ITEM 11. EXECUTIVE COMPENSATION.
Compensation Discussion and Analysis
Named Executive Officers
This Compensation Discussion and Analysis section discusses the compensation policies and programs for our Chief Executive Officer, our Chief Financial Officer, and our three next most highly paid executive officers during our fiscal year ended October 1, 2021 (“fiscal year 2021”), as determined under the rules of the SEC. We refer to this group of executive officers as our “Named Executive Officers.” For fiscal year 2021, our Named Executive Officers were:
• Liam K. Griffin, Chairman, Chief Executive Officer and President;
• Kris Sennesael, Senior Vice President and Chief Financial Officer;
• Carlos S. Bori, Senior Vice President, Sales and Marketing;
• Robert J. Terry, Senior Vice President, General Counsel and Secretary; and
• Karilee A. Durham, Senior Vice President, Human Resources.
Engagement with Stockholders Regarding Executive Compensation
In evaluating and establishing our executive compensation policies and programs, our Compensation Committee values and actively considers the opinions expressed by our stockholders through the “say-on-pay” advisory vote at each annual stockholder meeting, as well as through our ongoing stockholder engagement efforts. In order to better understand the lack of broad stockholder support for the “say-on-pay” proposal at our 2021 Annual Meeting of Stockholders, the chairman of our Compensation Committee, Ms. King, took a leading role in our formal post-meeting stockholder outreach, in which we solicited feedback on our fiscal year 2020 compensation program from more than thirty of our largest institutional stockholders representing approximately 51% of the Company’s shares outstanding. Our Company management held subsequent engagement meetings with stockholders representing approximately 39% of the Company’s shares outstanding, including eight of our ten largest stockholders, with Ms. King joining more than a dozen meetings with stockholders representing approximately 34% of the Company’s shares outstanding.
During these conversations, our institutional stockholders generally expressed support for the Company’s strategy, performance, and management, with most stockholders who had voted against the “say-on-pay” proposal noting that such opposition had been primarily in response to the one-time stock-based compensation awards made to the Named Executive Officers in November 2019 to address significant retention concerns. Many stockholders, while supporting the majority of the Company’s compensation policies, nonetheless suggested modifications to specific plan designs, including to the metrics and performance periods under the Company’s long-term stock-based compensation program. After considering this input from our stockholders, as well as evaluating practices related to executive compensation by public companies generally, and our peer group specifically, our Compensation Committee committed to several key responsive changes to the Company’s compensation program. The following changes were adopted after the conclusion of the Company’s fiscal year 2021, which is described in this “Compensation Discussion and Analysis” section, and therefore generally apply beginning with the Company’s fiscal year 2022 compensation program:
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November 2019 One-Time Awards
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No one-time awards granted to Named Executive Officers in 2020 or 2021 and no future one-time grants anticipated
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Long-Term Equity: FY 2022 Performance Share Award Design
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Transitioned from design win metric (non-disclosable) to relative EBITDA margin metric (disclosable)
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Extended performance period to two years for relative EBITDA margin metric
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Extended vesting period to two years for one-year emerging revenue growth metric
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Set target performance at 55th percentile of peer group for both relative EBITDA margin and total stockholder return (“TSR”) metrics
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Compensation Peer Group
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Adjusted peer group to remove certain large comparator companies and improve comparability
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Clawback Policy
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Committed to adopting comprehensive clawback policy to align with forthcoming SEC rulemaking
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Approach for Determining Form and Amounts of Compensation
The Compensation Committee, which is composed solely of independent directors within the meaning of applicable Nasdaq Rules and non-employee directors within the meaning of Rule 16b-3 under the Exchange Act, is responsible for determining all components and amounts of compensation to be paid to our Named Executive Officers, as well as any other executive officers or employees who report directly to the Chief Executive Officer. The Compensation Committee sets compensation for the Named Executive Officers, including base salary, short-term incentives, and long-term stock-based incentives, at levels generally intended to be competitive with the compensation of comparable executives in semiconductor companies with which we compete for executive talent and to link the compensation of our Named Executive Officers to improvements in the Company’s financial performance and increases in stockholder value.
Compensation Program Objectives
The objectives of our executive compensation program are to attract, retain, and motivate highly qualified executives to operate our business, and to link the compensation of those executives to improvements in the Company’s financial performance and increases in stockholder value. Accordingly, the Compensation Committee’s goals in establishing our executive compensation program include:
•ensuring that our executive compensation program is competitive with a group of companies in the semiconductor industry with which we compete for executive talent;
•providing a base salary that serves as the foundation of a compensation package that attracts and retains the executive talent needed to achieve our business objectives;
•providing short-term variable compensation that motivates executives and rewards them for achieving Company financial performance targets;
•providing long-term stock-based compensation that aligns the interest of our executives with stockholders by rewarding them for long-term increases in stockholder value; and
•ensuring that our executive compensation program is perceived as fundamentally fair to our employees.
Retention of Compensation Consultant
The Compensation Committee has engaged Aon/Radford Consulting (“Aon/Radford”) to assist in determining the components and amount of executive compensation. Aon/Radford reports directly to the Compensation Committee, through its chairman, and the Compensation Committee retains the right to terminate or replace the consultant at any time. The Compensation Committee has considered the relationships that Aon/Radford has with the Company, the members of the Compensation Committee and our executive officers, as well as the policies that Aon/Radford has in place to maintain its independence and objectivity, and has determined that Aon/Radford’s work for the Compensation Committee has not raised any conflicts of interest. Company management also purchases published compensation and benefits surveys from Aon/Radford, and on occasion engages certain affiliates of Aon/
Radford in various jurisdictions for services unrelated to executive compensation and benefits, engagements for which the Company’s management has not sought the Compensation Committee’s approval. The fees paid to Aon/Radford and its affiliates in fiscal year 2021 for these surveys and additional services did not exceed $120,000.
Use of Comparator Group Data
The Compensation Committee annually compares the components and amounts of compensation that we provide to our Chief Executive Officer and each of the other Named Executive Officers with “Comparator Group” data for each position and uses this comparison data to help inform its review and determination of base salaries, short-term incentives, and long-term stock-based compensation awards, as discussed in further detail below under “Components of Compensation.” For fiscal year 2021, the Compensation Committee approved Comparator Group data consisting of a 50/50 blend of (i) Aon/Radford survey data of semiconductor companies (where sufficient data was not available in the Aon/Radford semiconductor survey data for a given executive position, the Comparator Group data also included survey data regarding high-technology companies), and (ii) data from the group of 16 publicly traded semiconductor companies listed below. Our selected peer group for fiscal year 2021 remained unchanged from that used by the Compensation Committee for the prior fiscal year. The peer group includes many business competitors, as well as certain larger semiconductor companies with which we compete for executive talent.
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Peer Group for Fiscal Year 2021 Compensation (1)
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Advanced Micro Devices
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KLA Corporation
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Microchip Technology
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Qorvo
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Analog Devices
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Lam Research
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Micron Technology
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QUALCOMM
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Applied Materials
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Marvell Technology
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NVIDIA
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Texas Instruments
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Broadcom
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Maxim Integrated Products
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ON Semiconductor
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Xilinx
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________________________
(1) For the Company’s fiscal year 2022 compensation program, we made adjustments to our peer group to improve comparability. Specifically, we removed Applied Materials, Broadcom, and NVIDIA, all of which are significantly larger than the Company, as measured by multiple factors including market capitalization and annual revenue, and added Western Digital and NXP Semiconductors, both of which are more comparable in size to the Company.
The Compensation Committee generally seeks to make decisions regarding each Named Executive Officer’s compensation that are competitive within the Comparator Group, with consideration given to the executive’s role, responsibility, performance, and length of service. After reviewing the Comparator Group data and considering the input of Aon/Radford, the Compensation Committee established (and the full Board of Directors was advised of) the base salary, short-term incentive target, and stock-based compensation for each Named Executive Officer for fiscal year 2021. Aon/Radford advised the Compensation Committee that such components of executive compensation for fiscal year 2021 were competitive for chief executive officers and other executive officers at companies of similar size and complexity in the semiconductor industry.
In determining the compensation of our Chief Executive Officer for fiscal year 2021, the Compensation Committee focused on (i) competitive levels of compensation for chief executive officers who are leading a company of similar size and complexity, (ii) the importance of retaining and incentivizing a chief executive officer with the strategic, financial, and leadership skills necessary to ensure our continued growth and success, (iii) our Chief Executive Officer’s role relative to the other Named Executive Officers, (iv) input from the full Board of Directors on our Chief Executive Officer’s performance, and (v) the length of our Chief Executive Officer’s service to the Company. Our Chief Executive Officer was not present during the voting or deliberations of the Compensation Committee concerning his compensation.
The Compensation Committee considered the recommendations of the Chief Executive Officer regarding the compensation of the other Named Executive Officers and each of his other direct reports. These recommendations were based on an assessment of each individual’s responsibilities, experience, performance, and contribution to the Company’s performance, and also took into account internal factors such as scope of role and level in the organization, in addition to external factors such as the current environment for attracting and retaining executives.
Components of Compensation
The key elements of compensation for our Named Executive Officers are base salary, short-term incentives, long-term stock-based incentives, and health and welfare benefits. For fiscal year 2021, the Compensation Committee sought to make decisions that would result in each Named Executive Officer’s target total direct compensation being competitive within the Comparator Group, with consideration given to the executive’s role, responsibility, performance, and length of service.
Base Salary
The Compensation Committee determines a competitive base salary for each executive officer using the Comparator Group data and input provided by Aon/Radford. In order to provide flexibility in consideration of differences in individual executives’ scope of responsibilities, length of service, and performance, the Compensation Committee did not target a specific percentile of the Comparator Group for executive officer salaries; however, the salaries of the executive officers were generally near the median of the Comparator Group. The base salary for fiscal year 2021 for each Named Executive Officer, as reflected in the table below, increased on average 4.5% from the Named Executive Officer’s base salary in fiscal year 2020, with increases ranging from 3.9% to 5.7%. Salary increases were based on the market-based salary adjustments recommended by Aon/Radford as well as recommendations by the Chief Executive Officer (for Named Executive Officers other than himself).
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FY2021
Base Salary ($)
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FY2020
Base Salary ($)
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Liam K. Griffin
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1,075,000
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1,029,000
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Kris Sennesael
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560,000
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530,000
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Carlos S. Bori
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475,000
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457,000
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Robert J. Terry
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492,000
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473,000
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Karilee A. Durham
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450,000
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432,000
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Short-Term Incentives
Overview
Our short-term incentive compensation plan for executive officers is established annually by the Compensation Committee and is intended to motivate and reward executives by tying a significant portion of their total cash compensation to the Company’s achievement of pre-established performance goals that are generally one year or less in duration. The Fiscal Year 2021 Executive Incentive Plan (the “Incentive Plan”) adopted by the Compensation Committee on December 14, 2020, was based on the Company’s achievement of corporate performance goals established on a semi-annual basis during fiscal year 2021.
Consistent with the plan structure from the prior fiscal year, the Incentive Plan was established with two six-month performance periods. The Compensation Committee determined that semi-annual performance periods remained appropriate for fiscal year 2021 in light of continued uncertainties related to the COVID-19 pandemic. As with the prior year, this approach proved to be appropriate for fiscal year 2021, as the performance goals set by the Compensation Committee for the second performance period, as discussed below, reflected a significantly improved business outlook that resulted from greater-than-expected increases in overall demand for our wireless connectivity products.
Incentive Opportunities
For each executive officer, short-term incentive compensation at the “target” level is designed to be near the median short-term incentive compensation of the Comparator Group. After reviewing Comparator Group data, the
Compensation Committee determined that the target incentive under the Incentive Plan, as a percentage of base salary, for each of the Named Executive Officers should not be changed, as compared to the target incentives under the prior year’s short-term incentive plan.
The following table shows the range of short-term incentive compensation that each Named Executive Officer could earn in fiscal year 2021 as a percentage of such executive officer’s annual base salary.
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Threshold
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Target
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Maximum
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Chief Executive Officer
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80%
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160%
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320%
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Chief Financial Officer
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50%
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100%
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200%
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Other Executive Officers
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40%
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80%
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160%
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Performance Goals
In December 2020 and May 2021, the Compensation Committee established performance goals for the applicable semi-annual performance period, with each executive eligible to earn up to half of his or her annual short-term incentive compensation with respect to each six-month period. Under the Incentive Plan, any unearned amounts with respect to the first performance period were to be forfeited and could not be earned later based on performance during the second performance period or full-year performance. Payments under the Incentive Plan were based on achieving revenue and non-GAAP EBITDA performance goals, each of which was weighted at 50% for each respective performance period. EBITDA, for purposes of the non-GAAP EBITDA performance goal, was calculated by adding depreciation and amortization to the Company’s non-GAAP operating income, as publicly reported in the Company’s earnings release for the applicable period.
The target level performance goals were established by the Compensation Committee under the Incentive Plan after reviewing the Company’s historical operating results and growth rates as well as the Company’s expected future results relative to peers and were designed to require significant effort and operational success on the part of our executives and the Company. The threshold level performance goals established by the Compensation Committee under the Incentive Plan in each case exceeded the Company’s actual performance during the corresponding performance period during the prior fiscal year. The maximum level performance goals established by the Compensation Committee have historically been difficult to achieve and are designed to represent outstanding performance that the Compensation Committee believes should be rewarded. The performance goals established for the second half of fiscal year 2021 were based on the Company’s outlook in May 2021 for the remainder of the fiscal year, which included expectations for revenue and non-GAAP EBITDA that were significantly higher than the Company’s original operating plan, resulting in an upward adjustment to the metrics from the preliminary metrics discussed in December 2020.
The performance goals established under the Incentive Plan for fiscal year 2021 were as follows:
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Revenue
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Non-GAAP EBITDA
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(in millions)
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1st Half
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2nd Half
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1st Half
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2nd Half
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Threshold
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$1,700
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$2,018
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$730
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$855
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Target
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$1,835
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$2,168
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$795
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$940
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Maximum
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$1,900
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$2,318
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$825
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$1,025
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The Incentive Plan stipulated that payouts to executives following the end of the fiscal year, under either of the performance metrics, were conditioned upon the Company achieving full-year non-GAAP operating income of $650 million, which is increased from the $500 million threshold that applied for the prior fiscal year. Non-GAAP operating income, for purposes of the Incentive Plan, is based on the Company’s publicly disclosed non-GAAP operating income—which is calculated by excluding from GAAP operating income share-based compensation expense; acquisition-related expenses; amortization of acquisition-related intangibles; settlements, gains, losses, and impairments; restructuring-related charges; and certain deferred executive compensation—after accounting for any incentive award payments, including those to be made under the Incentive Plan.
Calculation of Incentive Plan Payments
Under the Incentive Plan, upon completion of the first six months of the fiscal year, the Compensation Committee determined the extent to which the Company’s performance goals for the first performance period were attained, reviewed the CEO’s recommended payouts under the Incentive Plan, and approved the awards to be made under the Incentive Plan with respect to the first performance period. Upon completion of the fiscal year, the Compensation Committee completed the same process with respect to the second performance period. Payments with respect to the first performance period were capped at 100% of the first half target level attributable to the applicable metric, with amounts over the target level held back and paid after the end of the fiscal year upon certification that the Company had achieved its nominal level of non-GAAP operating income for the fiscal year.
Achievement under the performance goals at the “threshold,” “target,” or “maximum” level corresponds to payment under the Incentive Plan at the “threshold,” “target,” or “maximum” percentage, as applicable, with such percentage multiplied by the executive’s base salary for the six-month period and then multiplied by the weighting assigned to that performance goal. The payout for achievement under the performance goals between either the “threshold” and “target” levels or the “target” and “maximum” levels would be based on linear interpolation between the two relevant amounts.
Each executive’s payment under the Incentive Plan is calculated by evaluating achievement of each performance goal individually, determining the portion of the total eligible incentive payment earned with respect to each such performance goal, and totaling the resulting amounts. The Compensation Committee retained the discretion to make payments, upon consideration of recommendations by the Chief Executive Officer, even if the threshold performance metrics were not met or if the nominal level of non-GAAP operating income was not met, or to make payments in excess of the maximum level if the Company’s performance exceeded the maximum metrics. While the Compensation Committee believed it was appropriate to retain this discretion in order to make short-term incentive compensation awards in appropriate extraordinary circumstances, no such adjustments were actually made.
Fiscal Year Results
For the first half of fiscal year 2021, the Company’s revenue and non-GAAP EBITDA achieved were $2,682 million and $1,226 million, respectively, resulting in a short-term compensation award for each Named Executive Officer with respect to such performance period equal to his or her maximum payment level, or 200% of the target payment level. A payment of the target amount was made to each Named Executive Officer in May 2021, with the remainder held back for potential payment following the completion of the fiscal year. For the second half of fiscal year 2021, the Company’s revenue and non-GAAP EBITDA achieved were $2,367 million and $1,050 million, respectively, resulting in a short-term compensation award for each Named Executive Officer with respect to such performance period equal to his or her maximum payment level, or 200% of the target payment level. In determining the Company’s performance for the second half of fiscal year 2021, the Company excluded all impacts to revenue and non-GAAP EBITDA resulting from the acquisition in July 2021 of Silicon Labs’ Infrastructure and Automotive business. In November 2021, upon certifying that the nominal level of non-GAAP operating income had been achieved for the fiscal year, the Compensation Committee approved payment of the short-term incentive achieved with respect to the second performance period as well as payment of the remaining portion of the short-term incentive achieved with respect to the first performance period, which had been held back. The Compensation Committee did not exercise discretion, either upward or downward, to executives’ payments under the Incentive Plan.
The following table shows the Company’s achievement under the Incentive Plan:
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Revenue
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Non-GAAP EBITDA
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(in millions)
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1st Half
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2nd Half
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1st Half
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2nd Half
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Threshold
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$1,700
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$2,018
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$730
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$855
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Target
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$1,835
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$2,168
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$795
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$940
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Maximum
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$1,900
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$2,318
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$825
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$1,025
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Achieved
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$2,682
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$2,367
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$1,226
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$1,050
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Long-Term Stock-Based Compensation
Overview
The Compensation Committee generally makes long-term stock-based compensation awards to executive officers on an annual basis. Long-term stock-based compensation awards are intended to align the interests of our executive officers with those of our stockholders and to reward our executive officers for increases in stockholder value over periods of time greater than one year. It is the Company’s practice to make stock-based compensation awards to executive officers in November of each year at a prescheduled Compensation Committee meeting. For fiscal year 2021, the Compensation Committee made an annual stock-based compensation award to each of the Named Executive Officers on November 11, 2020, at a regularly scheduled Compensation Committee meeting.
Fiscal Year 2021 Stock-Based Compensation Awards
In making annual stock-based compensation awards to executive officers for fiscal year 2021, the Compensation Committee first reviewed the Comparator Group grant data by executive position. The Compensation Committee used that data to inform its determination of a target dollar value for the long-term stock-based award for each executive officer, as set forth in the table below, targeting awards for fiscal year 2021 that were competitive within the Comparator Group. Each executive officer was granted a performance share award (“PSA”) and a restricted stock unit (“RSU”) award equivalent to sixty percent (60%) and forty percent (40%), respectively, of the dollar value of the executive’s fiscal year 2021 stock-based award, calculating the number of shares subject to each award using the fair market value of the Company’s common stock on the date of such award and an assumption that the Company would achieve the “target” level of performance required to earn the PSA. The Compensation Committee’s rationale for awarding PSAs is to further align the executive’s interest with those of our stockholders by using equity awards that will vest only if the Company achieves pre-established performance metrics, and we believe the Compensation Committee’s decision to award a portion of the PSAs subject to performance metrics measured over a multi-year performance period more closely aligns the executive’s interests with those of our stockholders.
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Name
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Value of FY21
Stock-Based Award (1)
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Number of Shares Subject
to PSAs, at Target (2)
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Number of Shares
Subject to RSUs (2)
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Liam K. Griffin
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$11,000,000
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45,874
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30,583
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Kris Sennesael
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$3,400,000
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14,179
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9,452
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Carlos S. Bori
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$2,900,000
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12,094
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8,062
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Robert J. Terry
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$2,700,000
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11,260
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7,506
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Karilee A. Durham
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$1,900,000
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7,923
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5,282
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________________________
(1)The grant date fair values of these stock-based awards as disclosed further below in the “Summary Compensation Table” and the “Grants of Plan-Based Awards Table” differ from the values stated above due to the grant date fair value of the PSAs being computed using a Monte Carlo simulation to value the portion of the award related to TSR percentile ranking, in accordance with the provisions of ASC 718.
(2)Reflects the dollar value of the award, divided by $143.87 per share, which was the closing price of the Company’s common stock on the Nasdaq Global Select Market on November 11, 2020.
After setting award levels by position and evaluating our business needs for the attraction and retention of executives and employees as well as internal and external circumstances impacting the Company and its employees, the Compensation Committee also reviewed the Comparator Group data to set the aggregate number of shares of the Company’s common stock that would be made available for annual equity awards to eligible non-executive employees of the Company, as a percentage of the total number of the outstanding shares of the Company’s common stock.
FY21 PSAs
The PSAs granted on November 11, 2020 (the “FY21 PSAs”), have both “performance” and “continued employment” conditions that must be met in order for the executive to receive shares underlying the award.
The “performance” condition of the FY21 PSAs compares the Company’s performance under three distinct performance metrics during the applicable performance period against a range of pre-established targets, as follows:
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Percentage of Aggregate Target Level Shares
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Performance Period
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Target Level Shares with Respect to Emerging Revenue Growth Metric (1)
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25%
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Fiscal Year
2021
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Target Level Shares with Respect to Design Win Metric (2)
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25%
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Fiscal Year
2021
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Target Level Shares with Respect to TSR Percentile Ranking Metric (3)
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50%
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Fiscal Years 2021–2023
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________________________
(1) The emerging revenue growth metric measures the Company’s year-over-year revenue growth in certain key product categories, each of which represents an identified longer-term growth market for the Company.
(2) The design win metric measures the success of the Company in achieving specific product design wins with a key customer.
(3) The TSR percentile ranking metric measures the Company’s percentile ranking achieved with respect to its peer group. The peer group for purposes of the TSR percentile ranking metric includes each of the companies in the Philadelphia Semiconductor Index as of November 11, 2020, but excludes any such company that during the three-year performance period is acquired by or merged with (or enters into an agreement to be acquired by or merged with) another entity.
The semiconductor industry generally and, in particular, many of the markets into which the Company sells its connectivity products, are characterized by constant and rapid technological change, continuous product evolution, and short product life cycles, including annual product refreshes in some cases. Recognizing that strong long-term financial performance depends largely on the Company’s ability to identify, and respond to, rapid market changes by introducing new and enhanced products and technologies on a timely basis, the Compensation Committee determined that half of the target value under the FY21 PSAs should be measured based on one-year performance periods, consistent with the PSA design from the prior year.
More specifically, the Compensation Committee retained emerging revenue growth and key customer design wins as one-year metrics appropriate for focusing our management team on long-term value creation, given that revenue growth over the next several years is highly dependent on executing in certain higher-growth product categories, as well as on continued success with a key customer that typically leads the market in the adoption of new technologies and maintains an annual sales cycle. As in prior years, the remaining half of the target value under the FY21 PSAs was based on three-year TSR percentile ranking, which the Compensation Committee believed provides an appropriate balance to the one-year measurement periods.
The specific pre-established targets under the emerging revenue growth and TSR percentile ranking metrics are as follows:
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Company Metric (1)
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Threshold
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Target
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Maximum
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1-year Emerging Revenue Growth (%)
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0.0%
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15.0%
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30.0%
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3-year TSR Percentile Ranking
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25th
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55th
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90th
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(1) Given both the Company’s contractual confidentiality obligations and the proprietary nature of the specific goals, the Company cannot publicly disclose the specific threshold, target, and maximum levels of performance established with respect to the design win metric.
As with the Incentive Plan, the pre-established targets under the FY21 PSAs were established by the Compensation Committee after reviewing the Company’s historical operating results and growth rates as well as the Company’s expected future results relative to peers and were designed to require significant effort and operational success on the part of our executives and the Company:
•Emerging Revenue Growth Metric: The target level was set at 15%, representing above-market annual growth, the maximum level was set at 30%, which the Compensation Committee believed represented outstanding performance that would be difficult to achieve, and the threshold level was set at 0% as a result of continued market uncertainties related to the COVID-19 pandemic.
•Design Win Metric: The Compensation Committee increased the threshold, target, and maximum levels of performance by 32%, 15%, and 11%, respectively, from the corresponding levels set for the prior year, in order to incentivize a significant increase over the prior year’s performance.
•TSR Percentile Ranking Metric: The Compensation Committee increased the target percentile to the 55th percentile of the peer group in order to further incentivize above-median performance and in response to stockholder feedback received in 2020.
The number of shares issuable under the FY21 PSAs corresponds to the level of achievement of the performance goals, as follows (subject to linear interpolation for amounts between “threshold” and “target” or “target” and “maximum”):
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Performance Achieved
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Threshold
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Target
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Maximum
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% of Target Level Shares Earned with Respect to Emerging Revenue Growth Metric
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50%
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100%
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200%
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% of Target Level Shares Earned with Respect to Design Win Metric
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50%
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100%
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200%
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% of Target Level Shares Earned with Respect to TSR Percentile Ranking Metric
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50%
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100%
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300%
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The “continued employment” condition of the FY21 PSAs provides that, to the extent that the performance metrics are met, the shares earned under such metrics would vest as follows (provided, in each case, that the executive remains employed by the Company through each such vesting date):
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Anniversary of Grant Date (1)
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One Year
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Two Year
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Three Year
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% of Shares Earned with Respect to Emerging Revenue Growth Metric
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50%
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50%
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% of Shares Earned with Respect to Design Win Metric
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50%
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50%
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% of Shares Earned with Respect to TSR Percentile Ranking Metric
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100%
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________________________
(1) In the event of termination by reason of death or permanent disability, the holder of an FY21 PSA (or the holder’s estate) would receive any earned but unissued shares that would have been issuable thereunder during the remaining term of the award.
During fiscal year 2020, the base period against which fiscal year 2021 emerging revenue performance was measured, the Company achieved revenue in the specified key product categories of $442 million. During fiscal year 2021, the Company achieved revenue in the specified key product categories of $996 million, representing emerging revenue growth of 125%, exceeding the “maximum” level of performance and resulting in achievement with respect to such metric of 200% of the target level of shares. In calculating emerging revenue for fiscal year 2021, the Company excluded all revenue resulting from the acquisition in July 2021 of Silicon Labs’ Infrastructure and Automotive business, consistent with the terms of the FY21 PSA, which required exclusion of the impacts on this metric of any acquisition made by the Company during the performance period. Performance under this metric significantly exceeded the Company’s annual operating plan, primarily as a result of stronger-than-expected demand for the applicable products.
Also during fiscal year 2021, the Company achieved design wins with the specified customer at a level exceeding the “maximum” level of performance, resulting in achievement with respect to such metric of 200% of the target level of shares. The level of actual achievement under this metric represented a significant increase from the prior year’s performance. Accordingly, upon the Compensation Committee’s certification of the performance results in November 2021, the Company issued 50% of the shares earned by each Named Executive Officer under the FY21 PSAs with respect to the emerging revenue growth and design win performance metrics. The remaining shares earned under such metrics will be issued in November 2022, provided that the Named Executive Officer meets the continued employment condition.
Outstanding PSAs at the End of Fiscal Year 2021
As summarized in the table below of the annual PSA grants made to Named Executive Officers since fiscal year 2018 (the first year in which the Compensation Committee awarded PSAs subject to a performance metric measured over a three-year performance period), achievement of the TSR percentile ranking performance metric under the FY21 PSAs, which is subject to a three-year performance period, will be determined following the conclusion of the Company’s fiscal year 2023. During the three-year performance period under the fiscal year 2019 PSAs comprising the Company’s fiscal years 2019, 2020, and 2021, the Company achieved a TSR of 105% resulting in its ranking in the 44.8th percentile against the applicable peer group. Accordingly, the Company issued 74.1% of the “target” level of shares, as earned by each Named Executive Officer under the fiscal year 2019 PSAs with respect to the TSR percentile ranking metric.
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|
|
|
PSA Fiscal Year
|
Grant Date
|
Performance Metric
|
Performance Period
|
Achieved
(% of Target)
|
FY18
|
11/7/2017
|
Non-GAAP EBITDA Growth
|
FY18
|
99.8%
|
3-year TSR Percentile Ranking
|
FY18–FY20
|
0%
|
FY19
|
11/6/2018
|
Non-GAAP EBITDA Growth
|
FY19
|
0%
|
3-year TSR Percentile Ranking
|
FY19–FY21
|
74.1%
|
FY20
|
11/5/2019
|
Emerging Revenue Growth
|
FY20
|
200%
|
Design Wins
|
FY20
|
200%
|
3-year TSR Percentile Ranking
|
FY20–FY22
|
Performance Period in Progress (1)
|
FY21
|
11/11/2020
|
Emerging Revenue Growth
|
FY21
|
200%
|
Design Wins
|
FY21
|
200%
|
3-year TSR Percentile Ranking
|
FY21–FY23
|
Performance Period in Progress (2)
|
________________________
(1) As of January 21, 2022, performance under this metric during the applicable performance period is between the “threshold” and “target” levels of performance.
(2) As of January 21, 2022, performance under this metric during the applicable performance period is below the “threshold” level of performance.
Other Compensation and Benefits
We provide other benefits to our executive officers that are intended to be part of a competitive overall compensation program and are not tied to any company performance criteria. Consistent with our objective of having compensation programs that are considered fair to our employees, executive officers are eligible to participate in the Company’s medical, dental, vision, life, and disability insurance plans, as well as the Company’s 401(k) Savings and Investment Plan and Employee Stock Purchase Plan, under the same terms as such benefits are offered to other benefits-eligible employees. We do not provide executive officers with any enhanced retirement benefits (i.e., executive officers are subject to the same limits on contributions as other employees, as we do not offer any supplemental executive retirement plan or other similar non-qualified deferred compensation plan), and they are eligible for 401(k) company-match contributions under the same terms as other employees.
We offered executives the opportunity to participate in a reimbursement program for fiscal year 2021 providing up to an aggregate of $20,000 to each executive for the purchase of financial planning services, estate planning services, personal tax planning and preparation services, and/or an executive physical. No tax gross-up was provided for such reimbursements. In fiscal year 2021, each of the Named Executive Officers, with the exception of Ms. Durham, received reimbursement in connection with such services.
Severance and Change-in-Control Benefits
None of our executive officers, including the Named Executive Officers, has an employment agreement that provides a specific term of employment with the Company. Accordingly, the employment of any such employee may be terminated at any time. We do provide certain benefits to our Named Executive Officers upon certain qualifying terminations of employment and in connection with terminations of employment under certain circumstances following a change in control. A description of the material terms of our severance and change-in-control arrangements with the Named Executive Officers can be found immediately below and further below under “Potential Payments Upon Termination or Change in Control.”
The Compensation Committee believes that severance protections can play a valuable role in recruiting and retaining superior talent. Severance and other termination benefits are an effective way to offer executives financial security to incent them to forego an opportunity with another company. These agreements also protect the Company as the Named Executive Officers are bound by non-solicit covenants for a period of twelve (12) months after termination of employment. Outside of the change-in-control context, each Named Executive Officer is entitled to
severance benefits if his or her employment is involuntarily terminated by the Company without cause and, in the case of the Chief Executive Officer, if he terminates his own employment for good reason (as defined in the Chief Executive Officer’s change-in-control agreement). The level of each Named Executive Officer’s cash severance or other termination benefit is generally tied to his or her annual base salary and short-term incentive amounts.
Additionally, each Named Executive Officer would receive enhanced severance benefits and accelerated vesting of equity awards if his or her employment were terminated under certain circumstances in connection with a change in control of the Company. These benefits are described in detail further below under “Potential Payments Upon Termination or Change in Control.” The Compensation Committee believes these enhanced severance benefits and accelerated vesting are appropriate because the occurrence, or potential occurrence, of a change-in-control transaction would likely create uncertainty regarding the continued employment of executive officers that typically occurs in a change-in-control context, and such severance benefits and accelerated vesting encourage the Named Executive Officers to remain employed with the Company through the change-in-control process and to focus on enhancing stockholder value both before and during the process. In addition, the vesting protection helps assure the Named Executive Officers that they will not lose the expected value of their equity awards because of a change in control of the Company.
Executive Officer Stock Ownership Requirements
We have adopted Executive Stock Ownership guidelines with the objective of more closely aligning the interests of our executive officers with those of our stockholders. Under the Executive Officer Ownership guidelines, our Named Executive Officers are each required to hold the lower of (a) the number of shares with a fair market value equal to the applicable multiple of such executive’s current base salary, or (b) the applicable number of shares, each as set forth in the table below. All of our Named Executive Officers are in compliance with the stock ownership guidelines as of the date hereof.
|
|
|
|
|
|
|
|
|
|
Multiple of
Annual Base Salary (1)
|
Shares
|
Chief Executive Officer
|
6
|
107,500
|
Chief Financial Officer
|
2.5
|
23,300
|
Senior Vice President, Sales and Marketing
|
2.5
|
19,800
|
Senior Vice President and General Counsel
|
2.5
|
20,500
|
Senior Vice President, Human Resources
|
2.5
|
18,800
|
________________________
(1) For purposes of the Executive Stock Ownership guidelines, the fair market value of the Company’s common stock is the average closing price per share of the Company’s common stock as reported on the Nasdaq Global Select Market (or if the common stock is not then traded on such market, such other market on which the common stock is traded) for the twelve (12) month period ending with the determination date.
Prohibition on Hedging and Certain Other Transactions
We prohibit our directors, officers, and employees (or any of their designees) from directly or indirectly engaging in the following transactions with respect to securities of the Company:
•selling short, including short sales “against the box”;
•buying or selling put or call options; or
•purchasing financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds), or otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of securities of the Company, whether through the use of traded securities, privately negotiated derivative securities, or synthetic financial instruments.
In addition, we prohibit our directors, officers, and employees from purchasing Company securities on margin, borrowing against Company securities held in a margin account, or pledging Company securities as collateral for a loan.
Compliance with Internal Revenue Code Section 162(m)
For fiscal year 2021, the Company will be unable to deduct compensation in excess of $1 million paid to certain executive officers, as specified under Section 162(m) of the Internal Revenue Code (“IRC”). The Compensation Committee uses its judgment to authorize compensation payments that may be subject to the limit when the Compensation Committee believes such payments are appropriate and in the best interests of the Company and its stockholders.
Compensation Tables for Named Executive Officers
Summary Compensation Table
The following table summarizes compensation earned by, or awarded or paid to, our Named Executive Officers for fiscal year 2021, our fiscal year ended October 2, 2020 (“fiscal year 2020”), and our fiscal year ended September 27, 2019 (“fiscal year 2019”).
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
Year
|
Salary
($)
|
Stock
Awards
($)(1)
|
Non-Equity
Incentive Plan
Compensation
($)(2)
|
All Other
Compensation
($)(3)
|
Total
($)
|
Liam K. Griffin
|
2021
|
1,070,223
|
11,612,745
|
3,440,000
|
27,453
|
16,150,421
|
Chairman, Chief Executive Officer
|
2020
|
1,043,888
|
17,430,589
|
3,292,800
|
33,162
|
21,800,439
|
and President
|
2019
|
972,000
|
11,658,937
|
1,011,257
|
18,399
|
13,660,593
|
Kris Sennesael
|
2021
|
556,885
|
3,589,223
|
1,120,000
|
15,203
|
5,281,311
|
Senior Vice President and
|
2020
|
537,192
|
5,677,593
|
1,060,000
|
18,591
|
7,293,376
|
Chief Financial Officer
|
2019
|
496,000
|
3,264,443
|
322,467
|
15,352
|
4,098,262
|
Carlos S. Bori
|
2021
|
473,131
|
3,061,420
|
760,000
|
17,154
|
4,311,705
|
Senior Vice President,
|
2020
|
463,189
|
4,856,262
|
731,200
|
15,444
|
6,066,095
|
Sales and Marketing
|
2019
|
428,200
|
3,147,860
|
222,373
|
12,561
|
3,810,994
|
Robert J. Terry
|
2021
|
490,027
|
2,850,298
|
787,200
|
16,045
|
4,143,570
|
Senior Vice President,
|
2020
|
479,396
|
4,431,833
|
756,800
|
15,994
|
5,684,023
|
General Counsel and Secretary
|
2019
|
442,700
|
1,981,920
|
230,112
|
15,287
|
2,670,019
|
Karilee A. Durham(4)
|
2021
|
448,131
|
2,005,655
|
720,000
|
13,830
|
3,187,616
|
Senior Vice President,
|
2020
|
437,908
|
3,037,435
|
691,200
|
16,531
|
4,183,074
|
Human Resources
|
|
|
|
|
|
|
________________________
(1) The amounts in the Stock Awards column represent the grant date fair values, computed in accordance with the provisions of FASB ASC Topic 718—Compensation—Stock Compensation (“ASC 718”), of PSAs and RSUs granted during the applicable fiscal year, without regard to estimated forfeiture rates. For fiscal years 2019, 2020, and 2021, assuming the highest level of performance achievement with respect to the PSAs, the grant date fair values of the Stock Awards would be as follows: Mr. Griffin (FY 2019: $14,658,935; FY 2020: $25,430,512; FY 2021: $14,912,691), Mr. Sennesael (FY 2019: $4,104,438; FY 2020: $6,637,546; FY 2021: $4,609,190), Mr. Bori (FY 2019: $3,957,856; FY 2020: $5,666,259; FY 2021: $3,931,401), Mr. Terry (FY 2019: $2,491,891; FY 2020: $5,211,819; FY 2021: $3,660,286), and Ms. Durham (FY 2020: $3,577,434; FY 2021: $2,575,596). For a description of the assumptions used in calculating the fair value of equity awards in fiscal year 2021 under ASC 718, see Note 10 of the Company’s financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on November 24, 2021.
(2) Reflects amounts paid to the Named Executive Officers pursuant to the executive incentive plan adopted by the Compensation Committee for each year indicated.
(3) “All Other Compensation” includes the Company’s contributions to the executive’s 401(k) Plan account, the cost of group term life insurance premiums, and financial planning benefits. For fiscal year 2021, it specifically includes $11,600 in Company contributions to each Named Executive Officer’s 401(k) Plan account, as well as $11,500 in financial planning benefits for Mr. Griffin.
(4) Ms. Durham was not a Named Executive Officer prior to fiscal year 2020.
Grants of Plan-Based Awards Table
The following table summarizes all grants of plan-based awards made to the Named Executive Officers in fiscal year 2021, including incentive awards payable under our Fiscal Year 2021 Executive Incentive Plan.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards(1)
|
Estimated Future Payouts
Under Equity Incentive Plan
Awards(2)
|
All Other
Stock
Awards:
Number of
Stock Or
|
Grant
Date Fair
Value of
Stock and
|
Name
|
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
Units
(#)(3)
|
Option
Awards ($)
|
Liam K. Griffin
|
|
860,000
|
1,720,000
|
3,440,000
|
|
|
|
|
|
|
11/11/2020
|
|
|
|
22,937
|
45,874
|
114,685
|
|
7,212,769(4)
|
|
11/11/2020
|
|
|
|
|
|
|
30,583
|
4,399,976(5)
|
Kris Sennesael
|
|
280,000
|
560,000
|
1,120,000
|
|
|
|
|
|
|
11/11/2020
|
|
|
|
7,089
|
14,179
|
35,447
|
|
2,229,364(4)
|
|
11/11/2020
|
|
|
|
|
|
|
9,452
|
1,359,859(5)
|
Carlos S. Bori
|
|
190,000
|
380,000
|
760,000
|
|
|
|
|
|
|
11/11/2020
|
|
|
|
6,047
|
12,094
|
30,235
|
|
1,901,540(4)
|
|
11/11/2020
|
|
|
|
|
|
|
8,062
|
1,159,880(5)
|
Robert J. Terry
|
|
196,800
|
393,600
|
787,200
|
|
|
|
|
|
|
11/11/2020
|
|
|
|
5,630
|
11,260
|
28,150
|
|
1,770,410(4)
|
|
11/11/2020
|
|
|
|
|
|
|
7,506
|
1,079,888(5)
|
Karilee A. Durham
|
|
180,000
|
360,000
|
720,000
|
|
|
|
|
|
|
11/11/2020
|
|
|
|
3,961
|
7,923
|
19,807
|
|
1,245,733(4)
|
|
11/11/2020
|
|
|
|
|
|
|
5,282
|
759,921(5)
|
________________________
(1) The amounts shown represent the potential value of awards earned under the Incentive Plan. The amounts actually paid to the Named Executive Officers under the Incentive Plan are shown above in the “Summary Compensation Table” under “Non-Equity Incentive Plan Compensation.” For a more complete description of the Incentive Plan, please see description above under “Components of Compensation—Short-Term Incentives.”
(2) The amounts shown represent shares potentially issuable pursuant to the FY21 PSAs granted on November 11, 2021, under the Company’s 2015 Long-Term Incentive Plan, as described above under “Components of Compensation—Long-Term Stock-Based Compensation.”
(3) Represents shares underlying RSU awards granted under the Company’s 2015 Long-Term Incentive Plan. The RSU award vests over four years at a rate of twenty-five percent (25%) per year commencing one year after the date of grant and on each subsequent anniversary of the grant date for the following three years, provided the executive remains employed by the Company through each such vesting date.
(4) Reflects the grant date fair value of the FY21 PSAs, computed in accordance with the provisions of ASC 718, using (a) a Monte Carlo simulation (which weights the probability of multiple potential outcomes) to value the portion of the award related to TSR percentile ranking, and (b) a price of $143.87 per share, which was the closing sale price of the Company’s common stock on the Nasdaq Global Select Market on November 11, 2020, to value the portion of the award related to emerging revenue growth and design wins, assuming performance at the “target” level. For a description of the assumptions used in calculating the fair value of equity awards granted in fiscal year 2021 under ASC 718, see Note 10 of the Company’s financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on November 24, 2021.
(5) Reflects the grant date fair value of the RSUs granted on November 11, 2020, computed in accordance with the provisions of ASC 718 using a price of $143.87 per share, which was the closing price of the Company’s common stock on the Nasdaq Global Select Market on November 11, 2020.
Outstanding Equity Awards at Fiscal Year End Table
The following table summarizes the unvested stock awards and all stock options held by the Named Executive Officers as of the end of fiscal year 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
Stock Awards
|
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Option
Exercise
Price
($)
|
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
($)(1)
|
Equity
Incentive
Plan
Awards:
Number
of Unearned
Shares,
Units or
other
Rights
that Have
Not Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
other Rights
that Have
Not Vested
($)(1)
|
Liam K. Griffin
|
13,211(2)
|
—
|
77.66
|
11/9/2023
|
26,914(2)
|
4,411,743
|
91,164(10)
|
14,943,603
|
|
|
|
|
|
30,388(3)
|
4,981,201
|
11,468(11)
|
1,879,835
|
|
|
|
|
|
94,965(4)
|
15,566,663
|
|
|
|
|
|
|
|
45,874(5)
|
7,519,666
|
|
|
|
|
|
|
|
6,193(6)
|
1,015,157
|
|
|
|
|
|
|
|
24,200(7)
|
3,966,864
|
|
|
|
|
|
|
|
30,388(8)
|
4,981,201
|
|
|
|
|
|
|
|
30,583(9)
|
5,013,165
|
|
|
Kris Sennesael
|
40,000
|
—
|
75.22
|
8/29/2023
|
7,535(2)
|
1,235,137
|
29,172(10)
|
4,781,874
|
|
12,770
|
—
|
77.66
|
11/9/2023
|
9,724(3)
|
1,593,958
|
3,544(11)
|
580,932
|
|
|
|
|
|
14,180(4)
|
2,324,386
|
|
|
|
|
|
|
|
2,158(6)
|
353,739
|
|
|
|
|
|
|
|
6,776(7)
|
1,110,722
|
|
|
|
|
|
|
|
9,723(8)
|
1,593,794
|
|
|
|
|
|
|
|
8,610(12)
|
1,411,351
|
|
|
|
|
|
|
|
9,452(9)
|
1,549,372
|
|
|
Carlos S. Bori
|
|
|
|
|
7,266(2)
|
1,191,043
|
24,615(10)
|
4,034,891
|
|
|
|
|
|
8,204(3)
|
1,344,800
|
3,023(11)
|
495,530
|
|
|
|
|
|
12,094(4)
|
1,982,448
|
|
|
|
|
|
|
|
2,158(6)
|
353,739
|
|
|
|
|
|
|
|
6,534(7)
|
1,071,053
|
|
|
|
|
|
|
|
8,205(8)
|
1,344,964
|
|
|
|
|
|
|
|
7,597(12)
|
1,245,300
|
|
|
|
|
|
|
|
8,062(9)
|
1,321,523
|
|
|
Robert J. Terry
|
502
|
—
|
75.91
|
11/10/2023
|
4,575(2)
|
749,934
|
23,703(10)
|
3,885,396
|
|
|
|
|
|
7,900(3)
|
1,294,968
|
2,815(11)
|
461,435
|
|
|
|
|
|
11,260(4)
|
1,845,739
|
|
|
|
|
|
|
|
1,349(6)
|
221,128
|
|
|
|
|
|
|
|
4,114(7)
|
674,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,900(8)
|
1,294,968
|
|
|
|
|
|
|
|
|
6,077(12)
|
996,142
|
|
|
|
|
|
|
|
|
7,506(9)
|
1,230,384
|
|
|
|
Karilee A. Durham
|
|
|
|
|
2,960(2)
|
485,203
|
|
16,410(10)
|
2,689,927
|
|
|
|
|
|
|
5,468(3)
|
896,315
|
|
1,980(11)
|
324,562
|
|
|
|
|
|
|
7,924(4)
|
1,298,902
|
|
|
|
|
|
|
|
|
4,426(13)
|
725,510
|
|
|
|
|
|
|
|
|
2,662(7)
|
436,355
|
|
|
|
|
|
|
|
|
5,469(8)
|
896,478
|
|
|
|
|
|
|
|
|
4,051(12)
|
664,040
|
|
|
|
|
|
|
|
|
5,282(9)
|
865,825
|
|
|
|
________________________
(1) Reflects a price of $163.92 per share, which was the closing sale price of the Company’s common stock on the Nasdaq Global Select Market on October 1, 2021.
(2) Represents shares issuable under the fiscal year 2019 PSAs (“FY19 PSAs”) with respect to the TSR percentile ranking performance metric. The shares earned under this portion of the FY19 PSAs, which was subject to a three-year performance period, were issued on November 6, 2021.
(3) Represents shares issuable under the fiscal year 2020 PSAs (the “FY20 PSAs”) with respect to two performance metrics measured over a one-year performance period consisting of the Company’s fiscal year 2020. Fifty percent (50%) of the shares earned under the FY20 PSAs with respect to such metrics were issued on November 5, 2020, and the remaining fifty percent (50%) of the shares earned with respect to such metrics were issued on November 5, 2021.
(4) Represents shares issuable under the one-time, non-recurring stock-based award granted to Mr. Griffin on November 5, 2019 (as described above under “Components of Compensation—Long-Term Stock-Based Compensation”), with respect to a non-GAAP EBITDA margin metric measured over the Company’s fiscal year 2020 and fiscal year 2021. During fiscal year 2020, the Company achieved a non-GAAP EBITDA margin of 43%, which put the Company in the 87.5th percentile of the peer group, resulting in achievement with respect to such metric of 200% of the target level of shares with respect to fiscal year 2020. During fiscal year 2021, the Company achieved a non-GAAP EBITDA margin of 45%, which put the Company in the 68.75th percentile of the peer group, resulting in achievement with respect to such metric of 175% of the target level of shares with respect to fiscal year 2021. The shares earned under this award were issued on November 5, 2021.
(5) Represents shares issuable under the FY21 PSAs (awarded on November 11, 2020, as described above under “Components of Compensation—Long-Term Stock-Based Compensation”) with respect to two performance metrics measured over a one-year performance period consisting of the Company’s fiscal year 2021, assuming achievement at the “maximum” level of performance. Fifty percent (50%) of the shares earned under the FY21 PSAs with respect to such metrics were issued on November 11, 2021, and the remaining fifty percent (50%) of the shares earned with respect to such metrics will be issued on November 11, 2022, provided that the executive meets the continued employment condition.
(6) Represents shares issuable under an RSU award granted on November 7, 2017, under the Company’s 2015 Long-Term Incentive Plan. The RSU award vested at a rate of twenty-five percent (25%) per year on each anniversary of the grant date until they became fully vested on November 7, 2021.
(7) Represents shares issuable under an RSU award granted on November 6, 2018, under the Company’s 2015 Long-Term Incentive Plan. The RSU award vests at a rate of twenty-five percent (25%) per year on each anniversary of the grant date through November 6, 2022.
(8) Represents shares issuable under an RSU award granted on November 5, 2019, under the Company’s 2015 Long-Term Incentive Plan. The RSU award vests at a rate of twenty-five percent (25%) per year on each anniversary of the grant date through November 5, 2023.
(9) Represents shares issuable under an RSU award granted on November 11, 2020, under the Company’s 2015 Long-Term Incentive Plan. The RSU award vests at a rate of twenty-five percent (25%) per year on each anniversary of the grant date through November 11, 2024.
(10) Represents shares issuable under the FY20 PSAs with respect to the TSR percentile ranking performance metric, assuming achievement at the “maximum” level of performance. This portion of the FY21 PSAs, which is subject to a three-year performance period, will be issued on November 5, 2022, to the extent earned and provided that the executive meets the continued employment condition.
(11) Represents shares issuable under the FY21 PSAs (awarded on November 11, 2020, as described above under “Components of Compensation—Long-Term Stock-Based Compensation”) with respect to the TSR percentile ranking performance metric, assuming achievement at the “threshold” level of performance. This portion of the FY21 PSAs, which is subject to a three-year performance period, will be issued on November 11, 2023, to the extent earned and provided that the executive meets the continued employment condition.
(12) Represents shares issuable under an RSU award granted on November 5, 2019, under the Company’s 2015 Long-Term Incentive Plan. The RSU award vested at a rate of fifty percent (50%) per year on each anniversary of the grant date until they became fully vested on November 5, 2021.
(13) Represents shares issuable under an RSU award granted on April 9, 2018, under the Company’s 2015 Long-Term Incentive Plan. The RSU award vests at a rate of twenty-five percent (25%) per year on each anniversary of the grant date through April 9, 2022.
Option Exercises and Stock Vested Table
The following table summarizes the Named Executive Officers’ option exercises and stock award vesting during fiscal year 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
Liam K. Griffin
|
—
|
—
|
62,677
|
9,271,879
|
Kris Sennesael
|
—
|
—
|
28,055
|
4,161,448
|
Carlos S. Bori
|
15,938
|
1,700,702
|
24,864
|
3,686,040
|
Robert J. Terry
|
1,750
|
128,203
|
20,678
|
3,064,656
|
Karilee A. Durham
|
—
|
—
|
17,105
|
2,722,837
|
________________________
(1) The value realized on exercise is based on the amount by which the market price of a share of the Company’s common stock at the time of exercise exceeded the applicable exercise price per share of the exercised option.
(2) The value realized upon vesting is determined by multiplying (a) the number of shares underlying the stock awards that vested, by (b) the closing price of the Company’s common stock on the Nasdaq Global Select Market on the applicable vesting date.
Potential Payments Upon Termination or Change in Control
Mr. Griffin
On May 11, 2016, in connection with the appointment of Mr. Griffin as Chief Executive Officer, the Company entered into an amended and restated Change in Control / Severance Agreement with Mr. Griffin (the “Griffin Agreement”). The Griffin Agreement sets out severance benefits that become payable if, while employed by the Company, other than following a change in control, Mr. Griffin either (i) is terminated without cause, or (ii) terminates his employment for good reason. The severance benefits provided to Mr. Griffin under either of these circumstances would consist of: (i) a lump-sum payment equal to two (2) times the sum of (A) his then-current annual base salary immediately prior to such termination and (B) the Bonus Amount (as defined below); (ii) full acceleration of the vesting of all of Mr. Griffin’s outstanding stock options, which stock options would become exercisable for a period of two (2) years after the termination date (but not beyond the expiration of their respective maximum terms), full acceleration of the vesting of all outstanding restricted stock awards, and the right to receive the number of performance shares under outstanding PSAs that are earned but unissued and that he would have
earned had he remained employed through the end of the applicable performance period; and (iii) provided he is eligible for and timely elects to continue receiving group medical coverage, certain COBRA continuation for him and his eligible dependents (“COBRA continuation”) for up to fifteen (15) months after the termination date. The Bonus Amount is an amount equal to the greater of (x) the average of the short-term cash incentive awards received for the three (3) years prior to the year in which the termination occurs, and (y) the target annual short-term cash incentive award for the year in which the termination occurs.
The Griffin Agreement also sets out severance benefits that become payable if, within the period of time commencing three (3) months prior to and ending two (2) years following a change in control, Mr. Griffin’s employment is either (i) terminated by the Company without cause, or (ii) terminated by him for good reason (a “Qualifying Termination”). The severance benefits provided to Mr. Griffin in such circumstances would consist of the following: (i) a lump-sum payment equal to two and one-half (21/2) times the sum of (A) his annual base salary immediately prior to the change in control, and (B) the CIC Bonus Amount (as defined below); (ii) all of Mr. Griffin’s then-outstanding stock options would become exercisable for a period of thirty (30) months after the termination date (but not beyond the expiration of their respective maximum terms); and (iii) COBRA continuation for up to eighteen (18) months after the termination date. The CIC Bonus Amount is an amount equal to the greater of (x) the average of the annual short-term cash incentive awards received for the three (3) years prior to the year in which the change of control occurs and (y) the target annual short-term cash incentive award for the year in which the change of control occurs.
The Griffin Agreement also provides that in the event of a Qualifying Termination, Mr. Griffin is entitled to full acceleration of the vesting of all of his outstanding equity awards (including stock options, restricted stock awards, RSU awards, and all earned but unissued performance-based equity awards). At the time of a change in control, all such outstanding equity awards would continue to be subject to the same time-based vesting schedule to which the awards were subject prior to the change in control (including performance-based equity awards that are deemed earned at the time of the change in control as described below). For performance-based equity awards where the change in control occurs prior to the end of the performance period, such awards would be deemed earned as to the greater of (i) the target level of shares for such awards, or (ii) the number of shares that would have been earned pursuant to the terms of such awards based upon performance up through and including the day prior to the date of the change in control. In the event that the successor or surviving company does not agree to assume, or to substitute for, such outstanding equity awards on substantially similar terms with substantially equivalent economic benefits as exist for such award immediately prior to the change in control, then such awards would accelerate in full as of the change in control.
In the event of Mr. Griffin’s death or permanent disability (within the meaning of Section 22(e)(3) of the IRC), the Griffin Agreement provides for full acceleration of the vesting of all then-outstanding equity awards subject to time-based vesting (including stock options, restricted stock awards, RSU awards, and all performance-based equity awards where the performance period has ended and the shares are earned but unissued). The Griffin Agreement also provides that if Mr. Griffin’s death or permanent disability occurs prior to the end of the performance period of a performance-based equity award, each such award would be deemed earned as to the greater of (i) the target level of shares for such award, or (ii) the number of shares that would have been earned pursuant to the terms of such award had he remained employed through the end of the performance period, and such earned shares would become vested and issuable to him after the performance period ends. In addition, all outstanding stock options would be exercisable for a period of twelve (12) months following the termination of employment (but not beyond the expiration of their respective maximum terms).
The Griffin Agreement is intended to be exempt from or compliant with Section 409A of the IRC and has an initial two (2) year term from May 11, 2016, and thereafter renews automatically on an annual basis for up to five (5) additional years unless either the Company or Mr. Griffin timely provides a notice of non-renewal to the other prior to the end of the then-current term. The payments due to Mr. Griffin under the Griffin Agreement are subject to potential reduction in the event that such payments would otherwise become subject to excise tax incurred under Section 4999 of the IRC, if such reduction would result in his retaining a larger amount, on an after-tax basis, than if he had received all of the payments due.
Additionally, the Griffin Agreement requires that Mr. Griffin sign a release of claims in favor of the Company before he is eligible to receive any benefits under the Griffin Agreement and contains a non-solicitation provision applicable to Mr. Griffin while he is employed by the Company and for twelve (12) months following the termination of his employment.
The terms “change in control,” “cause,” and “good reason” are each defined in the Griffin Agreement. Change in control means, in summary: (i) the acquisition by a person or a group of 40% or more of the outstanding stock of the Company; (ii) a change, without approval by the Board of Directors, of a majority of the Board of Directors of the Company; (iii) the acquisition of the Company by means of a reorganization, merger, consolidation, or asset sale; or (iv) stockholder approval of a liquidation or dissolution of the Company. Cause means, in summary: (i) deliberate dishonesty that is significantly detrimental to the best interests of the Company; (ii) conduct constituting an act of moral turpitude; (iii) willful disloyalty or insubordination; or (iv) incompetent performance or substantial or continuing inattention to or neglect of duties. Good reason means, in summary: (i) a material diminution in his base compensation, authority, duties, responsibilities, or budget over which he retains authority; (ii) a requirement that Mr. Griffin report to a corporate officer or employee instead of reporting directly to the Board of Directors; (iii) a material change in his office location; or (iv) any action or inaction constituting a material breach by the Company of the terms of the agreement.
Mr. Sennesael, Mr. Bori, Mr. Terry, and Ms. Durham
The Company entered into Change in Control / Severance Agreements with each of Mr. Sennesael, Mr. Bori, Mr. Terry, and Ms. Durham on August 29, 2016, November 9, 2016, November 10, 2016, and April 13, 2018, respectively. Each such Change in Control / Severance Agreement is referred to herein as a “CIC Agreement.”
Each CIC Agreement sets out severance benefits that become payable if, within the period of time commencing three (3) months prior to and ending twelve (12) months following a change in control, the executive officer’s employment is either (i) terminated by the Company without cause, or (ii) terminated by the executive for good reason (for each such executive, a “Qualifying Termination”). The severance benefits provided to the executive in such circumstances would consist of the following: (i) a lump sum payment equal to one and one-half (11/2) times the sum of (A) his or her annual base salary immediately prior to the change in control, and (B) the CIC Bonus Amount; (ii) all of the executive’s then-outstanding stock options would remain exercisable for a period of eighteen (18) months after the termination date (but not beyond the expiration of their respective maximum terms); and (iii) COBRA continuation for up to eighteen (18) months after the termination date.
Each CIC Agreement also provides that in the event of a Qualifying Termination, the executive is entitled to full acceleration of the vesting of all of his or her outstanding equity awards (including stock options, restricted stock awards, RSU awards, and all earned but unissued performance-based equity awards). At the time of a change in control, all such outstanding equity awards would continue to be subject to the same time-based vesting schedule to which the awards were subject prior to the change in control (including performance-based equity awards that are deemed earned at the time of the change in control as described below). For performance-based equity awards where the change in control occurs prior to the end of the performance period, such awards would be deemed earned as to the greater of (i) the target level of shares for such awards, or (ii) the number of shares that would have been earned pursuant to the terms of such awards based upon performance up through and including the day prior to the date of the change in control. In the event that the successor or surviving company does not agree to assume, or to substitute for, such outstanding equity awards on substantially similar terms with substantially equivalent economic benefits as exist for such award immediately prior to the change in control, then such awards would accelerate in full as of the change in control.
Each CIC Agreement also sets out severance benefits outside a change in control that become payable if the executive’s employment is terminated by the Company without cause. The severance benefits provided to the executive under such circumstance would consist of the following: (i) biweekly compensation continuation payments for a period of twelve (12) months, with each such compensation continuation payment being equal to the aggregate payment amount divided by twenty-six (26), where the aggregate payment is equal to the sum of (x) his or her annual base salary, and (y) any short-term cash incentive award then due; (ii) all then-vested outstanding stock
options would remain exercisable for a period of twelve (12) months after the termination date (but not beyond the expiration of their respective maximum terms); and (iii) COBRA continuation coverage for up to twelve (12) months after the termination date.
In the event of the executive’s death or permanent disability (within the meaning of Section 22(e)(3) of the IRC), each CIC Agreement provides for full acceleration of the vesting of all then-outstanding equity awards subject to time-based vesting (including stock options, restricted stock awards, RSU awards, and all performance-based equity awards where the performance period has ended and the shares are earned but unissued). Each CIC Agreement also provides that for a performance-based equity award where the executive’s death or permanent disability occurs prior to the end of the performance period, such award would be deemed earned as to the greater of (i) the target level of shares for such award, or (ii) the number of shares that would have been earned pursuant to the terms of such award had the executive remained employed through the end of the performance period, and such earned shares would become vested and issuable to the executive after the performance period ends. In addition, all outstanding stock options would remain exercisable for a period of twelve (12) months following the termination of employment (but not beyond the expiration of their respective maximum terms).
Each CIC Agreement is intended to be exempt from or compliant with Section 409A of the IRC and has an initial two (2) year term, and thereafter renews automatically on an annual basis for up to five (5) additional years unless either the Company or the executive timely provides a notice of non-renewal to the other prior to the end of the then-current term. The payments due to each executive under his or her CIC Agreement are subject to potential reduction in the event that such payments would otherwise become subject to excise tax incurred under Section 4999 of the IRC, if such reduction would result in the executive retaining a larger amount, on an after-tax basis, than if he or she had received all of the payments due.
Additionally, each CIC Agreement requires that the executive sign a release of claims in favor of the Company before he or she is eligible to receive any benefits under the agreement. Each CIC Agreement also contains non-solicitation provisions applicable to the executive while he or she is employed by the Company and for a period of twelve (12) months following the termination of his or her employment.
The terms “change in control,” “cause,” and “good reason” are each defined in the CIC Agreements. Change in control means, in summary: (i) the acquisition by a person or a group of 40% or more of the outstanding stock of the Company; (ii) a change, without approval by the Board of Directors, of a majority of the Board of Directors of the Company; (iii) the acquisition of the Company by means of a reorganization, merger, consolidation, or asset sale; or (iv) stockholder approval of a liquidation or dissolution of the Company. Cause means, in summary: (i) deliberate dishonesty that is significantly detrimental to the best interests of the Company; (ii) conduct constituting an act of moral turpitude; (iii) willful disloyalty or insubordination; or (iv) incompetent performance or substantial or continuing inattention to or neglect of duties. Good reason means, in summary: (i) a material diminution in the executive’s base compensation, authority, duties, or responsibilities; (ii) a material diminution in the authority, duties, or responsibilities of the executive’s supervisor; (iii) a material change in the executive’s office location; or (iv) any action or inaction constituting a material breach by the Company of the terms of the agreement.
The following table summarizes the payments and benefits that would be made to the Named Executive Officers as of October 1, 2021, in the following circumstances as of such date:
•termination without cause outside of a change in control;
•termination without cause or for good reason in connection with a change in control; and
•in the event of a termination of employment because of death or disability.
The accelerated equity values in the table reflect a price of $163.92 per share, which was the closing sale price of the Company’s common stock on the Nasdaq Global Select Market on October 1, 2021. The table does not reflect any equity awards made after October 1, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Benefit
|
Termination
w/o Cause
Outside
Change in
Control
($)(1)
|
Termination
w/o Cause
or for Good
Reason,
After
Change in
Control ($)
|
Death/
Disability
($)
|
Liam K. Griffin(2)
|
Salary and Short-Term Incentive
|
5,875,814(3)
|
7,344,767 (4)
|
—
|
|
Accelerated RSUs
|
14,976,387
|
14,976,387
|
14,976,387
|
|
Accelerated PSAs (5)
|
44,142,836
|
44,142,836
|
44,142,836
|
|
Medical
|
27,458
|
32,950
|
—
|
|
TOTAL
|
65,022,495
|
66,496,940
|
59,119,223
|
Kris Sennesael(2)
|
Salary and Short-Term Incentive
|
560,000(6)
|
1,715,904(7)
|
—
|
|
Accelerated RSUs
|
—
|
6,018,978
|
6,018,978
|
|
Accelerated PSAs (5)
|
—
|
8,783,161
|
8,783,161
|
|
Medical
|
24,426
|
36,639
|
—
|
|
TOTAL
|
584,426
|
16,554,682
|
14,802,139
|
Carlos S. Bori(2)
|
Salary and Short-Term Incentive
|
475,000(6)
|
1,315,121(7)
|
—
|
|
Accelerated RSUs
|
—
|
5,336,580
|
5,336,580
|
|
Accelerated PSAs (5)
|
—
|
7,643,590
|
7,643,590
|
|
Medical
|
24,426
|
36,639
|
—
|
|
TOTAL
|
499,426
|
14,331,930
|
12,980,170
|
Robert J. Terry(2)
|
Salary and Short-Term Incentive
|
492,000(6)
|
1,360,413(7)
|
—
|
|
Accelerated RSUs
|
—
|
4,416,988
|
4,416,988
|
|
Accelerated PSAs (5)
|
—
|
6,729,900
|
6,729,900
|
|
Medical
|
24,426
|
36,639
|
—
|
|
TOTAL
|
516,426
|
12,543,940
|
11,146,888
|
Karilee A. Durham(2)
|
Salary and Short-Term Incentive
|
450,000(6)
|
1,264,453(7)
|
—
|
|
Accelerated RSUs
|
—
|
3,588,209
|
3,588,209
|
|
Accelerated PSAs (5)
|
—
|
4,644,673
|
4,644,673
|
|
Medical
|
24,426
|
36,639
|
—
|
|
TOTAL
|
474,426
|
9,533,974
|
8,232,882
|
________________________
(1) For Mr. Griffin, includes amounts payable pursuant to a termination for good reason outside of a change in control.
(2) Excludes the value of accrued vacation/paid time off required by law to be paid upon termination.
(3) Represents an amount equal to two (2) times the sum of (A) Mr. Griffin’s annual base salary as of October 1, 2021, and (B) an Incentive Plan payment, which is equal to the three (3) year average of the actual incentive payments made to Mr. Griffin for fiscal years 2018, 2019, and 2020, since such average is greater than the “target” short-term cash incentive award for fiscal year 2021.
(4) Represents an amount equal to two and one-half (2½) times the sum of (A) Mr. Griffin’s annual base salary as of October 1, 2021, and (B) an Incentive Plan payment, which is equal to the three (3) year average of the actual incentive payments made to Mr. Griffin for fiscal years 2018, 2019, and 2020, since such average is greater than the “target” short-term cash incentive award for fiscal year 2021.
(5) Represents the value of PSAs that were unvested and outstanding as of October 1, 2021, in accordance with Item 402(j) of Regulation S-K, using the following assumptions: (a) achievement at the “target” level of performance for the FY19 PSAs (3-year TSR percentile ranking metric) scheduled to vest on November 6, 2021, based on the
Company’s actual TSR relative to peers for fiscal years 2019–2021 falling below the “target” level of performance; (b) achievement at 200% of the “target” level of performance for the FY20 PSAs (emerging revenue growth and design wins metrics) scheduled to vest on November 6, 2021, based on the Company’s actual achievement at the “maximum” level of performance with respect to both performance metrics measured over a one-year performance period consisting of the Company’s fiscal year 2020; (c) achievement at 127.78% of the “target” level of performance for the FY20 PSAs (3-year TSR percentile ranking metric) scheduled to vest on November 5, 2022, based on the Company’s TSR relative to peers for fiscal years 2020 and 2021; (d) achievement at 200% of the “target” level of performance for the FY21 PSAs (emerging revenue growth and design wins metrics) scheduled to vest on November 11, 2021, and November 11, 2022, based on the Company’s actual achievement at the “maximum” level of performance with respect to both performance metrics measured over a one-year performance period consisting of the Company’s fiscal year 2021; (e) achievement at the “target” level of performance for the FY21 PSAs (3-year TSR percentile ranking metric) scheduled to vest on November 11, 2023, based on the Company’s TSR relative to peers for fiscal year 2021 falling below the “target” level of performance; and (f) achievement at 187.5% of the “target” level of performance for the one-time, non-recurring stock-based award granted to Mr. Griffin scheduled to vest on November 5, 2021, based on the Company’s actual achievement at the “maximum” level of performance with respect to fiscal year 2020 and at 175% of the “target” level of performance with respect to fiscal year 2021.
(6) Represents an amount equal to the Named Executive Officer’s annual base salary as of October 1, 2021.
(7) Represents an amount equal to one and one-half (1½) times the sum of (A) the Named Executive Officer’s annual base salary as of October 1, 2021, and (B) an Incentive Plan payment, which is equal to the three (3) year average of the actual incentive payments made to the Named Executive Officer for fiscal years 2018, 2019, and 2020, since such average is greater than the Named Executive Officer’s “target” short-term cash incentive award for fiscal year 2021.
CEO Pay Ratio
Following is an estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of our other employees. For fiscal year 2021:
•The annual total compensation of our Chief Executive Officer was $16,150,421.
•The annual total compensation of our median compensated employee was $17,409.
•Based on the foregoing, we estimate that our Chief Executive Officer’s total annual compensation was approximately 928 times that of our median employee.
To determine the median of the annual total compensation of our employees, we applied the following methodology and material assumptions:
•We did not use the de minimis exception to exclude any non-U.S. employees. We have a globally diverse workforce with total headcount of approximately 11,000 as of October 1, 2021, of which approximately 77% are located outside the United States, primarily in locations employing large direct labor forces such as Mexico and Singapore where wages are significantly lower than in the United States. As permitted under SEC rules, we excluded from our headcount approximately 340 employees who became employees of the Company during fiscal year 2021 due to our acquisition of Silicon Labs’ Infrastructure and Automotive business. The median employee within our employee population was identified, consistent with prior years, as of the last day of our fiscal year, or October 1, 2021, and is a full-time employee in our Mexicali, Mexico facility.
•To identify the median employee, we used a consistently applied compensation measure that included total taxable earnings paid to our employees in the most recently completed taxable year in their respective jurisdictions. This included base salary, overtime pay, shift premiums, recognition bonuses, annual cash incentive awards, and long-term stock-based incentive awards. We annualized the compensation of permanent, full-time, and part-time employees who were hired after the beginning of the most recently completed taxable year in their respective jurisdictions.
•Using this consistently applied compensation measure, we identified an employee at the median and calculated such employee’s total compensation for fiscal year 2021 in accordance with Item 402(c)(2)(x) of Regulation S-K.
•We did not use any cost-of-living adjustments in identifying the median employee.
•The annual total compensation of our Chief Executive Officer is the amount reported in the “Total” column of our Summary Compensation Table for fiscal year 2021.
We believe our pay ratio presented above is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios.
Director Compensation
The Board of Directors sets the compensation for the Company’s non-employee directors, after receiving the recommendations of the Compensation Committee. In formulating its recommendations, the Compensation Committee seeks and receives input from Aon/Radford related to the amounts, terms, and conditions of director cash compensation and stock-based compensation awards, with the goal of establishing non-employee director compensation that is similar to, and competitive with, the compensation of non-employee directors at peer companies in the semiconductor industry.
Cash Compensation
Non-employee directors are paid, in quarterly installments, an annual retainer of $75,000. Additional annual retainers for Chairman, Lead Independent Director, and/or committee service (paid in quarterly installments) are as follows: any non-employee Chairman of the Board ($130,000); the Lead Independent Director, if one has been appointed ($50,000); the Chairman of the Audit Committee ($30,000); the Chairman of the Compensation Committee ($20,000); the Chairman of the Nominating and Governance Committee ($15,000); non-chair member of Audit Committee ($15,000); non-chair member of Compensation Committee ($10,000); and non-chair member of Nominating and Corporate Governance Committee ($7,500). In addition, the Compensation Committee continues to retain discretion to recommend to the full Board of Directors that additional cash payments be made to a non-employee director for extraordinary service during a fiscal year.
Equity Compensation
Currently, following each annual meeting of stockholders, each non-employee director who is reelected will receive a grant of RSUs having a value of approximately $200,000. Any newly appointed non-employee director will receive an initial equity grant of RSUs having a value of approximately $200,000. The number of shares subject to a non-employee director’s initial RSU award or annual award is determined by dividing the approximate value of the award, as stated above, by the average closing price per share of the Company’s common stock as reported on the Nasdaq Global Select Market (or if the common stock is not then traded on such market, such other market on which the common stock is traded) for each trading day during the 30 consecutive trading day period ending on, and including, the grant date. Unless otherwise determined by the Board of Directors, (a) a non-employee director’s initial equity grant of RSUs will vest in three (3) equal annual installments on the first three anniversaries of the date of grant, and (b) a non-employee director’s annual equity grant of RSUs will vest on the first anniversary of the date of grant. In the event of a change in control of the Company, any outstanding options and RSUs awarded under the 2008 Director Long-Term Incentive Plan will become fully exercisable and deemed fully vested, respectively.
No director who is also an employee receives separate compensation for services rendered as a director. Mr. Griffin is currently the only director who is also an employee of the Company.
Director Compensation Table
The following table summarizes the compensation paid to the Company’s non-employee directors for fiscal year 2021.
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Name
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Fees Earned
or Paid in Cash
($)
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Stock
Awards
($)(1)(2)
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Total
($)
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David J. Aldrich, Former Chairman of the Board (3)
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126,154
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—
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126,154
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Christine King, Lead Independent Director
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160,000
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175,099
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335,099
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Alan S. Batey
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82,500
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175,099
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257,599
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Kevin L. Beebe
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90,000
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175,099
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265,099
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Timothy R. Furey
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97,500
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175,099
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272,599
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David P. McGlade
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115,000
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175,099
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290,099
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Robert A. Schriesheim
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100,000
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175,099
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275,099
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Kimberly S. Stevenson
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82,500
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175,099
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257,599
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________________________
(1) The non-employee members of the Board of Directors who held such positions on October 1, 2021, held the following aggregate number of unexercised stock options and unvested RSU awards as of such date:
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Name
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Number of
Securities Underlying
Unexercised Options
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Number of Shares
Subject to
Unvested RSUs
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Christine King, Lead Independent Director
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—
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1,084
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Alan S. Batey
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—
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1,924
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Kevin L. Beebe
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—
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1,084
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Timothy R. Furey
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—
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1,084
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David P. McGlade
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—
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1,084
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Robert A. Schriesheim
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—
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1,084
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Kimberly S. Stevenson
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—
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1,084
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(2) Reflects the grant date fair value of 1,084 RSUs granted on May 12, 2021, to each non-employee director elected at the 2021 Annual Meeting of Stockholders, computed in accordance with the provisions of ASC 718 using a price of $161.53 per share, which was the closing sale price of the Company’s common stock on the Nasdaq Global Select Market on May 12, 2021.
(3) Mr. Aldrich served as Chairman of the Board and as a director until the 2021 Annual Meeting of Stockholders on May 12, 2021.
Director Stock Ownership Requirements
We have adopted Director Stock Ownership guidelines with the objective of more closely aligning the interests of our directors with those of our stockholders. The minimum number of shares of the Company’s common stock that the Director Stock Ownership guidelines require non-employee directors to hold while serving in their capacity as directors is the director base compensation (currently $75,000) multiplied by five (5), divided by the fair market value of the Company’s common stock (rounded to the nearest 100 shares). For purposes of the Director Stock Ownership guidelines, the fair market value of the Company’s common stock is the average closing price per share of the Company’s common stock as reported on the Nasdaq Global Select Market (or if the common stock is not then traded on such market, such other market on which the common stock is traded) for the twelve (12) month
period ending with the determination date. All of our directors have met the stock ownership guidelines as of the date hereof.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors currently consists of, and during fiscal year 2021 consisted of, Ms. King (Chairman), Mr. McGlade, and Mr. Schriesheim. No member of this committee was at any time during fiscal year 2021 an officer or employee of the Company, was formerly an officer of the Company or any of its subsidiaries, or had any employment relationship with the Company or any of its subsidiaries. No executive officer of the Company has served as a director or member of the compensation committee (or other committee serving an equivalent function) of any other entity, where one of such entity’s executive officers served as a director of the Company or a member of the Compensation Committee.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included herein with management, and based on the review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the annual report on this Form 10-K for the year ended October 1, 2021.
THE COMPENSATION COMMITTEE
Christine King, Chairman
David P. McGlade
Robert A. Schriesheim