2018 Guide to Effective Proxies

2.17.9 Performance metrics | 443 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES CompensationofExecutiveOfficers | CompensationDiscussionandAnalysis CORPORATEGOALS ACHIEVEMENTS EVALUATION Commercial Continuetoexecutesuccessful commerciallaunchfor CABOMETYXintheU.S.and exceedthenetproductrevenue targetestablishedbytheBoard › › Generatedcabozantinibfranchisenetproduct revenueof$349.0millionduring2017. Exceeded Developandimplementlaunch strategytoensureorganizational readinessshouldthecompany receiveFDAapprovalfor CABOMETYXasatreatmentfor patientswithpreviously untreatedadvancedRCCand/or patientswithpreviouslytreated advancedHCC › › Theorganizationwaslaunch-readyimmediately upontheFDA’sapprovalforCABOMETYXasa treatmentforpatientswithpreviouslyuntreated advancedRCConDecember19,2017. › › Continuedlaunchpreparednesseffortsinline withregulatorytimelinesforapotentialapproval ofCABOMETYXasatreatmentforpatientswith previouslytreatedadvancedHCC. Met Pipeline Development Supportlicensingeffortsforalate preclinical/clinicaloncologyasset andrapidlyadvancedevelopment oftheassetoncein-house › › Conductedaworldwidelandscapereviewof oncologyopportunities,followedbydue diligenceefforts,sitevisitsandearlystage partneringdiscussionsformultiplepre-clinical andclinicalstageoncologyassets,resultingin theexecutionofanexclusivelicenseand collaborationagreementwithStemSynergy Therapeutics,Inc.,orStemSynergy,onJanuary8 2018. Partially-met Completetheinitialbuildoutof aninternaldiscoveryteamand advanceinitialpotential programstoapreclinicalgo/ no-godecision(i.e.,proofof concepttoinitiatefulldiscovery program) › › Hiredthenecessaryfull-timeemployeesto enablerestartofinternaldiscoverywork, conductedmultipleproof-of-concept experimentsandadvancedoneprogramto preclinicaldevelopment. Met Finance and Legal Managecashbalancetoatarget establishedbytheBoard,and manageoperatingexpenses withinthebudgetapprovedby theBoard › › Managedoperatingexpensesto$286.6million andendedfiscal2017withacashbalanceof $457.2million. Met Executeanagreementwitha partnerforthedevelopmentand commercializationof cabozantinibinJapan › › Enteredintoanexclusivelicensingagreement withTakedatocommercializecurrentand potentialfuturecabozantinibindicationsin Japan. Met EffectivelymanagetheJAMS arbitrationhearinginthedispute withGenentech/Rocheregarding cobimetinib › › Amendedourcollaborationagreementwith Genentechinconnectionwiththeresolutionof ourarbitration,whichprovidesforafavorably- revisedrevenueandcost-sharingarrangement, thatbecameeffectiveasofJuly1,2017,andthat isapplicabletocurrentandallpotentialfuture commercialusesofCOTELLIC. Met Repayoutstandingdebtwith SiliconValleyBankandthe DeerfieldNotes › › Retiredalloutstandingdebt,includingour$80.0 milliontermloanwithSiliconValleyBankand ourDeerfieldNotesintheamountof $123.8million. Met 2018ProxyStatement 43 Total of 02 pages in section Reviewof2017AIPResults. InFebruary2018,thecommitteeevaluatedthecompany’sperformanceagainsttheAIP targets,whichwereasfollows: Performance Category PerformanceMetrics Weighting Threshold Target Maximum 2017 Results Financial ConsolidatedAdjustedEBITDA ($inbillions) 10% $4.50 $5.50 $6.20 $5.97 NetDebt*Reduction($inbillions) 15% $1.20 $2.00 $3.00 $3.11 CapitalExpenditures($inbillions) 10% $2.10 $1.90 $1.60 $1.41 TotalPTFICashDistributions ($inbillions) 15% $1.00 $2.00 $2.50 $1.44 Operational AmericasCopperSales(billionlbs) 12.5% 2.40 2.75 2.95 2.72 AmericasNetUnitCashCosts ($/lb) 12.5% $1.75 $1.58 $1.46 $1.60 Safety ReportableRate(TRIR) 15% 0.79 0.63 0.57 0.75 Environmental/Social Responsibility Environmental/SR(Score) 10% 1 3 5 3 * Netdebtiscalculatedasgrossdebtlessconsolidatedcash. 2017MetricsandGoals InestablishingthemetricsandgoalsinFebruary2017,thecommitteechose: • metricsdesignedtofocusourexecutives’effortsonthecriticalelementsofthecompany’s strategicplansfor2017–focusingonproduction,costandcapitaldiscipline,and generatingcashflows,whilestrengtheningthebalancesheetandrefocusingourbusiness onourleadingpositionintheglobalcopperindustry;and • targetgoalsthatwereconsistentwiththecompany’sbudgetfortheyear. Thecommitteealsoapprovedthemethodforcalculatingresultsundereachmetric.Inconnectionwiththe committee’sreviewofourresultsinearly2018,noadjustmentsweremadetothereportedresultsunderthe financialmetrics.Inconnectionwiththecalculationofnetunitcashcostsperpoundofcopper,weusethe “by-product”methodinourcalculationinourAnnualReportonForm10-KfortheyearendedDecember31,2017. Underthismethod,gold,molybdenumandothermetalrevenuesatcopperminesarereflectedascreditsagainst siteproductionanddeliverycosts.Ourcalculationofconsolidatedunitnetcashcostsperpoundofcopper excludesnoncashandothercosts,includingstock-basedcompensationcosts,start-upcosts,inventory adjustments,long-livedassetimpairments,restructuringand/orunusualcharges.Thecommitteedeterminedthat thecompanyperformedabovethemaximumlevelsforthenetdebtreductionandcapitalexpendituresmetrics, betweentargetandmaximumlevelsfortheconsolidatedadjustedEBITDAmetric,andnearorbelowtargetfor eachoftheotherfinancialandoperationalmetrics. TheconsolidatedadjustedEBITDAmetricisanon-GAAPmeasure.PleaserefertoAnnexAtothisproxystatement forareconciliationandotherinformationregardingourcalculationofconsolidatedadjustedEBITDA. Withregardtothesafetymetric,thecompany’sTRIRresultedinapayoutbetweentargetandthresholdlevelsfor thatmetric.Withregardtotheenvironmentalandsocialresponsibilitymetric,thecommitteeevaluatedthe company’sperformancerelativetoascorecarditapprovedinFebruary2017.Thecommitteeconsideredthe environmentalperformancewithrespecttoenvironmentalpenalties,reportablespillsandreleases,andnoticesof 34 Freeport-McMoRan ⎪ 2018ProxyStatement Total of 02 pages in section EXELIXIS, INC. FREEPORT-MCMORAN, INC. accomplishmentsduringwhichtheCompanypartially-met,metorexceededeachofthegoals,ashighlightedbythe corporateachievementsidentifiedinthetablebelow. CORPORATEGOALS ACHIEVEMENTS EVALUATION Product Development FileasNDAforCABOMETYXasa treatmentforpatientswith previouslyuntreatedadvanced RCCbasedonCABOSUNresults › › BasedontheresultsfromCABOSUN,fileda sNDAwiththeFDAforCABOMETYXasa treatmentforpatientswithpreviouslyuntreated advancedRCC.TheFDAgrantedPriorityReview ofthefilingandassignedaPDUFAactiondateof February15,2018. › › ReceivedFDAapprovalforCABOMETYXasa treatmentforpatientswithpreviouslyuntreated advancedRCConDecember19,2017,two monthsaheadoftheassignedPDUFAdate. Exceeded Conductasecondinterim analysis,orIA,forCELESTIAL,and ifpositive,fileasNDAfor CABOMETYXasatreatmentfor patientswithpreviouslytreated advancedHCC › › CompletedasecondIAforCELESTIAL,whichmet itsprimaryendpoint,withcabozantinibproviding astatisticallysignificantandclinicallymeaningful improvementinoverallsurvivalcomparedto placebo. › › Followinginternalpreparationsanddiscussions withtheFDAduring2017,filedasNDAon March15,2018forCABOMETYXasatreatment forpatientswithpreviouslytreatedadvanced HCC. PartiallyMet Initiatelatestagedevelopmentof cabozantinibincombinationwith animmunotherapyinpatients withpreviouslyuntreated advancedRCCandinbladder cancer › › InitiatedCheckMate9ER,aphase3pivotaltrial evaluatingthecombinationofcabozantinibwith nivolumabinpreviouslyuntreated,advancedor metastaticRCCandCheckMate040evaluating thesamecombinationandalsocabozantinib withbothnivolumabandipilimumabinaphase 1/2trialinbothpreviouslytreatedand previouslyuntreatedadvancedHCC. › › Initiatedaphase1btrialevaluatingcabozantinib andatezolizumabinpatientswithadvanced genitorurinarymalignancies,which,pursuantto itsamendedprotocolincludesexpansioncohorts forNSCLCandCRPC,inadditiontothepreviously includedRCCandUC. PartiallyMet Continuethebroadevaluationof cabozantinibinothertumortypes throughexternally-sponsored studies › › Managed31ongoingand29plannedexternally sponsoredtrialsevaluatingtheclinicaland therapeuticpotentialofcabozantinib,including thoseadministeredthroughourCooperative ResearchandDevelopmentAgreementwith NationalCancerInstitute’sCancerTherapy EvaluationProgramandourinvestigator sponsoredtrialprogram. Met Supportcabozantinibworldwide regulatoryfilingsbycabozantinib partners › › SupportedEMAvalidationoftheregulatory dossiersubmittedbyIpsen,forCABOMETYXasa treatmentforpatientswithpreviouslyuntreated advancedRCCintheEU. › › SupportedIpsen’sreceiptofregulatory approvalsinAustralia,SwitzerlandandSouth KoreaforCABOMETYXasatreatmentfor advancedRCCinadultsfollowingpriorVEGF targetedtherapy,launchesinFrance,Germany, Italy,SpainandtheUnitedKingdomand associatedpricingandreimbursement negotiationsintheEUmemberstates. Exceeded 42 Exelixis,Inc. GeneralStructureoftheAIPfor2017. For 2017,thecommitteeestablished target performance goalsinthree categories thatitbelieves effectively measure theperformance ofthecompany,witheachcategory accountingfor aspecificpercentage ofthetarget award. Inthese categories, thecommitteechosethefollowingmetricsto measure performance: Performance Category Performance Metrics Purpose Financial ConsolidatedAdjusted EBITDA Directlyreflects ourgoalof generating cashflows Net Debt Reduction Directlyreflects ourgoalof strengthening ourbalancesheet CapitalExpenditures Directlyreflects ourfocuson capitaldisciplineandourgoalof strengthening ourbalancesheet TotalPTFICashDistributions Directlyreflects ourgoalof generating cashflows Operational AmericasCopper Sales Reflects ourgoalofgenerating cashflows AmericasNet Unit CashCostsofCopper Reflects ourgoalofoperating efficientlyandcontrolling productioncosts Safety and Environmental/Social Responsibility Safety Alignswithourhighestpriority – safety ofourpeople Environmental&Social Responsibility Supports oursignificantfocuson workingtoward sustainable development Followingtheendoftheyear, eachperformance metricisevaluated againstthetarget goal,withpayout levels defined for threshold,target andmaximumlevelsofperformance. Ifperformance fallswithinthese levels,asliding scaleisused todetermine theappropriate payout. 2017Highlights:Annual IncentiveProgram • Underthe2017 program, eachexecutive hadatarget award based onamultipleofsalary, andwas eligibletoearn anannualcashaward based onthecompany’sperformance relative todefined goalsestablished by thecommittee. o Thetarget annualincentiveaward for Mr.Adkersonwas 150% ofbase salary,or $2.4million. o Thetarget annualincentiveaward for eachofMs.QuirkandMessrs. ArnoldandConger was 175% ofbase salary. o Annualcashincentivepayments for thresholdperformance started at50% oftarget with maximumperformance earning175% oftarget, althoughthecommitteeretained the discretiontoreduce thepayment to0%oftarget. • Basedonthecompany’sperformance relativetothepre-establishedgoals,the executivesearnedapayout amountequalto112.7%ofthetarget award. Freeport-McMoRan ⎪ 2018 ProxyStatement 33