under Section 162(m) of the Code pursuant to the transition relief described above. Because of certain ambiguities and uncertainties as to the application and interpretation of Section 162(m) of the Code, as well as other factors beyond the control of the Compensation Committee, no assurance can be given that any award granted under the Restated 2007 Equity Plan will be eligible for such transition relief and, therefore, eligible for the “performance-based compensation” exception under Section 162(m) of the Code.
ACCOUNTING TREATMENT
We will recognize compensation cost in connection with awards granted under the Restated 2007 Equity Plan as required under applicable accounting standards. We currently recognize compensation cost associated with equity awards over an award’s requisite service period and establish fair value of equity awards in accordance with applicable accounting standards.
VOTE REQUIRED
Shareholder approval of this Proposal No. 3 will require the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting.
| The Board recommends a voteFOR this Proposal No. 3. | |
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PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee has selected PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020. PricewaterhouseCoopers LLP has served as our independent registered public accounting firm since June 1998. A representative of PricewaterhouseCoopers LLP is expected to be present at the Annual Meeting. This representative will have an opportunity to make a statement and will be available to respond to appropriate questions.
Shareholder ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm is not required by our bylaws or other governing documents. However, the Board is submitting the appointment of PricewaterhouseCoopers LLP to the shareholders for ratification as a matter of good corporate governance. While the Audit Committee is not bound by a vote either for or against the proposal, it will consider a vote against PricewaterhouseCoopers LLP by the shareholders in selecting our independent registered public accounting firm in the future. Even if the shareholders do ratify the appointment, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it believes that such a change would be in the best interests of Seattle Genetics and its shareholders.
Shareholder approval of this Proposal No. 4 will require the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting.
| On behalf of the audit committee, the Board recommends a voteFOR this Proposal No. 4. | |
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PROPOSAL NO. 4: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
PricewaterhouseCoopers LLP served as our independent registered public accounting firm for 2019 and 2018 and their aggregate fees for services rendered were as follows:
Type of Fees | 2019 | 2018 | ||||||
Audit Fees | $ | 1,330,000 | $ | 1,543,000 | ||||
Audit-Related Fees | — | — | ||||||
Tax Fees | — | — | ||||||
All Other Fees | 2,790 | 2,700 | ||||||
Total Fees | $ | 1,332,790 | $ | 1,545,700 | ||||
Audit Fees. Audit fees represent fees for professional services provided in connection with the audit of our financial statements and review of our quarterly financial statements and audit services provided in connection with other statutory or regulatory filings. In 2018, these fees included services to support the acquisition of Cascadian Therapeutics, Inc.
Audit-Related Fees. 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 financial statements and are not reported under “— Audit Fees.” There were no audit-related fees billed to Seattle Genetics for services rendered during 2019 or 2018.
Tax Fees. Tax fees principally included tax compliance, tax advice and tax planning fees. There were no tax fees billed to Seattle Genetics for services rendered during 2019 or 2018.
All Other Fees. All other fees include any fees billed that are not audit, audit related, or tax fees. In 2019 and 2018, these fees related to accounting research software licenses.
PRE-APPROVAL POLICIES AND PROCEDURES
In October 2006, the Audit Committee adopted an Audit and Audit-Related ServicesPre-Approval Policy, or the Policy, which sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent registered public accounting firm may bepre-approved. Proposed services either may bepre-approved by the Audit Committee without consideration of specificcase-by-case services (i.e., generalpre-approval) or require the specificpre-approval of the Audit Committee (i.e., specificpre-approval). The Audit Committee believes that the combination of these two approaches has resulted in an effective and efficient procedure topre-approve services performed by the independent registered public accounting firm. As set forth in the Policy, unless a type of service has received generalpre-approval, it will require specificpre-approval by the Audit Committee if it is to be provided by the independent registered public accounting firm. Any proposed services exceedingpre-approved cost levels or budgeted amounts will also require specificpre-approval by the Audit Committee. In addition, the Audit Committee has delegated to the Chair of the Audit Committee the authority topre-approve services not prohibited by the Policy to be performed by our independent registered public accounting firm and associated fees up to $25,000, provided that the Chair is required to report any decision topre-approve such audit-related ornon-audit services and fees to the full Audit Committee for ratification at its next regular meeting. All audit-related andnon-audit related services performed by our independent registered public accounting firm in 2019 werepre-approved.
| 2020 PROXY STATEMENT | 87 | |||||||
AUDIT COMMITTEE REPORT |
The Audit Committee of the Board of Directors is currently comprised of three independent directors and operates under a written charter originally adopted by the Board of Directors in March 2001, which charter is reviewed on an annual basis and amended as necessary by the Board of Directors upon recommendation by the Audit Committee.
The members of the Audit Committee are currently David W. Gryska (chairman), John A. Orwin and Alpna H. Seth. Each of the members of the Audit Committee is an “independent director” as currently defined in Rules 5605(c)(2)(A)(i) and (ii) of the Nasdaq listing standards and Rule10A-3 of the Exchange Act. The Board of Directors has also determined that David W. Gryska is an “audit committee financial expert” as described in applicable rules and regulations of the Securities Actand Exchange Commission, or the SEC.
The Audit Committee appoints an accounting firm as our independent registered public accounting firm. The independent registered public accounting firm is responsible for performing an independent audit of 1933our financial statements in accordance with the standards of the Public Company Accounting Oversight Board, or the PCAOB, and Section 21Eissuing a report thereon. Management is responsible for our internal controls and the financial reporting process. The Audit Committee is responsible for monitoring and overseeing these processes.
The Audit Committee held six meetings during 2019. The meetings were designed to provide information to the Audit Committee necessary for it to conduct its oversight function of the external financial reporting activities and audit process of Seattle Genetics, and to facilitate and encourage communication between the Audit Committee, management and our independent registered public accounting firm, PricewaterhouseCoopers LLP. Management represented to the Audit Committee that our financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. The Audit Committee reviewed and discussed the audited financial statements for 2019 with management and the independent registered public accounting firm. The Audit Committee also instructed the independent registered public accounting firm that the Audit Committee expects to be advised if there are any subjects that require special attention.
The Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm, PricewaterhouseCoopers LLP, required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with PricewaterhouseCoopers LLP that firm’s independence.
Based on its review of the audited financial statements and the various discussions noted above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form10-K for the fiscal year ended December 31, 2019.
The Audit Committee of the Board of Directors of Seattle Genetics, Inc.:
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David W. Gryska (chair) | John A. Orwin | Alpna H. Seth | ||
| (1) | The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Seattle Genetics under the Securities Act of 1933, as amended, or the Securities Act, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. |
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FREQUENTLY ASKED QUESTIONS AND OTHER INFORMATION |
FREQUENTLY ASKED QUESTIONS AND OTHER INFORMATION
2020 MEETING INFORMATION | ||||||||||
| Meeting Date: | Friday, May 15, 2020 | Meeting Place: | Seattle Genetics, Inc. 21823 – 30th Drive SE, Building 3 Bothell, WA 98021 | |||||||
| Meeting Time: | 11:00 a.m. (Pacific) | |||||||||
| Record Date: | March 19, 2020 | |||||||||
VOTING MATTERS
Management Proposals | Board Vote Recommendation | See Page Number for More Detail | ||||
PROPOSAL NO. 1 | Election of Class I directors | FOR EACH NOMINEE | Page 8 | |||
PROPOSAL NO. 2 | Advisory vote on the compensation of our named executive officers | FOR | Page 29 | |||
PROPOSAL NO. 3 | Amendment and restatement of the 2007 Equity Plan to, among other things, increase the aggregate number of shares of common stock authorized for issuance thereunder by 6,000,000 shares | FOR | Page 75 | |||
PROPOSAL NO. 4 | Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020 | FOR | Page 86 | |||
WHY DID I RECEIVE THIS PROXY STATEMENT?
Our Board of Directors is soliciting your proxy to vote at the Annual Meeting, including at any adjournments or postponements of the Annual Meeting. This proxy statement describes the proposals on which we would like you, as a shareholder, to vote. It also gives you information on these proposals so that you can make an informed decision, information you may find useful in determining how to vote and information regarding voting procedures.
WHY DID I RECEIVE A NOTICE ABOUT INTERNET AVAILABILITY OF PROXY MATERIALS, INSTEAD OF PAPER COPIES OF THE PROXY MATERIALS?
This proxy statement and our 2019 annual report are available on the Internet at http://www.edocumentview.com/SGEN. In accordance with the rules of the SEC, we are using the Internet as our primary means of furnishing proxy materials to shareholders. Consequently, most shareholders will not receive paper copies of our proxy materials. We will instead send these shareholders a Notice of Internet Availability of Proxy Materials, or the Notice of Internet Availability, with instructions for accessing the proxy materials, including our proxy statement and 2019 annual report, and voting via the Internet. The Notice of Internet Availability also provides information on how shareholders may obtain paper copies of our proxy materials if they so choose. This makes the proxy distribution process more efficient and less costly, and it helps conserve natural resources.
WHEN AND WHERE WILL THE ANNUAL MEETING BE HELD?
The Annual Meeting is being held on Friday, May 15, 2020, at 11:00 a.m. local time at our principal offices located in Building 3 at 21823 – 30th Drive SE, Bothell, Washington 98021. Directions to our principal offices may be found at www.seattlegenetics.com. We are monitoring the emerging public health impact of the coronavirus outbreak (COVID-19). The health and well-being of our employees and shareholders are paramount. If public health developments warrant, we may need to change the location of the Annual Meeting or switch to a virtual meeting format. Any such change will be announced via press release and the filing of additional soliciting materials with the SEC. Please retain the control number from your proxy card or voting instruction form so that you can access the Annual Meeting if it is converted to a virtual meeting format.
| 2020 PROXY STATEMENT | 89 | |||||||
FREQUENTLY ASKED QUESTIONS AND OTHER INFORMATION |
CAN I VOTE AT THE ANNUAL MEETING?
All shareholders of record who owned shares of our stock as of March 19, 2020, the record date, may attend and vote on the proposals considered at the Annual Meeting.
WHAT IS THE DIFFERENCE BETWEEN A SHAREHOLDER OF RECORD AND A BENEFICIAL OWNER?
Shareholders whose shares are registered with our transfer agent, Computershare, Inc., in their own name are record holders, also known as shareholders of record. Shareholders whose shares are not registered in their own name with Computershare, Inc. are beneficial holders of shares held in street name. Such shares may be held in an account at a bank or at a brokerage firm (your record holder). If you are a beneficial holder, you have the right to direct your record holder on how to vote your shares, and you will receive instructions from your record holder that must be followed in order for your record holder to vote your shares per your instructions.
HOW CAN I VOTE?
For the election of directors (Proposal No. 1), you may vote “FOR” or “AGAINST” each nominee, or you may abstain from voting for all or any of the nominees. For each of the other three proposals, you may vote “FOR” or “AGAINST” or abstain from voting.
If you are a shareholder of record, as of the record date, you may vote via any of the following methods:
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| Via the Internet: | Call Toll-Free: | Mail Signed Proxy Card: | ||
| www.envisionreports.com/SGEN | 1-800-652-VOTE (8683) | Using the Provided Postage-Paid Envelope | ||
In addition, if you are a shareholder of record, you may vote in person at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the Annual Meeting and vote in person even if you have already voted by proxy. If your shares are held in street name, your shares may be voted by you in person at the Annual Meeting only if you obtain a legal proxy from your record holder giving you the right to vote such shares in person at the Annual Meeting.
If you are a beneficial holder, you have the right to direct your record holder on how to vote your shares, and you will receive instructions from your record holder that must be followed in order for your record holder to vote your shares per your instructions. Many banks and brokerage firms have a process for their beneficial holders to provide instructions via the Internet or by telephone. If Internet or telephone voting is unavailable from your record holder, please complete and return the voting instruction form in the addressed, postage paid envelope provided. If your shares are held beneficially in street name and you have not given your record holder voting instructions, your record holder will not be able to vote your shares with respect to any matter other than ratification of the appointment of Seattle Genetics’ independent registered public accounting firm as explained in more detail below.
For those shareholders who receive a Notice of Internet Availability, the Notice of Internet Availability provides information on how to access your proxy materials on the Internet, which contains instructions on how to vote via the Internet or by telephone. If you received a Notice of Internet Availability, you can request a printed copy of your proxy materials by following the instructions contained in the Notice of Internet Availability.
IF I AM A BENEFICIAL HOLDER, HOW CAN I VOTE?
If you are the record holder of your shares, you must vote by proxy or attend the Annual Meeting in person in order to vote on the proposals. If the shares you own are held in “street name” by a brokerage firm, your brokerage firm, as the record holder of your shares, is required to vote your shares according to your instructions. In order to vote your shares, you will need to follow the directions your brokerage firm provides you. Many brokers also offer the option of voting via the Internet or over the telephone, instructions for which would be provided by your brokerage firm on your voting instruction form. Under the current rules that govern brokers, if you do not give instructions to your brokerage firm, it will still be able to vote your shares, but only with respect to proposals for which it has discretionary voting authority. A “brokernon-vote” occurs when a broker or other holder of record holding shares for a beneficial owner
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submits a proxy for the Annual Meeting but does not vote on a particular proposal because that holder does not have discretionary voting power with respect to that proposal and has not received instructions from the beneficial owner.
The election of directors (Proposal No. 1), the advisory vote on the compensation of our named executive officers (Proposal No. 2) and amendment and restatement of the 2007 Equity Plan (Proposal No. 3) are proposals for which brokers do not have discretionary voting authority. If you do not instruct your broker how to vote with respect to these proposals, your broker may not vote with respect to these proposals and thosenon-votes will be counted as “brokernon-votes.” The ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm (Proposal No. 4) is considered to be discretionary and your brokerage firm will be able to vote on Proposal No. 4 even if it does not receive instructions from you, so long as it holds your shares in its name.
If you are a beneficial owner of shares held in street name, in order to ensure your shares are voted in the way you would prefer, you must provide voting instructions to your broker, bank or other agent by the deadline provided in the materials you receive from your broker, bank or other agent.
CAN I CHANGE MY VOTE OR REVOKE MY PROXY?
You may revoke or change a previously delivered proxy at any time before the final vote at the Annual Meeting. If you are the shareholder of record for your shares, you may revoke your proxy in any one of the following ways:
You may submit another properly completed proxy card with a later date.
You may grant a subsequent proxy over the telephone or via the Internet.
You may send a timely written notice that you are revoking your proxy to our Corporate Secretary at 21823 – 30th Drive SE, Bothell, Washington 98021.
You may attend the Annual Meeting and vote in person. Simply attending the Annual Meeting will not, by itself, revoke your proxy.
Your most recent proxy card or telephone or Internet proxy is the one that is counted.
If you are a beneficial owner whose shares are held by your broker, bank or other agent as a nominee or agent, you should follow the instructions provided by your broker, bank or other agent.
WHAT IF I RECEIVED MORE THAN ONE SET OF PROXY MATERIALS?
If you receive more than one set of proxy materials, or more than one Notice of Internet Availability or a combination thereof, your shares may be registered in more than one name or are registered in different accounts. Please follow the voting instructions on each set of proxy materials or Notices of Internet Availability to ensure that all of your shares are voted.
WHAT CONSTITUTES A QUORUM TO CONDUCT BUSINESS AT THE ANNUAL MEETING?
There were 172,601,285 shares of common stock issued and outstanding on the record date, March 19, 2020. Each share of common stock is entitled to one vote. The holders of a majority of our issued and outstanding shares of common stock entitled to vote as of the record date must be present at the Annual Meeting (either in person or by proxy) in order to hold the Annual Meeting and conduct business. This is called a “quorum.” Your shares will be counted towards the quorum only if you submit a valid proxy (or if one is submitted on your behalf by your broker, bank or other agent) or if you vote in person at the Annual Meeting. Abstentions and brokernon-votes will be treated as shares present for the purpose of determining the presence of a quorum for the transaction of business at the Annual Meeting.
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
Assuming that a quorum is present at the Annual Meeting, the following votes will be required:
With respect to the election of Class I directors (Proposal No. 1), directors in an uncontested election, such as this one, are elected by a majority of the votes cast. Accordingly, each of the three Class I director nominees must receive the affirmative vote of a majority of the votes cast on his or her election in order to be elected (i.e., the number of shares voted ‘FOR” such nominee must exceed the number of shares voted “AGAINST” such nominee).
| 2020 PROXY STATEMENT | 91 | |||||||
FREQUENTLY ASKED QUESTIONS AND OTHER INFORMATION |
With respect to the advisory vote on the compensation of our named executive officers as disclosed in this proxy statement (Proposal No. 2), approval will require the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting.
With respect to the vote on the amendment and restatement of the 2007 Equity Plan to, among other things, increase the aggregate number of shares of common stock authorized for issuance thereunder by 6,000,000 shares (Proposal No. 3), approval will require the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting.
With respect to the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm (Proposal No. 4), approval will require the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Meeting.
We believe that the procedures to be used by the Inspector of Election to count the votes are consistent with Delaware law concerning voting of shares and determination of a quorum.
Abstentions and brokernon-votes will not be considered votes cast at the Annual Meeting. Because the approval of all of the proposals is based on the votes cast at the Annual Meeting, abstentions and, as applicable, brokernon-votes will not have any effect on the outcome of voting on the proposals.
WHO SOLICITS PROXIES AND WHO BEARS THE COST OF SOLICITATION?
The Board of Directors of Seattle Genetics is soliciting your proxy to vote your shares at the Annual Meeting. We will bear the entire cost of this solicitation of proxies, including the preparation, assembly, printing, and mailing of the Notice of Internet Availability, this proxy statement, the proxy card and any additional solicitation material that we may provide to our shareholders. In addition to these proxy materials, our directors, officers and other employees may contact you by telephone, via the Internet, in person or otherwise to obtain your proxy. Our directors, officers and other employees will not receive any additional compensation for assisting in the solicitation. We have also engaged Morrow Sodali LLC to assist in the solicitation of proxies for a fee of approximately $15,000, plus reasonableout-of-pocket expenses. We will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners. We will reimburse these entities and our transfer agent for their reasonableout-of-pocket expenses in forwarding proxy materials.
WHO WILL COUNT THE VOTES AND DETERMINE IF A QUORUM IS PRESENT?
Votes cast by proxy or in person at the Annual Meeting will be tabulated by a representative of Computershare, Inc., our transfer agent, who will act as the Inspector of Election. The Inspector of Election will also determine whether a quorum is present at the Annual Meeting.
IF I RETURN A PROXY BUT DO NOT PROVIDE VOTING INSTRUCTIONS, HOW WILL MY SHARES BE VOTED?
Shares properly voted by proxy will be voted at the Annual Meeting. If you specify a choice with respect to any matter to be acted on, the shares will be voted in accordance with that specified choice. If you are the record holder of your shares and you do not specify your vote on each proposal individually when voting via the Internet or over telephone, or if you sign and return a proxy card without giving specific voting instructions, then your shares will be voted as follows:
FOR all of the director nominees named herein (Proposal No. 1);
FOR the approval of the compensation of our named executive officers as disclosed in this proxy statement (Proposal No. 2);
FOR the approval of the amendment and restatement of the 2007 Equity Plan to, among other things, increase the aggregate number of shares of common stock authorized for issuance thereunder by 6,000,000 shares (Proposal No. 3); and
FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm (Proposal No. 4).
If any other matter is properly presented at the Annual Meeting, it is the intention of the persons named in the accompanying proxy, referred to in this proxy statement as the “proxy holders,” to vote on those matters in accordance with their best judgment.
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Please note that if you are a beneficial owner of shares held in “street name” and you do not instruct your brokerage firm on how to vote your shares, your brokerage firm may still be able to vote your shares in its discretion. Please see “If I am a Beneficial Holder, How Can I Vote?” above or more information.
IF OTHER BUSINESS IS BROUGHT BEFORE THE ANNUAL MEETING, HOW WILL MY SHARES BE VOTED?
The Board of Directors knows of no other business that will be presented to the Annual Meeting. If any other business is properly brought before the Annual Meeting, or with respect to any adjournment or postponement thereof, it is the intention of the proxy holders to vote on such matters in accordance with their best judgment.
HOW CAN I FIND OUT THE RESULTS OF THE ANNUAL MEETING?
We will announce preliminary voting results at the Annual Meeting. We will publish the final results in a current report onForm 8-K, which we expect to file with the SEC within four business days of the Annual Meeting. If final voting results are not available to us in time to file a Form8-K within four business days after the meeting, we intend to file a Form8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form8-K to publish the final results. You can obtain a copy of any of these filings on our website at www.seattlegenetics.com or by contacting our Investor Relations Department at(425) 527-4000.
WHEN ARE PROPOSALS AND NOMINATIONS DUE FOR THE 2021 ANNUAL MEETING?
To have your proposal included in our proxy statement for the 2021 Annual Meeting, you must submit your proposal in writing by December 3, 2020 to Jean I. Liu, Corporate Secretary, Seattle Genetics, 21823 – 30th Drive SE, Bothell, Washington 98021, and you must comply with all applicable requirements ofRule 14a-8 promulgated under the Securities Exchange Act of 1934. Forward-looking statements1934, as amended, or the Exchange Act. However, if the 2021 Annual Meeting is not held between April 15, 2021 and June 14, 2021, then the deadline will be a reasonable time prior to the time we begin to print and send our proxy materials.
Shareholders wishing to submit proposals or director nominations for our 2021 Annual Meeting that are based onnot to be included in our management’s beliefs and assumptions and on information currently availableproxy statement must give timely written notice to our management. All statements otherCorporate Secretary in accordance with our bylaws. To be “timely,” written notice must be received by our Corporate Secretary at the above address no earlier than statementsJanuary 15, 2021 and no later than February 14, 2021; provided, however, that in the event the date of historical facts are “forward-looking statements”the 2021 Annual Meeting is not scheduled to be held between April 15, 2021 and June 14, 2021, then such notice must be received by the later of the 90th day prior to the date of the 2021 Annual Meeting or the 10th day following the date on which public announcement or disclosure of the date of the 2021 Annual Meeting is first made. However, in the event that the number of directors to be elected to the Board of Directors is increased and either all of the nominees for purposesdirector or the size of these provisions, including those relatingthe increased Board of Directors is not publicly announced or disclosed by Seattle Genetics on or prior to future events orFebruary 4, 2021, a shareholder’s notice to our future financial performance and financial guidance. In some cases, you can identify forward-looking statementsCorporate Secretary will also be considered timely, but only with respect to nominees for any new positions created by terminology such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “project,” “believe,” “estimate,” “predict,” “potential,” “intend” or “continue,”increase, if the negativeshareholder’s notice is delivered to our Corporate Secretary at the above address not later than the close of terms like these or other comparable terminology, and other words or terms of similar meaning in connection with any discussion of future operating or financial performance. These statements are only predictions. All forward-looking statements included in this Proxy Statement are based on information available to usbusiness on the 10th day following the first date hereof,all of such nominees or the size of the increased Board of Directors has been publicly announced or disclosed by Seattle Genetics. We also advise you to review our bylaws, which contain additional requirements about advance notice of shareholder proposals and we assume no obligationdirector nominations, including attendance requirements. A shareholder’s notice to update any such forward-looking statements, except asour Corporate Secretary must set forth the information required by law. Anyour bylaws with respect to each nominee or allmatter the shareholder proposes to bring before the 2021 Annual Meeting, and must be updated not later than ten days after the record date for the determination of shareholders entitled to vote at 2021 Annual Meeting to provide any material changes in the foregoing information. The person presiding at the 2021 Annual Meeting may determine, if the facts warrant, that a nominee or matter has not been properly brought before the meeting and, therefore, may not be considered at the meeting. In addition, the proxy solicited by the Board of Directors for the 2021 Annual Meeting will confer discretionary voting authority with respect to (i) any proposal presented by a shareholder at that meeting for which Seattle Genetics has not been provided with timely notice and (ii) any proposal made in accordance with our forward-looking statements in this document may turn outbylaws, if the 2021 proxy statement briefly describes the matter and how management proxy holders intend to be incorrect. Actual events or results may differ materially. Our forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks, uncertainties and other factors. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.vote on it, if the shareholder does not comply with the requirements of Rule14a-4(c)(2) promulgated under the Exchange Act.
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FREQUENTLY ASKED QUESTIONS AND OTHER INFORMATION |
SHAREHOLDERS SHARING THE SAME ADDRESS
The SEC has adopted rules that permit companies and intermediaries (such as brokers) to implement a delivery procedure called “householding.” Under this procedure, multiple stockholdersshareholders who reside at the same address may receive a single copy of our annual report and proxy materials, including the Notice of Internet Availability, unless the affected stockholdershareholder has provided contrary instructions. This procedure reduces printing costs and postage fees. Once you have received notice from your broker that it 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 copy of the Notice of Internet Availability and, if applicable, a separate copy of the annual report and other proxy materials, you may
NOTE ABOUT FORWARD-LOOKING STATEMENTS
Certain of the proxy holdersstatements made in this Proxy Statement are forward looking, such as those, among others, relating to voteour potential to achieve the noted development and regulatory milestones; our potential to bring a third product to market and effectively commercialize the Company’s products; the potential for our clinical trials to support further development, regulatory submissions and potential marketing approvals; the opportunities for, and the therapeutic and commercial potential of, ADCETRIS, PADCEV, tucatinib and our other product candidates; our ability to meet financial projections and guidance; our beliefs regarding the benefits and effects of our compensation policies and our expectations to attract and retain executive talent; statements related to our corporate responsibility and sustainability efforts; statements about our prospects for the future generally, as well as other statements that are not historical facts. Actual results or developments may differ materially from those projected or implied in these forward-looking statements. Factors that may cause such a difference include risks and uncertainties associated with maintaining or increasing sales of ADCETRIS and PADCEV due to competition, unexpected adverse events, regulatory action, reimbursement, market adoption by physicians, the impacts of the COVID-19 pandemic or other factors. We may also be delayed or unsuccessful in planned clinical trial initiations, enrollment in and conduct of our clinical trials, obtaining data from clinical trials, planned regulatory submissions, regulatory approvals and launch in each case for a variety of reasons including the difficulty and uncertainty of pharmaceutical product development, the impacts of the COVID-19 pandemic, negative or disappointing clinical trial results, unexpected adverse events or regulatory discussions or actions and the inherent uncertainty associated with the regulatory approval process and the pricing and reimbursement process when applicable. We may not be successful in retaining or attracting executive talent or in achieving the goals of our compensation policies or corporate responsibility and sustainability efforts due to market competition, the actions of third parties with which we do business or other factors. More information about the risks and uncertainties we face is contained under the caption “Risk Factors” included in our Annual Report on such matters in accordance with their best judgment.
By Order of the Board of Directors, | |||
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 | Jean I. Liu | ||
CORPORATE SECRETARY April | 2, 2020 | ||
A copy of the Company’s Annual Report to the Securities and Exchange CommissionSEC on Form10-K for the fiscal year ended December 31, 20182019 is available without charge upon written request to: Jean I. Liu, Corporate Secretary, Seattle Genetics, 21823 – 30th Drive SE, Bothell, Washington 98021.
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SEATTLE GENETICS, INC. AMENDED AND RESTATED 2007 EQUITY INCENTIVE PLAN (amended and restated by the Board August 5, 2009) (amended and restated by the Board March 11, 2010) (approved by the Company’s stockholders May 21, 2010) (amended and restated by the Board February 16, 2012) (approved by the Company’s stockholders May 18, 2012) (amended and restated by the Board February 28, 2014) (approved by the Company’s stockholders May 16, 2014) (amended and restated by the Board March 4, 2016) (approved by the Company’s stockholders May 20, 2016) (amended and restated by the Board March 14, 2018) (approved by the Company’s stockholders May 18, 2018) (amended and restated by the Board March 18, 2020) (approved by the Company’s stockholders May 15, 2020) 1. General. (a)Purpose of the Plan. The purpose of this Plan is to encourage ownership in Seattle Genetics, Inc., |
(b)Section 162(m) Transition Relief. Notwithstanding anything in the Plan to the contrary, any provision in the Plan that refers to “performance-based compensation” under Section 162(m) of participationthe Code will only apply to any Award that is intended to qualify, and is eligible to qualify, as “performance-based compensation” under Section 162(m) of the Code pursuant to the transition relief provided by the Tax Cuts and Jobs Act (the “TCJA”) for remuneration provided pursuant to a written binding contract which was in effect on November 2, 2017 and which was not modified in any stock option, stock purchase,material respect on or similar plan of the Company or any Designated Corporation. The Administrator shall have discretion to determine the application of this definition to Employees outside the United States.
2. Definitions.
As used herein, the following definitions shall apply:
(a) “Administrator” means the Board, any Committees or such delegates as shall be eligible to participateadministering the Plan in such Offering Period, subject to any limitations underaccordance with Section 4234 of the CodePlan.
(b) “Affiliate” means any entity that is directly or adoptedindirectly controlled by the Administrator pursuantCompany or any entity in which the Company has a significant ownership interest as determined by the Administrator.
(c) “Applicable Laws” means the requirements relating to subsections (b) through (d) hereof. Separate Offerings applythe administration of stock option and stock award plans under U.S. federal and state laws, the Code, any stock exchange or quotation system on which the Company has listed or submitted for quotation the Common Stock to each Designated Corporation and an Employee is only eligible to participate in the Offering made available to Employeesextent provided under the terms of the Designated Corporation which is the employer ofCompany’s agreement with such Employee.
(d) “Award” means a Stock Award or Option granted in accordance with the applicable jurisdiction would cause the Plan or an Offering under the Section 423 Componentterms of the Plan to violate Section 423 of the Code. In the case of an Offering under the Non-423 Component of the Plan,Plan.
(e) “Awardee” means an Employee, (or group of Employees) may be excluded from participation in the PlanConsultant or an Offering if the Administrator has determined, in its sole discretion, that participation of such Employee(s) is not advisable or practicable for any reason.
(f) “Award Agreement” means a Stock Award Agreement and/or Option Agreement, which may be in written or electronic format, in such form and with such terms and conditions as may be specified by the Administrator, evidencing the terms and conditions of an individual Award. Each Award Agreement is subject to the terms and conditions of the Plan.
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APPENDIX A |
(g) “Board” means the Board of Directors of the Company.
(h) “Cause” means (i) an action or omission of Awardee which constitutes a willful and intentional material breach of any subsidiarywritten agreement or covenant with the Company, including without limitation, Awardee’s theft or other misappropriation of the Company’s proprietary information; (ii) Awardee’s commitment of fraud, embezzlement, misappropriation of funds or breach of trust in connection with Awardee’s employment; or (iii) Awardee’s conviction of any crime which involves dishonesty or a breach of trust, or gross negligence in connection with the performance of the Awardee’s duties. The determination as to whether an Awardee is being terminated for Cause shall be made in good faith by the Company and shall be final and binding on the Awardee. The foregoing definition does not in any way limit the Company’s ability to terminate an Awardee’s employment or consulting relationship at any time as provided in Section 16 below, and the term “Company” will be interpreted to include any Affiliate or successor thereto, if appropriate.
(i) “Change in Control” means any of the following, unless the Administrator provides otherwise:
i. an acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation but excluding any merger effected exclusively for the purpose of changing the domicile of the Company);
ii. a sale of all or substantially all of the assets of the Company,
so long as in either i. or ii. above, the Company’s stockholders of record immediately prior to such transaction will, immediately after such transaction, hold less than fifty percent (50%) of the voting power of the surviving or acquiring entity; or
iii. any other event specified by the Board or a Committee, regardless of whether at the time an Award is granted or thereafter;provided, however, that no Change in Control (or any analogous term) shall be deemed to occur upon announcement or commencement of a tender offer or upon a “potential” takeover or upon shareholder approval of a merger or other transaction, in each case without a requirement that the Change in Control actually occur.
(j) “Code” means the United States Internal Revenue Code of 1986, as amended.
(k) “Committee” means the compensation committee of the Board or a committee of Directors appointed by the Board in accordance with Section 4 of the Plan.
(l) “Common Stock” means the common stock of the Company.
(m) “Company” means Seattle Genetics, Inc., a Delaware corporation, or its successor.
(n) “Constructive Termination” means (i) there is a material reduction or change in job duties, responsibilities and requirements inconsistent with Awardee’s position with the Company and prior duties, responsibilities and requirements, provided that neither a mere change in title alone nor reassignment to a position that is substantially similar to the position held prior to the change in terms of job duties, responsibilities or requirements shall constitute a material reduction in job responsibilities; (ii) there is a reduction in Awardee’s then-current base salary by at least twenty percent (20%), provided that anacross-the-board reduction in the salary level of all other employees by the same percentage amount as part of a general salary level reduction shall not constitute such a salary reduction; or (iii) Awardee refuses to relocate to a facility or location more than fifty (50) miles from the Company’s current location.
(o) “Consultant” means any person engaged by the Company or any Affiliate to render services to such entity as an advisor or consultant.
(p) “Conversion Award” has the meaning set forth in Section 4(b)(xiii) of the Plan.
(q) “Director” means a member of the Board.
(r) “Disability” means any physical or mental disability for which an Awardee becomes eligible to receive long-term disability benefits under the Company’s or an Affiliate’s, as applicable, long-term disability plan or policy.
(s) “Employee” means a regular, active employee of the Company or (ii) if such option would permit his any Affiliate, including an Officer and/or her rights to purchase stock under all
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APPENDIX A |
the foregoing, if any Offering Date falls on a day that is not a Trading Day, then such Offering Date shall instead fall on the next subsequent Trading Day.
(t) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(u) “Fair Market Value” of a Share on any given date means, unless otherwise required by Applicable Law, the fair market value of such Share as determined in good faith by the Administrator either through application of any reasonable valuation method or, in the manner designatedabsence of any method established under law, in the Company’s electronic ESPP interface (or such other enrollment process as the Company may designate from timepractice or otherwise to time). Any change in the rate of Contributionsbe reasonable, then pursuant to this Section 6(c) shall be effective as soon as administratively possible, but in no event later than thirty (30) days after the date the changeAdministrator’s good faith conclusion that its valuation determination is authorized. A Participant may not increase the rate of his or her Contributions with respect to the Offering Period during an Offering Period.
(v) “Grant Date” means, for all purposes, the date on which the Administrator makes the determination granting an Award, or such other date as is determined by the Administrator, provided that in the case of any Incentive Stock Option, the grant date shall be the later of the date on which the Administrator makes the determination granting such Incentive Stock Option or the date of determination,commencement of the Awardee’s employment relationship with the Company.
(w) “Incentive Stock Option” means an Option intended to qualify as reportedan incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(x) “Inside Director” means a Director who is an Employee.
(y) “Nasdaq” means the Nasdaq Global Market or its successor.
(z) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.
(aa) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(bb) “Option” means a right granted under Section 8 to purchase a number of Shares at such exercise price, at such times, and on such other terms and conditions as are specified in such sourcethe agreement or other documents evidencing the Option (the “Option Agreement”). Both Options intended to qualify as Incentive Stock Options and Nonstatutory Stock Options may be granted under the Board deems reliable. Unless otherwise provided byPlan.
(cc) “Outside Director” means a Director who is not an Employee.
(dd) “Participant” means the Board, if there is no closing sales price forAwardee or any person (including any estate) to whom an Award has been assigned or transferred as permitted hereunder.
(ee) “Plan” means this Seattle Genetics, Inc. Amended and Restated 2007 Equity Incentive Plan.
(ff) “Qualifying Performance Criteria” shall have the meaning set forth in Section 12(b) of the Plan.
(gg) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(hh) “Share” means a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan.
(ii) “Stock Appreciation Right” means a right to receive cash and/or shares of Common Stock based on the date of determination, thena change in the Fair Market Value shall beof a specific number of shares of Common Stock between the closing selling price (or closing bid if no sales were reported) onGrant Date and the last precedingexercise date forgranted under Section 11.
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APPENDIX A |
(jj) “Stock Award” means an award or issuance of Shares, Stock Units, Stock Appreciation Rights or other similar awards made under Section 11 of the Plan, the grant, issuance, retention, vesting, settlement and/or transferability of which is subject during specified periods of time to such quotation exists. Inconditions (including continued employment or performance conditions) and terms as are expressed in the absence of such markets foragreement or other documents evidencing the Common Award (the “Stock Award Agreement”).
(kk) “Stock Unit” means a bookkeeping entry representing an amount equivalent to the Fair Market Value of one Share (or a fraction or multiple of such value), payable in cash, property or Shares. Stock Units represent an unfunded and unsecured obligation of the Company, except as otherwise provided for by the Administrator.
(ll) “Subsidiary” means any company (other than the Company) in an unbroken chain of companies beginning with the Company, provided each company in the unbroken chain (other than the Company) owns, at the time of determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other companies in such chain.
(mm) “Termination of Employment” shall mean ceasing to be an Employee, Consultant or Director, as determined in the sole discretion of the Administrator. However, for Incentive Stock Option purposes, Termination of Employment will occur when the Awardee ceases to be an employee (as determined in accordance with Section 3401(c) of the Code and the regulations promulgated thereunder) of the Company or one of its Subsidiaries. The Administrator shall determine whether any corporate transaction, such as a sale orspin-off of a division or business unit, or a joint venture, shall be determined bydeemed to result in a Termination of Employment.
3. Stock Subject to the Board in good faith.
(a) Aggregate Limits.Subject to the provisions of Option
(b) Individual Share Limits. Subject to the Participant on the Purchase Date. During his or her lifetime, a Participant’s option to purchase Shares hereunder is exercisable only by him or her.
(c) Incentive Stock Option Limit.Subject to the provisions of the Code. If a Participant transfers from an Offering under the Non-423 ComponentSections 3(a) and 13 of the Plan, to an Offering under the 423 Component,maximum aggregate number of Shares that may be issued pursuant to the exercise of Incentive Stock Options is 78,000,000 Shares.
(d)Outside Director Compensation Limit. The aggregate value of all compensation granted or paid, as applicable, to any individual for service as an Outside Director with respect to any calendar year, including Awards granted and cash fees paid by the rightCompany to such Outside Director, will remain non-qualifiednot exceed (i) $1,000,000 in total value or (ii) in the event such Outside Director is first appointed or elected to the Board during such calendar year, $1,500,000 in total value, in each case calculating the value of any equity awards based on the grant date fair value of such equity awards for financial reporting purposes.
4. Administration of the Plan.
(a) Procedure.
i. Multiple Administrative Bodies. The Plan shall be administered by the Board, a Committee and/or their delegates.
ii. Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt underRule 16b-3 promulgated under the Non-423 Component.
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APPENDIX A |
iii. Other Administration. The Board or a Participant inCommittee may delegate to an authorized officer or officers of the Company the power to approve Awards to persons eligible to receive Awards under the Plan (exceptwho are not (A) subject to Section 16 of the Exchange Act or (B) any other executive officer.
iv. Delegation of Authority for theDay-to-Day Administration of the Plan. Except to the extent required underprohibited by Applicable Laws)Law, the Administrator may delegate to one or more individuals theday-to-day administration of the Plan and any of the functions assigned to it in this Plan. Such delegation may be revoked at any time.
v.Nasdaq.
(b) Powers of the Administrator. Subject to adjustment as provided in Section 19, the maximum numberprovisions of Shares which shall be made available for sale under the Plan and, in the case of a Committee or delegates acting as the Administrator, subject to the specific duties delegated to such Committee or delegates, the Administrator shall be 2,896,190 Shares. If any option granted underhave the Plan shall for any reason terminate without having been exercised,authority, in its discretion:
i. to select the sharesEmployees, Consultants and Directors of Common Stock not purchased under such option shall again become available for issuance under the Plan. If the Board determines that, on a given Purchase Date, the number of shares with respectCompany or its Affiliates to which optionswhom Awards are to be exercised may exceed (i)granted hereunder;
ii. to determine the number of shares of Common Stock that were availableor amount of cash to be covered by each Award granted hereunder;
iii. to determine the type of Award to be granted to the selected Employees, Consultants and Directors;
iv. to approve forms of Award Agreements for saleuse under the Plan onPlan;
v. to determine the Offering Dateterms and conditions, not inconsistent with the terms of the applicable Offering Period, Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise and/or (ii)purchase price (if applicable), the numbertime or times when an Award may be exercised (which may or may not be based on performance criteria), the vesting schedule, any vesting and/or exercisability acceleration or waiver of shares available for sale underforfeiture restrictions, the Planacceptable forms of consideration, the term, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such Purchase Date,factors as the Board mayAdministrator, in its sole discretion, provide (x) thatshall determine and may be established at the Company shall make a pro rata allocation of the Sharestime an Award is granted or thereafter;
vi. to determine whether and under what circumstances an Option may be settled in cash under Section 8(h) instead of Common Stock available for purchase on such Offering Date or Purchase Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretionStock;
vii. to be equitable among all Participants exercising optionscorrect administrative errors;
viii. to purchase Common Stock on such Purchase Date, and continue all Offering Periods then in effect, or (y) that the Company shall make a pro rata allocation of the shares available for purchase on such Offering Date or Purchase Date, as applicable, in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all Participants exercising options to purchase Common Stock on such Purchase Date, and terminate any or all Offering Periods then in effect pursuant to Section 21 below. The Company may make pro rata allocation of the Shares available on the Offering Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional Shares for issuance under the Plan by the Company’s stockholders subsequent to such Offering Date.
ix. to adopt rules orand procedures relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures for jurisdictions outside of the United States.procedures. Without limiting the generality of the foregoing, the BoardAdministrator is specifically is authorized (A) to adopt the rules and procedures and sub-plans, which, for purposes ofregarding the Non-423 Component, may be outside of the scope of Section 423 of the Code, regarding, without limitation, eligibility to participate, the definition of Compensation, the dates and duration of Offering Periods or other periods during which Participants may make Contributions toward the purchase of Shares, the method of determining the Purchase Price and the discount from Fair Market Value at which Shares may be purchased, any minimum or maximum amount of Contributions a Participant may make in an Offering Period or other specified period under the applicable sub-plan or policy, the treatment of options upon a change in control or a change in capitalization of the Company, the handling of Contributions, the making of Contributions to the Plan (including, without limitation, in forms other than payroll deductions), establishment of bank or trust accounts to hold Contributions, payment of interest, conversion of local currency, obligations to pay payroll tax, determination of beneficiary designation requirements, withholding procedures and handling of Share issuances and stock certificates thatwhich vary with applicable local requirement.requirements and (B) to adoptsub-plans
x. to prescribe, amend and rescind rules and regulations relating to the extentPlan, including rules and regulations relating tosub-plans and Plan addenda;
xi. to modify or amend each Award, including, but not prohibited by Applicable Laws, may delegate some limited to, the acceleration of vesting and/or all of the administrationexercisability,provided, however, that any such amendment is subject to Section 14 of the Plan and except as set forth in that Section, may not impair any outstanding Award unless agreed to a Committee or Committees. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessedwriting by the BoardParticipant;provided further, however, that have been delegated tonotwithstanding the Committee, includingforegoing or anything in the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereaftercontrary, the Administrator may amend any outstanding Award or the Plan, or may suspend or terminate the Plan, without the affected Participant’s consent, (A) to maintain the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code or (B) to change the terms of an Incentive Stock Option, if such change results in impairment of the Award solely because it impairs the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code;
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APPENDIX A |
xii. to allow Participants to satisfy withholding tax amounts by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or vesting of a Stock Award that number of Shares having a Fair Market Value equal to the Committeeamount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined in such manner and on such date that the Administrator shall determine or, subcommittee)in the absence of provision otherwise, on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may provide;
xiii. to authorize conversion or substitution under the Plan of any or all stock options, stock appreciation rights or other stock awards held by service providers of an entity acquired by the Company (the “Conversion Awards”). Any conversion or substitution shall be effective as of the close of the merger, acquisition or other transaction. The Conversion Awards may be Nonstatutory Stock Options or Incentive Stock Options, as determined by the Administrator, with respect to options granted by the acquired entity;provided, however, subject, however,that with respect to the conversion of stock appreciation rights in the acquired entity, the Conversion Awards shall be Nonstatutory Stock Options. Unless otherwise determined by the Administrator at the time of conversion or substitution, all Conversion Awards shall have the same terms and conditions as Awards generally granted by the Company under the Plan;
xiv. to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;
xv. to impose such resolutions, not inconsistentrestrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by a Participant or other subsequent transfers by the Participant of any Shares issued as a result of or under an Award, including without limitation, (A) restrictions under an insider trading policy or under any other Company policy relating to Company stock and stock ownership and (B) restrictions as to the use of a specified brokerage firm for such resales or other transfers;
xvi. to provide, either at the time an Award is granted or by subsequent action, that an Award shall contain as a term thereof, a right, either in tandem with the provisionsother rights under the Award or as an alternative thereto, of the Participant to receive, without payment to the Company, a number of Shares, cash or a combination thereof, the amount of which is determined by reference to the value of the Award; and
xvii. to make all other determinations deemed necessary or advisable for administering the Plan and any Award granted hereunder.
(c) Effect of Administrator’s Decision. All decisions, determinations and interpretations by the Administrator regarding the Plan, any rules and regulations under the Plan and the terms and conditions of any Award granted hereunder, shall be final and binding on all Participants and on all other persons. The Administrator shall consider such factors as it deems relevant, in its sole and absolute discretion, to making such decisions, determinations and interpretations including, without limitation, the recommendations or advice of any officer or other employee of the Company and such attorneys, consultants and accountants as it may select.
5. Eligibility.
Awards may be granted to Employees, Consultants and Directors of the Company or any of its Affiliates; provided that Incentive Stock Options may be granted only to Employees of the Company or of a Subsidiary of the Company.
6. Term of Plan.
The Plan originally became effective on December 23, 2007. It shall continue in effect for a term of ten (10) years from the latest date that the stockholders of the Company approve any amendment to add shares to the Plan, unless terminated earlier under Section 14 of the Plan.
7. Term of Award.
The term of each Award shall be determined by the Administrator and stated in the Award Agreement. In the case of an Option or Stock Appreciation Right, the term shall be ten (10) years from the Grant Date or such shorter term as may be adoptedprovided in the Award Agreement;provided, however, that an Incentive Stock Option granted to an Employee who on the Grant Date owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Subsidiary shall have a term of no more than five (5) years from the Grant Date.
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APPENDIX A |
8. Options.
The Administrator may grant an Option or provide for the grant of an Option, either from time to time in the discretion of the Administrator or automatically upon the occurrence of specified events, including, without limitation, the achievement of performance goals, the satisfaction of an event or condition within the control of the Awardee or within the control of others.
(a) Option Agreement. Each Option Agreement shall contain provisions regarding (i) the number of Shares that may be issued upon exercise of the Option, (ii) the type of Option, (iii) the exercise price of the Shares and the means of payment for the Shares, (iv) the term of the Option, (v) such terms and conditions on the vesting and/or exercisability of an Option as may be determined from time to time by the Board. The Board may retainAdministrator, (vi) restrictions on the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or alltransfer of the powers previously delegated. WhetherOption or not the Board has delegated administrationShares issued upon exercise of the Option and forfeiture provisions on either and (vii) such further terms and conditions, in each case not inconsistent with this Plan as may be determined from time to time by the Administrator;provided, however, that (x) each Option must have a Committee,minimum vesting period of one (1) year from the Board shall have the final power to determine all questions of policy and expediency that may arise in the administrationearlier of the Plan.
(b) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following:
i. In the case of an Incentive Stock Option, the per Share exercise price shall be no less than one hundred percent (100%) of the Fair Market Value per Share on the Grant Date; provided however, that in the case of an Incentive Stock Option granted to an Employee who on the Grant Date owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Subsidiary, the per Share exercise price shall be no less than one hundred ten percent (110%) of the Fair Market Value per Share on the Grant Date.
ii. In the case of a Nonstatutory Stock Option, the per Share exercise price shall be no less than one hundred percent (100%) of the Fair Market Value per Share on the Grant Date.
iii. Notwithstanding the foregoing, at the Administrator’s discretion, Conversion Awards may be granted in substitution and/or conversion of options of an acquired entity, with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of such substitution and/or conversion.
(c)No Option Repricings. Other than in connection with a change in the Company’s capitalization (as described in Section 13(a) of the Plan), the exercise or strike price of an Option or Stock Appreciation Right may not be reduced without stockholder approval. Additionally, the Administrator will not have the authority to cancel any outstanding Option or Stock Appreciation Right that has an exercise price or strike price greater than the current Fair Market Value of the Common Stock in exchange for cash or other Awards under the Plan, unless the stockholders of the Company have approved such an action within twelve months prior to such an event.
(d) Vesting Period and Exercise Dates. Subject to Section 8(a), Options granted under this Plan shall vest and/or be exercisable at such time and in such installments during the period prior to the expiration of the Option’s term as determined by the Administrator. The Administrator shall have the right to make the timing of the ability to exercise any Option granted under this Plan subject to continued employment, the passage of time and/or such performance requirements as deemed appropriate by the Administrator. At any time after the grant of an Option, the Administrator may reduce or eliminate any restrictions surrounding any Participant’s death subsequentright to exercise all or part of the Option.
(e) Form of Consideration. The Participant may pay the exercise price of an Option using any of the following forms of consideration, unless the Administrator determines not to permit such form of consideration at any time including at the time of exercise:
i. cash;
ii. check or wire transfer (denominated in U.S. Dollars);
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APPENDIX A |
iii. subject to the Company’s discretion to refuse for any reason and at any time to accept such consideration and subject to any conditions or limitations established by the Administrator, other Shares held by the Participant which have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised;
iv. consideration received by the Company under a broker-assisted sale and remittance program acceptable to the Administrator;
v. cashless “net exercise” arrangement pursuant to which the Company will reduce the number of Shares issued upon exercise by the largest whole number of Shares having an aggregate Fair Market Value that does not exceed the aggregate exercise price; provided that the Company shall accept a cash or other payment from the Participant to the extent of any remaining balance of the exercise price not satisfied by such reduction in the number of whole Shares to be issued; and also provided that Shares will no longer be outstanding under an Option and will not be exercisable thereafter to the extent that (A) Shares are withheld to pay the exercise price pursuant to a “net exercise,” and (B) the remaining number of whole Shares are delivered to the Participant as a result of such exercise;
vi. such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or
vii. any combination of the foregoing methods of payment.
(f)Effect of Termination on Options
i.Generally. Unless otherwise provided for by the Administrator, upon an Awardee’s Termination of Employment other than as a result of circumstances described in Sections 8(f)(ii) and (iii) below, any outstanding Option granted to such Awardee, whether vested or unvested, to the extent not theretofore exercised, shall terminate immediately upon the Awardee’s Termination of Employment;provided, however, that the Administrator may in the Option Agreement specify a period of time (but not beyond the expiration date of the Option) following Termination of Employment during which the Awardee may exercise the Option as to Shares that were vested and exercisable as of the date of Termination of Employment. To the extent such a period following Termination of Employment is specified, the Option shall automatically terminate at the end of an Offering Period but priorsuch period to delivery to him or herthe extent the Awardee has not exercised it within such period;provided, however, that (A) if during any part of such period, the Option is not exercisable because the issuance of the Shares and cash. In addition, a Participant may file a written designation of a beneficiary who is to receive any cash fromwould violate the Participant’s accountregistration requirements under the Plan inSecurities Act, the eventOption shall not expire until the Option shall have been exercisable for an aggregate of such Participant’s death priorperiod after the date of Termination of Employment (but in no event may the Option be exercised more than one year after the date of Termination of Employment), and (B) if on the date of such Termination of Employment, the Shares issued upon exercise of the Option may not be sold because the Awardee has material nonpublic information regarding the Company or is otherwise subject to a trading blackout period under the Purchase DateCompany’s Insider Trading Policy, the Option shall not expire until the five month period following the date of such Termination of Employment has elapsed.
ii. Disability of Awardee. Unless otherwise provided for by the Administrator, upon an Offering Period. IfAwardee’s Termination of Employment as a Participant is marriedresult of the Awardee’s Disability, all outstanding Options granted to such Awardee that were vested and exercisable as of the designated beneficiary is notdate of the spouse, spousal consent shall be required for such designation to be effective.
iii. Death of Awardee. Unless otherwise provided for by the Administrator, upon an Awardee’s Termination of Employment as a result of the Awardee’s death or her spouse, if any) at any time by written notice. Inin the event of the death of a Participantan Awardee within thirty (30) days following an Awardee’s Termination of Employment, all outstanding Options granted to such Awardee that were vested and inexercisable as of the absencedate of a beneficiary validly designated under the Plan who is living atAwardee’s death may be exercised until the timeearlier of (A) twelve (12) months following the Awardee’s death or (B) the expiration of the term of such Participant’s death,Option. If an Option is held by the Company shall deliverAwardee when he or she dies, such Shares and/or cashOption may be exercised, to the extent the Option is vested and exercisable, by the beneficiary designated by the Awardee (as provided in Section 15 of the Plan), the executor or administrator of the Awardee’s estate of the Participant, or, if nonone, by the person(s)
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APPENDIX A |
entitled to exercise the Option under the Awardee’s will or the laws of descent or distribution; provided that the Company need not accept exercise of an Option by such beneficiary, executor or administrator unless the Company has been appointedsatisfactory evidence of such person’s authority to act as such. If the Option is not so exercised within the time specified, such Option (to the knowledgeextent not exercised) shall automatically terminate.
iv. Termination for Cause. The Administrator has the authority to cause all outstanding Options held by an Awardee to terminate immediately in their entirety upon first notification to the Awardee of the Company),Awardee’s Termination of Employment for Cause. If an Awardee’s employment or consulting relationship with the Company is suspended pending an investigation of whether the Awardee shall be terminated for Cause, the Administrator has the authority to cause all the Awardee’s rights under all outstanding Options to be suspended during the investigation period in itswhich event the Awardee shall have no right to exercise any outstanding Options.
v.Other Terminations of Employment. The Administrator may provide in the applicable Option Agreement for different treatment of Options upon Termination of Employment of the Awardee than that specified above.
vi.Extension of Exercise Period. The Administrator shall have full power and authority to extend the period of time for which an Option is to remain exercisable following an Awardee’s Termination of Employment from the periods set forth in Sections 8(f)(ii) and (iii) above or in the Option Agreement to such greater time as the Board shall deem appropriate, provided that in no event shall such Option be exercisable later than the date of expiration of the term of such Option as set forth in the Option Agreement.
(g)Leave of Absence. The Administrator shall have the discretion may deliverto determine whether and to what extent the vesting of Options shall be tolled during any unpaid leave of absence;provided, however, that in the absence of such Shares and/or cashdetermination, vesting of Options shall be tolled during any leave that is not a leave required to be provided to the spouseAwardee under Applicable Law. In the event of military leave, vesting shall toll during any unpaid portion of such leave, provided that, upon an Awardee’s returning from military leave (under conditions that would entitle him or her to any oneprotection upon such return under the Uniform Services Employment and Reemployment Rights Act), he or more dependents or relatives ofshe shall be given vesting credit with respect to Options to the Participant, or if no spouse, dependent or relative is knownsame extent as would have applied had the Awardee continued to provide services to the Company thenthroughout the leave on the same terms as he or she was providing services immediately prior to such other personleave.
(h)Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares, an Option previously granted, based on such terms and conditions as the Company may designate.
9. Incentive Stock Option Limitations/Terms.
(a) Eligibility. Only employees (as determined in accordance with Section 3401(c) of an optionthe Code and the regulations promulgated thereunder) of the Company or to receive Shares under the Planany of its Subsidiaries may be granted Incentive Stock Options.
(b) $100,000 Limitation. Notwithstanding the designation “Incentive Stock Option” in an Option Agreement, if and to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Awardee during any calendar year (under all plans of the Company and any of its Subsidiaries) exceeds U.S. $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 9(b), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the Grant Date.
(c) Transferability. An Incentive Stock Option may not be sold, pledged, assigned, hypothecated, transferred pledged or otherwise disposed of in any way (othermanner by the Awardee otherwise than by will or the laws of descent and distribution, or as provided in Section 15)and, during the lifetime of such Awardee, may only be exercised by the Participant. Any such attempt at assignment, transfer, pledge or other dispositionAwardee. If the terms of an Incentive Stock Option are amended to permit transferability, the Option will be treated for tax purposes as a Nonstatutory Stock Option. The designation of a beneficiary by an Awardee will not constitute a transfer.
(d) Exercise Price. The per Share exercise price of an Incentive Stock Option shall be without effect, except thatdetermined by the Company may treat such act as an election to withdraw fundsAdministrator in accordance with Section 11.
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APPENDIX A |
(e) Other Terms. Option Agreements evidencing Incentive Stock Options shall contain such other terms and conditions as may be used by the Company for any corporate purpose (exceptnecessary to qualify, to the extent necessarydetermined desirable by the Administrator, with the applicable provisions of Section 422 of the Code.
10. Exercise of Option.
(a)Procedure for Exercise.
i. Any Option granted hereunder shall be exercisable according to complythe terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the respective Option Agreement.
ii. An Option shall be deemed exercised when the Company receives (A) written or electronic notice of exercise (in accordance with Applicable Laws)the Option Agreement) from the person entitled to exercise the Option; (B) full payment for the Shares with respect to which the related Option is exercised; and (C) payment of all applicable withholding taxes.
iii. An Option may not be exercised for a fraction of a Share.
(b)Rights as a Stockholder. The Company shall issue (or cause to be issued) such Shares as administratively practicable after the Option is exercised. Shares issued upon exercise of an Option shall be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and his or her spouse. Unless provided otherwise by the Administrator or pursuant to this Plan, until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option.
11. Stock Awards.
(a) Stock Award Agreement. Each Stock Award Agreement shall contain provisions regarding (i) the number of Shares subject to such Stock Award or a formula for determining such number, (ii) the purchase price of the Shares, if any, and the means of payment for the Shares, (iii) the performance criteria (including Qualifying Performance Criteria), if any, and level of achievement versus these criteria that shall determine the number of Shares granted, issued, retainable and/or vested, (iv) such terms and conditions on the grant, issuance, vesting, settlement and/or forfeiture of the Shares as may be determined from time to time by the Administrator, (v) restrictions on the transferability of the Stock Award and (vi) such further terms and conditions in each case not inconsistent with this Plan as may be determined from time to time by the Administrator;provided, however, that (x) each Stock Award must have a minimum vesting period of one (1) year from the earlier of the Grant Date or the vesting commencement date, if any, and (y) notwithstanding the foregoing, in the event of an Awardee’s Termination of Employment as a result of the Awardee’s death or Disability, the vesting (and exercisability, if applicable) of all outstanding Stock Awards granted to the Awardee (where such vesting and exercisability is based on the Awardee’s continued service with the Company or any Affiliate and the passage of time) shall accelerate such that such Stock Awards shall become vested (and exercisable, if applicable) as to an additional twelve (12) months, effective as of the date of such Termination of Employment.
(b) Restrictions and Performance Criteria. The grant, issuance, retention, vesting and/or settlement of each Stock Award or the Shares subject thereto may be subject to such performance criteria (including Qualifying Performance Criteria) and level of achievement versus these criteria as the Administrator shall determine, which criteria may be based on financial performance, stock price performance, strategic plan development and implementation with respect to development, commercialization or other Company objectives, approval by the U.S. Food and Drug Administration or other regulatory body of a product candidate, implementation or completion of projects, processes or milestones (including, without limitation, clinical trial initiation, clinical trial enrollment and dates, clinical trial results, regulatory filing submissions, regulatory filing acceptances, regulatory or advisory committee interactions, regulatory approvals, presentation of studies and launch of commercial plans, compliance programs or education campaigns), achievement of business development objectives, personal performance evaluations, such other performance criteria as the Administrator shall determine appropriate, and/or completion of service by the Awardee. If applicable, the Committee shall establish the Qualifying Performance Criteria applicable to, and the formula for calculating the amount payable under, the Award no later than the
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APPENDIX A |
earlier of (a) the date ninety (90) days after the commencement of the applicable performance period, or (b) the date on which 25% of the performance period has elapsed, and in any event at a time when the achievement of the applicable Qualifying Performance Criteria remains substantially uncertain.
(c) Forfeiture. Unless otherwise provided for by the Administrator, upon the Awardee’s Termination of Employment, the Stock Award and the Shares subject thereto shall be forfeited, provided that to the extent that the Participant purchased or earned any Shares, the Company shall have a right to repurchase the unvested Shares at such price and on such terms and conditions as the Administrator determines.
(d) Rights as a Stockholder. Unless otherwise provided by the Administrator in the Award Agreement, the Participant shall have the rights equivalent to those of a stockholder and shall be a stockholder only after Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) to the Participant. Unless otherwise provided by the Administrator, a Participant holding Stock Units shall not be obligatedentitled to segregatereceive dividend payments or any credit therefore as if he or she was an actual stockholder.
(e)Stock Appreciation Rights.
i.General. Stock Appreciation Rights may be granted either alone, in addition to, or in tandem with other Awards granted under the Plan. The Board may grant Stock Appreciation Rights to eligible Participants subject to terms and conditions not inconsistent with this Plan and determined by the Board. The specific terms and conditions applicable to the Participant shall be provided for in the Stock Award Agreement. Stock Appreciation Rights shall be exercisable, in whole or in part, at such Contributions (excepttimes as the Board shall specify in the Stock Award Agreement.
ii.Exercise of Stock Appreciation Right. Upon the exercise of a Stock Appreciation Right, in whole or in part, the Participant shall be entitled to a payment in an amount equal to the excess of the Fair Market Value on the date of exercise of a fixed number of Shares covered by the exercised portion of the Stock Appreciation Right, over the Fair Market Value on the Grant Date of the Shares covered by the exercised portion of the Stock Appreciation Right (or such other amount calculated with respect to Shares subject to the Award as the Board may determine). The amount due to the Participant upon the exercise of a Stock Appreciation Right shall be paid in such form of consideration as determined by the Board and may be in cash, Shares or a combination thereof, over the period or periods specified in the Stock Award Agreement. A Stock Award Agreement may place limits on the amount that may be paid over any specified period or periods upon the exercise of a Stock Appreciation Right, on an aggregate basis or as to any Participant. A Stock Appreciation Right shall be considered exercised when the Company receives written notice of exercise in accordance with the terms of the Stock Award Agreement from the person entitled to exercise the Stock Appreciation Right.
iii.Nonassignability of Stock Appreciation Rights. Except as determined by the Administrator, no Stock Appreciation Right shall be assignable or otherwise transferable by the Participant except by will or by the laws of descent and distribution.
12. Other Provisions Applicable to Awards.
(a) Non-Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by beneficiary designation, will or by the laws of descent or distribution. Subject to Section 9(c), the Administrator may in its discretion make an Award transferable to an Awardee’s family member or any other person or entity as it deems appropriate. If the Administrator makes an Award transferable, either at the time of grant or thereafter, such Award shall contain such additional terms and conditions as the Administrator deems appropriate, and any transferee shall be deemed to be bound by such terms upon acceptance of such transfer.
(b) Qualifying Performance Criteria. For purposes of this Plan, the term “Qualifying Performance Criteria” shall mean any one or more of the following performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit, Affiliate or business segment, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to apre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Administrator in the Award: (i) cash flow; (ii) earnings (including
2020 PROXY STATEMENT | A-11 | |||||||
APPENDIX A |
gross margin, earnings before interest and taxes, earnings before taxes, and net earnings); (iii) earnings per share; (iv) growth in earnings or earnings per share; (v) stock price; (vi) return on equity or average stockholders’ equity; (vii) total stockholder return; (viii) return on capital; (ix) return on assets or net assets; (x) return on investment; (xi) revenue; (xii) income or net income; (xiii) operating income or net operating income, in aggregate or per share; (xiv) operating profit or net operating profit; (xv) operating margin; (xvi) return on operating revenue; (xvii) market share; (xviii) growth in stockholder value relative to the moving average of a peer group index; (xix) strategic plan development and implementation (including individual performance objectives that relate to achievement of the Company’s or any business unit’s strategic plan); (xx) improvement in workforce diversity; (xxi) growth of revenue, operating income or net income; (xxii) approval by the U.S. Food and Drug Administration or other regulatory body of a product candidate; (xxiii) implementation or completion of projects or processes (including, without limitation, clinical trial initiation, clinical trial enrollment and dates, clinical trial results, regulatory filing submissions, regulatory filing acceptances, regulatory or advisory committee interactions, regulatory approvals, presentation of studies and launch of commercial plans, compliance programs or education campaigns) and (xxiv) any other similar criteria. The Committee may appropriately adjust any evaluation of performance under a Qualifying Performance Criteria to exclude any of the following events that occurs during a performance period: (A) asset write-downs; (B) litigation or claim judgments or settlements; (C) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results; (D) accruals for reorganization and restructuring programs and/or other nonrecurring charges; and (E) any gains or losses that are “unusual” in nature or occur “infrequently” under generally accepted accounting principles or discontinued operations in the Company’s financial statements.
(c) Certification. Prior to the payment of any compensation under an Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Committee shall certify the extent to which any Qualifying Performance Criteria and any other material terms under such Award have been satisfied (other than in cases where such relate solely to the increase in the value of the Common Stock).
(d) Compliance with Section 409A.Notwithstanding anything to the contrary contained herein, to the extent necessary to comply with Applicable Laws). Proceeds fromthat the sale of shares of Common Stock pursuant to optionsAdministrator determines that any Award granted under the Plan is subject to Code Section 409A and unless otherwise specified in the applicable Award Agreement, the Award Agreement evidencing such Award shall constitute general fundsincorporate the terms and conditions necessary for such Award to avoid the consequences described in Code Section 409A(a)(1), and to the maximum extent permitted under Applicable Law (and unless otherwise stated in the applicable Award Agreement), the Plan and the Award Agreements shall be interpreted in a manner that results in their conforming to the requirements of Code Section 409A(a)(2), (3) and (4) and any Department of Treasury or Internal Revenue Service regulations or other interpretive guidance issued under Section 409A (whenever issued, the “Guidance”). Notwithstanding anything to the contrary in this Plan (and unless the Award Agreement provides otherwise, with specific reference to this sentence), to the extent that a Participant holding an Award that constitutes “deferred compensation” under Section 409A and the Guidance is a “specified employee” (also as defined thereunder), no distribution or payment of any amount shall be made before a date that is six (6) months following the date of such Participant’s “separation from service” (as defined in Section 409A and the Guidance) or, if earlier, the date of the Company.
(e) Deferral of Award Benefits.The Administrator may in its discretion and upon such terms and conditions as it determines appropriate permit one or more Participants whom it selects to (a) defer compensation payable pursuant to the terms of an Award, or (b) defer compensation arising outside the terms of this Plan pursuant to a program that provides for deferred payment in satisfaction of such other compensation amounts through the issuance of one or more Awards. Any such deferral arrangement shall be maintained for each Participantevidenced by an Award Agreement in such form as the Plan. StatementsAdministrator shall from time to time establish, and no such deferral arrangement shall be a valid and binding obligation unless evidenced by a fully executed Award Agreement, the form of account willwhich the Administrator has approved, including through the Administrator’s establishing a written program (the “Program”) under this Plan to govern the form of Award Agreements participating in such Program. Any such Award Agreement or Program shall specify the treatment of dividends or dividend equivalent rights (if any) that apply to Awards governed thereby, and shall further provide that any elections governing payment of amounts pursuant to such Program shall be givenin writing, shall be delivered to participating Employees at least annually, which statements will set forth the amounts of Contributions, the per Share Purchase Price, the number of Shares purchasedCompany or its agent in a form and manner that complies with Code Section 409A and the remaining cash balance, if any.
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APPENDIX A |
13. Adjustments Uponupon Changes in Capitalization; Corporate Transactions
(a)
(b)
(c) Change in Control. In the event there is a Change in Control of a Corporate Transaction, each option outstanding under the Plan shall be assumed or an equivalent option shall be substitutedCompany, as determined by the successor corporationBoard or a parentCommittee, the Board or subsidiaryCommittee may, in its discretion, (i) provide for the assumption or substitution of, such successor corporation. Inor adjustment (including to the event thatnumber and type of Shares and exercise or purchase price applicable) to, each outstanding Award; (ii) accelerate the successor corporation refuses to assume vesting of Options and terminate any restrictions on Stock Awards and/or substitute(iii) provide for outstanding options, the Offering Period then in progress shall be shortened andtermination of Awards as a new Purchase Date shall be set (the “
For purposes of this Section 19,13(c), an option granted under the PlanAward shall be deemed to beconsidered assumed, without limitation, if, at the time of issuance of the stock or other consideration upon a Corporate Transaction,Change in Control, as the case may be, each holder of an option under the PlanAward would be entitled to receive upon exercise of the optionAward the same number and kind of shares of stock or the same amount of property, cash or securities as such holder would have been entitled to receive upon the occurrence of the transaction if the holder had been, immediately prior to thesuch transaction, the holder of the number of Shares of Common Stock covered by the optionAward at such time (after giving effect to any adjustments in the number of Shares covered by the optionAward as provided for in this Section 19)13(a)); provided however that if thesuch consideration received in the transaction is not solely common stock of the successor corporation, or its parent (as defined in Section 424(e) of the Code), the BoardAdministrator may, with the consent of the successor corporation, provide for the consideration to be received upon exercise of the optionAward to be solely common stock of the successor corporation or its parent equal into the Fair Market Value toof the per Share consideration received by holders of Common Stock in the transaction.
In the event of a Change in Control, and if an Awardee’s Awards are not assumed by the Company’s being consolidatedsuccessor corporation or its parent or subsidiary and such successor does not substitute equivalent options or awards for those outstanding under the Plan and the Awardee has not experienced a Termination of Employment without Cause as of, or has experienced a Termination of Employment without Cause immediately prior to, the effective time of the Change in Control, then such Awards shall become fully vested and exercisable and/or payable as applicable, and all forfeiture or repurchase restrictions on such Awards shall lapse immediately prior to the effective time of the Change in Control. Upon, or in anticipation of, such Change in Control, the Administrator may cause any and all Awards outstanding under the Plan to terminate at a specific time in the future and shall give each Awardee the right to exercise such Awards during a period of time as the Administrator, in its sole and absolute discretion, shall determine. The Administrator shall have sole discretion to determine whether an Award has been assumed by the successor corporation or its parent or subsidiary or whether such successor has substituted equivalent awards for those outstanding under the Plan in connection with a Change in Control subject to the preceding paragraph.
2020 PROXY STATEMENT | A-13 | |||||||
APPENDIX A |
In the event of a Change in Control, if outstanding Awards are assumed or merged intoequivalent awards are substituted by the successor corporation or a parent or subsidiary of such successor corporation, and if at the time of, immediately prior to or within twelve (12) months after, the effective time of such Change in Control, an Awardee experiences a Termination of Employment without Cause or as a result of a Constructive Termination, then, as of the date of Awardee’s Termination of Employment, the vesting and exercisability of any other corporation.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Administrator may amend, alter or discontinue the Plan or any Award Agreement, but any such amendment shall be subject to approval of the stockholders of the Company in the manner and to the extent required by Applicable Law. In addition, without limiting the foregoing, unless approved by the stockholders of the Company, no such amendment shall be made that would:
i. increase the maximum number of Shares for which Awards may endeavor to (i) qualify an option for favorable tax treatmentbe granted under the lawsPlan, other than an increase pursuant to Section 13 of the United States or jurisdictions outside ofPlan;
ii. reduce the United States or (ii) avoid adverse tax treatment (e.g., under Section 409A of the Code), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan. The Company shallminimum exercise prices at which Options may be unconstrained in its corporate activities without regard to any potential negative tax impact on Participantsgranted under the Plan (as set forth in Section 8(b));
iii. result in a repricing of Options or Stock Appreciation Rights; or
iv. change the class of persons eligible to receive Awards under the Plan.
(b) Effect of Amendment or Termination
(c) Effect of the Shares under any local, state, federal or foreign securities or exchange control law or under rulings or regulations of any governmental regulatory body, or prior to obtaining any approval or other clearance from any local, state, federal or foreign governmental agency, which registration, qualification or approvalPlan on Other Arrangements. Neither the Administrator shall, in its absolute discretion, deem necessary or advisable. The Company is under no obligation to register or qualify the Shares with any state or foreign securities commission, or to seek approval or clearance from any governmental authority for the issuance or saleadoption of the Shares. If,Plan by the Board or a Committee nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or any Committee to adopt such other incentive arrangements as it or they may deem desirable, including without limitation, the granting of restricted stock or stock options otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases. The value of Awards granted pursuant to this Section 23, the Administrator determines that the SharesPlan will not be issued toincluded as compensation, earnings, salaries or other similar terms used when calculating an Awardee’s benefits under any Participant, any Contributions credited to such Participant’s account will be promptly refunded, without interest, to the Participant, without any liability toemployee benefit plan sponsored by the Company or any Subsidiary except as such plan otherwise expressly provides.
15. Designation of its SubsidiariesBeneficiary.
(a) An Awardee may file a written designation of a beneficiary who is to receive the Awardee’s rights pursuant to Awardee’s Award or Affiliates
(b) Such designation of beneficiary may be changed by the Awardee at any time by written notice. In the event of the death of an option,Awardee and in the Company may requireabsence of a beneficiary validly designated under the person exercising such option to represent and warrantPlan who is living at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel forAwardee’s death, the Company such a representation is required by Applicable Laws.
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APPENDIX A |
16. No Right to Awards or to Employment.
No person shall have any claim or right to be granted an Award and the grant of any Award shall not be deemed to beconstrued as giving an Awardee the holder of, or to have any of the rights of a holder with respect to, Shares subject to options unless and until the Participant’s Shares acquired upon exercise of options under the Plan are recorded in the books of the Company (or its transfer agent).
17. Legal Compliance.
Shares shall not be issued pursuant to the exercise of an Option or Stock Award unless the exercise of such Option or Stock Award and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.
18. Reservation of Shares.
The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.
19. Notice.
Any written notice to the Company required by any provisions of this Plan shall be addressed to the Secretary of the Company or a Subsidiary or Affiliate to continue the employmentand shall be effective when received.
20. Governing Law; Interpretation of an Employee.
(a) This Plan and all determinations made and actions taken pursuant hereto shall be governed by the substantive laws, but not the choice of law rules, of the state of Delaware.
(b) In the event that any provision of the Plan or any Award granted under the Plan is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible, to the extent necessary to render it legal, valid and enforceable, or otherwise deleted, and the remainder of the terms of the Plan and/or Award shall not be affected except to the extent necessary to reform or delete such illegal, invalid or unenforceable provision.
(c) The headings preceding the text of the sections hereof are inserted solely for convenience of reference, and shall not constitute a part of the Plan, nor shall they affect its meaning, construction or effect.
(d) The terms of the Plan and any Award shall inure to the benefit of and be binding upon the parties hereto and their respective permitted heirs, beneficiaries, successors and assigns.
(e) All questions arising under the Plan or under any Award shall be decided by the Administrator in its total and absolute discretion. In the event the Participant believes that a decision by the Administrator with respect to such person was arbitrary or capricious, the Participant may request arbitration with respect to such decision. The review by the arbitrator shall be limited to determining whether the Administrator’s decision was arbitrary or capricious. This arbitration shall be the sole and exclusive review permitted of the Administrator’s decision, and the Awardee shall as a condition to the receipt of an Award be deemed to explicitly waive any right to judicial review.
(f) Notice of demand for arbitration shall be made in writing to the Administrator within thirty (30) days after the applicable decision by the Administrator. The arbitrator shall be selected from amongst those members of the Board who are neither Administrators nor Employees. If there are no such members of the Board, the arbitrator shall be selected by the Board. The arbitrator shall be an individual who is an attorney licensed to practice law in the State of WashingtonWashington. Such arbitrator shall be neutral within the meaning of the Commercial Rules of Dispute Resolution of the American Arbitration Association;provided, however, that the arbitration shall not be administered by the American Arbitration Association. Any challenge to the neutrality of the arbitrator shall be resolved by the arbitrator whose decision shall be final and conclusive. The arbitration shall be administered and conducted by the arbitrator pursuant to the Commercial Rules of Dispute Resolution of the American Arbitration Association. The decision of the arbitrator on the issue(s) presented for arbitration shall be final and conclusive and may be enforced in any court of competent jurisdiction.
2020 PROXY STATEMENT | A-15 | |||||||
APPENDIX A |
21. Limitation on Liability.
The Company and any Affiliate which is in existence or hereafter comes into existence shall not be liable to a Participant, an Employee, an Awardee or any other persons as to:
(a) TheNon-Issuance of Shares. Thenon-issuance or sale of Shares (including under Section 17 above) as to which the Company has been unable, or the Administrator deems it infeasible, to obtain from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any shares hereunder; and
(b) Tax Consequences. Any tax consequence realized by any Participant, Employee, Awardee or other person due to the receipt, vesting, exercise or settlement of any Option or other Award granted hereunder or due to the transfer of any Shares issued hereunder. The Participant is responsible for, and by accepting an Award under the Plan agrees to bear, all taxes of any nature that are legally imposed upon the Participant in connection with an Award, and the Company does not assume, and will not be liable to any party for, any cost or liability arising in connection with such tax liability legally imposed on the Participant. In particular, Awards issued under the Plan may be characterized by the Internal Revenue Service (the “IRS”) as “deferred compensation” under the Code resulting in additional taxes, including in some cases interest and penalties. In the event the IRS determines that an Award constitutes deferred compensation under the Code or challenges any good faith characterization made by the Company or any other party of the tax treatment applicable to an Award, the Participant will be responsible for the additional taxes, and interest and penalties, if any, that are determined to apply if such challenge succeeds, and the Company will not reimburse the Participant for the amount of any additional taxes, penalties or interest that result.
(c) Forfeiture. The requirement that Participant forfeit an Award, or the benefits received or to be received under an Award, pursuant to any Applicable Law.
22. Unfunded Plan.
Insofar as it provides for Awards, the Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Awardees who are granted Stock Awards under this Plan, any such accounts will be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets which may at any time be represented by Awards, nor shall this Plan be construed as providing for such segregation, nor shall the Company nor the Administrator be deemed to be a trustee of stock or cash to be awarded under the Plan. Any liability of the Company to any Participant with respect to an Award shall be based solely upon any contractual obligations which may be created by the Plan; no such obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company. Neither the Company nor the Administrator shall be required to give any security or bond for the performance of any obligation which may be created by this Plan.
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Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/SGEN Notice of 2020 Annual Meeting of Shareholders Proxy Solicited by Board of Directors for Annual Meeting — May 15, 2020 The undersigned hereby appoints Clay B. Siegall and Jean I. Liu, and each of them, with power to act without resortthe other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to that state’s conflictsrepresent and vote, as provided below, all the shares of laws rules.Seattle Genetics, Inc. Common Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the 2020 Annual Meeting of Shareholders of Seattle Genetics, Inc. (the “Meeting”) to be held on Friday, May 15, 2020 at 11:00 a.m. Pacific Time and or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the Meeting. UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED “FOR” ALL OF THE NOMINEES FOR DIRECTOR LISTED IN PROPOSAL NO. 1, AND “FOR” PROPOSAL NOS. 2, 3 AND 4, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH. IN THEIR DISCRETION, THE PROXIES OF THE UNDERSIGNED ARE AUTHORIZED TO VOTE UPON ANY AND ALL OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING. (Items to be voted appear on reverse side) Proxy - SEATTLE GENETICS, INC. qIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q Change of Address — Please print new address below. Comments — Please print your comments below. C Non-Voting Items Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Shareholders. The material is available at: www.envisionreports.com/SGEN 2020 Annual Meeting of Seattle Genetics, Inc. Shareholders May 15, 2020 at 11:00 A.M. Pacific Time
Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/SGEN Notice of 2020 Annual Meeting of Shareholders Proxy Solicited by Board of Directors for Annual Meeting — May 15, 2020 The undersigned hereby appoints Clay B. Siegall and Jean I. Liu, and each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided below, all the shares of Seattle Genetics, Inc. Common Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the 2020 Annual Meeting of Shareholders of Seattle Genetics, Inc. (the “Meeting”) to be held on Friday, May 15, 2020 at 11:00 a.m. Pacific Time and or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the Meeting. UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED “FOR” ALL OF THE NOMINEES FOR DIRECTOR LISTED IN PROPOSAL NO. 1, AND “FOR” PROPOSAL NOS. 2, 3 AND 4, AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH. IN THEIR DISCRETION, THE PROXIES OF THE UNDERSIGNED ARE AUTHORIZED TO VOTE UPON ANY AND ALL OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING. (Items to be voted appear on reverse side) Proxy - SEATTLE GENETICS, INC. qIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q Change of Address — Please print new address below. Comments — Please print your comments below. C Non-Voting Items Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Shareholders. The material is available at: www.envisionreports.com/SGEN 2020 Annual Meeting of Seattle Genetics, Inc. Shareholders May 15, 2020 at 11:00 A.M. Pacific Time
