◾ | | Base Salary —Approved annual base salary increase of 6% for our customersCEO (setting his annual base salary at $636,000) and annual base salary increases ranging from 1.5% to create a smart, secure, and connected world. For fiscal 2019, we achieved strong growth and significantly improved business results, including:
| • | | Non-GAAP Operating Income: Ournon-GAAP operating income (for purposes of our 2019 Cash Incentive Plan, as described below underAnnual Cash-based Incentive Compensation) was $101 million, which represents an increase of 39% from fiscal 2018.3%forour other Named Executive Officers.
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◾ | | Revenue: Our revenue in fiscal 2019 was $404 million, which represents an increase of 1% from fiscal 2018.
Asnon-GAAP operating income and revenue were elements of ourCash Incentive Awards —Paid annual cash incentive compensation programawards to our Named Executive Officers that reflected achievement between 161.1% to 171.1% of their target annual cash incentive award opportunity.
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◾ | | Long-Term Incentive Compensation Awards —Granted time-based restricted stock unit (“RSU”) awards that may be settled for fiscal 2019, these results provide context for stockholders reviewing our executive compensation disclosures. Please see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for a more detailed discussionshares of our fiscal 2019 financial results.
Resultscommon stock and performance-based restricted stock unit (“PRSU”) awards, which vest over varying periods of 2019 Stockholder Advisory Approvalup to five years from the date of grant, with aggregate target values of (i) $12,900,000 for our CEO and (ii) between $3,000,000 and $3,750,000 for each of our other Named Executive OfficerOfficers.
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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, 96% of his target total direct compensation for fiscal 2021 and, in the case of our other Named Executive Officers, on average 91% of their target total direct compensation for fiscal 2021 was “at risk” variable compensation in the form of a target annual cash incentive opportunity, a time-based RSU award and target PRSU awards. Executive Compensation-Related Policies and Practices We endeavor to align our executive compensation policies and practices with our governance standards. 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 2021: | | | | COMPENSATION OVERSIGHT | | | Independent Compensation Committee | | At the Company’s 2019 annual meetingThe Compensation Committee is comprised solely of stockholders, we requested our stockholders to approve, on an advisory(non-binding) basis, the compensation of the Company’s named executive officersfor fiscal 2018 as reported in the proxy statementindependent directors who have established effective means for the 2019 annual meeting of stockholders. The Company’s stockholders expressed substantial support for the named executive officers’ compensation, with approximately 73% of the votes cast approving, on an advisory basis, of our“say-on-pay” proposal. After receiving and reviewing the results of this advisory vote, we engagedcommunicating with our stockholders regarding their executive compensation views and concerns, as described in this Proxy Statement.
| | | Independent Compensation Advisor | | The Compensation Committee engaged an external compensation consultant to assist with its fiscal 2021 compensation review. This consultant performed no other consulting or other services for us during fiscal 2021. | | EVALUATION AND DESIGN OF COMPENSATION PROGRAM | | | Annual Compensation Review | | The Compensation Committee conducts an annual review of our 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 and has determined that there are no compensation policies or practices that are reasonably likely to have a material adverse effect on the following section.Company. 18
| | | Performance-Based Equity Awards | | In fiscal 2019, following the 2019 annual meeting of stockholders, we reached out to 102021, approximately 76% of our institutional stockholders who, in the aggregate, held 46%CEO’s and, on average, approximately 67% of our stock at the timeother Named Executive Officers’ target total direct compensation consisted of the 2019 annual meeting of stockholders. The purposes of this engagement werePRSU awards. | | | No Special Retirement or Pension Plans | | We do not currently offer, nor do we have plans to permit our board chair and compensation committee chairprovide any retirement plans to discuss governance topics, including our compensation philosophy and the key elements of our executive compensation program, address any changesofficers that are not available to our compensation practices (in particular, updates to our practices updated in response to issues identified by ISS and Glass Lewis), and solicit stockholder feedback. The result of this outreach was meetings with six of those stockholders, who held 29% of our stock at the time of the 2019 annual meeting of stockholders. | | | What They Said
| | What We Did
| Agreed that Chief Executive Officer pay strategy structure and elements of Mr. Anderson’s new hire package were appropriate | | Have increased proxy disclosure with respect to our short-term incentive plan goals | Asked for increased disclosure with respect to executive compensation goals | | Have continued strong linkage between achievement of goals and executive pay | Asked to continue the tying of pay to performance
Asked that target payout for relative Total Stockholder Return (“TSR”) equity awards be achieved only with performance above median
| | Have updated our TSR equity award program to provide that, starting with such awards granted in fiscal 2020, vesting at target levels will require the Company’s TSR to be at the 55th percentile of the peer group | Asked for additional disclosure with respect to engagement on ESG issues | | Have added proxy disclosure on these topics and formed a task force to assess our ESG opportunities; we intend to include our new initiatives in future proxy disclosure |
Compensation Risk Management
Our executive compensation program includes a number of key features intended to manage risk, including:
Pay-for-performance philosophy and program structure;
Approval by an independent compensation committee advised by an independent compensation consultant that reports directly to the compensation committee;
Balance between short-term and long-term pay to incentivize sustainable long-term value creation;
Stock ownership requirements for our Chief Executive Officer and members of our board of directors;
An incentive compensation recovery, or clawback policy;
Equity incentive plans expressly prohibiting repricing of stock options without stockholder approval;
Insider trading policy that includes a prohibition on short sales, trading in derivative securities, entering into hedging transactions, pledging our securities as collateral for loans, and holding our securities in margin accounts;
Annualsay-on-pay advisory votes;
Double-trigger change of control agreements; and
Nosimilarly situated employees, including pension arrangements, defined benefit retirement plans or nonqualified deferred compensation plans coveringor arrangements to our executive officers.
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Compensation Philosophy
Our executive compensation strategy 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 peer-group;
Attracting, retaining and motivating a high-performing executive team and our high expectations for that team; and
Rewarding executives for achieving near and long-term business goals, including increasing our profitability.
The compensation committee believes that we should make our executive compensation arrangements and practices clear and transparent to stockholders.
Our senior management has the highest potential to impact our business results, and thus, variable, performance-based compensation should constitute a material percentage of our executives’ overall potential cash and equity compensation. We also seek to measure senior management performance primarily by business results linked to stockholder interests.
We seek to directly link cash-based variable compensation of 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 Company management to the interests of our stockholders.
We also strive to maintain compensation programs that ensure consistent effort to achieve financial and operational goals.
In addition, 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 success. Keeping that in mind, we seek to accomplish our executive compensation goals while maintaining appropriate levels of internal pay equity, both between the Chief
| | COMPENSATION-RELATED POLICIES | | | Policy on Stockholder Advisory Vote on Named Executive Officer and other executives, and between executives and othernon-executive employees.Compensation | | Factors Considered in Compensation Deliberations
The compensation committee does not use a single method or measure in setting or approving the target total direct compensation opportunities or each individual compensation element for our executive officers, nor is the weighting of any one factor on the determination of pay components and levels quantifiable in comparison to the other factors. The factors below which the compensation committee considers when selecting and setting the amount of each compensation element for our executive officers, including our Chief Executive Officer and our named executive officers, provide a framework for its compensation decision-making. These factors are:
Our executive compensation program objectives;
Our performance against the financial and operational goals and objectives established by the Compensation Committee and our Board;
Each individual executive officer’s qualifications, knowledge, skills, experience and tenure relative to other similarly situated executives at the companies in our compensation peer group;
The scope of each executive officer’s role and responsibilities compared to other similarly situated executives at the companies on our compensation peer group;
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The prior performance of each individual executive officer, based onWe conduct an assessment of his or her contributions to our overall performance and ability to lead his or her area of responsibility and work as part of a team;
The potential of each executive officer to contribute to our long-term financial, operational and strategic objectives;
The CEO’s compensation relative to that of our executive officers, and compensation parity among our executive officers;
Our financial performance relative to our peers;
The compensation practices of our compensation peer group and the positioning of each executive officer’s compensation in a ranking of peer company compensation levels basedannual stockholder advisory vote on an analysis of competitive market data;
In the case of long-term incentive compensation, the value of any outstanding vested and unvested equity awards held by each of our executive officers, including the equity awards and other long-term compensation opportunities granted to each executive officer in prior years; and
The recommendations provided by our CEO regarding the compensation of our executiveNamed Executive Officers.
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| | | Stock Ownership Policy | | We maintain stock ownership requirements for our CEO and our Section 16 officers, as described above. These factors providewell as for the framework for decision-making by the compensation committee with respect to the compensation of eachnon-employee members of our executive officers.Board of Directors.
| Incentive Compensation Recovery Policy | | During fiscal 2019, the compensation committee used market data forWe maintain a peer group principally comprised ofmid-sized semiconductor and semiconductor equipment companies with significant operations in California or Oregon. Market data was collected and analyzed with the assistance of Compensia. 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.
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For reviewing and approving executive compensation during fiscal 2019, the peer group remained unchanged from fiscal 2018 and was made up of publicly-traded companies in the semiconductors and semiconductor equipment industry that, with the exception of Xcerra Corporation (which had been acquired in 2018), had the following financial characteristics as of February 1, 2019: revenue over the previous four quarters between $200 million and $1.2 billion, market capitalization between 0.4 to 6 times revenue, and gross profit between $75 million to $550 million. This peer group consisted of the following companies:
Alpha & Omega Semiconductor Ltd.
Ambarella Inc.
Axcelis Technologies, Inc.
Cohu, Inc.
Diodes Incorporated
Ichor Holdings Ltd.
Inphi Corporation
MACOM Technology Solutions
MaxLinear, Inc.
Nanometrics Incorporated
NeoPhotonics Corporation
Power Integrations, Inc.
Rambus Inc.
Semtech Corporation
Xcerra Corporation (acquired by Cohu, Inc.)
Xperi Corporation
The compensation committee reviewed the market data primarily to ensure that the executive compensation program as a whole was competitive with compensation programs at peer group companies so that we could attract, retain and motivate a high-performing team in connection with the executive transition. The compensation committee sought to generally match the compensation of individual executives with comparable executives from peer companies. In determining the amounts of each component of compensation for each executive officer, the compensation committee considered its judgment as to executive’s expected level of responsibility, prior experience, past job performance, contribution to the Company’s success, capability and results achieved, and reviewed the market data. The compensation committee did not apply formulas or assign these factors specific mathematical weights, but rather exercised its business judgment and discretion.
Fiscal 2019 Executive Compensation
Principal Components of Executive Compensation
The principal components of fiscal 2019 executive compensation are discussed below, and include:
annual cash-based incentive compensation; and
long-term equity incentive compensation, which includes time based and performance equity incentive compensation.
In reviewing the fiscal 2019 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 herein, 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 appropriate.
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Base Salary
Base salary is intended to compensate our named executive officers for services they provide to us during the fiscal year. Base salaries for our named executive officers for fiscal 2019 were set based on competitive factors including the need to 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’s review of salaries for 2019 indicated that the average of our named executive officer salaries fell below the 50th percentile of salaries for comparable positions at peer companies. The compensation committee did not make any adjustments to our named executive officers’ base salaries for fiscal 2019, but the compensation committee intends in the future to continue to review and to make annual adjustments to the base salaries of our named executive officers to generally align their base salaries to salaries paid to comparable officers at peer companies and in connection with the review of executive officer and other employee performance.
| | | | | Name | | Base Salary | | James R. Anderson | | $ | 550,000 | | Sherri Luther | | $ | 345,000 | | Stephen Douglass | | $ | 330,000 | | Esam Elashmawi | | $ | 360,000 | | Byron W. Milstead | | $ | 318,000 | |
Annual Cash-based Incentive Compensation
For fiscal 2019, all non-sales employees of the Company (including our named executive officers) were eligible to participate in the Company’s 2019 Cash Incentive Plan (the “2019 Cash Plan”). Each named executive officer’s target cash award (as a percentage of base salary) for fiscal 2019 remained unchanged from his or her target fiscal 2018 and was (i) 100% of base salary for the Chief Executive Officer and (ii) 65% of base salary for each of our other named executive officers.
Under the 2019 Cash Plan, individual cash incentive payments for our named executive officers were based on the achievement of the following three equally weighted components:(i) non-GAAP operating income (which is calculated in a manner similar to GAAP operating income, except for the exclusion of certain restructuring charges, expenses incurred in connection with mergers, acquisitions , or other similar corporate transactions, and accrual and payment of incentives under the 2019 Cash Plan), (ii) revenue goals, and (iii) Company performance. The Company performance component was measured by the achievement of the following management objectives: (i) delivering fiscal 2019 gross margin above a specified target, (ii) shipping certain new product samples along with related development software to customers in the fourth quarter of fiscal 2019, (iii) delivering certain solution software in the second and fourth quarters of fiscal 2019, and (iv) achieving certain design win goals for new products. 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.
With respect to each of thenon-GAAP operating income and revenue components, Company financial targets were established based on projected revenue of $420 million and non-GAAP operating income of $112 million.
For the component based on the achievement of corporate management objectives, the objectives related to achievement of certain financial performance, product development, and customer development targets. Pursuant to the terms of the 2019 Cash Plan, our named executive officers could not receive more than 100% of the portion of his or her target incentive allocated to such components.
The Company’snon-GAAP operating income for fiscal 2019 was approximately $101 million, the Company’s revenue for fiscal 2019 was approximately $404 million and the achievement of corporate
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management objectives was 62.5%, resulting in a payment to each of our named executive officers under the 2019 Cash Plan equal to 36.4% of his or her target cash award. The actual amount of each cash award paid to our named executive officers under the 2019 Cash Plan is set forth in the table below.
| | | | | Name | | Actual Cash Award | | James R. Anderson | | $ | 200,591 | | Sherri Luther | | $ | 78,012 | | Stephen Douglass | | $ | 78,230 | | Esam Elashmawi | | $ | 85,342 | | Byron W. Milstead | | $ | 75,386 | |
Long-Term Equity Incentive Compensation
We provide long-term equity incentive compensation to motivate and reward the achievement of long-term Company performance and to motivate, attract and retain key personnel, including our named executive officers.
With respect to the annual grants to Mr. Milstead in fiscal 2018 and in connection with the hire of our other named executive officers (which were made to Mr. Anderson, Mr. Douglass, and Mr. Elashmawi in fiscal 2018 and to Ms. Luther in fiscal 2019), we granted awards of time-based restricted stock units (“RSUs”) and awards of performance-based RSUs (“PRSUs”) that vest and become payable over a three-year period based upon the total shareholder return (“TSR”) of the Company relative to the PHLX Semiconductor (“SOX”) Index (withone-third of the PRSUs tested for vesting on each of the first three anniversaries of the grant date). In connection with his hire, Mr. Anderson also received a stock option and an award of PRSUs that vests and becomes payable based upon the Company generating specified “adjusted” EBITDA levels on a trailing four quarter basis in any two consecutive trailing four-quarter periods.
With respect to Ms. Luther’s new hire awards made during fiscal 2019, the number of time-based RSUs and target number of PRSUs were determined as follows: (i) the number of new hiretime-based RSUs was determined by dividing the award’s target grant value of $950,000 by the average of the closing prices of the Company’s common stock on the trading days during the30-calendar-day period ending on the date of grant, and (ii) the target number of PRSUs (which also had a target grant value of $950,000) was calculated based on a Monte-Carlo simulation. The target grant values of Ms. Luther’s new hire awards were based on the recommendations made by the compensation committee, which considered such factors as Ms. Luther’s skills and experience and the prevailing market conditions.
In fiscal 2019, the compensation committee engaged the services of Compensia to act as an advisor to the compensation committee. After this review, in August 2019, the compensation committee determined to continue granting a blend of time-based RSUs and PRSUs to our named executive officers in fiscal 2019.
The compensation committee did not grant Mr. Anderson any options or PRSUs that vest based on the Company’s adjusted EBITDA in fiscal 2019 because these equity awards that he received in fiscal 2018 wereone-time extraordinary grants in connection with his appointment (which were necessary to induce Mr. Anderson away from a much larger competitor, provide make-whole compensation to Mr. Anderson given incentive opportunities he relinquished at AMD, and help create incentives for Mr. Anderson consistent with the compensation committee’s philosophies) and, when they were granted, the compensation committee did not intend to continue to grant such equity awards to Mr. Anderson on an annual basis.
In determining the size of the equity awards granted in August 2019, the compensation committee established a target grant value for each award. The number oftime-based RSUs or the target number of PRSUs for each award (which is listed in the table below) was determined by dividing the award’s target grant value by the average of the closing prices of the Company’s common stock on the trading days during the 30 calendar day period ending on the date of the grant. For these PRSU awards, we changed our methodology from the one we
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used for the PRSU awards granted before August 2019 (which was based on a Monte-Carlo simulation) to use the same methodology to determine the number of shares subject to the time-based RSUs to (i) be more consistent with the methodology used by other companies in our compensation peer group, (ii) use a methodology similar to the one used by Institutional Shareholder Services (“ISS”), and (iii) avoid misalignment of expectations, since the new methodology is more transparent and easier to understand. In particular, the compensation committee believed that the new methodology would be more stockholder friendly because it would be certain to result in at least 50% of the number of equity awards grant beingperformance-based. However, since the grant date fair value of each PRSU award is determined based on a Monte-Carlo simulation, the target grant value of each PRSU award granted in August 2019 (which is listed in the table below) is different from the value of such award reported in the Stock Awards column of the Summary Compensation Table below. The compensation committee intends future grants to our named executive officers to be competitive and generally comparable with similar grants to similarly situated executive officers of companies in our peer group based on our valuation of the grants.
| | | | | | | | | | | | | | | | | Name | | Target Grant Value of Time- Based RSUs | | | Number of Time- Based RSUs | | | Target Grant Value of PRSUs | | | Target Number of PRSUs | | James R. Anderson | | $ | 1,875,000 | | | | 112,677 | | | $ | 1,875,000 | | | | 112,677 | | Sherri Luther | | $ | 500,000 | | | | 30,047 | | | $ | 500,000 | | | | 30,047 | | Stephen Douglass | | $ | 600,000 | | | | 36,056 | | | $ | 600,000 | | | | 36,056 | | Esam Elashmawi | | $ | 550,000 | | | | 33,051 | | | $ | 550,000 | | | | 33,051 | | Byron W. Milstead | | $ | 230,000 | | | | 13,821 | | | $ | 230,000 | | | | 13,821 | |
Each award of time-based RSUs in fiscal 2019 (which includes Ms. Luther’s new hire RSUs and the RSUs granted to all of our named executive officers in August 2019) vests and becomes payables as to 25% of the RSUs on the first anniversary of the date of grant and as to 6.25% of the RSUs each quarter thereafter, subject to the applicable named executive officer’s continued service with the Company.
Each award of PRSUs granted in fiscal 2019 (which includes Ms. Luther’s new hire PRSUs and the PRSUs granted to all of our named executive officers in August 2019) vests and becomes payable over a three-year period based upon the TSR of the Company relative to the SOX Index, with none of the PRSUs vesting if the Company’s TSR is at or below the 25th percentile, 100% of the target number of PRSUs vesting if the Company’s TSR is at the 50th percentile, and 200% (or in Mr. Anderson’s case, 250%) if the Company’s TSR is at the 75th percentile. The number of PRSUs that vest will scale linearly if the Company’s TSR is between the 25th and 75th percentile.One-third of the PRSUs are tested for vesting on each of the first three anniversaries of the grant date.
The compensation committee has determined that long-term incentive awards should be structured to provide for longer measurement periods to better align the interests of our executives with our shareholders. In February 2020, the compensation committee updated ourTSR-based PRSU award program to provide for longer measurement periods, in order to emphasize driving long-term stockholder value and to more closely align with the prevailing market practices. In connection with this update, the compensation committee amended each of the PRSU awards granted to our named executive officers in fiscal 2019 and new hire PRSU awards granted to our named executive officers in fiscal 2018 and 2019 to change the beginning of each measurement period that had not yet ended to the date of grant of the award (resulting in longer measurement periods for these tranches). It is the committee’s intention that all PRSU awards granted in 2020 and subsequent years will incorporate these longer measurement periods.
In fiscal 2019, 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 tranche of the PRSU awards (which coveredone-third of such awards) granted to our named executive officers (other than Ms. Luther) in fiscal 2018 that vest based on the TSR of the Company relative to the SOX
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Index (the “2018 TSR PRSU Awards”). The chair determined that the Company’s TSR ranked above the 75th percentile and, therefore, the following percentage of the target number of PRSUs covered by the first tranche of the awards had vested: (i) 250% for Mr. Anderson and (ii) 200% for Messrs. Douglass, Elashmawi, and Milstead. In addition, Mr. Bourgoin determined the level of achievement with respect to theperformance-based option granted to Mr. Milstead in fiscal 2017, which vested based on the TSR of the Company relative to the SOX Index. Mr. Bourgoin determined that the maximum level of performance had been achieved and 200% of the shares subject to the option vested.
Severance Arrangements
We have entered into employment agreements (which were amended in 2020) with our named executive officers that provides each named executive officer with severance payments and benefits in connection with the termination of his or her employment under certain circumstances. These severance arrangements help retain our named executive officers and increase stockholder value by reducing any potential distractions caused by the possibility of an involuntary termination of employment (including in connection with a change in control), which allows our named executive officers to focus on their duties and responsibilities. Please see the section “Potential Payments upon Termination orChange-in-Control” below for a summary of the material terms and conditions of these severance arrangements.
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
The Company’s Corporate Governance Policies include a requirement 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.
The Company’s Corporate Governance Policies include a requirement that thenon-employee directors of the Company, not more than five years after the date of initial election to the Board, maintain ownership of the Company’s stock equal in value to three times the director’s annual cash retainer unless doing so would impose a financial hardship on the director. Additionally, the director must retain and not sell during their tenure on the Board at least fifty percent of the shares of Company stock acquired while service as a director through the exercise of vested stock options or restricted stock or other equity grants.
Insider Trading Policy
The Company’s Insider Trading Policy prohibits our employees (including our named executive officers) from (i) trading our securities while in possession of material nonpublic information, (ii) trading the securities of our customers, suppliers, competitors, potential acquisitions, or partners while in possession of material nonpublic information, and (iii) engaging in short sales, trading in derivative securities, entering into hedging transactions, pledging our securities as collateral for loans, and holding our securities in margin accounts.
Restitution or Recovery Policy
The Company’s Corporate Governance Policies provide 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 | | Our equity incentive plans expressly prohibit the repricing of stock options without stockholder approval. 26
Other Executive Benefit Arrangements
| 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 | | Our change in control compensation committee has adoptedarrangements generally are “double-trigger” arrangements that require both a policy eliminatingchange in control of the paymentCompany plus a qualifying termination of allemployment 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 date of a 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 2019, 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.
Under Section 162(m)4999 of the Internal Revenue Code of 1986, as amended (the “Code”) and related regulations of the Internal Revenue Service, the Company generally receives a federal income tax deduction for compensation paid to our Chief Executive Officer and ourexecutive officers.
We do not provide any other named executive officer only with respect to amounts up to $1 million during any year. We expect to pay compensationtax “gross-ups” 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 the stockholders, after taking into consideration changing business conditions and/or the executive’s performance.other than on standard relocation benefits. 27
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of our compensation committee during 2019 were Mr. Bourgoin, Ms. Abrams, Mr. Lederer, Mr. Rangasayee, and Ms. Joshi. None of the members of the compensation committee was or is one of our officers or employees, nor has any member of the compensation 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.
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COMPENSATION COMMITTEE REPORT
| Succession Planning | | We have reviewedan executive assessment process to ensure oversight of performance and discussedmaintain a consistent succession planning process. |
Stockholder Advisory Vote on Named Executive Officer Compensation At our 2021 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 97.7% of the votes cast approved our Named Executive Officers’ compensation for fiscal 2020. 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 to continue to focus on incentivizing the Named Executive Officers and paying for performance 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 2023 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 managementlong-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 team; |
◾ | | Rewarding our senior executives for achieving near and long-term business goals, including increasing our revenue and 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 independent members of the 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 whether our compensation policies and practices reflect our executive compensation philosophy; seeks to make decisions that further our philosophy and align with 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/0d3c6d89-2fd6-466c-92e9-356bddcc293a. 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 program objectives; |
◾ | | our performance against the financial, operational and strategic objectives established by the Compensation DiscussionCommittee and Analysis to be included in this Proxy Statement filed pursuant to Section 14(a)our Board 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-K for the fiscal year ended December 28, 2019 and this Proxy Statement for the 2020 Annual Meeting.Directors; |
◾ | | Compensation Committee
John Bourgoin, Chair
Robin A. Abrams
James P. Lederer
Krishna Rangasayee
Anjali Joshi
2019 Summary Compensation Table
The following table sets forth summary information concerning compensation for our named executive officers, which includes each individual who servedexecutive officer’s knowledge, skills, experience, qualifications and tenure relative 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 scope of each 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; |
◾ | | the prior performance of each individual executive officer, based on a subjective assessment of his or her contributions to our overall performance, ability to lead his or her business unit or function and work as Chief Executive Officer or Chief Financial Officer duringpart of a team; |
◾ | | the potential of each individual executive officer to contribute to our fiscal year ended December 28, 2019long-term financial, operational and strategic objectives; |
◾ | | our CEO’s compensation relative to that of our other executive officers, as of the end of fiscal 2019. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Fiscal Year | | | Salary ($) | | | Bonus ($) | | | Stock Awards ($)(1) | | | Option Awards ($)(1) | | | Non-Equity Incentive Plan Compensa- tion ($) | | | All Other Compensa- tion ($)(2) | | | Total ($) | | | Anderson, James R. | | | 2019 | | | | 550,000 | | | | — | | | | 6,437,819 | | | | — | | | | 200,591 | | | | 2,990 | | | | 7,191,400 | | President and CEO(3) | | | 2018 | | | | 177,692 | | | | 400,000 | | | | 7,585,107 | | | | 1,700,114 | | | | 136,419 | | | | 2,723 | | |
| 10,002,055
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| | | | | | | | | | Luther, Sherri CFO(4) | | | 2019 | | | | 342,346 | | | | 200,000 | | | | — | | | | — | | | | 78,012 | | | | 4,460 | | | | 624,818 | | | | | | | | | | | Douglass, Stephen | | | 2019 | | | | 330,000 | | | | — | | | | 1,950,807 | | | | — | | | | 78,230 | | | | 6,913 | | | | 2,365,950 | | CVP R&D | | | 2018 | | | | 106,615 | | | | — | | | | 1,840,182 | | | | — | | | | 53,203 | | | | 2,873 | | | | 2,002,873 | | | | | | | | | | | Elashmawi, Esam | | | 2019 | | | | 360,000 | | | | — | | | | 2,069,127 | | | | — | | | | 85,342 | | | | 5,084 | | | | 2,519,553 | | Chief Marketing & Strategy Officer | | | 2018 | | | | 96,923 | | | | — | | | | 1,782,471 | | | | — | | | | 47,798 | | | | 2,228 | | | | 1,929,420 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Milstead, Byron W. Corporate VP & General Counsel(5) | | | 2019 | | | | 314,414 | | | | — | | | | 785,540 | | | | 1,809,172 | | | | 75,386 | | | | 62,577 | | | | 3,047,089 | | | | 2018 | | | | 313,282 | | | | — | | | | 424,154 | | | | — | | | | 156,821 | | | | 78,108 | | | | 972,365 | | | | 2017 | | | | 334,084 | | | | 384,117 | (6) | | | 214,535 | | | | 241,806 | | | | 138,339 | | | | 78,795 | | | | 1,391,676 | |
(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 actually received by the named executive officer. The assumptions used to calculate the value of the awards granted in 2019 are set forth in Note 17 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 Form10-K.
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(2) | Additional information regarding the amounts provided in this column for 2019 is provided in the 2019 All Other Compensation Table that follows this table.
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(3) | Mr. Anderson joined the Company as President and Chief Executive Officer effective September 4, 2018.
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(4) | Ms. Luther became Chief Financial Officer effective January 2, 2019.
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(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 2019, 2018, and 2017 includes compensation paid both for his service as Corporate VP & General Counsel of the Company 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.and compensation parity among our executive officers;
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◾ | | 29
(6) | 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.
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2019 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 28, 2019.
| | | | | | | | | | | | | | | | | | | | | Name | | Supplemental Life Insurance/ Disability Premiums ($) | | Additional Group Life Insurance Premiums ($) | | Other ($)(1) | | Total ($) | Anderson, James R. President & CEO(2) | | | | — | | | | | 990 | | | | | 2,000 | | | | | 2,990 | | Luther, Sherri CFO | | | | — | | | | | 1,460 | | | | | 3,000 | | | | | 4,460 | | Douglass, Stephen CVP R&D | | | | 1,075 | | | | | 2,838 | | | | | 3,000 | | | | | 6,913 | | Elashmawi, Esam Chief Marketing & Strategy Officer | | | | 566 | | | | | 1,518 | | | | | 3,000 | | | | | 5,084 | | Milstead, Byron W. Corporate VP & General Counsel | | | | 3,442 | | | | | 111 | | | | | 59,024 | (3) | | | | 62,577 | |
| (1) | Unless otherwise indicated, consists of employer contribution to 401(k) plan.
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| (2) | Mr. Anderson was appointed President and Chief Executive Officer effective September 4, 2018.
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| (3) | Consists of employer contribution to 401(k) plan of $622, an apartment and home office in Singapore at an aggregate incremental cost to the Company of $46,552 and a local transportation allowance of $11,850.Company and other companies;
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◾ | | 30
2019 Grants of Plan-Based Awards Table
The following table sets forth information regarding plan-based awards granted during the fiscal year ended December 28, 2019 to eachcompensation practices of our namedcompensation peer group and the companies in selected broad-based compensation surveys and the positioning of each executive officers.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Type of Award | | Grant Date | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | | All Other Option Awards: Number of Securities Underlying Options (#) | | | Exercise or Base Price of Option Awards ($ / Sh) | | | Grant Date Fair Value of Stock and Option Awards ($)(1) | | | Threshold ($) | | | Targets ($) | | | Maximums ($) | | | Threshold (#) | | | Targets (#) | | | Maximums (#) | | Anderson, James R. | | Cash Incentive | | | | | | | — | | | | 550,000 | | | | 1,100,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | President & CEO(6) | | RSU Grant(2) | | | 8/2/2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 112,677 | | | | — | | | | — | | | | 2,143,117 | | | | RSU Performance Grant (TSR)(3) | | | 8/2/2019 | | | | — | | | | — | | | | — | | | | — | | | | 112,677 | | | | 281,693 | | | | — | | | | — | | | | 19.02 | | | | 2,143,117 | | Luther, Sherri | | Cash Incentive | | | | | | | — | | | | 224,250 | | | | 448,500 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | CFO | | RSU Grant(4) | | | 1/2/2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 141,181 | | | | — | | | | — | | | | 982,620 | | | | RSU Performance Grant(5) | | | 1/2/2019 | | | | — | | | | — | | | | — | | | | — | | | | 107,183 | | | | 214,366 | | | | — | | | | — | | | | 6.96 | | | | 745,994 | | | | RSU Grant(4) | | | 8/2/2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,047 | | | | — | | | | — | | | | 571,494 | | | | RSU Performance Grant(5) | | | 8/2/2019 | | | | — | | | | — | | | | — | | | | — | | | | 30,047 | | | | 60,094 | | | | — | | | | — | | | | 19.02 | | | | 571,494 | | Douglass, Stephen | | Cash Incentive | | | | | | | — | | | | 214,500 | | | | 429,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | CVP R&D(7) | | RSU Grant(4) | | | 8/2/2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 36,056 | | | | — | | | | — | | | | 685,785 | | | | RSU Performance Grant (TSR)(5) | | | 8/2/2019 | | | | — | | | | — | | | | — | | | | — | | | | 36,056 | | | | 72,112 | | | | — | | | | — | | | | 19.02 | | | | 685,785 | | Elashmawi, Esam | | Cash Incentive | | | | | | | — | | | | 234,000 | | | | 468,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Chief Marketing & Strategy Officer(8) | | RSU Grant(4) | | | 8/2/2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 33,051 | | | | — | | | | — | | | | 628,630 | | | RSU Performance Grant (TSR)(5) | | | 8/2/2019 | | | | — | | | | — | | | | — | | | | — | | | | 33,051 | | | | 66,102 | | | | — | | | | — | | | | 19.02 | | | | 628,630 | | Milstead, Byron W. | | Cash Incentive | | | | | | | — | | | | 206,700 | | | | 413,400 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Corporate VP & General Counsel | | RSU Grant(4) | | | 8/2/2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 13,821 | | | | — | | | | — | | | | 262,875 | | | RSU Performance Grant (TSR)(5) | | | 8/2/2019 | | | | — | | | | — | | | | — | | | | — | | | | 13,821 | | | | 27,642 | | | | — | | | | — | | | | 19.02 | | | | 262,875 | |
(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 17 in the Notes to Consolidated Financial Statements in our Annual Report.
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(2) | These RSUs vest at a rate of 33.33% of the shares as of one year from the grant date,officer’s compensation in a ranking of these companies’ compensation levels based on an analysis of competitive market data; and at a rate of 8.33% of the shares as of the end of each three-month period thereafter.
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(3) | These PRSUs are divided into three equal tranches that vest between 0% and 250% of the target amount, based on the relative TSR of the Company relative to the performance of the SOX Index during the applicable performance period. Specifically, 100% of the PRSUs vest at achievement equal to the 50th percentile, 250% of the PRSUs vest at achievement equal to the 75th percentile, and vest at achievement below the 25th percentile, with vesting scaling linearly for achievement between the 25th and 75th percentiles. At the time of grant, the performance periods consisted of the1-year periods following the date of grant, the1-year anniversary of the date of grant, and the2-year anniversary of the date of grant, respectively. In 2020, we amended these PRSUs to change the beginning of each performance period that had not yet ended to the date of grant. The grant date fair values of these PRSUs 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.
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(4) | 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.
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(5) | These PRSUs are divided into three equal tranches that vest between 0% and 200% of the target amount, based on the relative TSR of the Company relative to the performance of the SOX Index during the applicable performance period. Specifically, 100% of the PRSUs vest at achievement equal to the 50th percentile, 200% of the PRSUs vest at achievement equal to the 75th percentile, none of the PRSUs vest at achievement below the 25th percentile, with vesting scaling linearly for achievement between the 25th and 75th percentiles. At the time of grant, the performance periods consisted of the1-year periods following the date of grant, the1-year anniversary of the date of grant, and the2-year anniversary of the date of grant, respectively. In 2020, we amended these PRSUs to change the beginning of each performance period that had not yet ended to the date of grant. The grant date fair values of these PRSUs 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.
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(6) | Mr. Anderson was appointed as President and Chief Executive Officer effective September 4, 2018.
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(7) | Mr. Douglass was appointed as Corporate Vice President, Research and Development effective September 4, 2018.
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(8) | Mr. Elashmawi was appointed as Corporate Vice President, Chief Marketing and Strategy Officer effective September 24, 2018.
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◾ | | 31the 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 team, including our CEO. Our management team 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. For the 2021 Cash Incentive Plan, up to 50% of the target annual cash incentive award for each of our Named Executive Officers was subject to a discretionary increase or decrease based on a general 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. Beginning in 2022, 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 to 100%. 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 2021, the Compensation Committee engaged Semler Brossy Consulting Group LLC. (“Semler Brossy”), a national compensation consulting firm, to serve as its compensation consultant 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 2021, Semler Brossy 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; |
◾ | | Narrative Disclosurean analysis of competitive market data for our executive officer positions and evaluation of how the compensation we pay our executive officers compares both to Summary our performance and to how the companies in our compensation peer group and/or in selected broad-based compensation surveys compensate their executives;
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◾ | | a review of and research on the composition of various alternative compensation peer groups; |
◾ | | an assessment of executive compensation trends within our industry, and an update on corporate governance and regulatory issues and developments; |
◾ | | an analysis of competitive market data for the compensation of non-employee members of our Board of Directors; and |
◾ | | support on other ad hoc matters. |
The terms of Semler Brossy’s engagement included reporting directly to the Compensation Committee chair. Semler Brossy also coordinated with our management for data collection and job matching for our executive officers. In fiscal 2021, Semler Brossy provided no other services to us. The Compensation Committee has evaluated its relationship with Semler Brossy to ensure that it believes that Semler Brossy is independent from management. This review process included a review of the services that Semler Brossy provided, the quality of those services and the fees associated with the services provided during fiscal 2021. 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 Semler Brossy. 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 for fiscal 2021 was comprised of publicly traded technology companies who hire executive talent comparable to our executives. In July 2021, the Compensation Committee determined no modifications were needed to the compensation peer group approved by the Compensation Committee in July 2020, which consisted of the following companies: | | | 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 Semler Brossy from the public filings of the companies in our compensation peer group, as well as data from special data cuts drawn from the Radford 2021 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 2021 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 Table and Grants of Plan-Based Awards TableElement | | Description | | Element Objectives | | | | Base Salary | | Amounts in theNon-Equity Incentive Plan Compensation column of the Summary Compensation Table for fiscal years 2017, 2018 and 2019 represent payments of awards under our Cash Incentive Plan for each of those years. Each named executive officer’s potential award wasFixed cash compensation based on the Named Executive Officer’s role, responsibilities, competitive market positioning and individual performance
| | ◾ Attract and retain key executive talent ◾ Provide a specified percentagelevel of cash compensation for the Named Executive Officer’s performance of his or her annual base salaryresponsibilities | | | | 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 the potential award increases when and if a named executive officer’s annual base salary increases. Paymentsindividual performance ◾ Provided under our 2021 Cash Incentive Plan are made annually | | ◾ Attract and retain key executive talent ◾ Encourage and reward individual contributions and achievement of annual 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 achievement of the goals applicablePRSU award granted to the year.our CEO in 2018 and based on our relative total stockholder return in comparison to an index or our revenue growth for other PRSU awards | | ◾ Attract and retain key executive talent Please see the section “Compensation Discussion
◾ Drive top-tier performance and Analysis” above for more information aboutfocus on sustained long-term 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 2021, the Compensation Committee reviewed the base salaries of our Named Executive Officers, taking into consideration a competitive market analysis prepared by Semler Brossy 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 2021. The base salaries of our Named Executive Officers for fiscal 2021 were as follows: | | | | | | | | | | | Named Executive Officer | | Fiscal 2020 Base Salary | | Fiscal 2021 Base Salary(1) | | Percentage Adjustment | | | | | Mr. Anderson | | $600,000 | | $636,000 | | 6% | | | | | Ms. Luther | | $379,500 | | $390,885 | | 3% | | | | | Mr. Douglass | | $350,100 | | $360,603 | | 3% | | | | | Mr. Elashmawi | | $370,800 | | $381,924 | | 3% | | | | | Mr. Nelson | | $412,000 | | $418,180 | | 1.50% |
(1) | These base salaries were effective April 1, 2021. |
The actual base salaries paid to our Named Executive Officers in fiscal 2021 are set forth in the “2021 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 2021. In December 2020, the Compensation Committee approved the 2021 Cash Incentive Plan to provide incentives for these employees to meet or exceed the principal business objectives set forth in our fiscal 2021 annual operating plan. Under the 2021 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 2021 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 2020 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 2021 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 2020, the Compensation Committee selected three equally weighted performance components for the 2021 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 2021 Cash Incentive Plan: ◾ | | “non-GAAP operating income” meant our Cash Incentive Plan for fiscal 2019. Amounts in the Bonus column of the Summary Compensation Table represent any signing bonusoperating 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 incentives under the executive transition,2021 Cash Incentive Plan; and service bonuses paid
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◾ | | “revenue” meant our GAAP revenue, as reflected in our audited financial statements for fiscal 2021. |
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. The resulting performance levels for the two financial performance components were as follows: Non-GAAP Operating Income | | | | | Attainment vs. Plan | | Amount | | Payout Percentage | | | | Threshold | | $75.8 million | | 0% | | | | Maximum | | $149.5 million or more | | 200% |
Revenue | | | | | Attainment vs. Plan | | Amount | | Payout Percentage | | | | Threshold | | $388.3 million | | 0% | | | | Maximum | | $506 million | | 200% |
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 2021 gross margin above a pre-established target, including through product cost savings, (ii) successful execution of our new product platform and the build-out of a new product pipeline, (iii) delivering certain application specific solutions to customers in the second, third and fourth quarters of fiscal 2021, (iv) driving revenue growth above a specified level through the achievement of certain design wins goals, including from strategic customers, (v) achieving industry leading employee engagement, and (vi) delivering a new company-wide training program. 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, drive new product adoption in order to achieve future revenue targets, and help enhance employee engagement and development. Under the terms of the 2021 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 2021 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 50% 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. The purpose of the increase in the discretionary amount of the award payment was to further align payment under the 2021 Cash Incentive Plan to the contribution and performance of each of our Named Executive Officers. Annual Cash Incentive Award Payments In February 2022, the Compensation Committee determined the annual cash incentive award payments for our Named Executive Officers for fiscal 2021. 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 2021 was approximately $156 million, our revenue for fiscal 2021 was approximately $515 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 83%. 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(1) | | | | | Non-GAAP operating income | | 33% | | 200% | | 66.7% | | | | | Revenue | | 33% | | 200% | | 66.7% | | | | | Corporate performance | | 33% | | 83% | | 27.8% | | | | | Total | | | | | | 161.1% |
(1) | The numbers in this column do not sum to the executive officers under a broad-based employment policy and discretionary bonusesTotal due to rounding. |
After the overall payment level for the corporate performance components under the 2021 Cash Incentive Plan had been determined to be 161.1%, our CEO met with the Compensation Committee and provided his recommendations with respect to any further adjustments to the Named Executive Officers’ annual cash incentive award payments 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 to make an adjustment in the final payment under the 2021 Cash Incentive Plan to Mr. Nelson based on Mr. Nelson’s individual performance in 2021, which helped achieve 26% year over year revenue growth in 2021. The Compensation Committee made no other adjustments based on the other Named Executive Officers’ individual performance. 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 February2022. 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 | | $627,000 | | $1,010,097 | | 161.1% | | | | | Ms. Luther | | $252,225 | | $406,335 | | 161.1% | | | | | Mr. Douglass | | $232,685 | | $374,856 | | 161.1% | | | | | Mr. Elashmawi | | $246,443 | | $397,020 | | 161.1% | | | | | Mr. Nelson | | $270,813 | | $463,361 | | 171.1% |
The annual cash incentive award payments made to our Named Executive Officers for fiscal 2021 are set forth in the “2021 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 to help drive 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 2021, 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 2021, after taking into consideration a competitive market analysis prepared by Semler Brossy 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 recommended the independent members of the Board of Directors grant equity awards to our CEO, and granted equity awards to our Named Executive Officers, in the amounts set forth in the chart below. Such equity grants included (1) a PRSU award with performance criteria based on our relative total stockholder return (“TSR”) in comparison to an index, (2) a Revenue Growth PRSU award (defined below) with performance criteria based on year over year revenue growth metrics, and (3) an RSU award with time-based vesting requirements. The independent members of our Board of Directors subsequently approved the grant of the equity awards to our CEO in February 2021. The equity awards granted to our Named Executive Officers in fiscal 2021 were as follows: | | | | | | | | | | | | | | | Named Executive Officer | | TSR Performance Restricted Stock Unit Award (target number of shares)(1) | | TSR Performance Restricted Stock Unit Award (target value) | | Revenue Growth Performance Restricted Stock Unit Award (target number of shares)(1) | | Revenue Growth 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 | | 54,736 | | $2,400,000 | | 196,138 | | $8,600,000 | | 43,332 | | $1,900,000 | | $12,900,000 | | | | | | | | | Ms. Luther | | 14,254 | | $625,000 | | 57,016 | | $2,500,000 | | 14,254 | | $625,000 | | $3,750,000 | | | | | | | | | Mr. Douglass | | 11,403 | | $500,000 | | 45,613 | | $2,000,000 | | 11,403 | | $500,000 | | $3,000,000 | | | | | | | | | Mr. Elashmawi | | 12,543 | | $550,000 | | 50,174 | | $2,200,000 | | 12,543 | | $550,000 | | $3,300,000 | | | | | | | | | Mr. Nelson | | 11,403 | | $500,000 | | 45,613 | | $2,000,000 | | 11,403 | | $500,000 | | $3,000,000 |
(1) | The number of shares of our common stock subject to these awards was determined by dividing 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 2019. 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 out30-day trailing average of the money. Commencing in fiscal 2018, awards of PRSUs became a principal component of executive compensation. These grants are intended to align the interestsmarket price of our executives with those of our stockholders.
Allcommon stock option grants have a per share exercise price equalprior 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 inby the future to grant, equity-based compensation awards (stock options, time-based RSUs, and/or PRSUs) to executives in anticipationtarget value of the release of material nonpublic information that is likely to result in changesawards.
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PRSU Awards TSR-Based PRSU Awards The TSR-Based PRSU awards will vest on the third anniversary of the date of grant based upon the total TSR of the Company 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 units granted will be tested for vesting on the third anniversary from the date of grant and 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 in the future to time, the release of material nonpublic information based on equity award grant dates. 32
2019 Outstanding Equity Awards at FiscalYear-End Table
The following table sets forth information with respect to all unexercised options and unvested stock grants asthreshold performance level, then none of the fiscal year ended, December 28, 2019, 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 (#) | | | 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 (#) | | Name | | (Exercisable) | | | (Unexercisable) | | | | | | | | | | | | | | | | | | | | Anderson, James R | | | 237,642 | (1) | | | 336,721 | | | | 8.24 | | | | 9/4/2025 | | | | — | | | | — | | | | — | | | | — | | President & CEO | | | — | | | | — | | | | — | | | | — | | | | 219,695 | (2) | | | 4,224,735 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 145,181 | (3) | | | 2,791,831 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 193,834 | (4) | | | 3,727,428 | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 112,677 | (5) | | | 2,166,779 | | | | | — | | | | — | | | | — | | | | — | | | | 112,677 | (6) | | | 2,166,779 | | | | — | | | | — | | | | | | | | | | | Luther, Sherri | | | — | | | | — | | | | — | | | | — | | | | 141,181 | (7) | | | 2,714,911 | | | | — | | | | — | | CFO | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 107,183 | (8) | | | 2,061,129 | | | | | — | | | | — | | | | — | | | | — | | | | 30,047 | (9) | | | 577,804 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,247 | (10) | | | 577,804 | | | | | | | | | | | Douglass, Stephen | | | — | | | | — | | | | — | | | | — | | | | 88,840 | (11) | | | 1,708,393 | | | | — | | | | — | | CVP R&D | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 61,538 | (12) | | | 1,183,376 | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 36,056 | (13) | | | 693,357 | | | | | — | | | | — | | | | — | | | | — | | | | 36,056 | (14) | | | 693,357 | | | | — | | | | — | | | | | | | | | | | Elashmawi, Esam | | | — | | | | — | | | | — | | | | — | | | | 88,344 | (15) | | | 1,698,855 | | | | — | | | | — | | Chief Marketing & Strategy Officer | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 67,773 | (16) | | | 1,303,275 | | | | — | | | | — | | | | — | | | | — | | | | 33,051 | (17) | | | 635,571 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 33,051 | (18) | | | 635,571 | | | | | | | | | | | Milstead, Byron W. | | | 10,519 | (19) | | | — | | | | 7.54 | | | | 3/21/2021 | | | | — | | | | — | | | | — | | | | — | | Corporate VP & General Counsel | | | 5,500 | (20) | | | 5,500 | | | | 5.28 | | | | 5/13/2023 | | | | — | | | | — | | | | — | | | | — | | | | 3,678 | (21) | | | 22,072 | | | | 5.73 | | | | 10/18/2024 | | | | — | | | | — | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | 4,588 | (22) | | | 88,227 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | 18,990 | (23) | | | 365,178 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | 20,477 | (24) | | | 393,773 | | | | — | | | | — | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 14,184 | (25) | | | 272,758 | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 13,821 | (26) | | | 265,778 | | | | — | | | | — | | | | — | | | | — | | | | 13,821 | (27) | | | 265,778 | | | | — | | | | — | |
** | 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 28, 2019, the last business day of fiscal 2019.
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(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.
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(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.
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(3) | These performance RSUs were granted on September 4, 2018 and vest upon achievement of the performance conditions.
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(4) | These performance RSUs were granted on September 4, 2018 and vest upon achievement of the performance conditions.
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(5) | These performance RSUs were granted on August 2, 2019 and vest upon achievement of the performance conditions.
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(6) | 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.
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(7) | 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
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(8) | These performance RSUs were granted on January 2, 2019 and vest upon achievement of the performance conditions.
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(9) | 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.
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(10) | These performance RSUs were granted on August 2, 2019 and vest upon achievement of the performance conditions.PRSUs will vest.
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(11) | These RSUs were grantedIf the relative TSR performance of our common stock achieves at least the threshold performance level, then the PRSUs will vest based 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.
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(12) | These performance RSUs were granted on September 4, 2018 and vest upon achievement of the performance conditions.
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(13) | These performance RSUs were granted on August 2, 2019 and vest upon achievement of the performance conditions.
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(14) | 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.
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(15) | 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.
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(16) | These performance RSUs were granted on September 24, 2018 and vest upon achievement of the performance conditions
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(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.
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(18) | These performance RSUs were granted on August 2, 2019 and vest upon achievement of the performance conditions.
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(19) | These stock options were granted on March 21, 2014. The options are fully vested and not beneficial owned by the holder.
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(20) | 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 6.25% of the total option shares as of the end of each three-month period thereafter.
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(21) | These stock options were granted on October 18, 2017. The options vest at the rate of 7.14% of the total option shares as of three months from the grant date, and 7.14% of the total option shares as of the end of each three-month period thereafter.
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(22) | These RSUs were granted on May 13, 2016. 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.
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(23) | These RSUs were granted on October 18, 2017. 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 7.50% of the total RSUs as of the end of each three-month period thereafter.
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(24) | 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.
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(25) | These performance RSUs were granted on September 4, 2018 and vest upon achievement of the performance conditions.
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(26) | These performance RSUs were granted on August 2, 2019 and vest upon achievement of the performance conditions.
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(27) | 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.
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2019 Option Exercises and Stock Vested Table
The following table sets forth information for the fiscal year ended December 28, 2019 with respect to the shares acquired pursuant to option exercises and shares acquired on vesting of RSUs for the named executive officers.
| | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | Name | | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($)(1) | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($)(2) | | Anderson, James R. President & CEO(3) | | | — | | | | — | | | | 336,529 | | | | 6,437,819 | | | | | | | Luther, Sherri CFO | | | — | | | | — | | | | — | | | | — | | | | | | | Douglass, Stephen CVP R&D | |
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| | | — | | | | 101,920 | | | | 1,950,807 | | | | | | | Elashmawi, Esam Chief Marketing & Strategy Officer | | | — | | | | — | | | | 107,931 | | | | 2,069,127 | | | | | | | Milstead, Byron W. Corporate VP & General Counsel | | | 191,449 | | | | 1,809,172 | | | | 47,377 | | | | 785,540 | |
(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.
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(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.
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(3) | Mr. Anderson was appointed as President and Chief Executive Officer effective September 4, 2018.performance matrix:
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| | | 34 Company Performance (Percentile Ranking) | | Percentage of Performance Shares Vesting (as a Percentage of the Target Number of PRSUs) | | | Less than 26th Percentile | | 0% | | | 26th Percentile | | 50% | | | 55th Percentile | | 100% | | | 75th Percentile | | 200%/CEO 250% |
◾ | | If the relative 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 through straight-line interpolation, with the result rounded to the nearest whole share. |
Revenue Growth PRSU Awards The Compensation Committee, working with its independent consultant, made the decision at the beginning of 2021 to grant a one-time, performance-based RSU to the CEO and other executive officers. Determination and sizing of this award was based upon two guiding principles. The first principle was to provide incentive for our executive officers to accelerate the company’s top-line revenue growth annually. The second principle was to provide additional unvested holding power to the Company’s executive officers, who have been successful in delivering both significant performance improvements company-wide along with significant improvements in shareholder value. These PRSUs were designed to align executive incentives with revenue growth by granting awards that pay out at or above target amounts if certain revenue growth targets are achieved (“Revenue Growth PRSUs”). Each Revenue Growth PRSU is divided into four equal tranches and for each tranche, revenue growth is measured by comparing organic revenue for that year to the highest revenue achieved in any prior year, beginning with Fiscal 2020. If there is inorganic revenue growth via an acquisition in a given year, that revenue is not counted until the year following the first full year of revenue is achieved for that acquisition. The size of the revenue growth percentage determines the extent to which any tranche will be eligible to vest. This can range from 0% to 200%, with payment at or above 100% only possible with actual achievement of revenue growth consistent with the revenue growth target publicly shared by the Company at the 2021 Investor Day. Eligibility for vesting of any tranche will occur on the 13-month anniversary following the annual measurement period for that tranche. As a result, the Revenue Growth PRSUs can only fully vest over a five-year period from the initial grant date of the award, which is consistent with the principles the Compensation Committee desired in driving continued revenue growth and maintaining sufficient unvested holding power to retain our executive officers in an increasingly competitive talent market. 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, Research and Development; and our Corporate Vice President, 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. 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 2021, Mr. Lederer, 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 third tranche of these PRSU awards. Mr. Lederer determined that our TSR ranked above the 75th percentile and, therefore, that the following percentage of the target number of PRSUs covered by the third tranche of the PRSU awards had vested: (i) 250% for 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 third tranche of their fiscal 2018 PRSU awards: | | | | | | | | | Named Executive Officer | | PRSU Award Grant Date | | Target Number of Shares in Third Tranche of PRSU Award | | Percentage of Shares Earned in Third Tranche of PRSU Award | | Actual Number of Shares in Third Tranche of PRSU Award Earned | | | | | | Mr. Anderson | | September 4, 2018 | | 72,590 | | 250% | | 181,475 | | | | | | Mr. Douglass | | September 4, 2018 | | 30,769 | | 200% | | 61,538 | | | | | | Mr. Elashmawi | | September 24, 2018 | | 33,886 | | 200% | | 67,772 |
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 August 2021, the Compensation Committee determined that we had achieved the pre-established “adjusted” EBITDA level for the trailing four quarter measurement period ending June 30, 2021 and, therefore, that 67,676 PRSUs had vested for that measurement period. In November 2021, respectively, the Compensation Committee determined that we had achieved the pre-established “adjusted” EBITDA level for the trailing four quarter measurement periods ending September 30, 2021 and, therefore, that 64,611 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 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 2021, August 2021 and January 2022, respectively, the Compensation Committee Chair, 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. The Compensation Committee Chair 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 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 | | August 2, 2019 | | 37,559 | | 250% | | 93,898 | | | | | | Ms. Luther | | August 2, 2019 | | 10,016 | | 200% | | 20,032 | | | | | | Mr. Douglass | | August 2, 2019 | | 12,019 | | 200% | | 24,038 | | | | | | Mr. Elashmawi | | August 2, 2019 | | 11,017 | | 200% | | 22,034 | | | | | | Mr. Nelson | | January 8, 2019 | | 55,391 | | 200% | | 110,782 | | | | | | | | August 2, 2019 | | 10,016 | | 200% | | 20,032 |
The equity awards granted to our Named Executive Officers during fiscal 2020 are set forth in the “2021 Summary Compensation Table” and the “2021 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 2021, 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 the Compensation Committee’s then compensation consultant, Compensia, Inc., 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 2021, 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 or she leaves our employ under certain circumstances to facilitate his or her 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 2021, 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, 2021, 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 his base salary. In May 2020, on the recommendation of the Compensation Committee, the Board of Directors amended our Corporate Governance Policies to extend 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, on the recommendation of the Compensation Committee, the Board of Directors 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. 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. COMPENSATION COMMITTEE REPORT We have reviewed and discussed with management the Compensation Discussion and Analysis to be included in this Proxy 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 for the fiscal year ended January 1, 2022 and this Proxy Statement for the Annual Meeting. Compensation Committee James P. Lederer, Chair Krishna Rangasayee Anjali Joshi 2021 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 | | 2021 | | 627,000 | | — | | 16,736,285 | | — | | 1,010,097 | | 14,040 | | 18,387,422 | | 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 | Luther, Sherri, CFO(3) | | 2021 | | 388,039 | | — | | 4,543,035 | | — | | 406,335 | | 15,429 | | 5,352,837 | | 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 | | 2021 | | 357,977 | | — | | 3,634,412 | | — | | 374,856 | | 18,474 | | 4,385,719 | | 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 | Elashmawi, Esam, Chief Marketing & Strategy Officer | | 2021 | | 379,143 | | — | | 3,997,801 | | — | | 397,020 | | 15,181 | | 4,789,145 | | 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 | Nelson, Mark, CVP Worldwide Sales(4) | | 2021 | | 416,635 | | — | | 3,634,412 | | — | | 463,361 | | 15,888 | | 4,530,296 | | 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 2021 are set forth in Note 11 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 2021 is provided in the 2021 All Other Compensation Table that follows this table. (3) Ms. Luther became Chief Financial Officer effective January 2, 2019. (4) Mr. Nelson joined the Company as CVP Worldwide Sales effective January 8, 2019. 2021 All Other Compensation Table | | | | | | | | | Name | | Supplemental Life Insurance/Disability Premiums ($) | | Additional Group Life Insurance Premiums | | Other ($)(1) | | Total ($) | | | | | | James R. Anderson President & CEO | | — | | 990 | | 13,050 | | 14,040 | | | | | | Sherri Luther CFO | | — | | 2,838 | | 12,591 | | 15,429 | | | | | | Stephen Douglass CVP R&D | | 1,068 | | 4,356 | | 13,050 | | 18,474 | | | | | | Esam Elashmawi Chief Marketing & Strategy Officer | | 613 | | 1,518 | | 13,050 | | 15,181 | | | | | | Mark Nelson CVP Worldwide Sales | | — | | 2,838 | | 13,050 | | 15,888 |
(1) Consists of employer contribution to 401(k) plan. 2021 Grants of Plan-Based Awards Table | | | | | | | | | | | | | | | | | | | | | Name | | Grant Date | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive Plan Awards | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | Exercise or Base Price of Option Awards ($/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 | | | | — | | 627,000 | | 1,254,000 | | — | | — | | — | | — | | — | | | | 2/19/2021 | | — | | — | | — | | — | | — | | — | | 43,332 | | — | | 2,090,769 | | 2/19/2021 | | — | | — | | — | | — | | 54,736 | | 136,840 | | — | | — | | 5,181,857 | | 2/19/2021 | | — | | — | | — | | — | | 196,138 | | 392,276 | | — | | — | | 9,463,659 | | | | | | | | | | | | Sherri Luther CFO | | | | — | | 252,225 | | 504,450 | | — | | — | | — | | — | | — | | | | 2/19/2021 | | — | | — | | — | | — | | — | | — | | 14,254 | | — | | 687,756 | | 2/19/2021 | | — | | — | | — | | — | | 14,254 | | 28,508 | | — | | — | | 1,1,104,257 | | 2/19/2021 | | — | | — | | — | | — | | 57,016 | | 114,032 | | — | | — | | 2,751,022 | | | | | | | | | | | | Stephen Douglass CVP R&D | | | | — | | 232,685 | | 465,370 | | — | | — | | — | | — | | — | | | | 2/19/2021 | | — | | — | | — | | — | | — | | — | | 11,403 | | — | | 550,195 | | 2/19/2021 | | — | | — | | — | | — | | 11,403 | | 22,806 | | — | | — | | 883,390 | | 2/19/2021 | | — | | — | | — | | — | | 45,613 | | 91,226 | | — | | — | | 2,200,827 | | | | | | | | | | | | Esam Elashmawi Chief Marketing & Strategy Officer | | | | — | | 246,443 | | 492,886 | | — | | — | | — | | — | | — | | | | 2/19/2021 | | — | | — | | — | | — | | — | | — | | 12,543 | | — | | 605,200 | | 2/19/2021 | | — | | — | | — | | — | | 12,543 | | 25,086 | | — | | — | | 971,706 | | 2/19/2021 | | — | | — | | — | | — | | 50,174 | | 100,348 | | — | | — | | 2,420,896 | | | | | | | | | | | | Mark Nelson CVP Worldwide Sales | | | | — | | 270,813 | | 541,626 | | — | | — | | — | | — | | — | | | | 2/19/2021 | | — | | — | | — | | — | | — | | — | | 11,403 | | — | | 550,195 | | 2/19/2021 | | — | | — | | — | | — | | 11,403 | | 22,806 | | — | | — | | 883,390 | | 2/19/2021 | | — | | — | | — | | — | | 45,613 | | 91,226 | | — | | — | | 2,200,827 |
(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 2019, 2020 and 2021 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 2021. 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 2021. 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. 2021 Outstanding Equity Awards at Fiscal Year-End Table | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | Name | | Number of Potential Payments upon Termination orChange-in-ControlSecurities 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 | | 474,363(1) | | | | | | $8.24 | | 9/4/2025 | | | | | | | | | | | | | | | | | | | | | | | | 69,229(2) | | 5,334,787 | | | | | | | | | | | | 49,296(3) | | 3,798,750 | | | | | | | | | | | | | | | | | | | | 37,559(4) | | 2,894,297 | | | | | | | | | | | | | | | | 116,464(5) | | 8,974,716 | | | | | | | | | | | | 51,181(6) | | 3,944,008 | | | | | | | | | | | | | | | | 43,332(7) | | 3,339,164 | | | | | | | | | | | | | | | | | | | | 54,736(8) | | 4,217,956 | | | | | | | | | | | | | | | | 196,138(9) | | 15,114,394 | | | | | | | | | | | Sherri Luther CFO | | | | | | | | | | | | 44,119(10) | | 3,399,810 | | | | | | | | | | | | | | | | | | | | 35,727(12) | | 2,753,123 | | | | | | | | | | | | 13,146(12) | | 1,013,031 | | | | | | | | | | | | | | | | | | | | 10,016(13) | | 771,833 | | | | | | | | | | | | | | | | 38,822(14) | | 2,991,623 | | | | | | | | | | | | 16,378(15) | | 1,262,089 | | | | | | | | | | | | | | | | 14,254(16) | | 1,098,413 | | | | | | | | | | | | | | | | | | | | 14,254(17) | | | | | | | | | | | | | | | | | | 57,016(18) | | 4,393,653 | | | | | | | | | | | Stephen Douglass CVP R&D | | | | | | | | | | | | 24,229(19) | | 1,867,087 | | | | | | | | | | | | | | | | 15,775(20) | | 1,215,622 | | | | | | | | | | | | | | | | | | | | 12,019(21) | | 926,184 | | | | | | | | | | | | | | | | 38,822(22) | | 2,991,623 | | | | | | | | | | | | 16,378(23) | | 1,262,089 | | | | | | | | | | | | | | | | 11,403(24) | | 878,715 | | | | | | | | | | | | | | | | | | | | 11,403(25) | | 878,715 | | | | | | | | | | | | | | | | 45,613(26) | | 3,514,938 | | | | | | | | | | | Esam Elashmawi Chief Marketing & Strategy Officer | | | | | | | | | | | | 24,094(27) | | 1,856,684 | | | | | | | | | | | | | | | | 14,460(28) | | 1,114,288 | | | | | | | | | | | | | | | | | | | | 11,017(29) | | 848,970 | | | | | | | | | | | | | | | | 38,822(30) | | 2,991,623 | | | | | | | | | | | | 16,378(31) | | 1,262,089 | | | | | | | | | | | | | | | | 12,543(32) | | 966,564 | | | | | | | | | | | | | | | | | | | | 12,543(33) | | 966,564 | | | | | | | | | | | | | | | | 50,174(34) | | 3,866,408 |
| | | | | | | | | | | | | | | | | | | | | 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 ($)(**) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | | | | | | | | | | Mark Nelson CVP Worldwide Sales | | | | | | | | | | | | 69,295(35) | | 5,339,873 | | | | | | | | | | | | | | | | | | | | 55,392(36) | | 4,268,508 | | | | | | | | | | | | 13,146(37) | | 1,013,031 | | | | | | | | | | | | | | | | | | | | 10,016(38) | | 771,833 | | | | | | | | | | | | | | | | 38,822(39) | | 2,991,623 | | | | | | | | | | | | 16,378(40) | | 1,262,089 | | | | | | | | | | | | | | | | 11,403(41) | | 878,715 | | | | | | | | | | | | | | | | | | | | 11,403(42) | | 878,715 | | | | | | | | | | | | | | | | 45,613(43) | | 3,514,938 |
** 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, 2021, the last business day of fiscal 2021. (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 performance RSUs were granted on September 4, 2018 and vest upon achievement of the TSR performance conditions. (3) 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. (4) These performance RSUs were granted on August 2, 2019 and vest upon achievement of the TSR performance conditions. (5) These performance RSUs were granted on February 14, 2020 and vest upon achievement of the TSR performance conditions. (6) 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. (7) These RSUs were granted on February 19, 2021. 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 19, 2021 and vest upon achievement of the Revenue Growth performance conditions. (9) These performance RSUs were granted on February 19, 2021 and vest upon achievement of the Revenue Growth performance conditions. (10) 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. (11) These performance RSUs were granted on January 2, 2019 and vest upon achievement of the TSR performance conditions. (12) 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. (13) These performance RSUs were granted on August 2, 2019 and vest upon achievement of the TSR performance conditions. (14) These performance RSUs were granted on February 14, 2020 and vest upon achievement of the TSR performance conditions. (15) 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. (16) These RSUs were granted on February 19, 2021. 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. (17) These performance RSUs were granted on February 19, 2021 and vest upon achievement of the TSR performance conditions. (18) These performance RSUs were granted on February 19, 2021 and vest upon achievement of the Revenue Growth performance conditions. (19) 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. (20) 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. (21) These performance RSUs were granted on August 2, 2019 and vest upon achievement of the TSR performance conditions. (22) These performance RSUs were granted on February 14, 2020 and vest upon achievement of the Revenue Growth performance conditions. (23) 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. (24) These RSUs were granted on February 19, 2021. 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. (25) These performance RSUs were granted on February 19, 2021 and vest upon achievement of the TSR performance conditions. (26) These performance RSUs were granted on February 19, 2021 and vest upon achievement of the Revenue Growth performance conditions. (27) 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. (28) 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. (29) These performance RSUs were granted on August 2, 2019 and vest upon achievement of the TSR performance conditions. (30) 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. (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 RSUs were granted on February 19, 2021. 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. (33) These performance RSUs were granted on February 19, 2021 and vest upon achievement of the TSR performance conditions. (34) These performance RSUs were granted on February 19, 2021 and vest upon achievement of the Revenue Growth performance conditions. (35) 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. (36) These performance RSUs were granted on January 8, 2019 and vest upon achievement of the TSR performance conditions. (37) 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. (38) These performance RSUs were granted on August 2, 2019 and vest upon achievement of the TSR performance conditions. (39) These performance RSUs were granted on February 14, 2020 and vest upon achievement of the TSR performance conditions. (40) 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. (41) These RSUs were granted on February 19, 2021. 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. (42) These performance RSUs were granted on February 19, 2021 and vest upon achievement of the TSR performance conditions. (43) These performance RSUs were granted on February 19, 2021 and vest upon achievement of the Revenue Growth performance conditions. 2021 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 | | | 100,000 | | | | 7,571,186 | | | | 566,792 | | | | 34,702,451 | | | | | | | Luther, Sherri CFO | | | — | | | | — | | | | 66,753 | | | | 3,753,867 | | | | | | | Douglass, Stephen CVP R&D | | | — | | | | — | | | | 139,634 | | | | 8,332,639 | | | | | | | Elashmawi, Esam Chief Marketing & Strategy Officer | | | — | | | | — | | | | 142,932 | | | | 8,965,217 | | | | | | | Nelson, Mark CVP Worldwide Sales | | | — | | | | — | | | | 206,500 | | | | 10,136,143 | |
(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 Employment Agreement with 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 effective September 4, 2018, which was amended in 2020. Under the terms of the agreement, 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 event of an Involuntary Termination (which is defined as termination of his employment by the Company without Cause (as defined in his agreement) or by Mr. Anderson for Good Reason (as defined in his 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 the12-month period following the date of the Involuntary Termination vesting at the target amount. Ifamount (i.e., at the Involuntary Termination occurs in connection with a change in control (which includes an Involuntary Termination that occurs during100% vesting level for the period beginning 90 days priorapplicable determination/testing date, and for grants subject to adjusted EBITDA targets, 100% vesting level being the number of granted units to the extent not already vested).
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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 (including any equity awards after giving effect to the treatment of 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-employmentnon-solicitation andnon-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 Code as a result of such payments or benefits being classified as “parachute payments” under Section 280G of the 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, whichever would entitle Mr. Anderson to receive the greatestafter-tax amount.
In 2020, Mr. Anderson’s employment agreement was amended to:
provide that in the event of a change in control described below) 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 the event of a change in control, Mr. Anderson will receive the following severance payments and benefits: ◾ | | 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 35
| average closing stock prices for the component members of the peer group for the30-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 agreement as equity awards that vest for measurement periods ending on or after the date of the change in control and those tranches 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; and |
◾ | | 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,
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For purposes of Mr. Anderson’s employment agreement, “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 employment agreement, that is not corrected within a30-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 aone-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 such30-day remedial period.
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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. 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 Ms. Luther in January 2019, with Mr. Douglass in September 2018, Mr. Elashmawi in September 2018 and Mr. Milstead in May 2008, 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 their agreements) or by the named executive officer for Good Reason (as defined in their agreements)), the named executive 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 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. Employment Agreements with 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. Each of these agreements was amended in 2020. 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’sNamed Executive Officer’s then base salary, plus the named executive officer’sNamed 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 in the case of Ms. Luther, Mr. Douglass, and Mr. Elashmawi, 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 officerNamed Executive Officer elects to continue health insurance coverage under COBRA, reimbursement of the monthly COBRA premium for the named executive officerNamed 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 in the case of Ms. Luther, Mr. Douglass, and Mr. Elashmawi, 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 (in the case of Ms. Luther, Mr. Douglass, and Mr. Elashmawi, 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-employmentnon-solicitation andnon-disparagement (and in the case of Mr. Milstead,non-competition) covenants in the agreement.
In the event the severance payments or benefits under the agreement (and in the case of Ms. Luther, Mr. Douglass, and Mr. Elashmawi, any other payments or benefits) to be provided to the named executive officer
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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 that vest solely based on continued service (including any equity awards after giving effect to the treatment of equity awards in the event of a change in control described below), 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 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 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 agreement as equity awards that vest solely based on service. For purposes of the 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 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 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 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. Equity Award Agreements The award agreements governing the relative TSR PRSU awards granted to our Named Executive Officers each provide that in the event of a change in control that occurs before the end of the performance period, then (i) the performance period will be shortened so that it ends on the date of the change in control, with the ending stock price for purposes of determining the Company’s TSR equal to the price per share paid for the Company’s stock in the change in control and the ending stock price for purposes of determining the TSR of each member of the peer group equal to the average closing stock prices for such company’s stock for the 30-calendar days on the date of the change in control, and (ii) the number of PRSUs that become eligible to vest based on the relative TSR for such adjusted performance period will vest on the last day of the originally scheduled performance period, subject to the applicable Named Executive Officer remaining a service provider to the Company or its successor. The award agreements governing the Revenue Growth PRSUs granted to our Named Executive Officers each provide that in the event of a change in control that occurs before the end of the performance period, then the number of PRSUs that become eligible to vest will be equal to the target number of PRSUs, and such PRSUs will vest on the originally scheduled measurement dates, subject to the applicable Named Executive Officer remaining a service provider to the Company or its successor. 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 (i) their employment with the Company had been terminated or (ii) a change in control occurred, in each case as of the last day of our fiscal year ended January 1, 2022. | | | | | | | | | | | | | | | | | | | | | | | Name | | Basis of Payment | | Cash Severance ($) | | | Continuation of Insurance Benefit ($) | | Vesting of Equity Awards ($)(1) | | | Total ($) | | | | | | | | James R. Anderson, President & CEO | | Involuntary Termination Not in Connection With a Change in Control | | | 1,646,097 | | | 30,355 | | | 19,445,297 | (2) | | | 21,121,749 | | | Involuntary Termination in Connection With a Change in Control | | | 2,526,000 | | | 30,355 | | | 50,818,758 | (2) | | | 53,375,113 | | | Continued Service after a Change in Control | | | — | | | — | | | 50,818,758 | (3) | | | 50,818,758 | |
| | | | | | | | | | | | | | | | | | | | | | | Name | | Basis of Payment | | Cash Severance ($) | | | Continuation of Insurance Benefit ($) | | Vesting of Equity Awards ($)(1) | | | Total ($) | | | | | | | | Sherri Luther, CVP & CFO | | Involuntary Termination Not in Connection With a Change in Control | | | 643,110 | | | 30,355 | | | —(2) | | | | 673,465 | | | Involuntary Termination in Connection With a Change in Control | | | 643,110 | | | 30,355 | | | 18,781,988 | (2) | | | 19,455,453 | | | Continued Service after a Change in Control | | | — | | | — | | | 18,781,988 | (3) | | | 18,781,988 | | | | | | | | Stephen Douglass, CVP R&D | | Involuntary Termination Not in Connection With a Change in Control | | | 593,288 | | | 30,355 | | | —(2) | | | | 628,367 | | | Involuntary Termination in Connection With a Change in Control | | | 593,288 | | | 30,355 | | | 13,534,973 | (2) | | | 14,158,616 | | | Continued Service after a Change in Control | | | — | | | — | | | 13,534,973 | (3) | | | 13,534,973 | | | | | | | | Esam Elashmawi, Chief Marketing & Strategy Officer | | Involuntary Termination Not in Connection With a Change in Control | | | 628,367 | | | — | | | —(2) | | | | 628,367 | | | Involuntary Termination in Connection With a Change in Control | | | 628,367 | | | — | | | 13,873,189 | (2) | | | 14,501,556 | | | Continued Service after a Change in Control | | | — | | | — | | | 13,873,189 | (3) | | | 13,873,189 | | | | | | | | Mark Nelson, Corporate VP, Worldwide Sales | | Involuntary Termination Not in Connection With a Change in Control | | | 688,993 | | | 26,622 | | | —(2) | | | | 715,615 | | | Involuntary Termination in Connection With a Change in Control | | | 688,993 | | | 26,622 | | | 20,919,324 | (2) | | | 21,634,939 | | | Continued Service after a Change in Control | | | — | | | — | | | 20,919,324 | (3) | | | 20,919,324 | |
(1) The value of each Named Executive Officer’s equity award vesting acceleration benefit in connection with a qualifying termination of the Named Executive Officer’s employment or the Named Executive Officer’s performance-based awards becoming subject only to time-based vesting upon a change in control, as applicable, is calculated as (i) the number of shares covered by the portions of the Named Executive Officer’s equity awards that are subject to such acceleration or that are eligible to vest following such change in control, as applicable, multiplied by the closing price of our common stock on December 31, 2021 (the last trading day in fiscal 2021), which was $77.06 per share, less (ii) the exercise price for any such shares subject to options. (2) Represents the value of the accelerated vesting of certain of each Named Executive Officer’s outstanding equity awards upon a qualifying termination of the Named Executive Officer’s employment as described above under the sections titled “Potential Payments upon Termination or Change-in-Control – Employment Agreement with James R. Anderson” and “Potential Payments upon Termination or Change-in-Control – Employment Agreement with Other Named Executive Officers”. (3) Represents the accelerated vesting of certain of Mr. Anderson’s equity awards subject to performance-based vesting relating to EBITDA upon a change in control and/or the value of certain of each Named Executive Officer’s outstanding performance-based equity awards becoming subject only to time-based vesting upon a change in control as described above under the sections titled “Potential Payments upon Termination or Change-in-Control – Employment Agreement with James R. Anderson”, “Potential Payments upon Termination or Change-in-Control – Employment Agreement with Other Named Executive Officers”, and “Potential Payments upon Termination or Change-in-Control – Equity Award Agreements”. 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 no portion of such payments and benefits being subjecta significant change to our pay ratio disclosure. Therefore, we used the excise, whichever would entitlesame median employee to calculate the named executive officerCEO pay ratio in fiscal 2021 that we had used to receivecalculate the greatestafter-tax amount. In 2020, each of the employment agreements with Ms. Luther, Mr. Douglass, and Mr. Elashmawi was amended to:
provide thatCEO pay ratio 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
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| 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 the30-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 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; andfiscal 2020.
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make certain changes to the “Good Reason” definition, as noted below.
In 2020, the employment agreement with Mr. Milstead was amended to provide the same terms and conditions as the amended employment agreements with Ms. Luther, Mr. Douglass, and Mr. Elashmawi.
For purposes of the original and amended employment agreements with Ms. Luther, Mr. Douglass, and Mr. Elashmawi and the amended employment agreement with Mr. Milstead, “Cause” means (i) the applicable named executive officer’s material breach of the agreement that is not corrected within a30-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, and Mr. Elashmawi and the amended employment agreement with Mr. Milstead, “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, and Mr. Elashmawi, excluding aone-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, and Mr. Elashmawi, 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 such30-day remedial period.
For purposes of the original employment agreement with Mr. Milstead, “Cause” means (i) Mr. Milstead’s material breach of the agreement that is not corrected within a30-day correction period that begins upon delivery to Mr. Milstead of a written demand from the board of directors that describes the basis for the belief of the board of directors that Mr. Milstead has materially breached the agreement; (ii) any willful act of fraud or dishonesty that
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causes material damage to the Company; (iii) any willful violation of the Company’s insider trading policy; (iv) any willful violation of the Company’s conflict of interest policies; (v) 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 employment agreement with Mr. Milstead, “Good Reason” means the occurrence of any of the following, without Mr. Milstead’s express written consent: (i) a substantial reduction of Mr. Milstead’s duties or responsibilities; (ii) a substantial reduction in Mr. Milstead’s base salary or target bonus amount other than aone-time reduction (not exceeding 10% in the aggregate) that also is applied to substantially all other executive officers of the Company on the CEO’s written recommendation or written approval if Mr. Milstead’s reduction is substantially proportionate to, or no greater than, the reduction applied to substantially all other executive officers; (iii) the Company’s material breach of the agreement including without limitation the failure to timely provide Mr. Milstead the cash compensation, equity compensation and/or employee benefits specified under the agreement; or (iv) the Company requiring Mr. Milstead to relocate his principal place of business or the Company relocating its headquarters, in either case to a facility or location outside of a 30 mile radius from Mr. Milstead’s current principal place of employment; provided, however, that Mr. Milstead will only have Good Reason if the event or circumstances constituting Good Reason specified in any of the preceding clauses is not cured or otherwise remedied to Mr. Milstead’s satisfaction within 30 days after Executive gives written notice to the board of directors.
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 fiscalyear-end if their employment with the Company had been terminated as of the last day of our fiscal year ended December 28, 2019.
| | | | | | | | | | | | | | | | | | | 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 | | | 1,100,000 | | | | 57,034 | | | | 8,974,436 | | | | 10,131,470 | | | Involuntary Termination in Connection With a Change in Control | | | 2,200,000 | | | | 57,034 | | | | 21,552,696 | | | | 23,809,730 | | | | | | | | Sherri Luther, CVP & CFO | | Involuntary Termination Not in Connection With a Change in Control | | | 569,250 | | | | 57,034 | | | | — | | | | 626,284 | | | Involuntary Termination in Connection With a Change in Control | | | 569,250 | | | | 57,034 | | | | 5,931,647 | | | | 6,557,931 | | | | | | | | Stephen Douglass, CVP R&D | | Involuntary Termination Not in Connection With a Change in Control | | | 544,500 | | | | 57,034 | | | | — | | | | 601,534 | | | Involuntary Termination in Connection With a Change in Control | | | 544,500 | | | | 57,034 | | | | 4,278,483 | | | | 4,880,017 | | | | | | | | Esam Elashmawi, Chief Marketing & Strategy Officer | | Involuntary Termination Not in Connection With a Change in Control | | | 594,000 | | | | — | | | | — | | | | 594,000 | | | Involuntary Termination in Connection With a Change in Control | | | 594,000 | | | | — | | | | 4,273,271 | | | | 4,867,271 | | | | | | | | Byron W. Milstead, Corporate VP & General Counsel | | Involuntary Termination Not in Connection With a Change in Control | | | 524,700 | | | | 19,727 | | | | — | | | | 544,427 | | | Involuntary Termination in Connection With a Change in Control | | | 524,700 | | | | 19,727 | | | | 2,181,701 | | | | 2,726,128 | |
(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 27, 2019 (the last trading day in fiscal 2019), which was $19.23 per share, less (ii) the exercise price for any such shares subject to options.
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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. James R. Anderson, our Chief Executive Officer (our “CEO”).
| • | | Methodology.To identify the “median employee” from our employee population, we determined that, as of the last day of fiscal 2019 (December 28, 2019), our employee population consisted of approximately 750 individuals working at our parent company and consolidated subsidiaries. We selected simplified total compensation, measured using our internal payroll and accounting records for 2019, 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 2019:
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Salary or base pay paid during 2019;
Non-equity incentive plan compensation (which consists of cash bonus payments paid under the Cash Incentive Plan or Sales Incentive Plan) during 2019; 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.
We identified and calculated the elements of the annual total compensation of the median employee for fiscal 20192021 in accordance with the requirements of Item 402(c)(2)(x) of RegulationS-K, resulting in annual total compensation of $85,974.$112,020. |
◾ | We used the amount reported in the Total column of our 20192021 Summary Compensation Table included in this Proxy Statement for the annual total compensation of our CEO. For fiscal 2019,
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For fiscal 2021, our last completed fiscal year: ◾ | The median of the annual total compensation of all employees of our company (other than our CEO), was $85,974.$112,020. |
◾ | The annualized annual total compensation of our CEO was $7,191,400. Ratio
For 2019, based on this information, the annual total compensation of our Chief Executive Officer and President was 83.6 times that of the median of the annual total compensation of all employees.
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DIRECTOR COMPENSATION
2019 Director Compensation Table
The following table sets forth information concerning compensation of ournon-employee directors for the fiscal year ended December 28, 2019.
| | | | | | | | | | | | | Name | | Fees Earned in Cash ($) | | | Stock Awards ($)(10) | | | Total ($) | | Richardson, D. Jeffrey | | | 73,333 | (1) | | | 129,990 | | | | 203,323 | | Abrams, Robin A. | | | 70,000 | (2) | | | 129,990 | | | | 199,990 | | Beattie, Brian M. | | | 55,000 | (3) | | | 129,990 | | | | 184,990 | | Bourgoin, John | | | 70,000 | (4) | | | 129,990 | | | | 199,990 | | Jensen, Mark E. | | | 75,000 | (5) | | | 129,990 | | | | 204,990 | | Lederer, James P. | | | 65,000 | (6) | | | 129,990 | | | | 194,990 | | Major, John E. | | | 50,000 | (7) | | | 129,990 | | | | 179,990 | | Rangasayee, Krishna | | | 55,000 | (8) | | | 129,990 | | | | 184,990 | | Joshi, Anjali | | | 8,333 | (9) | | | 75,002 | | | | 83,335 | |
| (1) | Includes a $30,000 retainer for serving as chair of the board since May 2018, a $45,000 retainer for serving as a member of the board of directors and a $5,000 retainer for serving as a member of the nominating and governance committee.$18,387,422.
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| (2) | Includes a $10,000 retainer for serving as chair of the nominating and governance committee, a $5,000 retainer for serving on the nominating and governance committee, 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.
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| (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. Mr. Beattie resigned from the Board of Directors effective December 31, 2019.
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| (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 compensation committee and a $45,000 retainer for serving as a member of the board of directors.
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| (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 audit committee and a $45,000 retainer for serving as a member of the board of directors.
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| (6) | Includes a $10,000 retainer for serving as a member of the audit committee, 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.
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| (7) | Includes 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, each for a partial year.
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| (8) | 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, each for a partial year.
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| (9) | Includes a $833 retainer for serving as a member of the compensation committee and a $7,500 retainer for serving as a member of the Board of Directors, each for a partial year.
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| (10) | The amounts provided in this column represent the full grant date fair value of the restricted stock unit awards (Messrs. Bourgoin, Beattie, Jensen, Richardson, Herb, Weber and Ms. Abrams) granted pursuant to our 2011Non-EmployeeRatio For 2021, based on this information, the annual total compensation of our Chief Executive Officer and President was 164.1 times that of the median of the annual total compensation of all employees.
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS Director Equity Incentive Plan to each director and former director in the fiscal year ended December 28, 2019, determined in accordance with ASC 718. 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 28, 2019, is as follows: Ms. Abrams 8,795, Mr. Bourgoin 8,795, Mr. Beattie 8,795, Mr. Jensen 8,795, Ms. Joshi 3,752 , Mr. Lederer 8,795, Mr. Major 8,795, Mr. Rangasayee 8,795, and Mr. Richardson 8,795. |
Narrative Discussion to 2019 Director Compensation Table
The Company compensates itsnon-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 $45,000 per year for service on the board of directors, 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 $10,000, respectively.
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Committee members receive annual retainers of $10,000 for the audit and compensation committees, and $5,000 for the nominating and governance committee.
RSUs were awarded in 2019 to ournon-employee directors under the Company’s 2011Non-Employee Director Equity Incentive Plan. Each outside director receives an initial grant of an RSU award for a number of shares of common stock determined by dividing $130,000 by the fair market value of a share of the common stock on the grant date (but prorated based on the month the new director joins the board of directors) on the date of the director’s election or appointment to the board of directors. The first grant vests in installments cumulatively with respect to 1/3 of the RSUs on each of the first three anniversaries of the grant date thereafter, so that 100% of the RSUs shall be vested on the third anniversary of the date of grant, provided that the director continues to serve as a director on such dates. 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 $130,000 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 compensation provided to anynon-employee director cannot exceed $500,000 in any year.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 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 committee of the board of 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. 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 nominating and governance committee (or other member of the nominating and governance committee, if the director in question is the 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 nominating and governance committee.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of March 11, 2020 (except as otherwise indicated), information about (i) persons known to us to be the beneficial owners of more than five percent of our outstanding common stock, (ii) each nominee, (iii) each current director and named executive officer, and (iv) all current directors and executive officers as a group. The address for each of our executive officers and directors or nominees is to be entered into, it must be fully disclosed to the Chief 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 Committee of the Board of 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.
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 and pre-approval of the chair of the Nominating and Governance Committee (or other member of the Nominating and Governance Committee, if the director in question is the 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 Nominating and Governance Committee. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of March 11, 2022, certain information with respect to the beneficial ownership of our common stock by (i) any person (including any “group” as that term is used in Section 13(d)(3) of the Exchange Act) known by us to be the beneficial owner of more than 5% of our voting securities, (ii) each director and each nominee for director, (iii) each of the executive officers named in the Summary Compensation Table appearing herein, and (iv) all current executive officers and directors as 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 c/o Lattice Semiconductor Corporation, 5555 NE Moore Court, Hillsboro, Oregon 97124. | | | | | | | | | | | Name of Beneficial Owner | | Amount and Nature of Beneficial Ownership (# of Shares)(1) | | Percent of Class | T. Rowe Price Associates, Inc. 100 E. Pratt Street Baltimore, MD 21202 | | | | 12,300,376 | (2) | | | | 9.15 | % | | | | Alliance Bernstein L.P 1345 Avenue of the Americas New York, NY 10105 | | | | 8,249,340 | (3) | | | | 6.14 | % | | | | The Vanguard Group, Inc. 100 Vanguard Boulevard Malvern, PA 19355 | | | | 16,054,923 | (4) | | | | 11.94 | % | | | | BlackRock, Inc. 55 E. 52nd Street New York, NY 10055 | | | | 10,028,827 | (5) | | | | 7.46 | % | | | | Wellington Management Company LLP (and Affiliates) 280 Congress Street Boston, MA, 02210 | | | | 9,295,162 | (6) | | | | 6.91 | % | | | | James R. Anderson, Director, President & CEO | | | | 507,792 | (7) | | | | * | | | | | Robin A. Abrams, Director | | | | 220,384 | (8) | | | | * | | | | | John Bourgoin, Director | | | | 229,475 | (9) | | | | * | | | | | Mark E. Jensen, Director | | | | 176,492 | (10) | | | | * | | | | | James Lederer, Director | | | | 52,977 | (11) | | | | * | | | | | John Major, Director | | | | 74,896 | (12) | | | | * | | | | | Krishna Rangasayee, Director | | | | 53,396 | (13) | | | | * | | | | | D. Jeffrey Richardson, Director | | | | 106,446 | (14) | | | | * | | | | | Anjali Joshi, Director | | | | 3,752 | (15) | | | | * | | | | | Sherri Luther, Corporate Vice President & CFO | | | | 69,906 | (16) | | | | * | | | | | Stephen Douglass, Corporate Vice President Research & Development | | | | 39,665 | (17) | | | | * | | | | | Esam Elashmawi, Chief Marketing and Strategy Officer | | | | 82,309 | (18) | | | | * | | | | | Byron W. Milstead, Corporate Vice President & General Counsel | | | | 38,216 | (19) | | | | * | | | | | All directors and executive officers as a group (16 persons) | | | | 1,669,565 | (20) | | | | * | |
| | | | | | | | | Name and Address | | Number of Shares(1) | | | Percent of Total(1) | | | | | BlackRock, Inc. 55 E. 52nd Street New York, NY 10055 * | Less than one percent.
| | | 21,633,746(2) | | | | 15.73% | | | | | The Vanguard Group, Inc. 100 Vanguard Boulevard Malvern, PA 19355 | | | 13,460,707(3) | | | | 9.79% | | | | | Artisan Partners Limited Partnership (and affiliates) 875 East Wisconsin Avenue Suite 800 Milwaukee, WI 53202 | | | 9,508,069(4) | | | | 6.91% | | | | | T. Rowe Price Associates, Inc. 100 E. Pratt Street Baltimore, MD 21202 | | | 8,986,089(5) | | | | 6.53% | | | | | James R. Anderson, Director, President & CEO | | | 1,343,071(6) | | | | * | | | | | Robin A. Abrams, Director | | | 151,862(7) | | | | * | | | | | John Bourgoin, Director | | | 121,020(8) | | | | * | | | | | Mark E. Jensen, Director | | | 142,841(9) | | | | * | | | | | James Lederer, Director | | | 42,407(10) | | | | * | | | | | John Major, Director | | | 38,552(11) | | | | * | | | | | Krishna Rangasayee, Director | | | 62,663(12) | | | | * | | | | | D. Jeffrey Richardson, Director | | | 78,295(13) | | | | * | | | | | Anjali Joshi, Director | | | 15,101(14) | | | | * | | | | | Sherri Luther, Corporate Vice President & CFO | | | 163,258(15) | | | | * | | | | | Stephen Douglass, Corporate Vice President Research & Development | | | 115,165(16) | | | | * | | | | | Esam Elashmawi, Chief Marketing and Strategy Officer | | | 160,978(17) | | | | * | | | | | Mark Nelson, Corporate Vice President Worldwide Sales | | | 47,439(18) | | | | * | | | | | All directors and executive officers as a group (13 persons) | | | 2,485,971(19) | | | | 1.80% | |
* | Represents less than 1%. |
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(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 14, 2020 by T. Rowe Price Associates, Inc. and T. Rowe PriceSmall-Cap Stock Fund, Inc. According to this Schedule 13/A, T. Rowe Price Associates, Inc. possessed sole voting power over 2,473,568 shares and sole dispositive power over 12,300,376 shares, and T. Rowe PriceSmall-Cap Stock Fund, Inc. possessed sole voting power over 4,816,460
(2) | Based solely on information contained in a Schedule 13G/A filed on January 27, 2022 by BlackRock, Inc., which reported sole voting power as to 20,608,494 shares and sole dispositive power as to 21,633,746 shares. |
(3) | Based solely on information contained in a Schedule 13 G/A filed on February 10, 2022 by The Vanguard Group, which reported shared voting power as to 258,002 shares, sole dispositive power as to 13,082,041 shares, and shared dispositive power as to 378,666 shares. |
(4) | Based solely on information contained in a Schedule 13G jointly filed on February 4, 2024 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 8,493,524 shares and shared dispositive power as to 9,508,069 shares. |
(5) | Based solely on information contained in a Schedule 13G/A which was filed on February 14, 2022 by T. Rowe Price Associates, Inc. According to this Schedule 13/A, T. Rowe Price Associates, Inc. possessed sole voting power over 2,702,557 shares and sole dispositive power over 8,986,089 shares. |
(6) | Includes 220,259 RSUs vesting within 60 days of March 11, 2022. |
(7) | Includes 3,855 RSUs vesting within 60 days of March 11, 2022. |
(8) | Includes 0 RSUs vesting within 60 days of March 11, 2022. |
(9) | Includes 3,855 RSUs vesting within 60 days of March 11, 2022. |
(10) | Includes 3,855 RSUs vesting, each within 60 days of March 11, 2022. |
(11) | Includes 0 RSUs vesting, each within 60 days of March 11, 2022. |
(12) | Includes 3,855 RSUs vesting, each within 60 days of March 11, 2022. |
(13) | Includes 3,855 RSUs vesting within 60 days of March 11, 2022. |
(14) | Includes 3,855 RSUs vesting within 60 days of March 11, 2022. |
(15) | Includes 10,701 RSUs vesting within 60 days of March 11, 2022. |
(16) | Includes 10,096 RSUs vesting within 60 days of March 11, 2022. |
(17) | Includes 2,253 RSUs vesting within 60 days of March 11, 2022. |
(18) | Includes 15,737 RSUs vesting within 60 days of March 11, 2022. |
(19) | The number of shares beneficially owned by all of our current directors and executive officers as a group includes 284,054 RSUs vesting, each within 60 days of March 11, 2022. |
(3) | Based solely on information contained in a Schedule 13G/A filed on February 18, 2020 by Alliance Bernstein L.P., which reported sole voting power as to 7,564,602 shares, shared voting power as to no shares, sole dispositive power as to 8,160,850 shares, and shared dispositive power as to 88,490 shares.
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(4) | Based solely on information contained in a Schedule 13 G/A filed on February 12, 2020 by The Vanguard Group, which reported sole voting power as to 268,710 shares, shared voting power as to 26,241 shares, sole dispositive power as to 15,778,147 shares, and shared dispositive power as to 276,776 shares.
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(5) | Based solely on information contained in a Schedule 13G/A filed on February 5, 2020 by BlackRock, Inc., which reported sole voting power as to 9,797,702 shares and sole dispositive power as to 10,028,827 shares.
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(6) | Based solely on information contained in a Schedule 13G/A filed on January 28, 2020 by Wellington Management Group LLP, which reported shared voting power as to 7,368,468 shares and shared dispositive power as to 9,295,162 shares.
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(7) | Includes 48,103 shares exercisable under options and 13,845 PSUs vesting within 60 days of March 11, 2020.
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(8) | Includes 8,795 RSUs vesting within 60 days of March 11, 2020.
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(9) | Includes 8,795 RSUs vesting within 60 days of March 11, 2020.
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(10) | Includes 8,795 RSUs vesting within 60 days of March 11, 2020.
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(11) | Includes 21,919 shares exercisable under options and 8,795 RSUs vesting, each within 60 days of March 11, 2020.
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(12) | Includes 21,919 shares exercisable under options and 8,795 RSUs vesting, each within 60 days of March 11, 2020.
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(13) | Includes 21,919 shares exercisable under options and 8,795 RSUs vesting, each within 60 days of March 11, 2020.
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(14) | Includes 8,795 RSUs vesting within 60 days of March 11, 2020.
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(15) | Includes 3,752 RSUs vesting within 60 days of March 11, 2020.
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(16) | Includes 8,823 RSUs vesting within 60 days of March 11, 2020.
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(17) | Includes no RSUs, PRSUs or options vesting within 60 days of March 11, 2020.
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(18) | Includes 8,031 RSUs vesting within 60 days of March 11, 2020.
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(19) | Includes 3,678 shares exercisable under options and 3,165 RSUs vesting within 60 days of March 11, 2020. Mr. Milstead disclaims beneficial ownership of 10,519 shares exercisable under options constructively transferred by Mr. Milstead upon receipt.
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(20) | The number of shares beneficially owned by all of our current directors and executive officers as a group includes 117,538 shares exercisable under options 13,845 PRSUs vesting and 99,195 RSUs vesting, each within 60 days of March 11, 2020.
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Equity Compensation Plan Information
The following table summarizes information, as of December 28, 2019,
EQUITY COMPENSATION PLAN INFORMATION The following table summarizes information, as of January 1, 2022, 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(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 | | | 4,800,952 | (1) | | $ | 6.62 | | | | 3,745,303 | | | | | | Not approved by security holders | | | — | | | | — | | | | — | | | | | | Total | | | 4,800,952 | | | $ | 6.62 | | | | 3,745,303 | |
(1) | Consists of shares of our common stock that mayissuable 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 2011 Non-Employee Director Equity Incentive Plan, or assumed by us in connection with mergers and acquisitions. We are unable to ascertain with specificity the number of securities to be issued upon exercise of outstanding rights under our existing equity compensation plans.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. | | | | | | | | | | | | | (in thousands except per share amounts) | | (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 | | | 8,106,434 | (1) | | $ | 6.16 | | | | 11,214,414 | | Not approved by security holders | | | — | | | | — | | | | — | | Total | | | 8,106,434 | | | $ | 6.16 | | | | 11,214,414 | |
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(3) | (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 28, 2019, 30,414 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.
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(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.
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(3) | Includes approximately 1,416,428Includes approximately 1,091,848 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 period or a purchase date applicable to such offering period, whichever is lower. Also includes approximately 8,603,013 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 443,813 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 for which we are requesting stockholder approval pursuant to Proposal 3.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership on Form 3 and changes in ownership on 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 certain reporting persons, we believe that, for fiscal 2019, 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 the number of shares of our common stock available for issuance under the 2013 Incentive Plan by 7,500,000 shares (from 25,140,000 shares to 32,640,000 shares, in each case not including any shares added to the 2013 Incentive Plan from (i) any authorized shares that were available for issuance, and not issued or subject to outstanding awards, under the Company’s 1996 Stock Plan (the “1996 Plan”) on the date of the initial stockholder approval of the 2013 Incentive Plan, and (ii) any shares subject to outstanding awards under the 1996 Plan on the date of the initial stockholder approval of the 2013 Incentive Plan that cease to be subject to such awards following the date of the initial stockholder approval of the 2013 Incentive Plan).
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 7,500,000 new shares to be available under the 2013 Incentive Plan. In determining the number of shares to be added to the 2013 Incentive Plan, the board of directors considered a number of other factors, including the following:
Shares Reserved for Issuance and Dilutive Impact. As of December 28, 2019, we had 8,626,073 shares available under the 2013 Incentive Plan (plus any shares that are subject to outstanding awards under the 2013 Incentive Plan or the 1996 Plan that are forfeited or canceled or expire can be reused under the 2013 Incentive Plan) and a weighted average of 132,471,000 shares of our common stock outstanding. The additional 7,500,000 shares to be authorized for issuance under the 2013 Incentive Plan represent approximately 6% of the weighted average number of shares of our common stock outstanding. Although the additional 7,500,000 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.
Historical Grant Practices. The board of directors considered the historical numbers of stock options, RSUs, and PRSUs that we have granted in the past three years. The annual share usage, or burn rate, under our equity compensation program for the last three years was as follows:
| | | | | | | | | | | | | | | | | Annual Share Usage | | Fiscal 2017 | | | Fiscal 2018 | | | Fiscal 2019 | | | Three-Year Average | | Stock Options Granted | | | 3,257,940 | | | | 842,734 | | | | — | | | | 1,366,891 | | RSUs Granted | | | 3,058,634 | | | | 5,421,500 | | | | 3,712,112 | | | | 4,064,082 | | PRSUs Granted | | | 474,900 | | | | 1,732,504 | | | | 1,418,342 | | | | 1,208,582 | | Total Equity Awards Granted | | | 6,791,474 | | | | 7,996,738 | | | | 5,130,454 | | | | 6,639,555 | | Basic Weighted Average Shares of Common Stock Outstanding | | | 122,677,341 | | | | 126,563,520 | | | | 132,471,270 | | | | 127,237,377 | | Annual Share Usage | | | 5.54% | | | | 6.32% | | | | 3.87% | | | | 5.22% | |
Our three-year burn rate, which we define as the number of shares subject to equity awards granted in a year (with each share covered by an RSU or PRSU award counted as 2.2 shares) divided by the weighted average shares of common stock outstanding for that fiscal year, is 5.22% Our senior management, the compensation committee, and Compensia, the independent consultants to the compensation committee, reviewed our burn rate as compared to our industry peer companies and believe that it was appropriate.
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Forecasted Grant Practices. We currently forecast stock option, RSU, and PRSU grants covering approximately 5 million shares over the next year (assuming our stock price remains at $18), which is equal to 1.7% of the fully diluted number of shares of our common stock outstanding as of December 28, 2019. In light of this forecast, we anticipate the additional shares for which we are seeking stockholder approval will be sufficient for our equity compensation program through fiscal year 2022, and that we will need to seek stockholder approval for additional shares at our annual stockholders meeting in 2021 as our annual stockholders meeting are typically held during the second quarter of each fiscal year. However, circumstances could alter this forecast, such as a change in our stock price, business conditions, our company strategy, or market conditions for attracting and retaining employees.
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. 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 46.
Under applicable rules of the Nasdaq, 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 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 the employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and any entity that is directly or indirectly controlled by, in control of or under common control with the Company (a “Related Company”) by providing them with the opportunity to acquire a proprietary interest in the Company and to align their interests and efforts to the long-term interests of our stockholders.
Administration. The board of directors or the compensation committee will administer the 2013 Incentive Plan. The board of directors or the compensation committee may delegate to a committee consisting of one or more members of the board of directors the authority to administer the 2013 Incentive Plan in accordance with its terms. To the extent consistent with applicable law, the board of directors or the compensation committee may also authorize any officer of the Company to grant awards under the 2013 Incentive Plan (other than to himself or herself or to any executive officer of the Company). References to the “committee” in this Proposal 3 are, as applicable, to the compensation committee, the board of directors, or any committee or officer to whom they have delegated authority to administer the 2013 Incentive Plan.
The committee will have full power and exclusive authority to (i) select the eligible persons to whom awards may from time to time be granted; (ii) determine the type or types of awards to be granted to each participant; (iii) determine the number of shares to be covered by each award; (iv) determine the terms and conditions of any award; (v) approve the forms of notice or agreement for use under the 2013 Incentive 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 2013 Incentive Plan
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and any instrument evidencing an award, notice or agreement executed or entered into under the 2013 Incentive Plan; (viii) establish such rules, regulationsand sub-plans as it shall deem appropriate for the proper administration and operation of the 2013 Incentive 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 2013 Incentive Plan. Decisions of the committee will be final, conclusive and binding on all persons, including the Company, any participant, any stockholder and any eligible person.
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 will be final.
Eligibility. Awards may be granted under the 2013 Incentive Plan to employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and any Related Company. As of March 11, 2020, approximately (i) 719 employees (including officers), (ii) 8non-employee directors, and (iii) no consultants, agents, advisors and independent contractors 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 (and that may be issued upon the exercise of incentive stock options) is 32,640,000 shares plus (i) any authorized shares that were available for issuance, and not issued or subject to outstanding awards, under the 1996 Plan on the date of the initial stockholder approval of the 2013 Incentive Plan, and (ii) any shares subject to outstanding awards under the 1996 Plan on the date of the initial stockholder approval of the 2013 Incentive Plan that cease to be subject to such awards following the date of the initial stockholder approval of the 2013 Incentive Plan (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), up to an aggregate maximum of 8,699,550 shares pursuant to clauses (i) and (ii). Shares issued under the 2013 Incentive Plan will be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company as treasury shares.
Any shares of common stock subject to stock awards, restricted stock, stock units, performance shares and performance units will count against the numerical limits described in the previous paragraph as 2.2 shares of common 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 2013 Incentive Plan to a participant and thereafter are forfeited to or otherwise reacquired by the Company and would otherwise return to the 2013 Incentive Plan pursuant to the following paragraph, 2.2 times the number of shares of common stock covered by such award will return to the 2013 Incentive Plan and will again be available for issuance.
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 issued but 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 in lieu of shares of common stock or in another manner where some or all of the shares covered by the award are not issued.
The number of shares of common stock available for issuance under the 2013 Incentive Plan will not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional shares of common
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stock or credited as additional shares of common stock subject or paid with respect to an award. 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.
Adjustments. In the event that 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 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 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 will make proportional adjustments in (i) the maximum number and kind of securities available for issuance under the 2013 Incentive Plan; (ii) the maximum number and kind of securities issuable as incentive stock options; (iii) the maximum numbers and kind of securities issuable under the limits described in the section below entitled “Limitations on Size of Awards”; (iv) the maximum number and kind of securities issuable under the limits described in the section “Limitations on Vesting”; 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 for such award.
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, will not affect, and no adjustment by reason thereof will be made with respect to, outstanding awards. In addition, upon a dissolution or liquidation of the Company or a Company Transaction, awards will not be adjusted as described in the previous paragraph but instead will be treated as described in the sections “Dissolution or Liquidation” and “Change in Control,” respectively.
In the event of any adjustment in the number of shares covered by any award, each such award will cover only the number of full shares resulting from such adjustment, and any fractional shares resulting from such adjustment shall be disregarded.
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 underlying shares of common stock on the date of grant, except in the case of options granted in connection with substituting options in acquisition transactions. At the time of grant, the committee determines when stock options vest and become 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 during regular trading, or if not trading on that date, such price on the last preceding date on which the Common Stock was traded.
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The committee will establish and set forth in each instrument that evidences an option whether the option will continue to be exercisable, and the terms and conditions of such exercise, after a termination of the participant’s service, any of which provisions may be waived or modified by the committee at any time. If the exercise of an option following termination of a participant’s 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 of 1933, as amended (the “Securities Act”), or the Company’s insider trading policy, then the option will remain exercisable until the earlier of (i) the last day of the option’s term or (ii) the expiration of a period of three months (or such longer period of time as determined by the committee, which longer period will
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not be more than two months beyond the end of such three-month period) after the termination of the participant’s service during which the exercise of the option would not be in violation of such Securities Act or insider trading policy requirements.
| • | | 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, 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 the SAR’s per share grant price (which must be at least 100% of the fair market value of a share of common stock 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. At the time of grant, the committee determines when SARs vest and become exercisable and when they expire, except that a tandem SAR may be exercised only with respect to the shares for which its related option is then exercisable, 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.
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| • | | 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. Upon vesting of restricted stock or stock units, (i) the shares covered by each award of restricted stock will become freely transferable by the participant, and (ii) stock units will 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 will be paid to the participant in cash.
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| • | | Performance Shares and 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 property other than shares of common stock. Either may be payable in stock, cash, other property, or a combination of stock, cash, and/or other property, upon the attainment of performance criteria and other terms and conditions as established by the committee. The amount to be paid under an award of performance units or performance shares may be adjusted on the basis of such further consideration as the committee determines in its sole discretion.
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| • | | 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.
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Repricing. The 2013 Incentive Plan prohibits the committee, without stockholder approval, from (i) lowering the exercise or grant price of an option or SAR after it is granted, except in connection with adjustments provided under the 2013 Incentive Plan, (ii) taking any other action that is treated as a repricing under generally accepted accounting principles, (iii) canceling 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 SAR, restricted stock, or other equity award, or (iv) issuing an option or SAR or amending 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.
Limitations on Vesting. Subject to adjustment described in the section above entitled “Adjustments,” the aggregate number of shares that may be issued pursuant to awards granted under the 2013 Incentive Plan that either (i) 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 the participant’s service) or (ii) vest over less than one year (except if accelerated pursuant to a Change in Control or in the event of a termination of the participant’s service) based on factors other than solely continuous employment or services shall not exceed 5% of the aggregate maximum number of shares authorized for issuance under the 2013 Incentive Plan. In addition, if and to the extent the committee accelerates vesting or exercisability
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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 in Control, the shares covered by such committee action will similarly count towards the 5% limitation described above. 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.
Limitation on Size of Awards. Subject to certain adjustments, a “covered employee” (as that term is defined for purposes of Section 162(m)(3) of the Code) 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 additionalone-time awards for up to 2,000,000 shares may be granted to newly hired or newly promoted individuals in any calendar year. The maximum dollar value payable to any covered employee 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.
Dividends and Distributions. Participants may, if the committee 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. The committee may apply any restrictions to the dividends or dividend equivalents that the committee deems appropriate. The committee may determine the form of payment of dividends or dividend equivalents, including cash, shares of common stock, restricted stock or stock units. 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 Code Section 409A. Also, 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 equivalents are paid to other stockholders and (ii) comply with or qualify for an exemption under Code Section 409A. Also, no participant will be paid amounts with respect to dividends or dividend equivalents credited with respect to unvested awards while such awards remain unvested.
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.
Dissolution or Liquidation. To the extent not previously exercised or settled, and unless otherwise determined by the committee, awards shall terminate immediately before the dissolution or liquidation of the
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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 will be forfeited immediately prior to the consummation of the dissolution or liquidation.
Change in 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 the Company or a Related Company, in the event of a Change in Control (as defined in the 2013 Incentive Plan):
all outstanding awards that are subject to vesting based on continued employment or service with the Company or a Related Company will 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 will 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 (as defined in the 2013 Incentive Plan) in which such awards could be converted, assumed, substituted for or replaced by the successor company, such awards will 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.
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 will 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 will remain in effect.
The committee may instead provide in the event of a Change in Control that is a Company Transaction that a participant’s outstanding awards will terminate upon or immediately prior to such Company Transaction and that such participant will receive, in exchange for the award, 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 constitutes certain sales, leases, exchanges or other transfers of all or substantially all of the Company’s assets 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, 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) exceeds (y) if applicable, the respective aggregate exercise price or grant price for such awards.
The 2013 Incentive Plan does not require all outstanding awards to be treated similarly in a Change in Control.
Assignability. Unless otherwise determined by the committee, 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, and during a participant’s lifetime, an award may be exercised only by the participant.
Amendment and Termination. The board of directors or the compensation committee may amend, suspend, or terminate the 2013 Incentive Plan, except that (i) if any applicable law, regulation, or stock exchange rule requires stockholder approval for an amendment to the 2013 Incentive Plan, then to the extent so required,
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stockholder approval will be obtained, (ii) any amendment that requires stockholder approval may be made only by the board of directors, and (iii) any amendment, suspension, or termination may not, without a participant’s consent, materially adversely affect any rights under any of the participant’s outstanding awards. 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 Information
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, 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.
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 valuebeginning of the six-month offering period or a purchase date applicable to such offering period, whichever is lower. Also includes approximately 2,292,724 shares underlying the SAR on the date of exercise and the grant price of the SAR.
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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. If a participant receives a restricted stock award, the 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, paidreserved 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 excess of the fair market value of the shares at the time of receipt over the amount, if any, paid for the shares. This election is madeissuance 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 vested stock unit is paid out, the participant generally will recognize compensation taxable as ordinary income at the time of such 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. Special rules limit the deductibility of compensation paid to our Chief Executive Officer and other “covered employees” as determined under Code Section 162(m) and applicable guidance. Under Code Section 162(m), the annual compensation paid to any of these covered employees will be deductible only to the extent that it does not exceed $1,000,000.
Code Section 409A. We intend that awards granted under the 2013 Incentive Plan, comply with,which may be granted pursuant to stock options, stock appreciation rights, stock awards or otherwise be exempt from, Code Section 409A, but make no representationrestricted stock or warranty to that effect.
Tax Withholding. We are authorized to deduct or withhold from any award granted or payment dueunits. Also includes approximately 360,731 shares reserved for issuance under the 2013our 2011 Non-Employee Director Equity Incentive Plan, or require a participant to remit to us, the amount of any withholding taxes due in
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respect of the award or payment and to take such other action aswhich may be necessarygranted pursuant to satisfy all obligations for the payment of applicable withholding taxes. We are not required to issue any shares of commonstock options, restricted 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, consultants, agents, advisors and independent contractors 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. Our executive officers andnon-employee directors have an interest in this proposal because they are eligible to receive awards under the 2013 Incentive Plan. The following table sets forth the aggregate number of shares covered by RSUs and PRSUs (at target levels) granted under the 2013 Incentive Plan during fiscal 2019 to (i) each of our named executive officers, (ii) our executive officers, as a group, (iii) our directors who are not executive officers, as a group, and (iv) all employees who are not executive officers, as a group. As of March 11, 2020, the closing sales price of a share of commonrestricted stock as reported on the Nasdaq was $16.46 per share.
| | | | | | | | | Name of Individual or Group and Principal Position | | Value of RSUs/ PRSUs ($) | | | Number of RSUs/ PRSUs (#) | | Named Executive Officers: | | | | | | | | | James R. Anderson, President and CEO | | | 4,286,233 | | | | 225,354 | | Sherri Luther, CVP & CFO | | | 2,871,601 | | | | 308,458 | | Stephen Douglass, CVP R&D | | | 1,371,570 | | | | 72,112 | | Esam Elashmawi, Chief Marketing & Strategy Officer | | | 1,257,260 | | | | 66,102 | | Byron W. Milstead, Corporate VP & General Counsel | | | 525,751 | | | | 27,642 | | All current executive officers, as a group | | | 14,174,716 | | | | 1,147,681 | | All current directors who are not executive officers, as a group | | | 1,114,923 | | | | 74,112 | | All employees who are not executive officers, as a group | | | 19,405,889 | | | | 1,096,096 | |
| (1) | The value of an equity award is based on the aggregate grant date fair value of such equity award (in the case of a PRSU award, at the target payout level) determined pursuant to FASB ASC Topic 718. See Notes 1 and 10 in the Notes to Consolidated Financial Statements in our Annual Report on Form10-K for the fiscal year ended December 28, 2019, for a discussion of all assumptions made by us in determining the aggregate grant date fair value of equity awards.
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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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RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our audit committee, in accordance with its charter, routinely reviews the performance and retention of our independent auditor and has recently submitted a request for proposal to several independent registered public accounting firms, including our current independent registered public accounting firm, KPMG LLP (“KPMG”). The request for proposal asks that these firms submit proposals to serve as our independent registered public accounting firm for the fiscal year ending January 2, 2021. After receiving and reviewing these proposals, the audit committee will select and appoint an independent registered public accounting firm for the fiscal year ending January 2, 2021. In light of this ongoing process, we are not submitting a proposal for ratification of the appointment of our independent registered public accounting firm at the Annual Meeting. While not required to do so, our practice has been to submit the selection of our independent auditor for ratification in order to ascertain the views of our stockholders, and we expect to resume this practice in 2021.
We expect that representatives of KPMG, which served as our independent registered public accounting firm during the fiscal year ended December 28, 2019, will be present at the Annual Meeting, will have an opportunity to make a statement and will be available to respond to appropriate questions from our stockholders. We currently expect to complete the process to select our independent registered public accounting firm for the fiscal year ending January 2, 2021 before the completion of our second quarter of the current fiscal year. If our audit committee makes a selection prior to the Annual Meeting, we expect that representatives from the firm selected by the audit committee will be present at the Annual Meeting and that they will have the opportunity to make a statement and to be available to respond to appropriate questions from our stockholders.
Audit and Related Fees
Under its charter, the audit committee reviewed andpre-approved all audit and permissiblenon-audit services performed by KPMG. The following table sets forth the fees for professional audit services rendered by KPMG for the audit of the Company’s annual financial statements for fiscal years 2019 and 2018, and fees billed for other services rendered by KPMG during those periods.
| | | | | | | | | | | Fiscal 2019 | | | Fiscal 2018 | | Audit Fees(1) | | $ | 1,477,000 | | | $ | 1,401,900 | | Tax Fees(2) | | | 12,000 | | | | 36,000 | | Total fees | | $ | 1,489,000 | | | $ | 1,437,900 | |
| (1) | For fiscal 2019 and 2018, this category includes fees for the audit of the annual financial statements included in 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.units.
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| (2) | This category includes fees billed for tax compliance, tax planning and tax advice.
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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 necessary and permissible). In this regard, the audit committee has the sole authority to approve the hiring and firing of the 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 appoints the independent registered public accounting firm annually.
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ANNUAL REPORT
Our 2019 Annual Report to Stockholders was provided to our stockholders together with this 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 11, 2020, an additional copy of our Annual Report on Form10-K for our most recent fiscal year filed with the SEC on February 24, 2020, including financial statement schedules but not including exhibits. Requests should be directed to the attention of the Secretary, Lattice Semiconductor Corporation, 5555 NE Moore Court, Hillsboro, Oregon 97124.
OTHER BUSINESS
The board of directors does not intend to present any business for action at the 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, the persons named in the accompanying form of proxy intend to vote the shares they represent as the board of directors 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 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-party firm to aid in the solicitation of proxies.
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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 of stockholders, a stockholder proposal must be received at our principal executive offices no later than November 23, 2020.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS 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 consolidated financial statements and our internal control over financial reporting in accordance with the standards 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 year ended January 1, 2022 with management and our 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 Rule 2-07 of Regulation S-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 the Company 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 reports 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 Form 10-K for the year ended January 1, 2022, for filing with the SEC. Respectfully submitted by the Audit Committee. Mark E. Jensen, Chair Robin Abrams James P. Lederer ANNUAL REPORT Our 2021 Annual Report to Stockholders was provided to our stockholders together with this 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 11, 2022, an additional copy of our Annual Report on Form 10-K for our most recent fiscal year filed with the SEC on February 23, 2022, including financial statement schedules but not including exhibits. Requests should be directed to the attention of the Secretary, Lattice Semiconductor Corporation, 5555 NE Moore Court, Hillsboro, Oregon 97124. OTHER BUSINESS The Board of Directors does not intend to present any business for action at the Annual 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 Annual Meeting, the persons named in the accompanying form of proxy intend to vote the shares they represent as the Board of Directors 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, or e-mail. 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-party firm to aid in the solicitation of proxies. 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 of Stockholders, a stockholder proposal must be received at our principal executive offices no later than November 24, 2022. Such proposals also will need to comply with SEC regulations under Rule14a-8 regarding the inclusion of stockholder proposals in Company-sponsored proxy materials. Proposals should be addressed to the Secretary, Lattice Semiconductor Corporation, 5555 NE Moore Court, Hillsboro, Oregon 97124. Other Stockholder Proposals and Director Nominations If a stockholder wishes to present a stockholder proposal at next year’s annual meetingAnnual Meeting of stockholdersStockholders that is not intended to be included in the proxy statement or to nominate a person for election to our boardBoard of directorsDirectors at next year’s annual meetingAnnual Meeting of stockholders,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 24, 2022, and | (1) | not earlier than the close of business on November 23, 2020, and
(2) not later than the close of business on December 24, 2022. |
| (2) | not later than the close of business on December 23, 2020.
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If the date of the next annual meetingAnnual Meeting of stockholdersStockholders is changed by more than 30 days from the anniversary of the Annual Meeting, then notice of a stockholder proposal that is not intended to be included in our proxy statement under Rule14a-8 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 year’s annual meetingAnnual Meeting of stockholdersStockholders should be addressed to the Secretary, Lattice Semiconductor Corporation, 5555 NE Moore Court, Hillsboro, Oregon 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 MaterialsMULTIPLE COPIES OF PROXY MATERIALS
You may receive more than one set of voting materials, including multiple copies of this Proxy 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) 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, 5555 NE Moore Court, Hillsboro, Oregon 97124, or you may contact the Secretary at(503) 268-8000 or by sending an email message to byron.milstead@latticesemi.comtracy.feanny@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 to request delivery of a single copy of these materials. 59
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 possible. You can vote your shares over the internetInternet 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 24, 2022 By Order of the Board of Directors Tracy Feanny Secretary
Byron W. Milstead
Secretary
Hillsboro, Oregon
March 23, 2020
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ANNEXAnnex A
LATTICE SEMICONDUCTOR CORPORATIONNon-GAAP Reconciliation
2013 INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of the Lattice Semiconductor Corporation 2013 Incentive Plan isIn addition 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 interestfinancial measures prepared 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 a“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 Committee may delegate concurrent responsibility for administering the Plan, includingaccordance 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
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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, 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(GAAP), this proxy makes reference to providenon-GAAP financial measures. Additional information regarding the non-GAAP measures is provided below:
(1) The non-GAAP adjustments for Stock-based compensation include related tax expenses. (2) Restructuring charges includes Acquisition related charges in 2021 YTD of $1.2 million. (3) We calculate non-GAAP tax expense by applying our tax provision model to year-to-date and projected income after adjusting for non-GAAP items. (4) Adjusted EBITDA (utilized in the grant or issuanceCEO EBITDA-BASED PRSU award) is calculated primarily by deriving non-GAAP net income and removing the impact 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, conclusiveinterest, taxes, 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) 32,640,000 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 Commondepreciation/amortization.
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| | | | | | | | | | | Twelve Months Ended | | | | January 1, 2022 | | | January 2, 2021 | | GAAP Income (loss) from operations | | $ | 100,816 | | | $ | 52,366 | | Stock-based compensation—gross margin | | | 4,105 | | | | 3,818 | | Stock-based compensation—OPEX | | | 46,113 | | | | 38,324 | | Amortization of acquired intangible assets | | | 2,613 | | | | 4,449 | | Restructuring charges | | | 2,111 | | | | 3,937 | | Non-GAAP Operating Income | | $ | 155,758 | | | $ | 102,894 | |
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 Awards granted under the Plan that either (a) contain no restrictions or restrictions based solely on
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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 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.
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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;
(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;
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(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 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.
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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 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.
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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 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
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attachment or similar proceedings otherwise than by will 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.
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
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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, 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 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.
(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
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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 (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
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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.
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
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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 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.
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(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.
(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.
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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.
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.
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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, 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
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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
(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,
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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.
“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.
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“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 “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.
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“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
| | | | | | | | | | | Twelve Months Ended | | | | December 28, 2019 | | | December 29, 2018 | | GAAP Income (loss) from operations | | $ | 59,041 | | | $ | (3,120 | ) | Stock-based compensation—gross margin | | | 1,422 | | | | 940 | | Inventory adjustment related to restructured operations | | | (338 | ) | | | 7,829 | | Stock-based compensation—operations | | | 17,477 | | | | 12,706 | | Amortization of acquired intangible assets | | | 13,558 | | | | 17,690 | | Restructuring charges | | | 4,664 | | | | 17,349 | | Impairment of acquired intangible assets | | | (1,023 | ) | | | 11,686 | | Acquisition related charges | | | — | | | | 1,531 | | | | | | | | | | | Non-GAAP Income from operations | | $ | 94,801 | | | $ | 66,611 | | Bonus | | | 5,765 | | | | 5,885 | | | | | | | | | | | Non-GAAP Income from operations excluding bonus | | $ | 100,566 | | | $ | 72,496 | |
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LATTICE VOTE SEMICONDUCTORTM Your vote matters – here’s how to vote! You may vote online or by phone instead of mailing this card. Votes submitted electronically must be received by 11:59 pm, (Eastern Time), on May 4, 2020. Online Go to www.envisionreports.com/LSCC or scan the QR code —– login details are located in the shaded bar below. Phone Call toll free1-800-652-VOTE (8683) within the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at www.envisionreports.com/LSCC Using a black ink pen, mark your votes with an X as shown in this example. Sign up for electronic delivery at Please do not write outside the designated areas. www.envisionreports.com/LSCC 20202022 Annual Meeting Proxy Card qIFIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q A Proposals —– The Board of Directors recommend a vote FOR A all the nominees listed and FOR Proposals 2—2 - 3 1. Election of Directors: + For Withhold For Withhold For Withhold 01—01 - James R. Anderson 02—For Withhold 02 - Robin A. Abrams 03—John Bourgoin 04—For Withhold 03 - Mark E. Jensen 05—AnjoliFor Withhold 04 - Anjali Joshi 06—05 - James P. Lederer 07—John E. Major 08—06 - Krishna Rangasayee 09—07 - D. JefferyJeffrey Richardson 2. To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022; For Against Abstain 3. To approve on a non-binding, advisory basis, the compensation of our Named Executive Officers (as defined below in the section of the Proxy Statement titled “Compensation Discussion and Analysis”); For Against Abstain 2. To approve, as an advisory vote, the compensation of the 3. To approve, the amended Lattice Semiconductor Corporation Company’s named executive officers. 2013 Incentive Plan. 4. To transact such other business as may properly come before the meeting. B Authorized Signatures —– This section must be completed for your vote to count. Please date and sign below. Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full 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. 92BV + 036VSE7 2 B V 03LS5A
2020The 2022 Annual Meeting Admission Ticket 2020 Annual Meetingof Stockholders of Lattice Semiconductor Corporation Stockholderswill be held on Friday, May 5, 2020,6, 2022 at 1:00pm00 p.m. PT, Lattice Semiconductor Corporation 2115 SW O’Nel Dr., San Jose, CAvirtually via the internet at www.meetnow.global/MW6AGK9. To access the virtual meeting, you must have the information that is printed in the shaded bar located on the reverse side of this form. Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/LSCC qIFIF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Lattice Semiconductor Corporation + Notice of 20202022 Annual Meeting of Stockholders Proxy Solicited by Board of Directors for Annual Meeting —– May 5, 20206, 2022 James Anderson and Byron Milstead,Tracy Feanny, or either of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Stockholders of Lattice Semiconductor Corporation to be held on May 5, 20206, 2022 or at any postponement or adjournment thereof. Shares represented by this proxy will be voted by the stockholder. If no such directions are indicated, the Proxies will have authority to vote FOR the election of the Board of Directors and FOR items2-3. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. (Items to be voted appear on reverse side) CNon-Voting Items Change of Address —– Please print new address below. Comments —– Please print your comments below. +
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