SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 14a-12
EXELIXIS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------------
EXELIXIS, INC.
170 Harbor Way
South San Francisco, CA 94080
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 16, 2003
TO THE STOCKHOLDERS OF EXELIXIS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Exelixis,
Inc., a Delaware corporation (the "Company"), will be held on Monday, June 16,
2003 at 8:00 a.m., local time, at the Company's offices located at 170 Harbor
Way, South San Francisco, California 94080 for the following purposes:
1) To elect two Class I directors to hold office until the 2006 Annual
Meeting of Stockholders.
2) To ratify the selection by the Audit Committee of the Board of
Directors of Ernst & Young LLP as independent auditors of the Company
for its fiscal year ending December 31, 2003.
3) To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 21, 2003,
as the record date for the determination of stockholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ Glen Y. Sato
Glen Y. Sato
Secretary
South San Francisco, California
April 28, 2003
- -------------------------------------------------------------------------------
| ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN |
|PERSON. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE |
|COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN |
|ORDER TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING. A RETURN ENVELOPE |
|(WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT|
|PURPOSE. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF |
|YOU ATTEND THE ANNUAL MEETING. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE |
|HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE |
|ANNUAL MEETING, YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR |
|NAME. YOU MAY ALSO BE ABLE TO SUBMIT YOUR PROXY OVER THE INTERNET OR BY |
|TELEPHONE, PLEASE REFER TO THE INFORMATION PROVIDED WITH YOUR PROXY CARD. |
- -------------------------------------------------------------------------------
EXELIXIS, INC.
170 Harbor Way
South San Francisco, CA 94080
-------------
PROXY STATEMENT
FOR THE 2003 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 16, 2003
-------------
QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why am I receiving these materials?
We sent you this proxy statement and the enclosed proxy card because the
Board of Directors of Exelixis, Inc. (sometimes referred to as the "Company" or
"Exelixis") is soliciting your proxy to vote at the 2003 Annual Meeting of
Stockholders. You are invited to attend the Annual Meeting, and Exelixis
requests that you vote on the proposals described in this proxy statement.
However, you do not need to attend the meeting to vote your shares. Instead,
you may simply complete, sign and return the enclosed proxy card.
The Company intends to mail this proxy statement and accompanying proxy
card on or about May 9, 2003 to all stockholders of record entitled to vote at
the Annual Meeting.
Who can vote at the Annual Meeting?
Only stockholders of record at the close of business on April 21, 2003 will
be entitled to vote at the Annual Meeting. On the record date, there were
approximately 59,694,141 shares of common stock outstanding and entitled to
vote.
Stockholder of Record: Shares Registered in Your Name
If on April 21, 2003 your shares were registered directly in your name with
Exelixis' transfer agent, Mellon Investor Services, then you are a stockholder
of record. As a stockholder of record, you may vote in person at the meeting or
vote by proxy. Whether or not you plan to attend the Annual Meeting, Exelixis
urges you to fill out and return the enclosed proxy card.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If on April 21, 2003 your shares were held electronically in an account at
a brokerage firm, bank, dealer or other similar organization, then you are the
beneficial owner of shares held in "street name," and these proxy materials are
being forwarded to you by that organization. The organization holding your
account is considered the stockholder of record for purposes of voting at the
Annual Meeting. As a beneficial owner, you have the right to direct your broker
or other agent on how to vote the shares in your account. You are also invited
to attend the Annual Meeting. However, since you are not the stockholder of
record, you may not vote your shares in person at the meeting unless you request
and obtain a valid proxy from your broker or other agent.
What am I voting on?
There are two matters scheduled for a vote:
- - Election of two Class I directors to hold office until the 2006 Annual
Meeting of Stockholders; and
- - Ratification of the selection by the Audit Committee of the Board of
Directors of Ernst & Young LLP as independent auditors of the Company for
its fiscal year ending December 31, 2003.
How do I vote?
You may either vote "For" all the nominees to the Board of Directors or you
may abstain from voting for any nominee you specify. For any other matter to be
voted on, you may vote "For" or "Against" or abstain from voting. The
procedures for voting are fairly simple:
Stockholder of Record: Shares Registered in Your Name
If you are a stockholder of record, you may vote in person at the Annual
Meeting or vote by proxy using the enclosed proxy card. Whether or not you plan
to attend the meeting, Exelixis urges you to vote by proxy to ensure your vote
is counted. You may still attend the meeting and vote in person if you have
already voted by proxy.
- - To vote in person, come to the Annual Meeting and Exelixis will give you a
ballot when you arrive.
- - To vote using the proxy card, simply complete, sign and date the enclosed
proxy card and return it promptly in the envelope provided. If you return
your signed proxy card to us before the Annual Meeting, Exelixis will vote
your shares as you direct.
Beneficial Owner: Shares Registered in the Name of Broker or Bank
Most beneficial owners whose stock is held in street name receive voting
instruction forms from their banks, brokers or other agents, rather than the
Company's proxy card. A number of brokers and banks are participating in a
program provided through ADP Investor Communication Services that offers the
means to grant proxies to vote shares by means of the telephone and Internet. If
your shares are held in an account with a broker or bank participating in the
ADP Investor Communications Services program, you may grant a proxy to vote
those shares telephonically by calling the telephone number shown on the
instruction form received from your broker or bank, or via the Internet at ADP
Investor Communication Services' web site at (www.proxyvote.com).
Votes submitted via the Internet or by telephone must be received by 3:59
p.m., Eastern Time, on June 13, 2003. Submitting your proxy via the Internet or
by telephone will not affect your right to vote in person should you decide to
attend the Annual Meeting.
------------------------------------------------------------------------------
|The telephone and Internet voting procedures are designed to authenticate |
|stockholders' identities, to allow stockholders to give their voting |
|instructions and to confirm that stockholders' instructions have been recorded|
|properly. Stockholders voting via the Internet should understand that there |
|may be costs associated with electronic access, such as usage charges from |
|Internet access providers and telephone companies, that must be borne by the |
|stockholder. |
------------------------------------------------------------------------------
How many votes do I have?
On each matter to be voted upon, you have one vote for each share of common
stock you own as of April 21, 2003.
What if I return a proxy card but do not make specific choices?
If you return a signed and dated proxy card without marking any voting
selections, your shares will be voted "For" the election of each of the two
nominees for director and "For" the ratification of the selection by the Audit
Committee of the Board of Directors of Ernst & Young LLP as independent auditors
of the Company for its fiscal year ending December 31, 2003. If any other
matter is properly presented at the meeting, your proxy (one of the individuals
named on your proxy card) will vote your shares using his or her best judgment.
Who is paying for this proxy solicitation?
Exelixis will bear the entire cost of soliciting proxies, including the
preparation, assembly, printing and mailing of this proxy statement, the proxy
card and any additional information furnished to stockholders. Copies of
solicitation materials will be furnished to banks, brokerage houses, fiduciaries
and custodians holding in their names shares of the Company's common stock
beneficially owned by others to forward to such beneficial owners. Exelixis may
reimburse persons representing beneficial owners of the Company's common stock
for their costs of forwarding solicitation materials to such beneficial owners.
Original solicitation of proxies by mail may be supplemented by telephone,
telegram or personal solicitation by directors, officers or other regular
employees of the Company. No additional compensation will be paid to directors,
officers or other regular employees for such services.
What does it mean if I receive more than one proxy card?
If you receive more than one proxy card, your shares are registered in more
than one name or are registered in different accounts. Please complete, sign
and return EACH proxy card to ensure that all of your shares are voted.
Can I change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the final vote at the
meeting. You may revoke your proxy in any one of three ways:
- - Your proxy may be revoked by filing with the secretary of the Company at
the Company's principal executive office, 170 Harbor Way, South San
Francisco, California 94080, either (1) a written notice of revocation or
(2) a duly executed proxy bearing a later date.
- - Your proxy may also be revoked by attending the Annual Meeting and voting
in person. Attendance at the Annual Meeting will not, by itself, revoke
your proxy.
When are stockholder proposals due for next year's Annual Meeting?
To be considered for inclusion in next year's proxy materials, your
proposal must be submitted in writing by January 9, 2004 to the secretary of the
Company at Exelixis, Inc., 170 Harbor Way, South San Francisco, California
94080. If you wish to submit a proposal that is not to be included in next
year's proxy materials, you must submit your proposal in writing, in the manner
set forth in the Company's bylaws, to the secretary of the Company at Exelixis,
Inc., 170 Harbor Way, South San Francisco, California 94080, not earlier than
the close of business on March 18, 2004, nor later than the close of business on
April 17, 2004.
How are votes counted?
Votes will be counted by the inspector of election appointed for the Annual
Meeting, who will separately count "For" and (with respect to proposals other
than the election of directors) "Against" votes, abstentions and broker
non-votes. A "broker non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power with respect to that proposal and has not
received instructions with respect to that proposal from the beneficial owner
(despite voting on at least one other proposal for which it does have
discretionary authority or for which it has received instructions.) Abstentions
will be counted towards the vote total for each proposal, and will have the same
effect as "Against" votes. Broker non-votes have no effect and will not be
counted towards the vote total for any proposal.
How many votes are needed to approve each proposal?
- - For the election of directors, the two Class I nominees receiving the most
"For" votes (among votes properly cast in person or by proxy) will be
elected. Broker non-votes will have no effect.
- - To be approved, Proposal No. 2, ratifying the selection by the Audit
Committee of the Board of Directors of Ernst & Young LLP as independent
auditors for the Company for its fiscal year ending December 31, 2003, must
receive a "For" vote from the majority of shares present and entitled to
vote either in person or by proxy. If you "Abstain" from voting, it will
have the same effect as an "Against" vote. Broker non-votes will have no
effect.
What is the quorum requirement?
A quorum of stockholders is necessary to hold a valid meeting. A quorum
will be present if at least a majority of the outstanding shares are represented
by votes at the meeting or by proxy. On the record date, there were
approximately 59,694,141 shares outstanding and entitled to vote. Thus
29,847,072 shares must be represented by votes at the meeting or by proxy to
have a quorum.
Your shares will be counted towards the quorum only if you submit a valid
proxy vote or vote at the meeting. Abstentions and broker non-votes will be
counted towards the quorum requirement. If there is no quorum, either the
chairman of the meeting or a majority of the votes present at the meeting may
adjourn the meeting to another date.
How can I find out the results of the voting at the Annual Meeting?
Preliminary voting results will be announced at the Annual Meeting. Final
voting results will be published in the Company's quarterly report on Form 10-Q
for the second quarter of 2003.
PROPOSAL 1
ELECTION OF CLASS I DIRECTORS
Our amended and restated certificate of incorporation and bylaws provide
that the Board of Directors shall be divided into three classes, each class
consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Vacancies on the Board of
Directors may be filled only by persons elected by a majority of the remaining
directors. A director elected by the Board of Directors to fill a vacancy
(including a vacancy created by an increase in the number of directors) shall
serve for the remainder of the full term of the class of directors in which the
vacancy occurred and until such director's successor is elected and qualified.
Our Board of Directors is presently composed of nine members. There are two
directors in Class I, the class whose term of office expires in 2003. Each of
the nominees for election to this class is currently a director of the Company.
If elected at the Annual Meeting, each of the nominees would serve until the
2006 Annual Meeting of stockholders and until his successor is elected and has
qualified, or until such director's earlier death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the Annual Meeting. Shares
represented by executed proxies will be voted, if authority to do so is not
withheld, for the election of the two nominees named below. In the event that
any nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose. Each person nominated for election has agreed
to serve if elected, and management has no reason to believe that any nominee
will be unable to serve.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
CLASS I NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2006 ANNUAL
MEETING
Charles Cohen, Ph.D., age 52, has been a director since November 1995. Dr.
Cohen is currently the Chairman, Supervisory Board of CellZome GmbH, a
post-genomics biopharmaceutical company. From July 2000 to August 2002, Dr.
Cohen was the Chief Executive Officer of CellZome GmbH. Before this, Dr. Cohen
co-founded Creative BioMolecules, Inc., a biotechnology company, in 1982 and was
a director and its Chief Scientific Officer. In July 2000, Creative
BioMolecules, Inc. merged with Ontogeny, Inc. and Reprogenesis, Inc. and formed
Curis, Inc. Dr. Cohen serves on the Board of Directors of several private
companies. Dr. Cohen holds a B.A. from State University of New York at Buffalo
and a Ph.D. in Basic Medical Sciences from New York University School of
Medicine.
Geoffrey Duyk, M.D., Ph.D., age 44, has been a director since April 1998
and has served as our President of Research and Development since January 2003.
Prior to that time, he served as our Executive Vice President and Chief
Scientific Officer from April 1997 to December 2002. From 1994 to 1997, Dr.
Duyk served at Millennium Pharmaceuticals, Inc., a genomics company, most
recently as Vice President of Genomics. From 1992 to 1994, Dr. Duyk was an
Assistant Professor in the Department of Genetics at Harvard Medical School and
an Assistant Investigator of the Howard Hughes Medical Institute. While at
Harvard Medical School, Dr. Duyk was a co-principal investigator in the
NIH-funded Cooperative Human Linkage Center. Dr. Duyk is a member of the Board
of Directors of two private companies. Dr. Duyk holds a Ph.D. and an M.D. from
Case Western Reserve University and completed his residency and post-doctoral
training at University of California, San Francisco.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
CLASS II DIRECTORS CONTINUING IN OFFICE UNTIL THE 2004 ANNUAL MEETING
Jason S. Fisherman, M.D., age 46, has been a director since March 1996.
Dr. Fisherman is a managing director of Advent International Corporation, a
global private equity and venture capital investment firm, which he joined in
1994. From 1991 to 1994, Dr. Fisherman served as Senior Director of Medical
Research at Enzon, Inc., a biopharmaceutical company. Dr. Fisherman serves on
the Board of Directors of Crucell N.V., ILEX Oncology, Inc., Oridon Systems Ltd.
and several private companies. Dr. Fisherman holds a B.A. in Molecular
Biophysics and Biochemistry from Yale University, an M.D. from the University of
Pennsylvania and an M.B.A. from the Wharton Graduate School of Business.
Jean-Francois Formela, M.D., age 46, has been a director since September
1995. Dr. Formela has been a principal of Atlas Venture, a venture capital
firm, since 1993. From 1989 to 1993, Dr. Formela served at Schering-Plough
Corporation, most recently as Senior Director, Medical Marketing and Scientific
Affairs, where he had biotechnology licensing and marketing responsibilities.
Dr. Formela serves on the Board of Directors of DeCode Genetics, Inc., Nuvelo,
Inc. and several private companies. Dr. Formela holds an M.D. from Paris
University School of Medicine and an M.B.A. from Columbia Business School.
Vincent T. Marchesi, M.D., Ph.D., age 67, has been a director since May
2001. Since 1973, Dr. Marchesi has been a Professor of Pathology and Cell
Biology at Yale University and since 1991, has been the Director of the Boyer
Center for Molecular Medicine at Yale University. Dr. Marchesi is also
Editor-in-Chief at the Federation of American Societies for Experimental Biology
Journal. In 1982, Dr. Marchesi co-founded Molecular Diagnostics, Inc., a
diagnostic development company. Dr. Marchesi was formerly Chair of Pathology at
the Yale-New Haven Hospital. Dr. Marchesi holds an M.D. from Yale University
and a Ph.D. from Oxford University.
CLASS III DIRECTORS CONTINUING IN OFFICE UNTIL THE 2005 ANNUAL MEETING
Stelios Papadopoulos, Ph.D., age 54, has been a director since December
1994 and the Chairman of the Board since January 1998. Dr. Papadopoulos has
been an investment banker at SG Cowen Securities Corporation since February
2000. Before this, Dr. Papadopoulos was an investment banker at UBS PaineWebber
from April 1987 to February 2000, and Chairman of PaineWebber Development Corp.,
a UBS PaineWebber subsidiary, from June 1998 to February 2000. Dr. Papadopoulos
is a member of the Board of Directors of Diacrin, Inc. and several private
companies. Dr. Papadopoulos holds a Ph.D. in Biophysics and an M.B.A. in
Finance, both from New York University.
George A. Scangos, Ph.D., age 54, has served as a director and as our
President and Chief Executive Officer since October 1996. From September 1993
to October 1996, Dr. Scangos served as President of Biotechnology at Bayer
Corporation, a pharmaceutical company, and was responsible for research,
business and process development, manufacturing, engineering and quality
assurance. Dr. Scangos is a member of the Board of Directors of Onyx
Pharmaceuticals, Inc. and a private company. Dr. Scangos was a Post-Doctoral
Fellow at Yale University and a faculty member at the Johns Hopkins University.
Dr. Scangos currently holds an appointment as Adjunct Professor of Biology at
Johns Hopkins University. Dr. Scangos holds a B.A. in Biology from Cornell
University and a Ph.D. in Microbiology from the University of Massachusetts.
Peter Stadler, Ph.D., age 57, has been a director since April 1998. Dr.
Stadler has been Managing Director of Artemis Pharmaceuticals GmbH, a
wholly-owned subsidiary of the Company, since May 2001. From 1998 to 2001, Dr.
Stadler was President and Chief Executive Officer of Artemis Pharmaceuticals
GmbH, a biotechnology company. From 1987 to 1997, Dr. Stadler was head of
pharma-biotechnology at Bayer AG, a pharmaceutical company. From 1986 to 1987,
Dr. Stadler served as a visiting scientist at the University of Munster, Germany
and the Massachusetts Institute of Technology in the area of biotechnology. Dr.
Stadler holds a Ph.D. in Organic Chemistry and Biochemistry from the University
of Hamburg.
Lance Willsey, M.D., age 41, has been a director since April 1997. Dr.
Willsey has been a Founding Partner of DCF Capital, a hedge fund focused on
investing in the life sciences, since July 1998. From July 1997 to July 1998,
Dr. Willsey served on the Staff Department of Urologic Oncology at the Dana
Farber Cancer Institute at Harvard University School of Medicine. From July
1996 to July 1997, Dr. Willsey served on the Staff Department of Urology at
Massachusetts General Hospital at Harvard University School of Medicine, where
he was a urology resident from July 1992 to July 1996. Dr. Willsey holds a B.S.
in Physiology from Michigan State University and an M.S. in Biology and an M.D.,
both from Wayne State University.
BOARD COMMITTEES AND MEETINGS
During the year ended December 31, 2002, our Board of Directors held four
meetings and acted by written consent three times. Our Board of Directors has
an Audit Committee and a Compensation Committee.
The Audit Committee of the Board of Directors oversees the Company's
corporate accounting and financial reporting process. For this purpose, the
Audit Committee performs several functions. The Audit Committee evaluates the
performance of and assesses the qualifications of the independent auditors;
determines on behalf of the Board of Directors the engagement of the independent
auditors; determines on behalf of the Board of Directors whether to retain or
terminate the existing independent auditors or to appoint and engage new
independent auditors; reviews and approves the engagement of the independent
auditors to perform any proposed permissible services; monitors the rotation of
partners of the independent auditors on the Company engagement team as required
by law; reviews the financial statements to be included in the Company's Annual
Report on Form 10-K; and discusses with management and the independent auditors
the results of the annual audit and the results of the Company's quarterly
financial statements.
The Audit Committee was established in January 2000 in connection with our
initial public offering. The Audit Committee is currently composed of three
non-employee directors: Drs. Fisherman, Formela and Willsey. The Audit Committee
met four times during the year ended December 31, 2002. All members of the Audit
Committee are independent (as independence is currently defined by the rules of
the National Association of Securities Dealers). The Audit Committee has adopted
a written Audit Committee Charter that is attached as Appendix A to these proxy
materials.
The Compensation Committee of the Board of Directors was established in
January 2000 in connection with our initial public offering and reviews and
recommends to the Board of Directors the compensation and benefits of all of our
officers, establishes and reviews general policies relating to compensation and
benefits of our employees that also include executive officers and performs such
other functions regarding compensation as the Board of Directors may delegate.
The Compensation Committee also administers the issuance of stock options and
other awards under our stock plans. The Compensation Committee is currently
composed of three non-employee directors: Drs. Cohen, Marchesi and Formela. The
Compensation Committee met two times during the year ended December 31, 2002.
All members of the Compensation Committee are independent (as independence is
currently defined by the rules of the National Association of Securities
Dealers).
During the year ended December 31, 2002, all of our directors attended at
least 75% or more of the total meetings of the Board of Directors and of the
committees on which they served, held during the period for which they were a
director or committee member, respectively.
REPORT OF THE AUDIT COMMITTEE(1)
The Audit Committee of the Board of Directors of Exelixis serves as the
representative of the Board of Directors for (a) general oversight of the
financial reporting process of the Company, (b) monitoring the integrity of the
Company's financial statements, (c) compliance with legal and regulatory
requirements related to the preparation and external audit of the Company's
financial statements and (d) selection, evaluation and retention of the
Company's independent auditors. Each of the members of the Audit Committee is
independent as defined under the Audit Committee Policies of the Nasdaq National
Market.
The Audit Committee maintains a written charter that outlines its
responsibilities. Exelixis management has primary responsibility for preparing
the Company's consolidated financial statements and establishing the financial
reporting process. Ernst & Young LLP, the Company's independent auditors, are
responsible for performing an audit of the Company's consolidated financial
statements and expressing an opinion as to the conformity of such financial
statements with generally accepted accounting principles in the Unites States.
The Audit Committee's responsibility is to oversee and review this process.
Based on this background, the Audit Committee reports as follows:
1. We have reviewed and discussed the Company's audited consolidated
financial statements as of and for the year ended December 31, 2002 with
management and the independent auditors. We have also discussed with management
and the independent auditors the process used to support the certifications of
the Chief Executive Officer and Chief Financial Officer that are required by the
Sarbanes-Oxley Act of 2002 and the Securities and Exchange Commission ("SEC")
that are required to accompany the Company's periodic filings with the SEC.
2. We have discussed with the independent auditors the matters required to
be discussed under generally accepted auditing standards in the United States,
including those matters set forth in Statement of Auditing Standards No. 61, as
amended, "Communication with Audit Committees" (Codification of Statements on
Auditing Standards, AU Section 380).
3. We have received and reviewed the written disclosures and letter from
the independent auditors required by Independence Standards Board Standard No.
1, Independence Discussions with Audit Committees, and have discussed with the
independent auditors their independence from the Company. We have also
considered whether the independent auditors' provision of non-audit services to
the Corporation is compatible with maintaining the auditors' independence. We
have concluded that the independent auditors are independent from the Company
and its management.
4. Based on review and discussion of the matters set forth in paragraphs
(1) through (3) above, we have recommended to the Board of Directors (and the
Board of Directors approved) that the audited consolidated financial statements
referred to above be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2002 for filing with the SEC.
We have also selected Ernst & Young LLP as the Company's independent
auditors for the fiscal year ended December 31, 2003 and have presented our
selection to the Board of Directors to present to the stockholders for
ratification.
The undersigned members of the Audit Committee have submitted this Audit
Committee Report as of this 31st day of March 2003.
Jason Fisherman
Jean-Francois Formela
Lance Willsey
- -------------------
(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 into any filing
of the Company under the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act of 1934, as amended (the "Exchange Act"), whether
made before or after the date hereof and irrespective of any general
incorporation by reference language contained in such filing.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has selected Ernst & Young
LLP as the Company's independent auditors for the fiscal year ending December
31, 2003 and has further directed that management submit the selection of
independent auditors for ratification by the stockholders at the Annual Meeting.
Ernst & Young LLP has audited the Company's financial statements for the years
ended December 31, 2002 and 2001, respectively. PricewaterhouseCoopers LLP had
audited the Company's financial statements from the Company's inception through
the year ended December 31, 2000. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting. They will have an opportunity to
make a statement if they so desire and will be available to respond to
appropriate questions.
Neither the Company's bylaws nor other governing documents or law require
stockholder ratification of the selection of Ernst & Young LLP as the Company's
independent auditors. However, the Board of Directors is submitting the
selection of Ernst & Young LLP to the stockholders for ratification as a matter
of good corporate practice. If the stockholders fail to ratify the selection,
the Audit Committee of the Board of Directors will reconsider whether or not to
retain that firm. Even if the selection is ratified, the Audit Committee of the
Board of Directors in its discretion may direct the appointment of different
independent auditors at any time during the year if it determines that such a
change would be in the best interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Ernst & Young LLP. Abstentions will be
counted toward the tabulation of votes cast on proposals presented to the
stockholders and will have the same effect as negative votes. Broker non-votes
are counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved.
AUDITORS' FEES
(1) "Audit fees" include fees for services necessary to perform the audit
of our financial statements for fiscal year 2002 and 2001, statutory audits,
attest services and consents and assistance with, and review of, documents filed
with the SEC.
(2) "Audit-related fees" include audit-related consultation and
consultation concerning financial accounting and reporting standards.
(3) "Tax fees" can include all services performed by professional staff of
the auditor's tax division, including fees for tax compliance, tax and planning
and tax advice. There were no such fees incurred in either of the last two
fiscal years.
The aggregate fees billed by Ernst & Young LLP for the last two fiscal
years for the services described above are as follows:
Year Ended December 31,
--------------------------
2002 2001
------------ ------------
Audit fees $ 175,677 $ 107,861
Audit-related fees 18,260 -
Tax fees - -
------------ ------------
$ 193,937 $ 107,861
============ ============
The Audit Committee did not pre-approve any fees associated with financial
systems consulting and accordingly, no such fees were incurred by the Company.
PRE-APPROVAL OF SERVICES
The Audit Committee of the Board of Directors approved the following audit
and non-audit services to be performed by Ernst & Young LLP, the Company's
external auditor. Non-audit services are defined as services other than those
provided in connection with an audit or a review of the financial statements of
the Company. The Audit Committee has approved engagements of Ernst & Young LLP
for the following services: (1) audit of the Company's Consolidated Financial
Statements and related review of the Proxy and Form 10-K; (2) review of the
Company's 2003 quarterly consolidated financial statements and the related SEC
filings; (3) 2002 German Statutory Audits; (4) review of the Company's 2003
Registration Statement, if any, (5) 2003 Accounting Consultations, if any, and
(6) 2003 Tax Consultations, if any. There are no de minimus exceptions for
Exelixis.
The Audit Committee has determined that the rendering of the tax services
and all other non-audit services by Ernst & Young LLP is compatible with
maintaining the auditor's independence.
During the fiscal year ended December 31, 2002, no hours expended on the
Company's financial audit by Ernst & Young LLP were provided by persons other
than Ernst & Young LLP's full-time permanent employees.
CHANGE IN INDEPENDENT AUDITORS
On December 14, 2001, the Company dismissed PricewaterhouseCoopers LLP as
the independent auditors of the Company and appointed Ernst & Young LLP as its
independent auditors. The decision to change independent auditors was approved
by the Audit Committee under authority granted by the Board of Directors of the
Company.
The independent auditors' report on the Company's financial statements for
the fiscal year ended December 31, 2000 did not contain an adverse opinion or
disclaimer of opinion, nor was the report qualified or modified as to
uncertainty, audit scope or accounting principles. In connection with the
Company's audits for the fiscal years ended December 31, 2000 and 1999, and in
the subsequent interim period prior to PricewaterhouseCoopers LLP's dismissal on
December 14, 2001, there were no disagreements between the Company and
PricewaterhouseCoopers LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers
LLP, would have caused PricewaterhouseCoopers LLP to make reference thereto in
their reports on the financial statements for such years. PricewaterhouseCoopers
LLP's letter to the SEC stating its agreement with the statements made herein is
filed as an exhibit to the Company's Current Report on Form 8-K filed with the
SEC on December 20, 2001.
During the fiscal year ended December 31, 2000 and through December 14,
2001, the Company did not consult with Ernst & Young LLP regarding the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides certain information as of December 31, 2002 with
respect to all of the Company's equity compensation plans in effect as of
December 31, 2002:
Number of Weighted-
securities to be average Number of securities
issued upon exercise price remaining available
exercise of of outstanding future issuance under
outstanding options, equity compensation plans
options, warrants warrants and (excluding securities
Plan Category and rights rights reflected in column (a))
- ----------------------------------- ------------------ --------------- --------------------------
(a)
Equity compensation plans approved
by stockholders:
2000 Equity Incentive Plan (1) 8,408,577 $15.46 259,507
2000 Non-Employee Directors
Stock Option Plan (2) 290,000 17.09 1,043,181
2000 Employee Stock Purchase
Plan (3) - - 430,948
1994 & 1997 Equity Incentive Plan (4) 797,627 5.35 -
Equity compensation plans not
approved by stockholders:
None - - -
------------------ --------------------------
Total 9,496,204 14.66 1,733,636
================== ==========================
The above equity compensation plans of the Company were adopted with the
approval of the Company's security holders.
- -------------------
(1) In January 2000, the Company adopted the 2000 Equity Incentive Plan ("2000
Plan") to replace the 1997 Plan. A total of 3,000,000 shares of Exelixis common
stock were initially authorized for issuance under the 2000 Plan. On the last
day of each year for ten years, starting in 2000, the share reserve will
automatically be increased by a number of shares equal to the greater of: 5% of
the Company's outstanding shares on a fully-diluted basis; or that number of
shares subject to stock awards granted under the 2000 Plan during the prior
12-month period.
(2) In January 2000, the Company adopted the 2000 Non-Employees Directors' Stock
Option Plan ("Director Plan"). The Director Plan provides for the automatic
grant of options to purchase shares of common stock to non-employee directors. A
total of 500,000 shares of the Company's common stock were initially authorized
for issuance under the Director Plan. On the last day of each year for ten
years, starting in 2000, the share reserve will automatically be increased by a
number of shares equal to the greater of: 0.75% of the Company's outstanding
shares on a fully-diluted basis; or that number of shares subject to options
granted under the Director Plan during the prior 12-month period.
(3) In January 2000, the Company adopted the 2000 Employee Stock Purchase Plan
(the "ESPP"). The ESPP allows for qualified employees (as defined in the ESPP)
to purchase shares of the Company's common stock at a price equal to the lower
of 85% of the closing price at the beginning of the offering period or 85% of
the closing price at the end of each purchase period. A total of 300,000 shares
of common stock were initially authorized for issuance under the ESPP. On the
last day of each year for ten years, starting in 2000, the share reserve will
automatically be increased by a number of shares equal to the greater of: 0.75%
of the Company's outstanding shares on a fully-diluted basis; or that number of
shares subject to stock awards granted under the plan during the prior 12-month
period.
(4) In January 1995, the Company adopted the 1994 Employee, Director and
Consultant Stock Option Plan ("1994 Plan"). The 1994 Plan provides for the
issuance of incentive stock options, non-qualified stock options and stock
purchase rights to key employees, directors, consultants and members of the
Scientific Advisory Board. In September 1997, the Company adopted the 1997
Equity Incentive Plan ("1997 Plan"). The 1997 Plan amends and supercedes the
1994 Plan. This Plan was replaced by the 2000 Plan and no further options will
be issued.
In connection with the acquisition of Agritope in December 2000, the Company
assumed all the options granted and outstanding to consultants and employees
under the Agritope, Inc. 1997 Stock Award Plan. Each outstanding Agritope stock
option was converted into the right to purchase the number of shares of the
Company's common stock as determined using the applicable exchange ratio of
0.35. All other terms and conditions of the Agritope stock options did not
change and such options will operate in accordance with their terms.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's common stock as of March 31, 2003 by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table; (iii) all executive officers and directors of the Company as
a group; and (iv) all those known by the Company to be beneficial owners of more
than five percent of its common stock.
Beneficial Ownership
--------------------------------------
Beneficial Owner Number of Shares Percent of Total
- ------------------------------------------------ -------------------- ----------------
George A. Scangos, Ph.D. (1) 2,864,461 4.80
Geoffrey Duyk, M.D., Ph.D. (2) 2,068,749 3.47
Pamela A. Simonton (3) 182,500 *
Jeffrey R. Latts, M.D. (4) 265,000 *
Stelios Papadopoulos, Ph.D. (5) 692,277 1.16
Charles Cohen, Ph.D. (6) 382,857 *
Jason S. Fisherman, M.D. (7) 1,635,768 2.74
Jean-Francois Formela, M.D. (8) 2,445,919 4.10
Vincent T. Marchesi, M.D., Ph.D (9) 40,000 *
Peter Stadler, Ph.D. (10) 263,958 *
Lance Willsey, M.D. (6) 77,500 *
5% Stockholders
T. Rowe Price (11)
100 E Pratt Street 5,150,080 8.63
Baltimore, MD 21202
FMR Corp. (11)
82 Devonshire Street 3,405,000 5.71
Boston, MA 02109
Wellington Management Company LLP (11)
75 State Street 4,076,765 6.83
Boston, MA 02109
All directors and executive officers as a group 12,574,556 21.08
(20 persons) (12)
- -------------------
* Less than one percent.
1. Includes 90,909 shares held by George A. Scangos, Trustee of The Leslie S.
Wilson Grantor Annuity Trust, 4,875 shares held by George A. Scangos and
Leslie S. Wilson, as Trustees of The Jennifer Wilson Scangos Trust and
4,875 shares held by George A. Scangos and Leslie S. Wilson, as Trustees of
The Katherine Wilson Scangos Trust. Includes 1,000,000 shares Dr. Scangos
has the right to acquire pursuant to an option exercisable within 60 days
of March 31, 2003, 730,209 of which would be subject to repurchase by
Exelixis, if so exercised, and 32,813 shares Exelixis has the right to
repurchase within 60 days of March 31, 2003.
2. Includes 17,137 shares held by Geoffrey M. Duyk and Ulrike Barbara Wolter,
Trustees of The Duyk 2000 Irrevocable Trust dated 2/21/00, 4,275 shares
held by Geoffrey M. Duyk and Ulrike Barbara Wolter, Trustees of The Charles
Duyk Trust dated 2/21/00, 22,500 shares held by Ulrike Barbara Wolter,
Trustee of The Geoffrey M. Duyk Irrevocable Trust dated 2/21/00 and 75,000
shares held by Geoffrey M. Duyk, Trustee of The Geoffrey M. Duyk Annuity
Trust dated 2/21/00. Also includes 1,018,750 shares Dr. Duyk has the right
to acquire pursuant to an option exercisable within 60 days of March 31,
2003, 644,793 of which would be subject to repurchase by Exelixis, if so
exercised, and 21,875 shares Exelixis has the right to repurchase within 60
days of March 31, 2003.
3. Consists of 182,500 shares Pamela A. Simonton has the right to acquire
pursuant to an option exercisable within 60 days of March 31, 2003, 96,825
of which would be subject to repurchase by Exelixis, if so exercised.
4. Consists of 265,000 shares Jeffrey R. Latts has the right to acquire
pursuant to an option exercisable within 60 days of March 31, 2003, 197,084
of which would be subject to repurchase by Exelixis, if so exercised.
5. Includes 10,000 shares held by Fondation Sante, of which Dr. Papadopoulos
is co-trustee. Also includes 40,000 shares Dr. Papadopoulos has the right
to acquire pursuant to an option exercisable within 60 days of March 31,
2003, 5,730 of which would be subject to repurchase by Exelixis, if so
exercised.
6. Consists of 40,000 shares Drs. Cohen and Willsey each has the right to
acquire pursuant to an option exercisable within 60 days of March 31, 2003,
5,730 of which would be subject to repurchase by Exelixis, if so exercised.
7. Includes 1,098,271 shares held by Rovent II L.P., 274,720 shares held by
Advent Performance Materials, L.P., 157,160 shares held by Adwest L.P.,
62,219 shares held by Advent Partners L.P. and 3,398 shares held by Advent
International Investors II, L.P. Advent International Corporation, the
venture capital firm that is the manager of the funds affiliated with
Advent International Group, exercises sole voting and investment power with
respect to all shares held by these funds. Dr. Fisherman is a partner of
Advent International Corporation and disclaims beneficial ownership of
these shares except for 16,449 shares that are indirectly beneficially
owned by Dr. Fisherman. Advent International Corporation is located at 75
State Street, Boston, MA 02109. Also includes 40,000 shares Dr. Fisherman
has the right to acquire pursuant to an option exercisable within 60 days
of March 31, 2003, 5,730 of which would be subject to repurchase by
Exelixis, if so exercised.
8. Consists of 2,325,398 shares held by Atlas Venture Fund II, L.P., 1,105,470
shares held by Atlas Venture Europe Fund B.V. and 54,051 shares held by
Atlas Venture Germany B.V. Atlas Venture Fund II, L.P., Atlas Venture
Europe Fund B.V. and Atlas Venture Germany B.V. are part of the Atlas
Venture, a group of funds under common control. Dr. Formela is a general
partner of Atlas Venture. No general partner of Atlas Venture is deemed to
have voting and investment power with respect to such shares, and Dr.
Formela disclaims beneficial ownership of these shares. Atlas Venture is
located at 222 Berkeley Street, Suite 1950, Boston, MA 02116. Also includes
40,000 shares Dr. Formela has the right to acquire pursuant to an option
exercisable within 60 days of March 31, 2003, 5,730 of which would be
subject to repurchase by Exelixis, if so exercised.
9. Consists of 30,000 shares Dr. Marchesi has the right to acquire pursuant to
an option exercisable within 60 days of March 31, 2003, 12,501 of which
would be subject to repurchase by Exelixis, if so exercised.
10. Consists of 117,500 shares Dr. Stadler has the right to acquire pursuant to
an option exercisable within 60 days of March 31, 2003, 5,730 of which
would be subject to repurchase by Exelixis, if so exercised.
11. As reported in SEC filings.
12. Total number of shares includes 12,574,556 shares of Exelixis common stock
held by entities affiliated with directors and executive officers,
3,922,765 shares issuable upon the exercise of options and warrants within
60 days of March 31, 2003, 2,453,368 of which would be subject to
repurchase by Exelixis, if so exercised, and 100,627 shares that Exelixis
has the right to repurchase within 60 days of March 31, 2003. See footnotes
1 through 11 above.
EXECUTIVE OFFICERS OF THE COMPANY
The following chart sets forth certain information regarding the executive
officers of the Company:
Name Age Position
- ----- --- ---------
George A. Scangos, Ph.D. (1) 54 President, Chief Executive Officer and Director
Geoffrey Duyk, M.D., Ph.D. (1) 44 President, Research and Development and Director
Glen Y. Sato 44 Senior Vice President, Chief Financial Officer, General Counsel and Secretary
Gregory D. Plowman, M.D., Ph.D. 46 Senior Vice President of Pharmaceutical Research
Jane M. Green, Ph.D. 51 Vice President of Corporate Communications
Jeffrey R. Latts, M.D. 55 Chief Medical Officer and Senior Vice President for Clinical Development
Michael M. Morrissey, Ph.D. 42 Senior Vice President of Discovery Research
Robert M. Myers (2) 39 Executive Vice President of Pharmaceuticals
Pamela A. Simonton 53 Vice President of Corporate Technology Development
John M. Nuss, Ph.D. 44 Vice President of Chemistry
Behrooz Najafi 43 Vice President of Corporate Services
D. Ry Wagner, Ph.D. 46 Vice President of Plant Genetics and Biotechnology
- ------------------------
(1) Please see "Proposal 1 - Election of Class I Directors" in this Proxy
Statement for information about this executive officer and director.
(2) Mr. Myers resigned effective March 31, 2003.
Glen Y. Sato has served as Senior Vice President, Chief Financial Officer,
General Counsel and Secretary since January 2003. From November 1999 to December
2002, Mr. Sato served as Chief Financial Officer, Vice President of Legal
Affairs and Secretary. From April 1999 to November 1999, Mr. Sato served as Vice
President, Legal and General Counsel for Protein Design Labs, Inc., a
biotechnology company, where he previously served as the Associate General
Counsel and Director of Corporate Planning from July 1993 to April 1999. Mr.
Sato holds a B.A. from Wesleyan University and a J.D. and M.B.A. from the
University of California, Los Angeles.
Gregory D. Plowman, M.D., Ph.D., has served as Senior Vice President of
Pharmaceutical Research since January 2003. From October 2000 to December 2002,
Dr. Plowman served as Vice President of Pharmaceutical Research. From December
1997 to September 2000, Dr. Plowman served as Vice President of Molecular
Biology at SUGEN, Inc., a Pharmacia Corporation company. From January 1994 to
December 1997, Dr. Plowman served as Director and Senior Director of Molecular
Biology at SUGEN. At SUGEN, Dr. Plowman was responsible for the identification
and validation of therapeutic targets in oncology, angiogenesis and metabolic
disease, with a particular focus on protein kinases and phosphatases. From
January 1988 to December 1993, Dr. Plowman served in various positions at
Bristol-Myers Squibb, a pharmaceutical company, the last year of which he was
Senior Principal Scientist, Oncology Drug Discovery. Dr. Plowman has previous
experience with Oncogen and The Fred Hutchinson Cancer Research Center in
Seattle. Dr. Plowman has authored numerous articles in the cancer field and is
an inventor on nine issued U.S. patents. Dr. Plowman holds a Ph.D. in Pathology
and an M.D., both from the University of Washington.
Jane M. Green, Ph.D., has served as Vice President of Corporate
Communications since January 2002. From June 1999 to December 2001, Dr. Green
served as Senior Director, Corporate Communications at Caliper Technologies
Corp., a life sciences tools company. At Caliper, Dr. Green was responsible for
all external and internal communications programs. From September 1994 to May
1999, Dr. Green directed corporate communications and investor relations for
Isis Pharmaceuticals, Inc., a biotechnology company. Before this time, Dr. Green
held various positions with Rhone-Poulenc Rorer (now Aventis). Dr. Green holds a
B.A. in English from the University of Pennsylvania and a Ph.D. in English
Literature from the State University of New York at Buffalo.
Jeffrey R. Latts, M.D., has served as Chief Medical Officer and Senior Vice
President of Clinical Development since July 2001. From 1995 to June 2001, Dr.
Latts served as Vice President of Clinical Research and Development and
Corporate Chief Medical Officer at Berlex Laboratories, a pharmaceutical
healthcare company. At Berlex, Dr. Latts was responsible for U.S. clinical
development operations and oversaw the efforts of a 120-member staff. Prior to
Berlex, Dr. Latts served as Vice President of Clinical Research at Wyeth Ayerst,
a pharmaceutical company. He began his career in the pharmaceutical industry
with Parke-Davis GmbH. In his 20 years in the industry, Dr. Latts has been
involved in numerous IND submissions and has successfully initiated early to
late stage clinical trials for multiple disease areas, including cancer,
immunology, central nervous system and metabolic diseases. He holds an M.D. from
the University of Minnesota.
Michael M. Morrissey, Ph.D., has served as Senior Vice President of
Discovery Research since January 2003. Previously he served as Vice President of
Discovery Research from February 2000 through December 2002. Previously with
Berlex Biosciences, a pharmaceutical company, since 1991, Dr. Morrissey held
various positions, including Vice President of Discovery Research, Director of
Pharmaceutical Discovery and Unit Head of Medicinal Chemistry. Dr. Morrissey
received his Ph.D. in Chemistry from Harvard University and his B.S. Honors in
Chemistry from the University of Wisconsin.
Robert M. Myers served as Executive Vice President, Pharmaceuticals from
January 2002 through March 2003. Mr. Myers has over ten years of experience in
the biopharmaceutical industry. He joined Exelixis from ALZA Corporation, a
pharmaceutical company, where he held various positions of increasing
responsibility from 1992 to 2002, most recently, Senior Vice President,
Commercial Development. In this position, he oversaw the company's commercial
development activities, including strategic and corporate planning, new product
planning, mergers and acquisitions and licensing. Mr. Myers holds an M.B.A. from
the Stanford Graduate School of Business and a B.S. and an M.S. in Engineering
from Stanford University.
Pamela A. Simonton has served as Vice President of Corporate Technology
Development since April 2000. From July 1996 to April 2000, Ms. Simonton served
as Vice President, Licensing and Acquisitions for Bayer Corporation's
Pharmaceutical Division. From September 1994 to July 1996, Ms. Simonton served
as Vice President of Patents and Licensing for Bayer's Pharmaceutical Division,
North America. Ms. Simonton holds a B.S. in Chemistry from Barry College, an
M.S. in Physics from Miami University, a J.D. from Nova University and an L.L.M.
in Patent and Trade Regulation from George Washington University.
John M. Nuss, Ph.D., has served as Vice President of Chemistry since
September 2002. From April 2000 to September 2002, Dr. Nuss served as Senior
Director, Chemistry at Exelixis. From April 1994 to April 2000, Dr. Nuss was
Director of Chemistry at Chiron Corporation, a biotechnology company. He was on
the faculty of the University of California, Riverside from 1988 to 1994. From
1986 to 1988, Dr. Nuss served as a National Institutes of Health post-doctoral
fellow at Stanford University. Dr. Nuss holds a B.S. in Chemistry from the
University of Kansas and a Ph.D. in Chemistry from the University of Wisconsin,
Madison.
Behrooz Najafi, has served as Vice President of Corporate Services since
January 2003 and in his current position, he is responsible for leading all
global information technology functions as well as managing telecommunications,
procurement and various administrative functions. Previously, Mr. Najafi served
as Senior Director of Corporate Services from March 2000 through December 2002.
From 1993 to 2000, Mr. Najafi served as Senior Director of Information
Technology at SUGEN, Inc., a Pharmacia Corporation company. At SUGEN, Mr. Najafi
was responsible for building and leading the global IT team and infrastructure
that contributed to SUGEN's growth from a private start-up company to a public
company acquired by Pharmacia Corporation in 1999. Mr. Najafi holds a B.S. in
Mathematics from the University of Washington.
D. Ry Wagner, Ph.D., has served as Vice President of Plant Genetics and
Biotechnology since December 2000. From December 1998 to January 2001, Dr.
Wagner served as Vice President, Research at Agritope, Inc., now Exelixis Plant
Sciences, Inc., a wholly-owned subsidiary of the Company. From September 1994 to
December 1998, Dr. Wagner was associate professor of Biology at the Institute of
Molecular Biology of the University of Oregon. He was appointed to the faculty
at the University of Oregon in 1988. From 1985 to 1988, Dr. Wagner served as a
National Science Foundation post-doctoral fellow. Dr. Wagner holds a B.S. in
Botany and Plant Science from Michigan State University and a Ph.D. in Genetics
from the University of Washington.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive
officers, and persons who own more than ten percent of a registered class of our
equity securities, to file with the SEC initial reports of ownership and reports
of changes in ownership of common stock and other equity securities of the
Company. Officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended December 31, 2002, all Section 16(a)
filing requirements applicable to our officers, directors and greater than ten
percent beneficial owners were complied with.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Each of our non-employee directors receives an annual stipend of $10,000
and a per meeting fee of $2,500. They receive $500 for each committee meeting
attended by committee members and $500 for participation in monthly Board of
Director and committee conference calls. In the year ended December 31, 2002,
the total compensation paid to non-employee directors was $164,359. The members
of the Board of Directors are also eligible for reimbursement for their expenses
incurred in attending Board meetings in accordance with Company policy.
In January 2000, we adopted the 2000 Non-Employee Directors' Stock Option
Plan (the "Directors' Plan") to provide for the automatic grant of options to
purchase shares of common stock to our directors who are not employees of
Exelixis or of any affiliate of Exelixis. Such options are granted
automatically, without further action by the Company, the Board of Directors or
the stockholders of the Company. Under the terms of the Directors' Plan, all
non-employee directors shall receive a one-time initial option to purchase
25,000 shares of common stock. In addition, all non-employee directors shall
receive an annual option to purchase 5,000 shares of common stock at the Annual
Meeting of stockholders. Options granted under the Directors' Plan are not
intended by the Company to qualify as incentive stock options under the Internal
Revenue Code of 1986, as amended. The exercise price of options granted under
the Directors' Plan is equal to 100% of the fair market value of a share of
common stock on the grant date. Under the terms of the Directors' Plan, the
initial option to purchase 25,000 shares is immediately exercisable but will
vest at the rate of 25% of the shares on the first anniversary of the grant date
and monthly thereafter over the next three years. The annual grants to purchase
5,000 shares are exercisable immediately but will vest monthly over the
four-year period. If the non-employee director is appointed to the board after
the Annual Meeting, the annual grant will be pro-rated. As long as the
optionholder continues to serve with us or with an affiliate of ours, the option
will continue to vest and be exercisable during its term. When the
optionholder's service terminates, we will have the right to repurchase any
unvested shares at the original exercise price, without interest. All options
granted under the Directors' Plan have a term of ten years, and are set to
terminate three months after a non-employee director's service terminates. In
the event of a merger of the Company with or into another corporation or a
consolidation, acquisition of assets or other change-in-control transaction
involving the Company, any surviving entity will either assume or replace all
outstanding options under the Directors' Plan. Otherwise, the vesting of the
options will accelerate.
During the last year, we granted options covering 5,000 shares to each
non-employee director of the Company, at an exercise price per share of $7.95.
The fair market value of such common stock on the date of grant was $7.95 per
share (based on the closing sales price reported on the Nasdaq National Market
on the date of grant). As of April 21, 2003, no options had been exercised under
the Directors' Plan.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal years ended December 31, 2000,
2001 and 2002, compensation awarded or paid to, or earned by, the Company's
Chief Executive Officer and its other four most highly compensated executive
officers at December 31, 2002 (the "Named Executive Officers"):
SUMMARY OF COMPENSATION TABLE
Long - Term
Compensation
Annual Compensation Awards (6)
----------------------------------------------------- --------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation Options Compensation(7)
- --------------------------------------- ------------- ----------- ---------- ------------- -------------- ----------------
George A. Scangos, Ph.D 2002 $525,000 $315,000 $ - - $ 4,000
President and Chief Executive Officer 2001 462,000 277,000 - 350,000 -
2000 420,000 252,000 378 250,000 -
Geoffrey Duyk, M.D., Ph.D. 2002 380,000 133,000 - - -
President, Research and Development 2001 335,000 117,250 - 250,000 -
2000 300,000 107,000 36,385 (1) 200,000 -
Robert M. Myers 2002 311,458 (2) 113,750 50,000 (2) 225,000 -
Executive Vice President of 2001 - - - - -
Pharmaceuticals 2000 - - - - -
Jeffrey R. Latts, M.D. 2002 310,000 93,000 - - 1,333
Chief Medical Officer and 2001 137,000 (3) - - 155,000 -
Senior Vice President of Development 2000 - - - - -
Pamela A. Simonton, J.D., L.L.M 2002 232,000 58,000 75,000 (4) - 3,900
Vice President of Corporate 2001 220,000 44,000 - 97,500 -
Technology Development 2000 157,500 (5) 23,625 20,660 (5) 35,000 -
(1) Other annual compensation includes relocation compensation to Dr. Duyk of
$36,007.
(2) Mr. Myers joined the Company in January 2002 and received a $50,000 sign on
bonus. Mr. Myer's annual salary for 2002 was $325,000.
(3) Dr. Latts joined the Company in July 2001. Dr. Latt's annual salary for
2001 was $300,000.
(4) Includes the forgiveness of $75,000 of a loan in principal amount of
$300,000 for Ms. Simonton in 2002.
(5) Ms. Simonton joined the Company in April 2000 and received a $8,750 sign on
bonus and $11,910 in relocation compensation. Ms. Simonton's annual salary
for 2000 was $210,000.
(6) We offer no other form of Long-Term compensation.
(7) Represents 401(k) matching contributions for 2002.
STOCK OPTION GRANTS AND EXERCISES
We grant options to our executive officers under our 2000 Equity Incentive
Plan, which was approved by our stockholders on March 15, 2000 and under which
no grants were made prior to our initial public offering. Prior to April 2000,
we granted options to our executive officers under our 1997 Equity Incentive
Plan and 1994 Employee, Director and Consultant Stock Plan. Under the 2000
Equity Incentive Plan, 1997 Equity Incentive Plan and 1994 Employee, Director
and Consultant Stock Plan, options to purchase an aggregate of 15,087,025 shares
of common stock were granted from the inception of these plans to December 31,
2002, of which options to purchase 10,055,616 shares of common stock were
outstanding and 1,733,636 shares remained available for grant under the 2000
Equity Incentive Plan as of December 31, 2002.
Our 1997 Equity Incentive Plan was terminated for purposes of new option
grants in April 2000. Our 1994 Employee, Director and Consultant Stock Plan was
terminated for purposes of new option grants in September 1997. Each of the
plans remains in effect as to outstanding options granted under that plan.
The following tables show for the fiscal year ended December 31, 2002,
certain information regarding options granted to, exercised by and held at
year-end by, the Named Executive Officers.
The exercise price of each option granted in 2002, $12.25, was equal to the
fair market value of common stock on the date of grant. The exercise price may
be paid in cash or shares of common stock valued at fair market value on the
exercise date.
The potential realizable value of the Company's options is calculated based
on the ten-year term of the option at the time of grant. Stock price
appreciation of 5% and 10% is assumed pursuant to rules promulgated by the SEC
and does not represent the Company's prediction of its stock price performance.
The potential realizable values at 5% and 10% appreciation are calculated by:
- multiplying the number of shares of common stock subject to a given
option by the grant day exercise price;
- assuming that the aggregate stock value derived from that calculation
compounds at the annual 5% or 10% rate shown in the table until the
expiration of the options; and
- subtracting from that result the aggregate option exercise price.
Percentages shown under "Percent of Total Options Granted to Employees in
2002" are based on an aggregate of 3,879,981 options granted to Exelixis
employees, consultants and directors under the Company's stock option plans
during 2002.
STOCK OPTION GRANTS IN YEAR ENDED DECEMBER 31, 2002
Individual Grants Potential Realizable
--------------------------------------------------------- Value at Assumed
Annual Rates of
Number of Percent of Stock Price
Securities Total Options Appreciation
Underlying Granted to Exercise for Option Term
Options Employees in Price per Expiration ----------------------
Name Granted (#) 2002 (%) Share Date 5% 10%
- --------------------------------- ------------- --------------- ----------- ------------ ---------- ----------
George A. Scangos, Ph.D. - - - - - -
Geoffrey Duyk, M.D., Ph.D. - - - - - -
Robert M. Myers 225,000 5.8% $12.25 02/01/2012 $1,733,391 $4,392,753
Jeffrey R. Latts, M.D. - - - - - -
Pamela A. Simonton, J.D., L.L.M. - - - - - -
The following table sets forth the number and value of securities
underlying unexercised options that are held by each of the Named Executive
Officers as of December 31, 2002.
Amounts shown under the column "Value of Unexercised In-the-Money Options
at December 31, 2002" are based on the December 31, 2002 closing price of $8.00
per share, without taking into account any taxes that may be payable in
connection with the transaction, multiplied by the number of shares underlying
the option, less the exercise price payable for these shares.
AGGREGATED STOCK OPTIONS AT DECEMBER 31, 2002
Number of Securities
Underlying Unexercised Value of Unexercised In-
Options at December 31, the-Money Options at
Shares 2002(1) December 31, 2002(1)
Acquired Value --------------------------- ---------------------------
on Exercise Realized Exercisable/ Exercisable/ Exercisable/ Exercisable/
Name (#) (2) Vested Unvested Vested Unvested
- ------------------------------- ------------ ---------- ------------ ------------ ------------ ------------
George A. Scangos, Ph.D. 862,500 $ 679,999 232,291 367,709 $ - $ -
Geoffrey Duyk, M.D., Ph.D. 375,000 240,000 327,083 291,667 1,305,000 -
Robert M. Myers - - - 225,000 - -
Jeffrey R. Latts, M.D. - - 51,770 103,230 - -
Pamela A. Simonton, J.D., L.L.M - - 71,873 60,627 - -
- -------------------
(1) All options are exercisable upon grant, but the underlying shares are
subject to a right of repurchase by Exelixis until vested.
(2) Based on the fair market value of the common stock on the date of exercise.
EMPLOYMENT, SEVERANCE AND CHANGE OF CONTROL AGREEMENTS
At the time of commencement of employment, Exelixis employees generally
sign offer letters specifying basic terms and conditions of employment. In
general, Exelixis employees are not subject to written employment agreements.
Each officer and employee has entered into a standard form agreement with
respect to confidential information and invention assignment that provides that
the employee will not disclose any confidential information of Exelixis received
during the course of employment and that, with some exceptions, the employee
will assign to Exelixis any and all inventions conceived or developed during the
course of employment.
In September 1996, we entered into an agreement with George Scangos in
connection with his appointment as President and Chief Executive Officer of
Exelixis. The agreement provides that Dr. Scangos' term of employment will be
renewed automatically each year unless either party provides written notice of
its intention not to renew. In the event that Dr. Scangos' employment is
terminated without cause, he may receive up to six months base salary and bonus,
together with all benefits. The agreement also provides that in the event of a
merger or sale of more than 50% of Exelixis' assets, Dr. Scangos' unvested stock
options shall automatically accelerate and vest in full.
In April 1997, we entered into an agreement with Geoffrey Duyk in
connection with his appointment as Chief Scientific Officer and Senior Vice
President of Research and Development. The agreement provides that Dr. Duyk's
term of employment will be renewed automatically each year unless either party
provides written notice of its intention not to renew. In the event that Dr.
Duyk's employment is terminated without cause, he may receive up to six months
base salary and any declared but unpaid bonus as of the date of termination,
together with all benefits. The agreement also provides that in the event of a
change of control, Dr. Duyk's unvested stock options shall automatically
accelerate and vest in full.
In October 1999, we entered into an agreement with Glen Sato in connection
with his appointment as Chief Financial Officer and Vice President of Legal
Affairs. The agreement provides that in the event that Mr. Sato's employment is
terminated without cause, he will receive six months base salary and benefits.
In February 2000, we entered into an agreement with Michael Morrissey in
connection with his appointment as Vice President of Discovery Research. The
agreement provides that in the event that Dr. Morrissey's employment is
terminated without cause, he may receive six months base salary and benefits.
In September 2000, we entered into an agreement with Gregory Plowman in
connection with his appointment as Vice President of Pharmaceutical Research.
The agreement provides that in the event that Dr. Plowman's employment is
terminated without cause, he may receive six months base salary and benefits.
In January 2002, we entered into an agreement with Robert M. Myers in
connection with his appointment as Executive Vice President, Pharmaceuticals.
The agreement provides that in the event that Mr. Myers employment is terminated
without cause, he may receive six months base salary and benefits.
In March 2003, we entered into an agreement with Robert M. Myers in
connection with Mr. Myers' resignation from his position with the Company as
Executive Vice President, Pharmaceuticals. The agreement provides that,
effective upon his resignation on March 31, 2003, Mr. Myers will be retained by
the Company as a consultant for a period of nine months following his
resignation for compensation of $30,000 per month. In addition, the agreement
provides that the continued vesting of any unvested stock options Mr. Myers
holds pursuant to the Company's 2000 Equity Incentive Plan will cease. In
consideration of his execution of a release of claims related to his employment,
we extended the period during which such options may be exercised to from 3
months to 18 months following his resignation date.
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION(2)
The Compensation Committee of the Board of Directors was formed in January
2000. The Compensation Committee is responsible for the administration of the
Company's executive compensation programs. These programs include base salary
and annual bonuses for officers as well as long-term incentive compensation
programs. The Company's compensation programs are designed to provide a
competitive level of total compensation and include significant incentive and
equity ownership opportunities directly linked to the Company's performance and
stockholder return.
The Compensation Committee is currently composed of three non-employee
directors: Drs. Cohen, Marchesi and Formela.
Compensation Philosophy. The Company's overall executive compensation philosophy
is based on the following principles:
(a) to provide competitive levels of total compensation which will enable
the Company to attract and retain the best possible executive talent;
(b) to motivate executives to achieve superior results for the Company;
(c) to align the financial interests of executives and stockholders
through equity-based plans; and
(d) to provide a compensation program that recognizes individual
contributions as well as overall business results.
Compensation Program. The Compensation Committee is responsible for
reviewing and recommending to the Board of Directors the compensation of all
officers of the Company and establishes and reviews general policies relating to
compensation and benefits of employees of the Company. The Compensation
Committee is also responsible for the administration of the 2000 Equity
Incentive Plan (the "2000 Option Plan"). There are three major components to the
Company's executive compensation: base salary, potential annual cash bonus and
potential long-term compensation in the form of stock options. The Compensation
Committee considers the total current and potential compensation of each
executive officer in establishing each element of compensation.
1. Base Salary. In setting compensation levels for executive officers,
------------
initial salaries are based on negotiations between the particular executive
officer and the Chief Executive Officer, as approved by the Compensation
Committee. Since 1999, the annual reviews of executive officers have
occurred in the fourth quarter of the year. The Compensation Committee
reviews competitive information relating to compensation levels for
comparable positions at medical product, biotechnology and high technology
companies as well as the compensation levels of other executive officers in
the Company. Historically, the Compensation Committee has relied on general
industry survey information for these companies. In addition, the
Compensation Committee may, from time to time, hire compensation and
benefit consultants to assist in developing and reviewing overall salary
strategies. Individual executive officer base compensation may vary based
on seniority in position, assessment of individual performance, salary
relative to internal and external equity and the significance of the
position relative to the success of the Company.
2. Annual Cash Bonus. The Compensation Committee annually reviews each
-------------------
executive officer's bonus by executive officer position and the performance
of the Company as well as the individual. Payment of cash bonuses is tied
to the accomplishment of corporate milestones and to each individual
officer's year-end performance review.
3. Long-Term Incentive Program. The Company's 2000 Option Plan provides for
----------------------------
the issuance of stock options to officers and employees of the Company to
purchase shares of common stock at an exercise price equal to the fair
market value of such stock on the date of grant. Stock options are granted
to the Company's executive officers and other employees both as a reward
for past individual and corporate performance and as an incentive for
future performance. The Compensation Committee believes that stock-based
performance compensation arrangements are essential in aligning the
interests of management and the stockholders in enhancing the value of the
Company's equity as well as encouraging executives to remain employed by
the Company.
4. Benefits. The Company provides benefits to the executive officers that
--------
are generally available to all employees of the Company. The amount of
executive level benefits and perquisites, as determined in accordance with
the rules of the Securities and Exchange Commission relating to executive
compensation for each executive officer, did not exceed 10% of total salary
and bonus for that individual in the calendar year 2002.
Compensation for the Chief Executive Officer. In determining Dr. Scangos'
salary for 2003, the Compensation Committee reviewed and considered his
historical compensation level, the number and nature of the transactions entered
into by the Company in 2002, the achievement of key scientific and research
goals as well as the compensation levels of other executives in peer companies,
taking into account Dr. Scangos' experience and knowledge. The Compensation
Committee determined that it was appropriate to increase Dr. Scangos' base
salary from $525,000 to $600,000. In addition, for his performance in 2002, the
Compensation Committee awarded Dr. Scangos a bonus of $315,000.
Section 162(m) of The Internal Revenue Code Limitations on Executive
Compensation. In 1993, Section 162(m) was added to the United States Internal
Revenue Code of 1986, as amended. Section 162(m) may limit the Company's ability
to deduct for United States federal income tax purposes, compensation in excess
of $1,000,000 paid to the Company's Chief Executive Officer and its four other
highest paid executive officers in any one fiscal year. No executive officer of
the Company received any such compensation in excess of this limit during fiscal
2002.
Non-officer employee stock option repricing. In 2001, the Compensation
Committee granted approximately 545,000 supplemental stock options under the
Company's 2000 Equity Incentive Plan to certain employees (excluding officers
and directors) who had stock options with exercise prices greater than $16.00
per share. The number of supplemental options granted was equal to 50% of the
corresponding original grant held by each employee. The supplemental options
have an exercise price of $16.00, vest monthly over a two-year period beginning
April 1, 2001, and have a 27-month term. The vesting on the corresponding
original stock options was suspended and resumed in April 2003 following the
completion of vesting of the supplemental options. The Compensation Committee
believes that equity ownership is a significant incentive to all employees and
that the supplemental stock option grants provide continuing incentives tied to
the future success of the Company for employees.
Conclusion. It is the opinion of the Compensation Committee that the
aforementioned compensation policies and structures provide the necessary
incentives to properly align the Company's corporate economic performance and
the interests of the Company's stockholders with progressive, balanced and
competitive executive total compensation practices in an equitable manner.
Respectfully submitted,
The Compensation Committee of the Board of
Directors
Charles Cohen
Vincent T. Marchesi
Jean-Francois Formela
- -------------------
(2) The material in this report is not "soliciting material," is not deemed
"filed" with the SEC and is not to be incorporated by reference into any filing
of the Company under the Securities Act or the Exchange Act, whether made before
or after the date hereof and irrespective of any general incorporation by
reference language contained in such filing.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Company's Compensation Committee has at any time
been an officer or employee of Exelixis. No interlocking relationship exists
between the Company's Board of Directors or Compensation Committee and the Board
of Directors or Compensation Committee of any other company, nor has any
interlocking relationship existed in the past.
During 2001, prior to Exelixis' acquisition of Artemis Pharmaceuticals GmbH
("Artemis") in May 2001, Drs. Formela, Papadopoulos and Scangos served as
members of the Shareholders' Committee of Artemis, the governing board of
Artemis that was responsible for compensation decisions.
PERFORMANCE MEASUREMENT COMPARISON
The following graph compares the cumulative total stockholder return on the
Company's common stock with the cumulative total return of the Nasdaq National
Market, U.S. Index ("Nasdaq") and the Nasdaq Biotech Index ("Nasdaq-Biotech")
for the period beginning on April 11, 2000, the Company's first day of trading
after its initial public offering, and ending on December 31, 2002.
Comparison of Quarterly Cumulative Total Return(3) Among Exelixis, Inc., the
Nasdaq National Market, U.S. Index and the Nasdaq Biotech Index(4)
[GRAPHIC OMITTED]
Cumulative Total Returns
-------- -------- -------- -------- -------- -------- -------- --------
4/11/00 6/30/00 9/30/00 12/31/00 03/31/01 06/30/01 09/30/01 12/31/01
-------- -------- -------- -------- -------- -------- -------- --------
Exelixis, Inc. 100 257 241 112 62 136 82 119
Nasdaq 100 98 91 61 44 52 36 47
Nasdaq Biotech 100 118 128 105 72 95 70 85
-------- -------- -------- --------
03/31/02 06/30/02 09/30/02 12/31/02
-------- -------- -------- --------
Exelixis, Inc. 99 54 35 57
Nasdaq 44 35 28 32
Nasdaq Biotech 73 48 45 47
- -------------------
(3) Assumes that $100.00 was invested on April 11, 2000 (the date of our initial
public offering) in the designated stock or index - including reinvestment of
dividends. Fiscal years ended December 31.
(4) The material in this report is not "soliciting material," is not deemed
"filed" with the SEC and is not to be incorporated by reference into any filing
of the Company under the Securities Act or the Exchange Act, whether made before
or after the date hereof and irrespective of any general incorporation by
reference language contained in such filing.
CERTAIN TRANSACTIONS
Indemnification Agreements. In connection with our initial public
offering, we adopted and filed an amended and restated certificate of
incorporation and restated bylaws. As permitted by Delaware law, our amended
and restated certificate of incorporation provides that no director will be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability for:
- any breach of duty of loyalty to the Company or our stockholders;
- acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- unlawful payment of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
Our amended and restated bylaws provide that we will indemnify our
directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. We believe
that indemnification under our amended and restated bylaws covers at least
negligence and gross negligence on the part of indemnified parties. Our amended
and restated bylaws also permit us to secure insurance on behalf of any officer,
director, employee or other agent for any liability arising out of his or her
actions in such capacity, regardless of whether the amended and restated bylaws
would permit indemnification.
We have entered into agreements to indemnify our directors and executive
officers, in addition to the indemnification provided for in our amended and
restated bylaws. These agreements, among other things, indemnify our directors
and executive officers for certain expenses, including attorneys' fees,
judgments, fines and settlement amounts incurred by any such person in any
action or proceeding, including any action by the Company, arising out of such
person's services as a director or executive officer with respect to the
Company, any of our subsidiaries or any other company or enterprise to which the
person provides services at our request. We believe that these provisions and
agreements are necessary to attract and retain qualified persons as directors
and executive officers.
Indebtedness of Management. As of April 15, 2003, the total amount of loans
outstanding to our executive officers was $1,112,869.
In January 1998, we entered into a loan agreement with George Scangos,
President, Chief Executive Officer and a director, in the amount of $150,000.
The loan had an interest rate of 6.13% and matured on January 19, 2003. Dr.
Scangos paid $140,566 of his loan amount during 2000, and the remainder of the
balance upon maturity. In January 1998, we also entered into a loan agreement
with Geoffrey Duyk, Chief Scientific Officer, President of Research and
Development and a director, in the amount of $90,000. The loan had an interest
rate of 6.13% and matured on January 16, 2003. Dr. Duyk repaid the loan upon
maturity.
In January 1998, we provided a non-interest bearing advance of $74,000 and
$44,000 to George Scangos, President, Chief Executive Officer and a director,
and Geoffrey Duyk, Chief Scientific Officer, President of Research and
Development and a director, respectively. Dr. Duyk repaid the full amount of the
advance during 2003.
In January 2000, we entered into a loan agreement with Glen Sato, Senior
Vice President, Chief Financial Officer, General Counsel and Secretary, in the
amount of $72,500. The loan has an interest rate of 6.50% and matures on the
earlier of January 27, 2004 or the sale of vested shares of common stock
purchased pursuant to the note.
In February 2000, we entered into loan agreements with George Scangos,
President, Chief Executive Officer and a director, Geoffrey Duyk, Chief
Scientific Officer, President of Research and Development and a director, and
Michael Morrissey, Senior Vice President, Discovery Research, in the amounts of
$470,000, $260,000 and $110,000, respectively. Dr. Scangos paid $48,125 of his
outstanding loan amount during 2000. Dr. Duyk repaid the full amount of the loan
during 2003. The loans have an interest rate of 6.50% and mature on the earlier
of February 3, 2004 or the sale of vested shares of common stock purchased
pursuant to the notes.
In April 2001, we entered into a loan agreement with George Scangos,
President, Chief Executive Officer and a director in the amount of $300,000. The
loan to Dr. Scangos had an interest rate of 6.00% and matured on December 31,
2001. Dr. Scangos repaid the full amount of the loan during 2001.
In April 2001, we entered into a loan agreement with Pamela Simonton, Vice
President Corporate Technology Development in the amount of $300,000. The loan
has an interest rate of 4.90% and matures on April 26, 2005. The loan is subject
to 25% forgiveness on each anniversary of the loan provided that Ms. Simonton is
a full-time employee during the preceding 12 months. Accordingly, $75,000 of the
loan principal was forgiven in 2002.
In September 2001, we entered into a loan agreement with Gregory Plowman,
Senior Vice President of Pharmaceutical Research in the amount of $75,000. The
loan has an interest rate of 4.82% and matures on September 18, 2005. The loan
is subject to 100% forgiveness of principal upon Mr. Plowman's fourth employment
anniversary date with Exelixis.
On July 15, 2002, we entered into a loan agreement with Jeffrey Latts,
Senior Vice President and Chief Medical Officer in the amount of $125,000. The
loan has an interest rate of 4.60% and matures on July 15, 2006. The loan is
subject to 50% forgiveness of principal upon Dr. Latts' third employment
anniversary date and forgiveness of the remaining 50% of the principal upon his
fourth employment anniversary date.
All future transactions other than loan facilities and amendments to any
existing loan facilities between the Company and our officers, directors,
principal stockholders and their affiliates will be approved by a majority of
the Board of Directors, including a majority of the independent and
disinterested directors, and will continue to be on terms no less favorable to
the Company than could be obtained from unaffiliated third parties. Effective
July 30, 2002, the Company no longer makes available loan facilities to, or
amends existing loan facilities with, our executive officers.
Additional Transaction. In May 2001, prior to the Company's acquisition of
Artemis, the Shareholders' Committee of Artemis approved a bonus payment of
$100,000 to Peter Stadler, managing director of our Artemis subsidiary and a
director of the Company, for his prior service as President and Chief Executive
Officer of Artemis from 1998 to 2001.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ Glen Y. Sato
GLEN Y. SATO
Secretary
April 28, 2003
HOUSEHOLDING OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g.,
brokers) to satisfy the delivery requirements for proxy statements and annual
reports with respect to two or more stockholders sharing the same address by
delivering a single proxy statement addressed to those stockholders. This
process, which is commonly referred to as "householding," potentially means
extra convenience for stockholders and cost savings for companies.
This year a number of brokers with account holders who are Exelixis
stockholders will be "householding" Exelixis' proxy materials. A single proxy
statement will be delivered to multiple stockholders sharing an address unless
contrary instructions have been received from the affected stockholders. Once
you have received notice from your broker that they will be "householding"
communications to your address, "householding" will continue until you are
notified otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in "householding" and would prefer to receive a
separate proxy statement, please notify your broker or direct your written
request to: Investor Relations, Exelixis, Inc., 170 Harbor Way, P.O. Box 511,
South San Francisco, California 94083 or contact Exelixis, Inc., Investor
Relations at (650) 837-7000. Stockholders who currently receive multiple copies
of the proxy statement at their address and would like to request "householding"
of their communications should contact their broker.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 2002, is available without charge upon written request to: Investor
Relations, Exelixis, Inc., 170 Harbor Way, P.O. Box 511, South San Francisco,
California 94083.
EXELIXIS, INC.
AUDIT COMMITTEE CHARTER
(Adopted July 25, 2000, As Amended March 31, 2003)
Purpose
The primary purpose of the Audit Committee (the "Committee") is to act in behalf
of and assist the Board of Directors (the "Board") in fulfilling its
responsibility to oversee management's conduct of the Company's financial
reporting process and ensuring the integrity of the Company's financial
statements. Committee members shall be independent and financially literate.
Generally, the responsibility of the Committee includes:
(a) overviewing the financial reports and other financial information
provided by the Company to any governmental or regulatory body, the
public or other users thereof;
(b) reviewing the Company's financial reporting process and systems of
internal accounting and financial controls; and
(c) ensuring the independence of the outside auditors and the performance
of an annual independent audit of the Company's financial statements.
In discharging its oversight role, duties and responsibilities, the Committee is
empowered to investigate any matter brought to its attention with full access to
all books, records, facilities and personnel of the Company. The powers of the
Committee include the authority to engage outside counsel, auditors or other
experts for this purpose. The Board and the Committee are in place to represent
the Company's stockholders; accordingly, the outside auditor is ultimately
accountable to the Board and the Committee.
While the Committee has the responsibilities and powers provided in this
Charter, it is not the duty of the Committee to plan or conduct audits, or to
determine that the Company's financial statements are complete and accurate and
are in accordance with generally accepted accounting principles ("GAAP").
Management remains responsible for the preparation, presentation and integrity
of the Company's financial statements and for the appropriateness of the
accounting principles and reporting policies that are used by the Company. The
independent auditors are responsible for auditing the Company's financial
statements and for reviewing the Company's unaudited interim financial
statements.
The Committee shall review the adequacy of this Charter on an annual basis.
Membership
The Committee shall be comprised of not less than three members of the
Board, and the Committee's composition will meet the requirements of the Audit
Committee Policy of the Nasdaq Stock Market. Accordingly, all of the members
will be directors who:
(a) have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
(b) are financially literate at the time of their appointment to the
Committee. In addition, at least one member of the Committee will have
accounting or related financial management expertise to meet the
definition of "audit committee financial expert," as defined by SEC
rules and regulations and applicable listing standards for the
exchange upon which the Company's securities trade from time to time.
Key Responsibilities
The Committee's job is one of oversight and it recognizes that the Company's
management is responsible for preparing the Company's financial statements and
that the outside auditors are responsible for auditing those financial
statements. Accordingly, the Committee is responsible for the review and
resolution of any disagreements the outside auditors may have with the Company's
management.
Since the Committee recognizes that Company management, as well as the
outside auditors, have more time, knowledge and more detailed information on the
Company than do Committee members; consequently, in carrying out its oversight
responsibilities, the Committee is not providing any expert or special assurance
as to the Company's financial statements or any professional certification as to
the outside auditor's work.
In general, the common recurring activities of the Committee in carrying out its
oversight function are specified below. These functions are set forth as
obligations under existing laws, rules and regulations with the understanding
that the Committee may diverge from these obligations as appropriate under the
circumstances and consistent with changes in the applicable laws, rules and
regulations.
- - The Committee shall meet and review with the outside auditors all critical
accounting policies and practices of the Company, alternative treatments of
financial information within GAAP that have been discussed by the outside
auditors with management, and the treatment preferred by the outside
auditors.
- - The Committee shall meet and review with management and the outside
auditors the audited financial statements to be included in the Company's
Annual Report on Form 10-K and Annual Report to Stockholders and review and
consider with the outside auditors the matters required to be discussed by
Statement of Auditing Standards No. 61, "Communication with Audit
Committees" ("SAS No. 61").
- - As a whole, or through the Committee chair, the Committee shall meet and
review with the outside auditors the Company's interim financial results to
be included in quarterly filings with the Securities and Exchange
Commission and the matters required to be discussed by SAS No. 61; this
review will occur prior to the Company's filing of the Quarterly Reports on
Form 10-Q.
- - The Committee shall review and discuss with management and the outside
auditors the quality and adequacy of the Company's internal controls, the
attestation of the independent auditors with respect to those controls
required by Section 404 of the Sarbanes-Oxley Act of 2002, and shall have
the further authority to meet with the internal auditors or individuals
performing those functions on behalf of the Company. The review shall
include any material issues raised by the internal auditors or by any
inquiry or investigation by governmental authorities.
- - The Committee shall review and discuss with management all Section 302 and
906 certifications required by the Sarbanes-Oxley Act of 2002.
- - The Committee shall at least annually:
(a) request from the outside auditors, a formal written statement
delineating all relationships between the auditor and the Company
consistent with Independence Standards Board Standard Number 1;
(b) discuss with the outside auditors any such disclosed
relationships and their impact on the outside auditor's
independence; and
(c) take appropriate action to oversee the independence of the
outside auditor.
- - The Committee, subject to any action that may be taken by the full Board,
shall have the ultimate authority and responsibility to appoint and remove,
compensate and review the performance of the independent auditors. This
authority shall include review and pre-approval of any and all services to
be provided by the independent auditors to the Company.
- - The Committee shall review and approve all related party transactions
entered into by the Company.
- - The Committee shall establish and maintain procedures for the receipt,
retention and treatment of complaints regarding accounting, internal
controls or auditing matters of the Company, including the establishment of
procedures for confidential, anonymous submissions by Company employees
with respect to the foregoing matters.