Payment of Filing Fee (Check the appropriate box): | | | | | | | | ☒ | | No fee required. | | | | ☐ | | Fee computed on table below per Exchange Act Rules14a-6(i)(1) and0-11. | | | | | | (1) | | (1) Title of each class of securities to which the transaction applies: | | | (2) | | (2) Aggregate number of securities to which the transaction applies: | | | (3) | | (3) Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | | | (4) | | (4) Proposed maximum aggregate value of the transaction: | | | (5) | | (5) Total fee paid: | | | | ☐ | | Fee paid previously with preliminary materials. | | | | ☐ | | Check box if any part of the fee is offset as provided by Exchange Act Rule0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | | | | | | (1) | | (1) Amount Previously Paid: | | | (2) | | (2) Form, Schedule or Registration Statement No.: | | | (3) | | (3) Filing Party: | | | (4) | | (4) Date Filed: |
 
April 10, 2018PROXY STATEMENT
TO OUR STOCKHOLDERS:2021 ANNUAL MEETING OF STOCKHOLDERS
March 25, 2021 To Our Stockholders: You are cordially invited to attend the annual meeting2021 Annual Meeting of the stockholdersStockholders and any adjournments, postponements or other delays thereof (the “Annual Meeting”) of Lattice Semiconductor Corporation, whichCorporation. As part of our precautions regarding the SARS-CoV-2(“COVID-19”) pandemic and in compliance with current mandatory orders from applicable governmental entities, we are holding this year’s Annual Meeting virtually. If you plan to participate in the Annual Meeting, please see the instructions in the accompanying proxy statement (the “Proxy Statement”). Stockholders will be held on Friday, May 4, 2018,able to listen, vote and submit questions (subject to the question guidelines) from any remote location that has Internet connectivity. There will be no physical location for stockholders to attend the Annual Meeting. Stockholders may participate in the Annual Meeting only by logging in at 1:00 p.m. Pacific Time, on the seventh floor of the US Bancorp Tower, 111 SW 5th Ave, Portland Oregon 97204.www.meetingcenter.io/236985556. The attached Notice of Annual Meeting of Stockholders (the “Notice”) and Proxy Statement describe the matters to be acted upon at the meeting.Annual Meeting. Included with the Proxy Statement is a copy of our 2017 Annual Report to Stockholderson Form 10-K for the fiscal year ended December 30, 2017.January 2, 2021 (the “Annual Report”). We encourage you to read the 2017 Annual Report to Stockholders.Report. It includes our audited financial statements and information about our operations, markets and products. It is important that your shares be represented and voted at the meetingAnnual Meeting whether or not you plan to attend. Therefore, we urge you to vote your shares as soon as possible. If you received a proxy card and otherpossible as directed in the proxy materials by mail, you may vote online, by telephone, or by signing and dating the proxy card and returning it in the envelope provided.receive. A copy of the Proxy Statement and our 2017the Annual Report to Stockholders isare available online at www.edocumentview.com/lscc.LSCC. Voting by telephone or over the Internetonline or by signing, dating and returning thea proxy card, you will ensure your representation at the Annual Meeting. However, voting in advance of the Annual meeting but does not deprive you of your right to attend the meetingAnnual Meeting and to vote your shares in person. Sincerely,at the Annual Meeting.
| Sincerely, | |  | | James R. Anderson
Chief Executive Officer |
Glen Hawk
Interim Chief Executive Officer
Whether or not you plan to attend the meeting, please vote your shares as soon as possible. You can vote your shares by telephone, online or by signing and dating a proxy card and returning it to the address provided on the proxy card. If you receive more than one proxy card because you own shares that are registered differently, then please vote all of the shares shown on all of your proxy cards following instructions listed on each of the individual proxy cards. Thank you.
| Whether or not you plan to attend the Annual Meeting, please vote your shares as soon as possible. You can vote your shares by telephone, online or by signing and dating a proxy card and returning it to the address provided on such proxy card. If you receive more than one proxy card because you own shares that are registered separately, then please vote all of the shares shown on all of your proxy cards following instructions listed on each of the individual proxy cards. Thank you. |
111 SW 5th AVE, SUITE 700Meeting of Stockholders
PORTLAND, OREGON 97204May 7, 2021
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 4, 2018
TO OUR STOCKHOLDERS:
The annual meeting of stockholders of Lattice Semiconductor Corporation will be held on the seventh floor of the US Bancorp Tower, 111 SW 5th Ave, Portland Oregon 97204, on Friday, May 4, 2018, at 1:00 p.m., Pacific Time
To Our Stockholders: You may participate in the 2021 Annual Meeting of Stockholders and any adjournments, postponements or other delays thereof (the “Annual Meeting”) of Lattice Semiconductor Corporation by logging in at www.meetingcenter.io/236985556. As part of our precautions regarding the SARS-CoV-2(“COVID-19”) pandemic and in compliance with current mandatory orders from applicable governmental entities, we are holding this year’s Annual Meeting virtually. If you plan to participate in the Annual Meeting, please see the instructions in the accompanying proxy statement (the “Proxy Statement”). Stockholders will be able to listen, vote and submit questions (subject to the question guidelines) from any remote location that has Internet connectivity. There will be no physical location for stockholders to attend the following purposes:Annual Meeting. MATTERS TO BE VOTED ON: | 1. | To elect eightthe seven directors each for a term of one year;named in the accompanying Proxy Statement; |
| 2. | To approve, as an advisory vote, the compensation of the Company’s named executive officers; |
| 3. | To approve the amended Lattice Semiconductor Corporation 2013 Incentive Plan; |
| 4. | To approve the amended Lattice Semiconductor Corporation 2011Non-Employee Director Equity Incentive Plan; |
| 5. | To ratify the appointment of KPMGErnst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 29, 2018; andJanuary 1, 2022; |
| 3. | 6.To approve on a non-binding, advisory basis, our named executive officer compensation; and |
| 4. | To transact such other business as may properly comebe brought before the meeting.Annual Meeting. |
The foregoing items of business are described in the Proxy Statement accompanying this Notice of Annual Meeting of Stockholders. Only stockholders of record at the close of business on March 9, 2018,12, 2021 are entitled to notice of and to vote at the meeting or any adjournment thereof. More information about these business items is described in the accompanying proxy statement. Any of the above matters may be considered at the annual meeting at the date and time specified above or at an adjournment or postponement of such meeting. Annual Meeting. All stockholders are cordially invited to attend the meetingand participate in person.our Annual Meeting. Whether or not you plan to attend the meeting,Annual Meeting, to assure your representation at the meeting,Annual Meeting, please vote as soon as possible.You We are being provided a proxy card and othermaking our proxy materials by mail,available to our stockholders over the Internet, and you may vote in person at the annual meeting, orAnnual Meeting by mail, by telephone or online. For specific voting instructions, please refer to the information provided in the accompanying Proxy Statement, together with your proxy card.Statement. A copy of the Proxy Statement and our 2017the Annual Report to Stockholders accompanies this notice and is alsoon Form 10-K for the fiscal year ending January 2, 2021 (the “Annual Report”) are available online at www.edocumentview.com/lscc. Any stockholder of record entitledLSCC. For specific instructions on how to vote atyour shares, please refer to the meeting may voteinstructions in person at the meeting even if he or she has returned a proxy card or voted by telephone or online.materials you receive in the mail and refer to the section of the Proxy Statement titled “How to Vote.” | | | Hillsboro, Oregon March 25, 2021 | | By Order of the Board of Directors, | | | | |  | | | 
Byron W. Milstead Secretary |
| Portland, OregonImportant Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to Be Held on May 7, 2021
April 10, 2018
111 SW 5th AVE, SUITE 700
PORTLAND, OREGON 97204
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
General
Our board of directors is soliciting proxies to be used at the 2018 annual meeting of stockholders to be held on the seventh floor of the US Bancorp Tower, 111 SW 5th Ave., Portland, Oregon 97204, on Friday, May 4, 2018, at 1:00 p.m., Pacific Time, or at any adjournment thereof.
ThisThe Proxy Statement our 2017and Annual Report to Stockholders and the proxy cardstockholders are first being sent on or about April 10, 2018, to all stockholders entitled to voteavailable at the meeting.
Purpose of Annual Meeting
The purpose of this annual meeting is:www.edocumentview.com/LSCC.
| 1. | To elect Robin A. Abrams, Brian M. Beattie, John Bourgoin, Mark E. Jensen, James P. Lederer, John E. Major, Krishna Rangasayee, and D. Jeffrey Richardson as directors of the Company, each for a term of one year; |
YOUR VOTE IS IMPORTANT | 2. | To approve, as an advisory vote, the compensation of the Company’s named executive officers; |
GENERAL INFORMATION ABOUT THE MEETING General Our board of directors (the “Board” or the “Board of Directors”) is soliciting proxies to be used at the 2021 Annual Meeting of Stockholders and any adjournments, postponements or other delays thereof (the “Annual Meeting”) of Lattice Semiconductor Corporation (the “Company”), to be held at www.meetingcenter.io/236985556, on Friday, May 7, 2021, at 1:00 p.m., Pacific Time. On or about March 25, 2021, we will mail to our stockholders entitled to vote at the Annual Meeting a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access this proxy statement (the “Proxy Statement”) and our 2020 Annual Report on Form 10-K for the fiscal year ended January 2, 2021 (the “Annual Report”) via the Internet and vote online. The Notice also provides instructions on how you can request a paper copy of these documents, if you desire, and how you can enroll in e-delivery to receive future annual meeting materials electronically. As part of our precautions regarding the SARS-CoV-2(“COVID-19”) pandemic and in compliance with current mandatory orders from applicable governmental entities, we are holding our Annual Meeting virtually. | 3. | To approve the amended Lattice Semiconductor Corporation 2013 Incentive Plan; |
| 4. | To approve the amended Lattice Semiconductor Corporation 2011Non-EmployeePurpose of the Annual Meeting Director Equity Incentive Plan; and |
| 5.The purpose of the Annual Meeting is: | 1. | To elect the seven directors named in the accompanying Proxy Statement; |
| 2. | To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 29, 2018. |
The board of directors recommends that stockholders vote “FOR” the election of Robin A. Abrams, Brian M. Beattie, John Bourgoin, Mark E. Jensen, James P. Lederer, John E. Major, Krishna Rangasayee, and D. Jeffrey Richardson as directors of the Company. The board of directors recommends that stockholders vote “FOR” the approval, on an advisory basis, of the compensation of the Company’s named executive officers. The board of directors recommends that stockholders vote “FOR” the approval of the amended Lattice Semiconductor Corporation 2013 Incentive Plan. The board of directors recommends that stockholders vote “FOR” the approval of the amended Lattice Semiconductor Corporation 2011Non-Employee Director Equity Incentive Plan. The board of directors recommends that stockholders vote “FOR” the ratification of KPMGErnst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 29, 2018.January 1, 2022;
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| 3. | Who Can VoteTo approve on a non-binding, advisory basis, our named executive officer compensation; and
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| 4. | Record holders of common stock atTo transact such other business as may properly be brought before the close of business on March 9, 2018, may vote at the meeting. On March 9, 2018, there were 124,211,710 shares of common stock outstanding. Each stockholder has one vote for each share of common stock owned as of the record date.Annual Meeting.
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The Board of Directors recommends that stockholders vote “FOR” the election of Robin Abrams, James R. Anderson, Mark Jensen, Anjali Joshi, James P. Lederer, Krishna Rangasayee and D. Jeffrey Richardson as directors of the Company. The Board of Directors recommends that stockholders vote “FOR” the ratification of appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 1, 2022. The Board of Directors recommends that stockholders vote “FOR” the approval, on an advisory basis, of the compensation of the Company’s named executive officers. Internet Availability of Proxy Materials We are providing access to our proxy materials over the Internet. Accordingly, we are sending the Notice to our stockholders of record as of March 12, 2021 (the “Record Date”). All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found in the Notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it. Our proxy materials include this Proxy Statement and the Annual Report. If you requested a printed version of our proxy materials, these materials also include a proxy card for the Annual Meeting. Who Can Vote You are entitled to vote at the Annual Meeting if you held shares as of the Record Date. As of the Record Date, there were 136,348,725 shares of common stock outstanding. Each stockholder has one vote for each share of common stock owned as of the Record Date. The common stock does not have cumulative voting rights. How to Vote Stockholders may vote their shares online at the Annual Meeting, by mail, by telephone or online before the Annual Meeting. Stockholders who hold their shares through a bank, broker or other nominee should vote their shares in the manner prescribed by the bank, broker or other nominee. | ◾ | 1
How to Vote
Stockholders may vote their shares in person atVoting Through the annual meeting, by mail, by telephone or online overInternet—Before the Internet. Stockholders who hold their shares through a bank, broker or other nominee should vote their shares in the manner prescribed by the bank, broker or other nominee.
Voting in Person at the Meeting. Annual Meeting: If you attend the annual meeting and plan to vote in person, we will provide you withare a ballot at the annual meeting. If your shares are registered directly in your name, you are considered the stockholder of record, andgo to www.envisionreports.com/LSCC. Please have your proxy card in hand when you havevisit the right to vote in person at the meeting.website. If your shares are held in thestreet name, of your broker or other nominee, you are considered the beneficial owner of shares held in street name. As a beneficial owner, if you wish to vote at the annual meeting, you will need to bring to the meetingobtain a legal proxy from your broker, bank or other nominee authorizing youin order to vote those shares.at the Annual Meeting.
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| ◾ | Voting Through the Internet—During the Annual Meeting: If you are a stockholder of record, you may vote live at the Annual Meeting through the virtual meeting platform by logging into www.meetingcenter.io/236985556. If your shares are held in street name, you will need to obtain a legal proxy from your broker, bank or other nominee in order to vote at the Annual Meeting. |
| ◾ | Voting by Mail.Telephone: To vote by telephone, please follow the instructions included in your proxy materials. If you vote by telephone, you do not need to sign and mail a proxy card. |
| ◾ | Voting by Mail: By signing the proxy card and returning it to the address provided on the proxy card, you are authorizing the individuals named on the proxy card to vote your shares at the annual meetingAnnual Meeting in the manner that you indicate. We encourage you to sign and return the proxy card even if you plan to attend the meetingAnnual Meeting so that your shares will be voted if you are unable to attend the meeting.Annual Meeting. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards that you receive in the mail to ensure that all of your shares are voted. Voting by Telephone. To vote by telephone, please follow the instructions included on your proxy card that you received in the mail. If you vote by telephone or online, you do not need to completesign and mail a proxy card.
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| ◾ | Voting over the Internet. To vote over the Internet, please follow theThrough Your Broker: If your shares are held through a broker, bank or other nominee (commonly referred to as held in “street name”), you will receive instructions included on your proxy cardfrom them that you received in the mail. If you vote over the Internet, you do not needmust follow to complete and mail a proxy card. The internet voting procedures are designed to comply with Delaware law, to authenticate the stockholder’s identity and to allow stockholders to vote their shares and confirm that their voting instructions have been properly recorded. If you deliver a proxy card by mail or vote by telephone or over the Internet, the proxy holders will vote your shares in accordance with the instructions that you provide. If you do not specify how to vote your shares, the proxy holders will vote them (i) “FOR” each of the nominees for director named herein, (ii) “FOR” approval of, as an advisory vote, the compensation for the Company’s named executive officers, (iii) “FOR” the approval of the amended Lattice Semiconductor Corporation 2013 Incentive Plan, (iv) “FOR” the approval of the amended Lattice Semiconductor Corporation 2011Non-Employee Director Equity Incentive Plan, (v) “FOR” ratification of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 29, 2018, and (vi) in accordance with the recommendations of our board of directors, or, if no recommendation is given, in the discretion of the proxy holders, on any other business that may properly come before the meeting or any adjournment thereof.voted.
Revoking Your Proxy
You may revoke your proxy at any time before it is exercised
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If you deliver a proxy card by mail or vote by telephone or online, the proxy holders will vote your shares in accordance with the instructions that you provide. If you do not specify how to vote your shares, the proxy holders will vote them (i) “FOR” each of the nominees for director named herein, (ii) “FOR” the ratification of appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 1, 2022, (iii) “FOR” approval of, as an advisory vote, the compensation for the Company’s named executive officers, and (iv) in accordance with the recommendations of our Board of Directors, or, if no recommendation is given, in the discretion of the proxy holders, on any other business at the Annual Meeting. How Are Votes Counted We will appoint a tabulator and inspector of election at the Annual Meeting. The tabulator and inspector of election is typically a representative of our transfer agent. The tabulator and inspector of election will collect all proxies and ballots and tabulate the results. Revoking Your Proxy You may revoke your proxy at any time before the Annual Meeting by: | ◾ | sending a written notice of revocation to the Secretary of Lattice Semiconductor Corporation, at 111 SW 5th Ave, Suite 700, Portland,5555 NE Moore Court, Hillsboro, Oregon 97204;97124, that is received before the deadline stated in your proxy materials; |
| ◾ | entering a new vote by telephone, over the Internetonline or by submitting a properly signed proxy card with a later date;date that is received before the deadline stated in your proxy materials; or |
| ◾ | voting in persononline at the meeting. Annual Meeting. 2
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Vote Required for the Proposals The votes required to approve the proposals to be considered at the Annual Meeting are as follows: Proposal 1—Election of Directors. The seven nominees for the Board of Directors receiving the highest number of affirmative votes cast at the Annual Meeting, online or by proxy, will be elected as directors. You may vote “FOR” the nominees for election as directors, or you may “WITHHOLD” your vote with respect to one or more nominees. For purposes of determining whether a quorum exists for the Annual Meeting, if you return a proxy card or vote by telephone or online before the Annual Meeting and withhold your vote from the election of any of the directors, your shares will be counted as present. If any director receives a greater number of “WITHHOLD” votes than “FOR” votes, then pursuant to our Corporate Governance Policies, such director is required to submit a letter of resignation to the Board of Directors. The Board of Directors will ask the Nominating and Governance Committee to consider the resignation and recommend the action it believes the Board of Directors should take with respect to such offer of resignation, including acceptance or rejection. Within 120 days of the Annual Meeting, the Board of Directors will act with respect to such offer of resignation. Proposal 2—Ratification of the appointment of our independent registered public accounting firm. Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 1, 2022 requires the affirmative vote of the holders of a majority of the stock having the voting power present in person or represented by proxy at the Annual Meeting. You may vote “FOR,” “AGAINST,” or “ABSTAIN,” from the proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 1, 2022. Proposal 3—Advisory Vote to Approve Named Executive Officers Compensation. Approval of the Proposals The votes required to approve the proposals to be considered at the annual meeting are as follows:
Proposal 1—Election of Directors. The eight nominees for the board of directors receiving the highest number of affirmative votes cast at the meeting, in person or by proxy, will be elected as directors. You may vote “FOR” the nominees for election as directors, or you may “WITHHOLD” your vote with respect to one or more nominees. For purposes of determining whether a quorum exists for the meeting, if you return a proxy card or vote by telephone or over the Internet and withhold your vote from the election of all directors, your shares will be counted as present.
If the election of directors at this annual meeting is uncontested and any director receives a greater number of “WITHHOLD” votes than “FOR” votes, then pursuant to our Corporate Governance Policies, such director is required to submit a letter of resignation to the board of directors. The board of directors will ask the nominating and governance committee to consider the resignation and recommend the action the committee believes the board of directors should take with respect to such offer of resignation, including acceptance or rejection. Within 120 days of the stockholder meeting, the board of directors will act with respect to such offer of resignation.
Proposal 2—Advisory Vote to Approve Named Executive Officers Compensation. Approval of thenon-binding, advisory advisory vote on the compensation of the Company’s named executive officers requires the affirmative vote of the holders of a majority of the stock having the voting power present in
person or represented by proxy at the Annual Meeting. The Board of Directors will consider the outcome of the vote when making future decisions regarding the compensation of the Company’s named executive officers. You may vote “FOR,” “AGAINST,” or “ABSTAIN” on the proposal to approve the compensation of the Company’s named executive officers. Quorum; Abstentions; and Broker Non-Votes A majority of the shares of common stock issued and outstanding on the Record Date, present online at the Annual Meeting or represented at the Annual Meeting by proxy, will constitute a quorum. A quorum must be present in order to hold the Annual Meeting and to conduct business. Your shares are counted as being present if you vote online at or before the Annual Meeting, by telephone, or by submitting a properly executed proxy card. Abstentions are counted as shares present at the Annual Meeting for purposes of determining whether a quorum exists. Abstentions have no effect on Proposal 1, the election of directors. Because abstentions will be included in tabulations of shares entitled to vote for purposes of determining whether a proposal has been approved, abstentions have the same effect as negative votes on Proposal 2, the ratification of the appointment of our independent registered public accounting firm, and on Proposal 3, the approval of the Company’s named executive officer compensation. If your broker holds your shares in its name (also known as “street name”), your broker is not permitted to vote your shares if it does not receive voting instructions from you on any matters that are not “routine” matters. Proposal 2, the ratification of the appointment of our independent registered public accountant firm is the only routine matter being presented at the Annual Meeting. Shares that are not permitted to be voted by your broker are called “broker non-votes.” Under the Delaware General Corporation Law, broker non-votes count as being present for purposes of determining whether a quorum of shares is present at a meeting but are not counted for purposes of determining the number of votes cast for or against a proposal. Broker non-votes will not affect the outcome of any matter being voted at the Annual Meeting, assuming that a quorum is obtained. How Can I Participate in the Virtual Annual Meeting? To participate in the Annual Meeting, visit www.meetingcenter.io/236985556 and enter your 16-digit control number as indicated. You can find your 16-digit control number on your proxy card or on the instructions that accompanied your proxy materials. You will be able to log into the virtual meeting platform beginning at 12:45 p.m. PDT on May 7, 2021. The Annual Meeting will begin promptly at 1:00 p.m. PDT. We encourage you to log in and ensure you can hear streaming audio prior to the Annual Meeting start time. The virtual meeting platform is supported across browsers (Internet Explorer, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong WiFi connection wherever they intend to participate in the Annual Meeting. If you wish to submit a question during the Annual Meeting, log into the virtual meeting platform, type your question into the “Ask a Question” field and click “Submit.” Questions pertinent to Annual Meeting matters will be answered during the Annual Meeting, subject to time constraints. Questions regarding personal matters, including those related to employment, product or service issues, or suggestions for product innovations, are not pertinent to Annual Meeting matters and, therefore, will not be answered. In the event we are not able to address any questions appropriately related to the business of the Company due to time constraints, we will aim to address them at an upcoming financial results conference call. If you encounter any difficulties accessing the Annual Meeting during check-in, please call the technical support number that will be posted on the virtual meeting platform’s log-in page. Internet Availability of Proxy Materials In accordance with the Securities and Exchange Commission (“SEC”) rules, we are furnishing proxy materials to our stockholders primarily via the Internet, instead of mailing printed copies of those materials to each stockholder. On or about March 25, 2021, we commenced mailing of the Notice to our stockholders (other than those who had previously requested electronic or paper delivery) containing instructions on how to access our proxy materials, including this Proxy Statement and our Annual Report. The Notice sets forth instructions on how to vote over the Internet and also how to request paper copies if that is your preference. This process is designed to provide stockholders with easy access to our proxy materials, while reducing the printing, distribution and environmental costs of the proxy process. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice. Eliminating Duplicative Proxy Materials To reduce the expense of delivering duplicate voting materials to our stockholders who may hold shares of Company common stock in more than one stock account, we are delivering only one set of our proxy materials to certain stockholders, as of the Record Date, who share an address, unless otherwise requested. A separate proxy card is included in the voting materials (either electronically or by mail, as applicable) for each of these stockholders. We will promptly deliver, upon verbal request, a separate copy of the Annual Report or this Proxy Statement to a stockholder at a shared address to which a single copy of the documents was delivered. To obtain an additional copy, you may also write us at Lattice Semiconductor Corporation, 5555 NE Moore Court, Hillsboro, Oregon 97124., Attn: Investor Relations, or contact our Investor Relations department by telephone at (408) 626-6120. Similarly, if you share an address with another stockholder and have received multiple copies of our proxy materials, you may contact us at the address or telephone number specified above to request that only a single copy of these materials be delivered to your address in the future. Stockholders sharing a single address may revoke their consent to receive a single copy of our proxy materials in the future at any time by contacting our distribution agent, Computershare, either by calling toll-free at 1-800-564-6253, or by writing to Computershare, at https://www-us.computershare.com/Investor/#Contact/Enquiry. It is our understanding that Computershare will remove such stockholder from the householding program within 30 days of receipt of such written notice, after which each such stockholder will receive an individual copy of our proxy materials. Incorporation by Reference To the extent that this Proxy Statement has been or will be specifically incorporated by reference into any other filing of the Company with the SEC, the sections of this Proxy Statement entitled “Report of the Audit Committee of the Board of Directors” (to the extent permitted by the rules of the SEC) and “Compensation Discussion and Analysis” shall not be deemed to be so incorporated, unless specifically provided otherwise in such filing. Stockholder List A list of stockholders entitled to vote at the Annual Meeting will be available for examination by stockholders of record at www.meetingcenter.io/236985556 during the Annual Meeting. | FURTHER INFORMATION We will provide without charge to each stockholder solicited by these proxy solicitation materials a copy of our Annual Report upon request of such stockholder made in writing to Lattice Semiconductor Corporation, 5555 NE Moore Court, Hillsboro, Oregon 97124, Attn: Investor Relations. We will also furnish any exhibit to the Annual Report if specifically requested in writing. You can also access our SEC filings, including our Annual Report, on the SEC website at www.sec.gov. |
Environmental, Social and Governance Highlights The Board believes that focusing on sustainable business practices that reduce business risk and advance the long-term goals and objectives of our stake holders will derive positive results. We work to conduct our business in ways that are principled, transparent and accountable to stockholders and other stakeholders. We focus our efforts where we can have the most positive impact on our business and society and are committed to managing the risks and opportunities that arise from environmental, social and governance (“ESG”) issues. Environmental We believe that a commitment to protecting the environment and reducing consumption of natural resources benefits us and our stakeholders. With innovative process technology and design, we seek to enhance sustainability through the products we provide to our customers. We aim to improve our own sustainability efforts as we pursue these goals: | ◾ | | We develop energy-efficient products that are lower power than our competitors and conduct business using sound environmental practices. |
| ◾ | | We partner with companies in our supply chain that are leaders in ESG and we commit to ensuring that these companies comply with global standards and maintain appropriate certifications. |
| ◾ | | We review the latest technologies and trends to support consistent energy reduction for the sustainable operation of our office buildings. |
Social We seek to grow and win together. We believe that good connections with our customers and our people lead to positive results for us. We work to do business consistent with our core values and seek to provide a workplace where each employee feels empowered to do so as well. We believe aspiring to better connections both in and out of the workplace has empowered us to better retain our employees and serve our communities. | ◾ | | We aim to provide a collaborative, diverse, inclusive and innovative work environment, competitive compensation and recognition to give our employees the opportunity to grow. Our pay for performance compensation program includes |
| | annual merit increases; a variable compensation cash incentive plan that provides annual incentive compensation based on Company financial performance, achievement of management business objectives and individual performance; and annual grants of restricted stock units to a majority of our employees. |
| ◾ | | Our employment practices are guided by our adherence to the shares present at the annual meeting, in person or by proxy, and entitled to vote on the proposal at the meeting. The board of directors will consider the outcometenets of the vote when making future decisions regardingResponsible Business Alliance Code of Conduct, that prescribes fair labor practices and prohibits forced labor, child labor and other inappropriate practices. |
| ◾ | | We pursue open communication with our employees through regular newsletters, town halls and the compensationactive collection of feedback from our employees on a regular basis. All employees receive an annual performance review. |
| ◾ | | We invest in, and give back to, our local communities through our volunteering and charitable efforts, including several additional donations to address community issues arising during the Company’s named executive officers. You may vote “FOR,” “AGAINST,” or “ABSTAIN” on the proposal to approve the compensation of the Company’s named executive officers. Proposal 3—Approval of the amended Lattice Semiconductor Corporation 2013 Incentive Plan. Approval of the amended Lattice Semiconductor Corporation 2013 Incentive Plan requires the affirmative vote of a majority of the total votes cast on the proposal (under applicable Nasdaq listing standards) and a majority of the shares present at the annual meeting, in person or by proxy, and entitled to vote on the proposal at the meeting (under Delaware law). You may vote “FOR,” “AGAINST,” or “ABSTAIN,” from the proposal to approve the amended Lattice Semiconductor Corporation 2013 Incentive Plan.
Proposal 4—Approval of the amended Lattice Semiconductor Corporation 2011Non-EmployeeCOVID-19 Director Equity Incentive Plan. Approval of the amended Lattice Semiconductor Corporation 2011Non-Employee Director Equity Incentive Plan requires the affirmative vote of a majority of the total votes cast on the proposal (under applicable Nasdaq listing standards) and a majority of the shares present at the annual meeting, in person or by proxy, and entitled to vote on the proposal at the meeting (under Delaware law). You may vote “FOR,” “AGAINST,” or “ABSTAIN” from the proposal to approve the amended Lattice Semiconductor Corporation 2011Non-Employee Director Equity Incentive Plan.pandemic.
Proposal 5—Ratification of Appointment of Independent Registered Public Accounting Firm. Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 29, 2018 requires the affirmative vote of a majority of the shares present at the annual meeting,
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Governance We believe that we should govern ourselves in person or by proxy, and entitled to vote on the proposal at the meeting. If the appointment of KPMG LLP is not ratified, the audit committee will take the results of this vote under advisement in evaluating whether to retain KPMG LLP. You may vote “FOR,” “AGAINST,” or “ABSTAIN” from the proposal to ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 29, 2018. Quorum; Abstentions; and BrokerNon-votes
A majority of the shares of common stock issued and outstanding on March 9, 2018, the record date for the annual meeting, present in person at the meeting or represented at the meeting by proxy, will constitute a way that encourages employees at every level to do it right, the first time. We pursue this commitment through striving to be connected to industry practices and our shareholders. Through both formal governance practices and informal commitments to ethical culture, we believe we can operate a company that better serves its stakeholders.
| ◾ | | 3We are committed to integrity and transparency.
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We value our stockholders’ governance views and seek to solicit governance feedback from our shareholders every two years. |
| ◾ | | quorum. A quorum must be presentWe annually measure our practices against the recommendations of Institutional Shareholder Services, Glass-Lewis, the BlackRock Investment Stewardship Guidelines and the governance recommendations of other institutional investors.
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| ◾ | | We operate in order to hold the annual meetingour stakeholders’ interests and to conduct business. Your shares are counted as being present if you vote in person at the meeting, by telephone, over the Internet, or by submitting a properly executed proxy card. Abstentions are counted as shares present at the meetingfollow applicable laws and best practices for purposesgovernance.
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PROPOSAL ONE ELECTION OF DIRECTORS Nominees Our Board of Directors is currently comprised of nine members. At the recommendation of the Nominating and Governance Committee of the Board of Directors, the Company will be nominating seven directors at the Annual Meeting for one-year terms ending in 2022. Your shares will be voted as you specify when providing your proxy. If you do not specify how you want your shares voted when you provide your proxy, we will vote your shares for the election of the seven nominees listed below. If unforeseen circumstances (such as death or disability) make it necessary for the Board of Directors to substitute another person for the nominee, we will vote your shares for that other person. The following briefly describes each of the individuals nominated for election at the Annual Meeting. In addition, a description of the specific experience, qualifications, attributes and skills that led our Board of Directors to conclude that each of the nominees should serve as a director follows the biographical information of each nominee below. For further information regarding the specific skills and qualities of the director nominees, see the section entitled “Corporate Governance and Other Matters – Director Qualifications, Skills and Experiences.” There are no arrangements or understandings between any director or nominee and any other person or entity other than the Company pursuant to which the director or nominee receives compensation, was nominated or serves as director. There are no family relationships among any of the nominees, our directors or executive officers. There are no material proceedings to which nominees, directors, executive officers or 5% stockholders are adverse to the Company. There have been no legal proceedings involving the nominees, directors or executive officers during the last ten years that the Company believes are material to such person’s integrity or ability to serve as an officer or director. | | | | | | | | | | Name | | Age | | Director Since | | | | | Robin A. Abrams(1)(3) | | 69 | | 2011 | | | | | James R. Anderson | | 48 | | 2018 | | | | | Mark E. Jensen(3) | | 70 | | 2013 | | | | | Anjali Joshi(2) | | 60 | | 2019 | | | | | James P. Lederer(2)(3) | | 60 | | 2018 | | | | | Krishna Rangasayee(2) | | 51 | | 2018 | | | | | D. Jeffrey Richardson(1) | | 56 | | 2014 |
| (1) | Member of determining whether a quorum exists. Abstentions have no effect on Proposal 1, the election of directors. Because abstentions will be included in tabulations of the votes cast and shares entitled to vote for purposes of determining whether a proposal has been approved, abstentions have the same effect as negative votes on Proposal 2, the approval of the Company’s named executive officer compensation, on Proposal 3, the approval of the amended Lattice Semiconductor Corporation 2013 Incentive Plan, on Proposal 4, the approval of the amended Lattice Semiconductor Corporation 2011Non-Employee Director Equity Incentive Plan, and on Proposal 5, the ratification of the appointment of our independent registered public accounting firm. If your broker holds your shares in its name (also known as “street name”), the broker is not permitted to vote your shares if it does not receive voting instructions from you on any matters that are not “discretionary” matters. Shares that are not permitted to be voted by your broker are called “brokernon-votes.” Under the Delaware General Corporation Law, broker non-votes count as being present for purposes of determining whether a quorum of shares is present at a meeting but are not counted for purposes of determining the number of votes cast for or against a proposal. Brokernon-votes will have no effect on Proposal 1, the election of directors, because directors are elected by a plurality of the votes cast. Brokernon-votes also will have no effect on Proposal 2, the approval of the Company’s named executive officers’ compensation on an advisory basis, Proposal 3, the approval of the amended Lattice Semiconductor Corporation 2013 Incentive Plan, or Proposal 4, the approval of the amended Lattice Semiconductor Corporation 2011Non-Employee Director Equity Incentive Plan, because brokernon-votes will not be included in tabulations of votes cast and shares entitled to vote for purposes of determining whether a proposal has been approved. Brokernon-votes will have no effect on Proposal 5, ratification of the appointment of our independent registered public accounting firm, because brokers or nominees have discretionary authority to vote on this proposal. We urge you to give voting instructions to your broker on all voting items.
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PROPOSAL 1: ELECTION OF DIRECTORS
Our board of directors is currently comprised of ten members. Effective at the 2018 annual meeting of stockholders, the board of directors acted to reduce the number of directors serving on the board of directors from ten to eight. Pursuant to action by the nominating and governance committee of the board of directors, the Company will be nominating eight directors, named below, at the meeting, all to serveone-year terms ending in 2019. We will vote your shares as you specify when providing your proxy. If you do not specify how you want your shares voted when you provide your proxy, we will vote your shares for the election of the eight nominees listed below. If unforeseen circumstances (such as death or disability) make it necessary for the board of directors to substitute another person for the nominee, we will vote your shares for that other person.
The following briefly describes each of the nominees for director. In addition, a description of the specific experience, qualifications, attributes and skills that led our board of directors to conclude that each of the nominees should serve as a director follows the biographical information of each nominee below. Except as otherwise noted, each nominee has served in his or her principal occupation for at least ten years. Each of Messrs. Lederer, Major and Rangasayee (the “New Directors”) have been appointed to our board of directors pursuant to an Agreement, dated March 7, 2018 (the “Agreement”), between the Company and Lion Point Capital, LP, Lion Point Master, LP, Lion Point Capital GP, LLC, Lion Point Holdings GP, LLC, Didric Cederholm and Jim Freeman (collectively, the “Lion Point Group”). Pursuant to the Agreement, the Company (i) increased the size of the Company’s board of directors by three directors, (ii) appointed Messrs. Lederer, Major and Rangasayee to fill the newly created vacancies, and (iii) appointed at least one New Director to the Nominating and Governance Committee andCommittee.
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| (2) | Member of the Compensation Committee. |
| (3) | Member of the Audit Committee. Pursuant to the Agreement, the Lion Point Group agreed to certain standstill commitments as previously disclosed in the Company’s Form8-K filed with the SEC on March 13, 2018. There are no arrangements or understandings between any director or nominee and any other person or entity other than the Company pursuant to which the director or nominee receives compensation in connection with that person’s candidacy or service as a director. There are no family relationships among any of the nominees, our directors or executive officers. There are no material proceedings to which nominees, directors, executive officers or 5% stockholders are adverse to the Company. There have been no legal proceedings involving the nominees, directors or executive officers during the last ten years that the Company believes are material to such person’s integrity or ability to serve as an officer or director. Nominees
Robin A. Abrams,age 66,
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Biographical Information Robin A. Abrams,age 69, has served as a director of the Company since 2011. Ms. Abrams served as the Interim Chief Executive Officer of Zilog, Inc. from August 2006 to January 2007 and the Chief Executive Officer of Firefly Communications, Inc. from 2004 to 2006. In addition to leading severalstart-ups, Ms. Abrams also served as President and CEO of Palm Computing, Inc. Prior to Palm, she was President and CEO of VeriFone, a leading global debit/credit card authorization solutions provider. Ms. Abrams also held several key executive positions at Apple, including president of Apple Americas and managing director of Apple Asia. Previously, Ms. Abrams held senior product marketing positions at Norwest Bank (Wells Fargo) and Unisys. Ms. Abrams currently is a member of the boards of directors of FactSet Research, HCL Technologies Ltd., Sierra Wireless, Inc. and a private firm. Ms. Abrams brings to the Company extensive executive management experience obtained at Fortune 500 companies, including experience managing operations in both Asia and the United States and experience in advance technology. Ms. Abrams contributes valuable governance experience based on service on a number of public company boards. James R. Anderson, age 48, has served as a director since joining the Company as President and Chief Executive Officer in September 2018. Prior to joining the Company, Mr. Anderson served as the Senior Vice President and General Manager of the Computing and Graphics Business Group at Advanced Micro Devices, Inc. (“AMD”). Prior to joining AMD in May 2015, Mr. Anderson served at Intel Corporation from November 2014 to May 2015. Prior to Intel, Mr. Anderson spent nearly a decade at Avago Technologies Limited and LSI Corporation in a variety of leadership positions. At AMD, Mr. Anderson drove a strategic and operational transformation that brought disruptive new products to the market and delivered market-leading revenue growth and significant profitability expansion for AMD. Prior to AMD, he held a broad range of leadership positions spanning general management, engineering, sales, marketing and strategy at companies including Intel, Broadcom Limited (formerly, Avago Technologies) and LSI Corporation. Mr. Anderson has received four patents for innovations in computer architecture. Mr. Anderson currently is a member of the board of directors of Sierra Wireless, Inc. He previously served as a member of the board of directors of Qylur Intelligent Systems, Inc until January 2020. Mr. Anderson earned an MBA and Master of Science in electrical engineering and computer science from the Massachusetts Institute of Technology, a Master of Science in electrical engineering from Purdue University and a Bachelor of Science in electrical engineering from the University of Minnesota. Mark E. Jensen,age70, has served as a director of the Company since June 2013. Mr. Jensen served as an executive of Deloitte & Touche LLP until his retirement in June 2012. He held a variety of positions, including U.S. Managing Partner-Audit and Enterprise Risk Services, Technology Industry and U.S. Managing Partner-Venture Capital Services Group.Prior to joining Deloitte & Touche LLP, Mr. Jensen was the Chief Financial Officer of Redleaf Group. Earlier in his career, Mr. Jensen was an executive at Arthur Andersen LLP, which he joined in 1978, was admitted to the partnership in 1991, and served as the Managing Partner of the firm’s Silicon Valley Office and leader of the firm’s Global Technology Industry Practice. Mr. Jensen currently serves on the board of directors of a private firm. Mr. Jensen served on the board of directors of Unwired Planet, Inc. (formerly Openwave Systems Inc.) from 2012 until 2015, Control4 Corporation from 2015 to 2019 and ForeScout Technologies, Inc. from 2013 to 2020. Mr. Jensen brings business experience in a number of advance technology industry segments and substantial financial expertise. Mr. Jensen has experience in executive management derived from his service as an executive officer, as the managing partner of a significant practice of a major accounting firm and service as a member of a public company board of directors. Anjali Joshi, age 60, has served as a director of the Company since November 2019. Mrs. Joshi brings more than 30 years’ experience in high-technology engineering and product management. Ms. Joshi was at Google for 12 years, most recently as VP Product Management leading product development for multiple search products having earlier led product management for multiple core business areas. Before joining Google, Ms. Joshi was EVP of Engineering at Covad Communications, a voice and data communications company that she helped grow from a start-up to a public company. She started her career at AT&T Bell Laboratories where she was a member of the technical staff focused on voice and high-speed communications. Ms. Joshi currently serves on the board of directors of Icertis, Inc. and Alteryx. Ms. Joshi served on the board of directors of McClatchy, Inc. from 2017 to 2020 and MobileIron from 2019 to 2020. She earned a Masters degree in Management Science from Stanford University, a Masters degree in Computer Science from the University at Buffalo and a Bachelors degree in Electrical Engineering from the India Institute of Technology, Kanpur. James P. Lederer, age60, has served as a director of the Company since March 2018. Mr. Lederer is an executive with decades of experience leading a preeminent company in the semiconductor industry. He served as an Executive Vice President and Officer of Qualcomm Technologies, Inc., a leading wireless technology company, including the dual CFO & COO roles for Qualcomm CDMA Technologies (QCT), its semiconductor division, from 2008 until his retirement in January 2014. Prior to that role, he served as CFO of the company’s largest segment from 2001 and additionally held a variety of senior management positions at Qualcomm, Inc., including Senior Vice President, Finance and Business Operations. Prior to joining Qualcomm in 1997, Mr. Lederer held a number of management positions at Motorola, General Motors and Scott Aviation. Mr. Lederer currently serves on the board of directors of Entegris, Inc. He holds a B.S. degree in Business Administration and an M.B.A. from the State University of New York at Buffalo, where he also serves on the Dean’s Advisory Council for the School of Management. Krishna Rangasayee, age 51, has served as a director of the Company since March 2018. Mr. Rangasayee has more than 25 years of experience in the semiconductor industry and currently serves as the Chief Executive Officer of SiMa Technologies, Inc. Until November 2018, Mr. Rangasayee served as Chief Operating Officer for Groq, a machine learning systems company, and worked in various positions at Xilinx, Inc. from 1999 until August 2017, including Senior Vice President and GM and Executive Vice President, Global Sales. He is a graduate of the National Institute of Technology in India and has a M.S. in Electrical Engineering from Mississippi State University. Mr. Rangasayee brings to the Company significant management experience with programmable logic technology. D. Jeffrey Richardson,age 56, has served as a director since December 2014 and as chair since May 2018. Mr. Richardson joined LSI Corporation in 2005 and most recently served as Executive Vice President and Chief Operating Officer until the company’s acquisition by Avago Technologies in May 2014. He earlier served as executive vice president of various LSI divisions, including the Semiconductor Solutions Group, Networking and Storage Products Group, Custom Solutions Group and Corporate Planning and Strategy. Before joining LSI, Mr. Richardson held various management positions at Intel Corporation, including Vice President and General Manager of Intel’s Server Platforms Group, and the company’s Enterprise Platforms and Services Division. Mr. Richardson’s career also includes serving in technical roles at Altera Corporation; Chips and Technologies; and Amdahl Corporation. Mr. Richardson serves as a Director of Ambarella Corporation and Kulicke and Soffa Industries, Inc. From 2011 until 2013, Mr. Richardson served on the board of directors of Volterra Corporation. Mr. Richardson brings extensive management experience in the advanced technology company environment, including operations, marketing, engineering and strategic transactions. start-ups, Ms. Abrams also served as President and CEO of Palm Computing, Inc. Prior to Palm, she was President and CEO of VeriFone, a leading global debit/credit card authorization solutions provider. Ms. Abrams also held several key executive positions at Apple, including president of Apple Americas and managing director of Apple Asia. Previously, Ms. Abrams held senior product marketing positions at Norwest Bank (Wells Fargo) and Unisys. Ms. Abrams currently is a member of the boards of directors of FactSet Research, HCL Technologies Ltd., Sierra Wireless, Inc. and a private firm. Ms. Abrams served on the board of directors of Unwired Planet, Inc. (formerly Openwave Systems Inc.) from 2008 until 2013.
Ms. Abrams brings to the Company extensive executive management experience obtained at Fortune 500 companies, including experience managing operations in both Asia and the United States and experience in high technology. Ms. Abrams contributes valuable governance experience based on service on a number of public company boards.
Brian M. Beattie, age 64, has served as a director of the Company since July 2016. Mr. Beattie served as the Executive Vice President, Business Operations and Chief Administrative Officer of Synopsys, Inc. (Nasdaq: SNPS), until his retirement in December 2017 and as Chief Financial Officer for Synopsys from January 2006 to
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December 2014. Prior to joining Synopsys, Mr. Beattie was Chief Financial Officer and Executive Vice President of Finance and Administration at SupportSoft, Inc. for 6 years and held various corporate, financial and operational roles at Nortel Networks over a 19 year period. Mr. Beattie served on the board of directors of Unwired Planet, Inc. (formerly Openwave Systems Inc.) from December 2010 until November 2012.
Mr. Beattie brings to the Company extensive financial and operational experience in the high technology company environment.
John Bourgoin,age 72, has served as a director of the Company since 2011. Mr. Bourgoin served as President and Chief Executive Officer of MIPS Technologies, Inc. from 1998 until his retirement in 2009. Previously, he had served as Senior Vice President of Silicon Graphics, Inc. from 1996 to 1998, where he established the intellectual property business model for MIPS and orchestrated the MIPSspin-out from Silicon Graphics. Mr. Bourgoin also was employed at Advanced Micro Devices, Inc., where he held various senior positions, including Group Vice President of Microprocessor Products. He also has extensive experience in the programmable logic industry, having served as the Vice President of AMD’s Programmable Logic Division. Mr. Bourgoin served on the board of directors at Micrel, Inc. from May 2010 until August 2015.
Mr. Bourgoin brings to the Company extensive experience in semiconductor and related high technology management, including programmable logic. Mr. Bourgoin has experience in executive management, strategic business development, operations management and other management disciplines derived during his service as a senior executive and chief executive officer.
Mark E. Jensen,age67, has served as a director of the Company since June 2013. Mr. Jensen served as an executive of Deloitte & Touche LLP until his retirement in June 2012. He held a variety of positions, including U.S. Managing Partner-Audit and Enterprise Risk Services, Technology Industry and U.S. Managing Partner-Venture Capital Services Group.Prior to joining Deloitte & Touche LLP, Mr. Jensen was the Chief Financial Officer of Redleaf Group. Earlier in his career, Mr. Jensen was an executive at Arthur Andersen LLP, which he joined in 1978, was admitted to the partnership in 1991, and served as the Managing Partner of the firm’s Silicon Valley Office and leader of the firm’s Global Technology Industry Practice. Mr. Jensen currently serves on the boards of directors of Control4 Corporation and ForeScout Technologies, Inc. Mr. Jensen served on the board of directors of Unwired Planet, Inc. (formerly Openwave Systems Inc.) from 2012 until 2015.
Mr. Jensen brings business experience in a number of high-tech industry segments and substantial financial expertise. Mr. Jensen has experience in executive management derived from his service as an executive officer, as the managing partner of a significant practice of a major accounting firm and service as a member of a public company board of directors.
James P. Lederer, age57, has served as a director of the Company since March 2018. Mr. Lederer served as Executive Vice President and Officer of Qualcomm Technologies, Inc. and General Manager of Qualcomm CDMA Technologies (QCT), its semiconductor division from 2008 until his retirement in 2014. Prior to that role, he held a variety of senior management positions at Qualcomm, leading teams in finance, operations, supply chain, strategy, M&A, legal and product/program management functions beginning in 1997. Prior to joining Qualcomm, Mr. Lederer held various management positions at Motorola and General Motors. Mr. Lederer currently serves on the board of directors of Entegris, Inc. He holds a B.S. degree in Business Administration and an M.B.A. from the State University of New York at Buffalo, where he also serves on the Dean’s Advisory Council for the School of Management.
Mr. Lederer brings to the Company more than 35 years of broad-ranging executive leadership experience, with over two decades focused on the semiconductor, mobile and wireless technology industries.
John E. Major, age72, has served as a director of the Company since March 2018. Mr. Major is President of MTSG, a company that provides consulting, management and governance services, which he founded in 2003. From 2004 to 2006, he served as CEO of Apacheta Corp., a privately held mobile, wireless software company.
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From 2000 until 2003, Mr. Major was chairman and CEO of Novatel Wireless Inc., a wireless data access solutions company. Prior to that, Mr. Major was chairman and CEO of Wireless Knowledge, a joint venture of Qualcomm Inc. and Microsoft Corp. Prior to joining Wireless Knowledge, Mr. Major served as corporate executive vice president of Qualcomm and president of its wireless infrastructure division. For approximately 18 years, he held various executive and leadership positions at Motorola Inc., the most recent of which was Senior Vice President and Chief Technology Officer. Mr. Major received a B.S. in Mechanical and Aerospace Engineering from the University of Rochester, an M.S. in Mechanical Engineering from the University of Illinois, an M.B.A. from Northwestern University and a J.D. from Loyola University. Mr. Major currently serves on the boards of directors of Lennox International, Inc., Littelfuse Inc., ORBCOMM Inc., Resonant Inc., and Pulse Electronics.
Mr. Major brings to the Company significant board experience and strong operational expertise at both public and private technology companies.
Krishna Rangasayee, age 48, has served as a director of the Company since March 2018. Mr. Rangasayee has more than 25 years of experience in the semiconductor industry and currently serves as Chief Operating Officer at Groq, a machine learningstart-up. Previously, Mr. Rangasayee worked in various positions at Xilinx, Inc. until August 2017, including Senior Vice President and GM and Executive Vice President, Global Sales. He is a graduate of the National Institute of Technology in India, and has a M.S. in Electrical Engineering from Mississippi State University.
Mr. Rangasayee brings to the Company significant management experience with programmable logic technology.
D. Jeffrey Richardson,age 53, has served as a director since December 2014. Mr. Richardson joined LSI Corporation in 2005 and most recently served as Executive Vice President and Chief Operating Officer until the company’s acquisition by Avago Technologies in May 2014. He earlier served as executive vice president of various LSI divisions, including the Semiconductor Solutions Group, Networking and Storage Products Group, Custom Solutions Group and Corporate Planning and Strategy. Before joining LSI, Mr. Richardson held various management positions at Intel Corporation, including Vice President and General Manager of Intel’s Server Platforms Group, and the company’s Enterprise Platforms and Services Division. Mr. Richardson’s career also includes serving in technical roles at Altera Corporation; Chips and Technologies; and Amdahl Corporation. Mr. Richardson presently serves as a Director of Ambarella Corporation. From 2011 until 2013, Mr. Richardson served on the board of directors of Volterra Corporation.
Mr. Richardson brings extensive management experience in the high technology company environment, including operations, marketing, engineering and strategic transactions.
Required Vote Required
The seven nominees receiving the highest number of affirmative votes cast at the Annual Meeting, in person or by proxy, shall be elected as directors. If any director receives a greater number of “WITHHOLD” votes than “FOR” votes, then pursuant to our Corporate Governance Policies, such director is required to submit a letter of resignation to the Board of Directors. The Board of Directors will ask the Nominating and Governance Committee to consider the resignation and recommend the action it believes the Board of Directors should take with respect to such offer of resignation, including acceptance or rejection. Within 120 days of the Annual Meeting, the Board of Directors will act with respect to such offer of resignation. Recommendation The Board recommends that stockholders vote “FOR” each of the seven nominees presented herein. CORPORATE GOVERNANCE AND OTHER MATTERS Director Independence The Board of Directors has determined that each of our directors, except for Mr. Anderson, our President and Chief Executive Officer, is independent within the meaning of the applicable rules and regulations of the SEC and Nasdaq. Furthermore, the Board of Directors has determined that each of the members of each of the committees of the Board of Directors is “independent” under the applicable rules and regulations of the SEC and Nasdaq. Board Meetings and Committees In fiscal 2020, the Board of Directors held a total of 8 meetings. The independent directors meet regularly without the presence of management. Mr. Richardson, in his capacity as Chair of the Board of Directors, leads meetings of independent directors. Each of our current directors attended at least 80% of the total number of meetings of the Board of Directors and at least 80% of the total number of meetings of the committees of the Board of Directors on which such director served. Our Board of Directors currently has three primary standing committees: the Audit Committee (“Audit Committee”), the Compensation Committee (“Compensation Committee”) and the Nominating and Governance Committee (“Nominating and Governance Committee”). Each of these committees operates under a written charter adopted by the Board of Directors. Copies of each of the committee charters are available on our website, https://www.latticesemi.com, at “About Us—Investor Relations—Corporate Governance.” Audit Committee The Audit Committee oversees the accounting and financial reporting process and the external audit process of the Company and assists the Board of Directors in the oversight and monitoring of (i) the integrity of the financial statements of the Company, (ii) the internal accounting and financial controls of the Company, (iii) compliance with legal and regulatory requirements and (iv) the qualifications, performance and independence of the Company’s independent registered public accounting firm. In this capacity, the Audit Committee is responsible for appointing, approving the compensation of and overseeing the work of, the independent registered public accounting firm. In addition, the Audit Committee reviews and approves all work performed by the independent registered public accounting firm. The Audit Committee meets regularly with management and with our independent registered public accounting firm, which has access to the Audit Committee without the presence of management representatives. During fiscal 2020, the Audit Committee was composed of Mr. Jensen (chair), Ms. Abrams (beginning in February) and Mr. Lederer. The Audit Committee met 13 times in fiscal 2020. Our Board of Directors has determined that each of the Audit Committee members meets the financial literacy requirements under applicable Nasdaq rules and that each of the Audit Committee members qualifies as an Audit Committee Financial Expert under applicable SEC rules and as “independent” under the applicable rules and regulations of the SEC and Nasdaq. Compensation Committee The Compensation Committee evaluates and, subject to obtaining the agreement of all the independent directors, approves our Chief Executive Officer’s compensation, approves the compensation of our other executive officers and reviews succession planning for the Chief Executive Officer position. The Compensation Committee also administers our equity plans and handles other compensation matters. During fiscal 2020, the Compensation Committee was composed of John Bourgoin (chair), Ms. Joshi, Mr. Lederer and Mr. Rangasayee. The Compensation Committee met 5 times in fiscal 2020. Our Board of Directors has determined that each of the Compensation Committee members qualifies as “independent” under the applicable rules and regulations of the SEC and Nasdaq. The Compensation Committee annually evaluates and, subject to obtaining the agreement of all the independent directors, approves the Chief Executive Officer’s and other executive officers’ compensation, including (i) the annual base salary, (ii) the annual cash-based variable compensation program, including the specific goals and target award amounts, (iii) equity compensation, (iv) any employment agreement, severance arrangement, or change in control agreement/provision, and (v) any other benefits, compensation, or arrangements. The Compensation Committee reviews and approves corporate goals and objectives relevant to the compensation of the Chief Executive Officer, evaluates his or her performance in light thereof, and considers other factors related to the performance of the Company, including accomplishment of the Company’s long-term business and financial goals. The Compensation Committee consults with the Chief Executive Officer regarding the specific goals established for the other executive officers in connection with the annual cash-based variable compensation program. The Compensation Committee also reviews compensation and benefits plans affecting non-executive employees. We have determined our compensation policies and practices for our employees appropriately manage compensation-related risk and are not reasonably likely to present a material risk to the Company. The entire Board of Directors considers strategic risks and opportunities and regularly receives detailed reports from the committees regarding risk oversight in their areas of responsibility. For further information on risk management see “Corporate Governance and Other Matters—Board Risk Oversight.” The Compensation Committee has the authority to retain its own compensation consultants and outside legal, accounting and other advisers at the Company’s expense. Such consultants and advisers report directly to the Compensation Committee and the Compensation Committee has the authority to approve the fees payable to such advisers by the Company and other terms of retention. The Compensation Committee does not delegate its authority to such consultants or advisers. In fiscal 2020, the Compensation Committee engaged the services of Compensia, Inc. (“Compensia”), a compensation consulting firm, and has considered such firm’s input in evaluating compensation trends and best practices, benchmarking compensation data, and other aspects of administering the Company’s executive compensation program and equity compensation programs. Compensia serves at the discretion of the Compensation Committee, and their services were discontinued in July 2020. In July 2020, the Compensation Committee engaged the services of Semler Brossy Consulting Group, LLP. (“Semler Brossy”), a compensation consulting firm, and has considered such firm’s input in evaluating compensation trends and best practices, identifying peer group companies and benchmarking compensation data and other aspects of administering the Company’s executive compensation program and equity compensation programs. Semler Brossy serves at the discretion of the Compensation Committee. There were no conflicts of interest between the Company and Compensia, Semler Brossy or Wilson Sonsini Goodrich & Rosati. Nominating and Governance Committee The Nominating and Governance Committee identifies qualified persons to be nominated as director candidates, recommends candidates for all vacant directorships to be filled by the Board of Directors or by the stockholders, reviews and evaluates the performance of the Board of Directors and each committee of the Board of Directors, makes recommendations to the Board of Directors for nominees to the committees of the Board of Directors, and oversees compliance with our corporate governance policies. During fiscal 2020, the Nominating and Governance Committee was composed of Ms. Abrams (chair), John E. Major and Mr. Richardson. The Nominating and Governance Committee met 4 times in fiscal 2020. Our Board of Directors has determined that each of the Nominating and Governance Committee members qualifies as “independent” under the applicable rules and regulations of the SEC and Nasdaq. The nominees receiving the highest number of affirmative votes cast at the meeting, in person or by proxy, shall be elected as directors. If the election of directors at this annual meeting is uncontested and any director receives a greater number of “WITHHOLD” votes than “FOR” votes, then pursuant to our Corporate Governance Policies, such director is required to submit a letter of resignation to the board of directors. The board of directors will ask the nominating and governance committee to consider the resignation and recommend the action the committee believes the board of directors should take with respect to such offer of resignation, including acceptance or rejection. Within 120 days of the stockholder meeting, the board of directors will act with respect to such offer of resignation.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE ELECTION OF ROBIN A. ABRAMS, BRIAN M. BEATTIE, JOHN BOURGOIN, MARK E. JENSEN, JAMES P. LEDERER, JOHN E. MAJOR, KRISHNA RANGASAYEE, AND D. JEFFREY RICHARDSON AS DIRECTORS OF THE COMPANY.
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CORPORATE GOVERNANCE AND OTHER MATTERS
Director Independence
The board of directors has determined that each of our directors, except for Mr. Billerbeck who retired effective March 16, 2018, is independent within the meaning of the applicable rules and regulations of the SEC and the director independence standards of the Nasdaq Stock Market, LLC. (“Nasdaq”), as currently in effect. Furthermore, the board of directors has determined that each of the members of each of the committees of the board of directors is “independent” under the applicable rules and regulations of the SEC and the director independence standards of Nasdaq, as currently in effect.
Annual Meeting Attendance
Although we do not have a formal policy regarding attendance by members of the board of directors at our annual meetings of stockholders, directors are encouraged to attend. Ms. Abrams, Mr. Bourgoin, Mr. Jensen and Mr. Billerbeck, our former President and Chief Executive Officer, who retired from the board of directors effective March 16, 2018, attended the last annual meeting of stockholders.
Board Meetings and Committees
In fiscal 2017, the board of directors held a total of 8 meetings. The independent directors meet regularly without the presence of management. Mr. John Bourgoin, in his capacity as Chairman of the Board of Directors, led meetings of independent directors in fiscal 2017. Each of our current directors attended or participated in 100% of the total number of meetings of the board of directors and 100% of the total number of meetings held by all committees of the board of directors on which such director served, except for Messrs. Lederer, Major and Rangasayee, who were appointed effective March 13, 2018.
Our board of directors currently has three standing committees: the audit committee, the compensation committee, and the nominating and governance committee. Each of these committees operates under a written charter adopted by the board of directors. Copies of each of the committee charters are available on our website at the following address: http://ir.latticesemi.com/phoenix.zhtml?c=117422&p=irol-govHighlights. In December 2015, our board of directors organized a strategic alternatives committee to evaluate strategic options for the Company to maximize stockholder value.
The board has elected to maintain a leadership structure with an independent director serving as the chairman. Although we recognize that different board leadership structures may be appropriate for companies in different situations and believe that no one structure is suitable for all companies, we believe our current board leadership structure is optimal for the Company as it provides for strong independent exercise of the board’s oversight responsibilities.
Audit Committee
The Company has a separately designated standing audit committee. The audit committee oversees the accounting and financial reporting process and the external audit process of the Company and assists the board of directors in the oversight and monitoring of (i) the integrity of the financial statements of the Company, (ii) the internal accounting and financial controls of the Company, (iii) compliance with legal and regulatory requirements, and (iv) the qualifications, performance, and independence of the Company’s independent registered public accounting firm. In this capacity, the audit committee is responsible for appointing, approving the compensation of, and overseeing the work of the independent registered public accounting firm. In addition, the audit committee reviews and approves all work performed by the independent registered public accounting firm. The audit committee meets regularly with management and with our independent registered public accounting firm, which has access to the audit committee without the presence of management representatives.
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During fiscal 2017, the audit committee was composed of, Mr. Jensen (chairman of the committee), Mr. Beattie, and Mr. Richardson. The audit committee met 7 times in fiscal 2017. Mr. Lederer was appointed to the audit committee in March 2018. Our board of directors has determined that the audit committee members meet the financial literacy requirements under applicable Nasdaq rules and that Mr. Jensen qualifies as an audit committee financial expert under applicable SEC rules.
It is management’s responsibility to manage risk on a daily basis and bring to the board of directors’ attention the most material risks to the Company. Although the board of directors has overall responsibility for oversight of risk management with a focus on the most significant risks facing the Company, the board has delegated to the audit committee responsibility for establishment with the Company’s management of a process by which the material risks facing the Company are identified. Each quarter, the committee receives a risk update from management, comprised of a list of major risks faced by the Company and the status of actions taken to mitigate those risks. Throughout the year, the board and the audit committee dedicate a portion of their meetings to review and discuss specific risk topics in greater detail. The audit committee also routinely meets with various Company compliance personnel to obtain a periodic assessment of compliance issues facing the Company.
Compensation Committee
The compensation committee evaluates and, subject to obtaining the agreement of all the independent directors, approves our chief executive officer’s compensation, approves the compensation of our other executive officers, and reviews succession planning for the chief executive officer position. The committee also administers our equity plans and handles other compensation issues. During fiscal 2017, the compensation committee was composed of Mr. Herb (chairman of the committee), Mr. Bourgoin, and Mr. Weber. The compensation committee met 5 times in fiscal 2017. Messrs. Lederer and Rangasayee were appointed to the compensation committee in March 2018.
The compensation committee, comprised of directors who satisfy the applicable independence requirements of Nasdaq, the SEC, and the Internal Revenue Code, reviews, approves, and administers our executive compensation program. As set forth in the committee charter, the role of the compensation committee is to act for the board of directors to oversee the compensation of our chief executive officer and other executive officers, and to oversee the executive officer compensation plans, policies, and programs of the Company. The committee also oversees our employee equity incentive plans, and reviews and approves equity grants to our employees.
The compensation committee annually evaluates and, subject to obtaining the agreement of all the independent directors, approves the chief executive officer’s compensation, including (i) the annual base salary, (ii) the annual cash-based variable compensation program, including the specific goals and target award amounts, (iii) equity compensation, (iv) any employment agreement, severance arrangement, or change in control agreement/provision, and (v) any other benefits, compensation, or arrangements. The compensation committee reviews and approves corporate goals and objectives relevant to the compensation of the chief executive officer, evaluates his performance in light thereof, and considers other factors related to the performance of the Company, including accomplishment of the Company’s long-term business and financial goals.
The compensation committee also annually evaluates and approves for the other executive officers of the Company (i) the annual base salary, (ii) the annual cash-based variable compensation program, including the target award amounts, (iii) equity compensation, (iv) any employment agreement, severance arrangement, or change in control agreement/provision, and (v) any other benefits, compensation, or arrangements. The compensation committee consults with the chief executive officer regarding the specific goals established for the other executive officers in connection with the annual cash-based variable compensation program.
The compensation committee also reviews compensation and benefits plans affecting employees in addition to those applicable to executive officers. We have determined that it is not reasonably likely that compensation policies and practices for our employees would have a material adverse effect on the Company. The full board considers strategic risks and opportunities and regularly receives detailed reports from the committees regarding risk oversight in their areas of responsibility.
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The compensation committee has the authority to retain its own compensation consultants and outside legal, accounting, and other advisers at the Company’s expense. Such consultants and advisers report directly to the compensation committee and the committee has the authority to approve the fees payable to such advisers by the Company and other terms of retention. The compensation committee does not delegate its authority to such consultants or advisers. In fiscal 2017, the compensation committee engaged the services of Compensia, Inc., a compensation consulting firm, and has considered such firm’s input in evaluating compensation trends and best practices, identifying peer group companies and benchmarking compensation data, and other aspects of administering the Company’s executive compensation program and equity compensation programs. Compensia, Inc. serves at the discretion of the compensation committee. The work performed for the Company by Compensia, Inc. has not raised any conflict of interest.
Nominating and Governance Committee The nominating and governance committee identifies qualified persons to become directors; recommends candidates for all vacant directorships to be filled by the board of directors or by the stockholders; reviews and evaluates the performance of the board of directors and each committee of the board of directors; makes recommendations to the board of directors for nominees to the committees of the board of directors; and oversees compliance with our corporate governance policies. During fiscal 2017, the nominating and governance committee was composed of, Ms. Abrams (chair of the committee), Mr. Herb and Mr. Richardson. The nominating and governance committee met 4 times in fiscal 2017. Mr. Major was appointed to the nominating and governance committee in March 2018.
The nominating and governance committee believes that each of the Company’s directors should have certain minimum personal qualifications, including the following:
| ◾ | | professional competence, expertise and diversity of background that is useful to the Company; |
| ◾ | | the desire and ability to serve as a director and to devote the time and energy required to fulfill the responsibilities of the position successfully; |
| ◾ | | character, judgment, experience and temperament appropriate for a director; and |
| ◾ | | independence, together with personal and professional honesty and integrity of the highest order. The committee evaluates candidates for nomination on the basis of their individual qualifications, and also on the basis of how such individuals would provide valuable perspective or fill a need on the board of directors.
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The Nominating and Governance Committee evaluates candidates for nomination on the basis of their individual qualifications, and also on the basis of how such individuals would provide valuable perspective or fill a need on the Board of Directors. Factors in such determination include: | ◾ | | the current size and composition of the boardBoard of directors;Directors; |
| ◾ | | the independence of the boardBoard of directorsDirectors and its committees; |
| ◾ | | the presence on the boardBoard of directorsDirectors of individuals with expertise in areas useful to the Company; |
| ◾ | | the diversity of individuals on the boardBoard of directors,Directors, including their personal characteristics, experiences and backgrounds; |
| ◾ | | the number of other boards on which the candidate serves; and |
| ◾ | | such other factors as the committee or the boardBoard of directorsDirectors consider significant. The committee believes that it is necessary for each of the Company’s directors to possess many qualities and skills. The committee typically seeks individuals with extensive experience and who bring a broad range of competencies to the role. When searching for new candidates, the committee considers the evolving needs of both the Company and the board and searches for candidates that fill any current or anticipated future gap. The committee also focuses on issues of diversity, such as diversity of education, professional experience, and differences in viewpoints and skills. The committee does not have a formal policy with respect to diversity;
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however, the board and the committee believe that it is essential that the Board members represent diverse viewpoints. In considering candidates for the board, the committee considers the entirety of each candidate’s credentials in the context of these standards. With respect to the nomination of continuing directors forre-election, an individual’s contributions to the Board are also considered.
The nominating and governance committee will consider candidates for our board of directors who have been suggested by its members, other members of the board of directors, our senior management, individuals personally known to members of our board, and our stockholders. From time to time, the committee may solicit proposals for candidates from interested constituencies, or may use paid third-party search firms to identify candidates.
Under the terms of its charter, the committee is obligated to consider in good faith any candidate recommended by one or more of our ten largest unaffiliated stockholders of record, provided that, in the committee’s judgment, the candidate satisfies the criteria for board service set forth in the committee’s charter. The committee evaluates candidates in the same manner regardless of how such candidates are brought to the attention of the committee.
Stockholders who wish to submit names of candidates for our board of directors for consideration by the nominating and governance committee should do so in writing, addressed to the nominating and governance committee, c/o Secretary, Lattice Semiconductor Corporation, 111 SW 5th Ave., Suite 700, Portland, Oregon 97204,
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The Nominating and Governance Committee believes that it is necessary for each of the Company’s directors to possess many qualities and skills. The Nominating and Governance Committee typically seeks individuals with extensive experience and who bring a broad range of competencies to the role. When searching for new candidates, the Nominating and Governance Committee considers the evolving needs of both the Company and the Board and searches for candidates that fill any current or anticipated future gap. The Nominating and Governance Committee does not have a formal policy with respect to diversity; however, the Board and the Nominating and Governance Committee believe that it is essential that the members of our Board of Directors represent diverse viewpoints, background and experiences and considers or seeks candidates considering the diverse communities, geographies and demographics in which we operate. In addition, the Nominating and Governance Committee believes that gender diversity is important to assure that the Board is representative of our investors, our employees and our communities. In considering candidates for the Board, the Nominating and Governance Committee considers the entirety of each candidate’s credentials in the context of these standards. With respect to the nomination of continuing directors for re-election, an individual’s contributions to the Board of Directors are also considered. For further description of the current Board of Directors’ qualifications, skills and experiences, please see “Corporate Governance and Other Matters—Director Qualifications, Skills and Experiences.” The Nominating and Governance Committee will consider candidates for our Board of Directors who have been suggested by its members, other members of the Board of Directors, our senior management, individuals personally known to members of our Board, and our stockholders. From time to time, the Nominating and Governance Committee may solicit proposals for candidates from interested constituencies or may use paid third-party search firms to identify candidates. The Nominating and Governance Committee evaluates candidates in the same manner regardless of how such candidates are brought to the attention of the Nominating and Governance Committee. Process for Stockholders to Recommend Candidates for Election to the Board of Directors Stockholders who wish to submit names of candidates for our Board of Directors for consideration by the Nominating and Governance Committee should do so in writing, addressed to the Nominating and Governance Committee, c/o Secretary, Lattice Semiconductor Corporation, 5555 NE Moore Court, Hillsboro, Oregon 97124, and should include the following information: | ◾ | | a statement that the writer is a stockholder and is proposing a candidate for consideration by the committee (if the stockholder believes that they are one of our ten largest unaffiliated stockholders, then the stockholder should include language to this effect in their statement);Nominating and Governance Committee; |
| ◾ | | the name and contact information for the candidate and the stockholder proposing the candidate; |
| ◾ | | a statement of the candidate’s occupation and background, including education and business experience; |
| ◾ | | information regarding each of the factors listed above, sufficient to enable the committeeNominating and Governance Committee to evaluate the candidate; |
| ◾ | | a statement detailing (i) any relationship or understanding between the candidate and the Company, or any customer, supplier, competitor, or affiliate of the Company; and (ii) any relationship or understanding between the candidate and the stockholder proposing the candidate for consideration, or any affiliate of such stockholder; and |
| ◾ | | a statement that the candidate is willing to be considered for nomination by the committeeNominating and Governance Committee and willing to serve as a director if nominated and elected. |
Additional information may be requested by the Nominating and Governance Committee as appropriate. In addition, our bylaws permit stockholders to nominate individuals to stand for election to our Board of Directors at an annual stockholders’ meeting. Stockholders wishing to submit nominations must notify us of their intent to do so on or before the date specified under “Stockholder Proposals—Other Stockholder Proposals and Director Nominations.” Such notice must include the information specified in our bylaws, a copy of which is available from our corporate secretary upon written request or can be found filed as an exhibit to our Annual Report, available at www.sec.gov, or on our website. Annual Meeting Attendance Although we do not have a formal policy regarding attendance by members of the Board of Directors at our annual meetings of stockholders, directors are encouraged to attend. Nine directors attended the 2020 Annual Meeting of Stockholders via remote communication. Board Evaluation The Company is committed to providing transparency regarding our Board and committee evaluation process. The chairperson of the Board, a member of the Nominating and Governance Committee, leads the Board’s self-evaluation process, which may vary year to year but generally requires each director to complete a comprehensive evaluation of the performance of both the Board as a whole and, to the extent applicable, the committees on which the director serves. The results of the directors’ evaluations, supplemented with third-party data, are consolidated and presented to the Nominating and Governance Committee along with areas for enhancement of Board practices. On the basis of the feedback provided during the annual Board and committee evaluation, the Board and each committee determine changes to Board and committee processes and procedures, as appropriate. Stockholder Communication with the Board of Directors Stockholders may communicate with the Board of Directors by writing to us c/o Secretary, Lattice Semiconductor Corporation, 5555 NE Moore Court, Hillsboro, Oregon 97124. Stockholders who would like their submission directed to a member of the Board of Directors may so specify, and the communication will be forwarded, as appropriate. Stockholder Engagement The Company maintains an active dialogue with its stockholders to ensure a diversity of perspectives is thoughtfully considered on issues including strategy, compensation practices and a broad range of ESG issues. The Nominating and Governance Committee assesses potential updates to our corporate governance practices and policies based on this feedback. To communicate broadly with our stockholders, we also seek to transparently share information relevant to our stockholders through our Investor Relations website, our Annual Report and this Proxy Statement. Independent Chair and Board Leadership The Board’s leadership structure consists of an independent Board Chair. We separate the positions of Chief Executive Officer (“CEO”) and Board Chair in recognition of the differences between the two roles. The Board believes this structure provides independent Board leadership and engagement. Given that our Chair is an independent director, the Board does not feel the need for a separate “lead independent director,” as our independent Chair performs that function. The Board takes its independence seriously and reinforces this standard with six of the seven director nominees being independent. Board Risk Oversight The Board oversees the Company’s enterprise risk management processes for assessing and managing enterprise-wide risk. In carrying out this responsibility, the Board has delegated primary responsibility to the Audit Committee for oversight of management’s enterprise risk management process. Each quarter, the Audit Committee receives a risk update from management, comprised of a list of major risks faced by the Company and the status of actions intended to mitigate such risks. Throughout the year, and at least annually, the Board and the Audit Committee each review the steps management has taken to monitor and mitigate risks to the Company. The Audit Committee also routinely meets with various Company compliance personnel to obtain periodic assessment of compliance issues facing the Company. The Board or the Audit Committee also requests, when appropriate, that management conduct additional review of, or reporting on, select enterprise risks. Cybersecurity Risk Oversight In addition, the Audit Committee requires the Company’s management to provide periodic reports regarding the Company’s cyber risk management program. In order to respond to the threat of security breaches and cyberattacks, the Company has taken a proactive approach to data protection consisting of administrative, technical and physical safeguards. More specifically, in 2020 the Company made additional enhancements to its cybersecurity, including implementing enhanced firewalls, implementing additional cybersecurity monitoring by third-parties and providing mandatory cybersecurity training to all employees during the year. The Audit Committee regularly briefs the entire Board on these matters, and the Board also receives periodic briefings on cyber threats in order to enhance our directors’ literacy on cyber issues. Hedging Policy The Company’s Insider Trading Policy prohibits our directors, officers, employees and certain agents (such as consultants and independent contractors) from engaging in short sales of our securities, transactions in publicly-traded options (such as puts and calls) or other derivative securities with respect to our securities, and hedging transactions. These individuals are also prohibited from trading our securities while in possession of material nonpublic information, trading the securities of our customers, suppliers, competitors, potential acquisitions, or partners while in possession of material nonpublic information, holding our securities in margin accounts, and pledging our securities as collateral for loans. Director Qualifications, Skills and Experience The Nominating and Governance Committee has determined that it is important for an effective Board to have directors with a balance of the qualifications, skills and experience. The table below sets forth certain qualifications, skills and experience of our non-employee director nominees. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Robin
Abrams | | | Mark
Jensen | | | Anjali
Joshi | | | James
Lederer | | | Krishna
Rangasayee | | | Jeff
Richardson | | | | | | | | | Industry-related skills | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | FPGA Industry Experience | | | | | | | | | | | | | | | | | | | X | | | | X | | | | | | | | | Semi-conductor Technology /Ecosystem | | | X | | | | X | | | | | | | | X | | | | X | | | | X | | | | | | | | | International Business Experience – Asia | | | X | | | | | | | | X | | | | X | | | | X | | | | X | | | | | | | | | International Business Experience – Europe | | | X | | | | | | | | X | | | | X | | | | X | | | | X | | | | | | | | | Domestic Business Experiences – North America | | | X | | | | X | | | | X | | | | X | | | | X | | | | X | | | | | | | | | Customer Segments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Communications | | | | | | | | | | | X | | | | X | | | | X | | | | X | | | | | | | | | Data Centers/Cloud | | | | | | | | | | | X | | | | | | | | X | | | | X | | | | | | | | | Industrial | | | X | | | | | | | | | | | | X | | | | X | | | | X | | | | | | | | | Consumer | | | X | | | | | | | | X | | | | X | | | | X | | | | | | | | | | | | | Automotive | | | | | | | | | | | | | | | X | | | | X | | | | | | | | | | | | | Trends in Customer-Facing Technologies | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Software | | | X | | | | X | | | | X | | | | X | | | | X | | | | | | | | | | | | | Edge Computing | | | | | | | | | | | | | | | X | | | | X | | | | | | | | | | | | | AI/ML/MLI | | | | | | | | | | | X | | | | | | | | X | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Robin
Abrams | | Mark
Jensen | | Anjali
Joshi | | James
Lederer | | Krishna
Rangasayee | | Jeff
Richardson | | | | | | | | General Business Skills | | | | | | | | | | | | | | | | | | | | Human Resource Management and Compensation | | | | X | | | | X | | X | | X | | | | | | | | Product Development & Marketing | | X | | | | X | | X | | X | | X | | | | | | | | Sales & Distribution | | X | | | | X | | X | | X | | X | | | | | | | | Supply Chain & Manufacturing | | | | | | | | X | | X | | X | | | | | | | | IT/CIO/Cybersecurity | | X | | X | | | | X | | | | | | | | | | | | Investor/Banking | | X | | | | | | X | | | | | | | | | | | | Public Company Experience | | X | | X | | X | | X | | X | | X | | | | | | | | Board and Committee Governance | | X | | X | | X | | X | | | | X | | | | | | | | Financial Literacy | | X | | X | | | | X | | X | | X | | | | | | | | Mergers & Acquisitions/ Organizational change | | X | | X | | X | | X | | X | | X | | | | | | | | Strategy Development | | X | | | | X | | X | | X | | X | | | | | | | | Executive level responsibility for Company Growth (“recent enough”) | | | | | | X | | X | | X | | X |
DIRECTOR COMPENSATION 2020 Director Compensation Table The following table sets forth information concerning compensation of our non-employee directors for the fiscal year ended January 2, 2021. | | | | | | | | | | | | | | Name | | Fees Earned or
Paid in Cash
($)(1) | | | Stock Awards
($) | | | Total
($) | | | | | | | Richardson, D. Jeffrey | | | 90,000 | | | | 159,997 | (2) | | | 249,997 | | | | | | | Abrams, Robin A. | | | 75,000 | | | | 159,997 | (3) | | | 234,997 | | | | | | | Bourgoin, John | | | 75,000 | | | | 159,997 | (4) | | | 234,997 | | | | | | | Jensen, Mark E. | | | 80,000 | | | | 159,997 | (5) | | | 239,997 | | | | | | | Lederer, James P. | | | 70,000 | | | | 159,997 | (6) | | | 229,997 | | | | | | | Major, John E. | | | 55,000 | | | | 159,997 | (7) | | | 214,997 | | | | | | | Rangasayee, Krishna | | | 60,000 | | | | 159,997 | (8) | | | 219,997 | | | | | | | Joshi, Anjali | | | 60,000 | | | | 159,997 | (9) | | | 219,997 | |
| (1) | The chart below summarizes the gross cash amounts earned by non-employee directors for service during fiscal 2020 on the committee as appropriate.Board and its committees: |
| | | | | | | | | | | | | | | | | | | | | | Name | | Annual Board
Service
($) | | | Audit
Committee
($) | | | Compensation
Committee
($) | | | Nominating
and
Governance
Committee
($) | | | Total
($) | | | | | | | | | Richardson, D. Jeffrey | | | 85,000 | | | | — | | | | — | | | | 5,000 | | | | 90,000 | | | | | | | | | Abrams, Robin A. | | | 50,000 | | | | 9,167† | | | | 833† | | | | 15,000 | | | | 75,000 | | | | | | | | | Bourgoin, John | | | 50,000 | | | | — | | | | 25,000 | | | | — | | | | 75,000 | | | | | | | | | Jensen, Mark E. | | | 50,000 | | | | 30,000 | | | | — | | | | — | | | | 80,000 | | | | | | | | | Lederer, James P. | | | 50,000 | | | | 10,000 | | | | 10,000 | | | | — | | | | 70,000 | | | | | | | | | Major, John E. | | | 50,000 | | | | — | | | | — | | | | 5,000 | | | | 55,000 | | | | | | | | | Rangasayee, Krishna | | | 50,000 | | | | — | | | | 10,000 | | | | — | | | | 60,000 | | | | | | | | | Joshi, Anjali | | | 50,000 | | | | — | | | | 10,000 | | | | — | | | | 60,000 | |
| † | In addition, our bylaws permit stockholders to nominate individuals to standReflects pro-rata amounts for election to our boardservice on the respective committees during the year.
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| (2) | The aggregate number of directorsshares underlying unvested stock awards and outstanding option awards held by Mr. Richardson at an annual stockholders’ meeting. Stockholders wishing to submit nominations must notify usJanuary 2, 2021 were 7,494 and 43,918 respectively. |
| (3) | The aggregate number of their intent to do so on or before the date specified under “Stockholder Proposals—Other Stockholder Proposalsshares underlying unvested stock awards and Director Nominations.” Such notice must include the information specified in our bylaws, a copyoutstanding option awards held by Ms. Abrams at January 2, 2021 were 7,494 and 30,000 respectively. |
| (4) | The aggregate number of which is available from our corporate secretary upon written request.shares underlying unvested stock awards and outstanding option awards held by Mr. Bourgoin at January 2, 2021 were 7,494 and 40,000 respectively. |
| (5) | Strategic Alternatives Committee
In December 2015, our boardThe aggregate number of directors organized a strategic alternatives committee to evaluate strategicshares underlying unvested stock awards and outstanding option awards held by Mr. Jensen at January 2, 2021 were 7,494 and 90,000 respectively.
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| (6) | The aggregate number of shares underlying unvested stock awards and outstanding option awards held by Mr. Lederer at January 2, 2021 were 7,494 and 21,919 respectively. |
| (7) | The aggregate number of shares underlying unvested stock awards and outstanding option awards held by Mr. Major at January 2, 2021 were 7,494 and 39,838 respectively. |
| (8) | The aggregate number of shares underlying unvested stock awards and outstanding option awards held by Mr. Rangasayee at January 2, 2021 are 7,494 and 33,338 respectively. |
| (9) | The aggregate number of shares underlying unvested stock awards held by Ms. Joshi at January 2, 2021 were 7,494. |
Narrative Discussion to 2020 Director Compensation Table The Company compensates its non-employee directors with cash retainers and equity grants. The cash retainers are comprised of annual retainers for service on the Board of Directors and its standing committees. Each director receives a cash retainer of $50,000 per year for service on the Board of Directors, the chairperson of the Board of Directors receives an annual retainer of $35,000, and the chairpersons of the Audit Committee, Compensation Committee, Nominating and Governance Committee receive annual retainers of $20,000, $15,000 and $10,000, respectively. Committee members receive annual retainers of $10,000 for the Audit and Compensation Committees, and $5,000 for the Nominating and Governance Committee. Director compensation is subject to review by the Compensation Committee every two years. Directors automatically receive an RSU award at the Board of Directors meeting following each annual meeting of stockholders for a number of shares of common stock determined by dividing $160,000 by the fair market value of a share of the common stock on the grant date, which grants shall vest and become payable with respect to 100% of the RSUs on the first anniversary of the grant date, provided that the director continues to serve as a director on such dates. In the event of a change in control, unvested RSUs and options held by our non-employee directors generally become vested and exercisable or payable in full effective immediately prior to the change in control. The compensation provided to any non-employee director cannot exceed $500,000 in any year. PROPOSAL TWO RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee has approved the appointment of Ernst & Young LLP (“EY”) to act as our independent registered public accounting firm for the fiscal year ending January 1, 2022. Although ratification is not legally required, we are asking stockholders to ratify the appointment of EY as our independent registered public accounting firm for our current fiscal year in the interest of good corporate governance. Representatives of EY have been invited and are expected to attend the Annual Meeting, will be given the opportunity to make a statement if they wish to do so, and are expected to be available to respond to appropriate questions. In fiscal year 2020, the Company conducted a competitive process to determine the Company’s independent registered public accounting firm. As a result of the competitive process, the Audit Committee approved the dismissal of KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm effective May 8, 2020. KPMG’s audit reports on the Company’s consolidated financial statements as of and for the fiscal years ended December 28, 2019 and December 29, 2018 did not contain any adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles, except as follows: KPMG’s report on the consolidated financial statements of Lattice Semiconductor Corporation (and subsidiaries) as of and for the years ended December 28, 2019 and December 29, 2018, contained a separate paragraph stating that “As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of December 30, 2018, due to the adoption of ASC 842, Leases, and related amendment ASU 2019-01, Leases (Topic 842): Codification Improvements. As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for revenue recognition as of December 31, 2017, due to the adoption of ASC 606, Revenue from Contracts with Customers.” The audit report of KPMG on the effectiveness of internal control over financial reporting as of December 28, 2019 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. During the fiscal years ended December 28, 2019 and December 29, 2018, and in the subsequent interim period through May 8, 2020, (i) there were no disagreements between the Company and KPMG (within the meaning of Item 304(a)(1)(iv) of Regulation S-K (“Regulation S-K”) of the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”)) on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure that if not resolved to KPMG’s satisfaction, would have caused KPMG to make reference thereto in its reports; and (ii) there were no reportable events (as defined in Item 304(a)(1)(v) of Regulation S-K). Audit and Related Fees Under its charter, the Audit Committee reviewed and pre-approved all audit and permissible non-audit services performed by our independent registered public accounting firm. The Audit Committee also reviewed and pre-approved the proposed fees to be charged by EY and KPMG for such services and ratified any increase in fees resulting from an increase in the scope of work to be performed. In its review of non-audit services, the Audit Committee considered whether the provision of such services was compatible with maintaining the independence of EY and KPMG. The following table sets forth the fees for professional audit services rendered by EY and KPMG for the audit of the Company’s annual financial statements for fiscal years 2020 and 2019, and fees billed for other services rendered by EY and KPMG during those periods. | | | | | | | | | | | | | | | | 2020(3) EY | | | 2020
KPMG | | | 2019
KPMG | | | | | | | Audit fees(1) | | $ | 1,265,000 | | | $ | 312,500 | | | $ | 1,477,000 | | | | | | | Tax fees(2) | | | 41,200 | | | | — | | | | 12,000 | | | | | | | Total | | $ | 1,306,200 | | | $ | 312,500 | | | $ | 1,489,000 | |
| (1) | For fiscal 2020 and fiscal 2019, this category includes fees for the Company to maximize stockholder value. The strategic alternatives committee presently consists of Mr. Beattie (Chairman), Mr. Jensen, and Mr. Richardson. In 2017, the strategic alternatives committee held a total of 10 meetings. 11
Stockholder Communications with the Board of Directors
Stockholders may communicate with the board of directors by writing to us c/o Secretary, Lattice Semiconductor Corporation, 111 SW 5th Ave., Suite 700, Portland, Oregon 97204. Stockholders who would like their submission directed to a memberaudit of the board of directors may so specify, and the communication will be forwarded, as appropriate.
Audit Committee Report
The responsibilities of the audit committee are fully described in the audit committee charter. Management is responsible for maintaining our financial controls and preparing our financial reports. Our independent registered public accounting firm is responsible for performing an independent audit of our consolidatedannual financial statements and our internal control over financial reporting in accordance with generally accepted auditing standards and for issuing audit reports. The audit committee’s responsibility is to execute the audit committee charter and oversee these processes. In fulfilling its responsibilities, the audit committee has reviewed and discussed the audited financial statements containedincluded in our Annual Report on Form10-K, review of the quarterly financial statements included in our quarterly reports on Form 10-Q, audit of our internal controls, issuance of consents and assistance with and review of documents filed with the SEC, and for statutory audits of certain of our international subsidiaries by KPMG.
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| (2) | This category includes fees billed for tax compliance, tax planning and tax advice. |
| (3) | This table does not include fees for non-audit services billed before EY was the year ended December 30, 2017 with management and ourCompany’s principal independent registered public accounting firm. The audit committee discussed with our independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, adopted by the Public Company Accounting Oversight Board and Rule2-07 of RegulationS-X, Communications with Audit Committees. In addition, the audit committee has received the written disclosures and the letter from our independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with our independent registered public accounting firm the independent accountant’s independence from Lattice and our management.
Based upon the audit committee’s discussions with management and our independent registered public accounting firm and the audit committee’s review of the representations of management, the report of our independent registered public accounting firm, and the information referenced above, the audit committee recommended that the board of directors include the audited consolidated financial statements in our Annual Report on Form10-K for the year ended December 30, 2017, for filing with the SEC.
Audit Committee
Mark E. Jensen, Chairman
Brian M. Beattie
D. Jeffrey Richardson
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Pre-Approval of Audit and Non-Audit Services The Audit Committee reviews and approves in advance all audit and non-audit services provided by the Company’s independent registered public accounting firm (or subsequently approves non-audit services in those circumstances where a subsequent approval is necessary and permissible). In this regard, the Audit Committee has the sole authority to approve the retention and termination of the independent registered public accounting firm, and to determine all audit and non-audit engagement fees and terms with the independent registered public accounting firm. The Audit Committee appoints the independent registered public accounting firm annually. Before appointing EY as our independent registered public accounting firm for the fiscal year ending January 1, 2022, the Audit Committee carefully considered that firm’s qualifications and performance during fiscal 2020. Vote Required The proposal to ratify the appointment of EY requires the affirmative vote of the holders of a majority of the stock having the voting power present in person or represented by proxy at the Annual Meeting. If the appointment of EY is not ratified, the Audit Committee will take the vote under advisement in evaluating whether to retain EY. Recommendation The Board of Directors recommends that the stockholders vote “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending January 1, 2022. PROPOSAL THREE ADVISORY VOTE TO APPROVE, ON A NON-BINDING, ADVISORY BASIS, NAMED EXECUTIVE OFFICER COMPENSATION We are asking stockholders to approve a non-binding advisory resolution on the Company’s named executive officer compensation as disclosed in this Proxy Statement. As described below in the “Executive Compensation—Compensation Discussion and Analysis” section of this Proxy Statement, the Compensation Committee believes that we should make our executive compensation arrangements and practices clear and transparent to stockholders. The Compensation Committee endeavors to align our executives’ interests with those of our stockholders, to attract, motivate and retain highly qualified executives, and to provide our executive team with additional compensation when they achieve superior financial results. The Compensation Committee and the Board of Directors believe that the compensation policies and procedures articulated in the “Compensation Discussion and Analysis” section of this Proxy Statement are effective in achieving our goals. We urge stockholders to read the “Executive Compensation” section of this Proxy Statement beginning on page 22 of this Proxy Statement, including the “Compensation Discussion and Analysis” that discusses our named executive compensation for fiscal 2020 in more detail, as well as the Summary Compensation Table and other related compensation tables, notes and narrative, appearing on pages 51 through 62 of this Proxy Statement, which provide detailed information on the compensation of our Named Executive Officers. In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to approve the following resolution at the Annual Meeting: RESOLVED, that the stockholders of Lattice Semiconductor Corporation (the “Company”) approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers as disclosed in the proxy statement for the Company’s 2021 Annual Meeting of Stockholders. Although this proposal, commonly referred to as a “say-on-pay” vote, is an advisory vote that will not be binding on the Board of Directors or the Compensation Committee, the Board of Directors and the Compensation Committee will consider the results of this advisory vote when making future decisions regarding our named executive officer compensation programs. Stockholders have an opportunity to cast such an advisory vote annually, therefore, your next opportunity to do so will be at the 2022 Annual Meeting of Stockholders. Vote Required Advisory Vote to Approve Named Executive Officers Compensation. Approval of the non-binding, advisory vote on the compensation of the Company’s named executive officers requires the affirmative vote of the holders of a majority of the stock having the voting power present in person or represented by proxy at the Annual Meeting. The Board of Directors will consider the outcome of the vote when making future decisions regarding the compensation of the Company’s named executive officers. You may vote “FOR,” “AGAINST,” or “ABSTAIN” on the proposal to approve the compensation of the Company’s named executive officers. Recommendation The Board of Directors recommends that stockholders vote “FOR” the approval, on a non-binding, advisory basis of our named executive officer compensation disclosed in this Proxy Statement. EXECUTIVE COMPENSATION EXECUTIVE OFFICERS The following individuals currently serve as our executive officers: | | | | | | Name | | Age | | Office Held | | | | 12James R. Anderson
PROPOSAL 2: ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
We are asking stockholders to approve anon-binding advisory resolution on the Company’s named executive officer compensation as disclosed in this proxy statement. As described below in the “Executive Compensation—Compensation Discussion
| | 48 | | President and Analysis” section of this proxy statement, the compensation committee has structured our executive compensation program to attract, motivate and retain highly qualified employees, to align our executives’ interests with those of our stockholders and to provide our executives with certain additional compensation when superior financial results are achieved. The compensation committee and the board of directors believe that the compensation policies and procedures articulated in the “Compensation Discussion and Analysis” section of this proxy statement are effective in achieving our goals.We urge stockholders to read the “Executive Compensation” section of this proxy statement beginning on page 14 of this proxy statement, including the “Compensation Discussion and Analysis” that discusses our named executive compensation for fiscal 2017 in more detail, as well as the “Summary Compensation Table” and other related compensation tables, notes and narrative, appearing on pages 14 through 39 of this proxy statement, which provide detailed information on the compensation of our named executive officers.
In accordance with recently adopted Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to approve the following resolution at the 2018 annual meeting of stockholders:
RESOLVED, that the stockholders of Lattice Semiconductor Corporation (the “Company”) approve, on anon-binding advisory basis, the compensation of the Company’s named executive officers as disclosed in the proxy statement for the Company’s 2018 annual meeting of stockholders.
Although this proposal, commonly referred to as a“say-on-pay” vote, is an advisory vote that will not be binding on the board of directors or the compensation committee, the board of directors and the compensation committee will consider the results of this advisory vote when making future decisions regarding our named executive officer compensation programs. Stockholders have an opportunity to cast such an advisory vote annually, therefore, your next opportunity to do so will be at the 2018 annual meeting of stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT
THE STOCKHOLDERS VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS,
OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
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EXECUTIVE COMPENSATION
TheChief Executive Officers of the CompanyOfficer
| | | | Sherri Luther | | 55 | | Chief Financial Officer | | | | The following individuals currently serve as our executive officers:Stephen Douglass
Glen Hawk, 56,joined the Company as
| | 59 | | Corporate Vice President of Research and Development | | | | Esam Elashmawi | | 52 | | Chief Marketing Officer on May 4, 2015 and was appointed to the new role of Chief OperatingStrategy Officer on November 6, 2015. Mr. Hawk was named as Interim Chief Executive Officer effective March 16, 2018. Prior to joining the Company, Mr. Hawk served as Vice President and General Manager of the NAND Solutions Group at Micron Technology. Before joining Micron in May 2010, Mr. Hawk was Vice President, General Manager of the Embedded Business Group at Numonyx and was at Intel for 22 years in both engineering and business functions, including General Manager of Intel’s Flash Products Group. Mr. Hawk started his career at Monolithic Memories developing Programmable Array Logic technologies. | | | | Mark Nelson Maxwell J. Downing, 52, joined the Company as Vice President, Finance and Corporate Controller in July 2012 and became Interim Chief Financial Officer effective April 2, 2016 and was appointed to
| | 55 | | Corporate Vice President, and Chief Financial Officer effective February 22, 2017. Prior to joining the Company, Mr. Downing served as Corporate Controller at Novellus Systems, Inc. from September 2007 to July 2012. Mr. Downing held various finance controller positions at Intel Corporation from September 2000 to September 2007. Prior to joining Intel Corporation, Mr. Downing held auditing and management positions at KPMG.Worldwide Sales | | | | Byron W. Milstead 61,joined the Company in May 2008 as | | 64 | | Corporate Vice President, General Counsel and Corporate Secretary. In January 2013, Mr. Milstead additionally was appointed to serve as President and General Manager of Lattice SG Pte. Ltd., the Company’s Secretary |
James R. Anderson, 48, joined the Company as the President and Chief Executive Officer in September 2018. Prior to joining the Company, Mr. Anderson led the Computing and Graphics business group at AMD. Prior to joining AMD in 2015, Mr. Anderson served at Intel Corporation from November 2014 to May 2014. Prior to Intel, Mr. Anderson spent nearly a decade at Avago Technologies Limited and LSI Corporation in a variety of leadership positions spanning general management, engineering, sales, marketing and strategy. Sherri Luther, 55, joined in the Company as Chief Financial Officer in January 2019. Prior to joining the Company, Ms. Luther was a senior financial executive at Coherent Inc. for over sixteen years, and most recently served as its Corporate Vice President of Finance. Prior to joining Coherent Inc., Ms. Luther held a number of senior finance and accounting positions at companies including Quantum, Ultra Network Technologies and Arthur Andersen. Ms. Luther is a Certified Public Accountant in the State of California. Stephen Douglass, 59, joined the Company as Corporate Vice President of Research and Development in September 2018. Prior to joining the Company, Mr. Douglass served as Corporate Vice President, Worldwide Technical Sales and Support at Xilinx. Prior to leading the Worldwide Technical Sales and Support Team in 2012, Mr. Douglass held a wide range of leadership positions at Xilinx, including Vice President and GM, Advanced Products Division, and Vice President of Product Development. Before joining Xilinx, Mr. Douglass was at Cypress Semiconductor for 13 years and served in various leadership roles, including Business Unit Director, CPLDs and FPGAs. Mr. Douglass started his career as a Circuit Design Engineer at Intel Corporation. Esam Elashmawi, 52, joined the Company as Chief Marketing and Strategy Officer in September 2018. Prior to joining the Company, Mr. Elashmawi served as Senior Vice President and General Manager at Microsemi Corporation. Mr. Elashmawi previously served as Vice President of Product Development at Actel Corporation, which Microsemi Corporation acquired in 2010. Earlier in his career, Mr. Elashmawi co-founded SiliconExpert Technologies, a component management software company, which was acquired by Arrow Electronics. Mark Nelson, 55, joined the Company as Corporate Vice President of Worldwide Sales in January 2019. Prior to joining the Company, Mr. Nelson served as Vice President and General Manager of Worldwide Sales for Intel Corporation’s Programmable Solutions Group from January 2016. Prior to his time at Intel, Mr. Nelson worked in various positions at Altera between August 2004 and December 2015, including Senior Vice President Worldwide & Technical Services and Vice President EMEA Sales. Byron W. Milstead, 64, joined the Company in May 2008 as Corporate Vice President, General Counsel, and Corporate Secretary. In January 2013, Mr. Milstead additionally was appointed to serve as President and General Manager of Lattice SG Pte. Ltd., the Company’s wholly-owned sales and distribution subsidiary in Singapore. Prior to joining the Company, Mr. Milstead served as Senior Vice President and General Counsel of Credence Systems Corporation from December 2005 to May 2008. Mr. Milstead served as Vice President and General Counsel of Credence Systems Corporation from November 2000 until December 2005. Prior to joining Credence Systems Corporation, Mr. Milstead practiced law at the Salt Lake City office of Parsons Behle & Latimer and the Portland offices of both Bogle and Gates and Ater Wynne. COMPENSATION DISCUSSION AND ANALYSIS This Compensation Discussion and Analysis describes the compensation program for our Principal Executive Officer, our Principal Financial Officer and the next three most highly compensated executive officers who were serving in such capacity as of January 2, 2021 (our “Named Executive Officers”). Our Named Executive Officers for the year ended January 2, 2021 (referred to below as “fiscal 2020”) were: | ◾ | | James R. Anderson, our President and Chief Executive Officer (our “CEO”); |
| ◾ | | Sherri Luther, our Corporate Vice President and General CounselChief Financial Officer; |
| ◾ | | Stephen Douglass, our Corporate Vice President of Credence Systems Corporation from December 2005 to May 2008. Mr. Milstead served asResearch and Development; |
| ◾ | | Esam Elashmawi, our Corporate Vice President and General CounselChief Marketing and Strategy Officer; and |
| ◾ | | Mark Nelson, our Corporate Vice President, Worldwide Sales. |
This Compensation Discussion and Analysis describes the material elements of our executive compensation program during fiscal 2020. It also provides an overview of our executive compensation philosophy, core principles and objectives. Finally, it analyzes how and why the Compensation Committee of our Board of Directors (the “Compensation Committee”) arrived at the specific compensation determinations for our Named Executive Officers for fiscal 2020, including the key factors that the Compensation Committee considered in deciding or making recommendations to our Board of Directors with respect to their compensation. Executive Summary Who We Are We develop technologies that we monetize through differentiated programmable logic semiconductor products, system solutions, design services and licenses. We are the low power programmable leader. We solve customer problems across the network, from the Edge to the Cloud, in growing communications, computing, industrial, automotive and consumer markets. Our technology, long-standing relationships and commitment to world-class support enable our customers to create a smart, secure and connected world. Fiscal 2020 Business Highlights | ◾ | | Grew revenue 1% year over year, and increased revenue by double digits in the key strategic markets of Credence Systems Corporationcommunications and computing, and automotive and industrial, despite the COVID-19 pandemic; |
| ◾ | | Increased gross margin 110bps year over year to 61.1%; |
| ◾ | | Expanded net income by 9% and EPS by 6.5% on a GAAP basis year over year; |
| ◾ | | Improved the cadence of new product launches with the introduction of two additional Nexus™ products; and |
| ◾ | | Launched three new software offerings during fiscal 2020. |
Fiscal 2020 Executive Compensation Highlights Consistent with our performance and compensation objectives, the Compensation Committee (and, in the case of our CEO, the independent members of our Board of Directors upon the recommendation of the Compensation Committee) took the following actions relating to the compensation of our Named Executive Officers for fiscal 2020: | ◾ | | Base Salary —Approved annual base salary increase of 9% for our CEO of (setting his annual base salary at $600,000) and annual base salary increases ranging from November 2000 until December 2005. Prior3% to joining Credence Systems Corporation, Mr. Milstead practiced law at10%forour other Named Executive Officers. |
| ◾ | | Cash Incentive Awards —Made an annual cash incentive award payment under our 2020 Cash Incentive Plan to our CEO in the Salt Lake City officeamount of Parsons Behle & Latimer$459,323, representing approximately 76.8% of his target annual cash incentive award opportunity, and the Portland officesannual cash incentive award payments to our other Named Executive Officers equal to 76.8% of both Bogletheir target annual cash incentive award. |
| ◾ | | Long-Term Incentive Compensation Awards —Granted time-based restricted stock unit (“RSU”) awards that may be settled for shares of our common stock and Gatesperformance-based restricted stock unit (“PRSU”) awards with aggregate target values of (i) $4,275,000 for our CEO and Ater Wynne.(ii) $1,400,000 for each of our other Named Executive Officers. |
Aligning Pay and Performance Our executive compensation program is driven by our pay-for-performance philosophy. As a result, we structure a significant portion of our Named Executive Officers’ target total direct compensation with variable elements tied to our performance. In addition, we set challenging target and threshold performance goals under our variable compensation plans to ensure that compensation is earned based upon exceptional performance against pre-established financial, operational and strategic goals. The following chart illustrates that, in the case of our CEO, 89% of his target total direct compensation for fiscal 2020 and, in the case of our other Named Executive Officers, on average 82% of their target total direct compensation for fiscal 2020 was “at risk” variable compensation in the form of a target annual cash incentive opportunity, a time-based RSU award and a target PRSU award. Executive Compensation-Related Policies and Practices We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices. The Compensation Committee evaluates our executive compensation program on a regular basis to ensure that it is consistent with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for executive talent. The following summarizes our executive compensation and related governance policies and practices that were in place in fiscal 2020: | | | | | COMPENSATION OVERSIGHT | | | Independent Compensation Discussion and AnalysisCommittee | | The Compensation Philosophy We believe thatCommittee is comprised solely of independent directors who have established effective means for communicating with our stockholders regarding their executive compensation arrangementsviews and practices should be clearconcerns, as described in this Proxy Statement.
| | | | Independent Compensation Advisor | | The Compensation Committee engaged an external compensation consultant to assist with its fiscal 2020 compensation review and unambiguous, and should be fully approved by thesubsequently engaged a new external compensation committee and disclosed to stockholders. We endeavor to attract, motivate and retain highly qualified employees, to align our executives’ interests with thoseconsultant in August 2020. These consultants performed no other consulting or other services for us during fiscal 2020. | | | EVALUATION AND DESIGN OF COMPENSATION PROGRAM | | | | Annual Compensation Review | | The Compensation Committee conducts an annual review of our stockholders,compensation strategy, including a review of our compensation peer group used for comparative purposes. | | | | Annual Compensation-Related Risk Assessment | | The Compensation Committee regularly reviews our compensation-related risk profile. | | | | Performance-Based Equity Awards | | In fiscal 2020, approximately 44% of our CEO’s and, on average, approximately 40% of our other Named Executive Officers’ target total direct compensation consisted of PRSU awards. | | | | No Special Retirement or Pension Plans | | We do not currently offer, nor do we have plans to provide any retirement plans to our executives with certain additional compensation when superior financial results are achieved. We believe our senior management has the highest potential to impact our business results, and thus, variable, performance-based cash compensation should constitute a higher percentage of our executives’ overall potential cash compensation. We also believe that senior management performance should be measured primarily by business resultsexecutive officers that are linkednot available to stockholder interests.
We strive to maintain an egalitarian culture in which thesimilarly situated employees, including pension arrangements, defined benefit retirement plans or nonqualified deferred compensation programs offered to all employees are aligned to ensure consistent effort to achieve financial and operational goals, and thus, to increase stockholder value. We believe that senior management should be held to the same standards as other employees. Therefore, we offer only limited enhanced benefits to senior management, and only with a direct business purpose.
We believe that cash-based variable compensation of executive officers should be directly linkedplans or arrangements to our short-term orexecutive officers.
| | | COMPENSATION-RELATED POLICIES | | | | Policy on Stockholder Advisory Vote on Named Executive Officer Compensation | | We conduct an annual performance, while longer-term incentives, such as equity compensation, should be aligned with the objective of enhancing stockholder value over the long term. We believe the use of equity compensation strongly links the interests of Company management to the interests of our stockholders. 14
In addition, we believe that our total compensation packages must be competitive with other companies in our industry to ensure that we can continue to attract, retain, and motivate the senior executives who we believe are critical to our long-term success. We believe that we can accomplish our executive compensation goals while maintaining appropriate levels of internal pay equity, both between the chief executive officer and other executives, and between executives and othernon-executive employees.
Comparisons to Market Data
Until September 13, 2017, the Company was party to an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with Canyon Bridge Acquisition Company, Inc., a Delaware corporation, and Canyon Bridge Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary, providing for acquisition of the Company by Canyon Bridge during fiscal 2017. The Merger Agreement contained operating covenants that restricted changes toadvisory vote on the compensation of our Named Executive Officers.
| | | | Stock Ownership Policy | | We maintain stock ownership requirements for our CEO and our Section 16 officers, as well as for the Company’s executive officers during the pendency of the transaction, which was subject to certain closing conditions including clearance by the Committee on Foreign Investment in the United States (“CFIUS”) under the Defense Production Act of 1950, as amended. As a result of these operating covenants, no adjustments were made to the base salaries and annual cash-based incentive compensation targets of Company executives during fiscal 2017. After the termination of the Merger Agreement, as part of its process for reviewing and approving executive compensation during fiscal 2017, the compensation committee used market data for a peer group principally comprised ofmid-sizednon-employee technology companies with significant operations in California and Oregon. Due to consolidating acquisitions amongmid-sized technology companies, the compensation committee reconstituted our peer group in 2017. Market data was collected and analyzed with the assistance of Compensia, Inc. Peer group comparisons were judged in part with reference to the relative size and financial performance of the Company and the members of the peer group.
For reviewing and approving executive compensation during fiscal 2017, the peer group consistedour Board of the following companies:Directors.
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| | | | Incentive Compensation Recovery Policy | | Alpha & Omega Semiconductor Ltd.
Ambarella Inc.
Diodes Incorporated
Ichor Holdings Ltd.
Inphi Corporation
MaxLinear, Inc.
Mellanox Technologies, Ltd.
Nanometrics Incorporated
NeoPhotonics Corporation
Power Integrations, Inc.
Rambus Inc.
Semtech Corporation
Silicon Laboratories, Inc.
The compensation committee analyzed the market data primarily to ensure that the executive compensation program asWe maintain a whole was competitive with compensation programs at peer group companies. The compensation committee did not generally target a specific position in the range of market data for each individual executive or for each component of compensation. In determining the amounts of each component of compensation for each executive officer, the compensation committee considered its judgment as to executive’s level of responsibility, prior experience, past job performance, contribution to the Company’s success, capability and results achieved, and reviewed the benchmark data. The compensation committee did not generally apply formulas or assign these factors specific mathematical weights, but rather exercised its business judgment and discretion.
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Fiscal 2017 Executive Compensation
The principal components of fiscal 2017 executive compensation are base salary, annual cash-based incentive compensation, and long-term equity incentive compensation.
In reviewing the fiscal 2017 compensation packagepolicy providing for the chief executive officer and the Company’s other named executive officers, the compensation committee considered all componentsrecovery of the officers’ compensation. Based on the factors discussed above, the compensation committee has determined that the total compensation of the chief executive officer and the other named executive officers of the Company, including the potential payouts in the case of severance and change of control arrangements, were reasonable and not excessive.
Base Salary
Base salaries for our named executive officers for fiscal 2017 were set based on competitive factors including the need to attract and retain and motivate superior performance by our executive officers, the historic salary structure for various levels of responsibility within the Company and the experience of the executive officer. The compensation committee periodically conducts surveys of companies in our industry in order to determine whether our executive base salaries are in a competitive range. The compensation committee’s review of salaries for 2017 indicated that the average of our executive salaries fell between the 10th and 80thpercentile of salaries for comparable positions at peer companies. In reviewing the base salary for the Company’s chief executive officer for fiscal 2017, the compensation committee reviewed survey data relating to peer companies in our industry and determined that the salary fell between the 35th and 40th percentile of salaries for this position. The compensation committee intends in the future to continue to review and to make annual adjustments to the base salary of the chief executive officer during its regularly scheduled board meeting during the first fiscal quarter to generally align the base salary of the chief executive officer to salaries paid to comparable officers at peer companies and in connection with the review of executive officer and other employee performance.
Annual Cash-based Incentive Compensation
The Company’s annual cash incentive compensation program is intended to align executive officer interests with our short-term corporate strategy and correlate pay with the achievement of short-term Company objectives and financial performance.
For fiscal 2017, the chief executive officer, other executive officers, and other members of senior management, including corporate vice presidents, together with all other employees of the Company were eligible to participate in the Company’s 2017 Cash Incentive Plan (the “2017 Plan”). Under the 2017 Plan, individual cash incentive payments for the chief executive officer and other executive officers were based both on Company financial performance, as measured by achievement of operating income (before incentive plan accruals and certain acquisition related costs) and revenue goals within specified ranges established by the compensation committee, and corporate management objective performance, as measured by the achievement of quarterly and annual management objectives, with each of these components potentially affecting the cash incentive award. The compensation committee determined the performance of the Company in fulfillment of certain corporate management objectives recommended by the chief executive officer and approved by the compensation committee during the first fiscal quarter of 2018. The corporate management objectives related to achievement of certain financial performance, product development, customer development operational efficiency and organizational development targets.
In setting the 2017 Plan award target amounts for the named executive officers for fiscal 2017, the compensation committee considered the overall affordability of the 2017 Plan and considered the industry market data provided by the compensation consultant.
The 2017 Plan required that the Company achieve a certain level of profitability on an anuual GAAP operating basis, or there would be no payments under the 2017 Plan. Under the 2017 Plan, the aggregate target
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cash awards for all executive management participants in the 2017 Plan, including the chief executive officer, other executive officers, and other members of senior management, including corporate vice presidents, totaled approximately $1.7 million, and the aggregate maximum cash award for all participants at 100% achievement of their incentive targets was approximately $12.1 million, based on headcount at adoption. Four levels of Company financial performance were projected (labeled L2, L3, L4 and L5 in the table below) as reflected in the GAAP operating income and revenue targets that were required to be met for the 2017 Plan to fund at each of the four levels, assuming 90% achievement of management objectives. In addition, the compensation committee provided that, in connection with payments under the 2017 Plan, the aggregate amount of payments under the 2017 Plan could not exceed 28% of GAAP operating income before accruals for 2017 Plan payments and before certain acquisition related expenses. If company performance fell between two performance levels (such as between L3 and L4), the 2017 Plan was to be funded on a curve. In addition, pursuant to the terms of the 2017 Plan and applicable employment agreements, all employees, including the chief executive officer, other executives and corporate vice presidents, were eligible to receive incentives under the 2017 Plan equal to not more than 200% of their target incentives in the event that the targets for each level were achieved.
2017 Plan Company Financial Performance Structure (Annual Figures)
| | | | | | | | | | | | | | | | | | | | L2 | | | L3 | | | L4 | | | L5 | | GAAP Operating Income | | $ | 50.8M | | | $ | 61.2M | | | $ | 72.2M | | | $ | 86.4M | | Revenue | | $ | 400M | | | $ | 460M | | | $ | 520M | | | $ | 560M | | Budget Pool Executives and Other Management | | $ | .9M | | | $ | 1.7M | | | $ | 2.6M | | | $ | 3.4M | | Budget Pool Other Employees | | $ | 5.1M | | | $ | 10.4M | | | $ | 15.5M | | | $ | 18.8M | | Executive Plan Element Funding Levels (% of Annual Target) | | | 50 | % | | | 100 | % | | | 150 | % | | | 200 | % |
The Company’s operating income for fiscal 2017 (before accrual and payment of incentives under the 2017 Plan and certain acquisition related expenses) was approximately $29.7 million, the Company’s revenue for fiscal 2017 was approximately $385 million and the achievement of corporate management objectives was 85%, resulting in a payment under the 2017 Plan to the personnel other than the chief executive officer, other executive officers and corporate vice presidents of $4.3 million under the 2017 Plan based on achievement of quarterly targets applicable to personnel other than the chief executive officer, other executive officers and corporate vice presidents and management objectives determined by the compensation committee. The compensation committee determined that the pendency of the proposed merger transaction with Canyon Bridge and associated compliance with Merger Agreement operating covenants had delayed the Company’s implementation of operating expense reduction measures and affected GAAP operating income. Based in part on this determination, the committee exercised its discretion to increase the bonus payments to all personnel including the chief executive officer, other executive officers and corporate vice presidents to 68.3% of annual target. The Company paid to the personnel other than the chief executive officer, other executive officers and corporate vice presidents an additional $1.7 million under the 2017 Plan as a discretionary increase. The aggregate amount paid to the chief executive officer, other executives and corporate vice presidents under the 2017 Plan was $.9 million.
Long-Term Equity Incentive Compensation
The Company’s equity incentive plans are intended to motivate and reward the achievement of long-term Company performance and to motivate and retain key personnel. In fiscal 2017, the compensation committee engaged the services of Compensia, Inc. to review the Company’s equity compensation programs. Based on this review and other deliberations, the compensation committee determined to continue its practice of granting a blend of options and RSUs in connection with its annual grants in fiscal 2017. The compensation committee established a potential grant value for each named executive officer, including the chief executive officer revised to reflect the Company’s commitment to a burn rate cap on annual equity grants. The compensation committee intends these grants to be competitive with similar grants to named executive officers by companies in our peer group based on our valuation of the grants using the Black-Scholes valuation model.
17
The compensation committee determined that twenty-five percent (25%) of the long-term incentive compensation of the chief executive officer should have vesting tied to achievement of the targets that reflect the Company’s commitment to increase shareholder value. The compensation committee has also determined that twenty-five percent (25%) of equity grants made to the Company’s other named executive officers similarly should incorporate performance based vesting criteria. For 2017, the compensation committee determined to provide for awards that vest based on the relative performance of the market value of the Company’s common stock compared to an index of other semiconductor companies. In fiscal 2017, the compensation committee made annual replenishment grants during its regularly scheduled board meeting during the fourth fiscal quarter. For 2017, 2016 and 2015, the compensation committee granted performance based stock options that vest based on the computation of the60-day trailing average of the Company’s stock price at the end of the two year measurement period divided by the60-day trailing average of the Company’s stock price at the beginning of the measurement period. Using this ratio, the performance will be compared with similar ratios for each company in the SOXX index and the percentile rank determined. Performance based stock options will vest at the target grant amount where the Company’s performance meets or exceeds the performance of the 50th percentile of the peer group up to a maximum of 200% of the target grant amount for maximum performance. The determination period for the performance-based stock options granted in 2015 ended on February 6, 2017. During the determination period for the performance-based stock options granted in 2015, the increase in the price of the company’s common stock measured as required by the grant conditions ranked the Company 17th among the 25 companies in the SOXX index. Accordingly, under the 2015 grant, each named executive officer earned a number of stock options equal to thirty-three percent (33%) of the target grant amount.
Certain Executive Officer and Other Compensation Polices
Equity Compensation Plans Prohibit Repricing Stock Options Without Stockholder Approval
The Company’s 2013 Incentive Plan, 2011Non-Employee Director Equity Incentive Plan and 1996 Stock Incentive Plan expressly prohibit the repricing of stock options without stockholder approval.
Stock Ownership and Retention Requirements
In 2011, the Board adopted the requirement under the Company’s Corporate Governance Policies that the Company’s chief executive officer, not more than five years after the date of initial employment, maintain ownership of the Company’s stock equal in value to three times the chief executive officer’s base salary.
Restitution or Recovery Policy
Since 2011, the Company’s Corporate Governance Policies have provided that the Company will seek to recover, at the direction of the compensation committee after it has considered the costs and benefits of doing so, and to the extent permitted by applicable law, incentive compensation awarded or paid to an executive officer of the Company for a fiscal period if the result of a performance measure upon which the award was based or paid is subsequently restated or otherwise adjusted in a manner that would reduce the size of the award or payment.
| | No Stock Option Repricing | | Other Executive Benefit ArrangementsOur equity incentive plans expressly prohibit the repricing of stock options without stockholder approval.
| Hedging and Gross UpsPledging Prohibitions | | Our insider trading policy prohibits short sales, trading in derivative securities, entering into hedging transactions, pledging our securities as collateral for loans and holding our securities in margin accounts. | | “Double-Trigger” Change in Control Arrangements | | In 2011,Our change in control compensation arrangements generally are “double-trigger” arrangements that require both a change in control of the compensation committee adoptedCompany plus a policy eliminatingqualifying termination of employment before payments and benefits are paid. Certain of our CEO’s original equity awards with performance-based vesting relating to EBITDA that have performance periods that would end after the paymentdate of alla change in control will vest at target upon a change in control.
| | Limited Tax “Gross-Ups” | | We do not provide any taxgross-ups“gross-ups” for the Company’s executive officers except for taxgross-ups for relocation expenses. Accounting and Tax Considerations
In determining the compensation programs, practices and packages offeredthat may arise due to the Company’s executive officers for fiscal 2017, the compensation committee took into consideration the accountingapplication of Sections 280G and tax effects of each component of compensation and aims to keep the compensation expenses associated with such programs, practices and packages within reasonable levels.
18
Under Section 162(m)4999 of the Internal Revenue Code and related regulations of the Internal Revenue Service, the Company generally receives a federal income tax deduction for compensation paid(the “Code”) to our chief executive officer and ourofficers.
We do not provide any other named executive officer (who is not our chief financial officer) only if the compensation is less than $1 million during any year. Prior to the recent tax reform effected through the adoption of the Tax Cuts and Jobs Act on December 27, 2017, compensation that is “performance-based” under Section 162(m) was excluded from this limitation. Our 1996 Stock Incentive Plan, 2001 Stock Incentive Plan and 2013 Incentive Plan were designed to permit our compensation committee to grant stock options and other equity compensation awards that are “performance-based” and thus fullytax-deductible“gross-ups” to the Company. Effective for taxable years beginning after December 31, 2017, compensation paid to our named executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017. We expect to pay compensation to our executive officers, other than on standard relocation benefits. | | Succession Planning | | We have an executive assessment process to ensure oversight of performance and maintain a consistent succession planning process. |
Stockholder Advisory Vote on Named Executive Officer Compensation At our 2020 Annual Meeting of Stockholders, we held a non-binding, advisory vote on the compensation of our Named Executive Officers (a “Say-on-Pay” vote) and approximately 98.5% of the votes cast approved our Named Executive Officers’ compensation for fiscal 2019. Our Board of Directors and Compensation Committee consider the result of the Say-on-Pay vote in determining the compensation of our executive officers. Based on the strong level of support for our executive compensation program demonstrated by the result of last year’s Say-on-Pay vote, among other factors, the Board of Directors and the Compensation Committee determined not to implement significant changes to our executive compensation program for fiscal 2021. The Board of Directors and the Compensation Committee will continue to consider the result of the Say-on-Pay vote, as well as feedback received throughout the year, when making compensation decisions for our executive officers in the future because we value the opinions of our stockholders. In addition, consistent with the recommendation of our Board of Directors and the preference of our stockholders as reflected in the non-binding, advisory vote on the frequency of future Say-on-Pay votes held at our 2017 Annual Meeting of Stockholders, we hold an annual Say-on-Pay vote. Accordingly, our next Say-on-Pay vote following the Annual Meeting to which this Proxy Statement relates will be conducted at our 2022 Annual Meeting of Stockholders. Compensation Philosophy Our executive compensation program is heavily weighted towards variable and equity compensation to reinforce the following principles: | ◾ | | Alignment with long-term stockholder interests, including increasing our long-term stock price performance relative to our peers; |
| ◾ | | Attracting, motivating and retaining a high-performing executive team and providing incentives related to our high expectations for that may not be deductible when,team; |
| ◾ | | Rewarding our senior executives for example, we believeachieving near and long-term business goals, including increasing our profitability; and |
| ◾ | | Measuring our senior executives’ performance primarily by business results linked to our stockholders’ interests. |
Consistent with these principles, we seek to directly link the cash-based variable compensation of our Named Executive Officers to our short-term or annual performance, while we align longer-term incentives, such as equity compensation, with the objective of enhancing stockholder value over the long term. We believe the use of equity compensation, including performance-based equity compensation, strongly links the interests of our Named Executive Officers to the interests of our stockholders. In addition, we seek to align our total compensation packages with the competitive market (as represented by our compensation peer group) to ensure that we can continue to attract, motivate and retain, our senior executives who we believe are critical to our success. Keeping that in mind, we seek to accomplish our executive compensation goals while maintaining appropriate levels of internal pay equity, both between our CEO and our other senior executives, and between our senior executives and our non-executive employees, and by considering our organizational structure, our stage in the company’s life cycle, affordability and the dilutive effect on our stockholders. Compensation-Setting Process Role of the Compensation Committee Generally, the Compensation Committee discharges many of the responsibilities of our Board of Directors relating to the compensation of our executive officers. The Compensation Committee has the overall responsibility for overseeing our compensation and benefits policies generally, and overseeing and evaluating the compensation plans, policies and practices applicable to our executive officers. The Compensation Committee makes recommendations to our full Board of Directors regarding the compensation of our CEO and determines the compensation for our other executive officers, including the other Named Executive Officers. The independent members of our Board of Directors make all final decisions regarding the compensation of our CEO. In carrying out its responsibilities, the Compensation Committee evaluates our compensation policies and practices with a focus on the degree to which these policies and practices reflect our executive compensation philosophy, develops strategies and makes decisions that it believes further our philosophy or align with developments in best compensation practices and reviews the performance of our CEO and executive officers when making decisions and recommendations with respect to their compensation. Each year, the Compensation Committee conducts an evaluation of our executive compensation program to determine if any changes are appropriate. The Compensation Committee also conducts an annual review of the compensation arrangements of our executive officers, typically during the first quarter of the fiscal year. The Compensation Committee’s authority, duties and responsibilities are further described in its charter, which is reviewed annually and revised and updated as warranted. The charter is available at https://ir.latticesemi.com/static-files/d5fff1fd-16ef-49dd-b92b-9ecbb0cc6d70. In making its determinations, the Compensation Committee engages a compensation consultant (as described below) to provide support in its review and assessment of our executive compensation program; however, the Compensation Committee exercises its own judgment in making final decisions and recommendations with respect to the compensation of our executives. Setting Target Total Direct Compensation The Compensation Committee reviews the base salary levels, annual cash incentive opportunities and long-term incentive compensation opportunities of our executive officers and all related performance criteria at the beginning of each year, or more frequently as warranted. The Compensation Committee does not establish a specific target for formulating the total direct compensation opportunities of our executive officers. In making its recommendations about the compensation of our CEO and its decisions about the compensation of our other executive officers, the members of the Compensation Committee rely primarily on their general experience and subjective considerations of various factors, including the following: | ◾ | | our executive compensation is appropriateprogram objectives; |
| ◾ | | our performance against the financial, operational and strategic objectives established by the Compensation Committee and our Board of Directors; |
| ◾ | | each individual executive officer’s knowledge, skills, experience, qualifications and tenure relative to other similarly situated executives at the companies in the best interests of the stockholders, after taking into consideration changing business conditionsour compensation peer group and/or selected broad-based compensation surveys; |
| ◾ | | the executive’s performance. Resultsscope of 2017 Stockholder Advisory Approvaleach executive officer’s role and responsibilities compared to other similarly situated executives at the companies in our compensation peer group and/or selected broad-based compensation surveys;
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| ◾ | | the prior performance of Named Executive Officer Compensation At the Company’s 2017 annual meeting of stockholders, we requested our stockholders to approve, on an advisory(non-binding) basis, the compensation of the Company’s named executive officersfor fiscal 2016 as reported in the proxy statement for the 2017 annual meeting of stockholders. The Company’s stockholders expressed substantial support for the named executive officers’ compensation, with approximately 96.16% of the shares present and entitled to vote for approval, on an advisory basis, of this“say-on-pay” proposal. Because of this high level of support expressed by our stockholders, the compensation committee has continued to apply a similar approach for named executive officers compensation decisions and policies.
2017 Summary Compensation Table
The following table sets forth summary information concerning compensation for our named executive officers, which includes our CEO, our CFO, each individual who served in such capacities duringexecutive officer, based on a subjective assessment of his or her contributions to our fiscal year ended December 30, 2017,overall performance, ability to lead his or her business unit or function and work as part of a team;
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| ◾ | | the potential of each individual executive officer to contribute to our long-term financial, operational and strategic objectives; |
| ◾ | | our CEO’s compensation relative to that of our other executive officers, for fiscal 2017. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Fiscal
Year | | | Salary
($) | | | Bonus
($) | | | Stock
Awards
($)(1) | | | Option
Awards
($)(1) | | | Non-Equity
Incentive
Plan
Compensa-
tion
($) | | | All Other
Compensa-
tion
($)(2) | | | Total
($) | | Billerbeck, Darin G. | | | 2017 | | | | 500,000 | | | | 517,000 | (3) | | | 1,068,797 | | | | 1,617,319 | | | | 0 | | | | 8,537 | | | | 3,712,153 | | President and CEO | | | 2016 | | | | 500,000 | | | | 0 | | | | 881,760 | | | | 907,990 | | | | 175,000 | | | | 28,428 | | | | 2,493,178 | | | | | 2015 | | | | 497,567 | | | | 1,000 | (4) | | | 999,997 | | | | 999,902 | | | | 60,554 | | | | 7,565 | | | | 2,566,585 | | | | | | | | | | | Downing, Maxwell J. | | | 2017 | | | | 275,000 | | | | 193,912 | (3) | | | 332,882 | | | | 375,315 | | | | 0 | | | | 2,134 | | | | 1,179,243 | | Corporate Vice President and | | | 2016 | | | | 270,148 | | | | 1,745 | (4) | | | 114,466 | | | | 102,229 | | | | 30,735 | | | | 2,000 | | | | 521,323 | | CFO(4) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Milstead, Byron W. | | | 2017 | | | | 334,084 | | | | 384,117 | (3) | | | 214,535 | | | | 241,806 | | | | 0 | | | | 78,795 | | | | 1,112,051 | | Corporate VP & General | | | 2016 | | | | 305,565 | | | | 0 | | | | 193,776 | | | | 198,871 | | | | 72,345 | | | | 81,679 | | | | 852,236 | | Counsel(5) | | | 2015 | | | | 279,351 | | | | 0 | | | | 200,001 | | | | 199,982 | | | | 22,224 | | | | 86,509 | | | | 788,066 | | | | | | | | | | | Hawk, Glen | | | 2017 | | | | 360,000 | | | | 284,410 | (3) | | | 407,220 | | | | 458,973 | | | | 0 | | | | 3,853 | | | | 1,514,456 | | Corporate Vice President and | | | 2016 | | | | 360,000 | | | | 0 | | | | 247,104 | | | | 255,291 | | | | 94,500 | | | | 22,621 | | | | 979,515 | | COO(6) | | | 2015 | | | | 242,308 | | | | 0 | | | | 0 | | | | 1,119,627 | | | | 0 | | | | 12,590 | | | | 1,374,525 | |
(1) | This amount represents the aggregate grant date fair value computed in accordance with the requirements of FASB ASC Topic 718, excluding the effect of any estimated forfeitures. Amounts shown do not reflect compensation actually received by the named executive officer. The assumptions used to calculate the valueand compensation parity among our executive officers;
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| ◾ | | 19
| of the option awards are set forth in Note 18 in the Notes to Consolidated Financial Statements in our Annual Report on Form10-K for the fiscal year ended December 30, 2017. |
(2) | Additional information regarding the amounts provided in this column for 2017 is provided in the 2017 All Other Compensation Table that follows this table. |
(3) | Consists of a discretionary bonus awarded to Company executives for their work in connection with the Agreement and Plan of Merger, as amended, with Canyon Bridge Acquisition Company, Inc., a Delaware corporation, and Canyon Bridge Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary, providing for the potential acquisition of the Company by Canyon Bridge and a discretionary bonus awarded to Company executives based on the impact of that transaction on the achievement of theNon-equity Incentive Plan operating income targets. |
(4) | Mr. Downing became Interim Chief Financial Officer effective April 2, 2016 and was appointed to serve as a Corporate Vice President and Chief Financial Officer effective February 22, 2017. |
(5) | Mr. Milstead also serves as President and General Manager of Lattice SG Pte Ltd., the Company’s wholly owned sales and distribution subsidiary in Singapore. Mr. Milstead’s compensation for fiscal 2017, 2016, and 2015 includes compensation paid both for his service as Corporate VP & General Counsel of Lattice Semiconductor Corporation and President & General Manager of Lattice SG Pte. Ltd. Amounts paid to Mr. Milstead in Singapore dollars have been converted to U.S. dollars using the exchange rate in effect on the last day of the applicable fiscal year. |
(6) | Mr. Hawk joined the Company as Corporate Vice President and Chief Marketing Officer on May 4, 2015 and was appointed to the new role of Chief Operating Officer on November 6, 2015. Mr. Hawk was appointed as Interim Chief Executive Officer effective March 16, 2018. |
2017 All Other Compensation Table
The following table sets forth information concerning items included inour financial performance relative to our peers, including the All Other Compensation columnrelative shareholder return of the Summary Compensation Table for the fiscal year ended December 30, 2017.Company and other companies;
| | | | | | | | | | | | | | | | | Name | | Supplemental
Life
Insurance/
Disability
Premiums
($) | | | Additional
Group
Life
Insurance
Premiums
($) | | | Other
($) | | | Total
($) | | Billerbeck, Darin G. President & CEO | | | 5,699 | | | | 2,838 | | | | 0 | | | | 8,537 | | Downing, Maxwell J. Corporate VP & CFO | | | 754 | | | | 1,380 | | | | 0 | | | | 2,134 | | Milstead, Byron W. Corporate VP & General Counsel | | | 7,972 | | | | 111 | | | | 70,712 | (1) | | | 78,795 | | Hawk, Glen Corporate VP & COO(2) | | | 1,015 | | | | 2,838 | | | | 0 | | | | 3,853 | |
(1) | Consists of an apartment and home office in Singapore at an aggregate incremental cost to the Company of $58,187 and a local transportation allowance of $12,525. |
(2) | Mr. Hawk was appointed as Interim Chief Executive Officer effective March 16, 2018. |
| ◾ | | 20
2017 Grants of Plan-Based Awards Table
The following table sets forth information regarding plan-based awards granted during the fiscal year ended December 30, 2017 to eachcompensation practices of our namedcompensation peer group and the companies in selected broad-based compensation surveys and the positioning of each executive officers.officer’s compensation in a ranking of these companies’ compensation levels based on an analysis of competitive market data; and
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Type of
Award | | Grant
Date | | | Estimated Future
Payouts
UnderNon-Equity
Incentive Plan Awards | | | Estimated Future Payouts
Under Equity Incentive Plan
Awards | | | All Other
Stock
Awards:
Number
of
Shares of
Stock
or
Units(#) | | | All Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#) | | | Exercise
or
Base
Price
of
Option
Awards
($ / Sh) | | | Grant
Date Fair
Value of
Stock and
Option
Awards($)(1) | | | | | | Thres-
hold
($) | | | Target
($) | | | Maximum
($) | | | Threshold
(#) | | | Target
(#) | | | Maximum
(#) | | | | | | Billerbeck, Darin G. President & CEO | | Cash Incentive
Plan Award | | | | | | | 0 | | | | 500,000 | | | | 1,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU Grant | | | 10/18/2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 210,300 | (2) | | | | | | | 5.73 | | | | 1,205,019 | | | | Stock Option | | | 10/18/2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 256,500 | (3) | | | 5.73 | | | | 522,644 | | | | Option
Performance
Grant | | | 10/18/2017 | | | | | | | | | | | | | | | | 0 | | | | 177,900 | | | | 355,800 | (4) | | | | | | | | | | | 5.73 | | | | 546,153 | | | | RSU Grant | | | 11/03/2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 70,000 | (5) | | | | | | | 5.89 | | | | 412,300 | | | | | | | | | | | | | | | Downing, Maxwell J. Corporate VP & CFO | | Cash Incentive
Plan Award | | | | | | | 0 | | | | 137,500 | | | | 275,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU Grant | | | 10/18/2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 65,500 | (2) | | | | | | | 5.73 | | | | 375,315 | | | | Stock Option | | | 10/18/2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 79,900 | (3) | | | 5.73 | | | | 162,804 | | | | Option
Performance
Grant | | | 10/18/2017 | | | | | | | | | | | | | | | | 0 | | | | 55,400 | | | | 110,800 | | | | | | | | | | | | 5.73 | | | | 170,078 | | | | | | | | | | | | | | | Milstead, Byron W. Corporate VP & General Counsel | | Cash Incentive
Plan Award | | | | | | | 0 | | | | 206,700 | | | | 413,400 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU Grant | | | 10/18/2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 42,200 | (2) | | | | | | | 5.73 | | | | 241,806 | | | | Stock Option | | | 10/18/2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 51,500 | (3) | | | 5.73 | | | | 104,936 | | | | Option
Performance
Grant | | | 10/18/2017 | | | | | | | | | | | | | | | | 0 | | | | 35,700 | | | | 71,400 | (4) | | | | | | | | | | | 5.73 | | | | 109,599 | | | | | | | | | | | | | | | Hawk, Glen Corporate VP & COO(6) | | Cash Incentive
Plan Award | | | | | | | 0 | | | | 270,000 | | | | 540,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU Grant | | | 10/18/2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 80,100 | (2) | | | | | | | 5.73 | | | | 458,973 | | | | Stock Option | | | 10/18/2017 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 97,700 | (3) | | | 5.73 | | | | 199,074 | | | | Option
Performance
Grant | | | 10/18/2017 | | | | | | | | | | | | | | | | 0 | | | | 67,800 | | | | 135,600 | (4) | | | | | | | | | | | 5.73 | | | | 208,146 | |
(1) | Fair value as of the grant date was determined in accordance with ASC 718, excluding the effect of any estimated forfeitures. The assumptions used to calculate the value of the option awards are set forth in Note 18 in the Notes to Consolidated Financial Statements in our Annual Report on Form10-K for the year ended December 30, 2017. |
(2) | These RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. |
(3) | These stock options vest at the rate of 6.25% of the total option shares as of three months from the grant date, and at the rate of 6.25% of the total options shares as of the end of each three-month period thereafter. |
(4) | These stock options vest between 0% and 200% of the target amount, based on a computation comparing the Company’s stock price performance compared to companies listed on the SOXX index. Specifically, the60-day trailing average of the Company’s stock price at the end of the two year measurement period divided by the60-day trailing average of the Company’s stock price at the beginning of the measurement period. Using this ratio, the performance will be compared with similar ratios for each company in the SOXX index and the percentile rank determined. Performance based stock options will vest at the target grant amount where the Company’s performance meets or exceeds the performance of the 50th percentile of the peer group. The grant date fair values of these stock options were determined and fixed on the date of grant using a Lattice-based option-pricing valuation model, which incorporates a Monte-Carlo simulation, and considered the likelihood that we would achieve the market condition. |
(5) | These RSUs vest at the rate of 50% of the total RSUs as of one year from the grant date, and the remaining 50% one year thereafter. |
(6) | Mr. Hawk was appointed as Interim Chief Executive Officer effective March 16, 2018. |
| ◾ | | 21the recommendations of our CEO with respect to the compensation of our other executive officers.
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These factors provide the framework for compensation decision-making and final decisions and recommendations regarding the compensation opportunity for our CEO and each executive officer. No single factor is determinative in setting compensation levels, nor is the impact of any individual factor on the determination of pay levels quantifiable. The Compensation Committee does not weight these factors in any predetermined manner, nor does it apply any formulas in developing its compensation decisions and recommendations. In making its decisions and recommendations, which are subjective in nature, the members of the Compensation Committee consider all of this information in light of their individual experience, knowledge of the Company, knowledge of the competitive market, business judgment and knowledge of each executive officer’s role, responsibilities, knowledge, skills, experience, qualifications and tenure. The Compensation Committee does not engage in formal benchmarking against other companies’ compensation programs or practices to establish our compensation levels or make specific compensation decisions or recommendations with respect to our CEO and executive officers. Instead, in making its determinations, the Compensation Committee reviews information summarizing the compensation paid at a representative group of peer companies, to the extent that the executive positions at these companies are considered comparable to our positions and informative of the competitive environment and more broad-based compensation surveys to gain a general understanding of market compensation levels. Role of Management In discharging its responsibilities, the Compensation Committee works with members of our management, including our CEO. Our management assists the Compensation Committee by providing information on corporate and individual performance, market compensation data and management’s perspective on compensation matters. The Compensation Committee solicits and reviews our CEO’s proposals with respect to program structures, as well as our CEO’s recommendations for adjustments to annual cash compensation, long-term incentive compensation opportunities and other compensation-related matters for our other executive officers based on our CEO’s evaluation of their performance for the prior year. The Compensation Committee reviews and discusses our CEO’s proposals and recommendations and considers them as one factor in determining and approving the compensation of our other executive officers. Our CEO also attends meetings of our Board of Directors and the Compensation Committee at which executive compensation matters are addressed, except with respect to discussions involving his own compensation. Beginning with the 2020 Cash Incentive Plan, up to 25% of the target annual cash incentive award of each of our executive officers was to be determined based on an assessment of his or her individual contributions during the year. At the beginning of the year, our CEO met with each of our other executive officers to review his or her performance for the prior year and to discuss expectations with respect to the performance of his or her respective business unit or function and such unit or function’s contributions to our overall results for the current year. These discussions were to form the basis for the evaluation of his or her performance at the end of the year with respect to the portion of his or her target annual cash incentive award attributable to his or her individual contributions. In the case of our CEO, these discussions were held with the independent members of our Board of Directors. It is anticipated in future periods the percentage of the target cash incentive award that will be determined based on an assessment of an executive officer’s individual contributions during the year will increase. Role of Compensation Consultant The Compensation Committee engages an external compensation consultant to assist it by providing information, analysis and other advice relating to our executive compensation program and the decisions resulting from its annual executive compensation review. The compensation consultant reports directly to the Compensation Committee and its chair, and serves at the discretion of the Compensation Committee, which reviews the engagement annually. In fiscal 2020, the Compensation Committee engaged Compensia, Inc. (“Compensia”), a national compensation consulting firm, to serve as its compensation consultant from January through July 2020 to advise on executive compensation matters, including competitive market pay practices for our executive officers, and assist with the data analysis and selection of the compensation peer group. During its engagement, Compensia attended the meetings of the Compensation Committee (both with and without management present) as requested and provided various services including the following: | ◾ | | consultation with the Compensation Committee chair and other members between Compensation Committee meetings; |
| ◾ | | an analysis of competitive market data for our executive officer positions and evaluation of how the compensation we pay our executive officers compares both to our performance and to how the companies in our compensation peer group and/or in selected broad-based compensation surveys compensate their executives; |
| ◾ | | a review of and research on the composition of various alternative compensation peer groups; |
| ◾ | | a review and assessment of stock ownership policies for the companies in our compensation peer group and the broader technology industry; |
| ◾ | | an assessment of executive compensation trends within our industry, and an update on corporate governance and regulatory issues and developments; and |
| ◾ | | support on other ad hoc matters. |
Subsequently, the Compensation Committee decided to change external compensation consultants and engaged Semler Brossy Consulting Group LLC., a national compensation consulting firm (“Semler Brossy”), beginning in August 2020. Semler Brossy provided various services including: | ◾ | | consultation with the Compensation Committee chair and other members between Compensation Committee meetings; |
| ◾ | | an analysis of competitive market data for our executive officer positions and evaluation of how the compensation we pay our executive officers compares both to our performance and to how the companies in our compensation peer group and/or in selected broad-based compensation surveys compensate their executives; and |
| ◾ | | an analysis of competitive market data for the compensation of non-employee members of our Board of Directors. |
The terms of Compensia’s and Semler Brossy’s engagements included reporting directly to the Compensation Committee chair. Compensia and Semler Brossy also coordinated with our management for data collection and job matching for our executive officers. In fiscal 2020, neither Compensia nor Semler Brossy provided any other services to us. The Compensation Committee has evaluated its relationship with Compensia and, subsequently, Semler Brossy to ensure that it believes that each such firm is independent from management. This review process included a review of the services that each such compensation consultant provided, the quality of those services and the fees associated with the services provided during fiscal 2020. Based on this review, as well as consideration of the factors affecting independence set forth in Exchange Act Rule 10C-1(b)(4), Rule 5605(d)(3)(D) of the Nasdaq Marketplace Rules and such other factors as were deemed relevant under the circumstances, the Compensation Committee has determined that no conflict of interest was raised as a result of the work performed by Compensia or Semler Brossy, respectively. Competitive Positioning The Compensation Committee believes that peer group comparisons are useful guides to measure the competitiveness of our executive compensation program and related policies and practices. For purposes of assessing our executive compensation against the competitive market, the Compensation Committee reviews and considers the compensation levels and practices of a select group of peer companies. This compensation peer group consists of technology companies that are similar to us in terms of revenue, market capitalization and industry focus. The competitive data drawn from this compensation peer group is only one of several factors that the Compensation Committee considers in making its decisions with respect to the compensation of our executive officers. The compensation peer group that the Compensation Committee used to analyze the compensation of our executive officers and make its compensation decisions from the beginning of fiscal 2020 until July 2020. This compensation peer group was developed in August 2019 with the assistance of Compensia and was comprised of publicly traded technology companies who hire executive talent comparable to our executives. The compensation peer group approved by the Compensation Committee in August 2019 consisted of the following companies: | | | Ambarella Inc. | | Monolithic Power Systems, Inc. | Axcelis Technologies, Inc. | | Nanometrics Incorporated | Cirrus Logic, Inc. | | Power Integrations, Inc. | Cohu, Inc. | | Rambus Inc. | Diodes Incorporated | | Semtech Corporation | Ichor Holdings Ltd. | | Silicon Laboratories | Inphi Corporation | | Universal Display Corporation | MACOM Technology Solutions | | Xperi Corporation | MaxLinear, Inc. | | |
In July 2020, with the assistance of Compensia, the Compensation Committee reviewed our compensation peer group using the peer group selection criteria described above. Based on this review, the Compensation Committee removed Cohu, Inc. and Ichor Holdings Ltd. from the compensation peer group because their market capitalizations fell below the peer group selection criteria and replaced these two companies with Cree, Inc. and Synaptics Incorporated, which had more appropriate market capitalizations and larger revenues. As result, the Compensation Committee approved the following compensation peer group for use when making any executive compensation decisions subsequent to July 2020: | | | Ambarella Inc. | | Nanometrics Incorporated | Axcelis Technologies, Inc. | | Power Integrations, Inc. | Cirrus Logic, Inc. | | Rambus Inc. | Cree, Inc. | | Semtech Corporation | Diodes Incorporated | | Silicon Laboratories | Inphi Corporation | | Synaptics Incorporated | MACOM Technology Solutions | | Universal Display Corporation | MaxLinear, Inc. | | Xperi Corporation | Monolithic Power Systems, Inc. | | |
As part of its annual executive compensation review, the Compensation Committee used data gathered by Compensia from the public filings of the companies in our compensation peer group, as well as data from special data cuts drawn from the Radford 2019 Global Technology Survey of companies that are similar to us in revenue, market capitalization and industry focus for purposes of providing additional perspective in the case of executive positions where the compensation peer group offered a limited number of relevant data points. This data permitted the Compensation Committee to evaluate the competitive market when formulating its recommendations for the total direct compensation package of our CEO and when determining the total direct compensation packages for our other executive officers, including base salary, target annual cash incentive awards and long-term incentive compensation. The Compensation Committee reviews our compensation peer group at least annually and makes adjustments to its composition if warranted, taking into account changes in both our business and the businesses of the companies in the peer group. Compensation Elements The principal elements of our fiscal 2020 executive compensation program for our Named Executive Officers are set forth in the following table, each of which is described in more detail below. The Compensation Committee considers the factors described under “Compensation-Setting Process – Setting Target Total Direct Compensation” above to determine the form and amount of each element of compensation similarly for our Named Executive Officers. The following table sets forth information regarding each individual compensation element, including a description of each element and a summary of the element’s key objectives. | | | | | | | | | Compensation Element | | Description | | Element Objectives | | | | | Base Salary | | Fixed cash compensation based on the Named Executive Officer’s role, responsibilities, competitive market positioning and individual performance | | ◾ Attract and retain key executive talent
Narrative Disclosure to Summary Compensation Table◾ Provide a specified level of cash compensation for the Named Executive Officer’s performance of his or her responsibilities.
| | | | | Annual Cash Incentive Awards | | ◾ Annual cash incentive with target award amount for each Named Executive Officer; actual cash awards may be higher or lower than target based on business and Grants of Plan-Based Awards Tableindividual performance Amounts in the
Non-Equity◾ Incentive Plan Compensation column of the Summary Compensation Table for fiscal years 2015 and 2016 represent payments of awardsProvided under our 2020 Cash Incentive Plan for each
| | ◾ Attract and retain key executive talent ◾ Encourage and reward individual contributions and achievement of those years. Each named executive officer’s potential award wasannual corporate performance objectives | | | | | Long-Term Incentive Compensation | | Long-term equity awards granted in the form of time-based restricted stock unit (“RSU”) awards and performance-based restricted stock unit (“PRSU”) awards; actual PRSU awards earned may be higher or lower than target, based on our adjusted EBITDA for the PRSU award granted to our CEO in 2018 and based on our relative total stockholder return in comparison to an index for other PRSU awards | | ◾ Attract and retain key executive talent ◾ Drive top-tier performance and focus on sustained success ◾ Enhance stock ownership/align with stockholders’ interests |
Base Salary Base salary represents the fixed portion of the compensation of our Named Executive Officers and is an important element of compensation intended to attract and retain highly talented individuals. Generally, we use base salary to provide each Named Executive Officer with a specified level of cash compensation during the year with the expectation that he or she will perform his or her responsibilities to the best of his or her ability and in our best interests. Generally, the Compensation Committee reviews the base salaries of our executive officers each year as part of its annual review of our executive compensation program, with input from our CEO (except with respect to his own base salary) and considers making adjustments as it determines to be reasonable and necessary to reflect the scope of an individual’s experience, performance, individual contributions and responsibilities, position in the case of a promotion and market conditions. In February 2020, the Compensation Committee reviewed the base salaries of our Named Executive Officers, taking into consideration a competitive market analysis prepared by Compensia and the recommendations of our CEO (except with respect to his own base salary), as well as the other factors described in “Compensation-Setting Process – Setting Target Total Direct Compensation” above. Following this review, the Compensation Committee recommended to the independent members of our Board of Directors that the base salary of our CEO be increased to be more competitive with the base salaries of similarly situated chief executive officers at companies of comparable size and stage of maturity. In addition, the Compensation Committee determined to adjust the base salaries of each of our other Named Executive Officers to better align their base salaries with the competitive market. Subsequently, the increase to the base salary of our CEO was approved by the independent members of our Board of Directors in February 2020. The base salaries of our Named Executive Officers for fiscal 2020 were as follows: | | | | | | | | | | | | Named Executive
Officer | | Fiscal 2019 Base
Salary | | Fiscal 2020 Base
Salary(1) | | Percentage
Adjustment | | | | | | Mr. Anderson | | $550,000 | | $600,000 | | 9% | | | | | | Ms. Luther | | $345,000 | | $379,500 | | 10% | | | | | | Mr. Douglass | | $330,000 | | $350,100 | | 6% | | | | | | Mr. Elashmawi | | $360,000 | | $370,800 | | 3% | | | | | | Mr. Nelson | | $400,000 | | $412,000 | | 3% |
| (1) | These base salaries were effective April 1, 2020. |
The actual base salaries paid to our Named Executive Officers in fiscal 2020 are set forth in the “2020 Summary Compensation Table” below. Annual Cash Incentive Compensation We use an annual cash incentive program in which all of our non-sales employees (including our Named Executive Officers) are eligible to participate to achieve our annual business goals. Although Mr. Nelson is our Executive Vice President, Worldwide Sales, he participated in our annual cash bonus program rather than our sales incentive plan in fiscal 2020. In December 2019, the Compensation Committee approved the 2020 Cash Incentive Plan to provide incentives for these employees to meet or exceed the principal business objectives set forth in our fiscal 2020 annual operating plan. Under the 2020 Cash Incentive Plan, annual cash incentive award payments were to be funded based on our level of achievement of pre-established corporate performance goals and then subject to adjustment for individual performance as described below. Target Annual Cash Incentive Awards For purposes of the 2020 Cash Incentive Plan, each Named Executive Officer’s target annual cash incentive award was to be based upon a specific percentage of his or her annual base salary. Each Named Executive Officer’s target annual cash incentive award (as a percentage of his or her base salary) for fiscal 2020 remained unchanged from his or her target annual cash incentive award for fiscal 2019 and was (i) 100% of base salary for the CEO and (ii) 65% of base salary for each of our other Named Executive Officers. Corporate Performance Objectives Each Named Executive Officer was eligible to receive an annual cash incentive award payment under the 2020 Cash Incentive Plan based upon his or her individual performance and the attainment of one or more corporate performance components that were established by the Compensation Committee and which related to financial and operational objectives that were important to us. In December 2019, the Compensation Committee selected three equally weighted performance components for the 2020 Cash Incentive Plan: (i) non-GAAP operating income, (ii) revenue, and (iii) management objectives. The Compensation Committee believed these components were appropriate because, in its view, they continued to be the best indicators of our successful execution of our annual operating planandprovided a strong emphasis on growth while managing expenses and strengthening our customer and employee relationships, which it believed would most directly influence the creation of sustainable long-term stockholder value. For purposes of the 2020 Cash Incentive Plan: | ◾ | | “non-GAAP operating income” meant our operating income determined under generally accepted accounting principles (“GAAP”), excluding stock-based compensation, certain restructuring charges, expenses incurred in connection with mergers, acquisitions, or other similar corporate transactions, and accrual and payment of his annual base salary andincentives under the potential award increases when and if a named executive officer’s annual base salary increases. Payments under our2020 Cash Incentive Plan; and |
| ◾ | | “revenue” meant our GAAP revenue, as reflected in our audited financial statements for fiscal 2020. |
The Compensation Committee established threshold, target and maximum achievement levels for each of the two financial performance components. To the extent that performance for either component was below the threshold performance level, there would be no payment with respect to that component. In addition, the potential payment for any such component was capped at the maximum performance level. Achievement levels and payment percentages for performance between the threshold and maximum performance levels were set forth in a matrix approved by the Compensation Committee. Payment for performance at points between those reflected in the matrix were to be calculated using straight-line interpolation. As part of its continuing assessment of the impact of the operational and financial challenges posed to the Company’s business by the COVID-19 pandemic, the Compensation Committee determined that it would be appropriate and consistent with the intent of its broad-based cash incentive programs (that the Company’s executive officers participate in along with other Company employees) to adjust two of the corporate financial performance components to take into account the impact of the COVID-19 pandemic. The resulting performance levels for the two financial performance components were as follows: Non-GAAP Operating Income | | | | | Attainment vs. Plan are made annually | | Amount | | Payout Percentage | | | | Threshold | | $87.5 million | | 0% | | | | Maximum | | $136.5 million or more | | 250% |
Revenue | | | | | | Attainment vs. Plan | | Amount | | Payout Percentage | | | | Threshold | | $381.6 million | | 0% | | | | Maximum | | $470.1 million | | 250% |
The Compensation Committee also determined that the minimum threshold for either the non-GAAP operating income component or the revenue component must be attained for there to be any payout with respect to the management objectives component. The management objectives component was based on the achievement of the following objectives: (i) delivering fiscal 2020 gross margin above a pre-established target, (ii) successful execution of our new product platform and the build-out of a new product pipeline, (iii) delivering certain solution software in the first, second and fourth quarters of fiscal 2020 and (iv) driving revenue growth above a specified level through the achievement of certain design wins goals, including from strategic customers. These management objectives were chosen in order to drive the expansion of gross margin to achieve our target business model, meet execution commitments on our new product platform, deliver additional solution value to our customers and drive new product adoption in order to achieve future revenue targets. Under the terms of the 2020 Cash Incentive Plan, each Named Executive Officer could not receive more than 100% of the portion of his or her target incentive allocated to this component. Individual Performance In addition to our actual results as measured against the corporate performance objectives under the 2020 Cash Incentive Plan, each Named Executive Officer’s tentative annual cash incentive award payment was subject to a discretionary increase or decrease by up to 25% based on a general assessment of his or her individual contributions for the year. In the case of our CEO, this assessment was made by the independent members of our Board of Directors. In the case of each of our Named Executive Officers (other than our CEO), this assessment generally involved a review of his or her functional area for the year as well as consideration of his or her contributions to our overall financial and operational results. Annual Cash Incentive Award Payments In January 2021, the Compensation Committee also determined the annual cash incentive award payments for our Named Executive Officers for fiscal 2020. First, the Compensation Committee reviewed our performance with respect to each of the corporate performance components and determined the extent to which each objective had been achieved for the year. Specifically, the Compensation Committee determined that our non-GAAP operating income for fiscal 2020 was approximately $102.9 million, our revenue for fiscal 2020 was approximately $408.1 million and, based on our achievement with respect to each of the pre-established management objectives for the year, our attainment level for the management objectives component was 76.8%. Based on these results, the Compensation Committee then determined the percentage achievement of each performance component and the corresponding weighted payment level, as follows: | | | | | | | Corporate Performance
Component | | Weighting | | Percentage
Achievement versus
Target Performance | | Weighted Payment
Level | | | | | | | Non-GAAP operating income | | 33% | | 78.6% | | 26.2% | | | | | | Revenue | | 33% | | 74.9% | | 25.0% | | | | | | Corporate performance | | 33% | | 76.8% | | 25.6% | | | | | | Total | | | | | | 76.8% |
After the overall payment level for the corporate performance components under the 2020 Cash Incentive Plan had been determined to be 76.8%, our CEO met with the Compensation Committee and provided his recommendations with respect to any further adjustments to their annual cash incentive award payments under the 2020 Cash Incentive Plan based on their individual performance. The Compensation Committee considered these recommendations, as well as the assessment of the individual contributions of our CEO by the independent members of our Board of Directors and its resulting recommendation for an individual performance adjustment for our CEO, and decided not to make any adjustments based on our Named Executive Officers’ individual performance in determining the potential final payments under the 2020 Cash Incentive Plan. The Compensation Committee recommended to the independent members of our Board of Directors the annual cash incentive award payment for our CEO set forth in the following table, which was subsequently approved by the independent members of our Board of Directors in February2021. The Compensation Committee also determined to make the following annual cash incentive award payments to our other Named Executive Officers: | | | | | | | Named Executive
Officer | | Target Award | | Actual Award | | Actual Award (as a
Percentage of the
Target Award) | | | | | | Mr. Anderson | | $598,077 | | $459,323 | | 76.8% | | | | | | Ms. Luther | | $245,381 | | $188,453 | | 76.8% | | | | | | Mr. Douglass | | $228,424 | | $175,429 | | 76.8% | | | | | | Mr. Elashmawi | | $243,765 | | $187,212 | | 76.8% | | | | | | Mr. Nelson | | $270,850 | | $208,013 | | 76.8% |
The annual cash incentive awards payments made to our Named Executive Officers for fiscal 2020 are set forth in the “2020 Summary Compensation Table” below. Long-Term Incentive Compensation We use long-term incentive compensation in the form of equity awards to incent and reward our Named Executive Officers for long-term corporate performance based on the value of our common stock and, thereby, to align their interests with those of our stockholders. In fiscal 2020, these equity awards were granted in the form of both PRSU awards and time-based RSU awards. We believe that an appropriate mix of PRSU awards and RSU awards allow us to compete effectively in a highly competitive market and provide an appropriate long-term incentive for our Named Executive Officers. Typically, we have granted equity awards to our executive officers as part of the Compensation Committee’s annual review of executive compensation. To date, the Compensation Committee has not applied a rigid formula in determining the size of these equity awards. Instead, the Compensation Committee determines the amount of each equity award after taking into consideration a competitive market analysis prepared by its compensation consultant, the recommendations of our CEO (except with respect to his own equity awards), the amount of equity compensation held by each executive officer (including the current economic value of his or her unvested equity and the ability of these unvested holdings to satisfy our retention objectives), as well as the other factors described in “Compensation-Setting Process – Setting Target Total Direct Compensation” above. In February 2020, after taking into consideration a competitive market analysis prepared by Compensia and the recommendations of our CEO (except with respect to his own equity awards), as well as the factors described in the preceding paragraph, the Compensation Committee (i) recommended to the non-employee members of our Board of Directors that our CEO be granted a PRSU award that may be settled for shares of our common stock with a target value of $2,400,000 and an RSU award with time-based vesting requirements that may be settled for shares of our common stock with a target value of $1,875,000 and (ii) determined to grant to each other Named Executive Officer a PRSU award with a target value of $800,000 and an RSU award with target values of $600,000. Subsequently, the grant of the equity awards to our CEO was approved by the independent members of our Board of Directors in February 2020. The equity awards granted to our Named Executive Officers in fiscal 2020 were as follows: | | | | | | | | | | | Named
Executive
Officer | | Performance
Restricted
Stock Unit
Award (target
number of
shares)(1) | | Performance
Restricted
Stock Unit
Award (target
value) | | Restricted
Stock Unit
Award (number of
shares)(1) | | Restricted
Stock Unit
Award (target
value) | | Aggregate
Target Value
of Award | | | | | | | | Mr. Anderson | | 116,464 | | $2,400,000 | | 90,989 | | $1,875,000 | | $4,275,000 | | | | | | | | Ms. Luther | | 38,822 | | $800,000 | | 29,116 | | $600,000 | | $1,400,000 | | | | | | | | Mr. Douglass | | 38,822 | | $800,000 | | 29,116 | | $600,000 | | $1,400,000 | | | | | | | | Mr. Elashmawi | | 38,822 | | $800,000 | | 29,116 | | $600,000 | | $1,400,000 | | | | | | | | Mr. Nelson | | 38,822 | | $800,000 | | 29,116 | | $600,000 | | $1,400,000 |
| (1) | The number of shares of our common stock subject to these awards is determined by dividing the 30-day trailing average of the goals applicable to the year. Please see the section entitled “Compensation Discussion and Analysis” above for more information about our Cash Incentive Plan for fiscal 2017.
Amounts in the Bonus column of the Summary Compensation Table represent any service and patent bonuses paid to the executive officers under a broad-based employment policy and discretionary bonuses approved by the compensation committee. Other elements of executive compensation include participation in a broad-based life and disability insurance program, broad-based medical benefits, and the ability to defer compensation pursuant to a broad-based 401(k) plan that provided matching contributions in fiscal 2017. The Company does not maintain a pension plan or any other defined benefit retirement plans.
The Company provides certain supplemental life and disability insurance coverage to executive officers and certain other members of senior management. Because the Company negotiates these insurance arrangements on a bulk basis, such insurance coverage, whether issued on a group basis or individually underwritten, is obtained by the Company at rates that are likely to be better than those obtainable by individuals seeking comparable insurance coverage on their own. The premiums paid by the Company for such supplemental insurance are considered a taxable benefit to the employee.
The principal equity component of executive compensation historically has been our employee stock option program. In past years, stock options were typically granted when an executive joined us and on an annual basis thereafter under a replenishment program. Initial stock option grants vest over a period of four years. The purpose of the annual replenishment program is to ensure that our executives always have options that vest in increments over a subsequent four-year period. Stock options are also occasionally granted for promotions or other special achievements. Stock options provide a means of retention and motivation for our executives and also align their interests with long-term stockmarket price appreciation.
All stock option grants have a per share exercise price equal to the fair market value of our common stock onprior to the date of grant and a seven-year term. The Company has not granted, nor does it intend inby the future to grant, equity-based compensation awards (stock options and/or restricted stock units) to executives in anticipationtarget value of the release of material nonpublic information that is likely to result in changesawards.
|
PRSU Awards The PRSU awards are divided into two equal tranches. The first tranche will vest based on the total stockholder return (“TSR”) of our common stock measured over a two-year performance period ending on the second anniversary of the date of grant of the award relative to the Russell 2000 Index (the “Index”), an index that tracks the results of similarly-sized U.S. public companies and of which we are a constituent. The second tranche will vest based on our TSR measured over a three-year performance period ending on the third anniversary of the date of grant of the award relative to the Index. Each tranche of PRSUs will vest according to the following terms: | ◾ | | If the pricerelative TSR performance of our common stock such as a significant positive or negative earnings announcement. Similarly,does not achieve the Company has not timed, nor does it intend inthreshold performance level, then none of the future to time,PRSUs covered by that tranche will vest. |
| ◾ | | If the releaserelative TSR performance of material nonpublic informationour common stock achieves at least the threshold performance level, then the PRSUs covered by that tranche will vest based on equity award grant dates. Separation Agreement
In connection with his retirement effective March 16, 2018, the Company and Mr. Billerbeck executed a Separation Agreement that provided for a $1.0 million cash severance payment, the vesting of equity awards as required under the terms of his Employment Agreement, the vesting of 35,000 restricted stock units and reimbursement for up to 12 months of health care. The agreement includes a release of claims against the Company, and certainnon-compete,non-solicitation andnon-disparagement provisions that will remain in effect for 12 months following his termination date.performance matrix:
CEO Employment Agreement
Effective November 8, 2010, in connection with the hiring of Mr. Billerbeck as the President and Chief Executive Officer, the Company entered into an employment agreement with Mr. Billerbeck, which sets forth
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terms and provisions governing Mr. Billerbeck’s employment as President and Chief Executive Officer. Key terms of Mr. Billerbeck’s agreement that relate to the information disclosed in the Summary Compensation Table and Grants of Plan-Based Awards Table are as follows:
Salary. Mr. Billerbeck receives a base salary at an annual rate of not less than $500,000, which the compensation committee of the Board of Directors must review at least annually and may increase at its discretion.
Annual Incentive. Mr. Billerbeck is eligible for an annual incentive bonus of at least 100% of his base salary (or such higher figure as the compensation committee may select (the “Target Bonus”) upon the achievement of specific milestones to be established by Mr. Billerbeck and the compensation committee no later than 45 days after the start of each fiscal year. Mr. Billerbeck’s maximum annual incentive bonus equals 200% of his Target Bonus.
Other Executive Agreements
In 2015, the Company entered into a Short Term Assignment Letter of Understanding with Byron W. Milstead, our Corporate Vice President, General Counsel and Secretary relating to his posting in Singapore pursuant to which the Company agreed to provide Mr. Milstead with additional benefits and compensation to facilitate his relocation from the United States and the conduct of his duties in Singapore. In 2016, the Company’s Singapore affiliate entered into an employment agreement with Mr. Milstead in connection with his permanent employment by that Company.
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2017 Outstanding Equity Awards at FiscalYear-End Table
The following table sets forth information with respect to all unexercised options and unvested stock grants as of the fiscal year ended, December 30, 2017, that have been previously awarded to the named executive officers.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | | | | Number of
Securities
Underlying
Unexercised
Options
(#) | | | Number of
Securities
Underlying
Unexercised
Options
(#) | | | Equity
Incentive
Plan
Awards;
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
(15) | | | Option
Exercise
Price
($) | | | Option
Expiration
Date | | | Number of
Shares or
Units of
Stock That
Have Not
Vested
(#) | | | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(**) | | Name | | Exercisable | | | Unexercisable | | | | | | | | | | | | | | | | | Billerbeck, Darin G. | | | | | | | | | | | | | | | | | | | | | | | 6,162 | (1) | | | 35,616 | | President & CEO | | | 480,000 | (2) | | | 0 | | | | | | | | 4.64 | | | | 2/5/2020 | | | | 51,230 | (6) | | | 296,109 | | | | | 433,683 | (3) | | | 28,913 | | | | | | | | 7.10 | | | | 2/11/2021 | | | | 104,375 | (5) | | | 603,288 | | | | | 136,235 | (4) | | | 61,926 | | | | | | | | 6.10 | | | | 2/6/2022 | | | | 210,300 | (23) | | | 1,215,534 | | | | | 45,769 | (7) | | | 0 | | | | 0 | | | | 6.10 | | | | 2/6/2022 | | | | 70,000 | (24) | | | 404,600 | | | | | 75,750 | (8) | | | 126,250 | | | | | | | | 5.28 | | | | 5/13/2023 | | | | | | | | | | | | | 0 | (9) | | | | | | | 139,900 | | | | 5.28 | | | | 5/13/2023 | | | | | | | | | | | | | 0 | (21) | | | 256,500 | | | | | | | | 5.73 | | | | 10/18/2024 | | | | | | | | | | | | | 0 | (22) | | | 0 | | | | 177,900 | | | | 5.73 | | | | 10/18/2024 | | | | | | | | | | | | | | | | | | Downing, Maxwell J. | | | 6,563 | (10) | | | 0 | | | | | | | | 3.54 | | | | 8/2/2019 | | | | | | | | | | Corporate VP & CFO | | | 25,305 | (19) | | | 0 | | | | | | | | 5.40 | | | | 3/25/2020 | | | | 589 | (14) | | | 3,404 | | | | | 20,528 | (11) | | | 1,369 | | | | | | | | 7.54 | | | | 3/21/2021 | | | | 5,609 | (15) | | | 32,420 | | | | | 19,685 | (12) | | | 15,311 | | | | | | | | 5.85 | | | | 7/9/2022 | | | | 13,384 | (16) | | | 77,360 | | | | | 14,725 | (13) | | | 32,398 | | | | | | | | 5.88 | | | | 7/19/2023 | | | | 65,500 | (23) | | | 378,590 | | | | | 0 | (21) | | | 79,900 | | | | | | | | 5.73 | | | | 10/18/2024 | | | | | | | | | | | | | 0 | (22) | | | | | | | 55,400 | | | | 5.73 | | | | 10/18/2024 | | | | | | | | | | | | | | | | | | Milstead, Byron W. | | | 9,294 | (16) | | | 0 | | | | | | | | 6.30 | | | | 2/1/2018 | | | | | | | | | | Corporate VP & General Counsel | | | 18,876 | (18) | | | 0 | | | | | | | | 6.43 | | | | 3/30/2019 | | | | 1,410 | (14) | | | 8,150 | | | | | 31,343 | (19) | | | 0 | | | | | | | | 5.40 | | | | 3/25/2020 | | | | 10,246 | (7) | | | 59,222 | | | | | 49,153 | (11) | | | 3,277 | | | | | | | | 7.54 | | | | 3/21/2021 | | | | 22,938 | (5) | | | 132,582 | | | | | 27,247 | (4) | | | 12,385 | | | | | | | | 6.10 | | | | 2/6/2022 | | | | 42,200 | (23) | | | 243,916 | | | | | 9,154 | (7) | | | | | | | 0 | | | | 6.10 | | | | 2/6/2022 | | | | | | | | | | | | | 16,500 | (8) | | | 27,500 | | | | | | | | 5.28 | | | | 5/13/2023 | | | | | | | | | | | | | 0 | (9) | | | | | | | 30,800 | | | | | | | | | | | | | | | | | | | | | 0 | (21) | | | 51,500 | | | | | | | | 5.73 | | | | | | | | | | | | | | | | | 0 | (22) | | | | | | | 35,700 | | | | 5.73 | | | | | | | | | | | | | | | | | | | | | | Hawk, Glen | | | 306,875 | (20) | | | 184,125 | | | | | | | | 6.21 | | | | 5/7/2022 | | | | 29,250 | (5) | | | 169,065 | | Corporate VP & COO(25) | | | 21,375 | (8) | | | 49,875 | | | | | | | | 5.28 | | | | 5/13/2023 | | | | 80,100 | (23) | | | 462,978 | | | | | 0 | (9) | | | | | | | 39,200 | | | | 5.28 | | | | 5/13/2023 | | | | | | | | | | | | | 0 | (21) | | | 97,700 | | | | | | | | 5.73 | | | | 10/18/2024 | | | | | | | | | | | | | 0 | (22) | | | | | | | 67,800 | | | | 5.73 | | | | 10/18/2024 | | | | | | | | | |
** | The market value of shares that have not vested was determined based on the fair market value of the Company’s common stock as of December 29, 2017, the last business day of fiscal 2017. |
| | | 24
Company Performance
(1) | These RSUs were granted on February 11, 2014. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter.(Percentile Ranking) | | Percentage of Performance Shares Vesting
(as a Percentage of the Target Number of
PRSUs) |
(2) | These stock options were granted on February 5, 2013. The options vest at the rate of 6.25% of the total option shares as of three months from the grant date, and 6.25% of the total option shares as of the end of each three-month period thereafter. | | |
(3) | These stock options were granted on February 11, 2014. The options vest at the rate of 6.25% of the total option shares as of three months from the grant date, and at the rate of 6.25% of the total option shares as of the end of each three-month period thereafter. | Less than 26th Percentile | | 0% |
(4) | These stock options were granted on February 6, 2015. The options vest at the rate of 6.25% of the total option shares as of three months from the grant date, and at the rate of 6.25% of the total option shares as of the end of each three-month period thereafter. | | |
(5) | These RSUs were granted on May 13, 2016. The RSUs vest at the rate of 25% as of one year from the grant date, and 6.25% as of the end of each three-month period thereafter. | 26th Percentile | | 50% |
(6) | These RSUs were granted on February 6, 2015. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. | | |
(7) | These performance stock options were granted on February 6, 2015. These stock options vest on the grant date upon achievement of the performance conditions. | 55th Percentile | | 100% |
(8) | These stock options were granted on May 13, 2016. The options vest at the rate of 6.25% of the total option shares as of three months from the grant date, and at the rate of 6.25% of the total option shares as of the end of each three-month period thereafter. | | |
(9) | These performance stock options were granted on May 13, 2016. These stock options vest on the grant date upon achievement of the performance conditions. |
(10) | These stock options were granted on August 2, 2012. The options vest at the rate of 6.25% of the total option shares as of three months from the grant date, and at the rate of 6.25% of the total option shares as of the end of each three-month period thereafter. |
(11) | These stock options were granted on March 21, 2014. The options vest at the rate of 6.25% of the total option shares as of three months from the grant date, and at the rate of 6.25% of the total option shares as of the end of each three-month period thereafter. |
(12) | These stock options were granted on July 9, 2015. The options vest at the rate of 6.25% of the total option shares as of three months from the grant date, and at the rate of 6.25% of the total option shares as of the end of each three-month period thereafter. |
(13) | These stock options were granted on July 19, 2016. The options vest at the rate of 6.25% of the total option shares as of three months from the grant date, and at the rate of 6.25% of the total option shares as of the end of each three-month period thereafter. |
(14) | These RSUs were granted on March 21, 2014. The RSUs vest at the rate of 25% as of one year from the grant date, and 6.25% as of the end of each three-month period thereafter. |
(15) | These RSUs were granted on July 9, 2015. The RSUs vest at the rate of 25% as of one year from the grant date, and 6.25% as of the end of each three-month period thereafter. |
(16) | These RSUs were granted on July 19, 2016. The RSUs vest at the rate of 25% as of one year from the grant date, and 6.25% as of the end of each three-month period thereafter. |
(17) | These stock options were granted on February 1, 2011. The options vest at the rate of 6.25% of the total option shares as of three months from the grant date, and at the rate of 6.25% of the total option shares as of the end of each three-month period thereafter. |
(18) | These stock options were granted on March 30, 2012. The options vest at the rate of 6.25% of the total option shares as of three months from the grant date, and at the rate of 6.25% of the total option shares as of the end of each three-month period thereafter. |
(19) | These stock options were granted on March 25, 2013. The options vest at the rate of 6.25% of the total option shares as of three months from the grant date, and at the rate of 6.25% of the total option shares as of the end of each three-month period thereafter. | 75th Percentile | | 200%/CEO 250% |
| ◾ | | 25
(20) | These stock options were granted on May 7, 2015. The options vest at the rate of 6.25% of the total option shares as of three months from the grant date, and at the rate of 6.25% of the total option shares as of the end of each three-month period thereafter. |
(21) | These stock options were granted on October 18, 2017. The options vest at the rate of 6.25% of the total option shares as of three months from the grant date, and at the rate of 6.25% of the total option shares as of the end of each three-month period thereafter. |
(22) | These performance stock options were granted on October 18, 2017. These stock options vest on the grant date upon achievement of the performance conditions. |
(23) | These RSUs were granted on October 18, 2017. The RSUs vest at the rate of 25% as of one year from the grant date, and 6.25% as of the end of each three-month period thereafter. |
(24) | These RSUs were granted on November 3, 2017. These RSUs vest at the rate of 50% of the total RSUs as of one year from the grant date, and the remaining 50% one year thereafter. |
(25) | Mr. Hawk was appointed as Interim Chief Executive Officer effective March 16, 2018. |
2017 Option Exercises and Stock Vested Table
The following table sets forth information forIf the fiscal year ended December 30, 2017relative TSR performance of our common stock is between the specified percentage ranges in the performance matrix, the Compensation Committee will determine the percentage of the target number of PRSUs covered by that tranche through straight-line interpolation, with respectthe result rounded to the shares acquired pursuant to option exercises and shares acquired on vesting of RSUs for the named executive officers.nearest whole share.
| | | | | | | | | | | | | | | | | Name | | Option Awards | | | Stock Awards | | | | Number of Shares
Acquired on Exercise
(#) | | | Value Realized
on Exercise
($)(1) | | | Number of Shares
Acquired
on Vesting
(#) | | | Value Realized
on Vesting
($)(2) | | Billerbeck, Darin G. President & CEO | | | 42,793 | | | | 499,902 | | | | 128,256 | | | | 855,601 | | Downing, Maxwell J. Corporate VP and CFO | | | 0 | | | | 0 | | | | 12,453 | | | | 80,798 | | Milstead, Byron W. Corporate VP & General Counsel | | | 0 | | | | 0 | | | | 28,583 | | | | 188,718 | | Hawk, Glen Corporate VP & COO(4) | | | 0 | | | | 0 | | | | 17,550 | | | | 118,170 | |
|
The Compensation Committee anticipates that in future periods the annual grants of PRSUs will be granted with a single tranche vesting on the third anniversary of the date of grant of the award relative to the Index. The Compensation Committee also anticipates that in a future period it will make grants of PRSUs to the CEO and other executive officers with vesting based on the achievement of Company objectives, including revenue growth over multiple years. RSU Awards The time-based RSU awards vest over a four-year period, with 25% of the units subject to the awards vesting on the first anniversary of the date of grant and the remaining units vesting at the rate of 6.25% of the total number of units subject to the awards as of the end of each three-month period thereafter, contingent upon each Named Executive Officer’s continued service with us through each applicable vesting date. Upon vesting, the RSU awards may be settled by issuing that number of shares of our common stock that equal the number of units that have vested. Vesting of Prior Years’ PRSU Awards Fiscal 2018 TSR-Based PRSU Awards In September 2018, Messrs. Anderson, Douglass and Elashmawi each received a PRSU award that may be settled for shares of our common stock in connection with joining the Company as our President and CEO, our Corporate Vice President of Research and Development, and our Corporate Vice President and Chief Marketing and Strategy Officer, respectively. Each of these PRSU awards was divided into three equal tranches, with each tranche eligible to vest based upon our TSR relative to the PHLX Semiconductor (“SOX”) Index during a one-year performance period, as follows: none of the PRSUs vesting if our TSR is at or below the 25th percentile, 100% of the target number of PRSUs vesting if our TSR is at the 50th percentile, and 200% (or, in the case of our CEO, 250%) of the target number of PRSUs vesting if our TSR is at the 75th percentile. The performance periods for the first, second and third tranches of each of these PRSU awards covered the first, second and third anniversaries of the award’s grant date, respectively. (1) | The value realized on exercise was determined based on the difference between the fair market value on the date of exercise and the exercise price before tax withholding. |
(2) | The value realized on vesting was determined based on the fair market value of the Company’s common stock on the date of vesting. |
(3) | Mr. Hawk was appointed as Interim Chief Executive Officer effective March 16, 2018. |
Potential Payments upon Termination orChange-in-Control
In February 2020, we amended these PRSU awards to provide that for each performance period that had not yet ended, the beginning of such performance period would be changed to the grant date. In approving these amendments, the Compensation Committee sought to align these PRSU awards with those granted to our Named Executive Officers in February 2020, as the Compensation Committee believed that the longer performance periods would emphasize building long-term stockholder value and were more consistent with market practice. In September 2020, Mr. Bourgoin, in his capacity as chair of the Compensation Committee and pursuant to a delegation of authority by the Compensation Committee, determined the level of achievement with respect to the second tranche of these PRSU awards. Mr. Bourgoin determined that our TSR ranked above the 75th percentile and, therefore, that the following percentage of the target number of PRSUs covered by the second tranche of the PRSU awards had vested: (i) 250% for our Mr. Anderson and (ii) 200% for each of Messrs. Douglass and Elashmawi. Accordingly, these Named Executive Officers earned and vested in the following number of shares of our common stock with respect to the second tranche of their fiscal 2018 PRSU awards: Darin G. Billerbeck
Upon Mr. Billerbeck’s retirement on March 16, 2018 and pursuant to a Separation Agreement, dated March 12, 2018, he received $1.0 million cash severance payment, the vesting of equity awards through May 31, 2019, the vesting of 35,000 restricted stock units and reimbursement for up to 12 months of health insurance premiums.
Under Mr. Billerbeck’s employment agreement, Mr. Billerbeck was entitled to receive a lump sum amount equal to (i) Mr. Billerbeck’s then base salary, plus Mr. Billerbeck’s then target bonus amount, plus (ii) if he elects to continue health insurance coverage under COBRA, the amount of his monthly premium until the earlier of twelve months after the termination date or the date he commences receiving substantially equivalent coverage
26
in connection with new employment, and to become immediately vested in all of his outstanding equity awards as if he continued service with the Company for an additional 12 months, subject to Mr. Billerbeck entering into (and not subsequently revoking) a separation agreement and release of claims, and agreeing to certainnon-compete,non-solicitation andnon-disparagement provisions that would be in effect for 12 months following his termination date.
Other Named Executive Officers
The following paragraphs describe the terms of the employment agreements between the Company and each of Mr. Downing, Mr. Hawk and Mr. Milstead that provide for payment of benefits to our named executive officers at, following, or in connection with, any termination of such named executive officer’s employment with the Company.
The Company entered into employment agreements with Mr. Milstead in May 2008 and with Mr. Hawk in November 2015, in connection with hiring each of them or their continuing employment. The Company entered into an employment agreement with Mr. Downing in October 2017 in connection with his promotion to Chief Financial Officer. Under the terms of each employment agreement with each of Mr. Milstead, Mr. Hawk, and Mr. Downing, in the event that the officer’s employment is terminated by the Company without cause (as defined in each agreement) or by the officer for Good Reason (as defined in the agreements), the Company will pay a lump sum amount equal to the officer’s then base salary, plus apro-rata portion of the officer’s then target bonus amount to each of Mr. Milstead, Mr. Hawk or Mr. Downing. Additionally, if the officer elects to continue health insurance coverage under COBRA, the Company will pay the amount of his monthly premium until the earlier of 12 months after the termination date or the date he commences receiving substantially equivalent coverage in connection with new employment.
In the event that the officer’s employment is terminated by the Company without cause or by the officer for Good Reason, and such termination occurs immediately prior to a change in control or within 24 months following the change in control, then the officer will immediately fully vest in all of his outstanding equity awards. Additionally, the Company will pay the officer a lump sum amount equal to the officer’s then base salary, plus the officer’s then target bonus amount, plus the amount of health insurance coverage under COBRA as described earlier.
The severance benefits will be subject to the officer entering into (and not subsequently revoking) a separation agreement and release of claims, and agreeing to certainnon-compete,non-solicitation andnon-disparagement provisions that would be in effect for 12 months following his termination date.
27
The following table provides information regarding the amounts that would have been owed to our current named executive officers if their employment with the Company had been terminated as of December 29, 2017, the last business day of our fiscal year ended December 30, 2017.
| | | | | | | | | | | | | | | | | | | | | | | Name | | Basis of Termination | | Accrued
Unpaid
Salary
($) | | | Unreimbursed
Business
Expenses
($) | | | Severance
Payment
($) | | | Continuation
of Insurance
Benefit
($) | | | Accelerated
Vesting of
Stock
Options
and
Restricted
Stock Units
($) | | Downing, Maxwell J. Corporate VP & CFO | | Voluntary Termination | | | 10,577 | | | | 3,605 | | | | 0 | | | | 0 | | | | 0 | | | | Terminated without Cause or Termination by Employee with Good Reason | | | 10,577 | | | | 3,605 | | | | 0 | (1) | | | | | | | 0 | | | | Within 24 months after Change in Control, Terminated without Cause or Termination by Employee with Good Reason | | | 10,577 | | | | 3,605 | | | | 412,500 | (2) | | | 25,378 | | | $ | 273,249 | (3) | | | | | | | | Hawk, Glen Corporate VP & COO(4) | | Voluntary Termination | | | 13,846 | | | | 123 | | | | 0 | | | | 0 | | | | 0 | | | | Terminated without Cause or Termination by Employee with Good Reason | | | 13,846 | | | | 123 | | | | 630,000 | (1) | | | 18,054 | | | | | | | | Within 24 months after Change in Control, Terminated without Cause or Termination by Employee with Good Reason | | | 13,846 | | | | 123 | | | | 630,000 | (2) | | | 18,054 | | | $ | 427,078 | (3) | | | | | | | | Milstead, Byron W. Corporate VP & General Counsel | | Voluntary Termination | | | 1,223 | | | | 3,878 | | | | 0 | | | | 0 | | | | 0 | | | | Terminated without Cause or Termination by Employee with Good Reason | | | 1,223 | | | | 3,878 | | | | 524,700 | (1) | | | 23,414 | | | | 0 | | | | Within 24 months after Change in Control, Terminated without Cause or Termination by Employee with Good Reason | | | 1,223 | | | | 3,878 | | | | 524,700 | (2) | | | 23,414 | | | $ | 318,160 | (3) |
(1) | This amount | | | | | | | | | Named Executive Officer | | PRSU Award
Grant Date | | Target Number
of Shares in
Second Tranche
of PRSU Award | | Percentage of
Shares Earned
in Second
Tranche of
PRSU Award | | Actual Number
of Shares in
Second Tranche
of PRSU Award
Earned | | | | | | | Mr. Anderson | | September 4,
2018 | | 72,591 | | 250% | | 181,478 | | | | | | | Mr. Douglass | | September 4,
2018 | | 30,769 | | 200% | | 61,538 | | | | | | | Mr. Elashmawi | | September 24,
2018 | | 33,887 | | 200% | | 67,774 |
Fiscal 2018 EBITDA-Based PRSU Award In September 2018, Mr. Anderson received a PRSU award that may be settled for shares of our common stock in connection with joining the Company as our President and CEO. This PRSU award was to vest between 0% and 250% of the target number of shares and become payable based upon us generating specified “adjusted” EBITDA levels on a trailing four quarter basis in any two consecutive trailing four quarter periods prior to the end of September 2022. In May 2020, the Compensation Committee determined that we had achieved the pre-established “adjusted” EBITDA level for the trailing four quarter measurement period ending March 31, 2020 and, therefore, that 64,547 PRSUs had vested for that measurement period. In July and October 2020, respectively, the Compensation Committee determined that we had not achieved the pre-established “adjusted” EBITDA level for the trailing four quarter measurement periods ending June 30, 2020 and September 30, 2020, respectively, and, therefore, that no PRSUs had vested for that measurement period. Fiscal 2019 TSR-Based PRSU Awards In January 2019, Ms. Luther and Mr. Nelson each received a PRSU award in connection with joining the Company as our Corporate Vice President and Chief Financial Officer and our Corporate Vice President, Worldwide Sales, respectively. In addition, our Named Executive Officers received PRSU awards in August 2019 as part of our annual equity grant program. Each of these PRSU awards was divided into three equal tranches, with each tranche eligible to vest based upon our TSR relative to the SOX Index during a one-year performance period, as follows: none of the PRSUs vesting if our TSR is equal to 1.0 times the executive officer’s base salary plus 1.0 times the executive officer’s target cash award (without any pro rata reduction due to the month of the hypothetical termination because the plan year had been completed) under the 2017 Cash Incentive Plan. |
(2) | This amount is equal to 1.0 times the executive officer’s base salary plus 1.0 times the executive officer’s target cash award (without any pro rata reduction) under the 2017 Cash Incentive Plan. |
(3) | These amounts represent the aggregate value of thein-the-money stock options that would have become exercisable and RSUs that would have vested as a result of acceleration of vesting provided for in each executive officer’s employment agreement if, within 24 months following a change in control, the Company had terminated the executive officer without cause or if the executive officer had terminated his employment with Good Reason on December 29, 2017, the last business day of our fiscal year ended December 30, 2017. The closing price of our common stock on December 29, 2017 was $5.78. |
(4) | Mr. Hawk was appointed as Interim Chief Executive Officer effective March 16, 2018. |
CEO Pay Ratio
As required by the Dodd-Frank Act, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. Darin G. Billerbeck, our Chief Executive Officer (our “CEO”).
For 2017, our last completed fiscal year:
The median of the annual total compensation of all employees of our company (other than our CEO), was $71,439.
The annual total compensation of our CEO was $3,712,153.
For 2017, based on this information, the annual total compensation of Mr. Billerbeck, our Chief Executive Officer and President, was 52.0 times that of the median of the annual total compensation of all employees.
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To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of the “median employee,” we used the following methodology:
We determined that, as of December 30, 2017, our employee population consisted of approximately 845 individuals working at our parent company and consolidated subsidiaries, with 39.4% of these individuals located in the United States and 60.6% located in various countries.
To identify the “median employee” from our employee population, we selected simplified total compensation, measured using our internal payroll and accounting records for 2017, as the most appropriate measure of compensation. Simplified total compensation consists of the sum of the three major pay elements received by all employees in 2017:
Salary or base pay paid during 2017,
Cash bonus, which consists of all cash bonus payments paid during 2017, and
Equity compensation, which consists of the grant date fair value of equity compensation awards granted during 2017 calculated according to ASC Topic 718, excluding any estimated forfeitures.
Using this methodology, we determined that the “median employee” was a full-time, salaried employee located in the US, with a simplified total compensation for 2017 in the amount of $70,290.
We identified and calculated the elements of the annual total compensation of the median employee for 2017 in accordance with the requirements of Item 402(c)(2)(x) of RegulationS-K, resulting in annual total compensation of $71,439. The difference between such employee’s simplified total compensationand the employee’s annual total compensation represents additional compensation in the form of cash payment forpeer-to-peer bonus awards and the amount of group term life insurance premiums paid by the Company.
We used the amount reported in the “Total” column (column (j)) of our 2017 Summary Compensation Table included in this Proxy Statement for the annual total compensation of our CEO.
29
DIRECTOR COMPENSATION
2017 Director Compensation Table
The following table sets forth information concerning compensation of ournon-employee directors for the fiscal year ended December 30, 2017.
| | | | | | | | | | | | | Name | | Fees Earned
in Cash
($) | | | Stock
Awards
($)(9) | | | Total
($) | | Bourgoin, John | | | 85,000 | (1) | | | 119,999 | | | | 204,999 | | Abrams, Robin A. | | | 70,000 | (2) | | | 119,999 | | | | 189,999 | | Beattie, Brian M. | | | 55,000 | (3) | | | 119,999 | | | | 174,999 | | Herb, Robert R. | | | 75,000 | (4) | | | 119,999 | | | | 194,999 | | Jensen, Mark E. | | | 75,000 | (5) | | | 119,999 | | | | 194,999 | | Richardson, D. Jeffrey | | | 60,000 | (6) | | | 119,999 | | | | 179,999 | | Weber, Frederick D. | | | 55,000 | (7) | | | 119,999 | | | | 174,999 | |
(1) | Includes a $30,000 retainer for serving as chairman of the board, a $45,000 retainer for serving as a member of the board of directors and a $10,000 retainer for serving as a member of the compensation committee. |
(2) | Includes a $10,000 retainer for serving as an observer of the audit committee, a $15,000 retainer for serving as chair of the nominating and governance committee, and a $45,000 retainer for serving as a member of the board of directors. |
(3) | Includes a $10,000 retainer for serving as a member of the audit committee and a $45,000 retainer for serving as a member of the board of directors. |
(4) | Includes a $15,000 retainer for serving as the chair of the compensation committee, a $10,000 retainer for serving as a member of the strategic alternatives committee, a $5,000 retainer for serving as a member of the nominating and governance committee, and a $45,000 retainer for serving as a member of the board of directors. |
(5) | Includes a $20,000 retainer for serving as the chair of the audit committee, a $10,000 retainer for serving as a member of the strategic alternatives committee, and a $45,000 retainer for serving as a member of the board of directors. |
(6) | Includes a $10,000 retainer for serving as a member of the audit committee, a $5,000 retainer for serving as a member of the nominating and governance committee, and a $45,000 retainer for serving as a member of the board of directors. |
(7) | Includes a $10,000 retainer for serving as a member of the compensation committee and a $45,000 retainer for serving as a member of the board of directors. |
(8) | The amounts provided in this column represent the full grant date fair value of the restricted stock unit awards (Messrs. Bourgoin, Beattie, Herb, Jensen, Richardson, Weber and Ms. Abrams) granted pursuant to our 2011Non-Employee Director Equity Incentive Plan to each director and former director in the fiscal year ended December 30, 2017, determined in accordance with ASC 718, excluding the effect of any estimated forfeitures. The aggregate number of unvested RSU awards outstanding under our 2001 Outside Directors’ Stock Option Plan or our 2011Non-Employee Director Equity Incentive Plan for each director as of the Company’s fiscal year end, December 30, 2017, is as follows: Ms. Abrams 17,291, Mr. Beattie 17,291, Mr. Bourgoin 17,291, Mr. Herb 17,291, Mr. Jensen 17,291, Mr. Richardson 17,291 and Weber 17,291. In prior years, directors received stock options under our 2001 Outside Directors’ Stock Option Plan or our 2011Non-Employee Director Equity Incentive Plan. The aggregate number of option awards outstanding for each director as of the Company’s fiscal year end, December 30, 2017, is as follows: Ms. Abrams 90,000, Mr. Bourgoin 90,000, Mr. Beattie 68,744, Mr. Herb 90,000, Mr. Jensen 90,000, Mr. Richardson 53,918, and Mr. Weber 60,639. |
at or below the 25th percentile, 100% of the target number of PRSUs vesting if our TSR is at the 50th percentile, and 200% (or, in the case of our CEO, 250%) of the target number of PRSUs vesting if our TSR is at the 75th percentile. The performance periods for the first, second and third tranches of each of these PRSU awards covered the first, second and third anniversaries of the award’s grant date, respectively. In February 2020, we amended these PRSU awards to provide that for each performance period that had not yet ended, the beginning of such performance period would be changed to the grant date. These amendments were made for the same reasons discussed above with respect to the September 2018 PRSU awards. In January 2020, August 2020 and January 2021, respectively, Mr. Bourgoin, in his capacity as chair of the Compensation Committee and pursuant to a delegation of authority by the Compensation Committee, determined the level of achievement with respect to the first and second tranche of these 2019 PRSU awards. Mr. Bourgoin determined that our TSR ranked above the 75th percentile and, therefore, that the following percentage of the target number of PRSUs covered by the first and second tranche of the awards had vested: (i) 250% for our CEO and (ii) 200% for each of the other Named Executive Officers. Accordingly, the following number of PRSUs vested with respect to the first and second tranche of these PRSU awards: | | | | | | | | | Named Executive
Officer | | PRSU Award
Grant Date | | Target Number
of Shares in First
Tranche of PRSU
Award | | Percentage of
Shares Earned in
First Tranche of
PRSU Award | | Actual Number
of Shares in First
Tranche of PRSU
Award Earned | | | | | | | Mr. Anderson | | August 2, 2019 | | 37,559 | | 250% | | 93,898 | | | | | | | Ms. Luther | | January 2, 2019 (First Tranche) | | 35,728 | | 200% | | 71,456 | | | | | | | | | | January 2, 2019 (Second Tranche) | | 35,728 | | 200% | | 71,456 | | | | | | | | | | August 2, 2019 | | 10,015 | | 200% | | 20,030 | | | | | | | Mr. Douglass | | August 2, 2019 | | 12,018 | | 200% | | 24,036 | | | | | | | Mr. Elashmawi | | August 2, 2019 | | 11,017 | | 200% | | 22,034 | | | | | | | Mr. Nelson | | January 8, 2019 | | 55,391 | | 200% | | 110,782 | | | | | | | | | | August 2, 2019 | | 10,015 | | 200% | | 20,030 |
The equity awards granted to our Named Executive Officers during fiscal 2020 are set forth in the “2020 Summary Compensation Table” and the “2020 Grants of Plan-Based Awards Table” below. Health and Welfare Benefits Our Named Executive Officers are eligible to participate in the same employee benefit plans, and on the same terms and conditions, as all other full-time, salaried U.S. employees. These benefits include medical, dental and vision insurance, business travel insurance, an employee assistance program, health and dependent care flexible spending accounts, basic life insurance, accidental death and dismemberment insurance, short-term and long-term disability insurance and commuter benefits. We also maintain a tax-qualified Section 401(k) retirement savings plan (the “Section 401(k) Plan”) that provides eligible employees, including our Named Executive Officers, with an opportunity to save for retirement on a tax-advantaged basis. Participants may make pre-tax contributions to the Section 401(k) Plan from their eligible earnings up to the statutorily prescribed annual limit on pre-tax contributions under the Code. An employee’s interest in his or her pre-tax deferrals is 100% vested when contributed. Currently, we match 100% of the first 3% of a participant’s contributions and 50% of the next 3% of the participant’s contributions to the Section 401(k) Plan, subject to an applicable annual statutory maximum per employee. We design our employee benefits programs to be affordable and competitive in relation to the market as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market. Perquisites and Other Personal Benefits Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide significant perquisites or other personal benefits to our Named Executive Officers, except as generally made available to all our employees, or in situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make an individual more efficient and effective, and for recruitment and retention purposes. During fiscal 2020, none of our Named Executive Officers received perquisites or other personal benefits that were, in the aggregate, $10,000 or more for each individual. In the future, we may provide perquisites or other personal benefits in limited circumstances, such as those described in the preceding paragraph. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the Compensation Committee. Employment Agreements In October 2019, the Compensation Committee, with the assistance of Compensia, began reviewing the employment agreements with our Named Executive Officers in order to update these agreements for market practices, to ensure the Named Executive Officers’ ability to execute effectively, to provide for the best interests of the Company and the retention of our Named Executive Officers, and to achieve consistence among all similar officers. In fiscal 2020, the Compensation Committee approved, and we entered into, an amended employment agreement for each of our Named Executive Officers. Each of these employment agreements provides for “at will” employment (meaning that either we or the Named Executive Officer may terminate the employment relationship at any time without cause) and sets forth the initial compensation arrangements for the Named Executive Officer, including an initial base salary and participation in our employee benefit programs. In addition, these employment agreements provide that our Named Executive Officers will be eligible to receive certain severance payments and benefits in connection with certain involuntary terminations of employment, including in connection with a change in control of the Company. These post-employment compensation arrangements are discussed in “Post-Employment Compensation” below. For detailed descriptions of the employment agreements we maintained with our Named Executive Officers during fiscal 2020, see “Potential Payments upon Termination or Change in Control” below. Post-Employment Compensation The employment agreements of our Named Executive Officers contain certain protections in the event of their involuntary termination of employment under specified circumstances, including following a change in control of the Company. These arrangements provide reasonable compensation to the Named Executive Officer if he leaves our employ under certain circumstances to facilitate his transition to new employment. Further, in some instances we seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring a departing Named Executive Officer to sign a separation and release agreement acceptable to us as a condition to receiving post-employment compensation payments or benefits. We also believe that these arrangements help maintain their continued focus and dedication to their assigned duties to maximize stockholder value if there is a potential transaction that could involve a change in control of the Company. In determining payment and benefit levels under the various circumstances triggering post-employment compensation provisions under the employment agreements of our Named Executive Officers, the Compensation Committee has drawn a distinction between (i) voluntary terminations of employment without good reason or terminations of employment for cause and (ii) terminations of employment without cause or voluntary terminations of employment for good reason. Payment in the latter circumstances has been deemed appropriate in light of the benefits described in the prior paragraphs, as well as the likelihood that the Named Executive Officer’s departure is due, at least in part, to circumstances not within his or her control. In contrast, we believe that payments are not appropriate in the event of a termination of employment for cause or a voluntary resignation without good reason because such events often reflect either performance challenges or an affirmative decision by the executive to end his or her relationship without fault by the Company. Under Mr. Anderson’s employment agreement, in the event of a change in control, his equity awards that are subject to performance-based vesting relating to EBITDA by reason of a determination/testing date falling after the date of the change in control will vest immediately at the target amount of the grant. All other payments and benefits that may be provided under a Named Executive Officer’s employment agreement in connection with a change in control of the Company are payable only if there is a subsequent loss of employment by the Named Executive Officer (a so-called “double-trigger” arrangement). In the case of the acceleration of vesting of outstanding equity awards, we use this double-trigger arrangement instead of a single-trigger arrangement (where the vesting acceleration would apply upon the change in control) to protect against the loss of retention value following a change in control of the Company and to avoid windfalls, both of which could occur if vesting of either equity or cash-based awards accelerated automatically as a result of the transaction. In the event of a change in control of the Company, to the extent Section 280G or 4999 of the Code is applicable to a Named Executive Officer, such individual is entitled to receive either payment of the full amounts to which he or she is entitled or payment of such lesser amount that does not trigger the excise tax imposed by Section 4999, whichever results in him or her receiving the greatest after-tax amount. We do not use excise tax payments (or “gross-ups”) relating to a change in control of the Company and have no such obligations in place with respect to any of our Named Executive Officers. We believe that having in place reasonable and competitive post-employment compensation arrangements in the event of a change in control of the Company are essential to attracting and retaining highly qualified executives. The Compensation Committee does not consider the specific amounts payable under the post-employment compensation arrangements when determining the annual compensation for our Named Executive Officers. We do believe, however, that these arrangements are necessary to offer compensation packages that are competitive. For a summary of the material terms and conditions of the post-employment compensation arrangements we maintained with our Named Executive Officers during fiscal 2020, as well as an estimate of the potential payments and benefits that they would have been eligible to receive if a hypothetical change in control or other trigger event had occurred on December 31, 2020, see “Potential Payments Upon Termination or Change in Control” below. Other Compensation Policies Stock Ownership Policy Our Corporate Governance Policies include a requirement that our CEO hold a specific beneficial ownership position in our common stock that is expressed as a dollar value calculated based on a specific multiple of base salary. In May 2020, the Compensation Committee amended our Corporate Governance Policies to extent a stock ownership requirement based on a multiple of base salary to our other executive officers. Pursuant to our policy, our CEO must maintain ownership of shares of our common stock equal in value to three times his base salary, while our executive officers must maintain ownership of shares of our common stock equal in value to two times their base salary. For purposes of our policy, stock ownership includes all shares of our common stock owned outright by our CEO or an executive officer or held in trust for them or immediate family members but does not include any unvested or unexercised equity compensation awards. Our CEO has five years from the date of initial appointment to this position to attain this ownership level, while each of our executive officers has five years from the later of (i) the date the Section 16 Officer commences employment with us or (ii) the date of the amendment of our Corporate Governance Policies to attain their required ownership level. In addition, in May2020, the Compensation Committee also amended our Corporate Governance Policies to increase the stock ownership requirement for the non-employee members of our Board of Directors. As amended, the non-employee members of our Board Directors must maintain ownership of our common stock equal in value to five times his or her annual cash retainer for Board service (not inclusive of chair or committee retainers). Previously, the ownership requirement for our non-employee directors was common stock with a value equal to three time his or her annual cash retainer for Board service. The existing non-employee members of our Board of Directors have three years from the date of the amendment to come into compliance with the amended ownership level. As before, new non-employee directors will have five years from the date of initial election to our Board of Directors to come into compliance with the new ownership level. Compliance is tested annually at our Annual Meeting of Stockholders. Any non-employee director who fails to meet the ownership requirement as of the applicable testing date is prohibited from any trading of their Company-granted shares of common stock until he or she comes into compliance. They have three years to come into compliance. Compliance is tested annually at the time of the company’s annual meeting. Hedging and Pledging Prohibitions Our Insider Trading Policy prohibits our employees (including our officers), the non-employee members of our Board of Directors and certain agents from engaging in short sales of our securities, transactions in publicly-traded options (such as puts and calls) or other derivative securities with respect to our securities, entering into hedging transactions, pledging our securities as collateral for loans and holding our securities in margin accounts. In addition, our Insider Trading Policy prohibits these individuals from trading our securities while in possession of material nonpublic information and trading the securities of our customers, suppliers, competitors, potential acquisitions or partners while in possession of material nonpublic information. Incentive Compensation Recovery Policy Under our Corporate Governance Policies, we will seek to recover, at the direction of the Compensation Committee after it has considered the costs and benefits of doing so, and to the extent permitted by applicable law, incentive compensation awarded or paid to an executive officer for a fiscal period if the result of a performance measure upon which the award was based or paid is subsequently restated or otherwise adjusted in a manner that would reduce the size of the award or payment. Where the result of a performance measure was considered in determining the compensation awarded or paid, but the incentive compensation was not awarded or paid based on a formula, the Compensation Committee will determine in its discretion the amount, if any, by which the payment or award should be reduced. In addition, if an executive officer engaged in intentional misconduct that contributed to the award or payment to such executive officer of a greater amount of incentive compensation than would have been paid or awarded in the absence of the misconduct, we may take other remedial and recovery action, as determined by the Compensation Committee in its discretion. Tax and Accounting Considerations Deduction Limitation Section 162(m) of the Code generally limits the amount we may deduct from our federal income taxes for compensation paid to our CEO and certain other current and former executive officers that are “covered employees” within the meaning of Section 162(m) to $1 million per individual per year, subject to certain exceptions. To maintain flexibility to compensate our executive officers in a manner designed to promote our short-term and long-term corporate goals and objectives, the Compensation Committee has not adopted a policy that all compensation must be deductible. The Compensation Committee believes it is important to maintain cash and equity incentive compensation at an appropriate level to attract and retain the individuals essential to our financial success, even if all or part of that compensation may not be deductible by reason of the Section 162(m) limit. Accordingly, we expect to pay compensation to our executive officers that may not be fully deductible when, for example, we believe such compensation is appropriate and in the best interests of our stockholders, after taking into consideration changing business conditions and/or the executive officer’s performance. Accounting for Stock-Based Compensation We follow FASB ASC Topic 718, Compensation - Stock Compensation, for our stock-based compensation awards. FASB ASC Topic 718 requires us to measure the compensation expense for all share-based payments made to our employees and the members of our Board of directors, including options to purchase shares of our common stock and other stock-based awards, based on the grant date “fair value” of these awards. This calculation is performed for financial accounting purposes and reported in the compensation tables below, even though recipients may never realize any value from their awards. FASB ASC Topic 718 also requires us to recognize the compensation cost of our share-based compensation awards in our income statements over the period that a recipient is required to render services in exchange for the option or other award. 30
Narrative Discussion to 2017 Director Compensation Table
RSU and option grants were awarded in 2017 to ournon-employee directors under the Company’s 2011Non-Employee Director Equity Incentive Plan. Outside directors receive an initial grant of stock options valued at $150,000 on the date of the director’s election or appointment to the board of directors. The first grant becomes exercisable in installments cumulatively with respect to 1/3 of the optioned stock on each of the first three anniversaries of the grant date thereafter, so that 100% of the optioned stock shall be exercisable on the third anniversary of the date of grant, provided that the director continues to serve as a director on such dates. The options have a term of ten years. Directors also automatically receive an RSU award at the board of directors meeting following each annual meeting of stockholders for a number of shares of common stock determined by dividing $120,000 by the fair market value of a share of the common stock on the grant date, which grants shall vest and become payable with respect to 100% of the RSUs on the first anniversary of the grant date, provided that the director continues to serve as a director on such dates. In the event of a change in control, unvested RSUs and options held by ournon-employee directors generally become vested and exercisable or payable in full effective immediately prior to the change in control.
The Company compensates itsnon-employee directors by paying an annual retainer for service on the board of directors and its standing committees. Each director receives a cash retainer of $45,000 per year for service on the Board, the chairperson of the board of directors receives an annual retainer of $30,000, and the chairpersons of the audit, compensation, nominating and governance committees receive annual retainers of $20,000, $15,000 and $15,000, respectively. Committee members receive annual retainers of $10,000 for the audit, compensation and strategic alternatives committees, and $5,000 for the nominating and governance committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of our compensation committee during 2017 were Mr. Bourgoin, Mr. Herb, and Mr. Weber. None of the members of the committee was or is one of our officers or employees, nor has any member of the committee had any relationship requiring disclosure under Item 404 of RegulationS-K under the Securities Exchange Act of 1934. None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee.
COMPENSATION COMMITTEE REPORT We have reviewed and discussed with management the Compensation Discussion and Analysis to be included in this proxy statementProxy Statement filed pursuant to Section 14(a) of the Exchange Act. Based on the reviews and discussions referred to above, we recommended to the board of directors that the Compensation Discussion and Analysis referred to above be included in the Company’s Annual Report on Form10-Kfor the fiscal year ended December 30, 2017January 2, 2021 and this proxy statementProxy Statement for the 2018 annual meeting of stockholders.Annual Meeting. Compensation Committee Robert R. Herb, Chairman
John Bourgoin,Chair Frederick D. WeberJames P. Lederer
Krishna Rangasayee 31Anjali Joshi
2020 Summary Compensation Table | | | | | | | | | | | | | | | | | Name and Principal
Position | | Year | | Salary ($) | | Bonus ($) | | Stock
Awards ($)(1) | | Option
Awards ($)(1) | | Non-Equity
Incentive Plan
Compensation ($) | | All Other
Compensation
($)(2) | | Total
($) | Anderson, James R, President and CEO(3) | | 2020 | | 598,077 | | — | | 6,155,336 | | — | | 459,323 | | 13,815 | | 7,226,551 | | | 2019 | | 550,000 | | — | | 5,686,809 | | — | | 200,591 | | 2,990 | | 6,440,390 | | | 2018 | | 177,692 | | 400,000 | | 7,585,107 | | 1,700,114 | | 136,419 | | 2,723 | | 10,002,055 | Luther, Sherri, CFO(4) | | 2020 | | 377,509 | | — | | 1,770,952 | | — | | 188,453 | | 15,663 | | 2,352,577 | | | 2019 | | 342,346 | | 200,000 | | 3,277,718 | | — | | 78,012 | | 4,460 | | 3,902,536 | Douglass, Stephen M, CVP R&D | | 2020 | | 351,421 | | — | | 1,770,952 | | — | | 175,429 | | 16,730 | | 2,314,533 | | | 2019 | | 330,000 | | — | | 1,614,102 | | — | | 78,230 | | 6,913 | | 2,029,245 | | | 2018 | | 106,615 | | — | | 1,840,182 | | — | | 53,203 | | 2,873 | | 2,002,873 | Elashmawi, Esam, Chief Marketing & Strategy Officer | | 2020 | | 375,023 | | — | | 1,770,952 | | — | | 187,212 | | 13,412 | | 2,346,599 | | | 2019 | | 360,000 | | — | | 1,479,583 | | — | | 85,342 | | 5,084 | | 1,930,009 | | | 2018 | | 96,923 | | — | | 1,782,471 | | — | | 47,798 | | 2,228 | | 1,929,420 | Nelson, Mark, CVP Worldwide Sales(5) | | 2020 | | 416,692 | | — | | 1,770,952 | | — | | 208,013 | | 15,663 | | 2,411,320 | | | 2019 | | 390,770 | | 400,000 | | 4,399,528 | | — | | 88,989 | | 4,460 | | 5,283,747 |
(1) This amount represents the aggregate grant date fair value computed in accordance with the requirements of FASB ASC Topic 718. Amounts shown do not reflect compensation received by the named executive officer. The assumptions used to calculate the value of the awards granted in fiscal 2020 are set forth in Note 10 in the Notes to Consolidated Financial Statements in the Annual Report, and for prior years in the corresponding note in that year’s Annual Report on Form 10-K. (2) Additional information regarding the amounts provided in this column for fiscal 2020 is provided in the 2020 All Other Compensation Table that follows this table. (3) Mr. Anderson joined the Company as President and Chief Executive Officer effective September 4, 2018. (4) Ms. Luther became Chief Financial Officer effective January 2, 2019. (5) Mr. Nelson joined the Company as CVP Worldwide Sales effective January 8, 2019. 2020 All Other Compensation Table | | | | | | | | | | Name | | Supplemental Life
Insurance/Disability
Premiums
($) | | Additional Group Life
Insurance Premiums | | Other
($)(1) | | Total
($) | | | | | | | James R. Anderson President & CEO | | — | | 990 | | 12,825 | | 13,815 | | | | | | | Sherri Luther CFO | | — | | 2,838 | | 12,825 | | 15,663 | | | | | | | Stephen Douglass CVP R&D | | 1,068 | | 2,838 | | 12,825 | | 16,731 | | | | | | | Esam Elashmawi Chief Marketing & Strategy Officer | | 613 | | 1,518 | | 11,281 | | 13,412 | | | | | | | Mark Nelson CVP Worldwide Sales | | — | | 2,838 | | 12,825 | | 15,663 |
(1) Consists of employer contribution to 401(k) plan. 2020 Grants of Plan-Based Awards Table | | | | | | | | | | | | | | | | | | | | | | Name | | Grant
Date | | Estimated Future
Payouts Under
Non-Equity Incentive Plan
Awards | | Estimated Future
Payouts Under Equity
Incentive Plan Awards | | All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units (#) | | Exercise or
Base Price
of Option
Awards
($/Sh) | | Grant Date
Fair Value
of Stock
and
Option
Awards(1) | | | | Thresh- old ($) | | Target ($) | | Maxi- mum ($) | | Thres- hold (#) | | Target
(#) | | Maxi- mum (#) | | | | | | | | | | | | | James R. Anderson President & CEO | | | | — | | 598,077 | | 1,196,154 | | — | | — | | — | | — | | — | | | | | 2/14/2020 | | — | | — | | — | | — | | — | | — | | 90,989 | | — | | 1,889,842 | | | 2/14/2020 | | — | | — | | — | | — | | 58,232 | | 145,580 | | — | | — | | 2,066,654 | | | 2/14/2020 | | — | | — | | — | | — | | 58,232 | | 145,580 | | — | | — | | 2,198,840 | | | | | | | | | | | | | Sherri Luther CFO | | | | — | | 245,381 | | 490,762 | | — | | — | | — | | — | | — | | | | | 2/14/2020 | | — | | — | | — | | — | | — | | — | | 29,116 | | — | | 604,739 | | | 2/14/2020 | | — | | — | | — | | — | | 19,411 | | 38,822 | | — | | — | | 566,607 | | | 2/14/2020 | | — | | — | | — | | — | | 19,411 | | 38,822 | | — | | — | | 599,606 | | | | | | | | | | | | | Stephen Douglass CVP R&D | | | | — | | 228,424 | | 456,847 | | — | | — | | — | | — | | — | | | | | 2/14/2020 | | — | | — | | — | | — | | — | | — | | 29,116 | | — | | 604,739 | | | 2/14/2020 | | — | | — | | — | | — | | 19,411 | | 38,822 | | — | | — | | 566,607 | | | 2/14/2020 | | — | | — | | — | | — | | 19,411 | | 38,822 | | — | | — | | 599,606 | | | | | | | | | | | | | Esam Elashmawi Chief Marketing & Strategy Officer | | | | — | | 243,765 | | 487,530 | | — | | — | | — | | — | | — | | | | | 2/14/2020 | | — | | — | | — | | — | | — | | — | | 29,116 | | — | | 604,739 | | | 2/14/2020 | | — | | — | | — | | — | | 19,411 | | 38,822 | | — | | — | | 566,607 | | | 2/14/2020 | | — | | — | | — | | — | | 19,411 | | 38,822 | | — | | — | | 599,606 | | | | | | | | | | | | | Mark Nelson CVP Worldwide Sales | | | | — | | 270,850 | | 541,700 | | — | | — | | — | | — | | — | | | | | 2/14/2020 | | — | | — | | — | | — | | — | | — | | 29,116 | | — | | 604,739 | | | 2/14/2020 | | — | | — | | — | | — | | 19,411 | | 38,822 | | — | | — | | 566,607 | | | 2/14/2020 | | — | | — | | — | | — | | 19,411 | | 38,822 | | — | | — | | 599,606 |
(1) Fair value as of the grant date was determined in accordance with ASC 718. The assumptions used to calculate the value of the awards are set forth in Note 10 in the Notes to Consolidated Financial Statements in our Annual Report. Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table Amounts in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table for fiscal years 2018, 2019 and 2020 represent payments of awards under our Cash Incentive Plan for each of those years. Each named executive officer’s potential award was based on a specified percentage of his or her annual base salary and the potential award increases when and if a named executive officer’s annual base salary increases. Payments under our Cash Incentive Plan are made annually based on the achievement of the goals applicable to the year. Please see the section “Compensation Discussion and Analysis” above for more information about our Cash Incentive Plan for fiscal 2020. Amounts in the Bonus column of the Summary Compensation Table represent any signing bonus in connection with the executive transition, and service bonuses paid to the executive officers under a broad-based employment policy and discretionary bonuses approved by the compensation committee. Other elements of executive compensation include participation in a broad-based life and disability insurance program, broad-based medical benefits, and the ability to defer compensation pursuant to a broad-based 401(k) plan that provided matching contributions in fiscal 2020. The Company does not maintain a pension plan or any other defined benefit retirement plans. The Company provides certain supplemental life and disability insurance coverage to executive officers and certain other members of senior management. Because the Company negotiates these insurance arrangements on a bulk basis, such insurance coverage, whether issued on a group basis or individually underwritten, is obtained by the Company at rates that are likely to be better than those obtainable by individuals seeking comparable insurance coverage on their own. The premiums paid by the Company for such supplemental insurance are considered a taxable benefit to the employee. The principal equity components of executive compensation historically have consisted of stock options and time-based RSUs. Stock options provide a means of retention and motivation for our executives and also align their interests with long-term stock price appreciation. Time-based RSUs help us retain our executives by ensuring that they receive some value from their equity awards since the RSUs will never be out of the money. Commencing in fiscal 2018, awards of PRSUs became a principal component of executive compensation. These grants are intended to align the interests of our executives with those of our stockholders and we intend to continue our increased focus on this alignment. All stock option grants have a per share exercise price equal to the fair market value of our stock on the date of grant and a seven-year term. The Company has not granted, nor does it intend in the future to grant, equity-based compensation awards (stock options, time-based RSUs and/or PRSUs) to executives in anticipation of the release of material nonpublic information that is likely to result in changes to the price of our stock, such as a significant positive or negative earnings announcement. Similarly, the Company has not timed, nor does it intend in the future to time, the release of material nonpublic information based on equity award grant dates. 2020 Outstanding Equity Awards at Fiscal Year-End Table | | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | | Name | | Number of Securities
Underlying
Unexercised
Options Exercisable
(#) | | Number of Securities
Underlying
Unexercised
Options Unexercis- able (#) | | Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) | | Option
Exercise
Price ($) | | Option
Expiration
Date | | Number of
Shares or
Units of
Stock That
Have Not
Vested (#) | | Market
Value of
Shares or
Units of
Stock
That Have
Not
Vested ($)(**) | | Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That Have
Not Vested (#) | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested ($) | | | | | | | | | | | | James R. Anderson President & CEO | | 430,054(1) | | 144,309 | | | | $8.24 | | 9/4/2025 | | | | | | | | | | | | | | | | | | | | | 94,155(2) | | 4,314,182 | | | | | | | | | | | | | | | | | | | | | 72,590(3) | | 3,326,074 | | | | | | | | | | | | | | | | | 124,609(4) | | 5,709,584 | | | | | | | | | | | | | 77,465(5) | | 3,549,446 | | | | | | | | | | | | | | | | | | | | | 75,118(6) | | 3,441,907 | | | | | | | | | | | | | 90,989(7) | | 4,169,116 | | | | | | | | | | | | | | | | | | | | | 116,464(8) | | 5,336,380 | | | | | | | | | | | | Sherri Luther CFO | | | | | | | | | | | | 70,590(9) | | 3,234,434 | | | | | | | | | | | | | | | | | | | | | 35,727(10) | | 1,637,011 | | | | | | | | | | | | | 20,658(11) | | 946,550 | | | | | | | | | | | | | | | | | | | | | 20,032(12) | | 917,866 | | | | | | | | | | | | | 29,116(13) | | 1,334,095 | | | | | | | | | | | | | | | | | | | | | 38,822(14) | | 1,778,824 | | | | | | | | | | | | Stephen Douglass CVP R&D | | | | | | | | | | | | 56,535(15) | | 2,590,434 | | | | | | | | | | | | | | | | | | | | | 30,769(16) | | 1,409,836 | | | | | | | | | | | | | 24,789(17) | | 1,135,832 | | | | | | | | | | | | | | | | | | | | | 24,038(18) | | 1,101,421 | | | | | | | | | | | | | 29,116(19) | | 1,334,095 | | | | | | | | | | | | | | | | | | | | | 38,822(20) | | 1,778,824 | | | | | | | | | | | | Esam Elashmawi Chief Marketing & Strategy Officer | | | | | | | | | | | | 56,219(21) | | 2,575,955 | | | | | | | | | | | | | | | | | | | | | 33,886(22) | | 1,552,657 | | | | | | | | | | | | | 22,723(23) | | 1,041,168 | | | | | | | | | | | | | | | | | | | | | 22,034(24) | | 1,009,598 | | | | | | | | | | | | | 29,116(25) | | 1,334,095 | | | | | | | | | | | | | | | | | | | | | 38,822(26) | | 1,778,824 | | | | | | | | | | | | Mark Nelson CVP Worldwide Sales | | | | | | | | | | | | 124,731(27) | | 5,715,174 | | | | | | | | | | | | | | | | | | | | | 110,783(28) | | 5,076,077 | | | | | | | | | | | | | 20,658(29) | | 946,550 | | | | | | | | | | | | | | | | | | | | | 20,032(30) | | 917,866 | | | | | | | | | | | | | 29,116(31) | | 1,334,095 | | | | | | | | | | | | | | | | | | | | | 38,822(32) | | 1,778,824 |
** The market value of shares that have not vested was determined based on the fair market value of the Company’s common stock as of December 31, 2020, the last business day of fiscal 2020. (1) These stock options were granted on September 4, 2018. The options vest at the rate of 33.33% of the total option shares as of one year from the grant date, and at the rate of 8.33% of the total option shares as of the end of each three-month period thereafter. (2) These RSUs were granted on September 4, 2018. The RSUs vest at the rate of 33.33% of the total RSUs as of one year from the grant date, and at the rate of 8.33% of the total RSUs as of the end of each three-month period thereafter. (3) These performance RSUs were granted on September 4, 2018 and vest upon achievement of the performance conditions. (4) These performance RSUs were granted on September 4, 2018 and vest upon achievement of the performance conditions. (5) These RSUs were granted on August 2, 2019. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. (6) These performance RSUs were granted on August 2, 2019 and vest upon achievement of the performance conditions. (7) These RSUs were granted on February 14, 2020. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. (8) These performance RSUs were granted on February 14, 2020 and vest upon achievement of the performance conditions. (9) These RSUs were granted on January 2, 2019. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. (10) These performance RSUs were granted on January 2, 2019 and vest upon achievement of the performance conditions. (11) These RSUs were granted on August 2, 2019. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. (12) These performance RSUs were granted on August 2, 2019 and vest upon achievement of the performance conditions. (13) These RSUs were granted on February 14, 2020. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. (14) These performance RSUs were granted on February 14, 2020 and vest upon achievement of the performance conditions. (15) These RSUs were granted on September 4, 2018. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. (16) These performance RSUs were granted on September 4, 2018 and vest upon achievement of the performance conditions. (17) These RSUs were granted on August 2, 2019. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. (18) These performance RSUs were granted on August 2, 2019 and vest upon achievement of the performance conditions. (19) These RSUs were granted on February 14, 2020. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. (20) These performance RSUs were granted on February 14, 2020 and vest upon achievement of the performance conditions. (21) These RSUs were granted on September 24, 2018. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. (22) These performance RSUs were granted on September 24, 2018 and vest upon achievement of the performance conditions (23) These RSUs were granted on August 2, 2019. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. (24) These performance RSUs were granted on August 2, 2019 and vest upon achievement of the performance conditions. (25) These RSUs were granted on February 14, 2020. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. (26) These performance RSUs were granted on February 14, 2020 and vest upon achievement of the performance conditions. (27) These RSUs were granted on January 8, 2019. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. (28) These performance RSUs were granted on January 8, 2019 and vest upon achievement of the performance conditions. (29) These RSUs were granted on August 2, 2019. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. (30) These performance RSUs were granted on August 2, 2019 and vest upon achievement of the performance conditions. (31) These RSUs were granted on February 14, 2020. The RSUs vest at the rate of 25% of the total RSUs as of one year from the grant date, and at the rate of 6.25% of the total RSUs as of the end of each three-month period thereafter. (32) These performance RSUs were granted on February 14, 2020 and vest upon achievement of the performance conditions. 2020 Option Exercises and Stock Vested Table | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | | Name | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($) | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($)(1) | | | | | | | | James Anderson President & CEO | | | — | | | | — | | | | 500,675 | | | | 14,175,892 | | | | | | | | Luther, Sherri CFO | | | — | | | | — | | | | 242,922 | | | | 7,327,492 | | | | | | | | Douglass, Stephen CVP R&D | | | — | | | | — | | | | 129,146 | | | | 3,772,256 | | | | | | | | Elashmawi, Esam Chief Marketing & Strategy Officer | | | — | | | | — | | | | 132,261 | | | | 3,811,555 | | | | | | | | Nelson, Mark CVP Worldwide Sales | | | — | | | | — | | | | 237,215 | | | | 5,566,708 | |
(1) The value realized on vesting was determined based on the fair market value of the Company’s common stock on the date of vesting. Potential Payments upon Termination or Change-in-Control James R. Anderson In connection with his hiring, the Company entered into an employment agreement with Mr. Anderson effective September 4, 2018. Under the terms of the employment agreement with Mr. Anderson, in the event of an Involuntary Termination (which is defined as termination of his employment by the Company without Cause (as defined in the agreement) or by Mr. Anderson for Good Reason (as defined in the agreement)), Mr. Anderson will receive the following severance payments and benefits: | ◾ | | a lump sum payment equal to Mr. Anderson’s then base salary, plus an amount equal to the annual incentive payment that Mr. Anderson would have earned had his employment continued through the end of the fiscal year in which the Involuntary Termination occurs, with such amount to be estimated reasonably and in good faith by the Company’s finance group at the time of the Involuntary Termination based on the anticipated actual payout as of the end of the fiscal year based on the performance of the Company; |
| ◾ | | if Mr. Anderson elects to continue health insurance coverage under COBRA, reimbursement of the monthly COBRA premium for him and his eligible covered dependents until the earliest of 12 months after the termination date, the date he commences receiving substantially equivalent coverage in connection with new employment or the date he is no longer entitled to continuation coverage under the Company’s group health plan; and |
| ◾ | | acceleration of the vesting of Mr. Anderson’s equity awards with respect to an additional number of shares of Company common stock as if Mr. Anderson had continued service with the Company for an additional 12 months following the date of his Involuntary Termination, with any performance-based equity awards vesting by reason of a determination/testing date falling within the 12-month period following the date of the Involuntary Termination vesting at the target amount. |
If the Involuntary Termination occurs in connection with a change in control (which includes an Involuntary Termination that occurs during the period beginning 90 days prior to the change in control and ending 24 months following the change in control), then Mr. Anderson will fully vest in all his outstanding equity awards (with any performance-based equity awards vesting at the target amount) and the amount of the lump sum cash severance payment described in the first bullet above will be increased to two times his then base salary, plus two times his then target bonus amount. In order to receive the severance payments and benefits described above, Mr. Anderson is required to timely sign and not revoke a separation agreement and release of claims and to continue to comply with the post-employment non-solicitation and non-disparagement covenants in the agreement. In the event any payments or benefits to be provided to Mr. Anderson (including any severance payments or benefits under the agreement) are subject to the excise tax imposed by Section 4999 of the Internal Revenue Code as a result of such payments or benefits being classified as “parachute payments” under Section 280G of the Internal Revenue Code, such payments and benefits will either be paid in full or reduced to a lesser that would result in no portion of such payments and benefits being subject to the excise tax, whichever would entitle Mr. Anderson to receive the greatest after-tax amount. In 2020, Mr. Anderson’s employment agreement was amended to: | ◾ | | provide that in the event of a change in control, Mr. Anderson’s equity awards that vest based on performance will vest based on the terms of such awards, provided that if no treatment has been set forth in such award then for purposes of determining performance under any relative TSR awards |
| outstanding on or granted after the effective date of the amended employment agreement, then (i) the ending average stock price will be determined as the price per share paid for the Company’s stock in the change in control and the peer group ending average stock price will be determined based on the average closing stock prices for the component members of the peer group for the 30-trading days ending prior to the date of the change in control, (ii) for purposes of any tranche where the determination period has not commenced as of the date of the public announcement of the proposed change in control, the Company stock price for the initial date of such determination period will be deemed to be the price of the Company’s stock as of the date of the original performance grant, and (iii) this calculation will be applied to any tranches of the relative TSR awards that were eligible to vest for measurement periods ending on or after the date of the change in control and those tranches will be converted to restricted stock units and will vest on the originally scheduled measurement dates, subject to Mr. Anderson remaining a service provider to the Company or its successor through such dates and such awards being afforded the same protection under the amended employment agreement as equity awards that vests solely based on service; |
| ◾ | | provide that in the event of a change in control, any of Mr. Anderson’s equity awards that are subject to performance-based vesting relating to EBITDA by reason of a determination/testing date falling after the date of the change in control will vest immediately at the target amount of the grant (i.e., for grants subject to adjusted EBITDA targets, the 100% vesting level being the number of granted units to the extent not already vested (for example, if 50% of the units granted have already vested as of the date, an additional 50% of those units will vest effective on the date of the change in control)); and |
| ◾ | | make certain changes to the “Good Reason” definition, as noted below. |
For purposes of Mr. Anderson’s original and amended employment agreements, “Cause” means (i) Mr. Anderson’s material breach of the agreement that is not corrected within a 30-day correction period that begins upon delivery to Mr. Anderson of a written demand from the Company that describes the basis for the Company’s belief that Mr. Anderson has materially breached the agreement; (ii) any refusal to comply with the reasonable and lawful instructions of the board of directors; (iii) any willful act of fraud or dishonesty that causes material damage to the Company; (iv) any willful violation of the Company’s insider trading policy; (v) any willful violation of the Company’s conflict of interest policies; (vi) any willful unauthorized use or disclosure of trade secrets or other confidential information; or (vii) Mr. Anderson’s conviction of a felony. For purposes of Mr. Anderson’s original and amended employment agreements, “Good Reason” means the occurrence of any of the following, without Mr. Anderson’s express written consent: (i) a material diminution of Mr. Anderson’s duties, responsibilities, or authority; (ii) a material diminution of Mr. Anderson’s base salary or target bonus amount (under Mr. Anderson’s original employment agreement, excluding a one-time reduction (not exceeding 10% in the aggregate) that also is applied to substantially all other executive officers of the Company on the approval of the board of directors if Mr. Anderson’s reduction is substantially proportionate to, or no greater than (on a percentage basis), the reduction applied to substantially all other executive officers); (iii) the Company’s material breach of the agreement; (iv) a requirement imposed by the Company or any successor to the Company that Mr. Anderson report to a corporate officer or employee rather than to the board of directors or any successor board of directors; (v) the Company requiring Mr. Anderson to relocate his primary place of employment to a facility or location that is more than 30 miles (or under Mr. Anderson’s original employment agreement, 50 miles) from his principal place of employment as of the effective date of the agreement; or (vi) the Company’s failure to have any successor promptly agree in writing to assume the Company’s obligations hereunder, except where the agreement is assumed by the successor by operation of law; provided, however, that Mr. Anderson will only have Good Reason if (i) he notifies the board of directors in writing of the existence of the condition which he believes constitutes Good Reason within 90 days of the initial existence of such condition (which notice specifically identifies such condition), (ii) the Company fails to remedy such condition within 30 days after the date on which the board of directors receives such notice, and (iii) his resignation is effective within 30 days after the expiration of such 30-day remedial period. Other Named Executive Officers The following paragraphs describe the terms of the employment agreements between the Company and each of Ms. Luther, Mr. Douglass, Mr. Elashmawi and Mr. Nelson that provide for payment of benefits to our named executive officers at, following, or in connection with, any termination of such named executive officer’s employment with the Company. The Company entered into employment agreements with Ms. Luther in January 2019, with Mr. Douglass in September 2018, Mr. Elashmawi in September 2018 and Mr. Nelson in January 2019, in connection with hiring each of them or their continuing employment. Under the terms of each of these employment agreements, in the event of an Involuntary Termination (which is defined as termination of the applicable named executive officer’s employment by the Company without Cause (as defined in the agreement) or by the named executive officer for Good Reason (as defined in the agreement)), the named executive officer will receive the following severance payments and benefits: | ◾ | | a lump sum payment equal to the named executive officer’s then base salary, plus the named executive officer’s then target bonus amount (adjusted pro rata on a monthly basis depending upon the month in which the Involuntary Termination occurs and for the amount estimated by the Company’s finance group to be the anticipated bonus plan payment percentage based on the performance of the Company anticipated for the applicable fiscal year); and |
| ◾ | | if the named executive officer elects to continue health insurance coverage under COBRA, reimbursement of the monthly COBRA premium for the named executive officer and his or her eligible covered dependents until the earliest of 12 months after the termination date, the date he or she commences receiving substantially equivalent coverage in connection with new employment or the date he or she is no longer entitled to continuation coverage under the Company’s group health plan. |
If the Involuntary Termination occurs in connection with a change in control (which includes an Involuntary Termination that occurs during the period beginning immediately prior to the change in control and ending 24 months following the change in control), then the named executive officer will fully vest in all his or her outstanding equity awards, with any performance shares vesting at the target amount, and the amount of the lump sum cash severance payment described in the first bullet above will be increased to his or her base salary, plus 100% of his or her then target bonus amount (without any pro rationing or other adjustment). In order to receive the severance payments and benefits described above, the named executive officer is required to timely sign and not revoke a separation agreement and release of claims and to continue to comply with the post-employment non-solicitation and non-disparagement covenants in the agreement. In the event the severance payments or benefits under the agreement, and any other payments or benefits, to be provided to the named executive officer are subject to the excise tax imposed by Section 4999 of the Internal Revenue Code as a result of such payments or benefits being classified as “parachute payments” under Section 280G of the Internal Revenue Code, such payments and benefits will either be paid in full or reduced to a lesser that would result in no portion of such payments and benefits being subject to the excise tax, whichever would entitle the named executive officer to receive the greatest after-tax amount. In 2020, each of the employment agreements with Ms. Luther, Mr. Douglass, Mr. Elashmawi and Mr. Nelson was amended to: | ◾ | | provide that in the event of a change in control, the named executive officer’s equity awards that vest based on performance will vest based on the terms of such awards, provided that if no treatment has been set forth in such award then for purposes of determining performance under any relative TSR awards outstanding on or granted after the effective date of the amended employment agreement, then (i) the ending average stock price will be determined as the price per share paid for the Company’s stock in the change in control and the peer group ending average stock price will be determined based on the average closing stock prices for the component members of the peer group for the 30-trading days ending prior to the date of the change in control, (ii) for purposes of any tranche where the determination period has not commenced as of the date of the public announcement of the proposed change in control, the Company stock price for the initial date of such determination period will be deemed to be the price of the Company’s stock as of the date of the original performance grant, and (iii) this calculation will be applied to any tranches of the relative TSR awards that were eligible to vest for measurement periods ending on or after the date of the change in control and those tranches will be converted to restricted stock units and will vest on the originally scheduled measurement dates, subject to the named executive officer remaining a service provider to the Company or its successor through such dates and such awards being afforded the same protection under the amended employment agreement as equity awards that vests solely based on service; and |
| ◾ | | make certain changes to the “Good Reason” definition, as noted below. |
For purposes of the original and amended employment agreements with Ms. Luther, Mr. Douglass, Mr. Elashmawi and Mr. Nelson, “Cause” means (i) the applicable named executive officer’s material breach of the agreement that is not corrected within a 30-day correction period that begins upon delivery to the named executive officer of a written demand from the Company that describes the basis for the Company’s belief that the named executive officer has materially breached the agreement; (ii) any refusal to comply with the reasonable and lawful instructions of the board of directors; (iii) any willful act of fraud or dishonesty that causes material damage to the Company; (iv) any willful violation of the Company’s insider trading policy; (v) any willful violation of the Company’s conflict of interest policies; (vi) any willful unauthorized use or disclosure of trade secrets or other confidential information; or (vii) the named executive officer’s conviction of a felony. For purposes of the original and amended employment agreements with Ms. Luther, Mr. Douglass, Mr. Elashmawi and Mr. Nelson, “Good Reason” means the occurrence of any of the following, without the applicable named executive officer’s express written consent: (i) a material diminution of the named executive officer’s duties or responsibilities; (ii) a material diminution of the named executive officer’s base salary or target bonus amount (under the original employment agreements with Ms. Luther, Mr. Douglass, Mr. Elashmawi and Mr. Nelson excluding a one-time reduction (not exceeding 10% in the aggregate) that also is applied to substantially all other executive officers of the Company on the approval of the board of directors if the named executive officer’s reduction is substantially proportionate to, or no greater than (on a percentage basis), the reduction applied to substantially all other executive officers); (iii) the Company’s material breach of the agreement; or (iv) the Company requiring the named executive officer to relocate his or her primary place of employment to a facility or location that is more than 30 miles (or under the original employment agreements with Ms. Luther, Mr. Douglass, Mr. Elashmawi and Mr. Nelson, 50 miles) from his or her principal place of employment as of the effective date of the agreement; provided, however, that the named executive officer will only have Good Reason if (i) he or she notifies the board of directors in writing of the existence of the condition which he or she believes constitutes Good Reason within 90 days of the initial existence of such condition (which notice specifically identifies such condition), (ii) the Company fails to remedy such condition within 30 days after the date on which the board of directors receives such notice, and (iii) his or her resignation is effective within 30 days after the expiration of such 30-day remedial period. The following table provides information regarding the amounts that would have been owed to our named executive officers who were employed by the Company at fiscal year-end if their employment with the Company had been terminated as of the last day of our fiscal year ended January 2, 2021. | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Basis of Termination | | Cash
Severance
($) | | | Continuation
of Insurance
Benefit ($) | | Accelerated
Vesting of
Equity
Awards ($)(1) | | | Total
($) | | | | | | | | | James R. Anderson, President & CEO | | Involuntary Termination Not in Connection With a Change in Control | | | 1,059,323 | | | 30,855 | | | 24,480,541 | | | | 38,362,062 | | | | Involuntary Termination in Connection With a Change in Control | | | 2,396,154 | | | 30,855 | | | 38,362,062 | | | | 40,792,916 | | | | | | | | | Sherri Luther, CVP & CFO | | Involuntary Termination Not in Connection With a Change in Control | | | 624,881 | | | 30,855 | | | — | | | | 657,030 | | | | Involuntary Termination in Connection With a Change in Control | | | 624,881 | | | 30,855 | | | 9,848,780 | | | | 10,505,809 | | | | | | | | | Stephen Douglass, CVP R&D | | Involuntary Termination Not in Connection With a Change in Control | | | 578,524 | | | 30,855 | | | — | | | | 608,520 | | | | Involuntary Termination in Connection With a Change in Control | | | 578,524 | | | 30,855 | | | 9,350,442 | | | | 9,958,961 | | | | | | | | | Esam Elashmawi, Chief Marketing & Strategy Officer | | Involuntary Termination Not in Connection With a Change in Control | | | 614,565 | | | — | | | — | | | | 611,820 | | | | Involuntary Termination in Connection With a Change in Control | | | 614,565 | | | — | | | 9,292,296 | | | | 9,904,116 | |
| | | | | | | | | | | | | | | | | | | | | | | | | Name | | Basis of Termination | | Cash
Severance
($) | | | Continuation
of Insurance
Benefit ($) | | Accelerated
Vesting of
Equity
Awards ($)(1) | | | Total
($) | | | | | | | | | Mark Nelson, Corporate VP, Worldwide Sales | | Involuntary Termination Not in Connection With a Change in Control | | | 682,850 | | | 27,074 | | | — | | | | 706,874 | | | | Involuntary Termination in Connection With a Change in Control | | | 682,850 | | | 27,074 | | | 15,768,586 | | | | 16,475,460 | |
(1) The value of each named executive officer’s equity award vesting acceleration benefit is calculated as (i) the number of shares covered by the portions of the named executive officer’s equity awards that are subject to acceleration multiplied by the closing price of our common stock on December 31, 2020 (the last trading day in fiscal 2020), which was $45.82 per share, less (ii) the exercise price for any such shares subject to options. CHIEF EXECUTIVE OFFICER PAY RATIO As required by the Dodd-Frank Act, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Mr. James R. Anderson, our Chief Executive Officer (our “CEO”). | ◾ | We believe that there have not been any changes to our employee population or employee compensation arrangements that would result in a significant change to our pay ratio disclosure. Therefore, we used the same median employee to calculate the CEO pay ratio in fiscal 2020 that we had used to calculate the CEO pay ratio in fiscal 2019. |
| ◾ | We identified and calculated the elements of the annual total compensation of the median employee for fiscal 2020 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $93,496. |
| ◾ | We used the amount reported in the Total column of our 2020 Summary Compensation Table included in this Proxy Statement for the annual total compensation of our CEO. |
For fiscal 2020, our last completed fiscal year: | ◾ | The median of the annual total compensation of all employees of our company (other than our CEO), was $93,496. |
| ◾ | The annualized annual total compensation of our CEO was $7,226,550. |
Ratio For 2020, based on this information, the annual total compensation of our Chief Executive Officer and President was 77.3 times that of the median of the annual total compensation of all employees. CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS During fiscal years 2017, 2016 and 2015, we paid approximately $2.7 million, $2.5 million and $2.4 million, respectively to Synopsys, Inc. for new and renewed license arrangements. Mr. Beattie, then Executive Vice President, Business Operations, and Chief Administrative Officer of Synopsys, Inc. was appointed to our Board effective July 3, 2016. Mr. Beattie received no direct compensation from the transactions with Synopsys, Inc. Mr. Beattie retired from Synopsys, Inc. in December 2017. The Company has determined that the transactions were entered into in the normal course of business and are consistent with prior periods.
The Company’s published Code of Conduct provides that as a general rule, employees should avoid conducting Company business or entering into any Company business agreements or arrangements with a relative or significant other, or with a business in which a relative or significant other has an influential role, and any other business agreements or arrangements that would be considered a related party transaction. Under the Company’s Code of Conduct, if a related party transaction is to be entered into, it must be fully disclosed to the chief financial officerChief Financial Officer in advance, and if determined to be material by the Chief Financial Officer, the transaction must be reviewed and approved in advance by the audit committeeAudit Committee of the boardBoard of directors.Directors. Any related party transactions involving the Company’s directors or executive officers are, by definition, material, and as such, must be reviewed and approved, in writing and in advance, by the audit committee.Audit Committee. Any approved related party transactions must be structured and conducted in a manner such that no preferential treatment is given to the related party. In addition, the Company’s published Director Code of Ethics provides that no director may receive any material personal profit or advantage in connection with any transaction involving the Company without disclosure andpre-approval of the chair of the chairman of the nominatingNominating and governance committeeGovernance Committee (or other member of the nominatingNominating and governance committee,Governance Committee, if the director in question is the chairman)chair). Furthermore, no director may have a material personal or family financial interest in any Company supplier, customer, reseller or competitor that might cause divided loyalty, or the appearance of divided loyalty, without advance disclosure and approval by the nominatingNominating and governance committee.Governance Committee. 32
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of March 9, 2018 (except12, 2021, certain information with respect to the beneficial ownership of our common stock by (i) any person (including any “group” as otherwise indicated), information about (i) personsthat term is used in Section 13(d)(3) of the Exchange Act) known toby us to be the beneficial ownersowner of more than five percent5% of our outstanding common stock,voting securities, (ii) each director and each nominee for director, (iii) each current director andof the executive officers named executive officer,in the Summary Compensation Table appearing herein, and (iv) all current directors and executive officers as a group. The address for each of our executive officers and directors or nomineesas a group. We do not know of any arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change of control. Unless otherwise indicated, the address of each stockholder in the table below is 111 SW 5th Ave., Suite 700, Portland,c/o Lattice Semiconductor Corporation, 5555 NE Moore Court, Hillsboro, Oregon 9720497124. | | | | | | | | | Name of Beneficial Owner | | Amount and
Nature of
Beneficial
Ownership
(# of Shares)(1) | | | Percent of Class | | Ameriprise Financial, Inc. 145 Ameriprise Financial Center Minneapolis, MN 55474 | | | 19,893,429 | (2) | | | 16.13 | % | | | | The Vanguard Group, Inc. 100 Vanguard Boulevard Malvern, PA 19355 | | | 9,784,506 | (3) | | | 7.93 | % | | | | NWQ Investment Management Company, LLC 2049 Century Park East, 16th Floor Los Angeles, CA 90067 | | | 7,951,075 | (4) | | | 6.45 | % | | | | Lion Point Master, LP 250 West 55th Street, 33rd Floor New York, New York 10019 | | | 7,664,095 | (5) | | | 6.2 | % | | | | BlackRock, Inc. 55 E. 52nd Street New York, NY 10022 | | | 7,596,718 | (6) | | | 6.2 | % | | | | Darin G. Billerbeck, former Director, President & CEO | | | 1,801,418 | (7) | | | 1.45 | % | | | | John Bourgoin, Director | | | 198,417 | (8) | | | * | | | | | Robin A. Abrams, Director | | | 198.417 | (9) | | | * | | | | | Byron W. Milstead, Corporate Vice President & General Counsel | | | 200,264 | (10) | | | * | | | | | Glen Hawk, interim CEO, Vice President & COO | | | 420,010 | (11) | | | * | | | | | Downing, Maxwell J., Corporate Vice President & CFO | | | 138,431 | (12) | | | * | | | | | Mark E. Jensen, Director | | | 161,434 | (13) | | | * | | | | | Robert R. Herb, Director | | | 159,235 | (14) | | | * | | | | | D. Jeffery Richardson, Director | | | 101,988 | (15) | | | * | | | | | Frederick D. Weber, Director | | | 100,657 | (16) | | | * | | | | | Brian Beattie, Director | | | 40,206 | (17) | | | | | | | | James Lederer | | | 0 | (18) | | | * | | | | | John Major | | | 0 | (18) | | | * | | | | | Krishna Rangasayee | | | 0 | (18) | | | * | | | | | All directors and executive officers as a group (14 persons) | | | 3,520,477 | (19) | | | 2.83 | % |
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| | | | | | | | | | Name and Address | | Number
of Shares(1) | | | Percent of
Total(1) | | | | | BlackRock, Inc.
55 E. 52nd Street
New York, NY 10055 | | | 14,025,905(2) | | | | 10.29% | | | | | The Vanguard Group, Inc.
100 Vanguard Boulevard
Malvern, PA 19355 | | | 13,147,996(3) | | | | 9.64% | | | | | Artisan Partners Limited Partnership (and affiliates)
875 East Wisconsin Avenue
Suite 800
Milwaukee, WI 53202 | | | 10,748,956(4) | | | | 7.88% | | | | | T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, MD 21202 | | | 8,309,792(5) | | | | 6.09% | | | | | James R. Anderson, Director, President & CEO | | | 925,673(6) | | | | * | | | | | Robin A. Abrams, Director | | | 178,007(7) | | | | * | | | | | John Bourgoin, Director | | | 196,532(8) | | | | * | | | | | Mark E. Jensen, Director | | | 174,986(9) | | | | * | | | | | James Lederer, Director | | | 82,389(10) | | | | * | | | | | John Major, Director | | | 97,308(11) | | | | * | | | | | Krishna Rangasayee, Director | | | 82,808(12) | | | | * | | | | | D. Jeffrey Richardson, Director | | | 74,440(13) | | | | * | | | | | Anjali Joshi, Director | | | 11,246(14) | | | | * | | | | | Sherri Luther, Corporate Vice President & CFO | | | 132,408(15) | | | | * | | | | | Stephen Douglass, Corporate Vice President Research & Development | | | 73,836(16) | | | | * | | | | | Esam Elashmawi, Chief Marketing and Strategy Officer | | | 118,333(17) | | | | * | | | | | Mark Nelson, Corporate Vice President Worldwide Sales | | | 73,692(18) | | | | * | | | | | All directors and executive officers as a group (14 persons) | | | 2,238,753(19) | | | | 1.64% | |
| * | LessRepresents less than one percent.1%. |
| (1) | Unless otherwise indicated, the named beneficial owner has sole voting and dispositive power with respect to the shares, subject to community property laws where applicable. |
| (2) | Based solely on information contained in a Schedule 13G/A which was jointly filed on February 2, 2018March 10, 2021 by Ameriprise Financial,BlackRock, Inc., and its affiliates, Columbia Management Investment Advisers, LLC, and Columbia Seligman Communications & Information Fund. According to this Schedule 13G/A, Ameriprise Financial, Inc. possessed sharedwhich reported sole voting power over 19,664,658as to 13,155,846 shares and sharedsole dispositive power over 19,893,429 shares, Columbia Management Investment Advisers, LLC possessed shared voting power over 19,664,658 shares and shared dispositive power over 19,887,180 shares, and Columbia Seligman Communications & Information Fund possessed sole voting and shared dispositive power over 13,920,477as to 14,025,905 shares. |
| (3) | Based solely on information contained in a Schedule 13 G/A filed on February 9, 201810, 2021 by The Vanguard Group, which reported soleshared voting power as to 243,153314,917 shares, sole dispositive power as to 9,545,07512,720,978 shares, and shared dispositive power as to 239,431427,018 shares. |
| (4) | Based solely on information contained in a Schedule 13G jointly filed on February 10, 2021 by Artisan Partners Limited Partnership, Artisan Investments GP LLC, Artisan Partners Holdings LP, and Artisan Partners Asset Management Inc. which reported shared voting power as to 9,285,630 shares and shared dispositive power as to 10,748,956 shares. |
| (5) | Based solely on information contained in a Schedule 13G/A which was filed on February 14, 201816, 2021 by NWQ Investment Management Company, LLC, which reported sole voting and dispositive power asT. Rowe Price Associates, Inc. According to 7,951,075 shares. |
(5) | Based solely on information contained in athis Schedule 13D which was jointly filed on February 5, 2018, as amended by Schedule 13D/13/A, which was jointly filed on March 9, 2018 by Lion Point Master, LP, Lion Point Capital GP, LLC, Lion Point Capital, LP, Lion Point Holdings GP, LLC, Didric Cederholm, and Jim Freeman. |
(6) | Based solely on information contained in a Schedule 13G/A filed on January 25, 2018 by BlackRock,T. Rowe Price Associates, Inc., which reported possessed sole voting power as to 7,343,984over 1,976,708 shares and sole dispositive power as to 7,596,718over 8,309,792 shares. |
(7)(6) | Mr. Billerbeck resigned effective March 16, 2018. Includes 1,274,387 shares exercisable under options and 10,2467,042 RSUs vesting within 60 days of March 9, 2018.12, 2021. |
(8)(7) | Includes 90,000 shares exercisable under options. |
(9) | Includes 90,000 shares exercisable under options. |
(10) | Includes 170,611 shares exercisable under options and 3,4597,494 RSUs vesting within 60 days of March 9, 2018. Mr. Milstead disclaims beneficial ownership of 1,527 shares, 36,610 shares exercisable under options constructively transferred by Mr. Milstead to his former spouse pursuant to a judgment of dissolution of marriage.12, 2021. |
(11)(8) | Includes 407,144 shares exercisable under options. |
(12) | Includes 109,854 shares exercisable under options and 2,0187,494 RSUs vesting within 60 days of March 9, 2018.12, 2021. |
| (9) | Includes 7,494 RSUs vesting within 60 days of March 12, 2021. |
| (10) | Includes 21,918 shares exercisable under options and 7,494 RSUs vesting, each within 60 days of March 12, 2021. |
| (11) | Includes 21,918 shares exercisable under options and 7,494 RSUs vesting, each within 60 days of March 12, 2021. |
| (12) | Includes 21,918 shares exercisable under options and 7,494 RSUs vesting, each within 60 days of March 12, 2021. |
| (13) | Includes 90,000 shares exercisable under options.7,494 RSUs vesting within 60 days of March 12, 2021. |
| (14) | Includes 90,000 shares exercisable under options.7,494 RSUs vesting within 60 days of March 12, 2021. |
| (15) | Includes 53,918 shares exercisable under options.10,701 RSUs vesting within 60 days of March 12, 2021. |
| (16) | Includes 60,639 shares exercisable under options.2,253 RSUs vesting within 60 days of March 12, 2021. |
| (17) | Includes 22,915 shares exercisable under options.10,097 RSUs vesting within 60 days of March 12, 2021. |
| (18) | Elected to the boardIncludes 15,737 RSUs vesting within 60 days of directors effective March 13, 2018.12, 2021. |
| (19) | The number of shares beneficially owned by all of our current directors and executive officers as a group includes 2,458,42969,433 shares exercisable under options and 15,367109,811 RSUs vesting, each within 60 days of March 9, 2018.12, 2021. |
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Equity Compensation Plan InformationEQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information, as of December 30, 2017,January 2, 2021, with respect to shares of our common stock that may be issued under our existing equity compensation plans. | | | | | | | | | | | | | | | | (A)
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights | | | (B)
Weighted
average
exercise
price of
outstanding
options,
warrants and
rights | | | (C)
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column (A)) | | | | | (in thousands except per share amounts) | | Equity compensation plans: | | | | | | | | | | | | | Approved by security holders | | | 15,552 | (1) | | $ | 5.77 | (2) | | | 3,567 | (3) | Not approved by security holders | | | 0 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | Total(4) | | | 15,552 | | | $ | 5.77 | | | | 3,567 | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | (A) Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights | | | (B) Weighted
average
exercise
price of
outstanding
options,
warrants
and rights(2) | | | (C) Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column (A))(3) | | | | | | | Equity compensation plans: | | | | | | | | | | | | | | | | | | Approved by security holders | | | 6,219,835 | (1) | | $ | 6.39 | | | | 7,668,315 | | | | | | | Not approved by security holders | | | — | | | | — | | | | — | | | | | | | Total | | | 6,219,835 | | | $ | 6.39 | | | | 7,668,315 | |
| (1) | Consists of shares of our common stock issuable upon exercise of options or payment of RSUs granted under the 1996 Stock Incentive Plan, the 2001 Stock Plan, the 2013 Incentive Plan, the 2001 Outside Directors’ Stock Option Plan and the 2011Non-Employee Director Equity Incentive Plan, or assumed by us in connection with mergers and acquisitions. As of December 30, 2017, 306,670 shares of our common stock were issuable upon exercise or vesting of those assumed options and RSUs. We are unable to ascertain with specificity the number of securities to be issued upon exercise of outstanding rights under our 2012 Employee Stock Purchase Plan. |
| (2) | The weighted-average exercise price does not take into account the shares issuable upon vesting of outstanding RSUs, which have no exercise price. The weighted average exercise price also excludes the rights outstanding under our 2012 Employee Stock Purchase Plan. |
| (3) | Includes approximately 1,901,0001,183,283 shares reserved for issuance under our 2012 Employee Stock Purchase Plan, which provides that shares of our common stock may be purchased at a per share price equal to 85% of the fair market value of the common stock on the beginning of thesix-month offering offering period or a purchase date applicable to such offering period, whichever is lower. Also includes approximately 2,944,0005,484,254 shares reserved for issuance under our 2013 Incentive Plan, which may be granted pursuant to stock options, stock appreciation rights, stock awards or restricted stock or units. Also includes approximately 373,000383,861 shares reserved for issuance under our 2011Non-Employee Director Equity Incentive Plan, which may be granted pursuant to stock options, restricted stock, or restricted stock units. Does not include the additional shares to be reserved for issuance under our amended 2013 Incentive Plan or our amended 2011Non-Employee Director Equity Incentive Plan for which we are requesting shareholder approval pursuant to Proposal 3 and Proposal 4, respectively. |
(4) | The weighted-average exercise price does not take into account the shares issuable upon vesting of outstanding RSUs, which have no exercise price. The weighted average exercise price also excludes the rights outstanding under our 2012 Employee Stock Purchase Plan. |
(5) | The table above shows our outstanding equity awards as of fiscal year end 2017. The weighted-average exercise price for outstanding options assumed by us in connection with mergers and acquisitions is $4.75 per share. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a)
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS The responsibilities of the Exchange Act requiresAudit Committee are fully described in the Audit Committee charter. Management is responsible for maintaining our officersfinancial controls and directors, and persons who own more than 10% of apreparing our financial reports. Our independent registered classpublic accounting firm is responsible for performing an independent audit of our equity securities, to file reports of ownership on Form 3consolidated financial statements and changes in ownership on 35
Form 4 or Form 5 with the SEC. Such officers, directors and 10% stockholders are also required by SEC rules to furnish us with copies of all forms they file pursuant to Section 16(a).
Based solely on our review of the copies of such forms received by us, or written representations from certaininternal control over financial reporting persons, we believe that, for fiscal 2017, all Section 16(a) filing requirements applicable to our officers, directors and 10% stockholders were complied with.
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PROPOSAL 3: APPROVAL OF THE AMENDED LATTICE SEMICONDUCTOR CORPORATION
2013 INCENTIVE PLAN
We are seeking stockholder approval of our amended 2013 Incentive Plan.
Subject to stockholder approval and upon recommendation of the compensation committee, our board of directors recently amended the 2013 Incentive Plan, to increase by 4,600,000 shares (from 14,040,000 shares to 18,640,000 shares) the number of shares of our common stock available for issuance under the 2013 Incentive Plan, and to make certain other changes, including the following:
Adding a2.2-to-1 fungible share ratio for full value awards;
Reducing to seven years the maximum term for stock options and stock appreciation rights;
Applying the minimumone-year vesting schedule to all awards;
Eliminating the committee’s discretion to waive performance-based conditions on awards other than in the case of death or disability; and
Prohibiting payment of dividends or equivalents on awards while they remain unvested.
In order to continue to have an appropriate supply of shares for equity incentives to recruit, hire and retain the talent required to successfully execute our business plans, the board of directors believes that we will need an additional 4,600,000 new shares to be available under the 2013 Incentive Plan. As of March 9, 2018, we had 3,087,596 shares available under the 2013 Incentive Plan and 124,211,710 shares of our common stock outstanding. The additional shares to be authorized for issuance under the 2013 Incentive Plan represent approximately 4.59% of our outstanding shares of common stock. Although the additional 4,600,000 new shares to be available under the 2013 Incentive Plan will increase the potential dilution to stockholders represented by Lattice’s equity compensation programs, our board of directors and compensation committee believe that the potential dilution represented by our equity compensation programs and the new shares to be authorized for issuance under the 2013 Incentive Plan is reasonable and below norms for our industry, and that our equity compensation programs are well-managed.
We anticipate the additional shares for which we are seeking stockholder approval will be sufficient for our equity compensation program through fiscal year 2019, and that we will need to seek stockholder approval for additional shares at our annual stockholders meeting in 2019 as our annual stockholders meeting are typically held during the second quarter of each fiscal year.
If stockholders do not approve the amended 2013 Incentive Plan, the amendment to the 2013 Incentive Plan previously approved by the board of directors will not become effective and the remaining shares available for issuance under the 2013 Incentive Plan will remain available for new grants until awards have been granted covering all the shares authorized for issuance under the 2013 Incentive Plan or it is terminated by our board of directors.
As of March 9, 2018, 3,087,596 shares were reserved and available for issuance under the 2013 Incentive Plan, not including the additional 4,600,000 new shares added to the 2013 Incentive Plan pursuant to the amendments recently approved by the Company’s board of directors and subject to stockholder approval. In addition shares that are subject to outstanding awards under the 2013 Incentive Plan or the Company’s 1996 Stock Incentive Plan that are forfeited or canceled or expire can be reused under the 2013 Incentive Plan. For more information regarding the shares of our common stock that may be issued under our existing equity compensation plans please refer to the information set forth in this proxy statement under the “Equity Compensation Plan Information” subheading starting on page 35.
Under applicable rules of the Nasdaq Stock Market, we are required to obtain stockholder approval of the amended 2013 Incentive Plan. In addition, stockholder approval of the amended 2013 Incentive Plan is necessary
37
to provide the compensation committee with the flexibility to grant incentive stock options to employees under the amended 2013 Incentive Plan. See “U.S. Federal Income Tax Information” below for more information about these issues.
The principal features of the amended 2013 Incentive Plan are summarized below. This summary does not contain all information about the amended 2013 Incentive Plan. A copy of the complete text of the amended 2013 Incentive Plan is included asAnnex A to this proxy statement, and the following description is qualified in its entirety by reference to the text of the amended 2013 Incentive Plan.
Description of the Amended 2013 Incentive Plan
Purpose. The purpose of the 2013 Incentive Plan is to attract, retain and motivate our employees, officers and directors by providing them with the opportunity to acquire a proprietary interest in Lattice and to align their interests and efforts to the long-term interests of our stockholders. The 2013 Incentive Plan would also allow us to provide the same opportunity to consultants, agents, advisors and independent contractors.
Administration. The compensation committee will administer the 2013 Incentive Plan. The board of directors or the compensation committee may delegate authority to approve awards under the 2013 Incentive Plan in accordance with its terms. References to the “committee” in this Proposal 3 are, as applicable, to the compensation committee, the board of directors or other delegate, including an officer of Lattice authorized by the board of directors or compensation committee to make grants to certain eligible employees of Lattice.
Eligibility. Awards may be granted under the 2013 Incentive Plan to employees, officers, directors, consultants, agents, advisors and independent contractors of Lattice and its subsidiaries and affiliates. As of March 9, 2018, approximately 856 employees, executive officers, and zeronon-employee directors were eligible to receive awards under the 2013 Incentive Plan.
Number of Shares.The number of shares of common stock authorized for issuance under the 2013 Incentive Plan is 18,640,000 shares. In addition, the shares underlying awards that are currently subject to outstanding awards under the 1996 Stock Incentive Plan and the 2013 Incentive Plan that are forfeited or canceled or expired can be reused under the 2013 Incentive Plan. Any shares of our common stock subject to awards other than stock options or SARs will count against the numerical limits of the plan as 2.2 shares of our common stock for every one share of common stock subject to the award.
The following shares will also become available again for issuance under the 2013 Incentive Plan:
shares subject to awards granted under the 2013 Incentive Plan that lapse, expire, terminate or are canceled prior to issuance of the underlying shares;
shares subject to awards granted under the 2013 Incentive Plan that are subsequently forfeited to or otherwise reacquired by us; and
shares related to an award granted under the 2013 Incentive Plan that is settled in cash or in another manner where some or all of the shares covered by the award are not issued.
| • | | Shares subject to an award granted under the 2013 Incentive Plan that are tendered or withheld in payment of purchase price or tax withholding obligationswill not become available again for issuance under the 2013 Incentive Plan. |
Awards granted in assumption of or substitution for previously granted awards in acquisition transactions will not reduce the number of shares authorized for issuance under the 2013 Incentive Plan.
Limitation on Full Value Awards. The maximum number of shares that may be issued pursuant to full value Awards granted under the Plan, which includes all Awards other than Awards of Options or Stock Appreciation Rights, is 50% of the aggregate number of shares authorized under the 2013 Incentive Plan and 50% of the new shares added under the 2013 Incentive Plan.
38
Minimum Vesting for Full Value Awards. The maximum number of shares that may be issued pursuant to full value awards granted under the Plan, which includes all awards other than awards of options or stock appreciation rights, without specified minimum vesting conditions is 5% of the aggregate maximum number of shares authorized under the 2013 Incentive Plan.
Adjustments. If any change in our stock occurs by reason of any stock dividend, stock split,spin-off, recapitalization, merger, consolidation, combination or exchange of shares, distribution to stockholders other than a normal cash dividend or other change in our corporate or capital structure, the committee will make proportional adjustments to the maximum number and kind of securities (a) available for issuance under the 2013 Incentive Plan, (b) issuable as incentive stock options, (c) issuable to certain individuals subject to Internal Revenue Code of 1986, as amended (the “Code”) Section 162(m), (d) issuable as full value awards, and (e) subject to any outstanding award, including the per share price of such securities.
Types of Awards.The 2013 Incentive Plan permits the grant of any or all of the following types of awards.
Stock Options. The committee may grant either incentive stock options, which must comply with Code Section 422, ornon-qualified stock options. The committee sets option exercise prices and terms, except that the exercise price of stock options granted under the 2013 Incentive Plan must be at least 100% of the fair market value of the common stock on the date of grant, except in the case of options granted in connection with assuming or substituting options in acquisition transactions. At the time of grant, the committee determines when stock options are exercisable and when they expire, except that the term of a stock option cannot exceed seven years. Unless the committee otherwise determines, fair market value means, as of a given date, the closing price of our common stock.
Stock Appreciation Rights (SARs). The committee may grant SARs as a right in tandem with the number of shares underlying stock options granted under the 2013 Incentive Plan or on a stand-alone basis. SARs are the right to receive payment per share of an exercised SAR in stock or cash, or a combination of stock and cash, equal to the excess of the share’s fair market value on the date of exercise over its fair market value on the date the SAR was granted. Exercise of a SAR issued in tandem with stock options will result in the reduction of the number of shares underlying the related SAR to the extent of the SAR exercised. The term of a stand-alone SAR cannot be more than seven years, and the term of a tandem SAR will not exceed the term of the related option.
Stock Awards, Restricted Stock and Stock Units. The committee may grant awards of shares of common stock, or awards designated in units of common stock, under the 2013 Incentive Plan. These awards may be made subject to repurchase or forfeiture restrictions at the committee’s discretion. The restrictions may be based on continuous service or the achievement of specified performance criteria, as determined by the committee.
Performance Awards. The committee may grant performance awards in the form of performance shares or performance units. Performance shares are units valued by reference to a designated number of shares of common stock, and performance units are units valued by reference to a designated amount of cash. Either may be payable in stock or cash, or a combination of stock and cash, upon the attainment of performance criteria and other terms and conditions as established by the committee.
Other Stock or Cash-Based Awards. The committee may grant other incentives payable in cash or in shares of common stock, subject to the terms of the 2013 Incentive Plan and any other terms and conditions determined by the committee.
Minimum Vesting Requirements. The committee’s ability to grant awards under the 2013 Incentive Plan that do not comply with specified minimum vesting requirements is capped at 5% of the aggregate maximum number of shares authorized for issuance under the 2013 Incentive Plan. The 2013 Incentive Plan provides for minimum vesting requirements of three years for vesting based solely on continuous employment or services and one year for vesting based on other factors (except if accelerated pursuant to a change in control or in the event of a termination of service).
39
Limitation on Acceleration of Vesting. The committee ability to accelerate vesting of an award or otherwise waive or lapse any restriction on an award is subject to the minimum vesting requirement, other than in connection with a participant’s death or disability, or a change of control. The committee may not waive the achievement of performance goals related to an award except in the case of a participant’s death or disability.
Repricing.The 2013 Incentive Plan prohibits the committee, without stockholder approval, from lowering the exercise or grant price of an option after it is granted, except in connection with adjustments provided under the 2013 Incentive Plan, taking any other action that is treated as a repricing under generally accepted accounting principles, canceling an option at a time when its exercise or grant price exceeds the fair market value of the underlying stock, in exchange for cash, another option or stock appreciation right, restricted stock, or other equity award, or issuing an option or stock appreciation right or amending an outstanding option or stock appreciation right to provide for the grant or issuance of a new option or stock appreciation right on exercise of the original option or stock appreciation right.
Limitation on Size of Awards. Subject to certain adjustments, participants may not be granted awards, other than performance units, for more than 2,000,000 shares of common stock in any calendar year, except that additional awards for up to 2,000,000 shares may be granted to newly hired or promoted individuals in any calendar year. The maximum dollar value payable to any participant with respect to performance units or other awards under the 2013 Incentive Plan that are payable in cash cannot exceed $10,000,000 in any calendar year.
No Payment of Dividends on Unvested Awards. The 2013 Incentive Plan prohibits the committee from providing that holders of awards granted under the 2013 Incentive Plan will receive payment of dividends with respect to unvested awards while such awards remain unvested. The committee may provide that dividends will accrue during the period that an award is unvested and holders will receive payment of accrued dividends upon vesting of the award.
Performance Goals and Criteria. The committee may select performance goals for awards granted under the 2013 Incentive Plan based on the attainment of specified levels of one, or any combination, of the following performance criteria for the Company as a whole or any business unit, as reported or calculated by the Company: cash flows (including, but not limited to, operating cash flow, free cash flow or cash flow return on capital); cash position; working capital; earnings per share; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; book value per share; operating income (including or excluding depreciation, amortization, extraordinary items, restructuring charges or other expenses); revenues; operating margins; operating earnings; economic profit; profit before tax; return on assets; return on equity; debt; debt plus equity; ratio of debt to debt plus equity; ratio of operating earnings to capital spending; sales growth; market or economic value added; equity or stockholder’s equity; stock price appreciation; total stockholder return; cost control; strategic initiatives; market share; net income; net profit; net sales; return on invested capital; improvements in capital structure; or customer satisfaction, employee satisfaction, services performance, subscriber, cash management or asset management metrics.
The performance goals also may be based on the achievement of specified levels of performance for the Company as a whole or any business unit or applicable affiliate under one or more of the performance goals described above relative to the performance of other corporations.
The committee may provide in any award that any evaluation of performance may include or exclude any of the following events that occur during a performance period: asset write-downs, litigation or claim judgments or settlements, the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, any reorganization and restructuring programs, extraordinary nonrecurring items as described in Accounting Standards Codification225-20 and/or in Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in our annual report to stockholders for the applicable year, acquisitions or divestitures, foreign exchange gains and losses, and gains and losses on asset sales.
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Change of Control.Under the 2013 Incentive Plan, unless otherwise provided in the instrument evidencing an award or in a written employment, services or other agreement between the participant and us, in the event of a change of control:
If awards that are subject to vesting based on continued employment or service will not be converted, assumed or replaced by a successor company pursuant to the change of control, then such awards will become fully and immediately exercisable, and all applicable restrictions or forfeiture provisions will lapse, effective immediately prior to the change of control and then terminate at the effective time of the change of control.
All unearned performance shares, performance units and other outstanding awards that are subject to vesting based on the achievement of specified performance goals will be prorated and will be paid in accordance with the payout schedulestandards of the Public Company Accounting Oversight Board (United States) and for issuing audit reports. The Audit Committee’s responsibility is to execute the Audit Committee charter and oversee these processes. In fulfilling its responsibilities, the Audit Committee has reviewed and discussed the audited financial statements contained in our Annual Report on Form 10-K for the award.
In the event of certain reorganizations, mergers or consolidations, the committee may, in its discretion, instead provide that a participant’s outstanding awards will be cashed out.
Definition of Change of Control. Unless the committee determines otherwiseyear ended January 2, 2021 with respect to an award at the time it is granted or unless otherwise defined for purposes of an award in a written employment, services or other agreement between a participantmanagement and us, a change of control of the Company generally means the occurrence of any of the following events:
an acquisition by any individual, entity or group of beneficial ownership of 50% or more of either (a) the then outstanding shares of common stock or (b) the combined voting power of the then outstanding voting securities of Lattice entitled to vote generally in the election of directors (excluding generally any acquisition directly from Lattice, any acquisition by Lattice, any acquisition by any employee benefit plan of Lattice or an affiliate, or the completion of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of Lattice pursuant to which specific requirements are met);
a change in the composition of the board of directors with the result that the incumbent board members cease to constitute at least a majority of the board (not including directors whose election, or nomination for election by stockholders, was approved by a majority of the incumbent board); or
completion of specified reorganizations, mergers or consolidations or other disposition of all or substantially all of the assets of Lattice.
Amendment and Termination.The board of directors or the committee may amend the 2013 Incentive Plan, except that if any applicable statute, rule or regulation requires stockholder approval for an amendment to the 2013 Incentive Plan, then to the extent so required, stockholder approval will be obtained. The board of directors or the committee may also suspend or terminate all or any portion of the 2013 Incentive Plan at any time, but any suspension or termination may not, without a participant’s consent, materially adversely affect any rights under any outstanding award. Unless sooner terminated by the board of directors or the committee, the 2013 Incentive Plan will terminate ten years after the date of the initial stockholder approval of the 2013 Incentive Plan.
U.S. Federal Income Tax Informationour independent registered public accounting firm.
The following is a brief summary of the U.S. federal income tax consequences of the 2013 Incentive Plan generally applicable to us and to participants in the 2013 Incentive Plan who are subject to U.S. federal taxes. The summary is based on the applicable Treasury Regulations and administrative and judicial interpretations thereof, each as in effect on the date of this proxy statement and is, therefore, subject to future changes in the law, possiblyAudit Committee discussed with retroactive effect. The summary is general in nature and does not purport to be legal or tax advice. Furthermore, the summary does not address issues relating to any U.S. gift or estate tax consequences or the consequences of any state, local or foreign tax laws. 41
Non-qualified Stock Options. A participant generally will not recognize income upon the grant or vesting of a nonqualified stock option with an exercise price at least equal to the fair market value of our common stock on the date of grant and no additional deferral feature. When anon-qualified stock option is exercised, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the shares underlying the option on the date of exercise and the option exercise price. When a participant sells the shares, the participant will have short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. The tax basis of the shares generally will be equal to the greater of the fair market value of the shares on the exercise date or the option exercise price.
Incentive Stock Options. A participant generally will not recognize income upon the grant of an incentive stock option. If a participant exercises an incentive stock option during employment as an employee or within three months after his or her employment ends (12 months in the case of permanent and total disability), the participant will not recognize income at the time of exercise for regular U.S. federal income tax purposes (although the participant generally will recognize income for alternative minimum tax purposes at that time as if the option were anon-qualified stock option). If a participant sells or otherwise disposes of the shares acquired upon exercise of an incentive stock option after the later of (a) one year from the date the participant exercised the option and (b) two years from the grant date of the option, the participant generally will recognize long-term capital gain or loss equal to the difference between the amount the participant received in the disposition and the option exercise price. If a participant sells or otherwise disposes of shares acquired upon exercise of an incentive stock option before these holding period requirements are satisfied, the disposition will constitute a “disqualifying disposition,” and the participant generally will recognize taxable ordinary income in the year of disposition equal to the excess of the fair market value of the shares on the date of exercise over the option exercise price (or, if less, the excess of the amount realized on the disposition of the shares over the option exercise price). The balance of the participant’s gain on a disqualifying disposition, if any, will be taxed as short-term or long-term capital gain, as the case may be.
With respect to bothnon-qualified stock options and incentive stock options, special rules apply if a participant uses shares of common stock already held by the participant to pay the exercise price.
Stock Appreciation Rights. A participant generally will not recognize income upon the grant or vesting of an SAR with a grant price at least equal to the fair market value of our common stock on the date of grant and no additional deferral feature. Upon the exercise of an SAR, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the shares underlying the SAR on the date of exercise and the grant price of the SAR.
Unrestricted Stock Awards. Upon receipt of an unrestricted stock award, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid by the participant with respect to the shares.
Restricted Stock Awards. Upon receipt of a restricted stock award, a participant generally will recognize compensation taxable as ordinary income when the shares cease to be subject to restrictions in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for the shares. Instead of postponing the federal income tax consequences of a restricted stock award until the restrictions lapse, a participant may elect to recognize compensation taxable as ordinary income in the year of the award in an amount equal to the fair market value of the shares at the time of receipt. This election is made under Section 83(b) of the Code. In general, a Section 83(b) election is made by filing a written notice with the Internal Revenue Service within 30 days of the date of grant of the restricted stock award for which the election is made and must meet certain technical requirements.
The tax treatment of a subsequent disposition of restricted stock will depend upon whether a participant has made a timely and proper Section 83(b) election. If a participant makes a timely and proper Section 83(b)
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election, when the participant sells the restricted shares, the participant generally will recognize short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant receives from the sale and the tax basis of the shares sold. If no Section 83(b) election is made, any disposition after the restriction lapses generally will result in short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. The tax basis of the shares generally will be equal to the amount, if any, the participant paid for the shares plus the amount of taxable ordinary income recognized either at the time the restrictions lapsed or at the time of the Section 83(b) election, if an election was made. If a participant has to forfeit the shares to us (e.g., upon the participant’s termination prior to expiration of the restriction period), the participant may not claim a deduction for the amount of compensation income recognized as a result of making the Section 83(b) election, and the participant generally will have a capital loss equal to the amount, if any, paid for the shares.
Restricted Stock Units. A participant generally will not recognize income at the time a stock unit is granted. When any part of a stock unit is issued or paid, the participant generally will recognize compensation taxable as ordinary income at the time of such issuance or payment in an amount equal to the then fair market value of any shares, cash or property the participant receives.
Performance Shares and Performance Units. A participant generally will not recognize income upon the grant of performance shares or performance units. Upon the distribution of cash, shares or other property to the participant pursuant to the terms of the performance shares or units, the participant generally will recognize compensation taxable as ordinary income equal to the excess of the amount of cash or the fair market value of any property transferred to the participant over any amount paid by the participant with respect to the performance shares or units.
Tax Consequences to the Company. In the foregoing cases, we generally will be entitled to a deduction at the same time and in the same amount as a participant recognizes ordinary income, subject to certain limitations imposed under the Code.
Code Section 409A. We intend that awards granted under the 2013 Incentive Plan comply with, or otherwise be exempt from, Code Section 409A, but make no representation or warranty to that effect.
Code Section 162(m). Under Code Section 162(m), we are generally prohibited from deducting compensation paid to “covered employees” in excess of $1,000,000 per person in any year. For purposes of the 2013 Incentive Plan going forward, our “covered employees” will consist of anyone who serves as our principal executive officer at any time during the taxable year, anyone who serves as our principal financial officer at any time during the taxable year, the individuals who serve as our three most highly compensated executive officers (other than our principal executive officer or principal financial officer) for the taxable year, and any person who was a covered employee of the corporation (or any predecessor) for any preceding taxable year beginning after December 31, 2016.
Tax Withholding. We are authorized to deduct or withhold from any award granted or payment due under the 2013 Incentive Plan, or require a participant to remit to us, the amount of any withholding taxes due in respect of the award or payment and to take such other action as may be necessary to satisfy all obligations for the payment of applicable withholding taxes. We are not required to issue any shares of common stock or otherwise settle an award under the 2013 Incentive Plan until all tax withholding obligations are satisfied.
Plan Benefits
All awards to employees, officers, directors and consultants under the 2013 Incentive Plan are made at the discretion of the committee. Therefore, the benefits and amounts that will be received or allocated under the 2013 Incentive Plan are not determinable at this time. However, please refer to the description of grants made to our named executive officers in the last fiscal year described in the “2017 Grants of Plan-Based Awards Table”
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above. Grants made to ournon-employee directors in the last fiscal year are described in the “2017 Director Compensation Table” section above. As of March 9, 2018, the closing sales price of a share of common stock as reported on the Nasdaq Stock Market was $6.45 per share.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS VOTE “FOR” APPROVAL OF THE AMENDED LATTICE SEMICONDUCTOR CORPORATION 2013 INCENTIVE PLAN.
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PROPOSAL 4: APPROVAL OF THE AMENDED LATTICE SEMICONDUCTOR CORPORATION
2011NON-EMPLOYEE DIRECTOR EQUITY INCENTIVE PLAN
We are seeking stockholder approval of our amended 2011Non-Employee Director Equity Incentive Plan, which we refer to as the Amended Director Plan. Our board of directors recently amended the 2011Non-Employee Director Equity Incentive Plan, upon recommendation of its compensation committee and subject to stockholder approval, to increase by 300,000 shares (from 1,710,000 shares to 2,010,000 shares) the number of shares of our common stock available for issuance under the Amended Director Plan.
As of March 9, 2018, the additional shares to be authorized for issuance under the Amended Director Plan represent approximately 0.24% of our outstanding shares of common stock. While authorizing these additional shares for issuance under the Amended Director Plan will increase the potential dilution represented by Lattice’s equity compensation program fornon-employee members of our board of directors, our board of directors and compensation committee believe that the potential dilution is reasonable.
We anticipate the additional shares for which we are seeking stockholder approval will be sufficient for our equity compensation program fornon-employee members of our board of directors through fiscal year 2019, and that we will need to seek stockholder approval for additional shares at our annual stockholders meeting in 2019.
If the stockholders approve the Amended Director Plan, in addition to the 300,000 new shares authorized for issuance under the Amended Director Plan, the shares that are subject to outstanding awards under the 2011Non-Employee Director Equity Incentive Plan that are forfeited or canceled or expire can be reused under the Amended Director Plan. For information regarding the shares of our common stock that may be issued under our existing equity compensation plans as of December 30, 2017, please refer to the information set forth in this proxy statement under the “Equity Compensation Plan Information” subheading starting on page 35.
If stockholders do not approve the Amended Director Plan, the amendment to the Amended Director Plan will not become effective and the remaining shares available for issuance under the 2011Non-Employee Director Equity Incentive Plan will remain available for new grants until awards have been granted covering all the shares authorized for issuance under the 2011Non-Employee Director Equity Incentive Plan or it is terminated by our board of directors.
The summary description of the amendment to the Amended Director Plan provided above and of the material terms of the Amended Director Plan provided below are not intended to be a complete description of the Amended Director Plan. A copy of the complete text of the Amended Director Plan is included as Annex B to this proxy statement, and the following description is qualified in its entirety by reference to the text of the Amended Director Plan.
Description of the Amended 2011Non-Employee Director Equity Incentive Plan
Purpose. The purpose of the Amended Director Plan is to attract, retain and motivatenon-employee members of our board of directors by providing them the opportunity to acquire a proprietary interest in the Company and to align their interests and efforts to the long-term interests of the Company’s stockholders.
Administration. Our board of directors will administer the Amended Director Plan.
Eligibility. Awards may be granted under the Amended Director Plan tonon-employee directors of the Company selected by the board of directors. As of March 9, 2018, sevennon-employee directors were eligible to receive awards under the Amended Director Plan. As of March 13, 2018, eightnon-employee directors were eligible to receive awards under the Amended Director Plan.
Number of Shares. The number of shares of common stock authorized for issuance under the Amended Director Plan is 2,010,000 shares. Shares to be issued under the Amended Director Plan will be drawn from
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authorized and unissued shares or shares then held or subsequently acquired by the Company as treasury shares. If any change in our stock occurs by reason of any stock dividend, stock split,spin-off, recapitalization, merger, consolidation, combination or exchange of shares, distribution to stockholders other than a normal cash dividend or other change in our corporate or capital structure, the board will make proportional adjustments to the maximum number and kind of securities available for issuance under the Amended Director Plan and subject to any outstanding award under the Amended Director Plan, including the per share price of such securities.
Types of Awards. The Amended Director Plan permits the grant of any or all of the following types of awards:
Stock Options. The board of directors may grant nonqualified stock options under the Amended Director Plan on the terms and conditions as determined by the board, except that the exercise price of stock options granted under the Amended Director Plan must generally be at least 100% of the fair market value of the common stock on the date of grant and the term of a stock option cannot exceed ten years. Unless the board otherwise determines, fair market value means, as of a given date, the closing price of our common stock.
Stock Appreciation Rights (SARs). The board may grant SARs under the Amended Director Plan. SARs are the right to receive payment per share of an exercised SAR in stock or cash, or a combination of stock and cash, equal to the excess of the share’s fair market value on the date of exercise over its fair market value on the date the SAR was granted. The term of a stand-alone SAR cannot be more than ten years.
Stock Awards, Restricted Stock and Stock Units. The board may grant awards of shares of common stock, or awards designated in units of common stock, under the Amended Director Plan. These awards may be made subject to repurchase or forfeiture restrictions at the board’s discretion. The restrictions may be based on continuous service with us or other criteria, as determined by the board.
Other Stock Based Awards. The board may grant other incentives payable in shares of common stock, subject to the terms of the Amended Director Plan and any other terms and conditions determined by the board.
Repricing. The Amended Director Plan prohibits the board, without stockholder approval, from lowering the price of an option after it is granted, except in connection with adjustments provided under the Amended Director Plan, taking any other action that is treated as a repricing under generally accepted accounting principles, or canceling an option at a time when its strike price exceeds the fair market value of the underlying stock, in exchange for cash, another option, restricted stock or units, or other equity, unless the cancellation and exchange occurs in connection with a merger, acquisition,spin-off or other similar corporate transaction.
Change in Control. Under the Amended Director Plan, unless otherwise provided in the instrument evidencing an award or in a written services or other agreement between the participant and us, in the event of a change of control:
In the event of a change in control, all awards will become fully and immediately exercisable, and all applicable deferral and restriction limitations or forfeiture provisions will lapse, immediately prior to the change in control and the awards will terminate at the effective time of the change of control.
In the event of certain reorganizations, mergers or consolidations, the committee may, in its discretion, instead provide that a participant’s outstanding awards will be cashed out.
Definition of Change in Control. Unless the board determines otherwise with respect to an award at the time it is granted or unless otherwise defined for purposes of an award in a written services or other agreement between a participant and us, a change in control of the Company generally means the occurrence of any of the following events:
An acquisition by any individual, entity or group of beneficial ownership of 50% or more of either (a) the then outstanding shares of common stock or (b) the combined voting power of the then
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| outstanding voting securities of the Company entitled to vote generally in the election of directors (excluding generally any acquisition directly from the Company, any acquisition by the Company, any acquisition by any employee benefit plan of the Company or an affiliate), or the completion of a reorganization, merger or consolidation, a sale of all of the Company’s outstanding shares, or sale or other disposition of all or substantially all of the assets of the Company (pursuant to which specific requirements are met);
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A change in the composition of the board such that the individuals who, as of the effective date of the Amended Director Plan, constitute the board cease for any reason to constitute at least a majority of the board (not including directors whose election, or nomination for election by stockholders, was approved by a majority of the incumbent board); or
Completion of specified reorganizations, mergers or consolidations or other disposition of all or substantially all of the assets of the Company.
Amendment and Termination. The board of directors may amend the Amended Director Plan, except that if any applicable statute, rule or regulation requires stockholder approval for an amendment to the Amended Director Plan, then to the extent so required, stockholder approval will be obtained. The board may also suspend or terminate all or any portion of the Amended Director Plan at any time, but any suspension or termination may not, without a participant’s consent, materially adversely affect any rights under any outstanding award. Unless sooner terminated by the board, the Amended Director Plan will terminate ten years after the date of stockholder approval of the Amended Director Plan.
U.S. Federal Income Tax Information
The following is a brief summary of the U.S. federal income tax consequences of the Amended Director Plan generally applicable to us and to participants in the Amended Director Plan who are subject to U.S. federal taxes. The summary is based on applicable Treasury Regulations and administrative and judicial interpretations thereof, each as in effect on the date of this proxy statement and is, therefore, subject to future changes in the law, possibly with retroactive effect. The summary is general in nature and does not purport to be legal or tax advice. Furthermore, the summary does not address issues relating to any U.S. gift or estate tax consequences or the consequences of any state, local or foreign tax laws.
Nonqualified Stock Options. A participant generally will not recognize income upon the grant or vesting of a nonqualified stock option with an exercise price at least equal to the fair market value of our common stock on the date of grant and no additional deferral feature. When a nonqualified stock option is exercised, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the shares underlying the option on the date of exercise and the option exercise price. When a participant sells the shares, the participant will have short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. The tax basis of the shares generally will be equal to the greater of the fair market value of the shares on the exercise date or the option exercise price. Special rules apply if a participant uses shares of common stock already held by the participant to pay the exercise price.
Stock Appreciation Rights. A participant generally will not recognize income upon the grant or vesting of an SAR with a grant price at least equal to the fair market value of our common stock on the date of grant and no additional deferral feature. Upon the exercise of an SAR, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the shares underlying the SAR on the date of exercise and the grant price of the SAR.
Unrestricted Stock Awards. Upon receipt of an unrestricted stock award, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid by the participant with respect to the shares.
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Restricted Stock Awards. Upon receipt of a restricted stock award, a participant generally will recognize compensation taxable as ordinary income when the shares cease to be subject to restrictions in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for the shares. Instead of postponing the federal income tax consequences of a restricted stock award until the restrictions lapse, a participant may elect to recognize compensation taxable as ordinary income in the year of the award in an amount equal to the fair market value of the shares at the time of receipt. This election is made under Section 83(b) of the Code. In general, a Section 83(b) election is made by filing a written notice with the Internal Revenue Service within 30 days of the date of grant of the restricted stock award for which the election is made and must meet certain technical requirements.
The tax treatment of a subsequent disposition of restricted stock will depend upon whether a participant has made a timely and proper Section 83(b) election. If a participant makes a timely and proper Section 83(b) election, when the participant sells the restricted shares, the participant generally will recognize short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant receives from the sale and the tax basis of the shares sold. If no Section 83(b) election is made, any disposition after the restriction lapses generally will result in short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. The tax basis of the shares generally will be equal to the amount, if any, the participant paid for the shares plus the amount of taxable ordinary income recognized either at the time the restrictions lapsed or at the time of the Section 83(b) election, if an election was made. If a participant has to forfeit the shares to us (e.g., upon the participant’s termination prior to expiration of the restriction period), the participant may not claim a deduction for the amount of compensation income recognized as a result of making the Section 83(b) election, and the participant generally will have a capital loss equal to the amount, if any, paid for the shares.
Restricted Stock Units. A participant generally will not recognize income at the time a stock unit is granted. When any part of a stock unit is issued or paid, the participant generally will recognize compensation taxable as ordinary income at the time of such issuance or payment in an amount equal to the then fair market value of any shares, cash or property the participant receives.
Tax Consequences to the Company. In the foregoing cases, we generally will be entitled to a deduction at the same time and in the same amount as a participant recognizes ordinary income, subject to certain limitations imposed under the Code.
Code Section 409A. We intend that awards granted under the Amended Director Plan comply with, or otherwise be exempt from, Code Section 409A, but make no representation or warranty to that effect.
Plan Benefits
All awards tonon-employee directors under the Amended Director Plan are made at the discretion of the board. Therefore, the benefits and amounts that will be received or allocated under the Amended Director Plan are not determinable at this time. However, please refer to the description of grants made to ournon-employee directors in the last fiscal year, which are described in this proxy statement under the “2016 Director Compensation Table” subheading starting on page 30. The closing price of our common stock, as reported on the Nasdaq Stock Market on March 9, 2018, was $6.45 per share.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
VOTE “FOR” APPROVAL OF THE AMENDED LATTICE SEMICONDUCTOR CORPORATION
2011NON-EMPLOYEE DIRECTOR EQUITY INCENTIVE PLAN.
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PROPOSAL 5: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The audit committee has approved the appointment of KPMG LLP (“KPMG”) to act as our independent registered public accounting firm for the fiscal year ending December 29, 2018, subjectmatters required to ratification of the appointmentbe discussed by Auditing Standard No. 1301, Communications with Audit Committees, adopted by the stockholders. Although ratification is not legally required, we are asking stockholders to ratifyPublic Company Accounting Oversight Board and Rule 2-07 of Regulation S-X, Communications with Audit Committees. In addition, the appointment of KPMG asAudit Committee has received the written disclosures and the
letter from our independent registered public accounting firm for our current fiscal year in the interest of good corporate governance. Audit and Related Fees
Under its charter, the audit committee reviewed andpre-approved all audit and permissiblenon-audit services performedrequired by KPMG. The audit committee also reviewed andpre-approved the proposed fees to be charged by KPMG for such services, and ratified any increase in fees resulting from an increase in the scope of work to be performed. In its review ofnon-audit services, the audit committee considered whether the provision of such services was compatible with maintaining the independence of KPMG. The following table sets forth the fees for professional audit services rendered by KPMG for the auditapplicable requirements of the Company’s annual financial statements for fiscal years 2016Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and 2015, and fees billed for other services rendered by KPMG during those periods.
| | | | | | | | | | | | Fiscal 2017 | | | Fiscal 2016 | | Audit Fees(1) | | $ | 1,888,500 | | | $ | 1,916,000 | | Tax Fees(2) | | | 14,000 | | | | 17,000 | | | | | | | | | | | Total fees | | $ | 1,892,500 | | | $ | 1,933,000 | | | | | | | | | | |
(1) | For fiscal 2017 and 2016, this category includes fees for the audit of the annual financial statements included inhas discussed with our Annual Report on Form10-K, review of the quarterly financial statements included in our quarterly reports on Form10-Q, audit of our internal controls, issuance of consents and assistance with and review of documents filed with the SEC and for statutory audits of certain of our international subsidiaries. |
(2) | This category includes fees billed for tax compliance, tax planning and tax advice. |
The audit committee reviews and approves in advance all audit andnon-audit services provided by the Company’s independent registered public accounting firm (or subsequently approvesnon-audit services in those circumstances where a subsequent approval is necessarythe independent accountant’s independence from the Company and permissible). In this regard,our management.
Based upon the audit committee has the sole authority to approve the hiringAudit Committee’s discussions with management and firing of theour independent registered public accounting firm and to determine all audit andnon-audit engagement fees and terms with the independent registered public accounting firm. The audit committee appointsAudit Committee’s review of the independent registered public accounting firm annually. Before appointing KPMG asrepresentations of management, the reports of our independent registered public accounting firm, forand the fiscal year ending December 29, 2018,information referenced above, the Audit Committee carefully consideredrecommended that firm’s qualifications and performance during fiscal 2017.the Board of Directors include the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended January 2, 2021, for filing with the SEC.
Representatives of KPMG have been invited and are expected to attendRespectfully submitted by the annual meeting, will be given the opportunity to make a statement if they wish to do so, and are expected to be available to respond to appropriate questions.Audit Committee.
Required VoteMark E. Jensen, Chair
The proposal to ratify the appointment of KPMG requires the affirmative vote of a majority of the shares present at the annual meeting, in person or by proxy, and entitled to vote on the proposal at the meeting. If the appointment of KPMG is not ratified, the audit committee will take the vote under advisement in evaluating whether to retain KPMG.Robin Abrams
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THEJames P. Lederer
RATIFICATION OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR THE YEAR ENDING DECEMBER 29, 2018.
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ANNUAL REPORT Our 20172020 Annual Report to Stockholders was provided to our stockholders together with this proxy statement.Proxy Statement. We will furnish without charge, upon the written request of any person who was a stockholder or a beneficial owner of our common stock at the close of business on March 9, 2018,12, 2021, an additional copy of our Annual Report on Form10-K for for our most recent fiscal year filed with the SEC on March 14, 2018,February 26, 2021, including financial statement schedules but not including exhibits. Requests should be directed to the attention of the Secretary, Lattice Semiconductor Corporation, 111 SW 5th Ave., Suite 700, Portland,5555 NE Moore Court, Hillsboro, Oregon 97204.97124. OTHER BUSINESS The boardBoard of directorsDirectors does not intend to present any business for action at the meetingAnnual Meeting other than the election of directors and the proposals set forth herein, nor does it have knowledge of any matters that may be presented by others. If any other matter properly comes before the meeting,Annual Meeting, the persons named in the accompanying form of proxy intend to vote the shares they represent as the boardBoard of directorsDirectors may recommend or if no such recommendation is given, in the discretion of such persons. METHOD AND COST OF SOLICITATION The cost of solicitation of proxies will be paid by the Company. In addition to solicitation by mail, certain of our employees, for no additional compensation, may request the return of proxies personally or by telephone, fax, ore-mail. We We will, on request, reimburse brokers and other persons holding shares for the benefit of others for their expenses in forwarding proxies and accompanying material and in obtaining authorization from beneficial owners of our stock to execute proxies. The Company may also engage the services of a third partythird-party firm to aid in the solicitation of proxies. 50
STOCKHOLDER PROPOSALS Stockholder Proposals for Inclusion in Next Year’s Proxy Statement To be considered for inclusion in the proxy statement relating to next year’s annual meeting,Annual Meeting of Stockholders, a stockholder proposal must be received at our principal executive offices no later than December 11, 2018.November 25, 2021. Such proposals also will need to comply with SEC regulations under Rule14a-8 regarding regarding the inclusion of stockholder proposals in Company-sponsored proxy materials. Proposals should be addressed to the Secretary, Lattice Semiconductor Corporation, 111 SW 5th Ave., Suite 700, Portland,5555 NE Moore Court, Hillsboro, Oregon 97204.97124. Other Stockholder Proposals and Director Nominations If a stockholder wishes to present a stockholder proposal at our next annual meetingyear’s Annual Meeting of Stockholders that is not intended to be included in the proxy statement or to nominate a person for election to our boardBoard of directorsDirectors at the annual meeting,next year’s Annual Meeting of Stockholders, the stockholder must provide the information required by our bylaws and give timely notice to our corporate secretary in accordance with our bylaws, which, in general, require that the notice be received by the corporate secretary: (1) not earlier than the close of business on November 25, 2021, and | (1) | not earlier than the close of business on December 11, 2018, and |
(2) not later than the close of business on December 25, 2021. | (2) | not later than the close of business on January 10, 2018. |
If the date of the next annual meetingAnnual Meeting of Stockholders is changed by more than 30 days from the anniversary of this year’s annual meeting,the Annual Meeting, then notice of a stockholder proposal that is not intended to be included in our proxy statement under Rule14a-8 or or of a nomination for election to our boardBoard of directorsDirectors must be received no later than the close of business on the later of 120 days prior to the meeting and 10 days after public announcement of the meeting date. Notices of intention to present proposals or to nominate persons for election to our boardBoard of directorsDirectors at the next annual meetingyear’s Annual Meeting of Stockholders should be addressed to the Secretary, Lattice Semiconductor Corporation, 111 SW 5th Ave., Suite 700, Portland,5555 NE Moore Court, Hillsboro, Oregon 97204.97124. You may also contact our corporate secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals.proposals or access a complete copy of our bylaws at http://www.sec.gov. Multiple Copies of Proxy Materials
MULTIPLE COPIES OF PROXY MATERIALS You may receive more than one set of voting materials, including multiple copies of this proxy statementProxy Statement and multiple proxy cards or annual reports. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one Notice of Internet Availability of Proxy Materials. If you share an address with another stockholder, you may receive only one set of proxy materials (including our Notice of Internet Availability of Proxy Materials, our 2017 Annual Report to Stockholders and this proxy statement)Materials) unless you have provided contrary instructions. If you wish to receive a separate set of proxy materials now or in the future, you may contact us to request a separate copy. Your request may be addressed to the Secretary, Lattice Semiconductor Corporation, 111 SW 5th Ave., Suite 700, Portland,5555 NE Moore Court, Hillsboro, Oregon 97204,97124, or you may contact the Secretary at(503) 268-8000 or or by sending an email message to byron.milstead@latticesemi.com with “Request for Proxy Materials” in the subject line and provide your name and address. Similarly, if you share an address with another stockholder and have received multiple copies of our proxy materials, you may write or call us at the above address, phone number ore-mail address address to request delivery of a single copy of these materials. It is important that your shares be represented at the meeting,Annual Meeting, regardless of the number of shares that you hold. Therefore, whether or not you expect to be present at the meeting,Annual Meeting, please vote your shares as soon as 51
possible. You can vote your shares over the Internet or by telephone. In addition, if you receive a proxy card by mail, you can vote by signing and dating the proxy card and returning it in the envelope provided. Dated: March 25, 2021 By Order of the Board of Directors
Byron W. Milstead Secretary Portland, Oregon
Annex A April 10, 2018Non-GAAP Reconciliation
| | | | | | | | | | | | Twelve Months Ended | | | | | December 28,
2019 | | | December 28,
2019 | | GAAP Income (loss) from operations | | $ | 52,366 | | | $ | 59,041 | | Stock-based compensation—gross margin | | | 3,818 | | | | 1,422 | | Inventory adjustment related to restructured operations | | | — | | | | (338 | ) | Stock-based compensation—operations | | | 38,324 | | | | 17,477 | | Amortization of acquired intangible assets | | | 4,449 | | | | 13,588 | | Restructuring charges | | | 3,937 | | | | 4,664 | | Impairment of acquired intangible assets | | | — | | | | (1,023 | ) | Acquisition related charges | | | — | | | | — | | Non-GAAP Income from operations | | $ | 102,894 | | | $ | 94,801 | |
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ANNEXC123456789
000000000.000000 ext 000000000.000000 ext 000004 000000000.000000 ext 000000000.000000 ext
ENDORSEMENT_LINE SACKPACK 000000000.000000 ext 000000000.000000 ext MR A
LATTICE SEMICONDUCTOR CORPORATION
2013 INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of the Lattice Semiconductor Corporation 2013 Incentive Plan is SAMPLE
DESIGNATION (IF ANY) ADD 1
ADD ADD 2 3 Your vote matters – here’s how to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and its Related Companies by providing them the opportunity to acquire a proprietary interest in the Company and to align their interests and efforts to the long-term interests of the Company’s stockholders.
SECTION 2. DEFINITIONS
Certain capitalized terms used in the Plan have the meanings set forth in Appendix A.
SECTION 3. ADMINISTRATION
3.1 Administration of the Plan
(a) The Plan shall be administered by the Board or the Compensation Committee, which shall be composed of two or more directors, each of whom is avote!
“non-employee director” within the meaning of Rule16b-3(b)(3) promulgated under the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission, and an “outside director” within the meaning of Section 162(m) of the Code, or any successor provision thereto.
(b) Notwithstanding the foregoing, the Board or Compensation CommitteeADD ADD 5 4 You may delegate concurrent responsibility for administering the Plan, including with respect to designated classes of Eligible Persons, to different committees consisting of one or more members of the Board, subject to such limitations as the Board deems appropriate, including limitations with respect to grants of Awards to Participants who are subject to Section 16 of the Exchange Act or pursuant to Section 16 of the Plan. Members of any committee shall serve for such term as the Board may determine, subject to removal by the Board at any time. To the extent consistent with applicable law, the Board or the Compensation Committee may authorize one or more officers of the Company to grant Awards to designated classes of Eligible Persons, within limits specifically prescribed by the Board or the Compensation Committee; provided, however, that no such officer shall have or obtain authority to grant Awards to himself or herself or to any person subject to Section 16 of the Exchange Act.
(c) All references in the Plan to the “Committee” shall be, as applicable, to the Board, the Compensation Committee or any other committee or any officer to whom the Board or the Compensation Committee has delegated authority to administer the Plan.
3.2 Administration and Interpretation by Committee
(a) Except for the terms and conditions explicitly set forth in the Plan and to the extent permitted by applicable law, the Committee shall have full power and exclusive authority, subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board or a Committee composed of members of the Board, to (i) select the Eligible Persons to whom Awards may from time to time be granted under the Plan; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of shares of Common Stock to be covered by each Award granted under the Plan; (iv) determine the terms and conditions of any Award granted under the Plan; (v) approve
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the forms of notice or agreement for use under the Plan; (vi) determine whether, to what extent and under what circumstances Awards may be settled in cash, shares of Common Stock or other property or canceled or suspended; (vii) interpret and administer the Plan and any instrument evidencing an Award, notice or agreement executed or entered into under the Plan; (viii) establish such rules, regulations andsub-plans as it shall deem appropriate for the proper administration and operation of the Plan; (ix) delegate ministerial duties to such of the Company’s employees as it so determines; and (x) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan.
(b) In no event, however, shall the Committee have the right, without stockholder approval, to (i) lower the exercise or grant price of an Option or SAR after it is granted, except in connection with adjustments provided in Section 15; (ii) cancel an Option or SAR at a time when its exercise or grant price exceeds the Fair Market Value of the underlying stock, in exchange for cash, another option or stock appreciation right, restricted stock, or other equity award; (iii) take any other action that is treated as a repricing under generally accepted accounting principles, or (iv) issue an Option or SAR or amend an outstanding Option or SAR to provide for the grant or issuance of a new Option or SAR on exercise of the original Option or SAR.
(c) The effect on the vesting of an Award of a Company-approved leave of absence or a Participant’s reduction in hours of employment or service shall be determined by the Company’s chief human resources officer or other person performing that function or, with respect to directors or executive officers, by the Compensation Committee, whose determination shall be final.
(d) Decisions of the Committee shall be final, conclusive and binding on all persons, including the Company, any Participant, any stockholder and any Eligible Person. A majority of the members of the Committee may determine its actions.
SECTION 4. SHARES SUBJECT TO THE PLAN
4.1 Authorized Number of Shares
Subject to adjustment from time to time as provided in Section 15.1, the aggregate maximum number of shares of Common Stock available for issuance under the Plan shall be:
(a) 18,640,000 shares; plus
(b) (i) any authorized shares available for issuance, and not issued or subject to outstanding awards, under the Company’s 1996 Stock Plan (the “Prior Plan”) on the Effective Date shall cease to be set aside and reserved for issuance pursuant to the Prior Plan, effective on the Effective Date, and shall instead be set aside and reserved for issuance pursuant to the Plan and (ii) any shares subject to outstanding awards under the Prior Plan on the Effective Date that cease to be subject to such awards following the Effective Date (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested or nonforfeitable shares) shall cease to be set aside or reserved for issuance pursuant to the Prior Plan, effective on the date upon which they cease to be so subject to such awards, and shall instead be set aside and reserved for issuance pursuant to the Plan, up to an aggregate maximum of 8,699,550 shares pursuant to clauses (i) and (ii) of this paragraph (b).
Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company as treasury shares.
4.2 Share Usage
(a) Any shares of Common Stock subject to Stock Awards, Restricted Stock, Stock Units, Performance Shares and Performance Units shall count against the numerical limits of Section 4.1 as 2.2 shares of Common
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Stock for every one share of Common Stock subject thereto. If any such Award lapses, expires, terminates or is canceled prior to the issuance of shares thereunder or if shares of Common Stock are issued under the Plan to a Participant and thereafter are forfeited to or otherwise reacquired by the Company and would otherwise return to the Plan pursuant to Section 4.2(b), 2.2 times the number of shares of Common Stock covered by such Award shall return to the Plan and shall again be available for issuance.
(b) Shares of Common Stock covered by an Award shall not be counted as used unless and until they are actually issued and delivered to a Participant. If any Award lapses, expires, terminates or is canceled prior to the issuance of shares thereunder, is settled in cash in lieu of shares of Common Stock, or if shares of Common Stock are issued under the Plan to a Participant and thereafter are forfeited to or otherwise reacquired by the Company, the shares subject to such Awards and the forfeited or reacquired shares shall again be available for issuance under the Plan. covered by an Award that is settled in such a manner such that some or all of the shares of Common Stock covered by the Award are not issued, shall again be available for Awards under the Plan. The number of shares of Common Stock available for issuance under the Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional shares of Common Stock or credited as additional shares of Common Stock subject or paid with respect to an Award. Notwithstanding the foregoing, any shares of Common Stock tendered by a Participant or retained by the Company as full or partial payment to the Company for the exercise or purchase price of an Award, or to satisfy tax withholding obligations in connection with an Award, shall not again be available for Awards under the Plan.
(c) The Committee shall also, without limitation, have the authority to grant Awards as an alternative to or as the form of payment for grants or rights earned or due under other compensation plans or arrangements of the Company.
(d) Notwithstanding any other provision of the Plan to the contrary, the Committee may grant Substitute Awards under the Plan. Substitute Awards shall not reduce the number of shares authorized for issuance under the Plan. In the event that an Acquired Entity has shares available for awards or grants under one or more preexisting plans not adopted in contemplation of such acquisition or combination and previously approved by the Acquired Entity’s stockholders, then, to the extent determined by the Board or the Compensation Committee, the shares available for grant pursuant to the terms of such preexisting plans (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to holders of securities of the entities that are parties to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the number of shares of Common Stock authorized for issuance under the Plan; provided, however, that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of such preexisting plans, absent the acquisition or combination, and shall only be made to individuals who were not employees or directors of the Company or a Related Company prior to such acquisition or combination. In the event that a written agreement between the Company and an Acquired Entity pursuant to which a merger or consolidation is completed is approved by the Board and that agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, those terms and conditions shall be deemed to be the action of the Committee without any further action by the Committee, except as may be required for compliance withRule 16b-3 under the Exchange Act, and the persons holding such awards shall be deemed to be Participants.
(e) Notwithstanding any other provision of this Section 4.2 to the contrary, the maximum number of shares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregate share number stated in Section 4.1, subject to adjustment as provided in Section 15.1.
4.3 Limitations
Subject to adjustment as provided in Section 15.1, the aggregate number of shares that may be issued pursuant to full value Awards granted under the Plan, which includes all Awards other than Awards of Options or
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Stock Appreciation Rights, may not exceed 50% of the new shares added under the 2013 Incentive Plan or 50% of the aggregate number of shares authorized under the Plan. Subject to adjustment as provided in Section 15.1, the aggregate number of shares that may be issued pursuant to Awards granted under the Plan that either (a) contain no restrictions or restrictions based solely on continuous employment or services over fewer than three years (except if accelerated pursuant to a Change in Control or in the event of a Termination of Service) or (b) vest over less than one year (except if accelerated pursuant to a Change in Control or in the event of a Termination of Service) based on factors other than solely continuous employment or services shall not exceed 5% of the aggregate maximum number of shares specified in Section 4.1. In addition, if and to the extent the Committee accelerates vesting or exercisability of an Award or otherwise acts to waive or lapse any restriction on an Award, other than in connection with a Participant’s death, Disability or Retirement or a Change of Control, the shares covered by such Committee action shall similarly count towards the 5% limitation described in this Section 4.3. The Committee may not waive the achievement of performance goals related to an Award except in the case of a participant’s death or Disability. Awards granted to any Participant under the Plan shall also be subject to the size limitations described in Section 16.3(a).
SECTION 5. ELIGIBILITY
An Award may be granted to any employee, officer or director of the Company or a Related Company whom the Committee from time to time selects. An Award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered to the Company or any Related Company that (a) are not in connection with the offer and sale of the Company’s securities in acapital-raising transaction and (b) do not directly or indirectly promote or maintain a market for the Company’s securities.
SECTION 6. AWARDS
6.1 Form, Grant and Settlement of Awards
The Committee shall have the authority, in its sole discretion, to determine the type or types of Awards to be granted under the Plan. Such Awards may be granted either alone or in addition to or in tandem with any other type of Award. Any Award settlement may be subject to such conditions, restrictions and contingencies as the Committee shall determine.
6.2 Evidence of Awards
Awards granted under the Plan shall be evidenced by a written, including an electronic, instrument that shall contain such terms, conditions, limitations and restrictions as the Committee shall deem advisable and that are not inconsistent with the Plan.
6.3 Dividends and Distributions
Participants may, if the Committee so determines, be credited with dividends or dividend equivalents paid with respect to shares of Common Stock underlying an Award in a manner determined by the Committee in its sole discretion. The Committee may apply any restrictions to the dividends or dividend equivalents that the Committee deems appropriate. The Committee, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, shares of Common Stock, Restricted Stock or Stock Units. Notwithstanding the foregoing, the right to any dividends or dividend equivalents declared and paid on the number of shares underlying an Option or a Stock Appreciation Right may not be contingent, directly or indirectly, on the exercise of the Option or Stock Appreciation Right, and must comply with or qualify for an exemption under Section 409A. Also notwithstanding the foregoing, the right to any dividends or dividend equivalents declared and paid on Restricted Stock must (i) be paid at the same time such dividends or dividend
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equivalents are paid to other stockholders and (ii) comply with or qualify for an exemption under Section 409A. Also notwithstanding the foregoing, no Participant shall be paid amounts with respect to dividends or dividend equivalents credited with respect to unvested Awards while such Awards remain unvested.
SECTION 7. OPTIONS
7.1 Grant of Options
The Committee may grant Options designated as Incentive Stock Options or Nonqualified Stock Options.
7.2 Option Exercise Price
Options shall be granted with an exercise price per share not less than 100% of the Fair Market Value of the Common Stock on the Grant Date (and such exercise price shall not be less than the minimum exercise price required by Section 422 of the Code with respect to Incentive Stock Options), except in the case of Substitute Awards.
7.3 Term of Options
Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of an Option shall be seven years from the Grant Date.
7.4 Exercise of Options
(a) The Committee shall establish and set forth in each instrument that evidences an Option the time at which, or the installments in which, the Option shall vest and become exercisable, any of which provisions may be waived or modified by the Committee at any time.
(b) To the extent an Option has vested and become exercisable, the Option may be exercised in whole or from time to time in part by delivery to or as directed or approved by the Company of a properly executed stock option exercise agreement or notice, in a form and in accordance with procedures established by the Committee, setting forth the number of shares with respect to which the Option is being exercised, the restrictions imposed on the shares purchased under such exercise agreement or notice, if any, and such representations and agreements as may be required by the Committee, accompanied by payment in full as described in Section 7.5. An Option may be exercised only for whole shares and may not be exercised for less than a reasonable number of shares at any one time, as determined by the Committee.
7.5 Payment of Exercise Price
The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased. Such consideration must be paid before the Company will issue the shares being purchased and must be in a form or a combination of forms acceptable to the Committee for that purchase, which forms may include:
(a) cash;
(b) check or wire transfer;
(c) having the Company withhold shares of Common Stock that would otherwise be issued on exercise of a Nonqualified Stock Option that have an aggregate Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;
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(d) tendering (either actually or, so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation) shares of Common Stock owned by the Participant that have an aggregate Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;
(e) so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, and to the extent permitted by law, delivery of a properly executed exercise agreement or notice, together with irrevocable instructions to a brokerage firm designated or approved by the Company to deliver promptly to the Company the aggregate amount of proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise, all in accordance with the regulations of the Federal Reserve Board; or
(f) such other consideration as the Committee may permit.
7.6 Effect of Termination of Service
(a) The Committee shall establish and set forth in each instrument that evidences an Option whether the Option shall continue to be exercisable, and the terms and conditions of such exercise, after a Termination of Service, any of which provisions may be waived or modified by the Committee at any time.
(b) If the exercise of the Option following a Participant’s Termination of Service, but while the Option is otherwise exercisable, would be prohibited solely because the issuance of Common Stock would violate either the registration requirements under the Securities Act or the Company’s insider trading policy, then the Option shall remain exercisable until the earlier of (i) the Option Expiration Date or (ii) the expiration of a period of three months (or such longer period of time as determined by the Committee in its sole discretion, which longer period shall not be more than two months beyond the aforementioned three months) after the Participant’s Termination of Service during which the exercise of the Option would not be in violation of such Securities Act or insider trading policy requirements.
SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS
Notwithstanding any other provision of the Plan to the contrary, the terms and conditions of any Incentive Stock Options shall in addition comply in all respects with Section 422 of the Code, or any successor provision, and any applicable regulations thereunder. If the shareholders of the Company do not approve the Plan within 12 months after the Board’s adoption of the Plan (or the Board’s adoption of any amendment to the Plan that constitutes the adoption of a new plan for purposes of Section 422 of the Code) Incentive Stock Options granted under the Plan after the date of the Board’s adoption (or approval) will be treated as Nonqualified Stock Options. No Incentive Stock Options may be granted more than ten years after the earlier of the approval by the Board or the shareholders of the Plan (or any amendment to the Plan that constitutes the adoption of a new plan for purposes of Section 422 of the Code).
SECTION 9. STOCK APPRECIATION RIGHTS
9.1 Grant of Stock Appreciation Rights
The Committee may grant Stock Appreciation Rights to Participants at any time on such terms and conditions as the Committee shall determine in its sole discretion. An SAR may be granted in tandem with an Option (a “tandem SAR”) or alone (a “freestanding SAR”). The grant price of a tandem SAR shall be equal to the exercise price of the related Option. The grant price of a freestanding SAR shall be established in accordance with procedures for Options set forth in Section 7.2. A SAR may be exercised upon such terms and conditions and for such term as the Committee determines in its sole discretion; provided, however, that, subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the SAR, the maximum term
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of a freestanding SAR shall be seven years, and in the case of a tandem SAR, (a) the term shall not exceed the term of the related Option and (b) the tandem SAR may be exercised for all or part of the shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option, except that the tandem SAR may be exercised only with respect to the shares for which its related Option is then exercisable.
9.2 Payment of SAR Amount
Upon the exercise of an SAR, a Participant shall be entitled to receive payment in an amount determined by multiplying: (a) the difference between the Fair Market Value of the Common Stock on the date of exercise over the grant price of the SAR by (b) the number of shares with respect to which the SAR is exercised. At the discretion of the Committee as set forth in the instrument evidencing the Award, the payment upon exercise of an SAR may be in cash, in shares, in some combination thereof or in any other manner approved by the Committee in its sole discretion.
9.3 Waiver of Restrictions
The Committee, in its sole discretion, may waive any other terms, conditions or restrictions on any SAR under such circumstances and subject to such terms and conditions as the Committee shall deem appropriate.
SECTION 10. STOCK AWARDS, RESTRICTED STOCK AND STOCK UNITS
10.1 Grant of Stock Awards, Restricted Stock and Stock Units
The Committee may grant Stock Awards, Restricted Stock and Stock Units on such terms and conditions and subject to such repurchase or forfeiture restrictions, if any, which may be based on continuous employment or service with the Company or a Related Company or the achievement of any performance goals, as the Committee shall determine in its sole discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the Award.
10.2 Vesting of Restricted Stock and Stock Units
Upon the satisfaction of any terms, conditions and restrictions prescribed with respect to Restricted Stock or Stock Units, or upon a Participant’s release from any terms, conditions and restrictions on Restricted Stock or Stock Units, as determined by the Committee, and subject to the provisions of Section 13, (a) the shares covered by each Award of Restricted Stock shall become freely transferable by the Participant, and (b) Stock Units shall be paid in shares of Common Stock or, if set forth in the instrument evidencing the Awards, in cash or a combination of cash and shares of Common Stock. Any fractional shares subject to such Awards shall be paid to the Participant in cash.
10.3 Waiver of Restrictions
The Committee, in its sole discretion, may waive the repurchase or forfeiture period and any other terms, conditions or restrictions on any Restricted Stock or Stock Units under such circumstances and subject to such terms and conditions as the Committee shall deem appropriate.
SECTION 11. PERFORMANCE AWARDS
11.1 Performance Shares
The Committee may grant Awards of Performance Shares, designate the Participants to whom Performance Shares are to be awarded and determine the number of Performance Shares and the terms and conditions of each
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such Award. Performance Shares shall consist of a unit valued by reference to a designated number of shares of Common Stock, the value of which may be paid to the Participant by delivery of shares of Common Stock or, if set forth in the instrument evidencing the Award, of such property as the Committee shall determine, including, without limitation, cash, shares of Common Stock, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. The amount to be paid under an Award of Performance Shares may be adjusted on the basis of such further consideration as the Committee shall determine in its sole discretion.
11.2 Performance Units
The Committee may grant Awards of Performance Units, designate the Participants to whom Performance Units are to be awarded and determine the number of Performance Units and the terms and conditions of each such Award. Performance Units shall consist of a unit valued by reference to a designated amount of property other than shares of Common Stock, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including, without limitation, cash, shares of Common Stock, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. The amount to be paid under an Award of Performance Units may be adjusted on the basis of such further consideration as the Committee shall determine in its sole discretion.
SECTION 12. OTHER STOCK OR CASH-BASED AWARDS
Subject to the terms of the Plan and such other terms and conditions as the Committee deems appropriate, the Committee may grant other incentives payable in cash or in shares of Common Stock under the Plan.
SECTION 13. WITHHOLDING
13.1 Payment of Tax Withholding and Other Obligations
The Company may require the Participant to pay to the Company or a Related Company, as applicable, the amount of (i) any taxes that the Company or a Related Company is required by applicable federal, state, local or foreign law to withhold with respect to the grant, vesting or exercise of an Award or any other taxable or tax withholding event related to an Award (“tax withholding obligations”) and (ii) any amounts due from the Participant to the Company or to any Related Company (“other obligations”). Notwithstanding any other provision of the Plan to the contrary, the Company shall not be required to issue any shares of Common Stock or otherwise settle an Award under the Plan until such tax withholding obligations and other obligations are satisfied.
13.2 Payment Methods
The Committee, in its sole discretion, may permit or require a Participant to satisfy all or part of the Participant’s tax withholding obligations and other obligations by one or a combination of any of the following: (i) paying cash to the Company or a Related Company, as applicable, (ii) having the Company, or a Related Company, as applicable, withhold an amount from any cash amounts otherwise due or to become due from the Company or a Related Company to the Participant, (iii) having the Company withhold a number of shares of Common Stock that would otherwise be issued to the Participant (or become vested, in the case of Restricted Stock) having a Fair Market Value equal to the tax withholding obligations and other obligations, (iv) surrendering a number of shares of Common Stock the Participant already owns having a value equal to the tax withholding obligations and other obligations, (v) selling shares of Common Stock issued under an Award on the open market or to the Company, or (vi) taking such other action as may be necessary in the opinion of the Committee to satisfy any applicable tax withholding obligations. The value of the shares so withheld or tendered
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may not exceed the employer’s applicable minimum required tax withholding rate or such other applicable rate as is necessary to avoid adverse treatment for financial accounting purposes, as determined by the Committee in its sole discretion.
SECTION 14. ASSIGNABILITY
No Award or interest in an Award may be sold, assigned, pledged (as collateral for a loan or as security for the performance of an obligation or for any other purpose) or transferred by a Participant or made subject to attachment or similar proceedings otherwise than by willvote online or by the applicable laws of descent and distribution, except to the extent, at the discretion of the Committee, the instrument evidencing the Award permits the Participant to designate one or more beneficiaries on a Company-approved form who may exercise the Award or receive payment under the Award after the Participant’s death. During a Participant’s lifetime, an Award may be exercised only by the Participant. Notwithstanding the foregoing, and to the extent permitted by Section 422 of the Code, the Committee, in its sole discretion, may permit a Participant to assign or transfer an Award subject to such terms and conditions as the Committee shall specify.
SECTION 15. ADJUSTMENTS
15.1 Adjustment of Shares
In the event that, at any time or from time to time, a stock dividend, stock split,spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to stockholders other than a normal cash dividend, or other change in the Company’s corporate or capital structure results in (a) the outstanding shares of Common Stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or kind of securities of the Company or (b) new, different or additional securities of the Company or any other company being received by the holders of shares of Common Stock, then the Committee shall make proportional adjustments in (i) the maximum number and kind of securities available for issuance under the Plan; (ii) the maximum number and kind of securities issuable as Incentive Stock Options as set forth in Section 4.2; (iii) the maximum numbers and kind of securities set forth in Section 16.3; (iv) the maximum number and kind of securities set forth in Section 4.3; and (v) the number and kind of securities that are subject to any outstanding Award and the per share price of such securities, without any change in the aggregate price to be paid therefor. The determination by the Committee as to the terms of any of the foregoing adjustments shall be conclusive and binding.
Notwithstanding the foregoing, the issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services rendered, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, outstanding Awards. Also notwithstanding the foregoing, a dissolution or liquidation of the Company or a Company Transaction shall not be governed by this Section 15.1 but shall be governed by Sections 15.2 and 15.3, respectively.
15.2 Dissolution or Liquidation
To the extent not previously exercised or settled, and unless otherwise determined by the Committee in its sole discretion, Awards shall terminate immediately prior to the dissolution or liquidation of the Company. To the extent a vesting condition, forfeiture provision or repurchase right applicable to an Award has not been waived by the Committee, the Award shall be forfeited immediately prior to the consummation of the dissolution or liquidation.
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15.3 Change in Control
Notwithstanding any other provision of the Plan to the contrary, unless the Committee shall determine otherwise in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, in the event of a Change in Control:
(a) All outstanding Awards that are subject to vesting based on continued employment or service with the Company or a Related Company shall become fully vested and immediately exercisable or payable, and all applicable restrictions or forfeiture provisions shall lapse, immediately prior to the Change in Control and such Awards shall terminate at the effective time of the Change in Control; provided, however, that with respect to a Change in Control that is a Company Transaction in which such Awards could be converted, assumed, substituted for or replaced by the Successor Company, such Awards shall become fully vested and exercisable or payable, and all applicable restrictions or forfeiture provisions shall lapse, only if and to the extent such Awards are not converted, assumed, substituted for or replaced by the Successor Company. If and to the extent that the Successor Company converts, assumes, substitutes for or replaces an Award, the vesting restrictions and/or forfeiture provisions applicable to such Award shall not be accelerated or lapse, and all such vesting restrictions and/or forfeiture provisions shall continue with respect to any shares of the Successor Company or other consideration that may be received with respect to such Award.
For the purposes of this Section 15.3(a), an Award shall be considered converted, assumed, substituted for or replaced by the Successor Company if following the Company Transaction the Award confers the right to purchase or receive, for each share of Common Stock subject to the Award immediately prior to the Company Transaction, the consideration (whether stock, cash or other securities or property) received in the Company Transaction by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Company Transaction is not solely common stock of the Successor Company, the Committee may, with the consent of the Successor Company, provide for the consideration to be received pursuant to the Award, for each share of Common Stock subject thereto, to be solely common stock of the Successor Company substantially equal in fair market value to the per share consideration received by holders of Common Stock in the Company Transaction. The determination of such substantial equality of value of consideration shall be made by the Committee, and its determination shall be conclusive and binding.
(b) All Performance Shares, Performance Units and other outstanding Awards that are subject to vesting based on the achievement of specified performance goals and that are earned and outstanding as of the date the Change in Control is determined to have occurred and for which the payout level has been determined shall be payable in full in accordance with the payout schedule pursuant to the instrument evidencing the Award. Any remaining outstanding Performance Shares, Performance Units and other outstanding Awards that are subject to vesting based on the achievement of specified performance goals (including any applicable performance period) for which the payout level has not been determined shall be prorated and shall be payable in accordance with the payout schedule pursuant to the instrument evidencing the Award. Any existing deferrals or other restrictions not waived by the Committee in its sole discretion shall remain in effect.
(c) Notwithstanding the foregoing, the Committee, in its sole discretion, mayphone instead provide in the event of a Change in Control that is a Company Transaction that a Participant’s outstanding Awards shall terminate upon or immediately prior to such Company Transaction and that such Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (x) the value of the per share consideration received by holders of Common Stock in the Company Transaction, or, in the event the Company Transaction is one of the transactions listed under subsection (c) in the definition of Company Transaction or otherwise does not result in direct receipt of consideration by holders of Common Stock, the value of the deemed per share consideration received, in each case as determined by the Committee in its sole discretion, multiplied by the number of shares of Common Stock subject to such outstanding Awards (to the extent then vested and exercisable or whether or not then vested and exercisable, as determined by the Committee in its sole discretion) exceeds (y) if applicable, the respective aggregate exercise price or grant price for such Awards.
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(d) For the avoidance of doubt, nothing in this Section 15.3 requires all outstanding Awards to be treated similarly.
15.4 Further Adjustment of Awards
Subject to Sections 15.2 and 15.3, the Committee shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation, dissolution or change of control of the Company, as defined by the Committee, to take such further action as it determines to be necessary or advisable with respect to Awards. Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, lifting restrictions and other modifications, and the Committee may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants. The Committee may take such action before or after granting Awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation, dissolution or change of control that is the reason for such action.
15.5 No Limitations
The grant of Awards shall in no way affect the Company’s right to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
15.6 No Fractional Shares
In the event of any adjustment in the number of shares covered by any Award, each such Award shall cover only the number of full shares resulting from such adjustment, and any fractional shares resulting from such adjustment shall be disregarded.
15.7 Section 409A
Notwithstanding any other provision of the Plan to the contrary, (a) any adjustments made pursuant to this Section 15 to Awards that are considered “deferred compensation” within the meaning of Section 409A shall be made in compliance with the requirements of Section 409A and (b) any adjustments made pursuant to this Section 15 to Awards that are not considered “deferred compensation” subject to Section 409A shall be made in such a manner as to ensure that after such adjustment the Awards either (i) continue not to be subject to Section 409A or (ii) comply with the requirements of Section 409A.
SECTION 16. CODE SECTION 162(m) PROVISIONS
Notwithstanding any other provision of the Plan to the contrary, if the Committee determines, at the time Awards are granted to a Participant who is, or is likely to be as of the end of the tax year in which the Company would claim a tax deduction in connection with such Award, a Covered Employee, then the Committee may provide that this Section 16 is applicable to such Award.
16.1 Performance Criteria
(a) If an Award is subject to this Section 16, then the lapsing of restrictions thereon and the distribution of cash, shares of Common Stock or other property pursuant thereto, as applicable, shall be subject to the achievement of one or more objective performance goals established by the Committee, which shall be based on the attainment of specified levels of one of or any combination of the following “performance criteria” for the Company as a whole or any business unit of the Company, as reported or calculated by the Company: cash flows
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(including, but not limited to, operating cash flow, free cash flow or cash flow return on capital); cash position; working capital; earnings per share; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; book value per share; operating income (including or excluding depreciation, amortization, extraordinary items, restructuring charges or other expenses); revenues; operating margins; operating earnings; economic profit; profit before tax; return on assets; return on equity; debt; debt plus equity; ratio of debt to debt plus equity; ratio of operating earnings to capital spending; sales growth; market or economic value added; equity or stockholder’s equity; stock price appreciation; total stockholder return; cost control; strategic initiatives; market share; net income; net profit; net sales; return on invested capital; improvements in capital structure; or customer satisfaction, employee satisfaction, services performance, subscriber, cash management or asset management metrics (together, the “Performance Criteria”).
(b) Such performance goals also may be based on the achievement of specified levels of Company performance (or performance of an applicable affiliate or business unit of the Company) under one or more of the Performance Criteria described above relative to the performance of other corporations. Such performance goals shall be set by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m) of the Code, or any successor provision thereto, and the regulations thereunder.
(c) The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a performance period: (i) asset write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (iv) any reorganization and restructuring programs, (v) extraordinary nonrecurring items as described in Accounting Standards Codification225-20 and/or in Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in the Company’s annual report to stockholders for the applicable year, (vi) acquisitions or divestitures, (vii) foreign exchange gains and losses, and (viii) gains and losses on asset sales. To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a form that satisfies the requirements for “performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code, or any successor provision thereto.
16.2 Compensation Committee Certification; Adjustment of Awards
(a) After the completion of each performance period, the Compensation Committee shall certify the extent to which any performance goal established under this Section 16 has been satisfied, and the amount payable as a result thereof, prior to payment, settlement or vesting, as applicable, of any Award subject to this Section 16.
(b) Notwithstanding any provision of the Plan other than Section 15, with respect to any Award that is subject to this Section 16, the Committee may adjust downwards, but not upwards, the amount payable pursuant to such Award, and the Committee may not waive the achievement of the applicable performance goals except in the case of the death or disability of the Covered Employee.
16.3 Limitations
(a) Subject to adjustment from time to time as provided in Section 15.1, no Covered Employee may be granted Awards other than Performance Units subject to this Section 16 in any calendar year period with respect to more than 2,000,000 shares of Common Stock for such Awards, except that the Company may make additional onetime grants of such Awards for up to 2,000,000 shares to newly hired or newly promoted individuals, and the maximum dollar value payable with respect to Performance Units or other awards payable in cash subject to this Section 16 granted to any Covered Employee in any one calendar year is $10,000,000.
(b) The Committee shall have the power to impose such other restrictions on Awards subject to this Section 16 as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code, or any successor provision thereto.
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SECTION 17. AMENDMENT AND TERMINATION
17.1 Amendment, Suspension or Termination
The Board or the Compensation Committee may amend, suspend or terminate the Plan or any portion of the Plan at any time and in such respects as it shall deem advisable; provided, however, that, to the extent required by applicable law, regulation or stock exchange rule, stockholder approval shall be required for any amendment to the Plan; and provided, further, that any amendment that requires stockholder approval may be made only by the Board. Subject to Section 17.3, the Committee may amend the terms of any outstanding Award, prospectively or retroactively.
17.2 Term of the Plan
Unless sooner terminated as provided herein, the Plan shall automatically terminate ten years from the Effective Date. After the Plan is terminated, no future Awards may be granted, but Awards previously granted shall remain outstanding in accordance with their terms and conditions and the Plan’s terms and conditions.
17.3 Consent of Participant
The amendment, suspension or termination of the Plan or a portion thereof or the amendment of an outstanding Award shall not, without the Participant’s consent, materially adversely affect any rights under any Award theretofore granted to the Participant under the Plan. Any change or adjustment to an outstanding Incentive Stock Option shall not, without the consent of the Participant, be made in a manner so as to constitute a “modification” that would cause such Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option. Notwithstanding the foregoing, any adjustments made pursuant to Section 15 shall not be subject to these restrictions.
SECTION 18. GENERAL
18.1 No Individual Rights
(a) No individual or Participant shall have any claim to be granted any Award under the Plan, and the Company has no obligation for uniformity of treatment of Participants under the Plan.
(b) Furthermore, nothing in the Plan or any Award granted under the Plan shall be deemed to constitute an employment contract or confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate a Participant’s employment or other relationship at any time, with or without cause.
18.2 Issuance of Shares
(a) Notwithstanding any other provision of the Plan, the Company shall have no obligation to issue or deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless, in the opinion of the Company’s counsel, such issuance, delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act or the laws of any state or foreign jurisdiction) and the applicable requirements of any securities exchange or similar entity.
(b) The Company shall be under no obligation to any Participant to register for offering or resale or to qualify for exemption under the Securities Act, or to register or qualify under the laws of any state or foreign jurisdiction, any shares of Common Stock, security or interest in a security paid or issued under, or created by, the Plan, or to continue in effect any such registrations or qualifications if made.
(c) The inability of the Company or impracticability for the Company, as determined by the Committee in its sole discretion, to obtain or maintain approval from any regulatory body having jurisdiction or to comply with
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applicable requirements, which approval and compliance are deemed by the Company’s counsel to be necessary to the lawful issuance, delivery, and sale of any shares of Common Stock, shall relieve the Company of any liability in respect of the failure to issue, deliver, or sell such shares as to which the requisite approval has not been obtained or as to which any necessary requirements are not met.
(d) As a condition to the exercise of an Option or any other receipt of Common Stock pursuant to an Award under the Plan, the Company may require (i) the Participant to represent and warrant at the time of any such exercise or receipt that such shares are being purchased or received only for the Participant’s own account and without any present intention to sell or distribute such shares and (ii) such other action or agreement by the Participant as may from time to time be necessary to comply with federal, state and foreign securities laws. At the option of the Company, a stop-transfer order against any such shares may be placed on the official stock books and records of the Company, and a legend indicating that such shares may not be pledged, sold or otherwise transferred, unless an opinion of counsel is provided (concurred in by counsel for the Company) stating that such transfer is not in violation of any applicable law or regulation, may be stamped on stock certificates to ensure exemption from registration. The Committee may also require the Participant to execute and deliver to the Company a purchase agreement or such other agreement as may be in use by the Company at such time that describes certain terms and conditions applicable to the shares.
(d) To the extent the Plan or any instrument evidencing an Award provides for issuance of stock certificates to reflect the issuance of shares of Common Stock, the issuance may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.
18.3 Indemnification
(a) Each person who is or shall have been a member of the Board, the Compensation Committee, or a committee of the Board or an officer of the Company to whom authority was delegated in accordance with Section 3, shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by such person in settlement thereof, with the Company’s approval, or paid by such person in satisfaction of any judgment in any such claim, action, suit or proceeding against such person; provided, however, unless such loss, cost, liability or expense is a result of such person’s own willful misconduct or except as expressly provided by statute, that such person shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person’s own behalf.
(b) The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person may be entitled under the Company’s certificate of incorporation or bylaws, as a matter of law, or otherwise, or of any power that the Company may have to indemnify or hold harmless.
18.4 No Rights as a Stockholder
Unless otherwise provided by the Committee or in the instrument evidencing the Award or in a written employment, services or other agreement, no Award, other than a Stock Award or an Restricted Stock Award, shall entitle the Participant to any cash dividend, voting or other right of a stockholder unless and until the date of issuance under the Plan of the shares that are the subject of such Award.
18.5 Compliance with Laws and Regulations
(a) In interpreting and applying the provisions of the Plan, any Option granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an “incentive stock option” within the meaning of Section 422 of the Code.
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(b) The Plan and Awards granted under the Plan are intended to be exempt from the requirements of Section 409A to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury RegulationSection 1.409A-1(b)(4), the exclusion applicable to stock options, stock appreciation rights and certain other equity-based compensation under Treasury RegulationSection 1.409A-1(b)(5), or otherwise. To the extent Section 409A is applicable to the Plan or any Award granted under the Plan, it is intended that the Plan and any Awards granted under the Plan comply with the deferral, payout and other limitations and restrictions imposed under Section 409A. Notwithstanding any other provision of the Plan or any Award granted under the Plan to the contrary, the Plan and any Award granted under the Plan shall be interpreted, operated and administered in a manner consistent with such intentions. Without limiting the generality of the foregoing, and notwithstanding any other provision of the Plan or any Award granted under the Plan to the contrary, with respect to any payments and benefits under the Plan or any Award granted under the Plan to which Section 409A applies, all references in the Plan or any Award granted under the Plan to the termination of the Participant’s employment or service are intended to mean the Participant’s “separation from service,” within the meaning of Section 409A(a)(2)(A)(i). In addition, if the Participant is a “specified employee,” within the meaning of Section 409A, then to the extent necessary to avoid subjecting the Participant to the imposition of any additional tax under Section 409A, amounts that would otherwise be payable under the Plan or any Award granted under the Plan during thesix-month period immediately following the Participant’s “separation from service,” within the meaning of Section 409A(a)(2)(A)(i), shall not be paid to the Participant during such period, but shall instead be accumulated and paid to the Participant (or, in the event of the Participant’s death, the Participant’s estate) in a lump sum on the first business day after the earlier of the date that is six months following the Participant’s separation from service or the Participant’s death. Notwithstanding any other provision of the Plan to the contrary, the Committee, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify the Plan and any Award granted under the Plan so that the Award qualifies for exemption from or complies with Section 409A; provided, however, that the Committee makes no representations that Awards granted under the Plan shall be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to Awards granted under the Plan.
(c) Also notwithstanding any other provision of the Plan to the contrary, the Board or the Compensation Committee shall have broad authority to amend the Plan or any outstanding Award without the consent of the Participant to the extent the Board or the Compensation Committee deems necessary or advisable to comply with, or take into account, changes in applicable tax laws, securities laws, accounting rules or other applicable laws, rules or regulations.
18.6 Participants in Other Countries or Jurisdictions
Without amending the Plan, the Committee may grant Awards to Eligible Persons who are foreign nationals on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan and shall have the authority to adopt such modifications, procedures,sub-plans and the like as may be necessary or desirable to comply with provisions of the laws or regulations of other countries or jurisdictions in which the Company or any Related Company may operate or have employees to ensure the viability of the benefits from Awards granted to Participants employed in such countries or jurisdictions, meet the requirements that permit the Plan to operate in a qualified ortax-efficient manner, comply with applicable foreign laws or regulations and meet the objectives of the Plan.
18.7 No Trust or Fund
The Plan is intended to constitute an “unfunded” plan. Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor of the Company.
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18.8 Successors
All obligations of the Company under the Plan with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all the business and/or assets of the Company.
18.9 Severability
If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Committee’s determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.
18.10 Choice of Law and Venue
The Plan, all Awards granted thereunder and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Delaware without giving effect to principles of conflicts of law. Participants irrevocably consent to the nonexclusive jurisdiction and venue of the state and federal courts located in the State of Oregon.
18.11 Legal Requirements
The granting of Awards and the issuance of shares of Common Stock under the Plan are subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required, whether located in the United States or a foreign jurisdiction.
SECTION 19. EFFECTIVE DATE
The Plan shall become effective on the date on which the Plan is approved by the stockholders of the Company (the “Effective Date”).
APPENDIX A
DEFINITIONS
As used in the Plan,
“Acquired Entity” means any entity acquired by the Company or a Related Company or with which the Company or a Related Company merges or combines.
“Award” means any Option, Stock Appreciation Right, Stock Award, Restricted Stock, Stock Unit, Performance Share, Performance Unit, cash-based award or other incentive payable in cash or in shares of Common Stock as may be designated by the Committee from time to time.
“Board” means the Board of Directors of the Company.
“Cause,” unless otherwise defined in the instrument evidencing an Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means dishonesty,
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fraud, serious or willful misconduct, unauthorized use or disclosure of confidential information or trade secrets, or conduct prohibited by law (except minor violations), in each case as determined by the Company’s chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Compensation Committee, whose determination shall be conclusive and binding.
“Change in Control,”unless the Committee determines otherwise with respect to an Award at the time the Award is granted or unless otherwise defined for purposes of an Award in a written employment, services or other agreement between the Participant and the Company or a Related Company, means the occurrence of any of the following events:
(a) an acquisition by any Entity of beneficial ownership (within the meaning of Rule13d-3 promulgated under the Exchange Act) of 50% or more of either (1) the number of then outstanding shares of Common Stock (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege where the security being so converted was not acquired directly from the Company by the party exercising the conversion privilege, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Related Company, (iv) an acquisition by any Entity pursuant to a transaction that meets the conditions of clauses (i), (ii) and (iii) set forth in the definition of Company Transaction;
(b) a change in the composition of the Board such that the individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that for purposes of this definition, any individual who becomes a member of the Board subsequent to the Effective Date, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; and provided further, however, that any such individual whose initial assumption of office occurs as a result of or in connection with an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of an Entity other than the Board shall not be considered a member of the Incumbent Board; or
(c) consummation of a Company Transaction.
“Code” means the United States Internal Revenue Code of 1986, as amended from time to time.
“Committee” has the meaning set forth in Section 3.1.
“Common Stock”means the common stock, par value $0.01 per share, of the Company.
“Company” means Lattice Semiconductor Corporation, a Delaware corporation.
“Company Transaction,”unless the Committee determines otherwise with respect to an Award at the time the Award is granted or unless otherwise defined for purposes of an Award in a written employment, services or other agreement between the Participant and the Company or a Related Company, means consummation of:
(a) a merger or consolidation of the Company with or into any other company;
(b) a sale in one transaction or a series of transactions undertaken with a common purpose of at least 50% of the Company’s outstanding voting securities; or
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(c) a sale, lease, exchange or other transfer in one transaction or a series of related transactions undertaken with a common purpose of all or substantially all of the Company’s assets, excluding, however, in each case, a transaction pursuant to which
(i) the Entities who are the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Company Transaction will beneficially own, directly or indirectly, at least 50% of the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, of the Successor Company in substantially the same proportions as their ownership, immediately prior to such Company Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities;
(ii) no Entity (other than the Company, any employee benefit plan (or related trust) of the Company, a Related Company or a Successor Company) will beneficially own, directly or indirectly, 50% or more of, respectively, the outstanding shares of common stock of the Successor Company or the combined voting power of the outstanding voting securities of the Successor Company entitled to vote generally in the election of directors unless such ownership resulted solely from ownership of securities of the Company prior to the Company Transaction; and
(iii) individuals who were members of the Incumbent Board will immediately after the consummation of the Company Transaction constitute at least a majority of the members of the board of directors of the Successor Company.
Where a series of transactions undertaken with a common purpose is deemed to be a Company Transaction, the date of such Company Transaction shall be the date on which the last of such transactions is consummated.
“Compensation Committee” means the Compensation Committee of the Board.
“Covered Employee” means a “covered employee” as that term is defined for purposes of Section 162(m)(3) of the Code or any successor provision.
“Disability,” unless otherwise defined by the Committee for purposes of the Plan in the instrument evidencing an Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means a mental or physical impairment of the Participant that is expected to result in death or that has lasted or is expected to last for a continuous period of 12 months or more and that causes the Participant to be unable to perform his or her material duties for the Company or a Related Company and to be engaged in any substantial gainful activity, in each case as determined by the Company’s chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Committee, whose determination shall be conclusive and binding.
“Effective Date” has the meaning set forth in Section 19.
“Eligible Person” means any person eligible to receive an Award as set forth in Section 5.
“Entity” means any individual, entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act).
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
“Fair Market Value” means the closing pricefor the Common Stock on any given date during regular trading, or if not trading on that date, such price on the last preceding date on which the Common Stock was traded, unless determined otherwise by the Committee using such methods or procedures as it may establish.
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“Grant Date”means the later of (a) the date on which the Committee completes the corporate action authorizing the grant of an Award or such later date specified by the Committee and (b) the date on which all conditions precedent to an Award have been satisfied, provided that conditions to the exercisability or vesting of Awards shall not defer the Grant Date.
“Incentive Stock Option”means an Option granted with the intention that it qualify as an “incentive stock option” as that term is defined for purposes of Section 422 of the Code or any successor provision.
“Incumbent Board” has the meaning set forth in the definition of “Change in Control.”
“Nonqualified Stock Option”means an Option other than an Incentive Stock Option.
“Option”means a right to purchase Common Stock granted under Section 7.
“Option Expiration Date”means the last day of the maximum term of an Option.
“Outstanding Company Common Stock”has the meaning set forth in the definition of “Change in Control.”
“Outstanding Company Voting Securities” has the meaning set forth in the definition of “Change in Control.”
“Parent Company” means a company or other entity which as a result of a Company Transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries.
“Participant” means any Eligible Person to whom an Award is granted.
“Performance Award”means an Award of Performance Shares or Performance Units granted under Section 11.
“Performance Criteria” has the meaning set forth in Section 16.1.
“Performance Share” means an Award of units denominated in shares of Common Stock granted under Section 11.1.
“Performance Unit” means an Award of units denominated in cash or property other than shares of Common Stock granted under Section 11.2.
“Plan” means the Lattice Semiconductor Corporation 2013 Incentive Plan.
“Prior Plan” has the meaning set forth in Section 4.1(c).
“Related Company” means any entity that is directly or indirectly controlled by,in control of or under common control with the Company, as determined by the Committee in its sole discretion.
“Restricted Stock” means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which are subject to restrictions prescribed by the Committee.
“Restricted Stock Unit” means a Stock Unit subject to restrictions prescribed by the Committee.
“Retirement,” unless otherwise defined in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means
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“Retirement” as defined for purposes of the Plan by the Committee or the Company’s chief human resources officer or other person performing that function or, if not so defined, means Termination of Service on or after the date the Participant reaches “normal retirement age,” as that term is defined in Section 411(a)(8) of the Code.
“Section 409A” means Section 409A of the Code.
“Securities Act”means the Securities Act of 1933, as amended from time to time.
“Stock Appreciation Right” or “SAR” means a right granted under Section 9.1 to receive the excess of the Fair Market Value of a specified number of shares of Common Stock over the grant price.
“Stock Award” means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which are not subject to restrictions prescribed by the Committee.
“Stock Unit,” including a Restricted Stock Unit, means an Award denominated in units of Common Stock granted under Section 10.
“Substitute Awards” means Awards granted or shares of Common Stock issued by the Company in substitution or exchange for awards previously granted by an Acquired Entity.
“Successor Company”means the surviving company, the successor company or Parent Company, as applicable, in connection with a Company Transaction.
“Termination of Service,” unless the Committee determines otherwise with respect to an Award, means a termination of employment or service relationship with the Company or a Related Company for any reason, whether voluntary or involuntary, including by reason of death, Disability or Retirement. Any question as to whether and when there has been a Termination of Service for the purposes of an Award and the cause of such Termination of Service shall be determined by the Company’s chief human resources officer or other person performing that function or, with respect to directors and executive officers, by the Compensation Committee, whose determination shall be conclusive and binding. Transfer of a Participant’s employment or service relationship between the Company and any Related Company shall not be considered a Termination of Service for purposes of an Award. Unless the Committee determines otherwise, a Termination of Service shall be deemed to occur if the Participant’s employment or service relationship is with an entity that has ceased to be a Related Company. A Participant’s change in status from an employee of the Company or a Related Company to a nonemployee director, consultant, advisor, or independent contractor of the Company or a Related Company, or a change in status from a nonemployee director, consultant, advisor or independent contractor of the Company or a Related Company to an employee of the Company or a Related Company, shall not be considered a Termination of Service.
“Vesting Commencement Date” means the Grant Date or such other date selected by the Committee as the date from which an Award begins to vest.
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ANNEX B
LATTICE SEMICONDUCTOR CORPORATION
2011NON-EMPLOYEE DIRECTOR EQUITY INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of the Lattice Semiconductor Corporation 2011Non-Employee Director Equity Incentive Plan is to attract, retain and motivate directors of the Company by providing them the opportunity to acquire a proprietary interest in the Company and to align their interests and efforts to the long-term interests of the Company’s stockholders.
SECTION 2. DEFINITIONS
Certain capitalized terms used in the Plan have the meanings set forth in Appendix A.
SECTION 3. ADMINISTRATION
3.1 Administration of the Plan
The Plan shall be administered by the Board.
3.2 Administration and Interpretation by Board
(a) Except for the terms and conditions explicitly set forth in the Plan and to the extent permitted by applicable law, the Board shall have full power and exclusive authority to (i) select the Eligible Persons to whom Awards may from time to time be granted under the Plan; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of shares of Common Stock to be covered by each Award granted under the Plan; (iv) determine the terms and conditions of any Award granted under the Plan; (v) approve the forms of notice or agreement for use under the Plan; (vi) determine whether, to what extent and under what circumstances Awards may be settled in cash, shares of Common Stock or other property or canceled or suspended; (vii) interpret and administer the Plan and any instrument evidencing an Award, notice or agreement executed or entered into under the Plan; (viii) establish such rules and regulations as it shall deem appropriate for the proper administration of the Plan; (ix) delegate ministerial duties to such of the Company’s employees as it so determines; and (x) make any other determination and take any other action that the Board deems necessary or desirable for administration of the Plan.
(b) In no event, however, shall the Board have the right, without stockholder approval, to (i) lower the price of an option after it is granted, except in connection with adjustments provided in Section 15.1; (ii) take any other action that is treated as a repricing under generally accepted accounting principles; or (iii) cancel an option at a time when its strike price exceeds the fair market value of the underlying stock in exchange for cash, another option, restricted stock, or other equity, unless the cancellation and exchange occurs in connection with a merger, acquisition,spin-off or other similar corporate transaction.
(c) The effect on the vesting of an Award of a Company-approved leave of absence or a Participant’s reduction in hours of employment or service shall be determined by the Company’s chief human resources officer or other person performing that function or, with respect to directors or executive officers, by the Board, whose determination shall be final.
(d) Decisions of the Board shall be final, conclusive and binding on all persons, including the Company, any Participant, any stockholder and any Eligible Person.
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SECTION 4. SHARES SUBJECT TO THE PLAN
4.1 Authorized Number of Shares
Subject to adjustment from time to time as provided in Section 15.1, a maximum of 2,100,000 shares of Common Stock shall be available for issuance under the Plan. Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company as treasury shares.
4.2 Share Usage
(a) Shares of Common Stock covered by an Award shall not be counted as used unless and until they are actually issued and delivered to a Participant. If any Award lapses, expires, terminates or is canceled prior to the issuance of shares thereunder or if shares of Common Stock are issued under the Plan to a Participant and thereafter are forfeited to or otherwise reacquired by the Company, the shares subject to such Awards and the forfeited or reacquired shares shall again be available for issuance under the Plan. Any shares of Common Stock (i) tendered by a Participant or retained by the Company as full or partial payment to the Company for the purchase price of an Award or to satisfy tax withholding obligations in connection with an Award, or (ii) covered by an Award that is settled in cash, or in a manner such that some or all of the shares of Common Stock covered by the Award are not issued, shall be available for Awards under the Plan. The number of shares of Common Stock available for issuance under the Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional shares of Common Stock or credited as additional shares of Common Stock subject or paid with respect to an Award.
(b) The Board shall also, without limitation, have the authority to grant Awards as an alternative to or as the form of payment for grants or rights earned or due under other compensation plans or arrangements of the Company.
SECTION 5. ELIGIBILITY
An Award may be granted to anynon-employee director of the Company whom the Board from time to time selects.
SECTION 6. AWARDS
6.1 Form, Grant and Settlement of Awards
The Board shall have the authority, in its sole discretion, to determine the type or types of Awards to be granted under the Plan. Such Awards may be granted either alone or in addition to or in tandem with any other type of Award. Any Award settlement may be subject to such conditions, restrictions and contingencies as the Board shall determine.
6.2 Evidence of Awards
Awards granted under the Plan shall be evidenced by a written, including an electronic, instrument that shall contain such terms, conditions, limitations and restrictions as the Board shall deem advisable and that are not inconsistent with the Plan.
6.3 Dividends and Distributions
Participants may, if the Board so determines, be credited with dividends paid with respect to shares of Common Stock underlying an Award in a manner determined by the Board in its sole discretion. The Board may
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apply any restrictions to the dividends or dividend equivalents that the Board deems appropriate. The Board, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, shares of Common Stock, Restricted Stock or Stock Units. Notwithstanding the foregoing, the right to any dividends or dividend equivalents declared and paid on the number of shares underlying an Option or a Stock Appreciation Right may not be contingent, directly or indirectly on the exercise of the Option or Stock Appreciation Right, and must comply with or qualify for an exemption under Section 409A. Also notwithstanding the foregoing, the right to any dividends or dividend equivalents declared and paid on Restricted Stock must (i) be paid at the same time they are paid to other shareholders and (ii) comply with or qualify for an exemption under Section 409A.
SECTION 7. OPTIONS
7.1 Grant of Options
The Board may grant Options designated as Nonqualified Stock Options.
7.2 Option Exercise Price
Options shall be granted with an exercise price per share not less than 100% of the Fair Market Value of the Common Stock on the Grant Date.
7.3 Term of Options
Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of an Option shall be ten years from the Grant Date.
7.4 Exercise of Options
(a) The Board shall establish and set forth in each instrument that evidences an Option the time at which, or the installments in which, the Option shall vest and become exercisable, any of which provisions may be waived or modified by the Board at any time.
(b) To the extent an Option has vested and become exercisable, the Option may be exercised in whole or from time to time in part by delivery to or as directed or approved by the Company of a properly executed stock option exercise agreement or notice, in a form and in accordance with procedures established by the Board, setting forth the number of shares with respect to which the Option is being exercised, the restrictions imposed on the shares purchased under such exercise agreement or notice, if any, and such representations and agreements as may be required by the Board, accompanied by payment in full as described in Section 7.5. An Option may be exercised only for whole shares and may not be exercised for less than a reasonable number of shares at any one time, as determined by the Board.
7.5 Payment of Exercise Price
The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased. Such consideration must be paid before the Company will issue the shares being purchased and must be in a form or a combination of forms acceptable to the Board for that purchase, which forms may include:
(a) cash;
(b) check or wire transfer;
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(c) having the Company withhold shares of Common Stock that would otherwise be issued on exercise of the Option that have an aggregate Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;
(d) tendering (either actually or, so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation) shares of Common Stock owned by the Participant that have an aggregate Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;
(e) so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, and to the extent permitted by law, delivery of a properly executed exercise agreement or notice, together with irrevocable instructions to a brokerage firm designated or approved by the Company to deliver promptly to the Company the aggregate amount of proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise, all in accordance with the regulations of the Federal Reserve Board; or
(f) such other consideration as the Board may permit.
7.6 Effect of Termination of Service
The Board shall establish and set forth in each instrument that evidences an Option whether the Option shall continue to be exercisable, and the terms and conditions of such exercise, after a Termination of Service, any of which provisions may be waived or modified by the Board at any time.
SECTION 8. STOCK APPRECIATION RIGHTS
8.1 Grant of Stock Appreciation Rights
The Board may grant Stock Appreciation Rights to Participants at any time on such terms and conditions as the Board shall determine in its sole discretion. An SAR may be granted in tandem with an Option or alone (“freestanding”). The grant price of a tandem SAR shall be equal to the exercise price of the related Option. The grant price of a freestanding SAR shall be established in accordance with procedures for Options set forth in Section 7.2. An SAR may be exercised upon such terms and conditions and for the term as the Board determines in its sole discretion; provided, however, that, subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the SAR, the maximum term of a freestanding SAR shall be ten years, and in the case of a tandem SAR, (a) the term shall not exceed the term of the related Option and (b) the tandem SAR may be exercised for all or part of the shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option, except that the tandem SAR may be exercised only with respect to the shares for which its related Option is then exercisable.
8.2 Payment of SAR Amount
Upon the exercise of an SAR, a Participant shall be entitled to receive payment in an amount determined by multiplying: (a) the difference between the Fair Market Value of the Common Stock on the date of exercise over the grant price of the SAR by (b) the number of shares with respect to which the SAR is exercised. At the discretion of the Board as set forth in the instrument evidencing the Award, the payment upon exercise of an SAR may be in cash, in shares, in some combination thereof or in any other manner approved by the Board in its sole discretion.
8.3 Waiver of Restrictions
The Board, in its sole discretion, may waive any other terms, conditions or restrictions on any SAR under such circumstances and subject to such terms and conditions as the Board shall deem appropriate.
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SECTION 9. STOCK AWARDS, RESTRICTED STOCK AND STOCK UNITS
9.1 Grant of Stock Awards, Restricted Stock and Stock Units
The Board may grant Stock Awards, Restricted Stock and Stock Units on such terms and conditions and subject to such repurchase or forfeiture restrictions, if any, which may be based on continuous service with the Company or a Related Company or the achievement of any performance goals, as the Board shall determine in its sole discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the Award.
9.2 Vesting of Restricted Stock and Stock Units
Upon the satisfaction of any terms, conditions and restrictions prescribed with respect to Restricted Stock or Stock Units, or upon a Participant’s release from any terms, conditions and restrictions of Restricted Stock or Stock Units, as determined by the Board (a) the shares of Restricted Stock covered by each Award of Restricted Stock shall become freely transferable by the Participant, and (b) Stock Units shall be paid in shares of Common Stock or, if set forth in the instrument evidencing the Awards, in cash or a combination of cash and shares of Common Stock. Any fractional shares subject to such Awards shall be paid to the Participant in cash.
9.3 Waiver of Restrictions
The Board, in its sole discretion, may waive the repurchase or forfeiture period and any other terms, conditions or restrictions on any Restricted Stock or Stock Unit under such circumstances and subject to such terms and conditions as the Board shall deem appropriate.
SECTION 10. OTHER STOCK-BASED AWARDS
Subject to the terms of the Plan and such other terms and conditions as the Board deems appropriate, the Board may grant other incentives payable in shares of Common Stock under the Plan.
SECTION 11. ASSIGNABILITY
No Award or interest in an Award may be sold, assigned, pledged (as collateral for a loan or as security for the performance of an obligation or for any other purpose) or transferred by a Participant or made subject to attachment or similar proceedings otherwise than by will or by the applicable laws of descent and distribution, except to the extent the Participant designates one or more beneficiaries on a Company-approved form who may exercise the Award or receive payment under the Award after the Participant’s death. During a Participant’s lifetime, an Award may be exercised only by the Participant. Notwithstanding the foregoing, the Board, in its sole discretion, may permit a Participant to assign or transfer an Award subject to such terms and conditions as the Board shall specify.
SECTION 12. ADJUSTMENTS
12.1 Adjustment of Shares
(a) In the event, at any time or from time to time, a stock dividend, stock split,spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to stockholders other than a normal cash dividend, or other change in the Company’s corporate or capital structure results in (a) the outstanding shares of Common Stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or kind of securities of the Company or (b) new, different or additional securities of the Company or any
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other company being received by the holders of shares of Common Stock, then the Board shall make proportional adjustments in (i) the maximum number and kind of securities available for issuance under the Plan; (ii) the maximum number and kind of securities set forth in Section 4.3; and (iii) the number and kind of securities that are subject to any outstanding Award and the per share price of such securities, without any change in the aggregate price to be paid therefor. The determination by the Board, as to the terms of any of the foregoing adjustments shall be conclusive and binding.
(b) Notwithstanding the foregoing, the issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services rendered, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, outstanding Awards. Also notwithstanding the foregoing, a dissolution or liquidation of the Company or a Company Transaction shall not be governed by this Section 12.1 but shall be governed by Sections 12.2 and 12.3, respectively.
12.2 Dissolution or Liquidation
To the extent not previously exercised or settled, and unless otherwise determined by the Board in its sole discretion, Awards shall terminate immediately prior to the dissolution or liquidation of the Company. To the extent a vesting condition, forfeiture provision or repurchase right applicable to an Award has not been waived by the Board, the Award shall be forfeited immediately prior to the consummation of the dissolution or liquidation.
12.3 Change in Control
Notwithstanding any other provision of the Plan to the contrary, unless the Board shall determine otherwise in the instrument evidencing the Award or in a written services or other agreement between the Participant and the Company or a Related Company, in the event of a Change in Control:
(a) All outstanding Awards shall become fully vested and exercisable or payable, and all applicable restrictions or forfeiture provisions shall lapse, immediately prior to the Change in Control and shall terminate at the effective time of the Change in Control.
(b) Notwithstanding the foregoing, the Board, in its sole discretion, may instead provide in the event of a Change in Control that is a Company Transaction that a Participant’s outstanding Awards shall terminate upon or immediately prior to such Company Transaction and that such Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (x) the value of the per share consideration received by holders of Common Stock in the Company Transaction, or, in the event the Company Transaction is one of the transactions listed under subsection (c) in the definition of Company Transaction or otherwise does not result in direct receipt of consideration by holders of Common Stock, the value of the deemed per share consideration received, in each case as determined by the Board in its sole discretion, multiplied by the number of shares of Common Stock subject to such outstanding Awards (to the extent then vested and exercisable or whether or not then vested and exercisable, as determined by the Board in its sole discretion) exceeds (y) if applicable, the respective aggregate exercise price or grant price for such Awards.
(c) For the avoidance of doubt, nothing in this Section 12.3 requires all outstanding Awards to be treated similarly.
12.4 Further Adjustment of Awards
Subject to Sections 12.2 and 12.3, the Board shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation, dissolution or change of control of the Company, as defined
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by the Board, to take such further action as it determines to be necessary or advisable with respect to Awards. Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, lifting restrictions and other modifications, and the Board may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants. The Board may take such action before or after granting Awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation, dissolution or change of control that is the reason for such action.
12.5 No Limitations
The grant of Awards shall in no way affect the Company’s right to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
12.6 Fractional Shares
In the event of any adjustment in the number of shares covered by any Award, each such Award shall cover only the number of full shares resulting from such adjustment.
12.7 Section 409A
Notwithstanding any other provision of the Plan to the contrary, (a) any adjustments made pursuant to this Section 12 to Awards that are considered “deferred compensation” within the meaning of Section 409A shall be made in compliance with the requirements of Section 409A and (b) any adjustments made pursuant to this Section 12 to Awards that are not considered “deferred compensation” subject to Section 409A shall be made in such a manner as to ensure that after such adjustment the Awards either (i) continue not to be subject to Section 409A or (ii) comply with the requirements of Section 409A.
SECTION 13. AMENDMENT AND TERMINATION
13.1 Amendment, Suspension or Termination
The Board or the Compensation Board may amend, suspend or terminate the Plan or any portion of the Plan at any time and in such respects as it shall deem advisable; provided, however, that, to the extent required by applicable law, regulation or stock exchange rule, stockholder approval shall be required for any amendment to the Plan; and provided, further, that any amendment that requires stockholder approval may be made only by the Board. Subject to Section 13.3, the Board may amend the terms of any outstanding Award, prospectively or retroactively.
13.2 Term of the Plan
Unless sooner terminated as provided herein, the Plan shall terminate ten years from the Effective Date. After the Plan is terminated, no future Awards may be granted, but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan’s terms and conditions.
13.3 Consent of Participant
The amendment, suspension or termination of the Plan or a portion thereof or the amendment of an outstanding Award shall not, without the Participant’s consent, materially adversely affect any rights under any Award theretofore granted to the Participant under the Plan. Notwithstanding the foregoing, any adjustments made pursuant to Section 12 shall not be subject to these restrictions.
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SECTION 14. GENERAL
14.1 No Individual Rights
(a) No individual or Participant shall have any claim to be granted any Award under the Plan, and the Company has no obligation for uniformity of treatment of Participants under the Plan.
(b) Furthermore, nothing in the Plan or any Award granted under the Plan shall be deemed to constitute an employment contract or confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate a Participant’s employment or other relationship at any time, with or without cause.
14.2 Issuance of Shares
(a) Notwithstanding any other provision of the Plan, the Company shall have no obligation to issue or deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless, in the opinion of the Company’s counsel, such issuance, delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act or the laws of any state or foreign jurisdiction) and the applicable requirements of any securities exchange or similar entity.
(b) The Company shall be under no obligation to any Participant to register for offering or resale or to qualify for exemption under the Securities Act, or to register or qualify under the laws of any state or foreign jurisdiction, any shares of Common Stock, security or interest in a security paid or issued under, or created by, the Plan, or to continue in effect any such registrations or qualifications if made.
(c) As a condition to the exercise of an Option or any other receipt of Common Stock pursuant to an Award under the Plan, the Company may require (i) the Participant to represent and warrant at the time of any such exercise or receipt that such shares are being purchased or received only for the Participant’s own account and without any present intention to sell or distribute such shares and (ii) such other action or agreement by the Participant as may from time to time be necessary to comply with the federal, state and foreign securities laws. At the option of the Company, a stop-transfer order against any such shares may be placed on the official stock books and records of the Company, and a legend indicating that such shares may not be pledged, sold or otherwise transferred, unless an opinion of counsel is provided (concurred in by counsel for the Company) stating that such transfer is not in violation of any applicable law or regulation, may be stamped on stock certificates to ensure exemption from registration. The Board may also require the Participant to execute and deliver to the Company a purchase agreement or such other agreement as may be in use by the Company at such time that describes certain terms and conditions applicable to the shares.
(d) To the extent the Plan or any instrument evidencing an Award provides for issuance of stock certificates to reflect the issuance of shares of Common Stock, the issuance may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.
14.3 Indemnification
(a) Each person who is or shall have been a member of the Board, or a Board appointed by the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by such person in settlement thereof, with the Company’s approval, or paid by such person in satisfaction of any judgment in any such claim, action, suit or proceeding against such person; provided, however, that such person shall give the
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Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person’s own behalf, unless such loss, cost, liability or expense is a result of such person’s own willful misconduct or except as expressly provided by statute.
(b) The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person may be entitled under the Company’s certificate of incorporation or bylaws, as a matter of law, or otherwise, or of any power that the Company may have to indemnify or hold harmless.
14.4 No Rights as a Stockholder
Unless otherwise provided by the Board or in the instrument evidencing the Award or in a written employment, services or other agreement, no Award, other than a Stock Award or Restricted Stock Award, shall entitle the Participant to any cash dividend, voting or other right of a stockholder unless and until the date of issuance under the Plan of the shares that are the subject of such Award.
14.5 Compliance with Laws and Regulations
The Plan and Awards granted under the Plan are intended to be exempt from the requirements of Section 409A to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury RegulationSection 1.409A-1(b)(4), the exclusion applicable to stock options, stock appreciation rights and certain other equity-based compensation under Treasury RegulationSection 1.409A-1(b)(5), or otherwise. To the extent Section 409A is applicable to the Plan or any Award granted under the Plan, it is intended that the Plan and any Awards granted under the Plan comply with the deferral, payout and other limitations and restrictions imposed under Section 409A. Notwithstanding any other provision of the Plan or any Award granted under the Plan to the contrary, the Plan and any Award granted under the Plan shall be interpreted, operated and administered in a manner consistent with such intentions. Without limiting the generality of the foregoing, and notwithstanding any other provision of the Plan or any Award granted under the Plan to the contrary, with respect to any payments and benefits under the Plan or any Award granted under the Plan to which Section 409A applies, all references in the Plan or any Award granted under the Plan to the termination of the Participant’s employment or service are intended to mean the Participant’s “separation from service,” within the meaning of Section 409A(a)(2)(A)(i). In addition, if the Participant is a “specified employee,” within the meaning of Section 409, then to the extent necessary to avoid subjecting the Participant to the imposition of any additional tax under Section 409A, amounts that would otherwise be payable under the Plan or any Award granted under the Plan during thesix-month period immediately following the Participant’s “separation from service,” within the meaning of Section 409A(a)(2)(A)(i), shall not be paid to the Participant during such period, but shall instead be accumulated and paid to the Participant (or, in the event of the Participant’s death, the Participant’s estate) in a lump sum on the first business day after the earlier of the date that is six months following the Participant’s separation from service or the Participant’s death. Notwithstanding any other provision of the Plan to the contrary, the Board, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify the Plan and any Award granted under the Plan so that the Award qualifies for exemption from or complies with Section 409A; provided, however, that the Board makes no representations that Awards granted under the Plan shall be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to Awards granted under the Plan.
14.6 Participants in Other Countries or Jurisdictions
Without amending the Plan, the Board may grant Awards to Eligible Persons who are foreign nationals on such terms and conditions different from those specified in the Plan as may, in the judgment of the Board, be necessary or desirable to foster and promote achievement of the purposes of the Plan and shall have the authority to adopt such modifications, procedures,sub-plans and the like as may be necessary or desirable to comply with provisions of the laws or regulations of other countries or jurisdictions in which the Company or any Related Company may operate or have employees to ensure the viability of the benefits from Awards granted to
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Participants employed in such countries or jurisdictions, meet the requirements that permit the Plan to operate in a qualified ortax-efficient manner, comply with applicable foreign laws or regulations and meet the objectives of the Plan.
14.7 No Trust or Fund
The Plan is intended to constitute an “unfunded” plan. Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor of the Company.
14.8 Successors
All obligations of the Company under the Plan with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all the business and/or assets of the Company.
14.9 Severability
If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Board’s determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.
14.10 Choice of Law and Venue
The Plan, all Awards granted thereunder and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Oregon without giving effect to principles of conflicts of law. Participants irrevocably consent to the nonexclusive jurisdiction and venue of the state and federal courts located in the State of Oregon.
14.11 Legal Requirements
The granting of Awards and the issuance of shares of Common Stock under the Plan are subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required.
SECTION 15. EFFECTIVE DATE
The effective date (the “Effective Date”) is the date on which the Plan is approved by the stockholders of the Company.
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APPENDIX A
DEFINITIONS
As used in the Plan,
“Award” means any Option, Stock Appreciation Right, Stock Award, Restricted Stock, Stock Unit, Performance Share, Performance Unit, cash-based award or other incentive payable in cash or in shares of Common Stock as may be designated by the Board from time to time.
“Board” means the Board of Directors of the Company.
“Change in Control,” unless the Board determines otherwise with respect to an Award at the time the Award is granted or unless otherwise defined for purposes of an Award in a written employment, services or other agreement between the Participant and the Company or a Related Company, means the occurrence of any of the following events:
(a) an acquisition by any Entity of beneficial ownership (within the meaning of Rule13d-3 promulgated under the Exchange Act) of 50% or more of either (1) the number of then outstanding shares of Common Stock (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”), provided, however, that the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege where the security being so converted was not acquired directly from the Company by the party exercising the conversion privilege, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Related Company, or (iv) an acquisition by any Entity pursuant to a transaction that meets the conditions of clauses (i), (ii) and (iii) set forth in the definition of Company Transaction;
(b) a change in the composition of the Board such that the individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that for purposes of this definition, any individual who becomes a member of the Board subsequent to the Effective Date, whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; and provided further, however, that any such individual whose initial assumption of office occurs as a result of or in connection with an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of an Entity other than the Board shall not be considered a member of the Incumbent Board; or
(c) consummation of a Company Transaction.
“Code” means the United States Internal Revenue Code of 1986, as amended from time to time.
“Common Stock” means the common stock, par value $0.01, of the Company.
“Company” means Lattice Semiconductor Corporation, a Delaware corporation.
“Company Transaction,” unless the Board determines otherwise with respect to an Award at the time the Award is granted or unless otherwise defined for purposes of an Award in a written employment, services or other agreement between the Participant and the Company or a Related Company, means consummation of:
(a) a merger or consolidation of the Company with or into any other company;
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(b) a sale in one transaction or a series of transactions undertaken with a common purpose of all of the Company’s outstanding voting securities; or
(c) a sale, lease, exchange or other transfer in one transaction or a series of related transactions undertaken with a common purpose of all or substantially all of the Company’s assets, excluding, however, in each case, a transaction pursuant to which
(i) the Entities who are the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Company Transaction will beneficially own, directly or indirectly, at least 50% of the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, of the Successor Company in substantially the same proportions as their ownership, immediately prior to such Company Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities;
(ii) no Entity (other than the Company, any employee benefit plan (or related trust) of the Company, a Related Company or a Successor Company) will beneficially own, directly or indirectly, 50% or more of, respectively, the outstanding shares of common stock of the Successor Company or the combined voting power of the outstanding voting securities of the Successor Company entitled to vote generally in the election of directors unless such ownership resulted solely from ownership of securities of the Company prior to the Company Transaction; and
(iii) individuals who were members of the Incumbent Board will immediately after the consummation of the Company Transaction constitute at least a majority of the members of the board of directors of the Successor Company.
Where a series of transactions undertaken with a common purpose is deemed to be a Company Transaction, the date of such Company Transaction shall be the date on which the last of such transactions is consummated.
“Disability,” unless otherwise defined by the Board for purposes of the Plan in the instrument evidencing an Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means a mental or physical impairment of the Participant that is expected to result in death or that has lasted or is expected to last for a continuous period of 12 months or more and that causes the Participant to be unable to perform his or her material duties for the Company or a Related Company and to be engaged in any substantial gainful activity, in each case as determined by the Board, whose determination shall be conclusive and binding.
“Effective Date” has the meaning set forth in Section 15.
“Eligible Person” means any person eligible to receive an Award as set forth in Section 5.
“Entity” means any individual, entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act).
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
“Fair Market Value” means the closing price for the Common Stock on any given date during regular trading, or if not trading on that date, such price on the last preceding date on which the Common Stock was traded, unless determined otherwise by the Board using such methods or procedures as it may establish.
“Grant Date” means the later of (a) the date on which the Board completes the corporate action authorizing the grant of an Award or such later date specified by the Board and (b) the date on which all conditions precedent to an Award have been satisfied, provided that conditions to the exercisability or vesting of Awards shall not defer the Grant Date.
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“Incumbent Board” has the meaning set forth in the definition of “Change of Control.”
“Nonqualified Stock Option” means an Option granted pursuant to Section 7.
“Option” means a right to purchase Common Stock granted under Section 7.
“Option Expiration Date” means the last day of the maximum term of an Option.
“Outstanding Company Common Stock” has the meaning set forth in the definition of “Change in Control.”
“Outstanding Company Voting Securities” has the meaning set forth in the definition of “Change in Control.”
“Parent Company” means a company or other entity which as a result of a Company Transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries.
“Participant” means any Eligible Person to whom an Award is granted.
“Plan” means the Lattice Semiconductor Corporation 2011Non-Employee Director Equity Incentive Plan.
“Related Company” means any entity that is directly or indirectly controlled by, in control of or under common control with the Company.
“Restricted Stock” means an Award of shares of Common Stock granted under Section 9, the rights of ownership of which are subject to restrictions prescribed by the Board.
“Retirement,” unless otherwise defined in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means “Retirement” as defined for purposes of the Plan by the Board or, if not so defined, means Termination of Service on or after the date the Participant reaches “normal retirement age,” as that term is defined in Section 411(a)(8) of the Code.
“Section 409A” means Section 409A of the Code.
“Securities Act” means the Securities Act of 1933, as amended from time to time.
“Stock Appreciation Right” or “SAR” means a right granted under Section 9.1 to receive the excess of the Fair Market Value of a specified number of shares of Common Stock over the grant price.
“Stock Award” means an Award of shares of Common Stock granted under Section 9, the rights of ownership of which are not subject to restrictions prescribed by the Board.
“Stock Unit” means an Award denominated in units of Common Stock granted under Section 9.
“Successor Company” means the surviving company, the successor company or Parent Company, as applicable, in connection with a Company Transaction.
“Termination of Service” means a termination of employment or service relationship with the Company or a Related Company for any reason, whether voluntary or involuntary, including by reason of death, Disability or Retirement. Any question as to whether and when there has been a Termination of Service for the purposes of an Award and the cause of such Termination of Service shall be determined by the Board, whose determination
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shall be conclusive and binding. Transfer of a Participant’s employment or service relationship between the Company and any Related Company shall not be considered a Termination of Service for purposes of an Award. Unless the Board determines otherwise, a Termination of Service shall be deemed to occur if the Participant’s employment or service relationship is with an entity that has ceased to be a Related Company. A Participant’s change in status from an employee of the Company or a Related Company to a nonemployee director, consultant, advisor, or independent contractor of the Company or a Related Company or a change in status from a nonemployee director, consultant, advisor or independent contractor of the Company or a Related Company to an employee of the Company or a Related Company, shall not be considered a Termination of Service.
“Vesting Commencement Date” means the Grant Date or such other date selected by the Board as the date from which an Award begins to vest.
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LATTICE SEMICONDUCTOR CORPORATION IMPORTANT ANNUAL MEETING INFORMATION Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Eastern Time, on May 3, 2018. Vote by Internet • this card.
ADD 6 Online
Go to www.envisionreports.com/LSCC • Oror scan the QR code with your smartphone • Follow— login details are located in the steps outlined on the secure website Vote by telephone • shaded bar below.
Phone
Call toll free 1-800-652-VOTE (8683) within the USA, US territories &and Canada on a touch tone telephone • Follow the instructions provided by the recorded message
Save paper, time and money!
Using a black ink pen, mark your votes with an X as shown in X this example. Sign up for electronic delivery at Please do not write outside the designated areas. www.envisionreports.com/LSCC
2021 Annual Meeting Proxy Card qIF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION,1234 5678 9012 345
IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” THE ELECTION OF DIRECTORS, “FOR” ITEMS 2, 3, 4 AND 5.
A Proposals — The Board of Directors recommendsrecommend a vote “FOR”FOR all the nominees listed and “FOR”FOR Proposals 2, 2—3 4 and 5. +
1. Election of Directors: + For Withhold For Withhold For Withhold 01 -
01—James R. Anderson 02—Robin A. Abrams 02 - Brian M. Beattie 03 - John Bourgoin 04 - 03—Mark E. Jensen 05 -
04—Anjali Joshi 05—James P. Lederer 06 - John E. Major 07 - 06—Krishna Rangasayee 08 -
07—D. Jeffrey Richardson
For Against Abstain For Against Abstain
2. To ratify the appointment of Ernst & Young LLP as our 3. To approve, as an advisory vote, the compensation of the 3. To approve the amended Lattice Semiconductor Company’s named executive officers; Corporation 2013 Incentive Plan; 4. To approve the amended Lattice Semiconductor Corporation 5. To ratify the appointment of KPMG LLP as our independent 2011 Non-Employee Director Equity Incentive Plan; registered public accounting firm for the fiscal Company’s named executive officers. year ending December 29, 2018; and 6. To transact such other business as may properly come before the meeting. January 1, 2022.
B Authorized Signatures — This section must be completed for your vote to be counted. — Datecount. Please date and Sign Below NOTE: sign below.
Please sign exactly as namename(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or guardian,custodian, please give full title as such. title.
Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS
C 1234567890 J N T MR A - C ON BOTH SIDES OF THIS CARD. 1UPX + 02TOYCSAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND
MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND
 
Attention Internet Users! You can now access your stockholder information on the following secure Internet site: www.computershare.com/investor Step 1: Register (1st time users only) Step 3: View your account details and perform multiple transactions, such as: Click on “Create Login” in the purple box and follow the instructions. • View account balances • Change your address • View transaction history • View electronic stockholder communications Step 2: Log In (Returning users) • View payment history • Sell shares Enter your User ID and Password and click the Login button. • View stock quotes • Check replacements If you are not an Internet user, and wish to contact7 2 B V 4 9 0 7 6 6 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND +
03F6XC
The 2021 Annual Meeting of Stockholders of Lattice Semiconductor Corporation will be held on Friday, May 7, 2021 at 1:00 p.m. PT, virtually via the internet at www.meetingcenter.io/236985556.
To access the virtual meeting, you may: Call: 1-800-522-6645 or Write: Lattice Semiconductor Corp., c/o Computershare, P.O. Box 43006, Providence, RI 02940 qIF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION,must have the information that is printed in the shaded bar located on the reverse side of this form.
The password for this meeting is — LSCC2021.
Small steps make an impact.
Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/LSCC
IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy — LATTICE SEMICONDUCTOR CORPORATION
Lattice Semiconductor Corporation + Notice of 2021 Annual Meeting of Stockholders
Proxy Solicited by Board of Directors for Annual Meeting — May 4, 2018 THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY The undersigned hereby appoints7, 2021
James Anderson and Byron W. Milstead, and Glen Hawk, and eachor either of them, each with power to act without the other and with power of substitution, as proxies and attorneys-in-fact andare hereby authorizes themauthorized to represent and vote as provided on the other side,shares of the undersigned, with all the sharespowers which the undersigned would possess if personally present, at the Annual Meeting of Stockholders of Lattice Semiconductor Corporation Common Stock whichto be held on May 7, 2021 or at any postponement or adjournment thereof.
Shares represented by this proxy will be voted by the undersigned is entitledstockholder. If no such directions are indicated, the Proxies will have authority to vote FOR the election of the Board of Directors and inFOR items 2-3.
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Annual Meeting of Stockholders of the companymeeting.
(Items to be held May 4, 2018 or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the Meeting. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and 2017 Annual Report are available at www.envisionreports.com/LSCC. (Continued and to be marked, dated and signed,voted appear on the otherreverse side)
C Non-Voting Items
Change of Address — Please print new address below. Comments — Please print your comments below. IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
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