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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

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the Securities Exchange Act of 1934 (Amendment No.          )

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Exact Sciences Corporation

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GRAPHIC

441 Charmany Drive
Madison, Wisconsin 53719

June 15, 2019

Dear Stockholder:

You are cordially invited to attend the annual meeting of stockholders of Exact Sciences Corporation to be held at 10:00 a.m., local time, on Thursday, July 25, 2019, at The Edgewater, Grand Ballrooms A and B, 1001 Wisconsin Place, Madison, Wisconsin 53703.

We look forward to your attending either in person or by proxy. Further details regarding the matters to be acted upon at this meeting appear in the accompanying Notice of 2019 Annual Meeting and Proxy Statement. Please give this material your careful attention.

Very truly yours,

GRAPHIC

Kevin T. Conroy
Chairman, President and Chief Executive Officer


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GRAPHIC

EXACT SCIENCES CORPORATION
441 Charmany Drive
Madison, Wisconsin 53719

NOTICE OF 2019 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 25, 2019

To the Stockholders of Exact Sciences Corporation:

NOTICE IS HEREBY GIVEN that the 2019 Annual Meeting of Stockholders of Exact Sciences Corporation, a Delaware corporation, will be held on Thursday, July 25, 2019, at 10:00 a.m., local time, at The Edgewater, Grand Ballrooms A and B, 1001 Wisconsin Place, Madison, Wisconsin 53703, for the following purposes:

1. To elect the two nominees to our Board of Directors nominated by our Board of Directors to serve for a three year term as Class I directors.

2. To ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for 2019.

3. To hold an advisory vote on executive compensation.

4. To approve the Exact Sciences Corporation 2019 Omnibus Long-Term Incentive Plan.

5. To transact such other business as may properly come before the annual meeting and any adjournments or postponements thereof.

Only stockholders of record at the close of business on May 30, 2019, the record date fixed by our Board of Directors, are entitled to notice of and to vote at the annual meeting and any adjournment or postponement thereof.

By Order of our Board of Directors,

GRAPHIC

D. Scott Coward
Senior Vice President, General Counsel, Chief
Administrative Officer and Secretary

Madison, Wisconsin
June 15, 2019


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TABLE OF CONTENTS

2019 Proxy Summary

  1

Proposal 1—Election of Directors

 
5

Information Concerning Directors and Nominees for Director

 
6

Information Concerning Executive Officers

 
11

Corporate Governance Principles, Board Matters and Non-Employee Director Compensation

 
13

Proposal 2—Ratification of Appointment of Independent Registered Public Accounting Firm

 
24

Certain Relationships and Related Transactions

 
25

Independent Registered Public Accounting Firm

 
26

Report of the Audit and Finance Committee

 
27

Proposal 3—Advisory Vote on Executive Compensation

 
28

Compensation and Other Information Concerning Named Executive Officers

 
29

Report of the Compensation and Management Development Committee

 
41

Executive Compensation Tables

 
42

Equity Compensation Plan Information

 
49

CEO Pay Ratio

 
50

Proposal 4—Approval of Exact Sciences Corporation 2019 Omnibus Long-Term Incentive Plan

 
51

Securities Ownership of Certain Beneficial Owners and Management

 
58

Section 16(a) Beneficial Ownership Reporting Compliance

 
60

Other Business

 
60

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on July 25, 2019

 
60

Questions and Answers

 
61

Annex A—Exact Sciences Corporation 2019 Omnibus Long-Term Incentive Plan

 
64

Exact Sciences 2019 Proxy Statement

 

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GRAPHIC

441 Charmany Drive
Madison, Wisconsin 53719

2019 PROXY SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROXY STATEMENT. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER. PLEASE READ THE ENTIRE PROXY STATEMENT CAREFULLY BEFORE VOTING.

Your Vote

Your vote is very important. Our Board of Directors is requesting you to allow your Common Stock to be represented at our 2019 Annual Meeting by proxies named on the proxy card.

This Proxy Statement is being sent to you and all of our stockholders on or about June 15, 2019 in connection with this request.

How to Vote

Stockholders of record may vote their shares prior to the annual meeting via the Internet, by telephone or by mail.

GRAPHIC   GRAPHIC   GRAPHIC

INTERNET

 

TELEPHONE

 

MAIL

Go to www.voteproxy.com.
You will need the control number
included in your Proxy Card.

 

Dial toll-free 1-800-776-9437.
You will need the control number
included in your Proxy Card.

 

Mark, sign and date your
Proxy Card and return it in the
postage paid envelope provided.

Beneficial owners of shares held in "street name" may vote by following the voting instructions provided to them by their bank or broker.

Exact Sciences 2019 Proxy Statement

 

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2019 PROXY SUMMARY

Summary of Voting Proposals and Voting Recommendations

Proposals
  Board Recommendation
PROPOSAL 1. Election of Directors (Page 5)   FOR ALL

We are asking stockholders to vote on each director nominee to our Board of Directors named in this Proxy Statement. Our Board of Directors believes that each director nominee has the qualifications, experience, and skills necessary to represent stockholders through service on our Board of Directors.

 

 

PROPOSAL 2. Ratification of Appointment of Independent Registered Public Accounting Firm (Page 24)

 

FOR

Our Audit and Finance Committee has appointed BDO USA, LLP to serve as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2019. Our Audit and Finance Committee and our Board of Directors believe that the continued retention of BDO to serve as our independent auditor is in the best interests of the Company and its stockholders. As a matter of good corporate governance, stockholders are being asked to ratify our Audit and Finance Committee's appointment of BDO.

 

 

PROPOSAL 3. Non-Binding, Advisory Approval of Compensation to NEOs ("Say-on-Pay") (Page 28)

 

FOR

We are asking our stockholders to indicate their support for our executive compensation programs as described in this Proxy Statement. This vote is referred to as a "Say-on-Pay" vote.

 

 

PROPOSAL 4. Approval of Exact Sciences Corporation 2019 Omnibus Long-Term Incentive Plan (Page 51)

 

FOR

We are asking stockholders to approve the Exact Sciences Corporation 2019 Omnibus Long-Term Incentive Plan, which has been approved by our Board of Directors and submitted to our stockholders, in part, due to the pending expiration in July 2020 of the Exact Sciences Corporation 2010 Omnibus Long-Term Incentive Plan (As Amended and Restated Effective July 27, 2017).

 

 

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Exact Sciences 2019 Proxy Statement


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2019 PROXY SUMMARY

Nominees for Election as Directors and Continuing Directors

Our Board of Directors recommends a vote FOR the election of each of the following nominees for director:

 
   
  Director
  Director
   
  Committee Membership
Name   Age   Since   Class   Primary Occupation   AFC   CMDC   CGN   ITP
Nominees for Election as Class I Directors            
Kevin T. Conroy   53   2009   Class I   President, CEO and Chairman of the Board of Directors, Exact Sciences Corporation                
Katherine S. Zanotti*   64   2009   Class I   Former CEO of Arbonne International       GRAPHIC        
Continuing Directors                                
Thomas D. Carey*   57   2013   Class III   Founder and Managing Director, Perspective Group, LLC           GRAPHIC    
Eli Casdin*   46   2017   Class II   Founder, Chief Investment Officer and Managing Director, Casdin Capital   GRAPHIC   GRAPHIC       GRAPHIC
James E. Doyle*   73   2014   Class II   Former Governor of Wisconsin (2003-2011); Currently Of Counsel, Foley & Lardner LLP, and Partner, Doyle & Boyce Strategies       GRAPHIC   GRAPHIC    
Daniel J. Levangie*   68   2010   Class III   Former CEO and President, Cytyc Health Corporation; Currently Co-founder and Manager, ATON Partners   GRAPHIC   GRAPHIC       GRAPHIC
Kathleen Sebelius*   71   2019   Class II   Former Secretary of the Department of Health and Human Services (2009-2014) and former Governor of Kansas (2003-2009); Currently CEO of Sebelius Resources LLC           GRAPHIC   GRAPHIC
David A. Thompson*   77   2010   Class II   Lead Independent Director, Exact Sciences Corporation; Former Senior Vice President and President of Diagnostic Division, Abbott Laboratories           GRAPHIC    
Michael S. Wyzga*   64   2015   Class III   Former Executive Vice President, Finance and Chief Financial Officer, Genzyme Corporation   GRAPHIC            
*    Independent     GRAPHIC  Chair     GRAPHIC  Member
AFC = Audit and Finance Committee; CMDC = Compensation and Management Development Committee; CGN = Corporate Governance & Nominating Committee; ITP = Innovation, Technology and Pipeline Committee

Exact Sciences 2019 Proxy Statement

 

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2019 PROXY SUMMARY

Governance Highlights

Eight of nine directors independent
Annual evaluation of CEO by our Board of Directors
Annual Board and Committee self-evaluations
Board exercising a strong, independent oversight function
Robust director nominee selection process
Lead Independent Director exercising forceful, energetic and independent leadership
Audit and Finance, Compensation and Management Development, Corporate Governance and Nominating and Innovation, Technology & Pipeline Committees comprised entirely of independent directors
Robust stock ownership guidelines for independent directors and senior executive officers
Clawback provisions in our key compensation programs
Regular executive sessions of non-management directors
Annual "say on pay" advisory vote
Anti-hedging, anti-short sale and anti-pledging policies
Engagement of independent compensation consultant

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Exact Sciences 2019 Proxy Statement


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PROPOSAL 1—ELECTION OF DIRECTORS

PROPOSAL 1—ELECTION OF DIRECTORS

WHAT YOU ARE VOTING ON:

At the 2019 Annual Meeting, two Class I directors are to be elected to hold office until the 2022 Annual Meeting and until their successors are elected and qualified, or until the directors either resign or are removed from office.

The Company's Board of Directors currently consists of ten members and is divided into three classes serving terms of three years. Stockholders elect one class of directors at each annual meeting. The class up for election at the 2019 Annual Meeting is Class I, whose members currently include Kevin T. Conroy, Dr. John A. Fallon and Katherine S. Zanotti. Dr. John A. Fallon has decided not to stand for re-election. Upon the recommendation of the Corporate Governance and Nominating Committee of our Board of Directors, our Board of Directors has nominated and recommended Kevin T. Conroy and Katherine S. Zanotti for re-election to our Board of Directors as Class I directors. Contingent upon the election of all of the nominees for the Board of Directors at the 2019 Annual Meeting, one position will remain vacant as a result of Dr. John A. Fallon's decision not to stand for re-election to the Board of Directors. The Board of Directors plans to fill this vacancy as soon as practicable. Following the 2019 Annual Meeting, our Board of Directors intends to take such as action as may be necessary to ensure that the classes of directors of our Board of Directors are as equal as possible.

Shares represented by all proxies received by our Board of Directors and not marked so as to withhold authority to vote for any individual nominee will be voted FOR the election of the nominees named below. Our Board of Directors knows of no reason why any nominee would be unable or unwilling to serve, but if such should be the case, proxies may be voted for the election of some other person nominated by our Board of Directors.

The Company's Corporate Governance Guidelines provide for a majority voting policy in uncontested elections of nominees to our Board of Directors. Under the majority voting policy, any nominee for director in an uncontested election who receives a greater number of votes "withheld" from his or her election than votes "for" such election must offer his or her resignation as a director to the Corporate Governance and Nominating Committee of our Board of Directors. Upon receipt of this offer of resignation, the Corporate Governance and Nominating Committee will consider the offer of resignation and recommend to our Board of Directors action to be taken with respect to the offer of resignation, including whether or not to accept such offer of resignation. Our Board of Directors will then act upon such recommendation and promptly disclose its decision, together with an explanation of the reasons behind such decision. Our majority voting policy is set forth in our Corporate Governance Guidelines, which can be found on our website located at www.exactsciences.com under "Investor Relations—Corporate Governance."

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Set forth below are the nominees to be elected at the 2019 Annual Meeting and other members of our Board of Directors and, for each such other director, the year such director was first elected as a director, the positions currently held by each director with us, the year each director's current term will expire and the current class of each director.

Exact Sciences 2019 Proxy Statement

 

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INFORMATION CONCERNING DIRECTORS AND NOMINEES FOR DIRECTOR

INFORMATION CONCERNING DIRECTORS AND NOMINEES FOR DIRECTOR

Set forth below is background information for each current director and nominee for director, as well as information regarding additional experience, qualifications, attributes or skills that led our Board of Directors to conclude that such director or nominee should serve on our Board of Directors.

Nominees for Class I Directors

 
  KEVIN T.
CONROY
DIRECTOR SINCE: 2009  
 
 


PHOTO
Positions: President, Chief
Executive Officer and
Chairman
of the Board of Directors
Current Class of Director: I
Current Term Expiration: 2019

 
Kevin T. Conroy, age 53, has served as our President and Chief Executive Officer since April 2009, as a director since March 2009 and as Chairman of our Board of Directors since March 2014. Mr. Conroy served as president and chief executive officer of Third Wave Technologies, Inc., a molecular diagnostics company, from December 2005 until the acquisition of Third Wave by Hologic, Inc. in July 2008. He joined Third Wave in July 2004 and served as general counsel until December 2005. Prior to joining Third Wave, Mr. Conroy held leadership positions at GE Healthcare and practiced intellectual property law in private practice. Mr. Conroy also serves as a director of Epizyme,  Inc., a clinical-stage biopharmaceutical company (NASDAQ: EPZM). He earned a bachelor's degree in electrical engineering at Michigan State University and a JD from the University of Michigan.

Mr. Conroy brings extensive business, legal and executive leadership experience to our Board of Directors. With his significant knowledge of, and breadth of experience in, the healthcare industry in general and the molecular diagnostics industry and our Company in particular, he provides our Board of Directors with a vital understanding of our business and industry.

 
 

 

 
  KATHERINE S.
ZANOTTI
DIRECTOR SINCE: 2009  
 
 


PHOTO
Position: Director
Current Class of Director: I
Current Term Expiration: 2019

 
Katherine S. Zanotti, age 64, has served as a director since April 2009. She served as chief executive officer of Arbonne International from August 2009 until June 2018. Ms. Zanotti also served as Chair of Natural Products Group (the holding company of Arbonne, Nature's Gate, and Levlad) from March 2010 until March 2018 when Groupe Rocher acquired Arbonne International. Arbonne is a botanically based skin care, cosmetic and nutrition company marketed in seven countries, with revenue of over $550 million. From July 2002 to March 2006, she served as senior vice president of marketing at McDonald's Corporation. Ms. Zanotti is a retired vice president of the Procter & Gamble Company and most recently served as vice president and general manager of the North American pharmaceutical business and the corporate women's health platform. Ms. Zanotti currently serves on the Board of Trustees of Xavier University. Ms. Zanotti currently serves as a director of Cutera, Inc., a developer of cosmetic and aesthetic laser equipment (Nasdaq:CUTR). She previously served as a director of Hill-Rom Holdings, Inc., a worldwide manufacturer and provider of medical technologies and related services (NYSE:HRC); Mentor Corporation, a medical device company; Alberto Culver Company, a personal care products company; and Third Wave Technologies, Inc., a molecular diagnostics company. Ms. Zanotti earned a bachelor's degree in economics and studio fine arts from Georgetown University and an MBA with a concentration in marketing and finance from Xavier University.

Ms. Zanotti's extensive executive, managerial and leadership experience, including many years in the pharmaceutical industry, positions her well to serve as a member of our Board. Her business acumen and experience on the boards of directors of numerous companies make her a valuable addition to our Board of Directors.

 
 

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Exact Sciences 2019 Proxy Statement


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INFORMATION CONCERNING DIRECTORS AND NOMINEES FOR DIRECTOR


Other Members of our Board of Directors

 
  THOMAS D.
CAREY
DIRECTOR SINCE: 2013  
 
 


PHOTO
Position: Director
Current Class of Director: III
Current Term Expiration: 2021

 
Thomas D. Carey, age 57, has served as a director since April 2013. Mr. Carey is the founder and Managing Director of Perspective Group, LLC, a human capital and executive search firm serving the healthcare industry. Previously, Mr. Carey was a member at Spencer Stuart, a global executive search firm, from 2010 through 2015, where he was responsible for leading the firm's global efforts in providing board services to companies within all segments of the healthcare market. Prior to Spencer Stuart, Mr. Carey was with Russell Reynolds Associates from 2001 to 2010 where he served as a Partner and Co-Head of the firm's Global Life Sciences Practice for the three years preceding his move to Spencer Stuart. Prior to entering the search industry, Mr. Carey served as an investment banker and then chief financial officer of both private and public healthcare and information technology companies. Mr. Carey earned a bachelor's degree from the College of the Holy Cross and an MBA from the Kellogg Graduate School of Management at Northwestern University.

Mr. Carey brings to our Board of Directors more than 20 years of broad life sciences industry expertise. His background in finance and the executive search industry also provides our Board of Directors a valuable perspective with respect to financial strategy, key executive hires and other personnel-related matters.

 
 

 

 
  ELI
CASDIN
DIRECTOR SINCE: 2017  
 
 


PHOTO
Position: Director
Current Class of Director: II
Current Term Expiration: 2020

 
Eli Casdin, age 46, founded Casdin Capital, LLC, a life sciences and healthcare investment company, in 2011 and has served as Chief Investment Officer and Managing Partner since its founding. Prior to founding Casdin Capital, Mr. Casdin was Vice President at Alliance Bernstein from 2007 to 2011 where he researched investment implications of new technologies for the life sciences and healthcare sectors. Prior to that, Mr. Casdin served as a research analyst at Bear Stearns and Cooper Hill Partners, specializing in healthcare investments in life sciences tools, diagnostics and medical devices. Mr. Casdin earned a bachelor's degree from Columbia University and an MBA from Columbia Business School.

Casdin brings to our Board of Directors significant financial and investment experience and a deep knowledge of the healthcare and life sciences industries that provides important insights into our industry and competitive landscape.

 
 

 

Exact Sciences 2019 Proxy Statement

 

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INFORMATION CONCERNING DIRECTORS AND NOMINEES FOR DIRECTOR


 
  JAMES E.
DOYLE
DIRECTOR SINCE: 2014  
 
 


PHOTO
Position: Director
Current Class of Director: II
Current Term Expiration: 2020

 
James E. Doyle, age 73, is currently Of Counsel at Foley & Lardner LLP, an international law firm, as well as partner of Doyle & Boyce Strategies, a consultant to several national foundations. Prior to his current positions, Gov. Doyle served two terms as the 44th governor of the state of Wisconsin from 2003 to 2011. Prior to his gubernatorial service, Gov. Doyle served three terms as the attorney general of the state of Wisconsin from January 1991 to January 2003. In connection with his service as attorney general, Gov. Doyle served as president of the National Association of Attorneys General from 1997 to 1998. Gov. Doyle also previously served as the District Attorney of Dane County, Wisconsin and worked in private practice. His extensive public service also includes stints in the Peace Corps as a teacher in Tunisia and as an attorney in a federal legal services office on the Navajo Indian Reservation. Gov. Doyle earned a bachelor's degree from the University of Wisconsin—Madison and a JD from Harvard Law School.

Gov. Doyle brings to our Board of Directors proven leadership and managerial capabilities acquired through his extensive public and private sector experience. He also provides our Board of Directors with deep knowledge of governmental and legal affairs.

 
 

 

 
  JOHN A.
FALLON, M.D.
DIRECTOR SINCE: 2016  
 
 


PHOTO
Position: Director
Current Class of Director: I
Current Term Expiration: 2019

 
John A. Fallon, M.D., age 71, has served as a director since January 2016. Dr. Fallon served as Senior Vice President and Chief Physician Executive at Blue Cross Blue Shield of Massachusetts ("BCBS MA") from 2004 through 2015. Prior to his role at BCBS MA, Dr. Fallon served as Chief Executive Officer for clinical affairs at the State University of New York Downstate Medical Center, including University Hospital of Brooklyn and the clinical faculty practice plan. His professional experience also includes the Partners Healthcare System, where he was chairman of the physician network. Dr. Fallon was also the founder and CEO of North Shore Health System, a large physician-hospital organization in Massachusetts. He serves on the boards of directors of Insulet Corporation, a medical devices company (Nasdaq: PODD), AMAG Pharmaceuticals, Inc., a specialty pharmaceutical company (Nasdaq: AMAG) and Collegium Pharmaceuticals,  Inc., a specialty pharmaceutical company (Nasdaq: COLL), as well as the board of Network for Excellence in Health Innovation (NEHI) (Chair), a not-for-profit institution. Dr. Fallon also previously served on the National Committee for Quality Assurance (NCQA) Medical Standards Committee (Chair) and the New England Comparative Effectiveness Public Advisory Council (CEPAC). Dr. Fallon practiced internal medicine for more than 20 years, fulfilled his residency at Boston City Hospital, is Board Certified in Internal Medicine and is a fellow of the American College of Physicians. Dr. Fallon earned a bachelor's degree from the College of the Holy Cross, an MBA from the University of South Florida and a Doctor of Medicine from Tufts University School of Medicine.

Dr. Fallon brings to our Board of Directors extensive business experience in the healthcare industry, and his service as a physician and as an executive with numerous healthcare providers and insurers provides valuable insight to our Board of Directors.

 
 

 

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INFORMATION CONCERNING DIRECTORS AND NOMINEES FOR DIRECTOR

 
  DANIEL J.
LEVANGIE
DIRECTOR SINCE: 2010  
 
 


PHOTO
Position: Director
Current Class of Director: III
Current Term Expiration: 2021

 
Daniel J. Levangie, age 68, has served as a director since July 2010. He is an experienced executive and corporate director with senior operating experience in the field of medical devices and in vitro diagnostics. Mr. Levangie is co-founder and manager of ATON Partners, a private investment firm, and Chairman, President & CEO of CereVasc, LLC, an early-stage medical device company. From 2013 through January 2017, Mr. Levangie served as President of Insulet Drug Delivery Systems. From 2011 through 2013, Mr. Levangie was chief executive officer of Dune Medical Devices, Inc. and co-founder and managing partner of Constitution Medical Investors,  Inc., a Boston-based private investment and product development firm acquired by Roche Diagnostics Corporation in July 2013. Prior to the above, Mr. Levangie held a variety of executive management positions with Cytyc Corporation until the acquisition of Cytyc by Hologic, Inc. in October 2007. These positions include executive vice president and chief operating officer, chief executive officer and president of Cytyc Health Corporation, executive vice president and chief commercial officer and president, Cytyc Surgical Products Division. Prior to joining Cytyc Corporation in 1992, Mr. Levangie held a number of sales, marketing and management positions with Abbott Laboratories, a diversified healthcare company. Mr. Levangie is currently a director of CereVasc, LLC, Dune Medical Devices and Renovia, Inc. He previously served as a director of Insulet Corporation, a medical device company (Nasdaq: PODD), Liposcience, Inc., a diagnostics company (formerly Nasdaq: LIPO), ev3, Inc., a medical device company, and Hologic, Inc., a diagnostic, imaging systems and surgical products company (Nasdaq: HOLX). Mr. Levangie is a member of the Advisory Board of the Barnett Institute of Northeastern University and is a trustee of Excel Charter School, East Boston. Mr. Levangie earned a bachelor's degree in pharmacy from Northeastern University.

Mr. Levangie brings a wealth of executive, managerial and leadership experience in the healthcare industry to our Board. He has significant board of director experience from his service on the boards of directors of numerous medical device and biotechnology companies.

 
 

 

 
  KATHLEEN G.
SEBELIUS
DIRECTOR SINCE: 2019  
 
 


PHOTO
Position: Director
Current Class of Director: II
Current Term Expiration: 2020

 
Kathleen G. Sebelius, age 71, serves as CEO of Sebelius Resources LLC, a strategic consulting firm that advises private companies, non-profit organizations and financial investors. From April 2009 through June 2014, Ms. Sebelius served in President Barack Obama's Cabinet as the 21st Secretary of the Department of Health and Human Services. At HHS, Sebelius managed 11 operating agencies, 90,000 employees in 50 countries around the world, and a $1 trillion budget. Prior to that Ms. Sebelius served as Governor of Kansas from 2003 to 2009. Previous elected offices include two terms as the Kansas insurance commissioner and four terms in the Kansas Legislature. Ms. Sebelius serves as a director of Dermira, Inc. (Nasdaq: DERM), a biopharmaceutical company, Myovant Sciences Ltd. (NYSE: MYOV), a biopharmaceutical company, and the Kaiser Family Foundation. She also co-chairs the Aspen Institute Health Strategy Group and serves on advisory boards for the Dole Institute of Politics, Solera Health, Out Leadership, the Estée Lauder Foundation, and the University of Kansas College of Liberal Arts and Sciences. Ms. Sebelius earned a bachelor's degree from Trinity Washington University and a master of public administration from the University of Kansas.

Ms. Sebelius brings a wealth of state and federal government expertise, management insight and health care experience to our Board of Directors with deep knowledge of the systemic challenges and opportunities to improve health care.

 
 

Exact Sciences 2019 Proxy Statement

 

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INFORMATION CONCERNING DIRECTORS AND NOMINEES FOR DIRECTOR


 
  DAVID A.
THOMPSON
DIRECTOR SINCE: 2010  
 
 


PHOTO
Position: Lead Independent
Director
Current Class of Director: II
Current Term Expiration: 2020

 
David A. Thompson, age 77, has served as a director since July 2010 and as lead independent director since March 2014. He was the chairman and lead independent director of Third Wave Technologies, Inc., a molecular diagnostics company, from 2005 until its acquisition by Hologic, Inc. in July 2008. Prior to that, he retired in 1995 from Abbott Laboratories, a diversified healthcare company, where he worked for more than 30 years. He held several corporate officer positions within Abbott, including senior vice president and president diagnostic division, vice president human resources, vice president corporate materials management and vice president operations. Mr. Thompson previously served as the lead director of St. Jude Medical, Inc., a medical technology and services company (formerly NYSE: STJ), and as a director of each of Hycor Biomedical, Inc., a medical diagnostic products company, LifeCell Corporation, a biological products company, NABI, a biopharmaceutical company, and TriPath Imaging, Inc., an automated imaging company. Mr. Thompson earned a bachelor's degree from South Dakota State University.

Mr. Thompson brings to our Board of Directors extensive executive and leadership experience in the healthcare industry in general and the molecular diagnostics industry in particular. His prior service as lead independent director for other companies provides a valuable perspective to our Board.

 
 

 

 
  MICHAEL S.
WYZGA
DIRECTOR SINCE: 2015  
 
 


PHOTO
Position: Director
Current Class of Director: III
Current Term Expiration: 2021

 
Michael S. Wyzga, age 64, served as the President and Chief Executive Officer and a member of the board of directors of Radius Health, Inc., a biopharmaceutical company focused on developing new therapeutics for the treatment of osteoporosis and other women's health conditions, from December 2011 to November 2013. Prior to that, Mr. Wyzga served in various senior management positions at Genzyme Corporation, a global biotechnology company. Mr. Wyzga joined Genzyme in March 1997 and most recently served as Executive Vice President, Finance from May 2003 until November 2011 and as Chief Financial Officer from July 1999 until November 2011. Mr. Wyzga is an independent healthcare consultant and currently serves as Chairman of the Board of Directors of Gensight Biologics S.A., a clinical-stage biologics company (EPA: SIGHT), Chairman of the Board of Directors of X4 Pharmaceuticals, a biopharmaceutical company (Nasdaq: XFOR), and LogiBio Therapeutics, Inc., a biopharmaceutical company (Nasdaq: LOGC),, and previously served as a director of Prosensa Holding N.V. (formerly Nasdaq: RNA), a biotechnology company, and Idenix Pharmaceuticals, Inc. (formerly Nasdaq: IDIX), a pharmaceutical company. Mr. Wyzga earned a bachelor's degree from Suffolk University and an MBA from Providence College.

Mr. Wyzga brings extensive financial and managerial experience in the biotechnology and biopharmaceutical industries to our Board of Directors with key insight into financial and strategic initiatives as well as extensive public company board service within our industry.

 
 

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INFORMATION CONCERNING EXECUTIVE OFFICERS

INFORMATION CONCERNING EXECUTIVE OFFICERS

Set forth below is background information relating to our executive officers. Kevin T. Conroy is discussed above under Information Concerning Directors and Nominees for Director.

 
  JEFFREY T.
ELLIOTT
   
 
 


PHOTO
Position: Chief Financial
Officer

 
Jeffrey T. Elliott, age 41, has served as our Chief Financial Officer since November 2016. Prior to his appointment as Chief Financial Officer, Mr. Elliott served as the Company's Vice President, Business Development and Strategy, from June 2016 to November 2016. Prior to joining the Company, from 2007 to 2016, Mr. Elliott was with Robert W. Baird & Co., where from June 2012 to June 2016 he was a senior research analyst who covered diagnostics and life science tools companies. Earlier in his career, Mr. Elliott worked in a supply chain role for Walgreens and as a consultant at Cap Gemini Ernst & Young. Mr. Elliott earned a bachelor's degree in business administration from the University of Illinois at Urbana-Champaign and an MBA from the University of Chicago Booth School of Business. Mr. Elliott is a CFA charterholder.
 
 

 

 
  D. SCOTT
COWARD
   
 
 


PHOTO
Positions: Senior Vice President,
General Counsel, Chief
Administrative Officer and
Secretary

 
D. Scott Coward, age 55, has served as our Senior Vice President, General Counsel and Secretary since January 2015 and as our Chief Administrative Officer since July 2018. He joined us from the global law firm K&L Gates LLP, where he practiced corporate and securities law and served as managing partner of the Raleigh, NC office. Prior to his tenure at K&L Gates, Mr. Coward served as General Counsel of Blue Rhino Corporation, a leading supplier of consumer propane-related products. Prior to Blue Rhino, Mr. Coward served as an Associate General Counsel at GE Medical Systems in Milwaukee, WI, and prior to that, as a partner at the Raleigh, NC law firm Smith Anderson Blount Dorsett Mitchell & Jernigan LLP. Mr. Coward earned a bachelor's degree in business administration from the University of North Carolina—Chapel Hill and a JD from Columbia Law School.
 
 

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  MARK
STENHOUSE
   
 
 


PHOTO
Position: President, Cologuard

 
Mark Stenhouse, age 52, has served as President, Cologuard since April 2018. Prior to joining Exact, Mr. Stenhouse worked for over 25 years at Abbott Laboratories (NYSE: ABT) and AbbVie, Inc. (NYSE: ABVV), including in a number of executive and managerial positions within its U.S. Immunology division. Most recently, from October 2016 until March 2018, Mr. Stenhouse served as Vice President, U.S. Immunology, where Mr. Stenhouse developed AbbVie's U.S. expansion into the immunology marketplace. From April 2010 until September 2016, Mr. Stenhouse served as Vice President and Vice President/General Manager, U.S. Immunology—Gastroenterology Franchise, where Mr. Stenhouse led a successful turnaround of the franchise, including approval of HUMIRA for treatment of Ulcerative Colitis. From September 2006 through March 2010, Mr. Stenhouse held various senior management, marketing and sales positions within Abbott Laboratories' U.S. Immunology division. Mr. Stenhouse earned a bachelor's degree in business administration from College of Charleston.
 
 

 

 
  ANA
HOOKER
   
 
 


PHOTO
Position: Senior Vice President,
Operations

 
Ana Hooker, age 53, has served as our Senior Vice President, Operations since 2015 where she is responsible for laboratory operations, manufacturing, information technology and corporate quality. Ms. Hooker joined Exact Sciences in 2013 to start our clinical laboratory pending FDA approval of Cologuard. Ms. Hooker brings over 20 years of clinical laboratory experience to Exact Sciences. Prior to joining Exact, Ms. Hooker was at ARUP Laboratories for 15 years, where she served as the Senior Vice President, Division Manager for anatomic pathology, oncology and genetics and, prior to such position, as Vice President, Division Manager for genetics. While at ARUP Laboratories, she held positions of increasing responsibility, including Group Manager for the Divisions of Oncology and Genetics and Technical Supervisor of the University of Utah Hospital Clinical Laboratories. Ms. Hooker earned a bachelor's degree from Kansas State University, her Medical Technologist certification from Hays Pathology Laboratories and an MBA from Westminster College.
 
 

 

 
  SCOTT
JOHNSON
   
 
 


PHOTO
Position: Senior Vice President,
Research and Development

 
Scott Johnson, age 50, has served as our Senior Vice President, Research & Development since September 2017. He joined us from Luminex Corporation, a molecular diagnostic product and life sciences tools manufacturer, where he served as Vice President—Assay Research & Development from 2014 to 2017 and as Vice President—Product Development & Manufacturing from 2011 to 2014. Prior to EraGen Biosciences' acquisition by Luminex, Dr. Johnson served as EraGen Biosciences' Vice President—Product from 2008 to 2011. Dr. Johnson earned a bachelor's degree in biotechnology from Rochester Institute of Technology, a doctorate in cellular and molecular biology from University of Wisconsin—Madison and an MBA from the Kellogg Graduate School of Management at Northwestern University.
 
 

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CORPORATE GOVERNANCE PRINCIPLES, BOARD MATTERS AND NON-EMPLOYEE DIRECTOR COMPENSATION

CORPORATE GOVERNANCE PRINCIPLES, BOARD MATTERS AND NON-EMPLOYEE DIRECTOR COMPENSATION

Board Independence

Our Board of Directors has determined that each of Thomas D. Carey, Eli Casdin, James E. Doyle, John A. Fallon, M.D., Daniel J. Levangie, Kathleen Sebelius, David A. Thompson, Michael S. Wyzga and Katherine S. Zanotti is an independent director within the meaning of the director independence standards of The NASDAQ Stock Market, Inc. ("NASDAQ"). Furthermore, our Board of Directors has determined that all of the members of our Audit and Finance Committee, Compensation and Management Development Committee, Corporate Governance and Nominating Committee and Innovation, Technology and Pipeline Committee are independent within the meaning of the director independence standards of NASDAQ and the rules of the SEC applicable to each such committee.

Executive Sessions of Independent Directors

Executive sessions of our independent directors are generally scheduled following each regularly scheduled in-person meeting of our Board of Directors. Executive sessions are led by David A. Thompson, our lead independent director, who actively solicits other independent directors for agenda items in advance of such meetings. Executive sessions of our independent directors are generally divided into two parts. The first part consists of a meeting between the independent directors and Kevin T. Conroy, our chairman and chief executive officer, and the second part consists of a meeting solely of the independent directors. The independent directors utilize the executive sessions to discuss, among other items, corporate strategy and planning, including succession planning for our executive officers.

Board Qualifications

Our Corporate Governance and Nominating Committee is responsible for identifying the appropriate qualifications, skills and characteristics desired of members of our Board of Directors in the context of the needs of the business and the current composition and needs of our Board of Directors.

Director candidates are considered based upon a variety of criteria, including demonstrated business and professional skills and experiences relevant to our business and strategic direction, concern for long-term stockholder interests, personal integrity and sound business judgment. Our Board of Directors seeks members from diverse professional backgrounds who combine a broad spectrum of relevant industry and strategic experience and expertise that, in concert, offer us and our stockholders diversity of opinion and insight in the areas most important to us and our corporate mission. In addition, nominees for director are selected to have complementary, rather than overlapping, skill sets. We are committed to actively seeking female and minority candidates for the pool from which Board candidates are chosen. All candidates for director nominee must have time available to devote to the activities of our Board of Directors. Our Corporate Governance and Nominating Committee also considers the independence of candidates for director nominee, including the appearance of any conflict in serving as a director. Candidates for director nominees who do not meet all of these criteria may still be considered for nomination to our Board of Directors if our Corporate Governance and Nominating Committee believes that the candidate will make an exceptional contribution to us and our stockholders.

Board Leadership Structure

Currently, Mr. Conroy serves as both the Chairman of our Board of Directors and the Chief Executive Officer of the Company. Our bylaws permit these positions to be held by the same person, and our Board of Directors believes that it is in the best interests of the Company to retain flexibility in determining whether to separate or combine the roles of Chairman and Chief Executive Officer based on our circumstances. While our Board of Directors does not have a formal policy regarding the separation of the roles of Chairman and Chief Executive Officer, our Board of Directors recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide independent oversight of senior management, a highly engaged Board of Directors, and the right balance between (i) effective independent oversight of the Company's business, (ii) our Board of Directors' activities and (iii) consistent corporate leadership. Our Board of Directors is open to, and assesses on at least an annual basis, different structures that provide such an optimal leadership structure, particularly given the dynamic and competitive environment in which the Company operates. As part of its most recent such assessment, the independent directors gave thorough consideration to a number of factors, including, but not limited to, the strategic goals of the Company, the dynamics of our Board of Directors, best practices within our industry, and the status of the Company's progress with respect to certain key strategic initiatives.

Based upon these considerations, the independent directors determined to maintain our Board of Directors' current leadership structure with Mr. Conroy serving as both the Chairman of our Board of Directors and the Chief Executive Officer of the Company. The independent directors based this determination on (1) Mr. Conroy's extensive experience in and knowledge of the Company, the diagnostics industry and the regulatory environment, (2) the highly effective bridge Mr. Conroy's service provides between our Board of Directors and the Company's management, (3) Mr. Conroy's continued leadership and vision necessary to lead our Board of Directors and the Company through its challenging industry and macroeconomic environments, (4) Mr. Conroy's ability to make prudent and key strategic decisions in the face of the Company's rapid growth, (5) Mr. Conroy's investor-focused perspective and (6) the effective independent leadership provided on the Board of Directors by David A. Thompson, currently serving in his role as lead independent director.

At any time that the Company does not have an independent chairman of the Board of Directors, the Board of Directors shall appoint an independent director to serve as Lead Independent Director. Until April 2019, our Corporate Governance Guidelines provided that the chairperson of the Corporate Governance and Nominating Committee also served as our Lead Independent Director (in the event our Board of Directors did not have an independent chairman). In connection with our Board of Directors' most recent review of our Board leadership

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structure and the roles and responsibilities of our Chairman and Lead Independent Director, in April 2019 our Board of Directors approved, upon the recommendation of our Corporate Governance and Nominating Committee, amended and restated Corporate Governance Guidelines and an amended and restated Corporate Governance and Nominating Committee Charter. Among other matters, the updated corporate governance materials provide that our Lead Independent Director will be appointed annually by our Board of Directors from among all of the independent directors, whereas previously the Chair of our Corporate Governance and Nominating Committee was automatically appointed as Lead Independent Director. These changes were adopted to provide our Board of Directors with the flexibility to appoint different individuals to serve as Lead Independent Director and the Chairperson of the Corporate Governance and Nominating Committee. The Lead Independent Director is elected to serve a one-year term commencing upon the adjournment of the annual meeting of stockholders until the adjournment of the following year's annual meeting of stockholders.

Our Corporate Governance Guidelines empower our Lead Independent Director with well-defined duties that are further summarized below. In addition, our Board of Directors—which consists entirely of independent directors other than Mr. Conroy—exercises a strong, independent oversight function which enhances the accountability of the senior management team to our Board of Directors and provides for robust and impartial leadership and a unified voice that is accountable to our stockholders. This oversight function is enhanced by the fact that our Audit and Finance, Compensation and Management Development, Corporate Governance and Nominating and Innovation, Technology and Pipeline Committees are comprised entirely of independent directors. Further, our Board of Directors meetings include regular executive sessions of the independent directors and an annual evaluation of our CEO's performance against pre-determined goals. Our Board of Directors can and will change its leadership structure if our Board of Directors determines that doing so is in the best interest of the Company and its stockholders.

Lead Independent Director Duties
»
Counsel the CEO on issues of interest and/or concern to the independent directors

»
Coordinate, develop the agenda for and chair executive sessions of the Board's independent directors

»
Act as principal liaison between the independent directors and the CEO on sensitive issues

»
Lead the Corporate Governance and Nominating Committee's annual CEO review process and meet with the CEO to discuss such evaluation

»
Review recommendations for retention of consultants who report directly to the Board

»
Provide the Board's chairperson with input as to the preparation of the agenda for Board meetings

»
Advise the Board's chairperson as to the quantity, quality and timeliness of the flow of information from management to the independent directors

Corporate Governance Guidelines

Our Board of Directors has approved, upon the recommendation of the Corporate Governance and Nominating Committee, a set of Corporate Governance Guidelines under which our Board of Directors and its committees operate. Our Corporate Governance Guidelines assist the Board and its committees in the exercise of their responsibilities and establish a common set of expectations and guidelines in order to provide a

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strong and robust governance framework for the Company. Among other topics, our Corporate Governance Guidelines address the following matters:

 
   

»

Board Evaluation:  Our Board of Directors annually conducts a confidential performance evaluation to determine whether it and its committees are functioning adequately and effectively. As part of this evaluation, each director completes a written self-assessment questionnaire with a variety of questions designed to gather suggestions for improving the effectiveness of the Board of Directors and its committees and to solicit feedback on a range of issues, including Board composition, Board dynamics, the Board's relationship with senior management, Board agendas and meetings, Board processes and Board committees.

   
   

»

Limitation on Other Board Service:  Carrying out the duties and fulfilling the responsibilities as a member of our Board of Directors requires a significant commitment of an individual's time and attention. While our Board of Directors does not believe that explicit limits on the number of other boards of directors on which directors may serve are currently appropriate, each director must notify the Chairman in connection with accepting a seat on the board of directors of another business corporation so that the potential for conflicts or other factors compromising such director's ability to perform his or her duties for our Board of Directors may be fully assessed.

   
   

»

Board and Committee Meeting Attendance:  Each member of the Board is expected to make reasonable efforts to attend regularly scheduled meetings of the Board and to participate in telephone conference meetings or other special meetings of the Board. Attendance and participation at meetings is an important component of the directors' duties and, as such, attendance rates are taken into account by the Corporate Governance and Nominating Committee in connection with assessments of director candidates for renomination as directors.

   
   

»

Director Orientation and Continuing Education:  In order to become familiar with the Company and the functioning of our Board of Directors, our Corporate Governance and Nominating Committee has developed an orientation program designed to familiarize each new director with our business and strategic plans, key policies and practices, principal officers and management structure, auditing and compliance processes and our Code of Business Conduct and Ethics. In addition, each of our committees monitors the continuing education needs of its members and recommends action to the Board where appropriate. Further, our executive officers are responsible for periodically providing materials or briefing sessions for continuing directors to assist them in discharging their duties.

   
   

»

Director Access to Management and Advisors:  Directors have complete access to senior members of our management. Our Board of Directors and each of its committees is authorized to request that any Company officer or employee, outside legal counsel, independent auditor or other professional retained by the Company to render advice to the Company, attend any meeting of the Board or such committee, or otherwise meet with members of or advisors to the Board of Directors. Our Board of Directors and each committee is authorized to engage legal, accounting or other advisors to provide it with advice and information in connection with carrying out its or their responsibilities.

   

Management Succession Planning

Our Board of Directors recognizes that one of its most important duties is to ensure continuity in the Company's senior leadership positions by overseeing the development of executive talent and planning for the succession of our senior management, including our Chief Executive Officer.

Our Corporate Governance and Nominating Committee and Compensation and Management Development Committee review and oversee the development and implementation of senior management succession plans. The Corporate Governance and Nominating Committee will periodically report to the Board of Directors on (i) such management succession plans, including recommendations and evaluations of potential successors to the Chief Executive Officer and other members of senior management and (ii) any development plans for then-current members of senior management.

Stockholder Engagement

We believe effective corporate governance requires regular, constructive and thoughtful engagement with our stockholders on a number of topics, including operating performance, corporate governance, long-term strategy, executive compensation and governance-related issues. Our Board of Directors, CEO and senior management team play a central role in our stockholder engagement strategy and we regularly engage stockholders throughout the year and consider their input. In addition, our Compensation and Management Development Committee is charged with monitoring and evaluating the Company's engagement with stockholders to solicit feedback on the Company's compensation philosophy, structure, programs, practices and policies.

We solicit ongoing feedback from major stockholders and strive for continued and robust stockholder engagement throughout the year. Our Board of Directors welcomes feedback on its corporate governance and executive compensation practices and policies and believes that continued engagement with stockholders will further align the long-term interests of our Board of Directors, the Company, its management and its stockholders.

As set forth in our Corporate Governance Guidelines, a copy of which is available at www.exactsciences.com, security holders who wish to communicate directly with our Board of Directors, the independent directors of our Board of Directors or any individual member of our Board of Directors may do so by sending such communication by certified mail addressed to the Chairman of our Board of Directors, as a representative of the entire Board of Directors, the Lead Independent Director, as a representative of the independent directors of our Board of Directors, or to the individual director or directors, in each case, c/o Secretary, Exact Sciences Corporation, 441 Charmany Drive, Madison, Wisconsin 53719. The Secretary reviews any such security holder communication and forwards relevant communications to the addressee.

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Policies Regarding Director Nominations

Our Board of Directors has adopted a policy concerning director nominations, a copy of which is available at www.exactsciences.com. Set forth below is a summary of certain provisions of this policy.

Process for Identifying and Evaluating Director Nominees

Our Board of Directors is responsible for selecting nominees for election to our Board of Directors by our stockholders. Our Board of Directors delegates the selection process to our Corporate Governance and Nominating Committee, with the expectation that other members of our Board of Directors, and of management, may be requested to take part in the process as appropriate. Generally, our Corporate Governance and Nominating Committee identifies candidates for director nominees in consultation with management, through the use of search firms or other advisers, through the recommendations submitted by other directors or stockholders or through such other methods as our Corporate Governance and Nominating Committee deems appropriate. We are committed to actively seeking female and minority candidates for the pool from which Board candidates are chosen. Once candidates have been identified, our Corporate Governance and Nominating Committee confirms that the candidates meet the qualifications for director nominees established by our Corporate Governance and Nominating Committee. Our Corporate Governance and Nominating Committee may gather information about the candidates through interviews, detailed questionnaires, comprehensive background checks, or any other means that our Corporate Governance and Nominating Committee deems to be helpful in the evaluation process. Our Corporate Governance and Nominating Committee then meets as a group to discuss and evaluate the qualities and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of our Board of Directors. Based on the results of the evaluation process, our Corporate Governance and Nominating Committee recommends candidates for our Board of Directors' approval as nominees for election to our Board of Directors. Our Corporate Governance and Nominating Committee also recommends candidates for our Board of Directors' appointments to the standing committees of our Board of Directors.

Procedures for Recommendation of Director Nominees by Stockholders

The policy of our Corporate Governance and Nominating Committee is to consider properly submitted stockholder recommendations for director candidates. To submit a recommendation to our Corporate Governance and Nominating Committee for director nominee candidates, a stockholder must make such recommendation in writing and include:

»
the name and address of the stockholder making the recommendation, as they appear on our books and records, and of such record holder's beneficial owner, if any;

»
the class and number of shares of our equity that are owned beneficially and held of record by such stockholder and such beneficial owner including all "synthetic equity instruments" (e.g., derivatives, swaps, hedges, etc.), voting rights, rights to fees, dividends, or other material rights;

»
a description of the material terms of any agreements, arrangements or understandings (whether or not in writing) entered into between such stockholder or such beneficial owner and any other person for the purpose of acquiring, holding, disposing or voting of any shares of any class of our equity;

»
the name of the individual recommended for consideration as a director nominee;

»
why such recommended candidate meets our criteria and would be able to fulfill the duties of a director;

»
how the recommended candidate meets applicable independence requirements established by the SEC and NASDAQ;

»
the recommended candidate's beneficial ownership in our securities;

»
any relationships between the recommended candidate and us which may constitute a conflict of interest; and

»
all other information relating to the recommended candidate that would be required to be disclosed in solicitations of proxies for the election of directors or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act, including the recommended candidate's written consent to being named in the proxy statement as a nominee and to serving as a director if approved by our Board of Directors and elected.

Recommendations must be sent to the Chairperson of our Corporate Governance and Nominating Committee, c/o Secretary, Exact Sciences Corporation, 441 Charmany Drive, Madison, Wisconsin 53719. The Secretary must receive any such recommendation for nomination not later than the close of business on the 120th day nor earlier than the close of business on the 150th day prior to the first anniversary of the date of the proxy statement delivered to stockholders in connection with the preceding year's annual meeting of stockholders; provided, however, that with respect to a special meeting of stockholders called by us for the purpose of electing directors to our Board of Directors, the Secretary must receive any such recommendation not earlier than the 90th day prior to such special meeting nor later than the later of (1) the close of business on the 60th day prior to such special meeting or (2) the close of business on the 10th day following the day on which a public announcement is first made regarding such special meeting. We will promptly forward any such nominations to our Corporate Governance and Nominating Committee. Once our Corporate Governance and Nominating Committee receives a recommendation for a director candidate, such candidate will be evaluated in the same manner as other candidates and a recommendation with respect to such candidate will be delivered to our Board of Directors.

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Policy Governing Director Attendance at Annual Meetings of Stockholders

Our policy is to schedule a regular meeting of our Board of Directors on the same date as our annual meeting of stockholders and, accordingly, directors are encouraged to be present at such stockholder meetings. All individuals serving on our Board of Directors at the time of the 2018 annual meeting attended the 2018 annual meeting of stockholders.

Code of Business Conduct and Ethics

We have in place a Code of Business Conduct and Ethics (the "Code of Ethics") that applies to all of our directors, officers and employees. The Code of Ethics is designed to deter wrongdoing and promote:

»
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

»
full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications that we make;

»
compliance with applicable governmental laws, rules and regulations;

»
the prompt internal reporting of violations of the Code of Ethics to an appropriate person identified in the Code of Ethics;

»
accountability for adherence to the Code of Ethics; and

»
anonymous reporting of violations of the Code of Ethics via reporting mechanisms approved by our Audit and Finance Committee.

A current copy of the Code of Ethics is available at www.exactsciences.com. A copy may also be obtained, free of charge, from us upon a request directed to Exact Sciences Corporation, 441 Charmany Drive, Madison, Wisconsin 53719, attention: Investor Relations. We intend to disclose any amendments to or waivers of a provision of the Code of Ethics by posting such information on our website available at www.exactsciences.com and/or in our public filings with the SEC.

Our Board of Directors and its Committees

Board of Directors

Our bylaws state that the number of directors constituting the entire Board of Directors shall be determined by resolution of our Board and that our Board has the authority to increase the number of directors, fill any vacancies on our Board and to decrease the number of directors to eliminate any vacancies. The number of directors currently fixed by our Board of Directors is ten.

Our Board of Directors is classified into three separate classes (Classes I, II and III), with one class of directors nominated for election each year. Our Board of Directors believes the classification of the Board is important to our philosophy of managing and promoting the Company's long-term growth. Given the highly competitive nature of our business and the complexity and evolution of the life sciences industry more broadly, it can take several years to gain a robust understanding of our business and strategy, the Company's organization and structure, our products and our industry. Electing directors to a three year term is intended to promote continuity and stability of strategy and business direction for the long-term interests and expectations of our stockholders and other stakeholders.

Our Board of Directors met 8 times during the year ended December 31, 2018. All directors attended at least 75% of the aggregate of all meetings of our Board of Directors and all committees of our Board of Directors on which he or she served during 2018.

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Committees

Our Board of Directors has standing Audit and Finance, Compensation and Management Development, Corporate Governance and Nominating and Innovation, Technology and Pipeline Committees. Our Board of Directors and each standing committee retains the authority to engage its own advisors and consultants. Each standing committee has a charter that has been approved by our Board of Directors. A copy of each committee charter is available at www.exactsciences.com. Each committee reviews the appropriateness of its charter annually or at such other intervals as each committee determines.

The following table sets forth the current members of each standing committee of our Board:

NAME
AUDIT AND
FINANCE

COMPENSATION
AND MANAGEMENT
DEVELOPMENT

CORPORATE
GOVERNANCE AND
NOMINATING

INNOVATION,
TECHNOLOGY AND
PIPELINE

Thomas D. Carey     GRAPHIC  
Eli Casdin GRAPHIC GRAPHIC   GRAPHIC
James E. Doyle   GRAPHIC GRAPHIC  
John A. Fallon, M.D. GRAPHIC   GRAPHIC GRAPHIC
Daniel J. Levangie GRAPHIC GRAPHIC   GRAPHIC
Kathleen G. Sebelius     GRAPHIC GRAPHIC
David A. Thompson     GRAPHIC  
Michael S. Wyzga GRAPHIC      
Katherine S. Zanotti   GRAPHIC    

GRAPHIC  Chair     GRAPHIC  Member

The following summarizes the membership of each committee, as well as the primary roles and responsibilities of each committee and the number of times each committee met in 2018.

 
  AUDIT AND FINANCE
COMMITTEE
  NUMBER OF MEETINGS IN 2018: 9  
 

MEMBERS

»

Mr. Wyzga (Chair)

»

Mr. Casdin

»

Dr. Fallon

»

Mr. Levangie

 

AMONG OTHER THINGS, OUR AUDIT AND FINANCE COMMITTEE:

»

Maintains responsibility for assisting our Board of Directors in fulfilling its oversight responsibilities with respect to financial reports and other financial information.

»

Reviews, monitors and reports to our Board of Directors on the adequacy of the Company's financial reporting process and system of internal controls over financial reporting.

»

Selects, evaluates and replaces the independent auditor and serves as ultimate authority to which independent auditors are accountable.

»

Oversees the Company's internal audit department, including the appointment, replacement or dismissal of the director of internal audit and the internal audit department's activities, including all issued internal audit reports, major findings and updates on remediation of past findings.

»

In consultation with management, periodically reviews the adequacy of the Company's disclosure controls and procedures and approves any significant changes thereto.

»

Advises and consults with management concerning plans and objectives for the Company's capitalization, including the structure and amount of debt and equity required to meet the Company's financing needs.

»

Reviews and evaluates significant capital expenditures, mergers, acquisitions, divestitures, joint ventures and other significant transactions.

»

Provides the Audit and Finance Committee report for inclusion in our proxy statement for our annual meeting of stockholders.

»

Recommends, establishes and monitors procedures for the receipt, retention and treatment of complaints relating to accounting, internal accounting controls or auditing matters and the receipt of confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters.

 
  Our Board of Directors has determined that each member of our Audit and Finance Committee is independent with the meaning of the NASDAQ director independence standards and applicable rules of the SEC for audit committee members. Our Board of Directors has also determined that each of Mr. Casdin and Mr. Wyzga qualifies as an "audit committee financial expert" under the rules of the SEC.  
 

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  COMPENSATION AND
MANAGEMENT
DEVELOPMENT
COMMITTEE
  NUMBER OF MEETINGS IN 2018: 5  
 

MEMBERS

»

Ms. Zanotti (Chair)

»

Mr. Casdin

»

Mr. Doyle

»

Mr. Levangie

 

AMONG OTHER THINGS, OUR COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE:

»

Discharges the responsibilities of our Board of Directors relating to the compensation of our executive officers.

»

Evaluates and recommends to our Board of Directors appropriate compensation for the Company's independent directors.

»

Oversees the Company's procedures for consideration and determination of executive and director compensation.

»

Reviews and approves all executive compensation.

»

Administers and implements the Company's incentive compensation plans and equity-based plans.

»

Oversees succession planning for executive management and reviews the performance, potential, development and retention of current and future executive management and the organizational capability to meet short- and long-term strategic objectives.

»

Reviews and recommends the Compensation Discussion & Analysis for inclusion in our proxy statement for our annual meeting of stockholders.

»

Provides our Compensation and Management Development Committee Report for inclusion in our proxy statement for our annual meeting of stockholders.

 
  Each member of our Compensation and Management Development Committee is a non-employee director as defined in Rule 16b-3 of the Exchange Act. Our Board of Directors has determined that each member of our Compensation and Management Development Committee is also an independent director within the meaning of NASDAQ's director independence standards and applicable SEC rules.  
 

 

 
  CORPORATE
GOVERNANCE AND
NOMINATING
COMMITTEE
  NUMBER OF MEETINGS IN 2018: 7  
 

MEMBERS

»

Mr. Thompson (Chair)

»

Mr. Carey

»

Mr. Doyle

»

Dr. Fallon

»

Ms. Sebelius

 

AMONG OTHER THINGS, OUR CORPORATE GOVERNANCE AND NOMINATING COMMITTEE:

»

Recommends to our Board of Directors persons to serve as members of our Board of Directors and as members of and chairpersons for the committees of our Board of Directors.

»

Considers the recommendations of candidates to serve as directors submitted from our stockholders.

»

Assists our Board of Directors in evaluating the performance of our Board of Directors and our Board committees.

»

Advises our Board of Directors regarding the appropriate board leadership structure for the Company.

»

Reviews and makes recommendations to our Board of Directors on corporate governance matters.

»

Reviews the size and composition of our Board of Directors and recommends to our Board of Directors any changes it deems advisable.

 
  Our Board of Directors has determined that each member of our Corporate Governance and Nominating Committee is an independent director within the meaning of the NASDAQ director independence standards and applicable rules of the SEC.  
 

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CORPORATE GOVERNANCE PRINCIPLES, BOARD MATTERS AND NON-EMPLOYEE DIRECTOR COMPENSATION


 
  INNOVATION,
TECHNOLOGY AND
PIPELINE COMMITTEE
  No meetings in 2018—Committee was formed in October 2018.  
 

MEMBERS

»

Mr. Levangie (Chair)

»

Mr. Casdin

»

Dr. Fallon

»

Ms. Sebelius

 

AMONG OTHER THINGS, OUR INNOVATION, TECHNOLOGY AND PIPELINE COMMITTEE:

»

Interacts with management and external advisors to develop insights and recommendations regarding the Company's approach to pipeline development and technical and commercial innovation, including:

»

Maintaining alignment between strategic commercial objectives and the Company's product development pipeline;

»

Assisting management in identification, evaluation and oversight of appropriate pipeline, technology and product development investments;

»

Working with management to prioritize medical and clinical technology needs that can effectively be addressed by the Company;

»

Development, oversight and review of key product development and other technical personnel; and

»

Assessment of new and existing intellectual property assets and risks.

»

Will support the recruitment and development of, and interaction with, the Company's scientific advisory board.

»

Provides an early assessment of, and acts as a sounding board to management with regard to, merger and acquisition opportunities that would expand the Company's pipeline or product/service offerings.

»

Provides feedback and input regarding the Company's development of innovative new business models, strategies and tactics.

 
  Our Board of Directors has determined that each member of our Innovation, Technology and Pipeline Committee is an independent director within the meaning of the NASDAQ director independence standards and applicable rules of the SEC.  
 

Compensation and Management Development Committee Interlocks and Insider Participation

Eli Casdin, James E. Doyle, Daniel J. Levangie and Katherine S. Zanotti served on our Compensation and Management Development Committee in 2018. None of the directors who served on our Compensation and Management Development Committee in 2018 served as one of our employees in 2018 or has ever served as one of our officers. During 2018, none of our executive officers served as a director or member of a compensation committee (or other committee performing similar functions) of any other entity of which an executive officer served on our Board of Directors or Compensation and Management Development Committee.

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CORPORATE GOVERNANCE PRINCIPLES, BOARD MATTERS AND NON-EMPLOYEE DIRECTOR COMPENSATION

Role of our Board of Directors in Risk Oversight

Our Board of Directors administers its risk oversight function directly and through our Audit and Finance Committee and our Compensation and Management Development Committee. Our Audit and Finance Committee regularly discusses with management the Company's major risk exposures, their potential financial impact on the Company, and the steps taken to monitor and control those risks and reviews with management annually a summary of risk management activities including an insurance review, a review of management's precautionary plans for disaster protection, and a review of the Company's policies and procedures with respect to cybersecurity threats and related issues. Additionally, our Audit and Finance Committee assists our Board in its oversight of the Company's compliance with legal and regulatory matters. Our Compensation and Management Development Committee, together with management, has reviewed the Company's compensation policies and practices and concluded that such policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.

Cybersecurity and Data Protection Risk Management

Protecting the privacy of our patients' and employees' information and the security of our systems and networks has long been and will continue to be a priority for Exact Sciences and our Board of Directors. We have technical, administrative and physical safeguards in place to help protect against unauthorized access to, use or disclosure of patient and employee information and data we collect and store. In addition, our comprehensive information security program includes, among other aspects, vulnerability management, antivirus and malware protection, file integrity monitoring, encryption and access control.

Consistent with our Board of Directors' risk management and oversight structure, our Audit and Finance Committee has primary responsibility for overseeing our risk management practices, programs, policies and procedures related to data privacy, data protection and network security. Management provides our Audit and Finance Committee and our Board of Directors with updates about cybersecurity practices, programs, policies and procedures and the status of projects designed to strengthen internal cybersecurity and data protection. Our Board of Directors and our Audit and Finance Committee also discuss potential cybersecurity and data protection threats.

Director Compensation

We maintain a compensation policy for our non-employee directors (the "Director Compensation Policy") that is intended to enable us to attract and retain, on a longer-term basis, high-qualified non-employee directors. The Director Compensation Policy is supported by a periodic benchmarking exercise conducted by Radford, an Aon Consulting Company ("Radford"), the Company's independent executive compensation consultant, which positions the cash and equity compensation paid to our non-employee directors at the market median of a peer group that is reviewed annually.

Under the Director Compensation Policy, on the date of each annual stockholders meeting, each non-employee director who continues to serve as a director following such meeting is paid an annual cash retainer as follows:

BOARD MEMBER COMPENSATION
  ANNUAL RETAINER ($)
 

Lead Independent Director

    75,000  

Director

    50,000  

 

COMMITTEE CHAIRPERSON COMPENSATION
  ANNUAL RETAINER ($)
 

Audit and Finance Committee

    25,000  

Compensation and Management Development Committee

    20,000  

Corporate Governance and Nominating Committee

    13,000  

Innovation, Technology & Pipeline Committee

    13,000  

 

COMMITTEE MEMBER COMPENSATION
  ANNUAL RETAINER ($)
 

Audit and Finance Committee

    12,500  

Compensation and Management Development Committee

    10,000  

Corporate Governance and Nominating Committee

    6,500  

Innovation, Technology & Pipeline Committee

    6,500  

In lieu of cash, each non-employee director may elect to receive shares of Company common stock having an equivalent dollar value.

In addition, non-employee directors are paid cash compensation of $1,500 per meeting in atypical circumstances when (1) our Board of Directors or any committee has met more than 10 times per year or (2) our Board of Directors creates a special committee. Further, members of our Innovation, Technology & Pipeline Committee receive an additional cash payment of $5,000 per full-day, on-site, special working meeting (of which it is anticipated that two such meetings per year will take place).

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CORPORATE GOVERNANCE PRINCIPLES, BOARD MATTERS AND NON-EMPLOYEE DIRECTOR COMPENSATION

Under the Director Compensation Policy, on the date of each annual stockholders meeting, each non-employee director who is continuing to serve as a director following such meeting is also granted restricted stock or deferred stock units having a value of $250,000 with the number of shares of restricted stock or deferred stock units to be issued being determined based on the closing price of the Company's common stock on the grant date. In addition, if the Board chair is independent and such Board chair will continue as Board chair following the date of the annual meeting, such Board chair will be granted an additional annual restricted stock or deferred stock unit award having a value of $15,000.These annual equity grants are scheduled to vest upon the earlier of the first anniversary of the grant date or the date of the next annual stockholders meeting; provided upon the death of a director, such director's awards vest in full; upon a director's ceasing to serve for any other reason, such director's awards vest pro rata based on the number of days since the grant date; and upon a change of control, all awards vest in full.

Under the Director Compensation Policy, if a director is elected or appointed to our Board of Directors other than on the date of the Company's annual meeting of stockholders, such director's annual cash and equity compensation as described above, for the period between the date of such election or appointment and the date of the Company's next annual meeting of stockholders, will be granted in a pro rata amount on the date of such annual meeting to reflect the date of such director's election or appointment and the date of the Company's following annual meeting of stockholders. The number of shares of restricted stock or deferred stock units to be issued to the director based on the foregoing pro rata compensation is determined based on the closing price of the Company's common stock on the date of such director's appointment, and such shares of restricted stock or deferred stock units are fully vested upon grant.

Upon his or her initial election to our Board of Directors, a new director receives shares of restricted stock or deferred stock units having a value equal to $375,000 based on the closing sale price of our common stock on the date of grant. Such shares of restricted stock or deferred stock units vest in three equal annual installments.

If approved by our stockholders at the 2019 Annual Meeting, the Exact Sciences Corporation 2019 Omnibus Long-Term Incentive Plan (the "2019 Plan") will establish limits on the awards issuable to our non-employee directors. Under the 2019 Plan, the maximum value of all awards granted to a non-employee director, taken together with all cash fees paid to such non-employee director under any other equity compensation plan of the Company or an affiliate in a given calendar year, may not exceed $600,000 (calculating the value of any equity compensation plan awards based on the grant date fair market value for financial reporting purposes). However, awards granted to non-employee directors upon their initial election to the Board of Directors or the board of directors of an affiliate will not be counted towards this limit, and certain other limited exceptions may apply.

The foregoing compensation is in addition to reimbursement of all out-of-pocket expenses incurred by directors in attending meetings of our Board of Directors.

The following table provides compensation information for the one-year period ended December 31, 2018 for each non-employee member of our Board of Directors. No member of our Board employed by us receives separate compensation for services rendered as a member of our Board. Kathleen G. Sebelius did not join our Board of Directors until March 3, 2019 and thus received no compensation in the one-year period ended December 31, 2018.

NAME
  FEES EARNED OR
PAID IN CASH
($)

  STOCK
AWARDS
($)(1)

  OPTION
AWARDS
($)(1)

  TOTAL
($)

 

Thomas D. Carey

    56,500     199,969         256,469  

Eli Casdin

    124,856 (2)   349,558 (3)       474,414  

James E. Doyle

    66,500     199,969         266,469  

John A. Fallon, M.D.

    69,000     199,969         268,969  

Daniel J. Levangie

        272,469         272,469  

David A. Thompson

        287,969         287,969  

Michael S. Wyzga

    37,500     237,469         274,969  

Katherine S. Zanotti

    70,000     199,969         269,969  
(1)
The amounts shown in this column indicate the grant date fair value of stock or option awards, respectively, computed in accordance with FASB ASC Topic 718. Generally, the grant date fair value is the amount that we would expense in our financial statements over the award's vesting schedule. For additional information regarding the assumptions made in calculating these amounts, see the Notes to our audited, consolidated financial statements included in our Annual Report on Form 10-K for 2018. These amounts reflect our accounting expense for these awards and do not correspond to the actual value that will be recognized by the directors.

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CORPORATE GOVERNANCE PRINCIPLES, BOARD MATTERS AND NON-EMPLOYEE DIRECTOR COMPENSATION
NAME
  NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS

  UNVESTED
SHARES OF
RESTRICTED STOCK,
RESTRICTED
STOCK UNITS
AND DEFERRED
STOCK UNITS

 

Thomas D. Carey

    15,620     3,230  

Eli Casdin

    10,100     3,230  

James E. Doyle

    18,477     3,230  

John A. Fallon, M.D.

    84,589     3,230  

Daniel J. Levangie

    52,472     3,230  

David A. Thompson

        3,230  

Michael S. Wyzga

    12,608     3,230  

Katherine S. Zanotti

    25,637     3,230  
(2)
Includes $52,356 fees earned in cash for the period between the date of Mr. Casdin's election to the Board of Directors and the 2018 Annual Meeting of Stockholders, paid in accordance with the Director Compensation Policy.

(3)
Includes $149,589 of stock awards earned for the period between the date of Mr. Casdin's election to the Board of Directors and the 2018 Annual Meeting of Stockholders, paid in accordance with the Director Compensation Policy.

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PROPOSAL 2—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PROPOSAL 2—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

WHAT YOU ARE VOTING ON:

We are asking our stockholders to ratify the appointment of BDO USA, LLP
as our independent registered public accounting firm for 2019.

Our Audit and Finance Committee of our Board of Directors has appointed BDO USA, LLP ("BDO") as our independent registered public accounting firm for the fiscal year ending December 31, 2019. We are presenting this selection to our stockholders for ratification at the annual meeting.

BDO audited our consolidated financial statements for 2018. A representative of BDO is expected to be present at the 2019 Annual Meeting. In addition to having the opportunity to make a statement, the BDO representative will be available to respond to any appropriate questions.

Vote Required for Approval

Ratification of the appointment of our independent registered public accounting firm requires the affirmative vote of a majority of the shares present or represented at the 2019 Annual Meeting, in person or by proxy, and voting on such ratification. If our stockholders fail to ratify the selection of BDO as the independent registered public accounting firm for 2019, our Audit and Finance Committee will reconsider whether to retain that firm. Even if the selection is ratified, our Audit and Finance Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year.

Board Recommendation

GRAPHIC

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Other than as described below and compensation agreements and other arrangements which are described in "Compensation And Other Information Concerning Named Executive Officers" beginning on page 29, in 2018 there was not, and there is not currently proposed, any transaction or series of similar transactions to which we were or will be a party in which the amount involved exceeded or will exceed $120,000 in which any director, executive officer, holder of five percent or more of any class of our capital stock or any member of their immediate family had or will have a direct or indirect material interest.

In May 2017, the Company engaged Perspective Group LLC, an executive search firm in which Thomas Carey, a member of our Board of Directors, is majority owner, to perform certain executive searches. Under the terms of the engagement, the Company paid Perspective Group approximately $251,300 during the year ended December 31, 2018, which was less than 5% of the Perspective Group's aggregate revenue for the year ended December 31, 2018. The Company does not currently expect to pay Perspective Group any amounts for such services for the year ended December 31, 2019.

Our Board of Directors has adopted a written policy with regard to related person transactions, which sets forth our procedures and standards for the review, approval or ratification of any transaction required to be reported in our filings with the SEC or in which one of our executive officers or directors has a direct or indirect material financial interest, with limited exceptions. Our policy is that our Audit and Finance Committee shall review the material facts of all related person transactions (as defined in the related person transaction approval policy) and either approve or disapprove of the entry into any related person transaction. In the event that obtaining the advance approval of our Audit and Finance Committee is not feasible, our Audit and Finance Committee shall consider the related person transaction and, if our Audit and Finance Committee determines it to be appropriate, may ratify the related person transaction. In determining whether to approve or ratify a related person transaction, our Audit and Finance Committee will take into account, among other factors it deems appropriate, whether the related person transaction is on terms comparable to those available from an unaffiliated third-party under the same or similar circumstances and the extent of the related person's interest in the transaction.

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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The following table sets forth the aggregate fees billed or expected to be billed by BDO for 2018 and 2017 for audit and non-audit services, including "out-of-pocket" expenses incurred in rendering these services. The nature of the services provided for each category is described following the table.

Fee Category
  2018
  2017
 

Audit Fees(1)

  $ 841,722   $ 732,769  

Audit-Related Fees(2)

    21,828     17,850  

Tax Fees

         

All Other Fees(3)

        7,087  

Total

  $ 863,550   $ 757,706  
(1)
Audit fees include fees for professional services rendered for the audit of our consolidated annual statements, quarterly reviews, consents and assistance with and review of documents filed with the SEC. Audit fees also include fees for professional services rendered for statutory audits performed by BDO's international affiliates.

(2)
Audit-related fees include fees for professional services rendered for the audit of our 401(k) Plan.

(3)
All other fees include fees for professional services rendered in connection with certain consulting projects undertaken by the Company.

Pre-Approval Policies and Procedures

Our Audit and Finance Committee has adopted a policy that requires that all services to be provided by the Company's independent public accounting firm, including audit services and permitted non-audit services, to be pre-approved by our Audit and Finance Committee. Our Audit and Finance Committee pre-approved all audit and permitted non-audit services provided by BDO during 2018 pursuant to this policy.

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REPORT OF THE AUDIT AND FINANCE COMMITTEE

REPORT OF THE AUDIT AND FINANCE COMMITTEE

The Audit and Finance Committee is comprised of Eli Casdin, John A. Fallon, M.D., Daniel J. Levangie and Michael S. Wyzga. None of the members of the Audit and Finance Committee is an officer or employee of the Company, and the Board of Directors has determined that each member of the Audit and Finance Committee meets the independence requirements promulgated by The NASDAQ Stock Market and the SEC, including Rule 10A-3(b)(1) under the Exchange Act.

The Audit and Finance Committee oversees the Company's financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls and the certification of the integrity and reliability of the Company's internal controls procedures. In fulfilling its oversight responsibilities, the Audit and Finance Committee has reviewed the Company's audited consolidated balance sheets at December 31, 2018 and 2017 and the related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2018, and has discussed them with both management and BDO USA, LLP ("BDO"), the Company's independent registered public accounting firm. The Audit and Finance Committee has also discussed with the independent registered public accounting firm the matters required to be discussed by the Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board. The Audit and Finance Committee has reviewed permitted services under rules of the SEC as currently in effect and discussed with BDO their independence from management and the Company, including the matters in the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the Audit and Finance Committee concerning independence. The Audit and Finance Committee has also considered and discussed the compatibility of non-audit services provided by BDO with that firm's independence.

Based on its review of the consolidated financial statements and the aforementioned discussions, the Audit and Finance Committee concluded that it would be reasonable to recommend, and on that basis did recommend, to the Board of Directors that the audited consolidated financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Respectfully submitted by the Audit and Finance Committee.

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PROPOSAL 3—ADVISORY VOTE ON EXECUTIVE COMPENSATION

PROPOSAL 3—ADVISORY VOTE ON EXECUTIVE COMPENSATION

WHAT YOU ARE VOTING ON:

At the 2019 Annual Meeting, stockholders are being asked to approve the compensation of our NEOs
as disclosed in this Proxy Statement.

This Proposal 3 enables our stockholders to cast a non-binding, advisory vote to approve the compensation of our named executive officers as disclosed in this Proxy Statement.

As described in detail under the heading "Compensation and Other Information Concerning Named Executive Officers—Compensation Discussion and Analysis" beginning on page 29, our executive compensation program is designed to attract, motivate and retain our executive officers, who are critical to our success. Please read the "Compensation and Other Information Concerning Named Executive Officers" section beginning on page 29 for additional details about our executive compensation programs, including information about the 2018 compensation of our named executive officers.

We are asking our stockholders to indicate their support for our executive compensation programs as described in this Proxy Statement. This vote is not intended to address any specific term of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we are asking our stockholders to vote FOR the following resolution at the annual meeting:

 
"RESOLVED, that the compensation paid to the Company's named executive officers, as disclosed pursuant to the SEC's compensation disclosure rules, including the "Compensation Discussion and Analysis", the compensation tables and any related material disclosed in the proxy statement for the Company's 2018 annual meeting, is hereby APPROVED."

Although the vote on this Proposal 3 regarding the compensation of our named executive officers is not binding on our Board of Directors, we value the opinions of our stockholders and will consider the result of the vote when determining future executive compensation arrangements.

Vote Required for Approval

The foregoing resolution will be approved if holders of a majority of the shares present or represented at the 2019 Annual Meeting, in person or by proxy, and voting on Proposal 3 vote in favor of such resolution.

Board Recommendation

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COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS

COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS

Compensation Discussion and Analysis

This Compensation Discussion and Analysis explains our executive compensation program as it relates to our named executive officers ("NEOs"), whose compensation information is presented in the following tables and discussion in accordance with SEC rules:

NAME

  POSITION

Kevin T. Conroy

 

Chairman, President and Chief Executive Officer

Jeffrey T. Elliott

 

Chief Financial Officer

Mark Stenhouse

 

President, Cologuard

D. Scott Coward

 

Senior Vice President, General Counsel, Chief Administrative Officer and Secretary

Maneesh K. Arora

 

Former Senior Vice President and Chief Operating Officer*

Graham P. Lidgard

 

Senior Vice President and Chief Science Officer**

*
In April 2018, Mr. Arora resigned from his positions as Senior Vice President and Chief Operating Officer and a member of our Board of Directors. Mr. Arora remained a non-executive employee of the Company for a transition period through December 31, 2018 when he retired from the Company.

**
In December 2018, Dr. Lidgard transitioned leadership of the Company's research and development function to Dr. Scott Johnson. Effective December 28, 2018, Dr. Lidgard ceased serving as an executive officer, though he continues his work as our Chief Science Officer.

Our executive compensation program is designed to focus executive behavior on achievement of both our annual and long-term objectives and strategy as well as align the interests of management with those of our stockholders. To that end, executive compensation consists of three primary elements: salary, long-term equity interests and an annual cash bonus opportunity based on individual and corporate performance.

Objectives and Philosophy of Our Executive Compensation Program

Our compensation program for our executive officers is intended to achieve the following objectives:

»
Focus executive behavior on achievement of our annual and long-term objectives and strategy;

»
Provide a competitive compensation package that enables us to attract and retain qualified executives;

»
Provide a total compensation structure that our Compensation and Management Development Committee believes is comparable to similarly-sized companies in the life sciences industry with which we may compete for talent and which consists of a mix of base salary, equity and cash incentives; and

»
Align the interests of management and stockholders by providing management with long-term incentives through equity ownership.

Elements of Executive Compensation

Our executive compensation program consists of three primary elements: salary, long-term equity interests and an annual cash bonus opportunity based on both corporate and individual performance. Pursuant to their employment agreements, certain of our executive officers participate in a long-term incentive plan that provides for certain cash payments upon certain changes of control of the Company. All of our executive officers are also eligible for certain benefits offered to employees generally, including, life, health, disability, dental and vision insurance, as well as participation in our 401(k) plan and 2010 Employee Stock Purchase Plan. We do not currently believe it is necessary for the attraction or retention of management talent to provide executive officers with compensation in the form of perquisites (other than housing and relocation benefits from time to time).

Determining Executive Compensation

It is the responsibility of our Compensation and Management Development Committee to administer our compensation practices, to ensure that they are competitive and financially prudent and that they include incentives that are designed to appropriately drive performance. To achieve this, our Compensation and Management Development Committee periodically reviews commercially-available, industry-specific compensation data for companies of generally similar employee size, stage of development and market capitalization in the diagnostic, biotechnology and medical device industries as a general guide for establishing our pay and equity practices and structures. Our Compensation and Management Development Committee, along with our Board of Directors, also reviews and approves corporate objectives used in our executive compensation program to confirm that appropriate goals have been established and tracks performance against them. On an annual basis, our

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COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS

Compensation and Management Development Committee reviews tally sheets reflecting each executive officer's compensation history with respect to each element of compensation, as well as projected payouts that would come due in connection with a termination or change of control.

Our Compensation and Management Development Committee conducts an annual review of performance and compensation during the first quarter of each year for the purpose of determining the compensation of executive officers other than the Chief Executive Officer. As part of this review, the Chief Executive Officer submits recommendations to our Compensation and Management Development Committee relating to the compensation of these officers. Following a review of these recommendations, our Compensation and Management Development Committee approves the compensation of these officers, with such modifications to the Chief Executive Officer's recommendations as our Compensation and Management Development Committee considers appropriate.

Our Compensation and Management Development Committee's review of the Chief Executive Officer's compensation is subject to additional procedures. With input from the independent directors, the Lead Independent Director, along with our Compensation and Management Development Committee, evaluates the Chief Executive Officer's performance and reviews the evaluation with him. Based on that evaluation and review and consultation with its independent compensation consultant, our Compensation and Management Development Committee then determines the Chief Executive Officer's compensation. The Chief Executive Officer does not attend the portions of meetings of our Compensation and Management Development Committee where the Committee votes or deliberates on his compensation.

Our Compensation and Management Development Committee has engaged Radford as its independent executive compensation consultant. Our Compensation and Management Development Committee has assessed the independence of Radford pursuant to SEC and listing exchange rules and concluded that no conflict of interest exists that would prevent Radford from serving as an independent consultant to our Compensation and Management Development Committee.

Use of Peer Group Data

In early 2018, with the guidance of Radford, our Compensation and Management Development Committee conducted an annual review of the competitiveness of our executive compensation program, including the competitiveness of our base salaries, target total cash compensation, long-term incentives and target total direct compensation.

Radford analyzed the components of our executive compensation program against information blended from (1) proxy statement data from a peer group of companies that consisted of publicly-traded diagnostic, biotechnology and medical device companies that were similar to the Company in terms of stage of headcount, revenue and market capitalization and (2) survey data from a broader group of commercial stage public diagnostics, biotechnology and medical device companies with revenue between $50 million and $750 million and market capitalization between $1.0 billion and $15.0 billion.

Our Compensation and Management Development Committee seeks to identify an executive compensation peer group of approximately 20 companies in the diagnostic, biotechnology and medical device industries at a similar stage of development and comparable financial profile that may compete with the Company for executive talent. Based on Radford's review and recommendations regarding the Company's executive compensation peer group, our Compensation and Management Development Committee approved a new peer group for 2018. In its review, Radford focused on creating a peer group that:

»
Represented companies operating in the diagnostics, medical device and biotechnology industries;

»
Contained commercialized companies with respect to the stage of such companies' development; and

»
Captured comparable companies in terms of headcount, revenue and market capitalization.

Based on Radford's recommendations, our Compensation and Management Development Committee (1) removed six companies from the prior year's peer group either because they were acquired or no longer met the targeted market capitalization level and (2) added three companies to the prior year's peer group (Hologic, Masimo and Opko Health) that met the stated criteria.

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COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS

The companies in our peer group for 2018 were:

COMPANY
  INDUSTRY
Abaxis   Health Care Equipment
ABIOMED   Health Care Equipment
Acorda Therapeutics   Biotechnology
Cardiovascular Systems   Health Care Equipment
DexCom   Health Care Equipment
Foundation Medicine   Biotechnology
Genomic Health   Biotechnology
Halozyme Therapeutics   Biotechnology
Hologic   Health Care Equipment
Insulet   Health Care Equipment
Ionis Pharmaceuticals   Biotechnology
Ironwood Pharmaceuticals   Biotechnology
Masimo   Health Care Equipment
Myriad Genetics   Biotechnology
Nektar Therapeutics   Pharmaceuticals
Opko Health   Biotechnology
Pacira Pharmaceuticals   Pharmaceuticals
Quidel   Health Care Equipment
Tesaro   Biotechnology

As part of its analysis and due to the Company's growth and significant stock price appreciation, Radford recommended a change in the methodology used by our Compensation and Management Development Committee to determine equity grants to be based entirely on grant value instead of a combination of grant value and percent of compensation. Radford also provided us with an assessment of our annual equity award burn rate and the expected retentive value of equity awards held by our executives, as well as an analysis of the alignment of Company performance and CEO compensation.

Based on Radford's analysis, we reached the following conclusions regarding our executive compensation program relative to our peer group:

»
Base salary and target total cash compensation (base salary plus annual cash bonus opportunity) levels for our NEOs had fallen to approximate the 25th percentile and should be increased to approximate the target 50th percentile per the Company's pay philosophy.

»
In light of the change in methodology for determining equity grants described above, which was expected to result in 2018 equity grants covering a substantially lower number of shares than 2017 equity grants, the aggregate value of the long-term incentive compensation awarded to our NEOs would be based on the 90th percentile.

Based on our assessment of the performance of the executives and our compensation philosophy as described in this Compensation Discussion and Analysis, in early 2018 our Compensation and Management Development Committee set salaries and target bonus opportunities as follows:

NAME
  2017 BASE
SALARY ($)

  2018 BASE
SALARY ($)

 

Kevin T. Conroy

    632,500     695,800  

Jeffrey T. Elliott

    350,000     400,000  

Mark Stenhouse(1)

        500,000  

D. Scott Coward(2)

    400,300     430,000  

Graham P. Lidgard

    430,500     463,600  

Maneesh K. Arora

    475,900     500,000  
(1)
The Company established an initial base salary for Mr. Stenhouse of $500,000 upon his hiring in April 2018.

(2)
in July 2018, the Compensation and Management Development Committee approved an increase in Mr. Coward's base salary from $430,000 to $470,000 in connection with his appointment as Chief Administrative Officer.

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COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS

 

NAME
  2017 TARGET
BONUS %

  2018 TARGET
BONUS %

 

Kevin T. Conroy

    90 %   100 %

Jeffrey T. Elliott

    40 %   50 %

Mark Stenhouse(1)

        50 %

D. Scott Coward

    50 %   50 %

Graham P. Lidgard

    50 %   50 %

Maneesh K. Arora

    60 %   60 %
(1)
The Company established a target bonus opportunity for Mr. Stenhouse of 50% of base salary upon his hiring in April 2018.

As indicated in the tables below, due to the Company's growth and significant stock price appreciation and to the above-described change in the methodology used by our Compensation and Management Development Committee to determine equity grants, the annual equity awards made to our NEOs in 2018 covered a significantly smaller number of shares than the 2017 annual equity awards.

NAME
  2017 OPTIONS
  2018 OPTIONS
 

Kevin T. Conroy

    240,000     68,300  

Jeffrey T. Elliott

    81,000     16,700  

D. Scott Coward

    75,000     16,700  

Graham P. Lidgard

    65,000     16,700  

Maneesh K. Arora

    132,000     40,000  

 

NAME
  2017 RSUS
  2018 RSUS
 

Kevin T. Conroy

    137,300     82,300  

Jeffrey T. Elliott

    37,200     20,100  

D. Scott Coward

    51,400     20,100  

Graham P. Lidgard

    46,300     20,100  

Maneesh K. Arora

    75,500     48,200  

Mr. Stenhouse received an RSU award covering 75,000 shares upon his hiring in April 2018.

2018 Bonus Plan

Our Compensation and Management Development Committee believes that a meaningful portion of our executives' compensation should be "at risk"—in other words, contingent upon successful implementation of our strategy and goals. Accordingly, one component of our executive compensation program is an annual cash bonus opportunity under which each of our executive officers is eligible to earn an annual cash bonus with a specified target amount equal to a percentage of base salary, with the actual bonus awarded to be based upon the achievement of corporate goals determined by our Compensation and Management Development Committee in its discretion. In January 2018, our Compensation and Management Development Committee approved metrics to be used to determine 2018 bonuses, which included (1) continuing to strengthen our core Cologuard business, (2) preparation for future demand for Cologuard and (3) advancement of our product development pipeline. Our NEOs were eligible to earn bonuses for 2018 performance equal to up to 147% of their target bonuses, which were target bonuses of 100% of base salary for Mr. Conroy, 50% of base salary for Mr. Elliott, 50% of base salary for Mr. Stenhouse, 50% of base salary for Mr. Coward, 60% of base salary for Mr. Arora and 50% of base salary for Dr. Lidgard. Our Compensation and Management Development Committee determined actual bonus payments after the end of 2018 based on the Committee's assessment of the performance of the Company relative to the business goals and weightings as described in the chart below.

Performance against the applicable goals is expected to be used by our Compensation and Management Development Committee in determining annual bonus payments. However, in determining actual bonus payments our Compensation and Management Development Committee ultimately relies on its judgment after a comprehensive review of Company performance, as well as consideration of qualitative and other factors, without being tied to any formulas or pre-established weightings. Our Compensation and Management Development Committee has ultimate discretion to modify the matrix and may periodically revisit goals and weightings as circumstances change (though our Compensation and Management Development Committee did not make any such modifications with respect to 2018 bonuses).

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In determining 2018 bonus awards, our Compensation and Management Development Committee considered the executive team's achievement of a variety of business plan goals, as follows:

GOAL
  PERFORMANCE MEASURES
  TARGET WEIGHTING
 
Command of the core Cologuard business  

»

Drive demand

»

Engage and invest in health systems and physicians

»

Develop additional evidence and medical capabilities

    60 %
Preparation for future demand  

»

Invest in people, processes, technology and systems to build capacity

»

Strengthen and build redundancy in supply chain

    20 %
Advance the pipeline  

»

Expand Cologuard label for age 45-49, average risk population

»

Progress through product research phases for two new offerings

    20 %

In addition, our Compensation and Management Development Committee provided each member of the executive team an opportunity to earn an additional 10% of his or her target bonus amount upon satisfactory levels of employee engagement, as measured by certain employee survey satisfaction results, and the development of management and talent succession plans.

After considering the executive team's achievement of key business plan goals, our Compensation and Management Development Committee determined to award cash bonuses for 2018 performance at 114.25% of target. Accordingly, Mr. Conroy, Mr. Elliott, Mr. Stenhouse, Mr. Coward, Mr. Arora and Dr. Lidgard received cash bonuses of $794,952, $228,500, $285,625, $268,488, $342,750 and $264,832, respectively.

Annual Equity Awards

We believe successful long-term Company performance is critical to enhancing stockholder value and aligning the interests of our executive officers with those of our stockholders. Our Compensation and Management Development Committee believes that annual equity awards provide executive officers with the opportunity to acquire long-term stock ownership positions, which motivates them to focus on long-term stockholder value, with the performance of each NEO primarily governing the Compensation and Management Development Committee's considerations in determining long-term equity awards to each of them. These time-based awards are also intended to motivate the retention of our NEOs and provide our NEOs with a market competitive long-term equity incentive opportunity.

In January 2018, our Compensation and Management Development Committee approved annual equity awards to our NEOs consisting of time-vesting RSUs and stock options, including the approval of the number of shares of our common stock subject to each award. These awards were issued on February 27, 2018 in accordance with our Statement of Policy with respect to Equity Award Approvals. In connection with these annual equity awards, Mr. Conroy, Mr. Elliott, Mr. Coward, Mr. Arora and Dr. Lidgard received stock options approved in February 2018 covering 68,300, 16,700, 16,700, 40,000 and 16,700 shares, respectively. The shares underlying these options vest and become exercisable in four equal annual installments beginning on the first anniversary of the grant date. Additionally, Mr. Conroy, Mr. Elliott, Mr. Coward, Mr. Arora and Dr. Lidgard received RSUs covering 82,300, 20,100, 20,100, 48,200 and 20,100 shares, respectively. These RSUs vest in four equal annual installments beginning on the first anniversary of the grant date. Additionally, Mr. Stenhouse received an RSU award covering 75,000 shares upon his hiring in April 2018.

2010 Plan and 2019 Plan

The Company maintains the Exact Sciences Corporation 2010 Omnibus Long-Term Incentive Plan (As Amended and Restated Effective July 27, 2017) (as amended, the "2010 Plan"), under which we may grant cash and equity incentive awards to eligible service providers in order to attract, motivate and retain the talent for which we compete. The plan is scheduled to expire on July 16, 2020 unless earlier terminated by our Board of Directors.

In connection with the scheduled expiration of the 2010 Plan, our Board of Directors has approved, upon the recommendation of the Compensation and Management Development Committee, and has submitted to our stockholders for approval at the 2019 Annual Meeting under Proposal 4 of this Proxy Statement for the 2019 Annual Meeting, the Exact Sciences Corporation 2019 Omnibus Long-Term Incentive Plan (the "2019 Plan"). The 2019 Plan, like the 2010 Plan, provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. Incentive stock options may be granted only to employees, and all other awards may be granted to our and our affiliates' employees, non-employee directors, consultants and other service providers. If approved by our stockholders at the 2019 Annual Meeting, the 2019 Plan will be administered by our Board of Directors or a committee of our Board of Directors designated by our Board of Directors to administer the 2019 Plan. Our Board of Directors has designated the Compensation and Management Development Committee to administer the 2019 Plan subject to its approval by our stockholders at the 2019 Annual Meeting.

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Company Clawback Policy

If any of the Company's financial statements are required to be restated, the Company may be entitled to recover all or a portion of any award made under the 2010 Plan or 2019 Plan with respect to any fiscal year of the Company the financial results of which are negatively affected by the restatement. The amount to be recovered will be the amount by which the affected award exceeds the amount that would have been payable had the financial statements been initially filed as restated. Moreover, any award, amount or benefit received under the 2010 Plan or 2019 Plan, as applicable, will be subject to potential cancellation, recoupment, rescission, payback or other action in accordance with the terms of any applicable Company clawback policy or any applicable law, as may be in effect from time to time, whether adopted prior to or following the date of the award.

Other Compensation

We permit executive officers to purchase common stock at a discount through our 2010 Employee Stock Purchase Plan on the same terms and conditions as our other employees. Executive officers may also participate in our 401(k) Plan, which allows for the investment of a portion of plan assets in shares of our common stock. Our Compensation and Management Development Committee approved a discretionary matching Company contribution to our 401(k) Plan for 2018. The matching contribution was made using Company stock in an amount equal to 100% of an employee's total deferrals into the plan up to a limit of 6% of the employee's total compensation (subject to IRS limits).

Role of Stockholder Say-on-Pay Votes

We provide our stockholders with the opportunity to cast an annual advisory vote on executive compensation (a "say-on-pay proposal"). At the Company's annual meeting of stockholders held in July 2018, approximately 89% of the votes cast on the say-on-pay proposal at the meeting were voted in favor of the proposal. Our Compensation and Management Development Committee believes this vote affirms our stockholders' support of the Company's approach to executive compensation and did not make specific changes to our executive compensation program in response to the vote. However, our Compensation and Management Development Committee continues to review and refine the design and administration of our executive pay practices. Our Compensation and Management Development Committee also will continue to consider the outcome of the Company's say-on-pay votes when making future compensation decisions for our NEOs.

Stock Ownership Guidelines

We maintain Stock Ownership Guidelines to encourage ownership of shares of the Company's common stock by our directors and senior executives, to further align their interests with the long-term interests of our stockholders and to further promote the Company's commitment to sound corporate governance. Under these guidelines, directors and senior executives have until the later of (1) April 21, 2019 and (2) three years from the date the director or senior executive becomes subject to the guidelines, to achieve an ownership target determined as follows:

POSITION

  OWNERSHIP TARGETS: LOWER OF:
    Base Salary Multiple
  Fixed Share Target

CEO

 

Number of shares with a stock value equal to or greater than 6 times base salary

 

Number of shares equal to or greater than base salary, divided by stock value, multiplied by 6

Senior Executive Officers

 

Number of shares with a stock value equal to or greater than 2 times base salary

 

Number of shares equal to or greater than base salary, divided by stock value, multiplied by 2

Board of Directors

 

Number of shares with a stock value equal to or greater than 3 times annual retainer

 

Number of shares equal to or greater than annual retainer, divided by stock value, multiplied by 3

Under the Base Salary Multiple, "stock value" is calculated annually at the end of each fiscal year based on the average of the closing prices of our common stock for the last 30 trading days of the fiscal year.

Under the Fixed Share Target, "stock value" is calculated as of the later of (1) January 1, 2012, and (2) the date the director or senior executive originally becomes subject to the Stock Ownership Guidelines, as the case may be, based on the average of the closing prices of our common stock for the 30 days leading up to, and inclusive of, the applicable date.

Under both the Base Salary Multiple and Fixed Share Target, "annual retainer" or "base salary" is the director's annual retainer or the executive's base salary, as applicable, at the end of each fiscal year.

Each director and senior executive is expected to continuously own sufficient shares to satisfy either the Base Salary Multiple or the Fixed Share Target ownership target once attained for as long as he or she remains subject to the Stock Ownership Guidelines. If an individual's ownership target increases because of a change in position or compensation, the individual will have a three-year period to achieve the incremental amount of shares beginning on the effective date of the change in position or compensation.

Following the initial three-year period that the director or senior executive is afforded to achieve his or her individual ownership target under the Stock Ownership Guidelines, until a director or senior executive has satisfied the applicable ownership target, the director or senior executive is

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required to retain an amount equal to 50% of the net shares received as the result of the exercise, vesting or payment of any Company equity awards granted to the director or executive. This amount is calculated using the closing price of our common stock on the trading day immediately preceding the date of exercise, vesting or payment of the equity award. Once a director or senior executive achieves his or her individual ownership target, the retention requirements as described above no longer will apply to such director or senior executive unless a disposition by such director or senior executive would cause such individual's stock ownership to fall below his or her ownership target.

Restrictions on Hedging and Pledging of Company Securities

Our Insider Trading Policy prohibits short sales of our securities, including a "sale against the box," by our directors and executives. Our Insider Trading Policy also prohibits directors and employees from engaging in hedging or monetization transactions, such as zero-cost collars and forward sale contracts, as they involve the establishment of a short position in our securities. Our Insider Trading Policy also prohibits directors and executives from holding our securities in a margin account or pledging such securities as collateral for a loan.

Our NEOs

In April 2009, Kevin T. Conroy and Maneesh K. Arora joined us as our President & Chief Executive Officer and Senior Vice President & Chief Financial Officer, respectively. In November 2016, Jeffrey T. Elliott became our Chief Financial Officer. In August 2009, Graham P. Lidgard joined us as our Senior Vice President & Chief Science Officer. In January 2015, D. Scott Coward joined us as Senior Vice President, General Counsel & Secretary. In July 2018, Mr. Coward was appointed Chief Administrative Officer in addition to his titles of Senior Vice President, General Counsel and Secretary. In April 2018, Mark Stenhouse joined us as President, Cologuard.

In February 2012, Mr. Arora was promoted to Chief Operating Officer in addition to his title of Chief Financial Officer. In August 2013, Mr. Arora dropped the title of Chief Financial Officer upon the Company's appointment of a new Senior Vice President, Finance. In April 2018, Mr. Arora resigned as our Senior Vice President and Chief Operating Officer.

In December 2018, Dr. Lidgard transitioned leadership of the Company's research and development function to Dr. Scott Johnson. Effective December 28, 2018, Dr. Lidgard ceased serving as an executive officer, though he continues his work as our Chief Science Officer.

Employment Agreements with our NEOs

We have entered into an employment agreement under which we have agreed to certain compensation arrangements and severance and change of control benefits. At this time, our Board of Directors does not intend to provide any additional tax gross-up payments to employees it may hire in the future.

Each of these packages was determined based on negotiations with the applicable NEO and taking into account his background and qualifications and the nature of his position. We believe that these compensation packages are appropriate in light of the competition for top executives in the biotechnology field and among similarly-situated companies, and that the terms of these arrangements are consistent with our executive compensation goals, including the balancing of short-term and long-term compensation to properly motivate our NEOs.

Conroy Employment Agreement

Mr. Conroy's employment agreement, dated March 18, 2009, provides for a minimum base salary and for a minimum target bonus opportunity equal to at least 50% of his base salary, with the exact amount of any such bonus to be based upon the achievement of corporate and individual performance goals to be determined by our Compensation and Management Development Committee. For 2018, Mr. Conroy's base salary was $695,800 and his target bonus opportunity was 100% of his base salary. Pursuant to his employment agreement, Mr. Conroy was also granted an option to purchase 2.5 million shares of our common stock at an exercise price of $0.83 (the closing price of our common stock on the date Mr. Conroy was hired).

Under his agreement, Mr. Conroy would be entitled to certain payments and benefits in connection with certain termination events or a change of control as described under "Potential Benefits upon Termination or Change of Control" beginning on page 37 below. The agreement also prohibits Mr. Conroy from engaging in certain activities involving competition with us and from soliciting our employees for an 18-month period following termination of his employment with the Company.

Elliott Employment Agreement

Mr. Elliott's employment agreement, dated November 8, 2016, provides for a minimum base salary and for a minimum target bonus opportunity equal to 40% of his base salary, with the exact amount of any such bonus to be based upon the achievement of certain goals, including corporate and individual goals, to be determined by the Chief Executive Officer and our Compensation and Management Development Committee. For 2018, Mr. Elliott's base salary was $400,000 and his target bonus opportunity was 50% of his base salary. Mr. Elliott also received a signing bonus and a relocation stipend in connection with the employment agreement.

Under his agreement, Mr. Elliott would be entitled to certain payments and benefits in connection with certain termination events or a change of control as described under "Potential Benefits upon Termination or Change of Control" beginning on page 37 below. The agreement also prohibits Mr. Elliott from engaging in certain activities involving competition with us and from soliciting our employees or certain of our customers for a 12-month period following termination of his employment with the Company.

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Stenhouse Employment Agreement

Mr. Stenhouse's employment agreement, dated April 2, 2018, provides for a minimum base salary and for a minimum target bonus opportunity equal to 50% of his base salary, with the exact amount of any such bonus to be based upon the achievement of certain goals, including corporate and individual goals, to be determined by the Chief Executive Officer and our Compensation and Management Development Committee. For 2018, Mr. Stenhouse's base salary was $500,000 and his target bonus opportunity was 50% of his base salary. Mr. Stenhouse also received a signing bonus and a relocation stipend in connection with the employment agreement. Pursuant to his employment agreement, Mr. Stenhouse was also granted an RSU award covering 75,000 shares of our common stock.

Under his agreement, Mr. Stenhouse would be entitled to certain payments and benefits in connection with certain termination events or a change of control as described under "Potential Benefits upon Termination or Change of Control" beginning on page 37 below. The agreement also prohibits Mr. Stenhouse from engaging in certain activities involving competition with us and from soliciting our employees or certain of our customers for a 12-month period following termination of his employment with the Company.

Coward Employment Agreement

Mr. Coward's employment agreement, dated October 30, 2014, provides for a minimum base salary and for a minimum target bonus opportunity equal to 40% of his base salary, with the exact amount of any such bonus to be based upon the achievement of certain goals, including corporate and individual goals, to be determined by the Chief Executive Officer and our Compensation and Management Development Committee. For 2018, Mr. Coward's base salary was $430,000 (which was subsequently increased to $470,000 in July 2018 in connection with Mr. Coward's appointment as Chief Administrative Officer), and his target bonus opportunity was 50% of this base salary. Mr. Coward also received a relocation stipend in connection with the employment agreement. Pursuant to his employment agreement, Mr. Coward was granted RSUs covering 75,000 shares of our common stock, which vested as follows: 25% on the first anniversary of the grant date and the balance on a ratable quarterly basis over a three-year period beginning on the first anniversary of the grant date.

Under his agreement, Mr. Coward would be entitled to certain payments and benefits in connection with certain termination events or a change of control as described under "Potential Benefits upon Termination or Change of Control" beginning on page 37 below. The agreement also prohibits Mr. Coward from soliciting our customers for a 12-month period following termination of his employment with the Company.

Lidgard Employment Agreement

Dr. Lidgard's employment agreement, dated August 1, 2009, provides for a minimum base salary and for a minimum target bonus opportunity equal to at least 40% of his base salary, with the exact amount of any such bonus to be based upon the achievement of corporate and individual performance goals to be determined by our Compensation and Management Development Committee. For 2018, Dr. Lidgard's base salary was $463,600 and his target bonus opportunity was 50% of his base salary. Pursuant to his employment agreement, Dr. Lidgard was also granted an option to purchase 600,000 shares of our common stock, at an exercise price of $2.88 (the closing price of our common stock on the date Dr. Lidgard was hired).

Under his agreement, Dr. Lidgard would be entitled to certain payments and benefits in connection with certain termination events or a change of control as described under "Potential Benefits upon Termination or Change of Control" beginning on page 37 below. The agreement also prohibits Dr. Lidgard from engaging in certain activities involving competition with us and from soliciting our employees for an 18-month period following termination of his employment with the Company.

Arora Employee Transition Agreement

In connection with Mr. Arora's resignation as Senior Vice President and Chief Operating Officer and his transition into a non-executive employee role, on April 25, 2018, we entered into an Employee Transition Agreement with Mr. Arora (the "Arora Transition Agreement") pursuant to which Mr. Arora remained a non-executive employee of the Company for a transition period through December 31, 2018 (the "Transition Period"). The Arora Transition Agreement terminated our employment agreement with Mr. Arora. Pursuant to the Arora Transition Agreement, Mr. Arora continued to receive during the Transition Period the same compensation he was receiving prior to his change in roles, in exchange for a release of claims and his continued compliance with all restrictive covenants. Pursuant to the Arora Transition Agreement, upon the expiration of the Transition Period on December 31, 2018, Mr. Arora received accelerated vesting of a portion of his equity awards. The agreement also prohibits Mr. Arora from engaging in certain activities involving competition with us and from soliciting our employees for an 18-month period following termination of his employment with the Company.

Change of Control and Severance

We believe that providing executives with severance and change of control protection is important for the following reasons:

»
to allow executives to value the forward looking elements of their compensation packages, and therefore limit retention risk; and

»
to provide compensation assurances which are competitive with those of other similarly-situated companies.

Accordingly, the Company's employment agreements and equity awards generally provide for salary continuation in the event of certain employment terminations beyond the control of the executive, as well as varying degrees of accelerated vesting of equity awards in the event of a change of control of the Company.

For further information see "Potential Benefits upon Termination or Change of Control" below.

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Potential Benefits upon Termination or Change of Control

This "Potential Benefits upon Termination or Change of Control" section should be read in conjunction with the "Potential Payments upon Termination or Change of Control" section below, which provides a table that quantifies the benefits described in this section.

Severance and Change of Control Arrangements in General

We have entered into employment agreements and maintain certain plans that will require us to provide compensation and other benefits to our executive officers in connection with certain events related to a termination of employment or change of control. In connection with Mr. Arora's resignation as Senior Vice President and Chief Operating Officer and his transition into a non-executive employee role, on April 25, 2018, we entered into the Arora Transition Agreement, pursuant to which Mr. Arora remained a non-executive employee of the Company for the Transition Period. Pursuant to the Arora Transition Agreement, upon the expiration of the Transition Period on December 31, 2018, Mr. Arora received accelerated vesting of a portion of his equity awards, as described below.

Conroy Employment Agreement

Under his employment agreement, Mr. Conroy would, upon termination without "cause," resignation for "good reason" or certain "change of control" events (in each case as defined in Mr. Conroy's agreement), be entitled to receive certain benefits, as described below.

Under Mr. Conroy's employment agreement, upon termination without cause or resignation for good reason, Mr. Conroy would become entitled to receive the following:

»
Salary continuation for a period of 18 months at his then current base salary;

»
Any accrued but unpaid bonus, including any performance-based bonus, as of the termination date, on the same terms and at the same times as would have applied had Mr. Conroy's employment not terminated;

»
The pro rata portion of a target bonus or any other performance-based bonus, provided that an annual incentive bonus is paid to other senior executives of the Company at the end of the applicable period within which Mr. Conroy's employment was terminated;

»
If Mr. Conroy elects COBRA coverage for health and/or dental insurance, Company-paid monthly premium payments for such coverage until the earliest of: (1) 12 months from the termination date; (2) the date Mr. Conroy obtains employment offering health and/or dental coverage comparable to that offered by the Company; or (3) the date COBRA coverage would otherwise terminate;

»
A payment of $10,000 towards the cost of an outplacement consulting package within 30 days of termination;

»
The vesting of the then unvested equity awards granted to Mr. Conroy (whether stock options, restricted stock or stock purchase rights under the Company's equity compensation plan, or other equity awards) will immediately accelerate by a period of 12 months; and

»
A change in the exercise period for vested equity awards such that vested equity awards become exercisable until the earlier of (1) two years from the date of termination of employment and (2) the latest date on which those equity awards expire or are eligible to be exercised under the grant agreements, determined without regard to such termination or resignation.

Under Mr. Conroy's employment agreement, in connection with a change of control, Mr. Conroy would become entitled to receive the following:

»
In the event of termination by the Company without cause or by Mr. Conroy for good reason, within 12 months before, or if Mr. Conroy remains employed with the Company on the effective date of, a change of control, a lump-sum payment equal to 24 months of base salary and his pro rata target bonus through the effective date of the change of control; provided, that any payments previously made to Mr. Conroy in connection with the termination of his employment by the Company without cause or by Mr. Conroy with good reason within the 12 months preceding a change of control would be credited against any such lump-sum payment;

»
Accelerated vesting of all outstanding unvested equity awards (whether stock options, restricted stock or stock purchase rights under the Company's equity compensation plans, or other equity awards), subject to Mr. Conroy's agreement to remain employed by the Company or any successor, if requested, for a period of at least six months following the change of control at his then current base salary;

»
In the event Mr. Conroy's employment is terminated by the Company without cause or by Mr. Conroy for good reason in anticipation or contemplation of a pending or potential change of control or while a potential change of control is under consideration or being negotiated by the Company's Board of Directors, Mr. Conroy will be deemed to remain an employee for purposes of the incentive plan to which he is entitled to participate under his employment agreement (the "Long Term Incentive Plan") as of the effective date of the change of control and will receive a full payout under the Long Term Incentive Plan as described in his employment agreement as though he remained an employee of the Company as of the effective date of such change of control; and

»
A tax gross-up payment in an amount sufficient to cause the net amount retained by him, after deduction of any parachute payment excise taxes, to equal the amounts payable as described above. At this time, our Board of Directors does not intend to provide any additional tax gross-up payments to employees it may hire in the future.

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Elliott, Stenhouse, Coward and Lidgard Employment Agreements

Under their employment agreements, Mr. Elliott, Mr. Stenhouse, Mr. Coward and Dr. Lidgard would, upon termination without "cause," resignation for "good reason" or certain "change of control" events (in each case as defined in their respective agreements), receive certain benefits, as described below.

Under their employment agreements, upon termination without cause or resignation for good reason, Mr. Elliott, Mr. Stenhouse, Mr. Coward and Dr. Lidgard would become entitled to receive the following:

»
Salary continuation for a period of 12 months (15 months for Dr. Lidgard) at his then current base salary;

»
Any accrued but unpaid bonus, including any performance-based bonus, as of the termination date, on the same terms and at the same times as would have applied had the executive's employment not terminated;

»
The pro rata portion of a target bonus or any other performance-based bonus, provided that an annual incentive bonus is paid to other senior executives of the Company at the end of the applicable period within which the executive's employment was terminated;

»
If the executive elects COBRA coverage for health and/or dental insurance, Company-paid monthly premium payments for such coverage until the earliest of: (1) 12 months from the termination date; (2) the date the executive obtains employment offering health and/or dental coverage comparable to that offered by the Company; or (3) the date COBRA coverage would otherwise terminate;

»
A payment of $10,000 towards the cost of an outplacement consulting package within 30 days of termination;

»
The vesting of the then unvested equity awards granted to the executive (whether stock options, restricted stock or stock purchase rights under the Company's equity compensation plan, or other equity awards) will immediately accelerate by a period of 12 months; provided, that, solely in respect of Mr. Stenhouse, for purposes of Performance Awards (as defined in Mr. Stenhouse's employment agreement), Mr. Stenhouse will be treated as having remained in service for an additional 12 months following actual Separation from Service (as defined in Mr. Stenhouse's employment agreement), provided that such Performance Awards will not become earned and vested solely as a result of such treatment, and the vesting and earning of all Performance Awards will remain subject to the attainment of all applicable performance goals, and such Performance Awards, if and to the extent they become earned and vested, will be payable at the same time as under the applicable award agreement; and

»
A change in the exercise period for vested equity awards such that vested equity awards become exercisable until the earlier of (1) two years from the date of termination of employment and (2) the latest date on which those equity awards expire or are eligible to be exercised under the grant agreements, determined without regard to such termination or resignation.

Under Dr. Lidgard's employment agreement, in connection with a change of control, Dr. Lidgard would become entitled to receive the following:

»
In the event of termination by us without cause or by the executive for good reason within 12 months before, or if Dr. Lidgard remains employed with the Company on the effective date of, a change of control, a lump-sum payment equal to 18 months base salary and Dr. Lidgard's pro rata target bonus through the effective date of the change of control; provided, that any payments previously made to Dr. Lidgard in connection with the termination of his employment by the Company without cause or by Dr. Lidgard with good reason within the 12 months preceding a change of control will be credited against any such lump-sum payment;

»
Accelerated vesting of all outstanding unvested equity awards (whether stock options, restricted stock or stock purchase rights under the Company's equity compensation plan, or other equity awards), subject to Dr. Lidgard's agreement to remain employed by the Company or any successor, if requested, for a period of at least six months following the change of control at his then current base salary; and

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In the event Dr. Lidgard's employment is terminated by the Company without cause or by Dr. Lidgard for good reason in anticipation or contemplation of a pending or potential change of control or while a potential change of control is under consideration or being negotiated by the Company's Board of Directors, Dr. Lidgard will be deemed to remain an employee for purposes of the Long Term Incentive Plan as of the effective date of the change of control and will receive a full payout under the Long Term Incentive Plan as described in Dr. Lidgard's employment agreement as though he remained an employee of the Company as of the effective date of such change of control.

Under our employment agreements with Mr. Elliott, Mr. Stenhouse and Mr. Coward, all such executives would become entitled to accelerated vesting of all outstanding unvested equity awards (whether stock options, restricted stock, RSUs or stock purchase rights under the Company's equity compensation plans, or other equity awards) if (1) within 12 months after a change of control, he is terminated by the Company (or any successor) without cause or he terminates his employment for good reason, (2) a change of control happens within four months after the Company terminates him without cause or he terminates his employment for good reason or (3) solely with respect to Mr. Elliott and Mr. Coward, he remains employed by the Company (or any successor) for at least six months following a change of control. Solely with respect to Mr. Stenhouse and any Performance Awards held by him as of such change of control, such Performance Awards will be deemed to have been fully vested and earned based upon the greater of (A) an assumed achievement of all relevant performance goals at the "targ